- The Washington Times - Friday, June 23, 2006

NEW YORK — Investors in Six Flags Inc. shaved off a quarter of its share value yesterday after the company said it may be in trouble with debt and may sell six theme parks, prompting credit-rating agencies to issue downgrades. Chief Executive Officer Mark Shapiro announced in a conference call after the market closed Thursday that the company — which owns Six Flags America in Largo — no longer expected to meet its earnings guidance and that revenue and attendance were lower.

Shares fell in after-hours trading by about 20 percent and kept falling when the market reopened. Shares tumbled $1.90, or 25.5 percent, to close at $5.55 yesterday on the New York Stock Exchange. Over the past 52 weeks, the stock has ranged from $4.30 to $11.93.

The last time the company’s shares suffered a comparable loss in a single day was July 16, 2004, when the price fell by about 25 percent.

Standard & Poor’s and Moody’s lowered their outlooks for the amusement park operator yesterday.

Mr. Shapiro told analysts and investors late Thursday that revenue was down about 1 percent through June 18, attendance fell by 13 percent, and the company may fail to comply with certain bank credit covenants. Mr. Shapiro also said the company would explore selling six properties, including one of its flagship locations, the Magic Mountain park near Los Angeles.

Mr. Shapiro took over as chief executive in December after Washington Redskins owner Daniel M. Snyder won a protracted proxy fight to gain control of the company. Mr. Snyder made his name building a direct-marketing firm that he reportedly sold for $2 billion. He has a reputation for being difficult as a manager, and since he bought the Redskins in 1999, the team has been through five head coaches.

Mr. Shapiro was recruited from ESPN and now faces the task of reforming the company. In recent months, the company has raised its prices for season passes in an effort to lessen the company’s focus on teenagers and attract higher-paying visitors and families. Sales of season passes have fallen, and higher spending per visitor has not offset those losses. Mr. Shapiro told analysts that the company planned to spend an additional $15 million on new hires to improve atmosphere in the parks.

Under earlier managements, the company bought a number of smaller, regional theme parks, taking on debt in the process. The proposed sales are a way for Mr. Shapiro to “tighten things up,” according to John Robinett, a senior vice president at Economics Research Associates in Los Angeles.

Standard & Poor’s lowered its outlook on Six Flags to negative from stable yesterday. The rating agency cited weak attendance, higher-than-expected operating costs and a tight “cushion of compliance” with its debt agreements.

Moody’s cut its already low credit rating based on the risk that Six Flags may be unable to repay its debts.

Mr. Shapiro said in the call with investors on Thursday that Magic Mountain is a sale candidate partly because of its rowdy teenage atmosphere. The property also sits on 250 acres north of Los Angeles and likely would attract real estate developers.

“When Mark Shapiro took over, he promised some bold action, and this is bold,” said Paul Ruben, the North American editor of Park World magazine. “I was surprised by his selection of parks. Magic Mountain in California, for example, is one of their flagship parks. And for that to go on the auction block was shocking.”

“I think it might be a real estate play,” Mr. Robinett of Economics Research Associates said. “Why would sell one of your flagship properties?”

The company, which owns 29 amusement and water parks, wants to reduce its reliance on teenage customers who cause security problems and don’t spend much money, Mr. Shapiro said.

The company, in evaluating which parks could be sold, also examined which ones sit on valuable real estate, he said.

The company also named five other parks it may sell. They are in or near Buffalo, N.Y., Denver, Seattle, Houston and Concord, Calif.

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