Monday, November 12, 2007

Six Flags: It's God's Fault

This one was easy to see coming. Oh yeah, the excuses management is giving you? Ignore them.

Six Flags (SIX), which operates 21 amusement parks, reported a third-quarter net profit of $84.2 million, or 61 cents per share, compared with $159.3 million, or $1.08 per share, a year ago. The year-ago period included a one-time gain of $36.8 million from discontinued operations. With the prior year gain subtracted, EPS in 2006 was 85 cents and 2007 EPS declined 28% on a comparable basis. Net loss for the first nine months of 2007 was $142.7 million, or $1.51 per share, compared to a net loss of $132.4 million, or $1.41 per common share last year.

Revenue fell 2% to $465.2 million. Management blamed this on bad weather in July cutting attendance at its Texas and Georgia parks, and bad publicity from an accident at its park in Kentucky. Attendance for the nine months ended September 30, 2007 was 22.1 million, flat with last year.

The total of Texas, Kentucky and Georgia parks equal 7, or 1/3 of total locations.

"I'm proud of the advances we continue to make at Six Flags despite a temporary setback within the third quarter due to inclement July weather and extensive negative publicity stemming from the accident at our Kentucky park," said Mark Shapiro, Six Flags President and CEO. "With revenue per guest and consumer satisfaction scores at all-time highs and a powerful park-wide capital expansion plan on deck, we are well positioned to deliver on the promise of this company's turnaround in 2008." Right, as long as it does not rain?

Shapiro then contradicted himself to a point in the conference call when he said "Secondly, with regard to attendance, yes, the East Coast which is where we usually have the most risks because we have so many parks really on the East Coast, we are great in East Coast. We had great weather and the parks did well with it." Now, if the weather was great there, why did Georgia and Texas matter so much?

Here is the thing. You can't blame the weather because it will always rain. The overall weather picture was not that bad this summer and as bad a they claim July was, June and August were just a good and the simple fact is they just did not "get it done" when the weather was good. We have not had a hurricane in two years now and Six Flags still cannot turn a profit. What they did not tell you was that the weather in September for almost the entire nation was the best in several years.

So, if from June to October you only have 1 bad month for 1/3 of your locations and it causes the whole house of cards to fall, things just are not working. What happens when we finally get an active hurricane season? It will happen sooner or later and they normally hit the east coast where Six Flags has it "greatest risk". If they cannot turn a profit in near perfect conditions almost all summer and into fall for the vast majority of its parks, what happens when these conditions turn imperfect. Answer? More, larger losses.

Disney (DIS) just reported a 5% guest increase at its Domestic parks over 2006.

They did triumph the fact that they got more from each customer. How? Per capita guest spending increased $0.04 during the quarter to $37.13 as guests spent 3% more in-park, primarily on food and beverages, parking, and games. Yea... we know. I detailed this robbery in October.

I'll check in on the call on provide any updates of note.......

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