Market Overview

2017 Off to a Strong Start and Poised to be Another Record Year for Six Flags

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Six Flags Entertainment Corporation (NYSE:SIX), the world's largest
regional theme park company, today announced that revenue for the first
quarter 2017 was $100 million as compared to $115 million for the same
period in 2016. The decline was primarily related to lower attendance
resulting from a previously anticipated visitation shift of
approximately 380 thousand guests due to the Easter holiday falling in
April. The later holiday timing caused many schools to schedule
spring-break vacations in the second quarter versus the first quarter in
2016. After adjusting for the attendance shift, attendance grew
approximately 5 percent.

"Our 2017 season is off to an excellent start with solid attendance
growth through this past weekend," said John Duffey, President and CEO.
"With a 17 percent increase in our Active Pass Base at the end of the
quarter, a new water park opening in Mexico and the best line-up of new
rides and attractions in the company's history, we are very
well-positioned for 2017 to be another record season. We remain
confident in our ability to achieve Project 600 in 2017 and continue to
drive toward our long-term aspirational goal of $750 million of Modified
EBITDA1 by 2020."

Since most of the parks were not open during the first quarter, the
company had a net loss during the quarter of $57.5 million. The loss per
share for the first quarter was $0.63 compared to a loss per share of
$0.51 in 2016. Adjusted EBITDA2 was a loss of $35 million in
the first quarter, representing a $12 million decrease from the first
quarter 2016 primarily due to the attendance shift previously mentioned.
On a constant currency basis3, Adjusted EBITDA declined $11
million.

As a result of continued strong sales of season passes and memberships,
the company's Active Pass Base, which represents the total number of
guests who have purchased a season pass or who are enrolled in the
company's membership program, increased 17 percent year over year. The
increase in the Active Pass Base is consistent with the company's
overall strategy to convert single-day visitors to multi-visit passes.
Season pass holders and members are the company's most valuable guests
since they generate higher revenue and cash flow for the company than a
single-day guest, and also provide an excellent hedge against inclement
weather throughout the season.

Deferred revenue of $157 million increased by $27 million or 20 percent
from March 31, 2016, driven by continued strength in season pass and all
season dining pass sales.

Guest spending per capita for first quarter 2017 was $44.29, a decrease
of $0.55 or 1 percent compared to 2016 primarily due to foreign exchange
translation. On a constant currency basis, guest spending per capita
increased by $0.21 in the quarter.

In the first quarter of 2017, the company invested $52 million in new
capital, which included $5 million of incremental capital expenditures
related to the new water park in Oaxtepec, Mexico. The company also paid
$59 million in dividends, or $0.64 per common share, and repurchased $20
million of its common stock. Net Debt4 as of March 31, 2017,
was $1,683 million, which translates to a 3.4 times net leverage ratio.

This month the company opened a new 60-acre water park in Oaxtepec,
Mexico. This represents the company's 19th park and will
provide opportunities to increase EBITDA and cash flow, as well as allow
the company to leverage its large Active Pass Base at the nearby theme
park. In February, the company also announced a second Chinese licensing
location in the city of Bishan, consisting of a theme park and a water
park, bringing the total number of international Six Flags-branded parks
under development to five.

As previously announced, this spring the company is introducing the best
and most innovative line-up of new rides in the company's history,
including the Thunder Rapids Water Coaster—the world's first rocket
blast water coaster at Six Flags Fiesta Texas; The Joker—a record
breaking 4D free-fly coaster at Six Flags New England, Six Flags Great
America, and Six Flags Over Texas; and Justice League: Battle for
Metropolis—an interactive dark ride with 3D graphics and robust gaming
elements at Six Flags Magic Mountain, Six Flags Great Adventure, and Six
Flags Over Georgia. The company is also introducing two new virtual
reality experiences and new attractions at each of the other theme and
water parks.

Conference Call

At 8:00 a.m. Central Time today, April 26, 2017, the company will host a
conference call to discuss its first quarter 2017 financial performance.
The call is accessible through either the Six Flags Investor Relations
website at www.investors.sixflags.com
or by dialing 1-855-889-1976 in the United States or +1-937-641-0558
outside the United States and requesting the Six Flags earnings call. A
replay of the call will be available by dialing 1-855-859-2056 or
+1-404-537-3406 through May 3, 2017, and requesting conference ID
1772355.

About Six Flags Entertainment Corporation

Six Flags Entertainment Corporation is the world's largest regional
theme park company with $1.3 billion in revenue and 19 parks across the
United States, Mexico and Canada. For 56 years, Six Flags has
entertained millions of families with world-class coasters, themed
rides, thrilling water parks and unique attractions. For more
information, visit www.sixflags.com.

Forward-Looking Statements

The information contained in this release, other than historical
information, consists of forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. These statements may involve risks and uncertainties that
could cause actual results to differ materially from those described in
such statements. These risks and uncertainties include, among others,
(i) the adequacy of cash flows from operations, available cash and
available amounts under our credit facilities to meet our future
liquidity needs, (ii) our ability to roll out our capital enhancements
in a timely and cost effective manner, (iii) our ability to improve
operating results by implementing strategic cost reductions, and
organizational and personnel changes without adversely affecting our
business, (iv) our operations and results of operations, and (v) the
risk factors or uncertainties listed from time to time in the company's
filings with the Securities and Exchange Commission ("SEC"). In
addition, important factors, including factors impacting attendance,
such as local conditions, contagious diseases, events, disturbances and
terrorist activities; recall of food, toys and other retail products
sold at our parks; risk of accidents occurring at the company's parks or
other parks in the industry and adverse publicity concerning our parks
or other parks in the industry; inability to achieve desired
improvements and our aspirational financial performance goals; adverse
weather conditions such as excess heat or cold, rain and storms; general
financial and credit market conditions; economic conditions (including
customer spending patterns); changes in public and consumer tastes;
construction delays in capital improvements or ride downtime;
competition with other theme parks and other entertainment alternatives;
dependence on a seasonal workforce; unionization activities and labor
disputes; laws and regulations affecting labor and employee benefit
costs, including increases in state and federally mandated minimum
wages, and healthcare reform; pending, threatened or future legal
proceedings and the significant expenses associated with litigation;
cyber security risks and other factors could cause actual results to
differ materially from the company's expectations. Although the company
believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such
expectations will be realized and actual results could vary materially.
Reference is made to a more complete discussion of forward-looking
statements and applicable risks contained under the captions "Cautionary
Note Regarding Forward-Looking Statements" and "Risk Factors" in the
company's Annual and Quarterly Reports on Forms 10-K and 10-Q, and its
other filings and submissions with the SEC, each of which are available
free of charge on the company's investor relations website at www.investors.sixflags.com
and on the SEC's website at www.sec.gov.

 

Footnotes

(1)   See the following financial statements and Note 3 to those financial
statements for a discussion of Modified EBITDA (a non-GAAP financial
measure) and its reconciliation to net income (loss).
(2) See the following financial statements and Note 3 to those financial
statements for a discussion of Adjusted EBITDA (a non-GAAP financial
measure) and its reconciliation to net income (loss).
(3) Constant Currency calculations assume prior year results for the
company's parks in Mexico and Canada are translated at current year
foreign exchange rates.
(4) Net Debt (a non-GAAP financial measure) represents total long-term
debt as reported, including current portion, and any short-term bank
borrowings, less cash and cash equivalents.
 
 

SIX FLAGS ENTERTAINMENT CORPORATION

 
Statement of Operations Data (1)
                 

Three Months Ended

Twelve Months Ended
(Amounts in thousands, except per share data) March 31, 2017 March 31, 2016 March 31, 2017 March 31, 2016
Theme park admissions $ 50,948 $ 58,081 $ 708,280 $ 705,354
Theme park food, merchandise and other 31,160 38,290 514,037 510,255
Sponsorship, licensing and other fees 13,290 14,432 65,187 62,123
Accommodations revenue   4,130     4,616     16,003     16,470  
Total revenue 99,528 115,419 1,303,507 1,294,202
Operating expenses (excluding depreciation and amortization shown
separately below)
92,112 94,111 487,408 475,968
Selling, general and administrative expense (excluding depreciation,
amortization and stock-based compensation shown separately below)
34,925 34,257 176,123 180,554
Costs of products sold 7,581 10,138 107,022 103,662
Depreciation 26,643 25,378 105,555 104,029
Amortization 648 650 2,601 2,615
Stock-based compensation 11,990 2,006 126,323 35,932
Loss (gain) on disposal of assets 670 (483 ) 3,121 8,733
Interest expense, net 21,001 19,458 83,415 76,774
Loss on debt extinguishment 2,935 6,557
Other (income) expense, net   (903 )   699     82     994  
(Loss) income before income taxes (95,139 ) (70,795 ) 208,922 298,384
Income tax (benefit) expense   (37,591 )   (23,860 )   62,808     82,138  
Net (loss) income (57,548 ) (46,935 ) 146,114 216,246
Less: Net income attributable to noncontrolling interests           (38,425 )   (38,165 )
Net (loss) income attributable to Six Flags Entertainment Corporation $ (57,548 ) $ (46,935 ) $ 107,689   $ 178,081  
 
Weighted-average number of common shares outstanding:
Weighted-average common shares outstanding — basic: 91,151 92,359 92,051 93,208
Weighted-average common shares outstanding — diluted: 91,151 92,359 94,011 95,433
 
Net (loss) income per average common share outstanding:
Net (loss) income per average common share outstanding — basic: $ (0.63 ) $ (0.51 ) $ 1.17   $ 1.91  
Net (loss) income per average common share outstanding — diluted: $ (0.63 ) $ (0.51 ) $ 1.15   $ 1.87  
 
 
Balance Sheet Data
       
As of
(Amounts in thousands) March 31, 2017 December 31, 2016
Cash and cash equivalents (excluding restricted cash) $ 31,001 $ 137,385
Total assets 2,429,379 2,487,672
 
Deferred revenue 156,892 123,955
Short-term bank borrowings 60,000
Current portion of long-term debt 29,010 29,161
Long-term debt (excluding current portion) 1,625,449 1,624,486
 
Redeemable noncontrolling interests 485,876 485,876
 
Total stockholders' deficit (184,837 ) (186,490 )
 
Shares outstanding 91,257 90,849
 
 

Definition and Reconciliation of Non-GAAP Financial Measures

We prepare our financial statements in accordance with United States
generally accepted accounting principles ("GAAP"). In our press release,
we make reference to non-GAAP financial measures including Modified
EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow. The definition for
each of these non-GAAP financial measures is set forth below in the
notes to the reconciliation tables. We believe that these non-GAAP
financial measures provide important and useful information for
investors to facilitate a comparison of our operating performance on a
consistent basis from period to period and make it easier to compare our
results with those of other companies in our industry. We use these
measures for internal planning and forecasting purposes, to evaluate
ongoing operations and our performance generally, and in our annual and
long-term incentive plans. By providing these measures, we provide our
investors with the ability to review our performance in the same manner
as our management.

However, because these non-GAAP financial measures are not determined in
accordance with GAAP, they are susceptible to varying calculations, and
not all companies calculate these measures in the same manner. As a
result, these non-GAAP financial measures as presented may not be
directly comparable to a similarly titled non-GAAP financial measure
presented by another company. These non-GAAP financial measures are
presented as supplemental information and not as alternatives to any
GAAP financial measures. When reviewing a non-GAAP financial measure, we
encourage our investors to fully review and consider the related
reconciliation as detailed below.

The following table sets forth a reconciliation of net (loss) income to
Adjusted EBITDA for the three months and twelve months ended March 31,
2017 and March 31, 2016:

    Three Months Ended       Twelve Months Ended
(Amounts in thousands) March 31, 2017     March 31, 2016 March 31, 2017     March 31, 2016
Net (loss) income $ (57,548 ) $ (46,935 ) $ 146,114 $ 216,246
Income tax (benefit) expense (37,591 ) (23,860 ) 62,808 82,138
Other (income) expense, net (903 ) 699 82 994
Loss on debt extinguishment 2,935 6,557
Interest expense, net 21,001 19,458 83,415 76,774
Loss (gain) on disposal of assets 670 (483 ) 3,121 8,733
Amortization 648 650 2,601 2,615
Depreciation 26,643 25,378 105,555 104,029
Stock-based compensation 11,990 2,006 126,323 35,932
Impact of Fresh Start valuation adjustments (2)   10     22     77     143  
Modified EBITDA (3) (35,080 ) (23,065 ) 533,031 534,161
Third party interest in EBITDA of certain operations (4)           (38,425 )   (38,165 )
Adjusted EBITDA (3) $ (35,080 ) $ (23,065 ) $ 494,606   $ 495,996  
 
Weighted-average common shares outstanding — basic: 91,151 92,359 92,051 93,208
 
 

The following table sets forth a reconciliation of net cash (used in)
provided by operating activities to Adjusted Free Cash Flow for the
three months and twelve months ended March 31, 2017 and March 31, 2016:

    Three Months Ended       Twelve Months Ended
(Amounts in thousands) March 31, 2017     March 31, 2016 March 31, 2017   March 31, 2016
Net cash (used in) provided by operating activities $ (60,588 ) $ (53,005 ) $ 455,652 $ 473,251
Changes in working capital 2,942 5,077 (13,282 ) (21,979 )
Interest expense, net 21,001 19,458 83,415 76,774
Income tax (benefit) expense (37,591 ) (23,860 ) 62,808 82,138
Amortization of debt issuance costs (1,171 ) (1,066 ) (4,608 ) (4,396 )
Other expense (income), net 1,171 2,005 1,826 (5,514 )
Interest accretion on notes payable (92 ) (117 ) (388 ) (663 )
Changes in deferred income taxes 39,238 28,421 (52,469 ) (65,593 )
Impact of Fresh Start valuation adjustments (2) 10 22 77 143
Third party interest in EBITDA of certain operations (4) (38,425 ) (38,165 )
Cash paid for interest, net (35,774 ) (28,682 ) (75,907 ) (71,637 )
Capital expenditures, net of property insurance recoveries in 2016 (51,634 ) (42,542 ) (138,030 ) (122,880 )
Cash taxes (5)   (2,662 )   (5,979 )   (13,950 )   (17,119 )
Adjusted Free Cash Flow (6) $ (125,150 ) $ (100,268 ) $ 266,719   $ 284,360  
 
Weighted-average common shares outstanding — basic: 91,151 92,359 92,051 93,208
 
 
(1)   Revenues and expenses of international operations are converted into
U.S. dollars on an average basis as provided by GAAP.
(2) Amounts recorded as valuation adjustments and included in
reorganization items for the month of April 2010 that would have
been included in Modified EBITDA and Adjusted EBITDA, had fresh
start accounting not been applied. Balance consists primarily of
discounted insurance reserves that will be accreted through the
statement of operations each quarter through 2018.
(3) "Modified EBITDA", a non-GAAP measure, is defined as our
consolidated income (loss) from continuing operations: excluding the
cumulative effect of changes in accounting principles, discontinued
operations gains or losses, income tax expense or benefit,
restructure costs or recoveries, reorganization items (net), other
income or expense, gain or loss on early extinguishment of debt,
equity in income or loss of investees, interest expense (net), gain
or loss on disposal of assets, gain or loss on the sale of
investees, amortization, depreciation, stock-based compensation, and
fresh start accounting valuation adjustments. Modified EBITDA as
defined herein may differ from similarly titled measures presented
by other companies. Management uses non-GAAP measures for budgeting
purposes, measuring actual results, allocating resources and in
determining employee incentive compensation. We believe that
Modified EBITDA provides relevant and useful information for
investors because it assists in comparing our operating performance
on a consistent basis, makes it easier to compare our results with
those of other companies in our industry as it most closely ties our
performance to that of our competitors from a park level perspective
and allows investors to review performance in the same manner as our
management.

"Adjusted EBITDA", a non-GAAP measure, is defined as Modified
EBITDA minus the interests of third parties in the Adjusted EBITDA
of properties that are less than wholly owned (consisting of Six
Flags Over Georgia, Six Flags White Water Atlanta and Six Flags
Over Texas). Adjusted EBITDA is approximately equal to "Parent
Consolidated Adjusted EBITDA" as defined in our secured credit
agreement, except that Parent Consolidated Adjusted EBITDA
excludes Adjusted EBITDA from equity investees that is not
distributed to us in cash on a net basis and has limitations on
the amounts of certain expenses that are excluded from the
calculation. Adjusted EBITDA as defined herein may differ from
similarly titled measures presented by other companies. Our board
of directors and management use Adjusted EBITDA to measure our
performance, and our current management incentive compensation
plans are based largely on Adjusted EBITDA. We believe that
Adjusted EBITDA is frequently used by all our sell-side analysts
and most investors as their primary measure of our performance in
the evaluation of companies in our industry. In addition, the
instruments governing our indebtedness use Adjusted EBITDA to
measure our compliance with certain covenants and, in certain
circumstances, our ability to make certain borrowings. Adjusted
EBITDA, as computed by us, may not be comparable to similar
metrics used by other companies in our industry.

(4) Represents interests of third parties in the Adjusted EBITDA of Six
Flags Over Georgia, Six Flags Over Texas and Six Flags White Water
Atlanta.
(5) Based on our current federal net operating loss carryforwards, we
believe we will continue to pay minimal amounts for cash taxes for
the next two years. Cash taxes paid represents statutory taxes paid,
primarily driven by Mexico and state level obligations.
(6) Management uses Adjusted Free Cash Flow, a non-GAAP measure, in its
financial and operational decision making processes, for internal
reporting, and as part of its forecasting and budgeting processes as
it provides additional transparency of our operations. Management
believes that Adjusted Free Cash Flow is useful information to
investors regarding the amount of cash that we estimate that we will
generate from operations over a certain period. Management believes
the presentation of this measure will enhance the investors' ability
to analyze trends in the business and evaluate the Company's
underlying performance relative to other companies in the industry.
A reconciliation from net cash provided by operating activities to
Adjusted Free Cash Flow is presented in the table above. Adjusted
Free Cash Flow as presented herein may differ from similarly titled
measures presented by other companies.
 

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