United Parks & Resorts Inc (PRKS) 2013 Q3 法說會逐字稿

Well, good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to SeaWorld's third quarter 2013 earnings conference call. My name is Kelsey, and I will be your conference operator today. At this time, all participants are in a listen-only mode. But after the prepared remarks, the management from SeaWorld will conduct a question-and-answer session and instructions will be given at that time.

In addition, today's conference is being recorded.

I will now turn the conference over to Mr. Gene Ballesteros, the Company's Treasurer and Head of Investor Relations. Please go ahead, sir.

Thanks, Kelsey. Good afternoon, everyone, and welcome to our third quarter earnings conference call which is being webcast live.

With me today are Jim Atchison, our President and Chief Executive Officer and Jim Heaney, our Chief Financial Officer. On this call we will review our third quarter 2013 results, which we released today after the market closed. If you don't have a copy, it is available on the Investor Relations portion of our website at SeaWorld Entertainment.com. Replay information for this call can also be found in the press release and will be available on our website following the call.

Before we begin, I'd first like to remind everyone that our comments today contain forward-looking statements within the meaning of the Federal Securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different, and we undertake no obligation to update such statements.

In addition, on the call we may reference certain non-GAAP financial measures. More information regarding our forward-looking statements and reconciliations of non-GAAP financial measures to the most comparable GAAP measures are included in earnings release and can be found in our filings with the SEC.

With that, I'd like to turn the call over to Jim Atchison.

Thanks, Gene, and thank you to everyone joining us on our call today. We appreciate your interest in SeaWorld Entertainment.

The third quarter is an extremely important period for our Company as the summer travel season accounts for a significant portion of our full year revenue and earnings. Given that, I am pleased to announce record results in revenue, per capita spending, adjusted EBITDA, adjusted EBITDA margin and net income.

The Company generated $538.4 million of revenue in the third quarter of 2013, an increase of 3% over 2012. The 3% revenue growth was driven by a 7% increase in total revenue per capita from the ongoing benefits of our pricing and yield management efforts and strong results at our SeaWorld branding parks. The strength of our SeaWorld branded parks was driven by the addition of our new Antarctica Empire of the Penguin attraction at SeaWorld Orlando and our new Aquatica Park at SeaWorld San Diego.

Adjusted EBITDA for the third quarter was $254.4 million, an increase of 10% over the third quarter of 2012. Net income during the quarter was $120.2 million, an increase of 30% over the same quarter in 2012. We're pleased with the results through the end of September and remain on track to finish our third straight record year in revenues and earnings with significant free cash flow growth.

At the beginning of 2013, we took above run rate pricing and implemented new yield management strategies that reduced the volume of promotions and the level of promotional discounts. The intent of these initiatives was to increase revenue and operating margins by driving higher quality attendance as we see in Q3. We expect these pricing and yield management efforts to impact per caps and attendance growth through the remainder of 2013 when we finish lapping periods under the prior strategy. In 2014 and beyond, we expect a more normalized mix of revenue with growth coming from both per cap and attendance growth.

In addition, you'll see us move into more variable and dynamic pricing with the intent of growing revenues by stimulating volume with lower prices than traditionally low demand periods and getting higher pricing in high demand periods.

Earlier this year, we introduced enhancements to our e-commerce and mobile platforms, which are helping us grow sales through internal channels. Driving business through these platforms also enables us to offer premium park experiences, up sell and generate other in-park spending commitments before guests arrive at our parks. We're seeing good results in this area, and the third quarter online admission sales are up 9% over last year, driven by an increase in the number of transactions and average transaction size.

Our enhanced desktop and mobile sites also enable us to move toward a more robust execution of our variable pricing model where we can strategically set pricing and business rules to achieve previsit commitments and provide an element of weather proofing to a large portion of our attendance.

The Company is also leveraging our brands into media, entertainment and consumer products. While these efforts are currently not a significant portion of our earnings, they increase our global brand presence and generate revenue outside of our parks. The third season premier of our successful television show Sea Rescue aired October 5. Since its debut, Sea Rescue has been the number one Saturday morning show in its time slot in many major US markets and recently eclipsed the 100 million viewer mark.

Following the season's premier of Sea Rescue, we debuted the Wildlife Docs, our second venture into television programming. The new show centered on the fascinating day-to-day activities at our animal care center at Busch Gardens, Tampa has been well received, drawing more than 5 million viewers since its October 5 premier. We look forward to sharing the stories of the 12,000 animals at Busch Gardens and the talented men and women who care for them throughout the Wildlife Doc debut season.

We recently announced our 2014 attractions, which include new offerings at 9 of our 11 parks. We're very excited to bring a Sea of Surprises, SeaWorld's 50th anniversary celebration to all three SeaWorld parks next year. Guests can look forward to new interactive experiences, shows, pathway performances, animal encounters and a surprise squad offering guests prizes every day.

At SeaWorld San Diego, construction of Explorers Reef is well underway. Explorers Reef is an innovative new experience that immerses guests in an undersea realm from the moment they arrive at the park. At Busch Gardens Tampa, Falcon Fury is taking to the skies and is scheduled for completion next spring. At 335 feet, Falcon Fury will be the tallest free-standing drop tower in North America.

Our European-themed Busch Gardens Williamsburg Park, guests will experience a new attraction that explores the British music invasion with our all-new production, London Rocks. Also opening this spring at Water Country USA is Colossal Curl. This new family thrill slide features tornado, funnel and tantrum wave elements and spans more than 550 feet throughout the park's landscape.

In 2014, all three of our Aquatica water parks will get new attractions. Our newest water park, Aquatica San Diego is getting its first new attraction in more than eight years. Taumata Racer, a thrilling high speed racing water slide will debut Memorial Day weekend. Aquatica San Antonio will unveil a new 13,500 square foot aviary. Located at Loggerhead Beach, this immersive animal experience will allow guests to float, wade or walk among hundreds of tropical birds. The aviary will also feature a guest pool and waterfalls.

Yesterday we announced the addition of Ihu's Breakaway Falls at Aquatica Orlando. We are excited to bring the tallest water thrill ride of its type to Orlando this spring. And finally, at Sesame Place, Cookie's Monster Land is taking shape and will open in May. The new realm will feature five new family friendly rides, a three story net climb and a soft play area for the park's youngest visitors.

Before Jim walks us through our third quarter and year-to-date financial performance, I'd like to take a moment to reflect on several developments in our education and conservation programs, which are key components of our Company's culture and mission. In September, our animal rescue team, in partnership with the Loggerhead Marine Center, returned more than 70 endangered sea turtle hatchlings to Florida waters. Several of the baby turtles received care at SeaWorld Orlando after washing ashore during storms.

Also, we announced the nonprofit SeaWorld and Busch Gardens conservation fund has awarded more than $1.2 million in grants to 93 wildlife projects in the US and around the world. Since its inception 10 years ago, the fund has awarded more than $10 million in grants to projects benefiting wildlife globally.

And finally, earlier today we hosted the digital premier of animal vision, an all new interactive platform providing 24/7 access into some of SeaWorld's animal habitats. Animal Vision allows our guests to deepen their connection with penguins at SeaWorld Orlando's new Antarctica, a school of stingrays at Aquatica San Antonio or majestic sea turtles and our SeaWorld San Diego Turtle Reef attraction through customized interactive websites at Animalvisions.com. We'll be showcasing additional animal species in the near future, so stay tuned for new additions.

As we finish the year and look back on 2014, we will continue to create meaningful revenue and free cash flow and focus on growing our globally recognized parks, brands and intellectual property.

With that, I'd like to turn the call over to Jim Heaney, our Chief Financial Officer, who will provide more details on our financial performance.

Thanks, Jim, and good afternoon, everyone.

I'll go through the quarterly results, cover balance sheet and cash flow items and close with our updated guidance for 2013. For the third quarter, the Company generated record revenue a $538.4 million, which is an increase of $16.1 million, or 3% over the comparable period in 2012. The revenue increase was driven by a 6.9% increase in total revenue per capita from $56.80 in 2012 to $60.74 in 2013, partially offset by a 3.6% decline in attendance.

In the quarter, admissions per capita spending increased by 9.1% while in park per capita spending increased by 3.5%. Attendance trends improved in the third quarter compared to the second quarter, reversing a negative trend earlier in the year with a 3.6% decline in the third quarter versus a 9.5% decline in the second quarter. This improvement continued into October and November, with attendance running flat with prior year levels. Roughly half of the 3.6% decline in the third quarter was expected due to new pricing and yield management strategies implemented at the beginning of 2013 to increase revenue, per capita revenue and operating margin. The remainder of the attendance decline in the third quarter was due to adverse weather in July when we had above average precipitation in all of our markets, including record precipitation in Florida. Weather conditions improved in August and September, and our attendance trends improved accordingly.

As mentioned earlier, we expect our new pricing and yield management strategies to impact attendance and per capita revenue through the end of 2013. Beginning in 2014, we expect to see more normalized patterns of revenue growth coming from both per capita revenue and attendance growth. Third quarter cost of food, merchandise and other revenue decreased by 7% from $43.5 million in 2012 to $40.4 million in 2013. As a percent of revenue, these costs decreased from 8.3% in the third quarter of 2012 to 7.5% in 2013.

Third quarter operating expense increased from $191.4 million in 2012 to $202.6 million in 2013. The increase was due to expense timing and the additional cost from new attractions. As percent of revenue, operating expense increased from 37% in the third quarter of 2012 to 38% in 2013.

Third quarter SG&A expense decreased 19% from $58.5 million in 2012 to $47.4 million in 2013. The decrease was primarily a result of the advertising and media spend, timing and termination of our 2009 advisory fee agreement with Blackstone in the prior quarter. As a percent of revenue, SG&A expense decreased from 11% in 2012 to 9% in 2013. A portion of the timing benefit in advertising and media spend will reverse in the fourth quarter, although most of the other side of the timing variance occurred in the second quarter. For the full year, we expect SG&A expense to be up low single-digit percentage points over 2012.

Third quarter adjusted EBITDA, a non-GAAP measure defined and reconciled in our earnings release, increased by 10% from $231.6 million in 2012 to $254.4 million in 2013. This improvement was driven by an increase in revenues and a 300-basis point increase in margin from 44% in the third quarter of 2012 to 47% in 2013. Third quarter depreciation and amortization expense decreased by 5% from $44.7 million in 2012 to $42.3 million in 2013. The decrease was due to the impact of fully depreciated assets, partially offset by the impact of new asset additions.

Third quarter interest expense decreased by $8.5 million, or 29% from $29.5 million in 2012 to $21 million in 2013. The decrease was a result of a $177 million paydown on our senior notes and credit facility with the net proceeds from our IPO and Amendment 5 of our credit facility that lowered the interest rate and extended the maturity date out to May 2020. Third quarter net income increased by 30% from $92.3 million in 2012 to $120.2 million in 2013. Net income increased due the increased operational earnings, lower interest expense and a lower tax provision rate.

Free cash flow increased by $18.3 million, or 15%, from $122.4 million in 2012 to $140.8 million in 2013 due to increased cash flow from operations and lower capital expenditures. At the end of the quarter, the Company had $210.5 million of cash and cash equivalents with no amount outstanding on our revolving credit facility. Total long-term debt, including current maturities and discounts, was $1.661 billion, which equates to a 3.3 times net leverage ratio at the end of the quarter.

This brings me to an update of our guidance for the full year of 2013. The following estimates are based on current management expectations. Please refer to the discussion of forward-looking statements in our earnings release and related SEC filings.

For 2013, we are increasing our adjusted EBITDA guidance to $432 million to $442 million, and narrowing our revenue guidance from $1.452 billion to billion $1.462 billion. Note, we plan to establish guidance for 2014 on the upcoming fourth quarter earnings call.

With that, I'll turn the call back to Jim Atchison.

Thank you, Jim.

Before we close, I'd like to once again thank you all for your interest in our Company. I would also like to take a moment to welcome Deborah Thomas, Executive Vice President and Chief Financial Officer of Hasbro to our board of directors. Deborah brings with her an abundance of corporate finance and governance expertise, along with being a leader at a Company that shares many of SeaWorld's core values. Welcome, Deborah, to the SeaWorld family.

At this time, Kelsey, we'd like to open the line up for questions.

Certainly.

(Operator Instructions)

We'll go first to Brian Goldberg with Bank of America-Merrill Lynch.

Hi. Thanks. Just a couple ones.

You mentioned you were expecting more normalized mix of rate and volume in 2014. I was just wondering, could you helps us think about some of the puts and takes next year? You mentioned you'll be lapping the price increases, but how should we think about the Easter comp, weather comps, the impact of so many new attractions across the Company. And I guess the timing of any - unusual timing of any major holidays, like July 4th?

Hi, Brian. This is Jim Atchison. I'll start the answer in that question, and then I'll ask Jim Heaney to chime in as well.

Certainly, you outlined some of the issues we deal with, of course, in this business, and that relates to timing of holidays and certainly weather impacts and our new attraction lineups, and those are always different each year. Probably the most notable of the holiday kind of lineups is that Easter shifts from Q1 to Q2 next year. So, that will have an impact, obviously, on the businesses as you'll see more of the related volume from the Easter and potentially spring break traffic shifting out of Q1 into Q2. So, you would probably look for that.

With respect to weather, we've had a challenging year for weather, in particular in our Florida markets, where we have quite a bit of geographic concentration. The summer months were awfully rainy for us. But we saw, coming out of the difficult rainy season we had in June and July, we saw continued improvement each successive month, and we are kind of lapping that -- well past that now.

I'll ask Jim to comment a little bit on some of our revenue strategies for next year and kind of how we see the mix both of per caps and volume kind of blending out.

Okay. Thanks, Jim.

Yes, going into 2014, as we mentioned earlier, we expect to see a more normalized mix of revenue growth coming from both attendance growth and per cap growth. If you peel that part a little bit farther, we would expect roughly one-third of our revenue growth next year to be from attendance. And then two-thirds from per capita growth come equally from pricing increases and then also yield management.

Okay, thanks. And then I have another one.

Your revised guidance for 2013, if I'm doing my math right, it implies maybe a little bit of margin compression in the fourth quarter year-over-year, just using the midpoints of your ranges. And I was just wondering, is there something unique operationally that's going to be occurring in the December quarter to cause the compression, like a shift of marketing dollars, or was last year abnormally elevated? Or any color on that dynamic would be great.

Yes, if you look at the -- if you do the math, what it indicates for Q4, what's going on there is, at the midpoint we have a small EBITDA decline, largely based on the spread of the sales and marketing spend. As I mentioned earlier in my comments, the sales and marketing spend shifted spending out of Q3, mostly into Q2, but a portion of that did end up in Q4. So, we have a slightly above run rate expense growth number in Q4, largely based on that spread of sales and marketing.

Thanks. Just finally, you your leverage was at 3.3 times, or it was at the end of the quarter. Could you just remind us what your comfort level is, where it no longer makes sense for you to de-lever from a target leverage standpoint? And what your priority uses of the excess capacity would be once you hit that level?

I'll start out and let Jim talk about the use of our free cash flow. As you heard earlier, we're at about 3.3 times. Our cash seasonally peaks in Q3, then it will drop down slightly in Q4 and Q1.

The range of our leverage at our current credit structure would be around 3.3 to 3.5 throughout the year, and we're comfortable in that area. The next logical step-down in our leverage ratio is at 3.25 where we get a 25 basis point rate reduction on our credit facility. But we're not really going to stress to get there. We may get there naturally, but at this point, we feel pretty comfortable with our current leverage ratio.

And with respect to uses of our cash flow, Brian, as you probably note and see, we're generating a lot of free cash flow. And that's been our plan as we've communicated all along, and we feel good about the pace that we're on. We do, as a Board, we do talk regularly about opportunities to deploy that cash flow to benefit all of our investors.

So, we look at options every time we meet, every time we talk. We don't have any definitive plans to announce at this point, but it's something that's always a high priority and an important discussion.

Thanks a lot.

Moving on to Tim Nollen with Macquarie.

Just was curious if you could give us any idea of what the Antarctica opening might have contributed to your revenues. And actually, behind the question is you mentioned a lot of new initiatives for 2014.

I don't think any of them are quite as big as Antarctica from the sound of it. But it's several different things. Just wonder if you could give us an idea of what kind of incremental growth you could expect from those.

Sure, this is Jim Atchison, Tim. I'll answer that. We were thrilled, we are thrilled with the performance of our Antarctica attraction. And I've been in our business nearly three decades, and it's refreshing when you see a new attraction that really resonated so well that it did what you wanted it to do, exactly how you hoped it would perform, and we see all of that with Antarctica.

Our SeaWorld Orlando park is our leading performer throughout the year. We're have a record year at that park. The response to Antarctica has been fantastic.

We're very pleased with the results that we've been able to drive through this new attraction. And being in Orlando, we benefit from this for some time to come. I'll lead into your follow-on question.

Because the Orlando market, for example, turns over with such frequency that this attraction will remain new for a longer period of time than, say, in one of our regional parks. So, we feel very good about the attraction, what it's done and the performance it's driving for us.

When you look ahead to 2014, we have attractions at 9 of our 11 parks. And you're right, they aren't of the size of Antarctica. But that recipe we've used before, and it's a bit tried and true. We have something to talk about everywhere, so it seems, and really a great mix and lineup throughout. So, we feel very good about the offerings we have.

There's something new in each of the markets, every one of our park markets. We've got a great lineup and it's a mix and very blend. There's some advantages to that over a concentrated year like we had this year in Florida in as much as we tend to spread the risk a little bit better with regards to weather and other things.

The fact that we've got something to talk about in all of our key markets makes us a little less dependent on one market having good timing and delivering. So, we feel very, very good about the plan for next year. It's a little bit more of a traditional one for us, perhaps.

Okay. That's helpful. No numbers we can assign to Antarctica or anything upcoming though that you're willing to put out there?

No, we don't detail out individual attraction performance, but unfortunately can't do that. Suffice to say, we're delighted with the performance of it and it's really driving record performance at our flagship park.

At least you can say Antarctica, you think has driven attendance increase, at least in Orlando, yes?

Well, we're pleased with the attendance we're getting throughout it. We don't detail out any of our specific park attendance, but we're having a terrific year in Orlando as a result of this attraction.

Okay, all right, great. Thanks.

Moving on to Tim Conder with Wells Fargo Securities.

Thank you. Jim, staying on the new attractions, one of your competitors in the Orlando market is introducing a major new ride next year. Can you remind us how this can benefit the region and then how the timing of that can have implications on yourselves and also other operators in the market?

Sure, sure, Tim. Yes, it's one of the interesting dynamics about the Orlando marketplace. Orlando's a little bit of the Wall Street of the theme park world.

So, the fact that there's other operators in town, sophisticated operators who invest in the business, do it smartly, is actually a benefit to all of us. And so when we see attractions like even Transformers this year, Fantasyland this year at Disney or Harry Potter 2, as you're alluding to, that's actually a benefit for the whole destination. It tends to provide more lift, brings more people to the market. As people are in town, then they can pick and choose the parks they go to.

So, it tends to help rise all the ships, if you will, raise all the ships if you will. There's certain benefits to having competition, and we feel that's something we've endured and have dealt with for many years and have a lot of history behind evaluating. And we think the destination's only going to continue to grow as it has this year.

Okay, okay. And then Jim Heaney, maybe a little bit more color -- you said 2014 will sort of be the first year of a -- under the new approach you're taking with implementing a broader, more dynamic pricing here. And you gave us some framework for 2014 in particular.

Going forward, would you anticipate that revenues, Jim, would be more similar to what you outlined, one-third attendance and then one-third through both pricing and both yield management techniques? And should we think somewhat in that mid single-digits total revenue growth framework?

Sure. If you look backwards, we've traditionally gotten about half of our revenue growth from attendance and half from per cap growth. Then in 2013, we've gotten all of our revenue growth through pricing and per cap growth.

Going forward into 2014 and beyond, no year -- every year doesn't look the same, but I think for 2014 and 2015 that one-third, one-third, one-third profile would hold for both 2014 and 2015. As you know, we get better revenue flow-through and margin flow-through when we can drive per cap growth versus attendance growth. We're trying to push that mix up to at least two-thirds from per cap growth versus attendance growth. And that's our goal for 2014 and long-term, that's a mix that I think we can achieve, although it will be certain years that look a little different.

Okay. And then along that, Jim, just to extend that a little bit more, you said you're getting that flow-through. What type of a range, if you can give us anything, looking out here over the next two, three years, would you anticipate that type of flow-through from the revenue?

Well, if you look at our guidance for this year at the midpoint, it would infer a 66% flow-through on our revenue growth. But again, this year was all price growth, as far as our revenue growth drivers. Going into 2014, I expect something a little bit more muted from that, but our minimum target is 50% flow-through on our revenue growth.

Okay. And then lastly, back to the capital deployment, Jim Atchison. Would -- you said the Board is looking at multiple things, nothing yet to announce. Would it be within the realm of reason that potentially we could see something from a new park venue, whether that's solely SeaWorld or with a partner domestically, internationally over the next 12 months to 24 months?

Yes, I don't -- to borrow your phrase, Tim, I don't think that's outside of the realm of possibilities at all. We have put quite a bit of work into a handful of development initiatives and feel very good about the progress that we're making and the pace they're moving along. We have really terrific brands that are extendable in various ways, both domestically and internationally. We continue to work hard on these initiatives, and I think we'll find some great opportunities over the not too distant future.

And if I may, one last thing is covering Hasbro and knowing Deb Thomas over there, they have a little license related to a property called Sesame Street. Obviously, you have something there. What potentially can you see some things that -- could there be some opportunities for the companies the to work together going forward, especially as you're pushing to further consumer products here?

Well, I think -- look, one of the -- there's a number of reasons we're excited to have Deb joining our Board. She's a dynamic professional who brings just a wealth of experience from her finance background, governance background and so forth. She's also affiliated with the world's premier toy company and one of the major consumer products company in that regard.

We already have had some relationships with Hasbro over years, but nothing of any notable scale. We would look to pursue opportunities that make sense, but we're not leaning on Deb to do that. We think as those opportunities make sense, we'll find our way to them or they'll find their way you to us. But being -- having Deb join our team and having by extension the relationship with Hasbro is something we're very excited about.

Great. Thank you, gentlemen.

-- Hamann with KeyBanc has the next question.

Yes, thanks. Good afternoon, everyone. Just in terms of the dynamic pricing stuff that you've kind of dipped your toe in the water on this year. Can you kind of give us maybe an update or just some general observations from the tests you had done with the $50 ticket and some of the benefits you had started to see? And how we should expect to wade a little bit further into the water, if you will, in 2014 with some of these initiatives.

Sure. Yes, as we've talked about before, we were -- we've been really excited and encouraged by the results of our $50 ticket offer. For those of you who aren't as familiar with it, that was an offer that we began offering at our Orlando and Tampa parks beginning in September. Actually it was mid-August, that was a $50 offer that had to be pre-purchased, and guests can only use those tickets during the week, Monday through Friday.

And we were trying to achieve a couple things. One is to drive volume. The visitation patterns at a theme park is very, obviously, weighted to the weekend, and there's a lot of operational efficiencies and guest experience benefit if you can smooth that and spread the attendance more evenly across the week.

And the exciting part of this ticket offer is we saw people are willing to move off the weekends and visit during the week based on price. And we're also seeing the distribution of visitation during the week was fairly even Monday through Friday, which was also interesting. But we got really nice volume on this ticket, and the effective discount on the ticket was at or even less than what we traditionally offer in an off-peak period. So, I think there's some confusion about that.

And then lastly, it's an efficient ticket, both from a standpoint of, the vast majority are sold online. And people buy them in advance, so you get that element of weather proofing with the purchase as well.

Okay, thanks. I guess just -- I was just going to follow up on that thought, I guess. You mentioned online sales in the third quarter were pretty strong, and I'm assuming that this may be playing into that. Can you give us an update on where you are online direct as a percentage of your sales and what the opportunity as you see it is there?

Yes, I'll comment on that, Scott. This is an area we've put a lot of investment, a lot of focus in over the last few years, and we've been migrating more and more of our business to our e-commerce platform. We feel very good about that, that migration, that transition as it's gone. And do we have further to go, yes, perhaps we do.

Our online business is about 36%, if you look on a year-to-date basis of our total mix. That has continued to migrate and move over time, and it continues to move up.

We also are balancing how much of the business we want to go through the trade, and for that matter, even direct through our call centers or front gate. But our online business, particularly through mobile, is where we've seen some terrific results. And the success there helps us just enormously with the up sells and add-ons of our in-park experiences and other ways to make a more full, rich day for our guests. So, it's a great fit on a number of fronts.

All right. Thanks a lot, guys.

We'll now hear from Amanda Bryant with Barclays.

Great. Thank you. Can you tell us what your promotional calendar looks like over the next couple of quarters and maybe how that compares to prior year programs?

And then just as a quick follow-on to that, will your portfolio-wide Christmas offering this year reflect an extension in terms of operating days this year versus last year? Or will all the parks be on the same Christmas calendar? Thank you.

Sure, Amanda, this is Jim Atchison. In terms of the view and look of our promotional calendar, we don't detail specific promotions ahead of time. But what I'll tell you is we've had a more measured, thoughtful approach to the promotional tenor of our offers throughout the year.

We tend to really have as we've done through this year, the drive towards having fewer offers, but more meaningful ones, ones that are differentiated, ones that kind of align with the pricing strategy and focus on driving more revenue. That's something that we'll continue to do, probably fewer offers, more targeted, more unique in nature. And that's something that you'll see, not just for the next quarter, but is really going to be a big part of our focus for next year.

Then with regard to Christmas, our Christmas programs, we're very excited about that we have lined up for this year. We launched a new program in Tampa last year, our Tampa park, and this will be the second year of it. It was quite a success last year, and we've expanded it a bit this year, to your point. Our Williamsburg Christmas program is also very strong.

And really, the offerings we have in all of our parks is really quite strong. We feel very good about the Christmas plans we have in place and the calendar that's aligned for them for the months ahead. They're quite strong. I didn't mention, I forgot to mention our Sesame Place park in Langhorne also has A Very Furry Christmas, which we launched a couple years ago and has really taken off, so we feel really good about that as well.

Thank you.

Our next question comes from Steven Kent with Goldman Sachs.

Hi, a couple questions. First, I guess I just want to understand the weather issues a little bit more. And the reason I say that is because we haven't heard weather issues as much from some of the other amusement park companies, and then even the entertainment companies seem to be able to do okay. So, is there something unique to the SeaWorld customer or to your product that you seem to be affected more by weather than maybe some of the other companies?

Yes, Steve, that's a good question, because there's other -- obviously others in this space, and there are a few things about us that might make -- might differentiate a little bit. For one, as a Company with us having five parks in Florida, we have a bit of geographic concentration in Florida that's rather significant versus, say, the regional comps that you might look at.

And then versus, say, a Disney, or as you point out, some of the other entertainment companies. They really have a lot more to their offering that of involve lodging. And so the circumstance that you might have bad weather, they've already perhaps pre-commited because their tickets and so forth might be intertwined with their lodging commitments which were made months in advance. Those are a couple differences that can affect us in a significant way.

If you look at our July attendance as we put in the release, being down 5.7%, that's a pretty significant number. Then you see as the weather improved, in August and September that improved to 1.8%, and now we're running flat to prior year. So, the weather impact is significant.

If the we had had a July that was more like our August and September numbers, we would have picked up about $10 million in additional revenue. That would have made a pretty meaningful impact on our revenue growth for the quarter. We do have a bit of weather concentration and perhaps compared to, say, a Disney who has lodging as a component of their offering, that might help lock up a visit earlier than a visit to our park.

Okay. Thanks.

Steve, this is -- I'd also add that at our Busch Gardens Tampa Park, they have a much higher percentage of their attendance coming from pass holders. From a weather standpoint, they tend to be a lot more sensitive to weather and drop out quicker. That doesn't apply as much to our Orlando park, but Tampa's much more susceptible to weather because of the high pass base.

And since we're just comparing, we do cover some of the other names. On the promotions, or keeping the pricing versus attendance versus the per caps, smoothing that out, again, is there something unique to your Company versus some of the other companies who have smoothed this out a little bit more? Or is it that you're experimenting, which isn't a bad thing, especially early on in these pricing strategies, and that's why there's a little bit more volatility in pricing versus volume issues?

Yes, I think coming into this year we made a decision to make some moves in pricing and yield management. We took above run rate pricing come into the year and implemented some new yield management strategies that we knew we would lose attendance on, and we did, and largely the results came in largely as expected. We made these moves before becoming a public Company and may have not made such a dramatic move knowing that we were going to be a public Company because it is somewhat of a jarring effect with attendance and per cap growth.

So, we may have transitioned it over a longer period of time. But we feel really good about the results we're seeing, and I think you'll see the results really start to pay off in 2014 and beyond where we set a higher per cap base and then grow attendance off of that as well.

Okay. Thank you.

Moving on to Afua Ahwoi with Goldman Sachs.

Thank you. Two questions from me.

On the operating expense line, that's a little surprise that we didn't see as much leverage; in fact, we didn't see leverage on that given that pricing was very strong and that should all flow through to that line. I understand there was timing, expense timing that you highlighted, but maybe you could talk a little bit more about that.

And then as we think about next year, your spending -- your advertising spending around your 50th anniversary, I think this year advertising has been quite lumpy in terms of the quarters that fall. How should we think about that for next year? Thanks.

Okay. Well, on the second item, in general you should see our advertise -- sales and marketing spend more closely track attendance. Maybe higher during the summer and maybe a little bit lower in the shoulder period.

The 50th anniversary spending will increase our sales and marketing spending slightly but not to a level where I think it would be very noticeable. The operating expense as a percentage of revenue, that was, as you mentioned, as we pointed out earlier, some of that was a timing of spending, some maintenance work. And then we also had the incremental cost from the new Aquatica waterpark on top of that. And then the cost from the new attractions and Antarctica.

So, it's really those three factors combined that caused that. If you look at the full year run rate leverage that we're getting on operating expenses it's very good, and we're getting nice margin lift if you look at the full year numbers.

Okay. Thank you.

Our next question will come from Alexia Quadrani with JPMorgan.

Thank you. Just staying on your commentary on pricing, could you give us a sense of I guess how much room you feel you have in general in terms of lifting price? I know some of your competitors have been pretty aggressive on the pricing side, particularly in the Orlando area.

Just trying to get a sense if you can give some color about how much room you may have? And if that differs dramatically, maybe by type of park or geographic location, maybe in some places you feel the ceiling's a bit higher?

Sure, Alexia. This is Jim Atchison. The work we put in on pricing through this year we feel good about and the results we're getting. When you look at our admissions per capita up 9.1% in this quarter alone, that's something that's encouraging from the results we're getting.

So how much more room there is, well, that kind of depends on the park and kind of the dynamics that we have. We do feel that we've made -- taken a number of actions that we feel good about for the year so I don't know that we have any further dramatic changes to propose or introduce for next year, if you will.

One of the things that when we look at pricing, we try to separate it a little bit by the local and nearby market and then the tourist market. And on the local and nearby side, we really focus on our loyalty products, our annual pass products and so forth.

If you go back to 1996, we created and introduced Easy Pay as a monthly means to secure pass purchases. And so we've had over 15 years experience in that, and we think we can tweak that offering a bit more.

And then on the tourist side, we price to the opportunities that we see, and we're really about bundling our parks together and selling more than one park in our experiences. So, we think we've done some good work here on e-commerce and on our yield management efforts. But we'll have a little bit more of a traditional approach to it next year since we'll be lapping so many of these efforts from this year.

And then on -- I know we discussed sort of the oddities of some of the timing of the holidays next year, like Easter being so late in April. Is there anything peculiar at all about the December quarter, Thanksgiving being a little late maybe, what the days Christmas or New Years falls on? Or is it more of a business as usual for the fourth quarter?

The biggest nuance, which you already identified, is Thanksgiving is a week later than normal. I think there's six less days between Thanksgiving and Christmas this year. Our park teams adjust their operation for that. They're starting Christmas earlier in some areas. You probably see that when you're out shopping, a lot of stores are doing that as well.

And then also running Christmas during the week more so than they've done in prior years. So, we've adjusted to that nuance. Beyond that, there's really nothing unusual in the quarter.

The only other thing I'd add, Alexia, is that with Christmas falling on a Wednesday this year, when people wrap up their travel plans, to illustrate, if Christmas had fallen on a Monday, for example, then we might see a longer week of that last week of the year holiday period. But falling on a Wednesday, people could wrap up their plans by Saturday the 28th or Sunday the 29th or something like that. So, those last couple days could be impacted a bit.

But those -- that would affect, obviously, our Florida park. But those last many days of the year are significant to the quarter for us. And earlier in the week, Easter is nice, but it moves with the calendar, and we kind of take that as it comes.

Okay, and just a last question. I guess any update on terms of timing for maybe a potential dividend hike? A lot of your -- I think your competitors recently raised their dividend. Just want to see if any new thoughts on that.

That's something -- we look at ways to return value to our shareholders with great frequency, as you can imagine. And our Board has had discussions around a variety of opportunities to do so. And as we pointed out, we're generating a lot of cash as well.

We don't have anything imminent to announce in that respect. So, I can't add more color on that other than our -- the dividend that we have, we're happy to have out. And our yield has been around 2.5%, 2.7%, somewhere thereabouts. It's something we look at from time to time, and we will again soon.

Okay. Thank you very much.

We'll now hear from Robert Fishman with MoffettNathanson.

Thank you. One question on the operating costs. Can you just help us think about the flexibility you have on the operating expenses, to dial it up or down in the quarter? Or if you can characterize how much is variable versus fixed there?

Robert, I'll add some comments on that. The business does have some operating levers to it in terms of how you manage the guest experience and provide a great experience, and that's always our top priority, and that's what we focus on. But having said that, there's nuances of how you schedule the park hours, the operating hours of specific attractions, how you can move guests around the park.

Our SeaWorld Park, for example, have some distinct advantages because they're so show driven. So, by arrangements of the show schedules, you can kind of help manage the crowd throughout the park a little better than, say, in one of our Busch Gardens parks. So, there's some real advantages there.

We do have, obviously, a variable and fixed component of our cost structure. We -- in aggregate, we probably have more fixed costs than variable. But that's one of the things that's -- there's some inherent efficiency implied with us having focusing on more profitable guests, and we get some efficiency out of that. So, it's a lot about the nuances of managing our labor mix is probably the biggest piece, and then some of the operating expenses related to attraction operating times.

Okay, great. And maybe if I could just give you an opportunity to address. Any potential impacts on your business from the OSHA ruling that I believe you're currently appealing?

The -- no. The OSHA appeal that we filed is with the DC Court of Appeals, and we remain very confident in our case. And as we've said all along, the greatest priority for us is the safety of our employees and guests.

And we continue to differ with OSHA on the merits of this case. But we feel very strong about our position and good about the arguments that we've made. I can't offer any more comment on it than that, though.

Thanks a lot, guys.

We have no further questions at this time. Mr. Atchison, I'll turn the conference back to you for closing or additional remarks.

Great, great. Well, thanks, Kelsey, and thank you, everyone.

Before our final closing, I'd like to thank all of our team members for continuing to deliver personal interactive and educational experience to each of our guests. We operate 11 of the most beautiful, well maintained parks in the world, and our employees are truly the best in the business. And we're very proud of what we do and how we get it done. We thank you all for participating today, and I'll turn it back to you, Kelsey.

Thank you. Again, ladies and gentlemen, that does conclude our conference for today. We thank you all for your participation.