Six Flags Entertainment Corp. ( SIX)

Q3 2011 Earnings Call

October 27, 2011 09:00 am ET


Jim Reid-Anderson – Chairman, President, Chief Executive Officer

John Duffey – Chief Financial Officer

Al Weber – Chief Operating Officer

Nancy Krejsa – Senior Vice President, Investor Relations and Corporate Communications


Ian Zaffino – Oppenheimer & Co.

Ian Corydon – B. Riley & Co.

Marc Vantricht – Trafelet & Co.



Good morning, ladies and gentlemen. Welcome to Six Flags’ Q3 2011 earnings conference call. My name is Sheri and I’ll be your operator today. Today’s conference is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the meeting over to Nancy Krejsa, Senior Vice President, Investor Relations and Corporate Communications for Six Flags.

Nancy Krejsa

Good morning. Thank you for joining our Q3 call. With me this morning are Jim Reid-Anderson, Chairman, President, and CEO of Six Flags; Al Weber, our Chief Operating Officer; and John Duffey, our Chief Financial Officer.

Following our prepared comments we will open the call to your questions. The company would like to caution you that comments made during this call will include forward-looking statements within the meaning of the Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in such statements and the company undertakes no obligation to update or revise them.

For a detailed discussion of these risks you may refer to the company’s annual and quarterly reports filed with the SEC. Statements made on our call today include non-GAAP financial measures, which have been reconciled to the most directly comparable GAAP measures, and included in our earnings release or other forms filed or furnished with the SEC.

Also, the company emerged from Chapter 11 Bankruptcy in April of 2010. During this call, we will compare our current year-to-date results to similar periods last year and we will not distinguish between the predecessor and successor periods, since we believe this is an appropriate and useful comparison.

And now, we will begin our prepared remarks and I will turn the call over to Jim Reid-Anderson.

Jim Reid-Anderson

Thank you, Nancy, and good morning to everyone on the call. We are extremely pleased with our Q3 financial performance, especially given the weather challenges that we’ve faced at numerous parks during the summer. We delivered a strong financial performance in the quarter with guest spending per caps up 5% and adjusted EBITDA up $12 million, or 5%, versus prior year.

Year-to-date guest spending per caps of $40.11 are now up there with the best in the regional theme park space, and many of you will remember that just 18 months ago, this was a significant gap for us. This performance directly results from a laser-focused implementation of our strategy in several key areas, including a more thoughtful approach to pricing, exciting new capital and attractions for every park, targeted marketing programs, and effective expense controls.

Our overall profitability was excellent with an LTM Modified EBITDA margin of 36.8% and LTM Adjusted EBITDA of $337 million, both records. Our LTM modified EBITDA margin was 620 basis points above our profit margin one year ago and 1,230 basis points above where we finished 2009.

Attendance was down 4% in the quarter primarily due to bad weather; however, the attendance decline was more than offset by a focused pricing and yield strategy along with effective cost management. After the third quarter, I am even more confident that Six Flags can succeed and create value for shareholders even in a challenging environment.

As you know from our 8K release from August 29 th, we were impacted by Hurricane Irene at our northeast parks. In addition to Irene, we experienced adverse weather throughout the quarter which affected several parks that collectively generate nearly two-thirds of our attendance.

To put the weather impact into perspective, in Q3 2011, we experienced bad weather on 35% of our operating days with almost 40% of those days falling on weekends, which are our peak operating days. The number of weekend days negatively impacted by weather was 20% higher than Q3 2010 and 35% higher than Q3 2009; however, it is worth noting that parks with more normal weather patterns experienced a 4% attendance growth in the quarter.

Ultimately, our success is driven by our ability to delight our guests and so I’m thrilled to share that our guest satisfaction ratings through September have reached all-time highs with improvements in all key categories. More importantly, even with higher pricing, we received our highest rating ever from guests in the area of perceived value. The record guest satisfaction ratings and our strong Q3 financial performance reflect the quality of our park and employees and their commitment to consistently provide exceptional experiences and special memories for our guests each and every day.

Our business strategy is right on target and is helping us to deliver record profitability for the company. I am very proud of the entire Six Flags team. I have a few more comments to share at the end of the call, but now I’m going to turn the call over to John Duffey, who will provide details on our financial performance. John.

John Duffey

Thanks, Jim. We had a solid quarter with good increases in both profitability and cash flow. Although revenue in the quarter was flat, our strategic focus on improving pricing and yield continued to have a positive impact. Admission per caps in the quarter improved by $1.35, or 6%, and in-park per caps were up $0.59, or 4%. Total guest spending per cap was a record $40.84 in the quarter, and increase of $1.94, or 5%. Per caps increased despite a higher mix of season pass attendance, which tends to lower per cap guest spending.

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