Six Flags Corporate Discussion Thread

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Postby EnglndPatriots6 » Thu Jun 18, 2009 10:06 pm

Haha hopefully Cedar Fair would pick up some.

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Postby rcroques » Thu Jun 18, 2009 10:16 pm

You've got to be kidding...

At this point, I have more faith in Six Flags to manage the parks than I could ever have in Cedar Fair. I say this because, at this point, Cedar Fair is running like Premier-era SF, right up to the amassing of debt and complete overexpansion of the brand.

Shapiro and his people are doing an absolutely brilliant job in reinventing the brand and to see that end would bother me. I agree that they could sell a few of their parks, but the whole brand need not be liquidated. And please, God, if it does come to that, let Cedar Fair not be the one buying Magic Mountain.
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Postby coolcalicoaster » Fri Jun 19, 2009 7:33 am

As long as SFMM gets another new coaster, everything will be okay. :roll:

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Postby KDCOASTERFAN » Fri Jun 19, 2009 8:39 am

astroworldfan1 wrote:
EnglndPatriots6 wrote:as long as kentucky kingdom doesnt close ill be happy tho lol. but i demand they add more rides to the park


You want SF to add rides to add rides to SFKK. But, if they add rides, SF will add to their debt...

-Tatum


While that may be true then perhaps SFI should consider NOT adding rides to ANY of their parks for a year or two as a means to save money.Adding all these big coasters to SFMM & SFGRADV every other year is partly,if not mostly to blame for the mess that they're currently in.

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Postby Hercules » Fri Jun 19, 2009 8:42 am

Adding rides every year is not the problem. Sure, it costs a lot. However, poor financial management at a company level for many years it to blame. If you want to blame anything, blame previous management for doing EVERYTHING wrong.

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Postby KDCOASTERFAN » Fri Jun 19, 2009 8:55 am

Hercules wrote:Adding rides every year is not the problem. Sure, it costs a lot. However, poor financial management at a company level for many years it to blame. If you want to blame anything, blame previous management for doing EVERYTHING wrong.


And overexpansion of the chain is a big part of that....it cost them mega amounts of capital for all of those rennovations in late 98/early 99 to bring the former premiere parks "up to SF standards" only to let them sit & rot a couple years later.

Now that CF runs KD for instance I ohh so hope they don't make the same mistakes that SFI made with SFA.....while things started out good they went downhill due to the debt situation created in part by adding all of those rides chainwide & as a result the park gets nothing now which is why I stopped visiting effective last season in favor of KD.

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Postby goatdan » Fri Jun 19, 2009 9:29 am

Sorry, long post coming... but I've been following this and interested in this whole thing every since I first invested in theme park operators in 1999, and I think I've got some decent knowledge worth sharing. If you're just interested in complaining about your local park not getting new stuff, move along...

MagicMountainMan wrote:This is just a floating rumor, but apparently the bondholders are going to try and buy up the stock to get a majority share of the company and then get Six Flags to liquidate.


That wouldn't make *any* sense.

Six Flags tried to get something going with the bondholders, and they turned it down. You can read about those attempts and it was talked about on their last conference calls.

So, if the bondholders who wouldn't work for *that exact deal* before now decide to buy up all the stock to liquidate the parks, it would be like throwing bad money after worse money. They didn't want to do it before, so now they want to do it to spite Six Flags and make them close parks and sell them, so they can lose even more money? Let's face it, there aren't that many other operators out there looking to buy right now, and if a company goes bankrupt, how much do they get in a liquidation? HRP sold for what, $25 million?

That doesn't make any sense. Whomever started that idea is crazy, period.

I admit I was one that fell for their EBITDA and thought that they were doing great. However once I looked into it I now think that it's going to take a miracle to get this company back on its feet all in one piece. I just don't see Six Flags being able to pull through this without selling off parks, temporarily closing some of the parks, or subscribing to massive layoffs.


But here's the thing -- I think most people are looking at this like Circuit City or the auto industry, and it isn't like them in either way.

Circuit City had a huge debt load and tons of stores that were not making much (if any) money. Their stores were worth more closed and liquidated then they were open, so that is exactly what happened -- the Circuit City stores closed and were liquidated.

Six Flags parks are not worth more closed and liquidated or they already would have been. Astroworld for instance was liquidated because they thought that the land under it was worth a ton more than it ended up being worth. Having used rides and moving them from park to park is generally more pricey to move than you'd expect, so while there would be some savings to moving stuff from another park, it wouldn't be huge.

In the auto industry, there have been massive layoffs and plant closings while the business still operates, but I wouldn't expect to see this out of Six Flags because if the business is profitable, they wouldn't be closing it down. It isn't like GM is saying, "Man, Hummers are really flying off the shelves, but we better shut it down!" They are closing down and selling or just shuttering lines that are not making money.

The Six Flags parks, from what we know, are making money. Even if lets say that a park like SFA only makes $1 million in profit a year. If that park is shut down, how much is the land really worth? How much could you get from the rides that are on it? Probably not much. And, since it is profitable, it makes more sense to leave it open, earning its meager $1 million (no idea if that is true or not, they don't break it down like that in earning reports) a year than not.

So, I would expect just what the chain has said -- business as usual. This is an issue that is really a back of the house sort of thing, where the banks and bondholders should have never granted the money that they did when they did, but because they risked it (and that's the key thing here, anything in stocks and bonds is a risk), because they failed to do their homework, they will lose most of it. This could have all been avoided if, when Gary Story was originally on his rampage to buy every park in the world, people had said "No." and "Show us the business plan." and then studied it.

As for the EBITDA stuff, it's a measure that is used whether for good or for evil by firms throughout the world. The bigger thing to look at (which they only started reporting this year, presumably because in the past it would have really shed a light on the house of cards that EBITDA has been for them) is free cash flow. The chain reported their first ever 'Free Cash Flow' year, which was reported at $5,607,000. While that isn't a ton of money, the fact is that Free Cash Flow is looked at as the money that is distributable to bond and shareholders after everything else has been satisfied for the year, including new capital. The year before was reported this year as about a $165 million loss in free cash flow, so it was quite the turnaround.

Now, if you take out 75% of the interest payments (shown for 2008 as $167,166,000), you have a $41,791,000 interest load that you're carrying. If the parks had that, the parks would have been $130,982,000 on the free cash flow side last year, and would have only had a loss of $40,589,000. The two years together would have been a profit of over $90 million dollars. While that isn't perfect, that would give the chain the ability to pay off their entire debt (including assuming interest payments would be the same, which wouldn't be the case) in about 15 years. If they have profit like last year, it would allow them to pay it off in less than 6 years.

So, long story short, what happened here was a completely unsurmountable level of debt taken on by the Premier acquisitions, and the mismanagement of it after that point. Thanks to the fact that with the financial crunch we're in now, banks aren't just willing to toss $1.8 billion in the way of a company that hasn't been making money to cover their payments, it means that this is being dealt with by harming the people who didn't investigate the company earlier with the bonds that were made then.

This is what investing is all about, and because the core business of Six Flags (providing the service of amusement parks) makes money still and not all will be lost, Chapter 11 will allow them to reorganize like this.

In the case of Circuit City, chapter 11 led them to realize that they wouldn't make money anywhere with their business model, which caused the chapter 9 liquidation. Six Flags will have to have a lot go wrong for this to suddenly become chapter 9.

However I would be a very happy man (okay boy) to see myself proven wrong.


Hopefully, the above will help to get you to that point. They still have a ways to go (the amusement park business fluctuates SO much year to year, it is hard to sit back and have any real idea where they will land), but this is the correct first step on their road toward becoming a (potentially very) profitable operator.

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Postby EnglndPatriots6 » Fri Jun 19, 2009 9:38 am

KDCOASTERFAN wrote:
astroworldfan1 wrote:
EnglndPatriots6 wrote:as long as kentucky kingdom doesnt close ill be happy tho lol. but i demand they add more rides to the park


You want SF to add rides to add rides to SFKK. But, if they add rides, SF will add to their debt...

-Tatum


While that may be true then perhaps SFI should consider NOT adding rides to ANY of their parks for a year or two as a means to save money.Adding all these big coasters to SFMM & SFGRADV every other year is partly,if not mostly to blame for the mess that they're currently in.


Thats my idea, but i just checked a site about what parks are getting a new coaster and it said SFMM new coaster next year. its really insane if you ask me.

And the thing about Cedar Fair taking some, i meant like how they have all those parks up in IN, and OH, they might take some of the local SF parks in the area, like KK, the one in Illinois and so on.

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Postby jamesdillaman » Fri Jun 19, 2009 9:56 am

^The only thing CF would do with SFKK is exactly what they did to Geauga Lake. If that's what you want, then you can come up to Kings Island and ride Chang. Let me know when you're coming, I'll meet you there....

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Postby goatdan » Fri Jun 19, 2009 10:05 am

astroworldfan1 wrote:You want SF to add rides to add rides to SFKK. But, if they add rides, SF will add to their debt...


Ah, but this is all a balancing act. The parks run the risk of having a huge attendance shortfall if they don't add anything, and they could potentially have a huge increase if they add something new. Coaster-centric parks (like the Six Flags chain) swing more toward the 'need to add something new' side of the coin than theme based parks to increase or keep their attendance going.

The problem with the previous management wasn't adding a new ride here and there, it was a problem with adding huge ride packages all at once. Adding four coasters to Ohio in one year, or more than one anywhere does almost nothing different than adding one in a single year. And it strained their infrastructure greatly -- I visited Six Flags Ohio the year they did that, and the rest of the park was dirty and stuff wasn't open, giving me the impression I never needed to go there again. One coaster and some infrastructure upgrades would have been much better (and cheaper), and left me wanting to return.

KDCOASTERFAN wrote:While that may be true then perhaps SFI should consider NOT adding rides to ANY of their parks for a year or two as a means to save money.Adding all these big coasters to SFMM & SFGRADV every other year is partly,if not mostly to blame for the mess that they're currently in.


It definitely isn't mostly the problem. It may be partly the problem, because the old management was only focused on one demographic, which was the thrill rider demographic. And by focusing only on that demographic, they skipped over the more profitable and sustainable family market.

Big coasters definitely have a place in the theme park landscape. You add one, and you get a definite boost in attendance, while family rides are more investments that can attract people for years. Look at Disneyland. Their last big addition was the Nemo Subs and before that was basically Indiana Jones in 1995. And they aren't having trouble bringing in huge attendance days still because family rides last longer.

But, when you rip out family rides to toss in only thrill rides, you have to constantly update them to get a return. So, they were doing things right sort of, but the thrill riding demographic is not close to enough to keep a park afloat all by themselves.

EnglndPatriots6 wrote:Thats my idea, but i just checked a site about what parks are getting a new coaster and it said SFMM new coaster next year. its really insane if you ask me.


Magic Mountain, especially in the market they are in, really has to have the thrill aspect to compete, which means I would expect them to continue to get new major thrill rides every couple years. If you want a family park, you have Disneyland and you had Knotts until Cedar Fair took away most of the family atmosphere, so those are much harder demographics to crack there.

And the thing about Cedar Fair taking some, i meant like how they have all those parks up in IN, and OH, they might take some of the local SF parks in the area, like KK, the one in Illinois and so on.


Cedar Fair doesn't have any parks in Indiana, and I don't know why they would be so gung ho to grab all the parks close to markets that they already have parks in anyway. When they did that with Six Flags Worlds of Adventure, they ended up closing it. And really, what sense did it make buying it to begin with? It would make more sense for Cedar Fair to invest in parks no where near to their others.

Having said that, Cedar Fair is the ultimate in coaster operators. They have done what Six Flags from 1999-2005 was trying to do way better than Six Flags ever did it, which is own and operate parks based almost entirely on their thrill content. They made Cedar Point into a very popular park by having almost nothing but thrill coasters at it.

But their problem is that their expansion has given them a lot of these other parks that used to attract everyone. Who knows what will happen with those, as rides like Diamondback at Kings Island is a great addition, but unless it is followed with family entertainment, it will eventually erode their base like what they have done with Knotts.

Coasters can only do so much, but since Cedar Fair did such a great job managing Cedar Point with just coasters, I think they are sorta blind to that. They might do things to make coaster fans happier with the parks if they were to get them in a short term basis, but in a long term basis, I think that Cedar Fair would (and maybe will) end up with the same crisis that Six Flags ended up with to get to this point.

If you want to read more about why parks invest in things even when they aren't necessarily profitable, I'd suggest checking out the book Walt's Revolution: By the Numbers written by Harrison "Buzz" Price. It discusses the whole mystery of Capital Expenditures, why they happen and what they can bring.

Fascinating industry. And very tough to easily understand.

This all reminds me, at some point soon I need to sell my Cedar Fair shares... maybe near the end of this year.

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