Six Flags Amusement Park Expects Rebound

Six Flags Inc. is hoping an improving economy will bring more thrill-seekers to its amusement parks this year and end a streak of five losing years in a row. <br><br>The Oklahoma City-based amusement park

Sunday, March 7th 2004, 12:00 am

By: News On 6

Six Flags Inc. is hoping an improving economy will bring more thrill-seekers to its amusement parks this year and end a streak of five losing years in a row.

The Oklahoma City-based amusement park operator last week reported a fall in attendance for the second straight year at its 39 theme parks. The company blamed poor weather and a soft economy.

Investors have seen Six Flags' stock fall from $40 per share in summer 1999 to a low of $3.29 in October 2002. It closed at $7.83 on Friday. Only one of eight analysts covering the stock currently rates it as a ``buy,'' according to Thomson First Call.

Despite dismal stock prices and negative profit margins, Six Flags management appears unworried by larger industry trends.

``We remain a large and independent company and expect to remain so for the foreseeable future,'' said Debbie Nauser, Six Flags' spokeswoman.

Executives maintain that the company's balance sheet is healthy, despite $2.3 billion in debt that will require interest payments totaling about $195 million this year.

The company had about $115 million in cash at year-end and has aggressively refinanced most of its debt in recent months, giving it significant breathing room until 2008.

Six Flags' poor performance in recent years was cyclical, executives said, and not a sign that the amusement park business itself is in decline.

``Our immediate challenge for 2004 is to arrest the attendance decline of the past two seasons and to begin the process of returning our parks' performance levels back closer to historic averages as the economic environment continues to improve,'' said Kieran Burke, the company's chairman and chief executive officer.

The theme park industry is expecting a rebound this year, said International Association of Amusement Parks and Attractions spokeswoman Beth Robertson.

U.S. attendance slipped 0.6 percent in 2003 to 322 million, stopping a decade-long streak of annual attendance increases. Revenue, however, rose 4 percent to $10.3 billion in 2003, according to the association.

``That can be attributed to the dreadful weather of last year,'' Robertson said. ``But as soon as people could get out in the parks and out in the weather, they were out there spending and enjoying.''

Robertson said theme park suppliers and ride manufacturers were reporting an increase in orders at the industry's trade show in November, a good sign for 2004.

``We're looking for a real positive season,'' she said. ``We're seeing people traveling more. They're returning more to destination parks as well as enjoying their regional locations.''

Burke said Six Flags, which has theme parks in 15 states, is looking to cash in on that rebound.

With the exception of a few large metropolitan areas such as Los Angeles, the company benefits from having little or no competition at its regional theme parks.

Six Flags has also slashed the amount it will spend on new rides and attractions this year.

Those capital expenditures are key for the industry, which relies on innovative and exciting rides to draw visitors to parks. Six Flags plans to spend $75 million on capital improvements this year, down from $112 million in 2003.

The company spent $140 million on rides and improvements in 2002.

``We believe the prudent course of action is to reduce investment levels until the economic recovery solidifies and increased investments can have a more meaningful impact on performance,'' Burke said in a recent conference call with analysts.

Tim O'Brien, author of the ``Amusement Park Guide'' and a longtime theme park observer, said Six Flags is wisely spending money on creature comforts.

``Six Flags is spending less money on new rides this year and more money on solving some of their problems they've had in the past that people have been complaining about,'' O'Brien said. ``They feel most of their ride arsenals have reached a critical mass after they've built them up over the years. Now they're going to start refining their guest services.''

Six Flags operates amusement parks in California, Colorado, Georgia, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, Missouri, New Jersey, New York, Ohio, Oklahoma, Texas and Washington. It also has theme parks in Canada, Mexico and Europe.