Scream! It's OK. The scary, mostly downhill ride for regional theme-park operator Six Flags
The latest earnings report fuels speculation that the downhill ride has not bottomed. Attendance fell 4%. That's 480,000 fewer people.
The good news, if it can be called that, was the smaller net loss. The other good news (ready?) was the company reduced its debt by downsizing from 39 to 31 theme parks. Debt is still approximately two times sales -- that's scary.
The company blamed a poor economy and weather for the downbeat results. Competitor Cedar Fair
There were bright spots. Destination parks did well. This strength might bode well for Disney's
After a thrill-ride plunge in capital spending from $334 million in 2000 to $130 million in 2003, the company spent only $75 million in 2004. Guess what? Where new rides were installed, attendance was up. (Who would have guessed that'd happen?)
So, debt-heavy Six Flags plans to increase attendance in 2005 by ramping up capital spending to $125 million. Ah, was that a bottoming out? Are operating results ready to bottom out, too?
Consider that Six Flags is not Anheuser-Busch
The reality at Six Flags, besides there being no clear view of 2006, is that debt is holding it hostage. A terrorist attack, a gas shortage, or a significant economic downturn would significantly hurt this company, especially if it happened during the third quarter, when the company makes money. Learning that there were 480,000 fewer screamers was bad news. When your interest payment is $73.8 million for a quarter, bad news is not what you can afford.
Fool contributor W.D. Crotty owns stock in Disney.