42 slides from Six Flags Entertainment's proxy contest presentation, Oct 18, 2005
Slide 1: Schedule 14A Proxy Statement Cover
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. __) Filed by the Registrant x Filed by a Party other than the Registrant o Check the appropriate box: o Revised Prelimi
Slide 2: Six Flags
SixFlags
Slide 3: Safe Harbor
Safe Harbor The information contained in this presentation, 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 coul
Slide 4: Agenda
Agenda I. Introduction II. Sale Process: Maximizing Value for All Stockholders III. Six Flags’ Strategic Plan Is Working IV. Red Zone’s Ill-Conceived Proposals: Nothing New, Potentially Harmful to Six Flags and Put Your Investment at Risk V. Red Zone’s Misguided Criticism Reflects Fundamental Lack o
Slide 5: Introduction
Introduction
Slide 6: Introduction: Red Zone's Proposals
Introduction Red Zone’s Proposals are . . . Bad for Stockholders Red Zone seeks to obtain effective control of Six Flags without providing a premium payment to stockholders for all of their shares Conditional tender offer for 23% of shares at $6.50, only if stock price falls below $6.50 during an ar
Slide 7: Introduction: Board Committed to the Sale Process
Introduction The Six Flags Board is committed to the sale process Prompt, orderly and competitive auction process led by Lehman Brothers and Allen & Company Designed to attract the best possible transaction for ALL stockholders and provide full and fair value for ALL Six Flags shares Stockholders wi
Slide 8: Introduction
Introduction Red Zone has been invited to participate in the sale process but has chosen instead to pursue its own agenda which is designed to allow it to obtain effective control of Six Flags without offering a real value- enhancing alternative Six Flags’ capital structure should not be an impedime
Slide 9: Sale Process: Maximizing Value for All Stockholders
Sale Process: Maximizing Value for All Stockholders
Slide 10: Sale Process
Sale Process Rationale Initiated sale process to avoid significant potential disruption and ongoing risks to the success of the Company’s strategic plan posed by Red Zone Best way to deliver full and fair value to all stockholders Favorable time to conduct an auction process due to: Company’s strong
Slide 11: Six Flags' Strategic Plan is Working
Six Flags’ Strategic Plan is Working
Slide 12: Theme Parks Challenged Beginning in 2001
Theme Parks Challenged Beginning in 2001 Company enjoyed uninterrupted growth from 1989 through 2001, growing from one park with revenues of $4.5 million to more than 30 parks with revenues of over $1 billion Entire sector impacted by 2001-2004 downturn Economic downturn coupled with 9/11 led to ove
Slide 13: Our Strategic Plan
Our Strategic Plan Reacted to Downturn with 2003 Strategic Review Leading to Multi- Pronged Turn-Around Plan 2004 Aggressive new marketing campaign led by a new, deeply experienced full service ad agency Increased operating expenses to improve look and feel of parks and enhance guest experience Capi
Slide 14: New Marketing Campaign
New Marketing Campaign “Mr. Six” – A Huge Success with Our Target Demographic Developed to appeal to both mothers and Award Winning Campaign teenagers Most Likable Ad Most Memorable Ad 70% of annual media spend targeted at women 25-49 years old #1 #3 Teens comprise 30% of attendance and are critical
Slide 15: New Marketing Campaign
New Marketing Campaign “Mr. Six” – A Powerful Icon for Six Flags’ Brand Strengthens Six Flags’ brand and drives Strong Ambassador for Six Flags’ Brand park attendance – tremendous recognition % of audience who think Mr. Six does a good job and recall representing Six Flags as its ambassador of fun “
Slide 16: New Advertising Agency
New Advertising Agency Hired Doner Cardwell Harkins for its Expertise with Retail and Branded Products Examples of Doner’s successful campaigns include: Client Campaign Result “Zoom-Zoom-Zoom” campaign Sales +8.3% since launch in 2000 (vs. industry -4%) capitalized on Mazda’s unique Higher recall sc
Slide 17: Improved Guest Experience
Improved Guest Experience Beginning in 2004, Instituted Several Initiatives to Enhance Guest Experience Increased seasonal labor staffing at all parks Additional spending on landscaping and park appearance Continued investment in systems and operating practices to better manage wait times Investment
Slide 18: Emphasis on Family Fun
Emphasis on Family Fun Six Flags Offers a Great Experience For the Whole Family Selected Family Attractions New Jersey Atlanta Dallas World’s Largest Safari Outside Skull Island in-park water Ten new rides for entire family in Africa attraction in 2005 2006 Mexican-themed section and Bugs Bunny Worl
Slide 19: Capital Investments
Capital Investments 2005 Targeted Spending for Greatest Impact Spending on new family-oriented attractions and thrill rides is vital to the theme park business Our competitors recognize this as well (Cedar Fair 2001 Annual Report) “New rides and attractions are the life blood of our Business” “The r
Slide 20: Sale of Non-Core Assets and Real Estate
Sale of Non-Core Assets and Real Estate Sold $358 million of assets since 2003 European operations Cleveland park Excess Chicago real estate Proceeds used to reduce debt Continue to evaluate alternatives to maximize value of asset portfolio Announced closure of AstroWorld (Houston), sale of underlyi
Slide 21: Strong and Growing Portfolio of Partners
Strong and Growing Portfolio of Partners Sponsorship Joint Marketing Branded Concessions Sponsorship revenue more than Partners provide over $23 million National and local branded doubled from 1998-2005 in co-op advertising and 360 concessions in numerous in-park million coupons locations Promotions
Slide 22: Strong Performance in 2005
Strong Performance in 2005… Our Strategic Plan is Working! Strong year to date results through August 1, 2005… Attendance +6.3% Revenues +9.8% Per Cap Revenues +3.5% … are expected to continue for all of 2005 Revenues up approximately 8.5% Y-O-Y Income from operations increase of $37 million (+24.6%
Slide 23: And Still More to Come
… And Still More to Come New Rides and Attractions for 2006 and Beyond Third children’s section (Bugs Bunny themed) in 2006 New Jersey Mexican-themed area anchored by new wooden coaster and family rides Launching blockbuster Tatsu coaster for the 2006 season Los Angeles Thrill ride to attract market
Slide 24: And Still More to Come (cont'd)
…And Still More to Come (cont’d) Selected Asset Expansion Opportunities Fully designed and approved 500 room hotel onsite at Great Adventure New Jersey Ability to expand to 700 rooms Lake George, 200-room Great Escape Lodge & Indoor Waterpark slated to open in NY winter of 2006 San Francisco New chi
Slide 25: Red Zone's Ill-Conceived Proposals
Red Zone’s Ill-Conceived Proposals: Nothing New, Potentially Harmful to Six Flags and Put Your Investment at Risk
Slide 26: Red Zone's Ill-Conceived Proposals
Red Zone’s Ill-Conceived Proposals Red Zone’s suggestions are neither original nor creative Valid ideas are taken from Six Flags’ current strategic plan Many proposed strategic and operational changes are misguided and demonstrate significant lack of understanding of and experience in theme park bus
Slide 27: Advertising/Marketing: Red Zone Doesn't Get It
Advertising/Marketing: Red Zone Doesn’t Get It The Theme Park Business is Unique Red Zone’s Ill-Conceived Proposals Six Flags’ Response Reduce advertising and marketing Mr. Six campaign has allowed us to decrease ad spending in face of expenditure inflationary media environment (8% reduction in 2005
Slide 28: Foolish Concessions Proposals
Foolish Concessions Proposals Red Zone’s Ill-Conceived Proposals Six Flags’ Response Outsource concessions operations All major theme park companies have self-run to professional concessions concessions given scale and greater profitability vendor; economics will benefit from vendor scale Six Flags
Slide 29: Misinformed Sponsorship Proposals
Misinformed Sponsorship Proposals Red Zone’s Ill-Conceived Proposals Six Flags’ Response Rename rides and attractions using more Sponsorship market for theme park rides is modern media and get paid for doing it different than sports teams Not the same value as naming rights for a pro sports stadium
Slide 30: Merchandise Proposals Offer No New Ideas
Merchandise Proposals Offer No New Ideas Red Zone’s Ill-Conceived Proposals Six Flags’ Response Improve merchandising tie-ins to Currently have a significant amount of increase merchandise sales merchandising tie-ins for products that appeal to our demographic Six Flags consistently uses proven bran
Slide 31: Bad Pricing and Parking Proposals
Bad Pricing and Parking Proposals Red Zone’s Ill-Conceived Proposals Six Flags’ Response Evaluate ticket pricing with latest Already perform extensive evaluations of ticket prices on a park- computer technologies by-park basis Ticket Pricing Local market experience is critically important Unlike Fed
Slide 32: Uninformed Asset Sales Proposals
Uninformed Asset Sales Proposals Red Zone’s Ill-Conceived Proposals Six Flags’ Response Rezone excess acreage Continually evaluate opportunities to realize surrounding select parks – value from our portfolio of assets sell property to third parties Example: Closure of AstroWorld and sale of land Exa
Slide 33: Red Zone's Misguided Criticism
Red Zone’s Misguided Criticism Reflects Fundamental Lack of Understanding of the Business
Slide 34: Red Zone Has No Theme Park Experience
Red Zone Has No Theme Park Experience No Experience, But Offers a “Trust Me” Plan to Stockholders Daniel M. Ownership of professional sports franchise not comparable Snyder to managing theme parks Mark Managing programming at a cable sports network not Shapiro comparable to managing theme parks 26
Slide 35: Six Flags is Not a Pro Sports Franchise
Six Flags is Not a Pro Sports Franchise 8 sold out home games per year vs. 29 theme parks each operating 140-180 days per year Pro sports franchise reflects monopoly in local market with die-hard fan base Sold out every home game since 1966 regardless of weather, economy or team performance Multi-ye
Slide 36: Red Zone's Misguided Criticism: Per Cap Spending
Red Zone’s Misguided Criticism Reflects Lack of Understanding of the Business Red Zone Criticism Six Flags’ Response Incorrect to compare per cap spending for Six Flags vs. Cedar Fair Per Cap Spending Cedar Fair generates approximately two-thirds of its revenue from two major market parks which typi
Slide 37: Red Zone's Misguided Criticism: Focus on Teens
Red Zone’s Misguided Criticism Reflects Lack of Understanding of the Business Red Zone Criticism Six Flags’ Response Incorrect to criticize safety of Six Flags’ parks and desire to attract teen attendance Focus on Teens Our visitors consistently report feeling safe at Six Flags parks (1) The safety
Slide 38: Red Zone's Misguided Criticism: Balance Sheet
Red Zone’s Misguided Criticism Reflects Lack of Understanding of the Business Red Zone Criticism Six Flags’ Response Have successfully managed balance sheet and improved operations Balance Sheet Sold $358 million of assets since 2003; proceeds used to reduce debt Management No significant maturities
Slide 39: Conclusion
Conclusion
Slide 40: Conclusion
Conclusion The Sale Process is on target; don’t let Red Zone disrupt it Our Strategic Plan is working Red Zone is offering neither full and fair value for your shares nor any realistic value-enhancing alternative Ill-conceived proposals come with tremendous execution risk To support Six Flags, DO NO
Slide 41: Adjusted and Modified EBITDA Reconciliation
Appendix Adjusted and Modified EBITDA Reconciliation The Company is not able as of this date to provide a reliable estimate of its income tax expense (benefit) and other income (expense) for the year ending December 31, 2005. Therefore, a reliable estimate of its net loss for that year is not availa
Slide 42: Adjusted and Modified EBITDA Reconciliation
Appendix Adjusted and Modified EBITDA Reconciliation The following table sets forth a reconciliation of net income (loss) to EBITDA (Modified) and Adjusted EBITDA for 2004. ($ in thousands) Twelve Months Ended December 31, 2004 Net income (loss) ($464,809) Discontinued operations, inclusive of tax b