Six Flags Entertainment Corporation

Stacy Frole - Director of IR Dick Kinzel - President and CEO Peter Crage - EVP and CFO

Michael Walsh - Wells Fargo Scott Hammond - KeyBanc Capital Markets James Hardiman - Longbow Research

Thank you, Douglas. Good morning and welcome to our first quarter earnings conference call.

I’m Stacy Frole, Cedar Fair’s Director of Investor Relations. Earlier today, we issued our 2011 first quarter earnings release.

A copy of that release can be obtained on our corporate website at www.cedarfair.com or by contacting our Investor Relations offices at (419) 627-2233. On this call this morning are Dick Kinzel, our President and Chief Executive Officer and Peter Crage, our Executive Vice President and Chief Financial Officer.

We also Operational Executive Vice Presidents with us this morning, Richard Zimmerman and Philip Bender who will be available for comments during the call. Before we begin, I need to caution you that comments made during this call will include forward-looking statements within the meaning of the Federal Securities laws.

These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. You may refer to filings by the company with the SEC for a more detailed discussion of these risks.

In compliance with SEC Regulation FD, this webcast is being made available to the media and the general public, as well as analysts and investors. Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed.

Now, like to turn the call over to Dick Kinzel.

Thank you, Stacy. Good morning everyone.

Thank you for joining us on today's call and we appreciate your interest in Cedar Fair. Today's call will focused on our first quarter performance, our outlook for 2011 operating season, our recently refiling and current capital structure, as well as our distribution expectation going forward.

Before discussing first quarter results I would like to remind everyone that the first quarter represents les than 5% of our full year revenues. So it is not material to our full year operating results.

Therefore, it is always risky to jump to any conclusion based on the first quarter numbers alone. Overall, first quarter results were in line of our expectations.

Net revenues for the first quarter of 2011 decreased $400,000 to $26.9 million compared to $27.3 million for the first quarter of 2010. The decrease in 2011 was primarily due to fewer operating days in the southern region and a dip in attendance in the western region, which was partially offset by an increase in park guest per capita spending in the western region.

Our pre-season operating costs were in line of our expectation for the quarter where only three of our seven key properties when operation. The other parks including our largest seasonal parks Cedar Point, Kings Island and Canada’s Wonderland were idle as those teams finalized their preparations to open for their operating seasons.

Peter will review the details behind the financial results with you in just a bit, but first I would like to discuss our view on the upcoming 2011 operating season in a little more detail. Although it's much too early determine the kind of year we will ultimately have, we are encouraged by the initial positive trends season's pass and group sales at our parks.

Overall, seasons pass sales were up when compared to this time last year in terms of both units sold and total revenue. This was primarily due to our aggressive marketing campaign, competitive pricing and hopefully continue to improve it in the economy.

Our focus is to convince people to make their plans early in the year and by their seasons passes now at great value, which we hope will lead to a greater number of visits throughout the year. Approximately, 50% of our budgeted sales have taken place to-date.

In addition, our group business book to-date is up slightly compared with this time last year. While it is still true only to call this a trend we are hopeful the important segment of our customer base, we continue to improve as the overall economy continues to recover from the 2009 recessionary levels.

We believe we will be able to build upon the record setting momentum we created for Cedar Fair in 2010 as our parks begin opening for the 2011 operating season. Our continuing the focus on improving the operations and the distinctive public draw of our parks, as well as strengthening the balance sheet we expect to generate significant cash flow to support our ongoing efforts to reward our unit holders with steadily increasing value creation through a sustainable and growing distribution.

Our recent investments in several new leading-edge attractions coupled with the addition of new family friendly shows will be key two drivers to the company’s 2011 success. Currently, seven of our ten seasonal amusement parks are in operation and have strong marketing programs underway.

In just another two weeks all ten seasonal parks will be in operation. We expect our 2011 capital expenditure program to be approximately $75 million.

This year’s program is highlighted by four 300 foot tall swing rise at our four largest properties, Cedar Point, Knott's Berry Farm, Kings Island, and Canada’s Wonderland, We will also be introducing Planet Snoopy, a popular true children’s area to World's of Fun, Dorney Park and Valleyfair. Kings dominion, Carowinds, and Canada’s Wonderland will be riding up the night sky with Snoopy Starlight Spectacular, an evening light show that has proven to be very popular among our guest at our other parks.

We also continue to invest in appealing new live entertainment shows for all ages with more than 25 new shows across our parks this year. We are particularly pleased with the level of our public interest in our new rides and attractions thus far.

As long as our parks perform, as we fully expect them to, and the economy and the weather corporate we expect to generate revenues between $975 million to $1 billion and full year adjusted EBITDA in the range of $350 million, $370 million in 2011. Assuming results continue to meet our expectations, we intend to pay $1 per unit in distributions in 2011.

To that end, the board has already declared the quarterly cash distribution of $0.10 per limited partner unit payable on June 15. Looking ahead, with that same assumption our goal is to double the $1 per unit distribution in 2011 to $2 or more per unit in 2013.

Before I turn the call over to Peter, I would like to briefly comment on a letter to our board of directors from Q Funding that was filed with the SEC a few weeks ago. This letter mentioned an unsubstantiated rumor that Mark Shapiro, the former CEO of Six Flags is a candidate being considered by the board.

Mark Shapiro, whom I consider a friend, has never been a candidate for a CEO position and has never expressed an interest for this position. Frankly, Mark is plain busy right now with several projects and is currently a Partner and Chief Executive Officer of Dick Clark Productions.

He is a good man and I resent that Q Funding is now trying to drag him to the mud, a seemingly never ending effort that denigrate the company and the distract investors from our solid results and strong balance sheet. Cedar Fair is a strong company with immutable reputation as being the best operator regional amusement parks within North America.

We are coming off of a record setting year, despite the lingering economy choppiness and have the best operating margins in the industry. We have a longstanding and loyal team of experienced and high qualified management staff members at all of our parks who are hardworking and dedicated to providing our customers with the best guest experience possible.

Our balance sheet is healthy and we expect to produce a significant amount of free cash while going forward, which will allow for increased distributions to our unit holders. Additional capital investments within our properties continually strengthening of our capital structures and these are just of the few of the reasons as to why Cedar Fair is special attractive opportunity for the next CEO.

We continue to be on track with our succession plan and we expect to announce my successor by the end of the second quarter. As anyone who has been in this industry for a while, as someone who has been in this industry for a while, and personally as a large individual unit holder of Cedar Fair, I am pleased with the strategies we have in place with our succession plans.

I am confident that this company will be very successful for many years to come. On that note, I would like to turn the call over to Peter to discuss our first quarter financial results in more detail.

Thanks very much, Dick, and good morning to everyone. As Dick pointed out, our first quarter results represent less than 5% of our full year results.

Given the highly seasonal nature of our business, the majority of our revenues are realized during a 130 to 140 day timeframe beginning in our second quarter and most of that revenue is concentrated in the peak vacation months of July and August, with a growing percentage starting to emerge in and around the Halloween season. Overall, our results for the first quarter were in line with our expectations.

Consolidated net revenues for the three months ended March 27, 2011 were $26.9 million, down slightly compared with a year ago. During the first quarter of 2011, we had fewer operating days in the southern region and a dip in attendance in the western region, which was partially offset by increased in park guest per capita spending in the western region.

The operating loss for the first quarter of 2011 was $67.3 million compared with $60.6 million in the first quarter of 2010. The increase in operating loss in the first quarter of 2011 was due primarily to two factors: slightly increased pre-opening expenses associated with our parks in the northern and southern regions that are actively preparing for their respective operating seasons; and an increase in general and administrative expenses, which includes $4.4 million of legal and professional cost incurred during the period including litigation expenses and cost for SEC compliance matters related to special meeting request and an increase in non-cash acquisition costs of approximately $3.3 million as a result of a 28% increase in the market value of our limited partner units.

For the quarter, depreciation and amortization decreased $99,000 or 2% compared with a year ago. Interest expense increased to $41.1 million compared to $29.6 million a year ago.

As a result of our refinancing in July of 2010 interest rate spreads were higher for the first three months of 2011 than the same period a year ago. This resulted in the higher interest expense for the first quarter of 2011.

During the first quarter of 2011, the net effect of swaps decreased $5.7 million to a non-cash charge to earnings of $1.9 million reflecting a regularly scheduled amortization of amounts in accumulated other comprehensive income related to the outstanding swaps. These charges were offset somewhat by gains from marking the ineffective and de-designated swaps to market and foreign currency gains related to the US dollar denominated Canadian term loan in the current period.

During the period, we also recognized a $6.9 million benefit to earnings principally due to unrealized foreign currency gains on the US dollar denominated notes issued last July and held at our Canadian entity. We recorded a net benefit of $19.6 million to account for the tax attributes of our corporate subsidiaries and publicly traded partnership taxes during the first quarter of 2011 compared with a net benefit of $57.8 million for taxes in the same period a year ago.

The variation in the first quarter tax benefit recorded year-over-year is due primarily to a lower estimated annual set of tax rate for the 2011 year, which was impacted by lower expected foreign taxes for 2011 and the related favorable adjustments to the foreign tax credit valuation allowance. For clarity, we expect that our actual cash taxes to be in the range of $8 to $10 million for 2011 a reduction from previous years due to some effective tax planning strategies.

After interest expense and the net benefit for taxes net loss for the first quarter ended March 27, 2011 total $84.7 million or $1.53 per diluted limited partner unit. For the first quarter ended March 28, 2010 the company reported a net loss of $39.9 million or a $0.72 per diluted limited partner unit.

Thanks in large part to our timely rate favorable refinancing efforts coupled with our strong 2010 performance we ended the first quarter of 2011 well-positioned in terms of both liquidity and cash flow. Our receivables and inventories are at normal seasonal levels and we have credit facilities in place and current liabilities, capital expenditures and preopening expenses handy, partners equity totaled $58.8 million and our total cash on hand was $7.3 million.

This past year we have succeeded in improving our capital structure by refinancing our debt. This provides us with long-term stability in our capital structure as our earlier debt maturity revolving credit facility is four years out.

In addition, our recent credit agreement amendment in February increased our flexibility to pay distributions and when coupled with the expiration of certain LIBOR interest rates swaps in October of this year reduced interest expense significantly over the long-term, which in turn supports our strategy of providing a growing distribution to our unit holders. At the end of the first quarter, we had $1.18 billion of variable rate term debt of which all has been converted to fixed rate to several swap agreements, $399.5 million of fixed rate debts and $127.1 million in borrowings under our revolving credit facilities.

Of the total term debt, $11.8 million is scheduled to mature within the next 12 months. We expect to pay cash interest costs of $145 million to $150 million in 2011 and as a result, our projected full year cost of debt is approximately 9.1%.

The cost of debt is expected to decrease significantly in 2012 as a large portion of our current swap agreements mature in October of this year. Going forward, we anticipate cash interest costs will decrease to $100 million to $115 million in 2012 and beyond.

Now, I would like to take some time to discuss our recent refinancing and our capital structure. As part of our going capital structure management, we completed a refinancing of our outstanding debt in July of 2010 by issuing $405 million of 9 1/8% unsecured notes and entering into a new $1.435 billion senior secured credit facility.

Among other things, this refinancing allowed us to greatly improve the financial flexibility needed to quickly reinstate the distribution to unit holders that had been temporarily halted under the terms of the old credit agreement in the wake of historic macro economic collapse. Then in February of this year, we again took advantage of the improving markets by amending our senior secured credit agreement reducing interest rates, modifying certain distribution covenant, and extending the maturity of our term loan by one year to December 2017 which will provide even greater flexibility in the future.

Since our amendment in February modified certain distribution covenants, I would like to take a few minutes to walk through the specifics regarding the parameters around the distribution. As we have stated we anticipate paying a $1 per unit distribution in 2011 to unit holders should operating results meet our expectations.

Payment of a distribution is governed by both the senior secured credit agreement and the bond indenture. The covenants and the distribution capabilities within these credit agreements are somewhat involve computations and my explanation as follows is they no means a substitute for complete reading of these agreements.

For simplicity sake, we have a $60 million basket available to us in 2011 under the credit agreement and adequate flexibility under our indenture provided our leverage ratios including average revolver falls below 4.75 times. These leverage tests are performed on a quarterly basis.

This is why we are looking to our results for the year to confirm that the $1 distribution did mention can be paid and not get ahead of ourselves. For 2012 and beyond, we have a minimum $20 million basket for distribution under both the credit agreement and the indenture regardless of leverage levels.

In addition, we have the ability to consider distribution payments from our excess cash flow of the immediately proceeding year subject to a percentage sweep based on our senior secured leverage ratio as long as we maintain a total leverage ratio excluding the revolver of 4.5 times or less. Excess cash flow is very closely aligned to adjusted EBIDTA after cash taxes, CapEx, interest, scheduled debt amortization, plus, minus changes in working capital.

For example the excess cash flow generated in 2011 will be available for payment in 2012 subject to the sweep 25% at current senior secured leverage ratios and of course board direction. Under the indenture, as long we comply with the 4.75 timed leverage ratio including average revolver test, we should have adequate excess cash flow flexibility.

Now, in English, if we meet our result expectations for 2011 we intend to pay $1 in distributions for the full year and have a goal to double this payment to $2 or more in the 2013 fiscal year. By way of example, for 2011 our current adjusted EBITDA guidance is $350 million to $370 million.

Our cash interest expense expectations for 2011 are $145 million to $150 million and current schedule debt repayments are approximately $12 million. Fiscal year capital expenditures are expected to be about $80 million and our cash tax payments are expected to be about $10 million.

The change in working capital year-over-year is typically a minimal amount. From these expectations, the excess cash flow available in 2012 would be between $98 million and to $123 million of which 25% is likely required to pay down debt depending on our senior secured leverage ratio leaving $73 million to $92 million potentially available in 2012.

There are approximately 55.6 million units outstanding in Cedar Fair. The amount available for distributions under the excess cash flow calculation will increase in 2012 for payment in 2013 and beyond as our cash interest expense will decreased with the expiration of certain swap agreements and as we reduce our senior secured leverage ratio below three times.

The cash interest savings in 2012 will be somewhat offset by the cash termination costs of the Canadian cross currency swap in February 2012. Based on currency exchange rates in place at the end of the first quarter of 2011, we estimate a cash termination costs of the swaps will total approximately $48 million in February 2012.

However, we do not believe this will impact our ability to pay the $2 or more per unit distribution in 2013 should operating results meet our expectations. Hopefully, this has helped to provide some clarity surrounding the distribution covenants.

Of course both Stacey Frole and myself are available anytime should you have any questions regarding this important item. We believe the combination of our well run properties, the improving business conditions, our ability to generate significant cash flow and the refinancing we accomplished over the past year support our plans to grow the distribution over the long run.

At this time, I would know like to open the call up to your questions.

Just filling in for Tim Conder here. What your are assuming in terms of debts payoff you have mentioned possibly getting to $2 or more in distribution by '13 and with your cash interest forecast, what are you thinking there that revolve balance, what are you going to carry, and is there going to be any early pay off of some of the term debt?

Michael, this is Peter. We expect some amount of debt pay off in 2011, even if we move forward and our results are at the level where we can pay the $1 and in distribution.

It is difficult to peg what our revolver balance will be but clearly there it is a desire to manage that down below a quarter, a quarter turn on EBITDA, so that we can meet these covenants with enough headroom. With respect to debt payment going forward, we've laid out of plan for increasing the distribution and that will be something that we would obviously discuss with the board and then make that decision accordingly when the time comes.

Can you just talk about overall pricing and how that is going to look in '11 versus '10, may be at the gate and the group season passes and may be even a little bit on food which I think you talk about last time, do you expect pricing up year-over-year?

Sure, Michael. This is Dick.

We have increased our prices depending on capital expenditures into the park. We have seen increase of commodities this year, which I think every one is experiencing.

Where we can, we pass those costs along. I think we do have some flexibility in our front pricing.

Yet, we are a very value oriented commodity for our guest to visit at the park. So, we do as flexibility in our pricing but, we adjust accordingly and we watch our margins very closely and adjust accordingly.

If we have to raise prices, we do it.

Would you categorize the price increase as may be as modest or low single digit, is that kind of fair?

Some of the parts we have from last year but we put the bigger attractions in a way we raise the price approximately a dollar. Now at get the front gate of course depending on the seasons passes did not go up that much or the group business but the front gate price did go up.

Then lastly, go about your overall strategy that you guys have laid out going into 2015 of low single digit revenue and EBITDA growth. What is the biggest driver there for you guys to meet those?

I mean, is it going to be volume? You did record attendance last year.

Is it going to be pricing, the combination of those things recovery in the overall economy?

I think it is going to be combination of all those things, Michael. Certainly, the weather and economy play a big part, the weather more than anything, but then certainly I think the capital expenditures you put into the park that has a great deal of influence on the attendance also.

Just a couple of ones here, were there any delays that you experienced, weather related as it relates to getting rides up and ready for the opening weekends?

Yes. Scott, this Dick.

Of course, when we do have a limited window for construction of the big rides and the four rides we’re putting in this year are prototypes. As you can see from the weather map, we've had a very severe weather and winds in the south especially in Ohio.

So, we are experiencing some problems with, but we expect we are open very, very quickly and we expect to be very, very successful rides for it. Certainly, the weather we've had especially in Sandusky and in Cincinnati has played a role in construction time.

Scott, we do have other things that are already open, like I mentioned in my prepared comments, the (inaudible) new piece of things like they are open and running well. It’s just the prototype rides and the shorter windows we have to get those constructed where we seem to have a little bit of problem this year.

Are we talking about weeks or months?

No, I think we are talking at the latest Memorial Day.

Peter, just trying to understand a little bit more on your revenue guidance for this year. I mean, it kind of implies up 1%.

Should we you think about the volume component being the -- I mean how should we think about the price volume component there? I mean record of tenants last year, I mean is that kind of flattish with some of this price increases, kind of getting us up one or what's the (inaudible)?

Yes, I think that’s a good approach. Record attendance last year, building on that although really in the year here we have a good feel.

We are feeling good about season pass. Volume, the increase for the coming years is principally price driven.

Again, as Dick pointed out, it’s a balance. As you get into the year, we’ll evaluated it but I think from the outset year, it’s a little bit more pricing than it is attendance growth.

Then just lastly on operating days, do you have a total count of what it is going to be this year versus last year, and are there variances and which quarters?

Yes, for this quarter we just completed there is just one last operating day this year than last year. For the total year, there are four less operating days in 2011 as there were in 2010.

I just wanted to make sure that I understand some of the put and takes in the SG&A, I guess, also operating expenses to a lesser degree in the quarter. You had the $4 million of merger cost last year, you had the legal cost this year about $4.4 million.

On an apples to apples basis though it still looks like SG&A was up meaningfully this year over last year. I'm just trying to make sure I understand what that was?

You mentioned equity cost expenses. Was that the remaining delta and if so, how should I think about that throughout the remained of the year?

James, this is Peter. Yes, it is the equity comp.

Just go through the numbers real quickly with you again. $2.3 million was operating expense increase that we had the 4.4 of legal and professional, and then we had 3.3 of equity comp and that is of course a non-cash cost.

As our unit price increased in the market over the year, that increased. Going forward, how to look at that going forward, it totally depends on the performance of our units over the year as that number will increase or decrease with the market price of our units.

So that $3.3 million of equity cost that was all in SG&A?

Yes.

I should know the answer to this but to explain one more time what is the difference between that and the equity comp fees that you put in the EBIDTA reconciliation is with that much smaller number. What does that number represent?

Which number are you talking about in reconciliation that you looked at?

Yes, there is an equity based compensation number of about $228,000 for the quarter.

Fine, those are the same thing.

The 3.3 and 228 what's the?

I just want to make sure I am not giving you the wrong answer to this. We can take this one offline and make sure that we get you the right answer.

Sure, my apology that it is probably a better question for off-line. And then just so that I understand the guidance between sales and EBIDTA for the year, the sale guidance is basically flat up 2%.

The EBIDTA guidance is down 3% to up 3%. I guess I can understand why at the high end 2% revenue you get the leverage, get the 3% EBIDTA.

I guess I’m trying to figure out why the low end in a flat sales environment EBIDTA would be down that 3%?

We have to take into consideration cost increases. Although we think we believe we can pass along pricing here because the brands in our markets are very strong, we just want to make sure that the guidance is appropriate and we take into consideration the fact that we have some cost pressures.

Sort of back to the sales guidance, up 2% is the high end of your guidance, obviously last year was a good year, up almost 7%. What are you seeing this year that makes you think that it won’t be sort of as robust as last year?

Is it a weather issue, is it a fuel price issue; seems like the group sales numbers are coming in pretty strong, is that just ultimately been conservative on your outlook?

We are coming off of a very week year in 2009, James. 2010 was as rebound of 2009’s recession year and we are just going historically, we think we can increase the numbers that we have given you.

Basically, we never expect that 2009 to be the way it was and we did rebound in 2010 and now our goal is to keep that momentum going.

Then just last housekeeping question here, the tax guidance is always helpful. Is that a fair assumption to make that $8 million to $10 million you guys mentioned for 2011, is that a safe assumption moving forward beyond 2011?

For a few years I think it is a fair assumption.

Okay, on behalf of the management team, I would like to thank you again for your time this morning. Also, I'd like to let you know how much we appreciate the continued to support of our unit holders.

As we head into our full operating season we feel very good about Cedar Fair's progress and potential, and we remain committed to acting in the best interest of all of our unit holders by executing a strategy that creates maximum value for the long term. Stacy, I'll turn it back over to you.

Thank you everyone for joining us on the call today. Should you have any follow-up question please feel free to contact me at (419) 627-2227.

We look forward speaking with you again in about three months to discuss our second quarter results.