United Parks & Resorts Inc (PRKS) 2014 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to SeaWorld Entertainment's second-quarter 2014 financial results conference call. My name is Melissa, and I will be your conference operator today.

(Operator Instructions)

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Gene Ballesteros, Senior Director of Investor Relations and Corporate Treasurer. Please go ahead, sir.

Thank you. Good morning and welcome to our second-quarter 2014 earnings conference call. Today's call is being recorded and webcast live.

Our second-quarter Earnings Release was issued this morning and is available on the Investor Relations portion of our website at SeaWorldEntertainment.com. Replay information for this call can be found in the press release and will be available on our website following the call.

Joining me this morning are Jim Atchison our President and Chief Executive Officer, and Jim Heaney, our Chief Financial Officer. They will review our financial results and discuss important factors impacting the business.

Before we begin I'd like to remind everyone that our comments today may 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 these 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 also found in our filings with the SEC.

Now I'd like to introduce Jim Atchison. Jim?

Thanks, Gene.

Good morning and thank you to everyone for joining us on our call. I will provide comments on our performance and other developments impacting the business, and Jim Heaney will provide details surrounding our second-quarter performance, as well as update you on our 2014 guidance.

We are pleased to report attendance growth in the quarter. Despite a challenging comparison to the prior-year quarter, which included the attendance benefit from opening Antarctica, our largest expansion ever at SeaWorld Orlando. This increase in attendance resulting from the shift in the timing of Easter and generally favorable weather in the quarter was partially offset by lower attendance at our destination parks. Jim Heaney will cover these attendance drivers in more detail in a few minutes.

As part of our ongoing and continuous efforts to drive growth, and in light of the lower attendance at our destination parks, we are undertaking a number of initiatives, including a detailed review of our Company-wide cost structure, with an external advisor. Our intent is to drive significant cash cost savings in both 2014 and 2015.

We intend to reinvest these savings into new attractions at our destination parks and return capital to shareholders through share repurchases. Stay tuned, as we will announce more details on one of these leading edge investments in the upcoming days.

In the near-term we are moving aggressively to address factors impacting revenue and attendance at our destination parks. Our variable pricing strategy continues in several of our park markets, with our Your Day Priced Your Way ticket promotion, along with other weekday pricing offers, which have been well received. Additionally we are building on our successful and popular Halloween and Christmas events to help drive attendance during the last half of the year.

We also continue to ramp up our communication initiatives through our truth campaign and other national marketing efforts to build and protect our brands, as well as to counter the recent media attention from the legislation proposed in California. We've seen the early benefits of these initiatives and expect to build on them through 2014 and into 2015.

As we announced in our earnings release, our Board of Directors has authorized a share repurchase program of up to $250 million of our common stock, effective January 1, 2015. This authorization reflects our confidence and the health and long-term outlook of our Company. We believe we can take advantage of volatile market conditions to buy back our shares, while maintaining the flexibility to make strategic investments in our future.

On the international business development front, we continue to make significant progress on our plans to expand our theme parks outside the US. We recently executed a letter of intent with Village Roadshow Theme Parks, a leading international entertainment and media company, to co-develop theme parks in pan-Asia, India and Russia. This letter of intent, along with our previously announced memorandum of understanding with our partner in the Middle East, creates exciting opportunities for us to extend our parks and brands beyond our domestic borders.

As a quick update, on our last earnings call I announced that we had entered into a new multi-year strategic alliance with American Express. We continue to diligently work on branding integration with American Express inside our 11 parks.

Additionally, we are developing consumer activation programs to enhance guest satisfaction, and are also building co-marketing initiatives that will leverage American Express's vast consumer targeting capabilities. These are just a few of the many opportunities to come from this mutually beneficial partnership.

On the mobile technology front, in July, we announced an enhancement to our parks' mobile apps that allow guests at our SeaWorld, Busch Gardens and Sesame Place theme parks to make unique purchases and redeem offers on their iPhone and Android mobile devices. We are excited about this new commerce feature, which allows guests to use their mobile devices as a payment method for culinary merchandise and other in-park offerings.

For example, guests may purchase and redeem app-exclusive products such as a single ride quick queue and an in-moment product, enabling them to skip a line with a simple tap of their smartphone. In the coming months we will be adding other additional products, including the ability to pre-order meals.

This latest announcement is part of the multi-year digital innovation strategy we launched in May with the introduction of mobile ticketing and responsive web design. Our Company is among the first in the theme park industry to offer these innovative technologies.

These investments go beyond new technology but also extend to park operations for a more interactive and connected guest experience. These mobile applications will enable us to create signature engagements and enhance, facilitate and improve our guest experience, while providing more opportunity for in-park spending.

Finally, I'd like to update you on our media and entertainment businesses. I'm thrilled to announce that our Emmy-nominated television show, Sea Rescue, has been renewed and will return next year for its fourth season. I'm also excited to announce that our newest television show, The Wildlife Docs, has also been renewed and will return for its second season.

Both shows will continue airing as part of the Litton's Weekend Adventure on ABC stations. Together these two shows have surpassed more than 218 million in viewership since April of 2012.

Now I'd like to hand the call over to Jim Heaney who will review our second-quarter financial performance.

Thanks, Jim. And good morning, everyone. I will go through our results for the second quarter and then review our guidance for 2014.

For the second quarter of 2014, the Company generated revenue of $405.2 million, a decrease of 1% over the second quarter of 2013. Decrease in revenue was driven by a 1.8% decrease in total revenue per capita from $62.67 in the second quarter of 2013 to $61.54 in the second quarter of 2014. This decrease was partially offset by a 0.3% increase in attendance.

Decrease in total revenue per capita was primarily a result of an increase in promotional offerings and an unfavorable change in the park attendance mix. With the same park attendance mix in the second quarter 2014 as in 2013, total revenue per capita would have been up 0.7% versus the reported 1.8% decline.

Attendance for the quarter improved when compared to the second quarter of 2013. As Jim mentioned earlier, attendance increased despite a challenging industry and competitive environment and a tough comparable quarter in 2013. We concluded the favorable attendance impact from the opening of Antarctica at SeaWorld Orlando.

Overall attendance improved due to the shift of Easter into the second quarter of 2014, along with more favorable weather compared to the second quarter of 2013. However, this increase was offset by lower attendance at our destination theme parks due to a combination of factors, including a late start to summer for schools in the Company's key source markets, new attraction offerings at competitors' destination parks, and a delay in the opening of Falcon Fury at Busch Gardens Tampa. In addition, we believe attendance in the quarter was affected by demand pressures related to recent media attention from legislation proposed in California.

The cost of food, merchandise and other revenue increased by 2% from $33 million in 2013 to $33.7 million in 2014. As a percent of revenue, these costs increased slightly from 8% in 2013 to 8.3% in 2014.

Operating expenses in the quarter decreased by 3% from $194.7 million in 2013 to $189.2 million in 2014. This decrease in operating expenses was primarily a result of a reduction in variable labor costs and other cost mitigation efforts employed by our park operators.

SG&A expenses in the second quarter decreased by 6% from $62.2 million in 2013 to $58.6 million in 2014. This decrease was primarily related to the termination of our 2009 advisory agreement with Blackstone (inaudible) 2013 and a decrease in equity compensation expense.

Adjusted EBITDA, a non-GAAP measure defined and reconciled in our earnings release, decreased 1% from $127 million in the second quarter of 2013 to $126.1 million in 2014. The decline in adjusted EBITDA was the result of a decline in total revenue, largely offset reduced operating and SG&A expenses.

Depreciation and amortization expense increased from $40.4 million in the second quarter of 2013 to $43.1 million in 2014. This increase was due to the impact of new asset additions, partially offset by a drop-off from assets that are now fully depreciated.

Total interest expense in the quarter decreased by 10% from $22.9 million in 2013 to $20.6 million in 2014. This interest expense reduction reflects the redemption of $140 million of our senior notes and a $37 million paydown of our term loan with a portion of the net proceeds from our initial public offering last April. In addition, we amended our credit facility in May 2013, which reduced the interest rate and pushed out maturities to 2020.

Cash interest expense in the quarter was $18.9 million versus $21.1 million in the second quarter 2013. GAAP net income increased from a loss of $15.9 million during the second quarter of 2013 to net income of $37.3 million in 2014.

Diluted earnings per earnings per share increased from a loss of $0.18 in 2013 to earnings of $0.43 per share in 2014. We ended the second quarter with $63 million of cash and cash equivalents on our balance sheet and no amounts drawn on our revolving credit facility. Total long-term debt, including current maturities, is $1.651 billion, which equates to a 3.9 times net leverage ratio.

Before we open up the line for questions I want to provide an update on our guidance for 2014. 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.

Based on recent trends, we expect our full-year 2014 revenue and adjusted EBITDA to be down approximately 6% to 7%, and 14% to 16%, respectively, versus the prior year. This guidance assumes full-year revenue trends similar to the first half of the year and improving adjusted EBITDA trends in the second half of the year, due to the partial-year benefit of the cost optimization work Jim mentioned earlier in the call.

At this time we would like to open up the line for questions. Operator?

(Operator Instructions)

James Hardiman, Longbow Research.

You listed a whole bunch of factors as to why attendance was maybe lighter than a lot of people were hoping for. You quantified the mix shift; but maybe just help us compartmentalize those a little bit through the lens of which of these items do you think are very much temporary in nature, which are the ones that are going to take a little bit longer to work your way through, and which of these are the new normal.

As I look at some of these issues -- the school calendar issue, the delayed ride, you'll get past that. Some of the media exposure, it seems like I think most people are looking past that long term. But just the competitive pressures being the third bucket, those probably aren't going anywhere. So help us think about those various items.

Sure, James. This is Jim Atchison. I'll take a shot at that first, and then Jim Heaney may have some comments, as well.

Let me, first of all say that, suffice to say, we're disappointed in the quarter's results and performance. And we've done some of the same analysis you're describing here in your question -- what is temporary, what is going to be short-lived, and what might be a longer challenge for us.

As we step back a little bit and you look at where we sat in mid-May as we did our Q1 earnings call, we were coming off a strong April. We had, really, May off to a decent start. We had a good mix of attractions ahead of us. 9 of our 11 parks had major attractions coming up. And we had some reasonable weather comps. So we had reason to believe that we would have a decent summer ahead.

To be clear, the vast majority of our organic performance is derived in the summer months. So the challenge we had is as we moved into the summer period now -- getting to your comment around what's temporary, what's not -- we immediately had a few headwinds. One of them clearly related to, as others have talked about in this space as well, the later school breaks that you mentioned. And certainly our delay in opening Falcons Fury in Tampa were two unexpected consequences that we had to grapple with.

There were others, too. In our destination parks, where we're having the biggest challenge, our friends down the street at Universal delaying their opening of Harry Potter. That actually, I think, helped defer some visitation to the Orlando market. Those things, I think, will right themselves over time.

I think if there's a dynamic that we're going to address, and it really relates to our comment on our cost focus, we really want to invest more aggressively in our destination markets. I think the competitive stakes and a bit of the arms race in Southern California and Orlando, in particular those two markets, is not going to wane. So I think that's the more enduring challenge for us.

I think we had some short-term challenges, as I've described. Then we have some matters related to our brand management efforts. We've talked a little bit about the legislation in California that affected our San Diego park. And I think we're well on our way to addressing a lot of that.

I think if there's one thing that's going to be enduring for us, it's really maybe trying to reposition our destination parks in those markets for a more competitive offering versus what else is happening in town.

That's very helpful. And then just as I think about the guidance for the second half, I get to revenues down 7%, 8%; EBITDA down somewhere in the low teens. Help me think about the revenue decline.

Again, it seemed like some of the issues in the first half were temporary. But you have things getting even worse, it sounds like, in the second half. A, can you speak to July and early August trends at all? And, B, how should I think about that revenue decline between attendance and per caps? Thanks.

Sure. I can take that one.

If you look at the year in two pieces, the first half and second half, and focus on the top line, on the revenue line in the first half, revenues were down 5% in the first half of the year. And, as you recall, on our last earnings call, we mentioned revenues being down 3% through mid May. So the turn really happened beginning in late May and then June.

Our guidance basically projects out similar trends to what we saw in the first half, but with a small incremental decline from what we saw in June, July and August. I will say, the revenue trends appeared to bottom in June, and then they improved in July and August, not to levels we obviously like. But from a trend perspective, it looks like we bottomed out in June.

I'll add, James, the difficulty we have there is while our trends improved off of June and July and August, those three months combined to be probably three quarters of our EBITDA for the year. So our problem is quite sudden. It's really a 75-day problem. And therefore this business has limited operating leverage. It flows both ways.

And in the short term, there are fewer levers we can work with. So having such a sudden impact on our top line is what's driving a more precipitous decline in our bottom line.

Great. And maybe just a clarification of that last point. July and August, was attendance actually up? Or was it just down less than it was in June?

We're not going to speak to attendance specifically; but from a revenue perspective, they were down less.

Got it. Great. Thank you.

Alexia Quadrani, JPMorgan.

A couple questions. First is Disney's launch of My Magic Plus, which I believe is fully rolled out, which encourages their guest's coming to Orlando to pre-book their entire stay. Do you think that has been an incremental negative to your attendance trends in the sense that there's that natural overflow that you might have otherwise seen from guests coming to the market?

This is Jim Atchison, Alexia.

The My Magic Plus initiative that Disney has launched, we obviously have paid close attention to from both a business and a guest experience and a technology standpoint. I would say, no. I don't think we could attribute any of our performance challenges to that offering in particular.

It's an interesting model and approach, but we don't think it's had an effect on our business in a direct way.

And then on the cost-cutting initiatives that you have highlighted, and the announcements coming shortly in terms of how you can reinvest in new attractions, is there any way you can size up how significant that is? And would those reinvestments be focused in SeaWorld Orlando?

Our intent is, we recognize that we need to invest more in our destination parks, both in Orlando and California. But we want it to be self-funding. So we were initiating this cost optimization work with the intent of essentially funding all those capital investments, and then some amount beyond which would be then be redeployed into share repurchases. So I can't talk specifically to the amount that we'll hit, but it's substantial and, at minimum, will fund our capital reinvestment program.

And, Alexia, to the point of would we see those investments in Orlando, yes. I would say we would concentrate those incremental investments in our destination markets; and obviously, Orlando is our biggest one. But you would expect to see something in San Diego, perhaps, too.

Thank you very much.

Barton Crockett, FBR Capital Markets.

Switching gears a little bit, your share repurchase authorization. You're starting out January 1, 2015. Why then? Why not now? Is there some type of relationship to Blackstone? Do they need to exit first before you can do it?

Then on a related note, you have your restricted payments basket, which constrains the overall amount that you can put into cash returns. Would there be any thought to try and go out to lenders and maybe adjust that to see if you return more over time?

I'll start with the second question first. As you're aware, there's a window of opportunity to refinance or take out our senior notes in December. There's a step down and a call premium. Our expectation as part of that process is that we would look to restructure some of our covenants, and, more specifically to your point, focus on the restricted payment basket to give us more flexibility there. So, yes, that's our intent and our expectation going into refinancing this fall.

Tim Conder, Wells Fargo Securities.

Gentlemen, just to back up here a little bit on what you're seeing, especially in the second quarter. If the attendance was more impacted by your destination parks, it's a little confusing given that Disney and Universal didn't make any commentary that the school delays were impacting them. And clearly, they are the destination parks only. So just a little bit of clarity there.

And then looking at the price increase that you announced in May. Should we assume that on an effective basis, given the promotions that you commented on in your press release, that that effectively hasn't held? And if so, on a net basis -- because we know that some of your single-day tickets, they are still up, if you look at the websites, they're up -- but on a net basis with others, are we flat year over year now on your overall pricing across the parks?

Tim, this is Jim Atchison.

I'll let Jim Heaney address the pricing questions you had. But before that, let me get to your first question. There's no question the later school breaks had an impact on our business. It certainly isn't the only factor, as we've described. And I'm obviously familiar with the earnings announcements that Disney and Universal made.

Now, in a certain respect, theirs maybe is less clear because their theme park segments are just that -- segments of those bigger conglomerates. So I really can't speak to them or that.

But I will say for us, as an enterprise, we definitely saw some effect from these delayed school breaks for sure. Again, not the only factor that we're dealing with but certainly one of them. But that was an issue for us.

Okay.

Tim, in regards to the pricing, one of the comments we talked about earlier was when you look at the per cap growth, while we reported a decline overall for the Company, if you look at a same-store's adjusted number, where the attendance mix would be the same year over year, we actually would have posted a per cap increase. What's going on there is with the bulk of our decrease being in the destination parks, those are higher per-cap parks and we're getting growth on our lower per-cap parks. So that mix dynamic impacts the reported total number.

But when you look park to park, ticket category to ticket category, most of our price increases are sticking. And we're pleased with how they're behaving. There was obviously an increase in promotional activity during the quarter as well, and that pressured per caps.

Okay. As it relates to your planned investments in the destination parks, are these more short-term in nature? Because obviously a major attraction like Antarctica takes a couple of years in the planning. Or do you have things that you're looking to materially accelerate?

So is it more changing of additional shows of other, let's just call it, more softer CapEx items or items that would enhance the park? Or are we talking the combination of larger CapEx items? And it would seem like to have an impact more immediately, you'd have to accelerate a couple of projects.

It's a bit of both, Tim. We certainly have some projects that are already teed up and prepared to announce, as we hinted in the release. We actually will make a significant announcement in the next couple of days. And we have others that we can add in, that will be of lesser CapEx.

But we'll wind up with a mix of both. We'll have some significant new attractions that can be put in the pipeline and shifted in terms of priority. And we have some other, as you say, soft CapEx attractions that will still add value and meaning to the visit and help our messaging. So it will be a bit of both.

Okay. Thank you.

Felicia Hendrix, Barclays.

I'm just wondering, when we look at your new or your revised EBITDA guidance for the second half of the year, how much of that guidance is taking into consideration some of these cost-saving initiatives that you're discussing?

This is Jim Heaney.

The cost initiative work, we initiated that a couple of weeks ago. And we have some big ambitions to pull out a big number out of our P&L. Given the nature of the type of costs we're going after, it'll take some time to implement some of those.

This year, we expect a partial-year benefit from those efforts. And you can see that through the improving EBITDA trend when you look first half, second half, and what's implied in our guidance. But the bulk of the savings will probably hit in 2015. And, again, we intend to use those to fund our incremental CapEx program and buy back shares.

Okay. Thank you.

And I'm still not clear on some of the attendance comments that you've made, so maybe you could help clarify that for me. First, in the release, you mentioned that attendance in the second quarter faced tough comps. But attendance declined 9.5% last year, so I was just wondering how that was a tough comp.

And then I also don't understand the commentary regarding the proposed legislation having an effect on attendance because that was resolved in early April. And when you addressed this in May, that didn't come up as an issue at all. So I'm just wondering why you thought that was an issue in the quarter.

Felicia, this is Jim Atchison.

I think our release, we mentioned tough competitive environment, not so much tough comps. We actually, I think we mentioned having favorable weather comps on the quarter, if I'm not mistaken. So we actually did see very tough competitive environments, maybe more so than we expected, obviously.

And I think, also, as we got through the lapping of Antarctica, I think in retrospect, we realized that that attraction probably even had a bigger impact for us last year than maybe we had originally thought. So in that respect, lapping our own numbers made a challenge there.

With respect to the California legislation, as we spoke in May, realize, really, the full year is quite ahead of us. And at that point in time, we were really still grappling with what impact there would be related to the news attention around that legislation. So I'm not sure that we had a clear view on what that would look like. That's a rather unprecedented event for us and difficult to model in that respect.

Also, our California park, although it's year-round, is the most seasonal of all of our full-time parks. So it still had not just the old whole summer ahead, but summer is bigger for that park than it is even for, say, our Orlando park or Tampa park. So in that regard, I think it was too early to call and tell what kind of impact we might have over the rest of the summer.

Okay. Just a point of clarification here. In the first sentence of the release, it does say the challenging industry and competitive environment. But it also says a tough comparison to the prior-year quarter, which included the attendance benefit from SeaWorld. So that's what was causing the confusion -- because it does say tough comparison to the prior-year quarter.

I see what you're saying. That's a fair comment.

Okay. And so you did mention before earlier that your attendance in the destination parks saw a bigger increase overall. Is there any way to quantify that for us?

Say your question one more time, Felicia?

Sorry. You mentioned that your attendance saw a bigger decrease in the destination parks. I was wondering if you could quantify that.

We're not going to quantify that from an attendance perspective. But I will say 9 of our 11 parks performed exactly how we expected. A lot of them got new capital, new attractions, and performed exactly how we expected.

It was really our two big destination parks that caused the shortfall to our expectations. If those two parks had even matched what they did in the prior year, we would have hit in our numbers.

Okay, that's helpful. And, just finally, do we have any update on Falcon Fury?

We're very excited to be opening it soon. I don't think we've set a firm announcement date yet, so I don't want to misspeak and mess up any of that. But it will be opening very, very soon.

Okay. Great. Thank you.

Robert Fishman, MoffettNathanson.

Can you share with us any additional color around the impact of your brand in the marketplace, and maybe any survey work you've done that compares how your brand is perceived today versus maybe a year ago?

Robert, obviously the health of all of our brands -- and we have several between SeaWorld or Busch Gardens or Sesame Place Park and our water parks, and so forth -- but the health of our brands is something that we put a lot of attention and focus on. We are always looking at relevant research that is available more broadly from other sources and things that we conduct of our own initiatives to measure and see.

What we see is relative brand health, of course, with the SeaWorld brand, which is probably where you're going on that question. But, at the same time, we see opportunities for us to further build on that brand and build on the 50 years of history we have. So we're endeavoring to do that.

But I think in terms of trajectory, we feel like, if we're getting better or worse, we think it's getting better. So that's probably as far as I can lean into that.

Okay. And with the Southwest Airlines ending its sponsorship recently, do you mind help sizing the total sponsorship revenues that you generated last year? And is any of the lower guidance -- did that expect any other sponsors to cancel their relationships with you?

Sure, I'll talk more broadly about that because I don't think we detail our sponsorship numbers precisely. Our sponsorship dollars in aggregate of the Company will be relatively flat to prior year. It could be up a little or maybe down slightly, but nothing meaningful.

The relationship with Southwest was a terrific one, and one we're very proud to have enjoyed together for 25 years. But it's really a promotional relationship. There were not significant dollars exchanged.

It was really a collaborative marketing relationship with a partner that we did for 25 years. And it had a great run, and we certainly wish them well. And it's a good opportunity for us to look at another airline partner as well.

Okay. And then maybe, lastly, with the expected step up in CapEx, is there any way you can help us size the increases as a percent of total revenue over the next few years, and whether these debt restrictions come into play here also?

As you can imagine, we've looked at all that. The outlook at this point would be, we've talked in the past about a 10%-ish number, 70% of that for attractions and 30% for maintenance CapEx. With the program we're starting going forward, we expect that number to be closer to 13% of revenue. And for modeling purposes, I would flex that number out for the foreseeable future.

As we mentioned earlier, some of the investments are more short-term in nature, quick wins, quick hits. But then there are other projects that are larger and take longer to build. So I'd model that 13% out for the foreseeable future.

Thank you.

Afua Ahwoi, Goldman Sachs.

Two questions for me.

First, I know in the past your rhetoric maybe around some of your competitor openings, I think specifically of a big attraction, like the Harry Potter, was that you thought it would be good for the whole market and would also help lift all boats, including you. Can you maybe update us? It sounds like, at least from your comments, maybe that may not be the case. Just to clarify that.

And I'm sorry, just to go back to the 2Q attendance. The only thing that I'm still a little confused about is you only had about roughly a month of Antarctica last 2Q. So this 2Q, you should have two months. We should see a bigger boost. I'm just a little confused as to why that didn't help a little bit. Thanks.

Let me talk about the competitive dynamic in Orlando. As we've shared before, we actually think that investments in destination markets like Orlando are actually a good thing overall. In this case, I think the major investments at Universal opening in early July was probably not ideal. I think it probably hurt us a little bit in June.

But I think overall, that's probably a good thing for the market. I do think it helps drive the destination overall. It may hurt us more in the immediate term here because of just the timing of events as they are. But I think overall, it's actually a good thing for the market.

With respect to attendance in Q2, we had modest, a very slight attendance growth. That's no small feat. There are others in the space who didn't have attendance growth at all; they had declines, despite the Easter shift. From an attendance standpoint, we would have liked to have done better. We would have hoped to have done better.

Antarctica, the first 60 days opening of a major attraction, actually is going to have quite a spike in attendance. So lapping that opening is probably the most precise time to have a more challenging comp. Having said that, we did benefit from better weather. And those factors may have washed a bit.

Okay. I actually have just a follow-up on that.

From comments you made in the past, I think just adding one-third because last quarter, last year you said roughly one-third of the decline in attendance in Q2 2013 was because of the weather. So if we do that calculation plus the Easter shift, that alone maybe should have given you about 500,000 more visitors. So does that mean those didn't materialize? Or was the weakness in the destination park just much weaker to offset all of that?

I think the best way to frame it is we did put those numbers out last year, and I think they're still directionally correct. If you look at our portfolio of parks, 9 of the 11 performed, as I said earlier, exactly how we expected. The weakness was really focused in our two big destination parks, Florida and California.

The Harry Potter delay -- it was going to open in June and then it moved to July, so there was a lot of deferred visitation to Orlando. And then, as you flip over to July, then we are comping up against a big opening of the new attraction. So I think that pattern is why we saw the attendance decline bottom out in June and then begin to recover -- not to prior-year levels, but the trajectories improved since then. And we view it as stabilized at this point.

Okay. Thank you.

Tim Nollen, Macquarie.

I haven't done all the math. But you mentioned a $250 million share repurchase, and you're saying you expect to offset that as well as investments with your cost savings. That looks like a really big cost savings, therefore, to fund that. We'll wait to hear from you on what that will entail, but if there's anything you could say on that now.

And then also, in terms of the investments, do you actually have land to expand outward in Orlando? Or would you be doing more in-park expansions? Then I have a follow-up, please.

Tim, I'll talk to the latter part of your question; and Jim can talk about our share repurchase initiatives.

We do have undeveloped, if you will, land adjacency to our three parks in Orlando. So that is certainly an opportunity for us. And that's a great benefit that we have here in this important Orlando market. We also have other real estate holdings at some of our other locations that provide some opportunities for us. So we'll evaluate that and judge that as we move along.

I'll let Jim talk a little bit about the share repurchase program. But what I will say about the cost question you had is that we've really, as I've shared, as we've shared here this morning, the biggest challenges that we've seen here, this really arrived within the last 75 days. So our focus is dealing with the suddenness of it. And, unfortunately, that's the peak of our season.

So the efforts on our cost initiatives are newly underway. And it probably wouldn't be fair for me to speculate as to size of the prize and things like that. We're focused on being smart about how we do it; and looking at it and making sure we don't do anything that would affect safety, animal welfare or guest experience or our employee morale. So those things aside, we'll be very thoughtful about what we do and how we do it.

In regard to the share repurchase, keep in mind that's a multi-year authorization. There's no defined endpoint. That could run out multiple years.

In regard to the CapEx program, again, we're taking our CapEx guidance up from 10% of revenue to 13%, and the differential being this incremental investment in our destination parks. There will be an announcement later this week on one of the larger investments we're making. And, again, that's contemplated in the 13%.

The follow-up I had was actually about your international expansions. How does that factor into the investments you're talking about and the 13% CapEx figure? Would that all be incremental? And I'm assuming, with partners, obviously your actual cash contribution to that is some minority stake. Could you comment on that?

As we've said in the past, our international strategy is largely based on a capital-light structure, where we would not be investing material capital into those projects. So, yes, the 13% would include those efforts, although we don't expect to be putting a lot of material capital work internationally.

Okay. Thank you.

Barton Crockett, FBR Capital Markets.

I wanted to come back with a follow-up. When I asked earlier, I'm not sure, maybe I missed it the response. But I was curious about the start of the share repurchase. It seems to start on January 1, 2015. Is there some type of caveat that Blackstone needs to be done exiting before you can start buying back from the rest of the public shareholders? Does that in any way affect the pace of repurchase here?

No, it doesn't. The January 1, 2015, was largely based on the fact that we used up the bulk of our capacity this year. And given the sudden change in our outlook, we thought it made sense to stabilize the business and then begin those efforts in 2015, once we've actualized the benefits of our cost reduction program. So it had nothing to do with Blackstone.

All right. And, then, if I could ask about the pricing.

You cited promotions as a headwind in the quarter. Are those still a headwind? And as you were going through a process of paring back promotions. And so I was assuming pricing would stabilize. Is there some type of change in strategy at this point?

No. I wouldn't say there's a change in strategy. But when you do see abrupt changes in your demand outlook, particularly on the attendance side, we will run more promotions to generate attendance the way the business model works here. You're better off doing that as opposed to just letting the attendance decline happen. So we've been more aggressive than we expected to be with promotions, but that's a normal part of running of the business.

Okay. All right. Thank you very much.

James Hardiman, Longbow Research.

Couple of follow-ups for me.

Judging by the results since you've been a public Company, and certainly what the stock is doing today, I think you're functionally telling us this is sort of a turnaround, at least in the short term. Obviously, without getting into guidance, what's your level of confidence that as we look to next year, you can be back in growth mode, much less the growth that maybe you had anticipated from a long-term perspective coming into this year, coming into last year?

James, as I said with your first question, we're certainly disappointed in the quarterly results. But\ at the same time, we're very bullish on our plans and vision moving ahead. We have beloved brands and a terrific team and a great following from our guests. We really think we'll be growing from this base and getting a solid plan together over the coming months that we'll share more broadly.

But we feel quite confident in the longer-term trajectory of the business. Every business is going to have a rough patch, a rough quarter, or whatever it might be. It's important and incumbent upon us, as management, to take the actions and put forth the efforts to try to get back on that trajectory. And we feel quite confident that we can do that.

Great. And then maybe just clarify the competitive environment. I think from an investor standpoint, the two things that a lot of people were focused on were the Harry Potter addition at Universal and then Magic Plus at Disney. Harry Potter obviously didn't open until 3Q, and then the Disney Magic Plus you said was a non-issue.

Are there specific attractions in Orlando and Southern California that you can speak to that were an issue? Or was it that some of your competitive parks were getting a little bit more aggressive on pricing? Can you give us a little bit more specifics there?

I think there are different issues. In California, I think our challenges related more to the media attention from the legislative initiative that was at work through much of this quarter. That was probably our biggest headwind in California.

I think the Orlando dynamic really comes into play with some of the collection of other factors -- the delayed school breaks up North, certainly lapping Antarctica. And while I would agree that My Magic Plus probably hasn't had a significant impact on the business, there are just other competitive dynamics. The Fantasyland opening that Disney has in full now is a tough comp, as is Harry Potter. So I think those are probably the bigger issues. I think the more competitive issues are related to the Orlando market.

Got it. And then just last question with respect to the international agreement. Six Flags at least started getting a revenue bump pretty quickly after signing those agreements. A, is any revenue contemplated in your guidance for this year? And, B, how should we think about the pace of that? When should we start to see some of those benefits?

We don't have any revenue in our plan today. What we are going to do is focus on negotiating the best terms and conditions for the long-term deal that we can. And so we feel very good about our ongoing work with our partners in the Middle East to strike the right deal. We're very excited and encouraged to be off and running with the Village Roadshow folks.

Whether that ends up creating some revenue in the immediate term or not will really depend on the puts and takes of how we negotiate the deal. And we're really focused on the best overall deal, less so on any immediate impact of it.

Got it. Thank you.

Thank you.

Ladies and gentlemen, we've come to the conclusion of our allotted time for questions. I'd like to turn the floor back over to Mr. Atchison for closing comments.

Thank you, Melissa.

Thanks to all of you for your questions and your continued interest in our Company. Before I close today's call, I want to take a moment to express how proud I am of all of our team members and their dedication and commitment to our mission and values. Last month 9 of our 11 theme parks were recognized by TripAdvisor, the world's largest travel website, in their 2014 Travelers' Choice Awards. Discovery Cove, our all-inclusive reservation-only day resort, was named the number one amusement park in the world.

In addition to Discovery Cove, all three of our SeaWorld parks and our two Busch Gardens-branded parks were also ranked among the top 25 amusement parks in the United States. And 3 of our water parks were among the top 25 water parks in the nation.

We're honored to receive this recognition from TripAdvisor travelers who have first-hand experience in our parks. I'd like to congratulate all our team members on this extraordinary accolade, and thank them for their commitment to creating unforgettable interactive and educational experiences for our guests.

That concludes today's call. And thank you all again for your time.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. And have a wonderful day.