• Six Flags Over Texas ought to reinvent itself, but its parent company is dogged by big losses and bigger debts.
Serious money is about to start flowing into the entertainment district of Arlington.
A new stadium for the Dallas Cowboys. Wide bridges and interchanges for the highways. And further on the horizon, some kind of a mixed-use development for sports fans and shoppers.
For Six Flags Over Texas, there couldn't be a better opportunity for an extreme makeover. After years of declining attendance, all the activity next door will give Six Flags a chance to pull in thousands of new customers and renew ties with others.
If only the amusement park could pull it off.
Unfortunately, the park's operator says it doesn't need any reinvention.
Maybe that's the easy way to avoid a conversation on the bigger problem: It doesn't have the money to do anything dramatic.
The park's parent company, Six Flags Inc., recently reported a net loss of almost half a billion dollars for 2004.
It hasn't made a profit since 1998. That's when Premier Parks, an Oklahoma City outfit that began as a real estate company, bought the Six Flags chain from Time Warner for $1.9 billion.
The group also spent hundreds of millions more for theme parks in Europe and elsewhere.
The idea was to rebrand the various properties under the Six Flags flag, fix 'em up and capitalize on the well-known name.
It hasn't worked. The company has nearly $2.2 billion in debt and a stock market value of $450 million, a quarter of what it paid for the Six Flags parks alone.
One year after the Six Flags buy, the stock price was near a split-adjusted $40 a share. On Friday, it closed at $4.35.
In an e-mail, the company's chief financial officer, James Dannhauser, wrote that buying Six Flags "was an excellent transaction for our company."
He predicts improved performance after new investments in rides and an advertising campaign.
The results couldn't get much worse.
It seems obvious today that Premier vastly overpaid for its amusement and water parks, probably borrowed too heavily to get them and hasn't exactly set the world on fire with its operational management.
Six Flags Over Texas is insulated from some of the financial turmoil. Or at least its owners are, because they're governed by a separate deal.
In Arlington, Six Flags Inc. has a minority position in the park, with an option to pay off the limited partners by 2028. It has a similar contract with Six Flags Over Georgia.
It's a sweet deal for those limited partners, led by Dallas businessman Jack Knox. Partners at both parks get an annual distribution, along with a guaranteed price for all the holdings.
This year, according to the company's 10-K form filed last week, the limited partners will get a total distribution of $54.9 million.
In addition, Six Flags is required to reinvest at least 6 percent of park revenues in capital improvements. In 2005, that will total about $6 million for both parks.
That's not much for such an enterprise. Corporatewide, Six Flags is investing twice that level to add rides and improve other parks.
The Arlington park has received better treatment in the past. One reason is that the original sale required Premier to quickly pump $30 million into new attractions.
In Arlington, a Batman ride opened in 1999, the Titan roller coaster in 2001 and the Superman Tower of Power in 2003.
New coasters are an old-school way of goosing attendance. Amusement parks used to be able to count on getting a big bump by simply adding a new thrill. More recently, the added attractions simply hold on to market share.
Attendance at Six Flags' parks has been falling steadily since 2001, along with its revenue. The company doesn't break out performance of individual parks, but a trade publication, Amusement Business, annually estimates the total.
It's not a pretty picture for the local park. The magazine says that Arlington attendance peaked at 3.1 million in the mid-1990s and hit 3 million again in 2001. Since then, it has dropped steadily, bottoming out at 2.2 million in 2004.
Nationally, Six Flags Over Texas ranked No. 16 among amusement parks less than a decade ago. In 2004, it was No. 26, the magazine says.
Six Flags officials say the numbers are inaccurate, although it cites the rankings in its financial reports. And the trend line mirrors the company's overall performance.
Yet when I asked whether Six Flags had the financial muscle to invest in a make-over, a spokeswoman in Oklahoma City was taken aback.
"Do you think it needs to be reinvented?" she asked.
Dannhauser had a similar reaction. Regularly investing in new rides and shows is enough, he wrote.
I don't think the status quo will cut it, not over the long term. It's a question of squandered opportunity.
In my view, the park must find a way to connect with the village that will eventually be part of the new stadium. When voters were weighing the stadium issue, local Six Flags officials pledged to get into the act and work with the sports teams.
Perhaps the park can build a separate main street that invites pedestrian traffic, without any admission charges.
Maybe it can figure out a pricing structure so folks touring the area are tempted to drop in for a few rides or a few hours. And what about something more for people who don't go for thrill rides?
I'm suggesting that Six Flags Over Texas consider a whole new way of thinking. The billion-dollar-plus investment envisioned around the park changes everything.
Six Flags doesn't have to rush. The Cowboys stadium won't be finished until 2009, and the Super Bowl won't be here until two years later.
But by then, the parent company's big financial hits will be coming due: $480 million in payments in 2010, more than $1.2 billion five years later.
The company plans to refinance the debt, of course. But it has serious issues.
"We have a history of net losses and expect to continue to report net losses for the next several years," Six Flags states in the 10-K.
"We will have to use a significant part of our cash flow to make payments on our debt, to pay the dividends on preferred stock ... and to satisfy other obligations, which may reduce the capital available for operations and expansion," it says.
This does not sound like an organization that can contemplate a major upgrade of the original Texas amusement park.
"They don't have the money to be able to do it," says Dennis Speigel, president of International Theme Park Services, a consulting company in Cincinnati.
In his view, the best-case scenario is a change in management and ownership. Somehow Six Flags has to be restructured; perhaps with new investment, perhaps with something more extreme.
The best hope for Arlington is that it happens sooner rather than later.
There's plenty of time to nurture a rebirth at Six Flags Over Texas. But there's not forever.
I think it's idiotic that Six Flags is going to have this opportunity with 2 MAJOR sports venues less than 5 square miles away from the park. A Super Bowl coming on 2011. Any improvements made to the park over the next 6 years can be made up with 1 full football season and 1 super bowl week. Easily.
SFOT, IMO is in a perfect geographical area. Moreso than Disneyland and a hell of alot more than SFMM.
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