Six Flags Inc.

founded: 1989

Contact Information:

headquarters: 11501 northeast expwy.
oklahoma city, ok 73131 phone: (405)475-2500 fax: (405)475-2555 url: http://www.sixflags.com

OVERVIEW

Six Flags Inc. is the world's second largest theme park operator. It is second in size only to Walt Disney. Unlike Disney's parks, Six Flags' parks are meant to be experienced in a single day. The 39 parks are spread throughout the world and each reflects a unique regional personality. Most of Six Flags' customers live within in a 150-mile radius of its parks. Each park offers different themes and attractions. The parks operate on a seasonal basis, usually from Memorial Day until Labor Day. Some parks have longer operating seasons depending on the local climate. The company generates the majority of its revenues during the second and third quarters of each year, which is optimal park season. Attractions include thrill rides, water rides, live entertainment, and concerts.

COMPANY FINANCES

Six Flags posted a net loss of $58.1 million on $1.1 billion in revenues in fiscal year 2001, which represents the third consecutive year that the company has lost money. In 2000 the losses totaled $52 million on revenues of nearly $1.1 billion—an increase on the 1999 loss of $30 million. In 2000 some 54 percent of revenues were derived from admission fees, while 46 percent was derived from sales of food and merchandise.

ANALYSTS' OPINIONS

Six Flags ended 2001 falling slightly short of analysts' predictions; however, much of the downturn can be attributed to the September 11, 2001, terrorist attacks. Prior to the events of that day, the company had been building momentum going into the fall. Frederic E. Russell, a Tulsa money manager, said that the setback should not be surprising. Attendance at theme parks and destination vacation resorts collectively plunged during the final months of 2001. By March 2002 the financial landscape showed signs of improvement. The company posted a smaller than expected fourth quarter loss for fiscal year 2001. Goldman Sachs analyst Chris Cox upgraded the company to a "trading buy" and predicted that a seven to eight percent growth in earnings was possible for 2002.

HISTORY

Tierco Group Inc., the original company behind Six Flags Inc., got into the theme park business almost by accident. Tierco, an Oklahoma City-based developer of commercial property, in 1982 bought Frontier City, a rundown Oklahoma City theme park, with the intention of razing the park to make way for an office complex. The Oklahoma economic slump intervened, putting the local real estate market into a tailspin. Generating more money as a theme park than it would if converted into commercial real estate, Frontier City was saved.

A whole new enterprise began to take shape in 1989 when Tierco's major shareholder took direct control of the troubled company in a financial restructuring. As part of the restructuring, all of Tierco's assets were relinquished to lenders, except Frontier City. Soon after assuming control, the new management team embarked on a two-year capital program to reposition and revitalize the 30-year-old Frontier City. By 1990 Tierco was transformed from a real estate developer into the operator of a single theme park. However, Frontier City was not to remain the company's sole attraction for long. In 1991 the company purchased White Water Bay, a winter adventure park in Oklahoma City. The following year the company went out of the hometown market and acquired Wild World Amusement Park, located between Baltimore and the District of Columbia. The park's name was changed to Adventure World in 1994.

The fledgling operator of theme parks changed its name to Premier Parks Inc. in 1994. In 1995 Premier purchased Ohio-based Funtime Parks Inc., acquiring Geauga Lake, Wyandot Lake, and Darien Lake theme parks in the process. Things really took off for Premier Parks in 1996 when the company raised nearly $70 million in an initial public offering. Armed with fresh capital, company officials went searching for new acquisitions. That year alone, Premier purchased Elitch Gardens Amusement Park in Denver, Colorado; Waterworld USA water adventure parks in Concord and Sacramento, California: and Great Escape and Splashwater Kingdom in Lake George, New York.

Premier pursued a vigorous program of expansion into 1997, purchasing Riverside Amusement Park in Agawam, Massachusetts. A secondary public offering in early 1997 raised another $200 million for Premier. In April 1997, the company assumed management of Marine World Africa USA. Later this year Premier acquired Kentucky Kingdom theme park in Louisville and purchased the site of the Old Indiana in Indianapolis for redevelopment as a theme park. In fall 1997, Premier announced that it had negotiated a definitive agreement to purchase Walibi Family Parks in Western Europe. In December 1997, the company's stock, which had been traded on the NASDAQ Exchange since the company first went public in 1996, began trading on the New York Stock Exchange.

All that had gone before was dwarfed by the company's stunning 1998 acquisition of the Six Flags theme parks from Time Warner Entertainment and an investor group led by Boston Ventures for nearly $1 billion in cash and an assumption of about $900 million in debt. In one fell swoop, the company added to its stable 12 of the most popular regional theme parks in the country. A short time later, Premier finalized its acquisition of Walibi, which operates six theme parks in Western Europe—three in France, two in Belgium, and one in the Netherlands.

As the world entered the twenty-first century, Six Flags Inc. entered the world. Beginning in 2000 the company focused on non-U.S. acquisitions. Six Flags Mexico, Warner Brothers Movie World Madrid, Montreal's La Ronde, and Warner Brothers Movie World Madrid were all integrated into operations. International parks accounted for 15 percent of gate revenues in 2001.

STRATEGY

Six Flags holdings consist of a diverse set of properties around the world. Despite the size and scope of operations, management has devised and implemented a global marketing strategy. National marketing programs are designed to promote the Six Flags brand name. To further enhance this strategy, 11 parks have been re-branded under the Six Flags name since 1998. Three of the renamed parks were international holdings. In 2000 Six Flags entered into a marketing agreement with America Online (AOL)/Time Warner. America Online promised to feature Six Flags prominently in its sites and include Six Flags as its official theme park sponsor. Six Flags will provide ticket discounts and special offers to AOL customers and use its software in its U.S. theme parks. This alliance provides Six Flags with exposure to a worldwide audience.

In addition to global brand marketing, parks are promoted through local media outlets. The emphasis is placed on the individual park and its unique features and specific attractions. Regional companies are often approached to distribute discounts or premium offers to customers in the local area of a park. This strategy allows geographic or cultural themes to be featured in advertising.

Direct marketing and telemarketing are also key components in the campaign for customers. Group sales constituted 34.5 percent of sales in 2001. Each park has its own group sales team that targets different markets in the area. The season pass is also a profitable marketing channel. Pre-sold attendance instruments assure revenues regardless of unexpected changes in the economy or inclement weather. Discount tickets, coupons, and other offers are also effective in bolstering attendance. Historically, in-park spending by consumers offsets the revenue loss on a discount ticket.

FAST FACTS: About Six Flags Inc.

Ownership: Six Flags Inc. is a publicly traded company on the New York Stock Exchange.

Ticker Symbol: PKS

Officers: Kieran E. Burke, Chmn. and CEO, 43, salary $773,240; Gary Story, Pres., COO, and Dir., 45, salary $587,423; James F. Dannhauser, CFO and Dir., 48, salary $459,289

Employees: 43,081

Principal Subsidiary Companies: Six Flags Inc. is a multi-national corporation with operations in 39 locations throughout the United States, Canada, and Europe.

Chief Competitors: Six Flags Inc. is the second largest amusement and theme park operator in the world. Its primary competitors are in the entertainment and theme park industries, including Walt Disney, Universal Studios, Viacom Entertainment, Cedar Fair Ltd., and Anheuser Busch.

INFLUENCES

All marketing or promotional campaigns are updated or completely changed each season. The company faces an ongoing challenge to keep its image fresh and exciting. A number of elements are combined to produce a plan for each park. Six Flags owns licensing rights to a number of well-known fictional and cartoon characters including Warner Brothers and DC Comics animated characters, including Superman, Batman, Bugs Bunny, and Daffy Duck. Additionally, the company has acquired rights to some Cartoon Network and Hanna-Barbera characters for use in Europe and Latin and South America; these characters include Scooby Doo, the Flintstones, and Yogi Bear. Ownership of these characters allows the company to take advantage of trends and capitalize on marketing opportunities. In 2002, a live action Scooby Doo film is expected to resurrect interest in that character and his cohorts. Many comic book heroes are receiving the large screen treatment, and Six Flags will utilize all avenues of promotion presented.

Local and regional customs are also critical in creating appeal for park guests. Food, music, concerts, and theme events are designed to reflect the culture and appetite of the area.

CURRENT TRENDS

Six Flags has created a vast empire of theme parks largely through purchasing and revitalizing existing sites. It is highly likely that this will continue to be the model for any planned expansion. Analysts at Six Flags have determined that it would cost more than $200 million and take at least two years to design and build a regional theme park comparable to its holdings. In addition, it has become more difficult to secure the necessary permits to undertake such a project. Environmental regulations are increasingly stringent, and compliance with all appropriate codes and laws can be extremely costly.

In 2002 Six Flags is focused on increasing attendance at each park and maximizing customer spending at each venue. In order to achieve this goal, the company attempts to rotate attractions every two years, which allows an attraction to remain new and exciting to the thrill-seeking public. The development of new rides is also a continuous process that helps to maintain interest in the parks.

PRODUCTS

In 2002 Six Flags operated 39 theme parks in North America and Europe serving more than 46 million visitors. The parks are designed for single day visitation, as opposed to a resort destination park designed for stays of a week or longer. All of the parks provide family-oriented entertainment and attractions. Depending on the regional climate, the attractions range from water parks and thrill rides to concert venues and regional theme shows. Collectively, the parks boast more than 1,430 different rides, which are rotated between parks. Roller coasters are the centerpiece of theme park attractions, and Six Flags owns 185 separate rides guaranteed to thrill even the most seasoned rider. Six Flags theme parks account for 16 of the most popular parks in North America. A complete list of parks and their locations can be found on the company's Web site.

CHRONOLOGY: Key Dates for Six Flags Inc.

1982:

Tierco purchases a run-down amusement park, Frontier City, with intentions to build an office complex in its place

1989:

Tierco's major shareholder assumes control and begins to revitalize Frontier City

1990:

Tierco abandons real estate development and focuses on theme parks

1994:

Tierco becomes Premier Parks

1996:

Premier Parks goes public

1998:

Purchases Six Flags theme parks from Time Warner; begins global expansion with purchase of Walibi Parks

2000:

Changes name to Six Flags Inc.

2002:

Opens Warner Brothers Movie World Madrid

MAKING THE GRADE

Six Flags isn't talking about the rate of the inclines on its latest thrill rides when it talks about grades. It has partnered with a local insurance agency in the Washington DC area to encourage kids to do well in school. As part of an incentive program, children who received A's and B's in their classes are rewarded with a trip to the Six Flags America theme park in Largo, Maryland. The reward program entices the students to work harder to achieve the grades necessary to make the trip, which is held at the end of the school year.

CORPORATE CITIZENSHIP

Six Flags considers itself to be a vital part of the communities surrounding its many parks. In an effort to contribute to the quality of life and give back to the residents, Six Flags participates in many local charitable events. The company donates free passes to many worthy organizations and sponsors events to raise funds and awareness for many causes. In June 2001 Six Flags New England joined forces with the Leary Firefighters Foundation to provide a family night out at the park. The event was held to honor firefighters who died in a tragic fire in 1999 and to demonstrate appreciation for the many firefighters who continue to risk their lives in the protection of others.

GLOBAL PRESENCE

Six Flags operates 39 theme parks in the United States and Belgium, Canada, France, Germany, Holland, Mexico, the Netherlands, and Spain. In 2001 approximately 84 percent of sales originated in the United States, with the remainder attributed to international operations. There are 10 international properties, but this number is expected to increase. The most recent addition to the international roster is Warner Brothers Movie World Madrid. Six Flags is developing the park, which was slated to open in April 2002.

X MARKS THE SPOT

The extreme sports craze is everywhere and Six Flags is no exception. In an attempt to capitalize on the youth-oriented movement, Six Flags Magic Mountain in Los Angeles has been christened as the home of the "Xtreme" park. "Xperience the Xtreme" is the slogan and the "X" is the premier attraction. The "X" is billed as a one of a kind, first of its kind thrill ride. Unlike traditional roller coasters that operate with the cars running parallel to the track, this ride offers a second axis of rotation. The ride is described as a "prototype vehicle that spins independently 360 degrees forward and backward on a separate axis." Passengers whip through a 3,600-foot track, traveling in a 20-foot-wide winged vehicle that plummets 200 feet to the ground head first, face down, spinning backward and forward, head over heels. Xtra seatbelts required for this ride!

EMPLOYMENT

During the 2001 operating season, Six Flags employed 3,000 full-time employees and 44,000 seasonal workers. A large number of the seasonal employees are teenagers who fall under the jurisdiction of child labor laws. Seven percent of the company's full-time employees are participants in a labor agreement with a national union. These agreements are slated for renewal in 2002 and 2003, and management expects this relationship to continue uninterrupted.

SOURCES OF INFORMATION

Bibliography

bunyan, clytie. "acquisitions boost company; parks operator's formula keeps firm growing." the oklahoman, 15 october 1997.

laval, kevin. "shareholder takes control of tierco: some assets relinquished; frontier city is new priority." the oklahoman, 21 october 1989.

martin, stacy. "theme park firm getting big boost from acquisitions." the oklahoman, 15 october 1995.

mcdowell, edwin. "premier parks is the new monster of the midway." new york times, 21 june 1998.

"meltzer group pays off insurance policy for good grades." pr newswire, 21 august 2001.

meltzer, mark. "six flags to go on spending ride." atlanta business chronicle, 1 june 1998.

payne, charles, and rhonda schaffler. "upgrades & downgrades: six flags waving strong." cnnfn, 20 march 2002.

"premier parks agrees to buy six flags from time warner entertainment and boston ventures for $1.9 billion." business wire, 9 february 1998.

"six flags blames terror attacks for earnings shortfall." ap wire, 8 november 2001.

"six flags inc." hoover's online, 2002. available at http://www.hoovers.com

"six flags new england and the leary firefighter foundation unite for june 8, 2001 benefit." pr newswire, 14 may 2001.

For an annual report:

on the internet at: http://www.sixflags.com/forinvestors/

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. six flags inc.'s primary sics are:

7996 amusement parks

7999 amusement and recreation

also investigate companies by their north american industry classification system codes, also known as naics codes. six flag inc.'s primary naics code is:

713110 amusement and theme parks