SIX - Sector: Services---Industry: General Entertainment

[terainvestment]

Hi David,

yes it was me that I wrote a post with some concern on a possible bankruptcy...in this week end I was giving a look to financial statement of SIX and noticed that shareholders equity now is negative, the cash position is light (30 Mln) and the debt is huge. Also, this debt will expiry in 18 months and in some way it must be paid (or re.financed).

Do you think SIX is at risk with bankruptcy?
You said no, but the negative shareholders equity associeted to continue losses is a concern?

ciao,

Andrea (aka Tera)

[terainvestment]

Hi David this was I talked about on SIX...this article appeared today.

Moody's Downgrades Ratings on Six Flags
Monday March 24, 3:29 pm ET 
Moody's Downgrades Six Flags' Outlook to Negative on Poor Performance and Default Risk


WASHINGTON (AP) -- Moody's Investors Service downgraded Six Flags Inc.'s outlook to "negative" Monday, saying the company could default on several upcoming obligations if performance doesn't improve.
Moody's also downgraded the company's liquidity rating to SGL-4 from SGL-3, reflecting a higher degree of risk.

The credit rating agency said the downgrades reflect Six Flags' refinancing risk as $288 million in redeemable preferred stock matures in 2009 and $280 million in unsecured debt matures in 2010.

Moody's warned that the company's chances for default will rise if "it does not execute an operational turnaround in 2008 or credit market conditions remain tight"

Moody's gives Six Flags a Caa1 corporate credit rating, meaning its obligations are subject to very high credit risk. According to the credit rating service, increased spending without gains in attendance "have translated into operating margins below that of other regional theme park operators."

[David Randolph]

Thanks for posting the "news" terainvestment:

Moody's Downgrades Ratings on Six Flags
AP (Mon 3:29pm)

According to the release hour on Yahoo Finance, the news was out yesterday at 3:29 pm and it had no impact on the share price. No trades this morning either.

I think the news was expected and is already priced in.

Moody's warned that the company's chances for default will rise if "it does not execute an operational turnaround in 2008 or credit market conditions remain tight"

I believe in the company's turnaround in 2008 and the company has this for short term liquidity:

«As of December 31, 2007, the Company had $5.0 million outstanding on its $275 million revolving credit facility (excluding letters of credit in the amount of $27.3 million) and had $28.4 million in unrestricted cash.»

I'll keep holding SIX.

[David Randolph]

Nothing new at SIX, I continue to believe in the success of the company's turnaround plan for 2008:

• Six Flags Provides Outlook for 2008
PR Newswire (Mon, Mar 10)

[BigSully1]

here's some more bad news on SIX and will cost them in KY. Better hope more states than the 10 already don't follow suit. This would be the first in the main portfolio I would have let go of and also most of IMMR. There's too many much better prospects out there, IMO.

Ky. Passes Bill on Thrill Ride Operation
Wednesday April 2, 9:11 am ET
By Roger Alford, Associated Press Writer 
Ky. Passes Bill on Thrill Ride Operation After Grisly Accident That Severed Teen's Feet


FRANKFORT, Ky. (AP) -- Most high schoolers will soon be barred from operating thrill rides in Kentucky after a grisly accident last year severed the feet of a girl at a Louisville amusement park.
The state Senate voted 37-0 on Tuesday night for final passage of legislation that prohibits anyone younger than 18 from operating such rides. The House passed the bill 97-0 on Thursday.

"This is long overdue legislation," said state Sen. Tom Jensen, a Republican and sponsor of the bill, which drew opposition from the amusement industry. "It is a good step forward on safety."

Gov. Steve Beshear has supported the bill and will sign it into law, spokesman Dick Brown said. The measure would take effect in July.

The move comes less than a year after the accident on the Six Flags Kentucky Kingdom ride, which was being operated by a 16 year old.

The Kentucky Department of Agriculture is awaiting tests on the broken cable at the Superman Tower of Power ride to determine what caused it to snap, severing the feet of 14-year-old Kaitlyn Lasitter of Louisville.

The state agency, which inspects amusement park rides, has said it is unclear whether the Kentucky Kingdom accident could have been prevented if the changes lawmakers are seeking had been in place last year.

Only 10 states require ride operators to be at least 18, according to the International Association of Amusement Parks and Attractions. Another 17 states require ride operators to be at least 16. The others, including Kentucky, currently have no age requirement.

David Mandt, spokesman for the industry group, said Kentucky lawmakers may be unnecessarily shrinking the labor pool that amusement parks can draw from.

"It can take several thousand -- up to 4,000 or so -- to staff a park," Mandt said. "This new 18-year-old requirement may make it more difficult to staff the attractions in Kentucky."

Mandt said he believes the law is unnecessary.

"I'm not aware of any data that links 16- or 17-year-old ride operators to a higher rate of incidents," he said.

Lasitter and her family are suing Six Flags Kentucky Kingdom, claiming the park failed to maintain the ride and equipment and ensure riders' safety. In court filings, the amusement park has denied liability. Doctors were able to reattach the girl's right foot.

[David Randolph]

here's some more bad news on SIX and will cost them in KY. Better hope more states than the 10 already don't follow suit.

Ah, I don't think it costs significantly more to hire 18 year old employees than 16 or 17 years old ones. It may have a negative impact, but not material in my view.

There's too many much better prospects out there, IMO.

Yes, probably.

It's funny how FUN is worth 8 times more than SIX while it owns similar properties. SIX's management just needs to do as good job as FUN does and voilá, you'll have SIX at $10 a share.

I remain a believer in SIX's management (in the job since late 2006) and their capacity to turn the company to profitability. 

(but it's true that when I bought it, I could have gone out with a 20% plus profit at the 50 days SMA - the natural exit point after a rebound - complexity and patience aren't paying).

[berloga]

(but it's true that when I bought it, I could have gone out with a 20% plus profit at the 50 days SMA - the natural exit point after a rebound - complexity and patience aren't paying).

I am glad, you, David, are showing your flexibility once more. Bigsully1 is right. When a trade gets too complicated and dependent on so many iffy factors, it's better to let go and look somewhere else.

Your job is extremely hard, emotionally. I always thought you needed a companion to help run the site. This way, you both can discuss opportunities, take independent time off and provide views from a different angle. Go TEAM!! 

[la-onda]

fyi:

SIX: CRT Capital Cuts to Sell from Fair Value; Analyst Notes
Wednesday, April 16, 2008 11:22ET
Issuer: Six Flags, Incorporated (NYSE: SIX)
Analyst Firm:  CRT Capital Group
Ratings Action: DOWNGRADE
Current Rating: Sell (from Fair Value)
Analyst Comments: The firm downgraded shares as they believe the company will not be able to grow out of its capital structure and will require some form of debt reduction to reduce an "unsustainable" level of financial risk.

&


Gulf Finance House in exclusive licensing deal with Six Flags
Wednesday, April 16, 2008 04:13ET
LONDON, Apr 16, 2008 (Thomson Financial via COMTEX) -- Gulf Finance House Bsc. said it has signed a one-year exclusivity agreement with the world's largest regional theme park company Six Flags to bring Six Flags' theme parks to China.
The company said the initiative is well placed to deliver exciting results for the regional expansion of China's tourism. The investment bank added the project also offers the potential for the future collaboration of Gulf Finance House and Six Flags to develop a Six Flags theme luxury resort.

[soxguy]

Six Flags 1Q revenue up 35% to $68 mln

By John Ittner
Last update: 8:39 a.m. EDT April 17, 2008

NEW YORK (MarketWatch) -- Six Flags Inc. (SIX:six flags inc com
News, chart, profile, more

SIX 1.54, -0.02, -1.3%) said Thursday that first-quarter revenue grew by 35% to $68 million, due mostly to the shift of Easter holiday, which moved from the second quarter last year to the first quarter this year. First-quarter results historically represent up to approximately 5% of the company's full-year attendance.



Up nicely premarket. Hope it's meaningful.

[soxguy]

 



       

AP
Six Flags Inc. 1st-quarter revenue on higher attendance
Thursday April 17, 8:58 am ET 
Six Flags Inc. 1st-quarer revenue rises as more customers visit parks and spend more


NEW YORK (AP) -- Six Flags Inc. said Thursday first-quarter revenue climbed 35 percent, helped by increased attendance and guest spending.
The theme park operator reported quarterly sales of $68 million compared with $50.7 million a year earlier.




Analysts predicted revenue of $53.4 million, according to a Thomson Financial poll.

Attendance climbed 19 percent to more than 1.4 million during the quarter, helped by an earlier Easter holiday than last year. First-quarter results typically make up 5 percent of full-year attendance, the company said.

First-quarter guest spending rose 13 percent to $38.95 from $34.44 per person, reflecting higher admission prices, food and beverage, parking and other revenue.

Revenue from sponsorship and international fees climbed to $11.1 million from $7.8 million.

"With the cost of airline tickets going up and the hassle and frustration of air travel increasing, we believe Six Flags is well-positioned to be a preferred entertainment option this summer," President and Chief Executive Mark Shapiro said in a statement.

Six Flags has 21 theme parks in the U.S., Mexico and Canada.

[David Randolph]

Thanks for posting the news soxguy:

• Six Flags Announces First Quarter Revenues
PR Newswire (Thu 8:30am)

There's no doubt SIX's operations are improving meaningfully:

«Total revenues of approximately $68 million increased 35% over the prior-year quarter, while total attendance grew by 19% to over 1.4 million.

Revenues for the first quarter also reflected increases in per capita guest spending, which grew $4.51 to $38.95, a 13% increase over the per capita guest spending of $34.44 for the first quarter of 2007. Guest spending increases were across the board, reflecting higher admissions, food and beverage, rentals, retail, games, parking and other revenues.

Revenue growth was also driven by sponsorship and international fees, which increased $3.3 million to $11.1 million for the first quarter. This growth, combined with the increased guest spending, resulted in a 13% increase in total revenue per capita to $47.11 in the current quarter from $41.51 in the first quarter of 2007.

Regarding the current state of the economy and its potential impact on the upcoming season, Shapiro added: "With the cost of airline tickets going up and the hassle and frustration of air travel increasing, we believe Six Flags is well-positioned to be a preferred entertainment option this summer."»

So, the operational turnaround is going well, much better than expected in my view.

The second part of the press release isn't so positive:

«PIERS Dividend

The Company also announced that its Board of Directors decided not to declare and pay a quarterly dividend on its outstanding Preferred Income Equity Redeemable Securities ("PIERS") for the quarter ending May 15, 2008, each such PIERS representing one one-hundredth of a share of the Company's 7-1/4% Convertible Preferred Stock.

As it enters its core operating season, the Company reiterated that it has ample cash and liquidity to fund its current operating needs and is comfortably in compliance with the one financial covenant included in its $275 million revolving credit facility. As of March 31, 2008, the Company had approximately $13 million in unrestricted cash and $131 million available (after reduction for outstanding letters of credit of approximately $29 million) on its $275 million revolving credit facility.»

SIX is running out of cash. Management decided not to pay the dividends on the PIERS and tapped its credit facility for a significant amount of cash, because, at the latest earnings release, they said the following:

«As of December 31, 2007, the Company had $5.0 million outstanding on its $275 million revolving credit facility (excluding letters of credit in the amount of $27.3 million) and had $28.4 million in unrestricted cash.»

So, they spent $15 M of their own cash and borrowed $144 M from the credit facility.

I figure the 1st quarter loss was about $159 M, down from $170 M in the year ago period. This is SIX's weakest quarter.

The conclusion is SIX's operational turnaround really needs to work and right now in 2008. And I believe that's exactly what will happen and SIX will be at $6 a share in 12 months time.

[David Randolph]

Positive research out for SIX:





Event: Announces Q1 Sales Results and Accrual of Upcoming Preferred Dividend Payment

Introduction
Six Flags is one of the largest regional theme park operators in the world, currently operating 21 parks, nineteen of which are located domestically. The Company also has a park located in
Mexico and one in Canada. In general, the parks offer a variety of thrill rides, water attractions, themed shows, restaurants, game venues, concerts and retail outlets. Six Flags also holds exclusive long-term licenses to characters such as Bugs Bunny, Daffy Duck, Tweety Bird, Yosemite Sam, Batman, Superman and others.

Investment Summary
Six Flags reported a Q1 '08 sales increase of 35% to roughly $68.0MM, well ahead of our $54.9MM estimate as the Easter holiday shift had a greater impact than we anticipated. Also driving the higher revenue was a significant increase in total revenue per capita, which increased to $47.11 from $41.51 in Q1 '07. This increase was driven by a $3.3MM increase in sponsorship/international fees as well as a 13% increase in per capita in-park guest spending (driven by higher admissions, food, beverage, rentals, retail, games, parking, and other revenues). We believe the increase in per capita guest spending bodes well for the remainder of the year and demonstrates the effectiveness of the initiatives executed in recent years to improve this metric. Six Flags also announced that the Board of Directors has elected not to pay the quarterly dividend on the PIERS due May 15, 2008. Instead, the company will take advantage of what is essentially a form of interest free funding as the dividend will accrue without interest. Regarding liquidity, the company had $131MM available at March 31, 2008. Peak borrowing needs are reached in early May, and while availability does tighten during Q2 (our new estimate calls for roughly $30MM in availability at the end of Q2 after accounting for letters of credit), we note that the availability at the end of Q1 was better than we anticipated.

Strong Q1 sales reflect some momentum in the company's turnaround efforts. At the same time, the dividend announcement casts a shadow over the eventual outcome for holders of the PIERS (hence the disconnect between the performance of common and preferred shares on Thursday in which the common rose while the PIERS declined despite the PIERS superior standing in the capital structure). If Q2 and Q3 results show significant Y-o-Y improvement and liquidity is adequate to get the company through peak borrowings in early May (and we believe it is), the likelihood of the company retiring the PIERS at par increases substantially. Should the company produce weak Q2 and Q3 results, the likelihood that the company could be forced to restructure and/or cut a deal with the PIERS holders that causes a recovery of less than par increases. We will be monitoring business trends vigilantly. While early indicators (including strong guest spending, increasing sponsorship revenue, rising attendance, strong season pass sales and international licensing deals) lead us to believe that management's initiatives have been successful and that the business has turned the corner, the company's performance in its critical second and third quarters will be the real test. We continue to believe that Six Flags has many options available for the retirement of the PIERS including sale of excess land and use of the optional term loan facility. In addition, we note that the company has an outstanding insurance claim of $150MM related to the New Orleans park, which depending on the outcome, could provide an additional source of funds to assist in retiring the PIERS.

We made slight adjustments to our model accounting for the larger than expected Easter holiday shift and increased our per capita guest spending estimates given the strength in Q1. We will look to further refine our model once the company releases its full first quarter results. Given the strong quarter and improving business trends, we believe the company will be able to retire the PIERS by maturity and therefore maintain our "Buy" rating.

Risks & Considerations

• Attendance: Attendance is impacted by factors outside of the Company's control including weather, disturbances, and local economic conditions.

• Liquidity and Solvency: The Company has a significant debt load and interest expense, which may hamper its ability to invest in the business. Also, the company may need to raise additional capital in the future and access to such capital is difficult to predict.

• Risk of Accidents: The risk of accidents occurring at Six Flags or competing parks may impact attendance and affect operational results.

• Our estimates: Sales and earnings may fall short of our estimates.

• See Six Flag's SEC filings, particularly its 10-K filings, for a discussion of further potential
risks.

Personal comment: There's more evidence that SIX's turnaround plan is working. I'll keep holding SIX.

[David Randolph]

I have bad news and good news for SIX, which one do you want first?

Ok, let's start by the bad news. Fitch continues to be very concerned about SIX's credit and liquidity outlook: oopps, I can't copy/paste the full report right now, maybe later.

The good news is Bill Gates has been holding SIX's shares:

Billionaire Bill Gates Diversifies His Wealth with Eclectic Holdings
Indie Research (Mon, Apr 21)

(anyway, this isn't new information).

I'll keep holding SIX for the long term.

[David Randolph]

There was a press release out from SIX yesterday:

Prices are Rolling Back at Six Flags Over Georgia!
PR Newswire (Tue 10:12am)

I'm not sure if this is good news or bad. Of course, lower prices attract more people, but they also compress profit margins. The equilibrium price, that is, the one which maximizes profit, is what companies want to practice.

I guess this Georgia park had higher than average admission ticket prices and now prices were cut to the national average.

SIX's turnaround story seems to be on track, however, liquidity problems persist. 2008 is a crucial year for SIX and it can't fail. I believe it won't.

[David Randolph]

SIX made a bullish breakout above the 50 days SMA. It feels like the bottom was made and I still see $6/share by the end of the year.