Six Flags - The Rise and Fall...And Rise Again

[Music] Six Flags now there's a fun place dare I say the happiest place on earth can't say that but it is a happy place I imagine most of you know about Six Flags but in case you don't it's the non Disney version of Disneyland is sort of it's a theme park with rides attractions cartoon characters walking around but instead of Mickey Mouse in the gang it's Bugs Bunny in the gang around 2005 they had these commercials with mr. six dancing around to this catchy song enough of that and what I want to talk about today is the rise in fall and rise again of Six Flags I'll get more into it later but here's a few things that perfectly express what I'm talking about first off look at this it's from one of their annual reports and it says that if you invested $100 in Six Flags in December of 2004 it would have been a bad decision because it'd be mostly gone by 2009 you would have done significantly better investing in an S&P 500 index or let's face it almost anywhere else but if you would invested that $100 in 2010 that would have been a terrific decision because you would have more than tripled your money in a few years far better than that other index here's a chart showing their net income from the past 20 years they were losing money every year without exception from 1999 to 2009 and then amazingly just switched to earning money every year after it's really looking like something changed right around 2010 and that's because in 2009 they filed for bankruptcy and came back from it the following year meant new owners new managers and maybe most importantly lower debt by almost any key measure they're back so let's talk about what happened in the late 1950s this real estate developer named Angus Wynn got together with a few partners to buy 75 hundred acres of land in Texas with the intention of turning it into an industrial area essentially construct a bunch of buildings that various businesses move in and make a ton of money in the process the issue was they had spent all of their money in buying the land and had nothing left to pay for the buildings their big idea is to how to raise money was to open Six Flags now I know that sounds completely random sort of was but it did make sense I already had more than enough land to build it on and plus Disneyland had just opened a few years earlier it was doing well and setting an example that they could follow which they did over the next year they took two hundred and twelve acres of their land in Arlington Texas and spent ten million dollars 3.5 million of it from Angus personally to build this theme park it was actually a theme somewhat educational even they called it Six Flags Over Texas referring to the six areas that have ruled over Texas they were Spain France Mexico the Republic of Texas Confederate States of America and finally the United States of America I don't want to turn this into a whole history lesson but the park was divided into six sections each one with a theme from that area so if you were ever wondering why it's called Six Flags that's where it comes from they obviously took big inspiration from Disneyland but they did give people reason to visit their park instead obviously you have the cool themes relevant to Texas history but then there's the convenience factor it was easier for the residents of Texas to travel to Arlington as opposed to Anaheim California and also the price the initial admission price in 1961 to Six Flags Over Texas was two dollars and seventy five cents for an adult and 225 for a child but that price was all-inclusive it included all the rides and attractions when Disneyland opened in 1955 the admission was only one dollar for an adult $0.50 for a child but then 10 to 35 cents per attraction meant you were spending way more according to an article from CNBC it can cost you as much as 874 an adult in 515 for each kid so in general Six Flags Over Texas would turn out to be a cheaper and more convenient alternative for millions of people that's how they would promote themselves to for these reasons the park attracted over a million people in its first year which was more than double their projections despite their unexpected success they more or less stuck to their plan when they used the money that they made to build up their industrial area and in 1966 five years after its grand opening and they sold it to Penn Central Corporation they had a lot more money to put toward growing the business and opening new theme parks they didn't waste any time either the next year in 1967 they opened the second ever Six Flags in it logically called it Six Flags Over Georgia it had the same concept and theme as the one in Texas but of course applied to Georgia by now I should also mention it there was a lot more happening at these parks introduced the first log flume ride the first steel roller coaster and as a result of their investment in these innovations they were able to charge more and were attracting more visitors when Six Flags Over Georgia opened that over 1.2 million visitors in that first summer that were now paying 395 to get into the park these first two theme parks were such a success that they spent the next decade or so opening more of them 1971 they opened Six Flags Over mid-america in Eureka Missouri in 1975 they opened Astroworld in Houston in 1978 it was Six Flags Great Adventure in Jackson New Jersey and in 1979 they bought Magic Mountain in Valencia California at this point I think we can see their pattern opening or in some cases acquiring theme parks in different regions throughout the country and attracting local customers with innovative new rides cool themes and reasonable prices all of that continued but I want to switch my focus to the ownership of Six Flags because it starts getting crazy as I said it was started by Angus win in 1961 and then sold to Penn Central in 1966 they held on to it for a while building it to the six parks that I mentioned located across the country then in 1982 Bally manufacturing bought it for one hundred and forty seven million dollars it was under their control in 1984 when they added Six Flags Great America in Illinois and acquired the theme park rights to the Warner Brothers characters which meant they could now legally have Bugs Bunny walking around the park in 1987 Six Flags was then bought by a company called West ray capital for six hundred and seventeen million dollars in a shaky leveraged buyout to raise the money they issued these high risk bonds and took out a bunch of bank loans then in 1990 Time Warner bought 19.5% of Six Flags for oddly enough 19 point five million dollars and it seemed like such a great fit their involvement started six years earlier with that deal involving all those characters and this was a way to take things one step further I'm talking about stronger character integration things like merchandising it not mention this is just a huge company that can provide money and other resources such as their television involvement that was used to promote the parks just one year later there were more big changes to investment firms from New York pulled together one hundred and fifty million dollars to buy half of Six Flags and Time Warner put up an additional 31 million to increase their ownership to half in 1993 Time Warner then paid those investment firms 70 million dollars for their half and we're not 100% owner of Six Flags Bugs Bunny Six Flags the whole thing they were finally all together under the same company after this long line of transfers it seems like this would be the end but no we have a few more to go just two years later in 1995 Time Warner sold 51% of a chair to an investment group led by Boston Ventures for 1 billion dollars here's what the deal meant instead of being part of Time Warner Six Flags was now its own company 49% owned by Time Warner and 51% owned by Boston Ventures Time Warner received 200 million dollars in cash and effectively transferred 800 million dollars in debt to the newly formed independent Six Flags we have one more to go but it's easily the biggest and most significant transfer of them all in 1998 premier bought six flags for one point eight six billion dollars since I'm guessing you've never heard of premier you may be wondering where they came from and how they got one point eight six billion dollars well let me tell you about them they started in the early 70s as a real estate company but then in 1981 they bought this rundown amusement park in Oklahoma City called frontier city their initial intention was to divide up the land build a shopping center but instead they decided to invest some money into fixing up the part the investment paid off and by the late 80s they had switched their focus from real estate to theme parks they got together with all these private investors had a couple of public stock offerings took out some debt and throughout the 1990s used all of that money to acquire some other theme parks by 1998 they had 13 of them and were ready to take on the huge acquisition of Six Flags the deal added eight theme parks three water parks the rights to use those Warner brother characters and DC characters such as Batman uberman and the rights to the name premier quickly started rebranding all of those various existing theme parks into Six Flags parks in 2000 they changed their name to Six Flags all while continuing to acquire more parks for example in 1999 that acquired the largest theme park in Mexico now let me talk about all of the debt that's tied to this back to 1987 that weird leveraged buyout added a bunch of death then in 1995 when they became their own company Time Warner effectively pushed eight hundred million dollars of their debt into it that opportunity to reduce their debt was actually a big reason they got rid of it when premier bought it in 1998 they received eight hundred and ninety million dollars in debt from Six Flags and added more in the process on top of some debt that they had built up from their previous acquisitions and then as if that wasn't enough instead of working to pay off that debt they actually added to it so they can continue acquiring other theme parks that's just irresponsible I'm just saying it isn't six flags enough at the point where you spent almost two billion dollars buying it after buying a dozen other theme parks over the past decade all resulting in this crushing debt to stop buying theme parks you bought enough here's a graph showing premiers long-term debt over this time it clearly just shot up with the Six Flags acquisition in 1998 and stayed in that range up until the bankruptcy the reason they weren't paying it off is well as I said they were still buying theme parks for the next few years finally started selling some around 2004 but look at this interest expense they were paying around two hundred million dollars a year in interest I think it's safe to say it that's why they never made any money so in 2009 here we have a company with two billion dollars in debt paying two hundred million dollars in interest each year that never makes any money I would have to say those are pretty big factors and why that stock price dropped now I usually try to tell a story by looking at revenue but it really doesn't work here there were so many parks being bought and sold that it makes their sales and attendance rise and fall from year to year but none of it really reflects the state of the company they did have trouble attracting people to their parks at various times I've seen it blamed on the weather economic issues exchange rates I guess you can look deeper into some of those but I don't think that's where the story is here these people are premier created a situation where sales needed to be unreasonably high to make any profit in looking at their mentality and what they did with their existing funds over that time I don't think it would have went toward lowering that debt anyway I don't think they would have stopped until they actually owned Disneyland and come on let me know in the comments do you agree with everything I just said I know this video had more of a financial focus but I think that was appropriate maybe as a customer you have some other explanations for the rise and fall and rise again maybe it was the rides that got worse or better the attractions there was always this debate on whether they should be focusing on teenagers or the whole family could be something involving that did mr6 have something to do with it I don't know I just like that guy so any thoughts about it leave them in the comments I'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 684,733

Rating: 4.9142375 out of 5

Keywords:

Id: MiME7Lr1MtY

Length: 12min 3sec (723 seconds)

Published: Wed May 27 2020

Reddit Comments

[u/sonimatic14]

Good video but unfortunately talked very little about the rides and after the bankruptcy, even for one of his videos.

[u/NussknackerNick]

Just saw that Video of the great Youtuber Company Man, he makes analysis of Companies, their History and how well they perform. Even though Six flags won't be everyone's favorite cup of tea, it's still interesting to see what a non theme park enthusiast is saying about one of the major theme park chains.

[u/ArrowEnlightenmenter]

Company Man is a great channel, sometimes I find myself binge watching a lot of his videos.

[u/a_magumba]

This gave great perspective on what /u/RaccHudson has been writing about, but ultimately I found it kind of unsatisfying. Great overview of the debt and leveraged buyout situation up until 2010 but then anything after 2010 was just kind of like "dunno, whatever, they seem fine now!"

[u/RaccHudson]

good video imo

[u/Grantsdale]

And possibly (probably?) fall again due to COVID-19.

[u/iMango_]

...and soon to fall again

[u/popfilms]

This is the comment I left on the video.

You forgot to mention their investments into the parks. In 1999 premier invested 42 million (1999 dollars) into one park (great adventure) plus their other massive investments into other parks. In 2001 they invested nearly 70 million into magic mountain (although that number was supposed to be 40 but was inflated by the cost overruns on a roller coaster called X).

Why is this relevant now? Well, Six Flags' TOTAL investment over all their parks in 2018 was under 120 million. That's not just rides, that's all the money they spent on all of their parks. They were willing to drop many 10s of millions on new rides in the early 2000s, but today a park is lucky to get a 10 million dollar ride.

[u/Maddox121]

I get he's not an enthusiast, but he's really not in-depth about a lot of stuff. Six Flags is WAY DIFFERENT than Disneyland.