Six Flags charts course, but skies aren't clear yet

[GAcoaster]

From the Star Telegram:

 

Six Flags charts course, but skies aren't clear yet

ANDREA AHLES

 

It has been raining on Mark Shapiro’s parade all year.

 

In just his second year as Six Flags chief executive, he has watched the company stock price hover around $2, and has seen bad weather in Texas and a tragic accident in Kentucky contribute to a 9 percent attendance drop in July.

 

Yet his outlook for the theme-park chain remains sunny, even as he stepped through puddles on a recent cold, rainy weekend visit to Six Flags Over Texas’ Holiday in the Park.

 

“The story of this company’s turnaround might be on fast-forward,” but for the bad weather and the accident, Shapiro said.

 

Bottom line

 

Despite Shapiro’s optimism, Six Flags’ rehabilitation isn’t producing results as quickly as planned, and Wall Street is still waiting to see whether the company — saddled with $2 billion in debt — can become a regional Disney, analysts said.

 

“We like the approach; it’s just unclear if it was implemented in time,” Kit Spring, a Denver-based analyst with Stifel Nicolaus & Co., told  Bloomberg News in November.

 

Shapiro was named chief executive in December 2005 after the old management team had been ousted in a proxy battle with Washington Redskins owner Daniel Snyder. The Snyder-Shapiro duo promised investors that they would clean up the chain’s image and reduce Six Flags’ heavy debt load by selling parks.

 

Shapiro mapped out a three-year plan to turn the chain around. The first year was to clean up the parks, the second was to offer more family rides and the third was to bring back thrill rides that would appeal to teens and ’tweens.

 

He appears on target to meet his goals. He raised $312 million in cash by shedding seven parks, and customer-satisfaction ratings have reached new highs, with more families visiting Six Flags and spending 20 percent to 30 percent more than before.

 

And Six Flags Over Texas is adding the Tony Hawk Big Spin roller coaster, which has proven to be a favorite among the younger demographic.

 

The market, however, has not been impressed.

 

The company last month posted a 46 percent drop in net income for the third quarter, disappointing investors who expected better results from Shapiro’s second year. The stock is trading at $2.30, down from its high of $11.93 in February 2006.

 

And although Six Flags restructured its debt in April and has an untapped $300 million line of credit, the company still spends more money on operations than it makes and will post a loss in 2007.

 

“In this marketplace, with a company as highly leveraged as we are, people are running from anybody with credit,” said Shapiro, adding that he spent three days in New York, Boston and Denver in investor meetings. “And truth be told, we haven’t put up any numbers to blow people away.”

 

Attendance declines

 

Some of the parks’ woes go beyond financial management.

 

On June 22, a broken cable on the Superman Tower of Power ride at Kentucky Kingdom severed the legs of a 13-year-old girl. Her family is suing Six Flags, claiming that the park did not properly maintain the ride.

 

“The accident was devastating,” Shapiro said. “It was a tragic, random, freakish accident that hopefully will never be repeated anywhere at any other theme park.”

 

Before that day, attendance across the theme park chain was up 300,000 guests compared with a year earlier. Three weeks later, attendance was down 300,000 guests, a swing of 600,000 in less than a month, he said. The accident was coupled with persistent rainy weather in Texas, where Six Flags Over Texas and Six Flags Fiesta Texas each bring in almost 50,000 visitors on summer weekends. The effects of the wet weather are continuing to linger. On Dec. 7, for example, more than 25,000 people showed up at Six Flags Over Texas for Holiday in the Park when it was a record 84 degrees. The wet weather returned the following weekend, when Shapiro stopped by Arlington for a visit, and only 500 people showed up. “There is no telling what they would have done [in terms of attendance] if they had had good weather,” Shapiro said.

 

Looking brighter

 

Since August, however, attendance has improved steadily and Shapiro expects annual attendance at the chain’s 20 operating parks to be up about 100,000 from the 24.8 million guests who came through the turnstiles in 2006.

 

And despite historic rains in Texas — it was the fourth-wettest year on record in San Antonio — the two parks here will finish the year with higher attendance numbers than last year, Shapiro said.

 

Going into next year, Six Flags Over Texas is leading the company in group sales, which are up 12 percent at all the parks compared with last year. And season passes are selling well, he added.

 

Locally, the Arlington park has already demolished the Wildcatter ride to make room for the $6 million Tony Hawk coaster. The park is also in the middle of a $1 million renovation of its food court, which will be renamed Six Flags All American Café, and officials have applied for a liquor license from the state with plans to sell beer within Six Flags and Hurricane Harbor.

 

Six Flags Over Texas President Steve Martindale said the Batman ride will get a new paint job, just as Mr. Freeze did last year. And the SpongeBob 3D ride will be replaced with a new 3D show called “Fly Me to the Moon” featuring the voices of Kelly Ripa and Christopher Lloyd.

 

Plasma televisions will be going into all of the parks in the next two years along with fiber-optic cables that will allow the parks to control audio and video from a central location.

 

“We can run content for our ride lines and our food lines where people are just standing there, and sell media and advertising,” Chief Financial Officer Jeffery Speed said of the infrastructure improvements.

 

What’s ahead

 

With the continued housing crisis and consumer confidence dropping, however, theme-park analysts say the industry could be in for a tough year.

 

Shapiro said he is not concerned about a possible economic downturn, emphasizing that Six Flags has held up well in previous recessionary periods, excepting the period just after 9-11.

 

He believes that the company will benefit from people choosing to stay close to home to visit entertainment attractions, such as the regional Six Flags parks.

 

And Shapiro acknowledges that with 2008 the final year in his turnaround plan, he must have better attendance numbers regardless of whether it rains in Texas or anywhere else.

 

“It’s put-up-or-shut-up year for us, and we aim to deliver,” Shapiro said.