Six Flags swings to 2Q profit as higher parks attendance boosts revenue

By Rebecca Melvin

Princeton, N.J., Aug. 9 - Six Flags Inc. swung to a second-quarter profit, boosted by higher attendance at its theme parks as capital additions, a continued marketing program and better weather lured guests, Kieran E. Burke, the company's chairman and chief executive, said during a conference call.

Net income for the quarter was $11.1 million, or six cents a share, compared with a loss of $6.83 million, or 13 cents a share, in the year earlier period.

The latest quarter was helped by a tax valuation reversal, and the year-earlier quarter was negatively affected by the early repurchase of debt. Excluding items, Six Flags said it earned two cents a share.

Second-quarter revenue jumped 8.4%, as attendance increased 753,000, or 6.6%.

"All parks are pacing ahead of the prior year," Burke said, who later stressed that attendance growth was broad based, encompassing parks in New Jersey, Chicago, Mexico as well as in New England, Denver and other areas. The company owns 18 U.S. parks and one each in Mexico and Canada.

The Oklahoma City-based company held its forecast steady for 2005 for $300 million of earnings before interest, taxes, depreciation, and amortization, based on expected full-year revenue growth of 8.5%.

"We continue to enjoy substantial liquidity and have no near-term debt maturities," Burke said.

The only blip on the screen was that season passholders, which typically account for 29.5% to 30% of visitors on average system wide, declined a tick in July, and the company now expects season passholders to account for 28% to 29% of total attendance for 2005. Burke said the reason for the decline wasn't known.

Meanwhile, Burke said plans for 2006 were being polished to include capital spending of $125 million on new rides and attractions. The additions will include a foray into an indoor water park hotel in Lake George, N.Y., set to open in December or January.

But Burke declined to outline other expenditures for competitive reasons. The water park foray is a joint venture, with Six Flags contributing $5 million in land and a restaurant, while a partner builds the hotel. Six Flags will hold 41% of the partnership and expected a 20% return on investment.

The company continues to shoulder a large debt burden of $2.15 billion of gross debt outstanding, at a blended rate of 7.7%. But for the quarter net interest expense was down to $45.8 million from $49.1 million in 2004.

For 2005, the company expects net interest expense of $180 million and expected minority interest in earnings is approximately $40 million.

In 2004, Six Flags took out its $423.5 million of remaining 9¾% notes due 2007 in January in a two-step transaction, using proceeds of its $325 million issue of 9 5/8% notes due 2014, sold in December 2003, and some proceeds from a $130 million increase in its term loan B.

In November, it issued $299 million of 4.5% convertible notes due 2015 and used the proceeds to repurchase a portion of its 9½% senior notes due 2009 and 8 7/8% senior notes due 2010.

It opened 2005 with a $195 million sale of additional 9 5/8% notes, using the proceeds to redeem all of the remaining 9½% notes.

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