THEME PARKS RIDING DOWNWARD SPIRAL.

Byline: Greg Hernandez Staff Writer

The theme park industry's summer of discontent worsened Tuesday as Six Flags Inc., owner of Magic Mountain in Valencia, announced overall attendance has dropped by 11 percent from a year ago - a post-Sept. 11 downturn that has hit The Walt Disney Co. and other theme park operators.

The situation facing Six Flags and Disney reflects an overall slump in theme park attendance for several companies that have suffered mightily from drops in tourism since the terrorist attacks against the United States and their aftermath.

Vivendi Universal, the beleaguered owner of Universal Studios Hollywood in Universal City and other theme parks, will announce its second-quarter earnings today and is expected to take a write-down worth billions on some of its entertainment assets.

Shares of Oklahoma City-based Six Flags Inc. plummeted more than 57 percent Tuesday after the company, which owns more than 30 other theme parks around the world, posted disappointing second-quarter earnings and warned of a bleak outlook for the rest of 2002.

``The theme parks have to work very, very hard at getting the attendance and this is what is impacting the earnings,'' said Jack Kyser, chief economist at the Los Angeles Economic Development Corp. ``Disney and Universal are waiting for the international tourist to come back and most people say it won't be until 2003 before that happens.''

Six Flags blamed the current attendance plunge on terrorism fears in early July, which kept visitors away, as well as poor weather in some parts of the country.

Kyser said that in Southern California, Six Flags Magic Mountain has to compete for local attendance with Disneyland, Knott's Berry Farm, Sea World and Universal Studios Hollywood among others.

``Those that can draw from the biggest drive market will be in the best shape for the next 12 months,'' Kyser said. ``They have to be promotional.''

Six Flags posted a $6 million second-quarter loss, or 12 cents a share, compared with earnings of $13.4 million, or 8 cents a share, a year ago. This led several analysts to downgrade the company's stock because of the magnitude of the shortfall even in troubled economic times.

Six Flags Chairman and Chief Executive Officer Kieran E. Burke called the company's performance through June 30 ``disappointing.''

``We experienced some softness in group outings business in certain markets reflecting the impact of the difficult economy,'' Burke said.

Meanwhile, slumping theme park attendance at Walt Disney World in Florida and Anaheim's Disneyland and Disney's California Adventure is putting a major drag on Disney's bottom line. But that hasn't stopped rumors that the entertainment giant is interested in purchasing the Universal Studios theme parks from struggling Vivendi Universal should they be put up for sale.

Disney and Universal have waged a battle for tourists in Orlando, Fla., for more than a decade. Disney Chief Financial Officer Thomas Staggs told Reuters news service last week that the entertainment giant could be interested in buying some of Vivendi Universal's assets such as its Universal Studios theme parks in Florida and Universal City in Southern California.

``Any assets that are in our core business that come available, we would certainly take a look at,'' Staggs said. ``Our primary focus is our core business.''

But Staggs added that Disney would only take a look at an acquisition ``that is not dilutive to the earnings or cash flow.''

Rumors of a sale of Vivendi's entertainment business, which includes theme parks, a movie studio and television, have gained momentum following the ouster of former CEO Jean-Marie Messier. Messier's successor, Jean-Rene Fourtou, has has made clear his intention of lowering the French-owned conglomerate's debt load.

``If any company is having difficulty and looking to unload something to pare down debt, any reasonable observer would say another company would take a look at it,'' said David Joyce, an analyst with Guzman & Co. in Miami. ``I don't think it would be a stretch of the imagination that Disney might be interested.''

But Joyce said the timing is not ideal for Disney to make such a purchase, which would not likely go over well with shareholders. It could also hurt Disney's credit rating, which has already suffered because of the downturn in theme park attendance, he said.

``Right now, the investor community is really focused on the here and now,'' Joyce said. ``It's not the best time for them but sometimes you do have to look at the long term. If it's an attractive-enough price for something, they would take a near-term hit to stock price and credit rating but maybe it would make sense in the long term.''

In the third quarter, Disney's theme parks and resorts division, which includes Disneyland in Anaheim and Walt Disney World in Florida, saw revenue drop by 5 percent, to $1.8 billion, and operating income slump to $467 million, a 17 percent drop. The ongoing slump in its theme park business has spilled over to the fourth quarter with bookings currently down by 10 percent compared with a year ago.

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THRILL-LESS SUMMER

SOURCE: Daily News research