Six Flags says it will keep Magic Mountain rolling
Magic Mountain will remain a theme park -- not converted into a housing development or retail complex -- if Six Flags Inc. Chief Executive Mark Shapiro has anything to do with it.
Shapiro told investors Tuesday that the company expected to decide by the end of the year whether it would sell Magic Mountain and several other properties to reduce its $2.2-billion debt.
He said all the parks would keep operating for the foreseeable future and wouldn’t be sold for their real estate value.
In June, Six Flags raised the possibility it might unload some of its 30 amusement and water parks, perhaps to developers.
“Magic Mountain is open for business and will stay open for business,” Shapiro said in an interview Tuesday after a conference call with investors and analysts.
Doubts about the future of Magic Mountain contributed to a 12% decrease in attendance in the key June-to-December period from a year earlier, and Shapiro said he wanted to eliminate that uncertainty.
“Too many people thought we were closing down the park,” he said. In addition, company executives realized that they would get more money selling the parks as ongoing operations than as real estate, Shapiro said.
Local leaders said they were relieved that Magic Mountain and its water-park neighbor, Hurricane Harbor, were not slated to disappear.
“Clearly having Magic Mountain remain an entertainment facility is the best and highest possible use for that land,” said Larry Mankin, CEO of the Santa Clarita Valley Chamber of Commerce.
But the park may be losing some local prominence. Santa Clarita City Manager Ken Pulskamp said he was considering a request from the local auto dealers association that Magic Mountain Parkway be renamed Santa Clarita Auto Center Parkway. The city plans to have public meetings on the proposed name change.
The effort isn’t playing well at Six Flags’ New York headquarters.
“We’re shocked by this. Here’s Santa Clarita calling us for months and saying they’ll do anything to keep the park, and now the city manager is thinking of changing the name of Magic Mountain Parkway,” Shapiro said. “Some love.”
Also on Tuesday, Six Flags unveiled an array of initiatives designed to draw in families and boost revenue, including character licensing deals with Thomas the Tank Engine and Australian children’s entertainers the Wiggles, a discount on season passes and corporate alliances with companies such as Cold Stone Creamery.
Six Flags executives predicted that in 2007, observers would see the results of the changes Shapiro made since becoming CEO last December. But some analysts wish that the turnaround was proceeding at a pace resembling a thrill ride.
“The news or lack thereof has clearly disappointed investors,” analyst Barbara Cappaert of Vermont-based KDP Investment Advisors Inc. wrote in a note to clients Tuesday.
Six Flags shares fell 33 cents to $5.26. The stock has slumped 87% since its high in May 1999.
Cappaert expects that the company will sell only some of the parks, raising $500 million from the sale. Analysts previously had said the company needed about $800 million from the sale to steady its finances.
Six Flags wants to sell parks in Concord, Calif., Buffalo, N.Y., Denver, Houston, Oklahoma City and Seattle, in addition to Magic Mountain and Hurricane Harbor in Valencia.
During Tuesday’s conference call, Chief Financial Officer Jeffrey Speed said that total park attendance decreased 14% from 2005 and that revenue would be down 2% for the year.
Shapiro said, “Don’t get me wrong. We have a long way to go. This is a turnaround story that will play out in three or four years total.”
Although the turnaround ride may be making some investors queasy, Shapiro said the company had made great strides since his arrival. Guest satisfaction regarding park cleanliness, security and safety are all at five-year highs, according to surveys conducted by an independent company, and the average guest is spending 14% more at Six Flags parks than a year ago.
“2007 will be a pivotal year,” said David Miller, an analyst and managing director at Sanders Morris Harris in Los Angeles. “It will be more indicative of the company operating at full tilt.”
The deals involving the Wiggles and Thomas the Tank Engine are huge, Miller said, and will help rekindle family interest in the parks.
Miller also was encouraged by the partnership deals Shapiro has secured with Home Depot Inc., Papa John’s International Inc., Eastman Kodak Co., H.J. Heinz Co. and Cold Stone Creamery. In 2006, sponsorship revenue rose to $29 million, which the company hopes to increase to $40 million in 2007.
The company’s emphasis on season passes is also paying off, Shapiro said. Aided by heavy discounting, about 109,000 season passes have been sold this year, compared with 52,000 during the same period last year, the company said.