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Two analysts and top management from seven sector firms examine the leisure & entertainment sector in this special 46-page Leisure & Entertainment issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info466.htm.

TWST: How would you assess the impact of the events of September 11 on the sectors that you follow? Did they compound the recession-caused problems that the companies were already experiencing, or present a new set of challenges?

Ms. Krutick: Both. There is no question that for the advertising-sensitive companies there was a light at the end of the tunnel before September 11, and that light has been shut off. There is really no visibility in the ad market. In fact, some near-term data points suggest that we may not be at the precise bottom yet in terms of the advertising market, while other data points are somewhat encouraging. For example, total magazine ad spending fell 9.6% and ad pages fell 16.8% in October, but first quarter 2002 cancellations appear to be quite low. There has been a major corporate retrenchment on the advertising side, so that recovery will likely to be more protracted. Meanwhile, the content-driven businesses have shone, lending some stability to the entertainment companies. The theme park sector, along with the travel industry as a whole, has been severely affected. Attendance trends at Disney World are tracking 20%-25% lower than last year. Similarly, other destination leisure companies in the cruise industry were decimated short term, but have rebounded recently. Given the differing seasonality of the leisure businesses, the timing of recent events hurt some companies less than others. For example, cruise companies and regional theme park operators are in a less critical part of their season. The real key for the cruise business will be the level of demand during the wave period. The wave period is the first quarter of each year when about a third of the current-year bookings are made. Six Flags’ key season does not begin until next spring, so there is still time for a consumer spending rebound. Even boating company Brunswick Corp. has done a good job of managing its inventories and is entering next season with a relatively strong position despite its obvious sensitivity to the high-end consumer.

TWST: Six Flags (NYSE:PKS) theme parks are not destinations in the way that the Disney (NYSE:DIS) parks are.

Ms. Krutick: Exactly, and that’s why you’ve seen Six Flags outperform Walt Disney in recent attendance trends, because Six Flags’ business is primarily a drive-in business. In contrast, Disney’s destination parks rely on a high component of fly-in traffic. A good proxy for the ability of these businesses to bounce back, in our view, is sporting events. These events rely on a model similar to regional parks — large groups of people drive to enjoy a particular activity. Encouragingly, attendance at sporting events has rebounded smartly off trough levels.

TWST: We haven’t talked about Six Flags from an investment standpoint. What is the outlook for Six Flags and how do you rate it at this time?

Ms. Krutick: We carry an outperform rating on Six Flags (formerly Premier Parks) and a mid-teens price target. Recently, the shares of this high quality regional theme park operator have moved up on cue with its usual seasonal lift. Typically the fourth quarter is a big seasonal positive for Six Flags’ stock, as the anticipatory build moves into next year; spring is the high point of its season, offering upside from our target. From an operational standpoint, Six Flags has been beaten down by weather and economic issues, setting them up for another year of easy comparisons. The company tends to be more recession-resistant, and should the geopolitical situation be fairly stable, Six Flags should have a very fine year next season.

1) Leisure & Entertainment Stocks - In an in-depth (4,200 words) Analyst Interview, Jill S. Krutick, Managing Director at Salomon Smith Barney, examines the outlook for the sector and shares specific stock recommendations.

2) Interactive Entertainment - In an in-depth (4,000 words) Analyst Interview, Miguel Iribarren, Research Analyst at Wedbush Morgan Securities, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of seven sector firms examine the outlook for their firm and the sector.