Six Flags (SIX)

TOP CONTRIBUTORS

Andrew Lewis

Alan Ibrahim

Six Flags (NYSE: SIX) is the largest regional theme park operator in the world and owns or operates 19 theme parks throughout North America. The company's only business segment involves the operation of its regional theme parks which generates theme park admission revenue and in-park sales income. Six Flags holds exclusive long-term licenses for the use of Warner Brothers and DC Comics characters like Bugs Bunny, Daffy Duck, Batman, and Superman; in addition to planting walk-around characters in its parks and using licensed characters for advertising, Six Flags builds character-inspired rides that are an important marketing tool. The company 's parks have an annual attendance of around 24 million people. ^[1] The company earned $912 million in revenue but incurred a net loss of $64 million in 2009.^[2]

Six Flags has only turned a profit once since 1998, and in 2009 filed for Chapter 11 bankruptcy protection due to the accumulation of $2.5 billion in debt.^[3]

Company Overview

Six Flags is the largest regional theme park operator and the second largest amusement park operator in the world. Although approximately 24 million people visit its 19 operating theme parks each year, the company has posted a positive net income just once since 1998. Six Flags operates as a seasonal business - over 84% of park attendance and revenues are generated between the second and third quarters of the calendar year - and primarily generates its income through ticket sales, in-park food and merchandise sales, and sponsorship revenue.^[4]

Business Segments^[5]

Six Flags manages its operations on an individual park location basis; financial information is kept for each park and regularly submitted to management for review and decision-making. The company has only one official segment - "operation of theme parks" - since the company's parks all provide similar services to a similar group of customers. Six Flags' parks are:

• Six Flags America: A 131-acre combination theme and water park in Largo, Maryland. This park's primary market is in Maryland, northern Virginia, Washington D.C., and parts of Pennsylvania and Delaware; a permanent resident population of approximately 7.5 million people live within 50 miles and about 12.7 million within 100 miles. Six Flags owns approximately 300 undeveloped acres at this site which can be used for further development.

• Six Flags Discovery Kingdom: Formerly Six Flags Marine World, this Vallejo, California-based park features rides, marine mammals, and land animals. Near San Francisco, Oakland, and Sacramento, Discovery Kingdom is surrounded by a permanent resident population of 5.7 million within 50 miles and 10.9 million within 100 miles.

• Six Flags Fiesta Texas: A 216-acre combination theme and water park in San Antonio, Texas. A permanent resident population of approximately 2.1 million people live within 50 miles of the park and about 3.7 million live within 100 miles.

• Six Flags Great Adventure, Six Flags Hurricane Harbor, and Six Flags Wild Safari: These three adjacent but separately-gated parks in Jackson, New Jersey serve the New York and Philadelphia markets, with a permanent resident population of about 13.9 million within 50 miles and 28.2 million within 100 miles. The parks occupy approximately 635 acres of a 2,200-acre site and about 700 acres are available for future development. Great Adventure acts as a traditional theme park, Hurricane Harbor as a water park, and Wild Safari as an animal park with over 1,200 animals representing more than 55 species.

• Six Flags Great America: A 234-acre combination theme and water park in Gurnee, Illinois. A permanent resident population of approximately 8.8 million people live within 50 miles of the park and about 13.7 million live within 100 miles.

• Six Flags Magic Mountain and Six Flags Hurricane Harbor: These two adjacent but separately-gated parks in Valencia, California serve the Los Angeles, California market, with a permanent resident population of about 10.6 million within 50 miles and 17.7 million within 100 miles. The parks occupy about 260 acres.

• Six Flags Mexico: Six Flags acquired Reino Aventura, the largest paid admission theme park in Mexico, and rebranded it as "Six Flags Mexico" in 2000. Located on approximately 107 acres in Mexico City, the park serves the Mexico City, Cuernavaca, Puebla, and Toluca markets, with about 25 million permanent residents within 50 miles and about 35 million within 100 miles.

• Six Flags New England: A 126-acre combination theme and water park in Springfield, Massachusetts about 90 miles west of Boston. A permanent resident population of approximately 3.2 million people live within 50 miles of the park and about 15.6 million live within 100 miles.

• Six Flags Over Georgia and Six Flags White Water Atlanta: Six Flags Over Georgia is a 238-acre park about 20 miles outside of Atlanta. A permanent resident population of approximately 5.1 million people live within 50 miles of the park and about 8.2 million live within 100 miles. White Water Atlanta is a water park is about 20 miles from Over Georgia. Six Flags owns only a 26% stake in these parks as the managing general partner in a Georgia-based partnership.

• Six Flags Over Texas and Six Flags Hurricane Harbor: These two adjacent but separately-gated parks in Arlington, Texas, serve the Dallas and Forth Worth markets, with a permanent resident population of about 6.0 million within 50 miles and 7.1 million within 100 miles. The parks occupy about 187 and 45 acres respectively. Six Flags owns only a 38% stake in these parks as the managing general partner in a Texas-based partnership.

• Six Flags St. Louis: A 224-acre combination theme and water park in Eureka, Missouri, about 35 miles west of St. Louis. A permanent resident population of approximately 2.7 million people live within 50 miles of the park and about 3.9 million live within 100 miles.

• La Ronde: Located in Montreal, Quebec, on the 146-acre site of the 1967 Montreal Worlds Fair. A permanent resident population of approximately 4.3 million people live within 50 miles of the park and about 5.8 million live within 100 miles.

• The Great Escape and Six Flags Great Escape Lodge & Indoor Waterpark: A 132-acre combination theme and water park in Lake George, New York. The Great Escape Lodge & Indoor Waterpark has a 200 suite hotel and 38,000-square foot water park. Six Flags owns a 41% interest in this facility. These parks' primary markets are the Lake George tourist population and the residential populations of upstate New York and New England; a permanent resident population of approximately 1.1 million people live within 50 miles and about 3.1 million within 100 miles. Around 7.9 million tourists visit Warren County, where Lake George is located, annually.

Business Growth

FY 2009 (ended December 31, 2009)^[2]

• Net revenue fell 10.6% to $912 million. Theme park admission revenue decreased by 8.4% while sales from food and merchandise fell by 10.8%. The company's parks also suffered from a 6% decrease in attendance. Per capita spending fell 5% to $36.58.
• The company reported a net loss of $64 million compared to a gain of $53 million in the prior year.

Trends and Forces

Theme Park Attendance Suffers In Sluggish Economy

Because theme parks provide a discretionary service, they are often susceptible to the pressures of the economic environment. In a sluggish economy, consumers cut back on discretionary spending and as a result theme parks suffer from lower attendance. Additionally, the consumers that do end up going to theme parks typically spend less on food, drinks, and merchandise, also hurting the revenues of the park. In 2009, attendance at Six Flags parks fell 8.4% and sales from food and merchandise fell 10.8%.^[2]

Competition

The Walt Disney Company

Six Flags is the second leading amusement park operator in the United States behind the Walt Disney Company. While Disney's Parks and Resorts segment focuses on attracting visitors from across the globe to visit its parks, Six Flags targets its local demographic and does not seek to advertise internationally.

Cedar Fair

Cedar Fair is a regional theme park operator that owns and operates many parks that directly compete with Six Flags.

Busch Entertainment Corporation

A subsidiary of Anheuser-Busch, the Busch Entertainment Corporation ("BEC") operates nine theme parks across America, including the Sea World and Busch Gardens parks.

Competing Parks

Each of SIX's parks competes with different parks within its region.

References

1. ↑ SIX 2009 10-K "Introduction" pg. 1
2. ↑ ^{2.0 2.1 2.2} SIX 2009 10-K "Selected Financial Data" pg. 40
3. ↑ SIX 2009 10-K "Reasons for Bankruptcy" pg. 7
4. ↑ SIX 2009 10-K "Seasonality" pg. 22
5. ↑ SIX 2009 10-K "Description of Parks" pg. 16-18