United Parks & Resorts Inc (PRKS) 2014 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to SeaWorld Entertainment's Third-Quarter 2014 Financial Results Conference Call. My name is Manny 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 call over to Mr. Gene Ballesteros, Senior Director of Investor Relations and Corporate Treasurer. Please go ahead, sir.

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

Our third 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 Chief Executive Officer, President, and Jim Heaney, our Chief Financial Officer. They will discuss important factors impacting the business and review our financial results. 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. 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 the earnings release and can be also found in our filings with the SEC.

Now, I would like to introduce Jim Atchison. Jim?

Thank you, Gene. Good morning and thank you to everyone for joining us today. During our call, I will first provide comments on strategic developments impacting the business and then Jim Heaney will provide details surrounding our third quarter performance and provide an update on our 2014 guidance.

Clearly, 2014 has failed to meet our expectations. Consistent with the update we provided in August, the attendance trends the Company experienced in the latter part of the second quarter continued into the third quarter. The market's reaction following our last earnings call and the stock's underperformance of the last few months is not something we take lightly. I want to reassure the investment community and all of our stakeholders that we firmly believe our brands remain strong and are resilient to the challenges we are facing.

Over these last few months, our senior management team has worked diligently to identify the recent issues affecting our Company, as well as to define opportunities, initiatives, and actions that will move us forward. As we work to improve our results, it is clear that a more aggressive and scalable cost structure must be part of that equation. As we discussed last quarter, we engaged external advisors to help us evaluate our existing addressable cost base.

Based on the work today, we plan to deliver $50 million of annual cost savings by the end of 2015. A portion of these savings will be recognized on a pro forma basis in 2014, with the remainder being realized in 2015 as we implement all aspects of our plan. Among other expense reductions, our cost initiatives focus on the centralization of certain administrative and support functions and the further optimization of our park operations. This plan is being developed with a keen focus on the guest experience and the clear understanding that we will not impact guest and team member safety or the health and welfare of our animals.

Our plan is designed, not only to lower our cost base, but also to deliver increased levels of effectiveness from our teams and to improve the scalability of our operations. We have great confidence in our ability to deliver on this plan based on the thoughtful advice from our external advisors, engagement of our team, and our overall disciplined approach to this effort. Jim Heaney will provide additional details on the timing and financial impact of the cost savings plan in a few minutes.

In addition to the cost savings plan, we are adjusting our traction and marketing plans to address our top line concerns, primarily at our destination parks. These challenges include negative media attention in California and competitive pressures in Florida.

On the reputation side, we have introduced a number of aggressive and proactive initiatives and campaigns to make sure the truth is being told, address public perceptions, and raise and protect brand awareness. On the competitive side, we engaged in-depth research, which has provided valuable insights to assist us in realigning and focusing on our guests' needs and desires. I am confident we are taking the necessary steps to address our near-term challenges and position the Company to deliver value over the longer term.

As part of our longer-term strategy, we have extended our memorandum of understanding and continue to work with our partners in the Middle East evaluating the business plan, technical models, and proposed agreements for a multi-park development. We expect the first phase of the project to open in 2020. We also continue to work with Village Roadshow Theme Parks on potential development opportunities in Asia and other international markets.

Before highlighting some of our 2015 new attractions, I want to provide an update on the progress of our Blue World Project, which we announced in August. We continue to move forward with our independent advisory panel in developing and designing our new state-of-the-art killer whale environments. As we noted in our announcement, these habitats will be the first of their kind and will nearly double of the volume of water in our existing facilities.

We plan for the new environments to have views exceeding 40 feet in height, providing our guests with the world's largest underwater killer whale viewing experience. We expect to break ground on the first new environment at San Diego SeaWorld next year.

Looking ahead to 2015, we believe our announced lineup of new attractions will deliver something for everyone. Next year, at Busch Gardens Williamsburg, we will introduce a new roller coaster, bringing the park's coaster portfolio to six. This exciting new coaster will tower more than 150 feet over the park's Italian village and will launch next spring.

Adventure Island, the sister waterpark to our Busch Gardens Tampa theme park, will be getting its first new attraction in eight years. Colossal Curl, which opened to great reviews at Water Country USA earlier this year, will deliver 560 feet of action-packed thrills. This new slide will open during Adventure Island's 2015 operating season.

Opening at SeaWorld San Antonio in 2015 is Pacific Point Preserve, a new immersive experience where guests will make connections with sea lions and other coastal wildlife. This new realm includes a brand-new show, dining and merchandise menus, and a transformation of the park's sea lion habitat that will allow guests to experience an enriching animal connection.

Finally, next year, Sesame Place will celebrate its 35th birthday. Guests at the park will enjoy birthday decor throughout the park, an all new neighborhood birthday party parade, and a transformation of Elmo's Eatery, the park's largest restaurant. The restaurant will be converted from its current cafeteria style to a modern, technology-based service where guests can order their food and have it delivered directly to their tables.

As a reminder, stay tuned to our park websites and social media pages as we have additional news regarding our new attractions at our parks in the coming months. Turning to our rescue efforts, you may have heard that our animal rescue program recently surpassed a milestone of helping more than 1,000 animals in 2014. This milestone, which shows why animals need our help now more than ever, brings the total number of animals we've helped in our 50-year history to over 24,000.

Our animal care teams, who are on call 24 hours a day, 365 days a year, are the true advocates for wildlife and conservation. They work diligently day in and day out to rescue, care for, and return to the wild hundreds of orphaned, ill, or injured animals. I'm extremely proud of the work our teams and partner organizations do to protect and care for wild animals and wild places.

Before I hand the call over to Jim, I want you to know that our team is intensely focused on overcoming the short-term challenges we face and on improving our results. However, we recognize that we are in the early stages of these initiatives and the results we envision will take time to execute. With the implementation of the planned cost initiatives I've discussed, adjustment of our attraction and marketing plans, and our continued focus on expanding our parks into international markets, we firmly believe these actions will enable us to overcome the current challenges and enhance our competitive standing.

Now, I'd like to turn the call over to Jim, who will provide details on our third quarter financial results. Jim?

Thanks, Jim, and good morning, everyone.

For the third quarter of 2014, the Company generated revenue of $495.8 million, a decrease of 8% over the third quarter of 2013. The decrease in revenue was driven by a 5.2% decline in attendance and a 2.9% decrease in total revenue per capita from $60.74 in the third quarter of 2013 to $58.99 in the third quarter of 2014.

The decrease in total revenue per capita was primarily a result of an unfavorable change in the park attendance mix during the quarter and an increase in promotional offerings. Attendance for the quarter declined versus 2013 as the attendance trends we experienced at our destination parks in the latter part of the second quarter continued into the third quarter.

We believe the decline resulted from a combination of factors, including negative media attention in California, along with a challenging competitive environment, particularly in Florida. Part of the challenges in Florida relate to significant new attractions at competitor destination parks and a delay in the scheduled opening of Falcon's Fury at our Busch Gardens Tampa Park.

In addition, the prior-year also includes a benefit from the opening of Antarctica, which helped drive record revenue in the third quarter of last year. I am pleased to say that Falcon's Fury opened over the Labor Day weekend and has been a home run new attraction for the park with a 93% excellent guest rating. The cost of food, merchandise, and other revenues decreased by 5% from $40.4 million in 2013 to $38.2 million in 2014.

As a percent of total revenue, these costs increased slightly from 7.5% in 2013 to 7.7% in 2014. Operating expenses in the quarter decreased by 1% from $202.6 million in 2013 to $200.9 million in 2014. This decrease in operating expenses was primarily a result of a reduction in variable rate labor costs and other cost mitigation efforts employed by our park operations team, largely offset by additional operating costs to support new attractions and other cost pressures.

SG&A expense in the third quarter increased by 6% from $47.4 million in 2013 to $50.4 million in 2014. The increase was primarily related to higher marketing spend due to incremental brand initiatives, partially offset by a reduction in equity comp expense. Adjusted EBITDA, a non-GAAP measure defined and reconciled in our earnings release, decreased by 18% from $254.4 million in the third quarter of 2013 to $209.1 million in 2014.

The decline in adjusted EBITDA was primarily a result of the decrease in total revenue. Depreciation and amortization expense increased from $42.3 million in the third quarter of 2013 to $44.4 million in 2014. This increase was due to the impact of new asset additions, partially offset by the drop off of assets that are now fully depreciated.

Total interest expense in the quarter increased by 3% from $20.2 million in 2013 to $20.9 million in 2014. The increase primarily relates to an increase in interest rate swap expense, along with a decrease in capitalized interest in the quarter. As a reminder, the Company executed a new interest rate swap agreement in March that increased our interest rate swap position from $550 million to $1 billion of our variable rate term loan debt.

GAAP net income decreased from $120.7 million in the third quarter of 2013 to $87.2 million in 2014. Diluted earnings per share decreased from $1.34 in the third quarter of 2013 to $1 per share in 2014. Adjusted net income, a non-GAAP measure reconciled in our earnings release, was $88.6 million or $1.01 per diluted share. We ended the third quarter with $115.2 million of cash and cash equivalents on our balance sheet with no amounts drawn on our revolving credit facility.

Total long-term debt, including current maturities, was $1.616 billion, which includes the impact of the $31.5 million voluntary prepayment on our term loan during the third quarter of 2014. Our net leverage ratio at the end of third quarter was 4.09 times adjusted EBITDA. Based on our debt covenant calculations at of the end of the third quarter, we have $120 million of capacity for certain restricted payments in 2014.

As of September 30, we have used approximately $104.9 million for dividend declarations and the repurchase the shares during the secondary offering in April. To maximize flexibility, we are anticipating that our Board will shift the timing of the next quarterly dividend declaration from mid-December to early January 2015, with the payment still occurring in January. This shift also creates $15.1 million of restricted payment capacity for other purposes in 2014.

The amount available for dividend payments and other restricted payments under the Company's debt covenants will reset on January 1, 2015, as described in our Form 10-Q. Before I go into our guidance, I want to provide insight into the prior period revisions disclosed in our press release. During the third quarter, based on an internal analysis, we determined that we'd incorrectly applied accounting guidance to certain debt transactions in 2011, 2012, and 2013. As a result, we deferred more fees than we should have or did not extinguish certain fees at the appropriate time.

Our Management team concluded that the revisions were not material to any of our previously issued annual or interim financial statements. We have revised prior year amounts to reflect these revisions and will include a full disclosure for all affected periods in our Form 10-Q that will be filed tomorrow morning.

Now, moving onto 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. We are affirming our prior guidance for full-year 2014 revenue and adjusted EBITDA to be down approximately 6% to 7% and 14% to 16% respectively versus the prior year.

The cost reductions mentioned earlier in the call are expected to deliver approximately $50 million of annual cost savings by the end of 2015. For purposes of calculating adjusted EBITDA, $10 million of the cost reductions will be recognized in 2014 on a pro forma basis, as permitted by our debt covenant definition for adjusted EBITDA, with the remaining balance benefiting 2015.

The 2015 impact of the cost reductions will largely be offset by normal inflationary cost increases in labor and other expenses and an expected increase in marketing spending. On a net basis, we expect 2015 EBITDA expenses to be flat or down slightly versus 2014. We also expect to take a one-time restructuring charge of up to $13 million in the fourth quarter of 2014 related to the cost reduction initiatives.

We expect this change will be excluded from adjusted EBITDA, consistent with what is permitted by our debt agreement definition for adjusted EBITDA expenses. In addition to the existing guidance, I thought it would be helpful to provide more specific guidance on our near-term capital expenditures. For 2014, we expect our full-year capital expenditures to be in the range of $155 million to $165 million and our 2015 capital expenditures to be in the range of $185 million to $195 million.

At this time, we'd like to open up the call for questions. Operator?

(Operator Instructions)

Tim Conder, Wells Fargo.

Gentlemen, if you could give a little bit more color, and I apologize if I missed part of this, on the trajectory of attendance trends and particularly, Southern California and Orlando throughout the quarter, and then here into the fourth quarter?

Jim just a clarification on your statement there, will cost on a net basis you're saying, to be down slightly resulting in EBITDA to be up slightly at this point for 2015?

Good morning, Tim. I'll take the second question, first. Our guidance on expenses for 2015, as Jim mentioned, there is a $50 million total cost reduction. Based on our EBITDA definition, we're able to take $10 million of that early in 2014,with the remainder impacting 2015.

Net of our anticipated cost increases outside of the cost reductions merits, we're also looking at increasing our marketing spend. On a net basis, we expect 2015 expenses to be flat to down slightly versus 2014.

Good morning, Tim, this is Jim Atchison. I'll take your first question. With respect to the attendance trends in those two parks, we're seeing a continuation of what we had reported and signaled in Q2. So we're not surprised by that, not that we're happy with it or accepting of it, but we're seeing similar trends through those two parks, as has been reported previously in our Q2 numbers.

I think on the Q2 call, you mentioned that those attendance trends were still down in the early part of third quarter, but had apparently tried to stabilize. Can you just give us an update on that sort of cadence across the months through where we stand now?

We've seen some improvement, subtle improvement I'll say, through the months. I think we had the biggest challenge beginning, really, -- let me back up.

Our San Diego park, the challenges were a little bit earlier in the year. It wasn't until our Orlando park really came into the very late May and essentially June period that we started seeing some softness relative to the competitive environment.

We did see a bit of a flattening out of the trend, in other words it not getting worse, and we've kind of stuck to that over the last three months, basically. It's kind of been at about the same pace.

Okay. Lastly, for Jim Heaney, any additional comment, Jim, regarding potential of some refinancing on the debt side?

Sure. As you know, our senior notes are callable in December and we are working with several banks looking at our options. The two obvious being a new bond offering or tapping into the capacity of our term loan debt. We have $350 million of capacity.

We're evaluating the trade-offs, the maturity profile of the two options, prepayment flexibility. We're also, obviously, factoring in market conditions, preserving our future capacity if we wanted to do something on the M&A side, and then obviously, cost. We expect to execute something during the fourth quarter or in the first quarter at the latest.

Okay. Thank you, gentlemen.

Alexia Quadrani, JPMorgan.

First one, just on your full-year guide, which you've maintained despite a bit of a shortfall in adjusted EBITDA this quarter. The benefit in Q4 EBITDA, is it largely the $10 million in the cost savings you implied or is there some other more positive trends underlying our Q4 to Q4 expectations?

You mentioned the $10 million benefit for adjusted EBITDA will impact the fourth quarter and it's around $10 million. Our reaffirming guidance is based on the trends to date through the fourth quarter.

We have October behind us and a portion of November behind us. So it's really a factor of what we see in the business so far in the quarter and then the $10 million benefit of the cost reductions.

Then when you're look toward a bigger question, when you're looking at the competitive environment, my understanding is Disney has a fair amount of new attractions popping up the next few years. But more specifically, the Universal, where you have experience with the initial launch of Harry Potter two years ago and now you have this addition.

Do you have any sense of how long the initial challenge to you guys lasts? Should we be through the worst of it now that it's open or will it -- any color on how long you think that more intense competitive environment from the Universal side will go on for?

This is Jim Atchison. I'll answer that.

I think the overall investments in this market over the longer term are good for the market, good for the destination, good for the players in it. In then immediacy of a major attraction, there can be shifts in market share. Over the longer term, it does tend to draw more people to the market.

So I think, if you're implying that might the initial phases of a more intense competitive offering in Orlando hurt us a little bit more and might it flatten out or even ultimately draw more people to the destination, I think that's a fair premise. So I do think that the initial offering and the initial launch of a major attraction tends to kind of over index and then things tend to norm out a little bit.

Orlando is a very repeatable market, so a lot of visitors to this town are here year after year or at least every other year, things like that. So even if people index -- if a competitor over indexed in one year, that might trade off the next year.

How long is that sort of initial period you described, just based on your past experiences?

Typically, the most intense period in that would usually be the full calendar year impact of a new attraction. So I think that's probably a decent rule of thumb.

Okay, thank you very much.

Felicia Hendrix, Barclays.

Hi, good morning. Jim Heaney, I was wondering if you could just give us some color. You've talked a lot about why expenses are going up and you talked about marketing programs.

I was just wondering if you could help us understand what those marketing programs are and strategically, how you're thinking about those to offset some of the competitive pressures you're seeing?

Sure. To give you a little bit more color of the add backs from 2015, there's really three large categories. One is labor costs. We have impacts around minimum wage legislation in California. We do annual increases with our hourly labor in the parks and the Affordable Care Act costs are impacting us slightly. We've largely managed against that, but there are some cost pressures from that.

The incremental marketing spend, I'll ask Jim to talk about the strategy behind it, but from an order of magnitude standpoint, it's about $10 million that we're adding or increasing our marketing spend by.

And then lastly, if you look at our non-labor costs, our other expenses, we have a long track record of being able to hold those down to around 1% year-over-year inflationary cost increase impact and that's baked into that number as well, so it's really those three categories.

To add more color on the marketing spend, what we're doing is we're effectively redeploying some of our cost savings into increased marketing and that will be most prominently featured in probably more advertising, some television, some digital, and some other efforts, most squarely situated, targeted at our destination markets, more so than our regional portfolio.

Is that a major change from what you've done previously?

Yes, it's a significant new investment. When you look at it as an increase in our marketing spend, it's a significant increase. But if we choose to focus it primarily just on advertising, it's even a bigger increase, obviously.

So that's a significant change for us and I think that's going to be beneficial, both for stimulating demand and talking about our new attractions that we have and also, giving us opportunity to kind of better build our brand.

Okay. That's a good segue to my next question because as you think about next year and as you're budgeting for next year, do you foresee revenue growth?

We're not providing guidance for revenues for next year. I think we've shared some views on our CapEx spend and we have shared some views on our expense base, which we see as flat to a slightly declined overall expense base.

And that contemplates us absorbing these marketing expenses and some of the other expenses Jim had talked about. So at this point in the year, we're not giving any guidance on revenues for next year.

Okay, I totally understand that. I was just trying to figure out -- but you're facing a lot of headwinds right now so its just trying to figure out if there was any comfort you could give us that those headwinds might abate for next year? But it sounds like you're trying to do via marketing.

I think we'll be able to circle back down the road with more view on that, but for now, we've had, really, our focus is finishing out this year. We've had a tremendous amount of work in this cost base, which we feel good about, and that's something that we fully expect and plan to deliver on for next year.

So as we put together our final marketing plans and offerings for next year, we'll circle back with a more clear view. But we think that we've got a good plan in place overall for 2015.

Great. Final for me is just, you talked about this on your last call, and obviously, the spending that you're doing at your parks, particularly around the orca sanctuaries, are lifting your CapEx as a percentage of revenues higher than the range that you had originally intended, higher than that 10% to 11% range.

Just wondering, as we model out several years, how should we think about that CapEx as a percentage of revenues running for the next several years?

This is Jim. We recognize that our CapEx profile is an important number for everybody to get right. As you heard on the call, we are providing short-term guidance on CapEx, $155 million to $165 million for 2014 and $185 million to $195 for 2015.

If you look at the Blue World Project spends, there's three habitats, directionally, we expect each habitat to cost around $100 million. The first habitat opens in 2018 and the last one opens in 2022.

So if you take that $300 million spend and put it on a per-year basis, it's roughly about $40 million and that would start to hit, really, beginning in 2016. I think the best way to model it is to take the 2015 CapEx number and then add half of the $40 million increase for Blue World. Because the Blue World Project will replace some other planned attractions. We consider Blue World an attraction on its own, albeit maybe a more expensive one.

So the best way to model, at least in our mind, is 2015 being $185 million to $195 million and then about half of that, $40 million or $20 million, additionally on top of that going forward for the next five or six years. Individual years might be higher or lower, but as a run rate, we think that's a good number.

Okay, super helpful. Thank you so much.

Tim Nollen, Macquarie Securities.

My question actually follows directly on the last which was about the cost savings and the investment profile. So $50 million, I think, was perhaps a slightly higher number than we expected, but it sounds like you're going to be channeling really all of that into increased marketing really in Q4 and going into next year. I thought the cost savings was going to be directed into the CapEx investment, although that sounds like that really is more starting in 2016.

So, if I can just check my logic and make sure I still understand that the OpEx will be transferred into CapEx, only that next year, your cost savings is going to be used more for marketing purposes. Then, if you could also explain, please, where the cost savings are coming from? I understand it's kind of central office costs, but if there's anything more you could explain on that? Thanks.

Sure. When we were initiating this effort, this cost reduction effort, a big part of our motivation was to offset a significant portion of the incremental CapEx or all of it for that matter and at $50 million, we get there. When you look at the year-over-year rollover of how those cost reductions will impact our P&L, there are ongoing cost increases that offset a portion of that.

So, if you think about the $50 million, we'll get $10 million of it in 2014 and then another $40 million in 2015, so cumulatively, we'll be up to $50 million. Our cost base is around $1 billion, so we have directionally 3% to 4% of increases from labor costs, the incremental marketing spend that Jim referenced, and then just general inflationary costs on our other expenses, which we try to hold it around 1%.

So that'll offset a portion of the cost savings. It's still cost avoidance, absent these cost efforts, our cost base would've been much higher. We do view that as a net benefit and again, from a year-over-year basis, we expect EBITDA expenses to be down to flat versus 2014.

Okay, so I think I understand that for next year. Still, the idea is you're freeing up capital to put into your CapEx spending, which begins more heavily in 2016?

Yes, a portion of the Blue World Project impacts 2015, but it's the smaller part. The real increases start in 2016.

This is Jim Atchison. To your question about categorically where we're getting these cost savings, if you look at our cost program as a percent of our total addressable base, it's in the high single-digits.

We have two big categories buckets and it relates to our centralization efforts of back office functions and then really, just some other nuances of the operations, which, if you were to look at just those operational pieces, they are probably in the 3% or 4% of our total addressable base. So, they are nuances. They are not massive changes.

Okay. Lastly, in addition to Blue World, you've laid out some expansion plans in Williamsburg and Tampa and San Antonio. Are there any others to be aware of in Orlando itself?

Our attraction pipeline is always changing. We have concepts we look out for several years at a time, but we also have ones that are always in play. So, I wouldn't say that we're fully done with announcements around other attractions, but those are the only ones we're prepared to announce at this point.

Okay. Thank you.

Afua Ahwoi, Goldman Sachs.

First, I know in the past you've said, I think, your CapEx would be 70% of return projects and then maybe 30% other. The number has not moved much higher. Is that still a fair split to think about what expenses are going towards return projects? Is it still 70/30?

The other one was on the international expansion, I guess the 2020 timeline is a little further than we all thought was possible. Can you maybe talk about some of the steps between now and the next six years that makes this opening a little later, especially versus some of what your peers are announcing?

Sure. I'll talk a little bit about the international expansion and I'll let Jim comment on our CapEx mix of ROI projects versus infrastructure projects. So with respect to the international development and the timing we've signaled around 2020, that is a project we're very excited about. We're working with a terrific partner and we have a terrific development in mind and as we said, that's kind of the first piece of it, would it have that targeting opening date.

That data aligns with a number of things, not the least of which is our partners' development ambitions and schedules and other things that are in play in that particular market. I think when we get this project fully completed and prepared to announce, I think it'll probably make a lot more sense, Afua. But that timing has a number of components to it, not just the deal, but also what else is happening in that region.

Afua, on the CapEx, the incremental spending is largely on attractions. If you do the math on it, that would shift our mix from 70/30 to 80/20. Again, all the incremental spend is on new attractions, Blue World and also adding some attractions at our destination parks.

Okay, thank you.

Joel Simkins, Credit Suisse.

If you think about the CapEx going into San Diego around Blue World, how much room is there for disruption as that project gets ramped up and are you designing ways to minimize that on the rest of the park?

Maybe you could clarify a bit what you mean -- from the construction impact in the park?

Exactly.

That's something we've given a lot of thought to and we're used to building attractions and major attractions, even, in our parks and we have three of our parks, big format parks, run year round. So we're used to dealing with that.

This particular development and the location that we've conceived for it, we think we have a pretty good plan to minimize the impact thereof. So I don't think it's going to be a major impact, from a guest experience or just from the logistics of the layout of the park and we have a very good plan in place for how to mitigate that.

Just a follow-up, on the dividend, obviously, you guys might be delaying that until the first quarter. I think when you came public, SeaWorld was not designed to be a yield story, per se.

So given that you've got a lot of capital commitments coming up over the next couple of years, you've got to sort of rethink the business a bit, how should we be thinking about your absolute payout levels going forward or at least in the near to intermediate term?

This is Jim Heaney. Protecting our dividend is a very high priority for us. The shifting that was referenced in the earnings release and on the call, it's really more of a technical matter.

We're shifting the declaration date from December into January. It revolves around a technical issue with our debt covenants. We have, at the end of the quarter, we had $115 million of cash and we have had no draw on our revolver, so we have plenty of liquidity.

It's really a technical matter. By shifting the dividend declaration out to January, it does two things. One is it avoids us paying a technical fee for a waiver, which could have been several million dollars, which we didn't think was a good use of cash for the Company. Then it also opens up $15 million of RP capacity to do something else in 2014, which could be share buyback or a special dividend.

So we thought it was the right call for the Company. We didn't want to come out of pocket for what really was a technical matter and we also like having $15 million of RP capacity now to do something in 2014.

Sure, that's helpful. One final follow-up. As you completed your discussions with consultants, obviously you identified some of these cost opportunities. What did they say with regard to your need for any potential investments in technology and other sort of back of the house infrastructure? Do you feel like that's sufficient to continue to support the business?

Their feedback, specifically to your question, was favorable in that regard. We've made significant investments over the last five years around our infrastructure from an IT standpoint, a systems standpoint.

So from both servicing the needs of the going concern of the business, their view is that we were well-equipped and from the opportunities we see to further drive top line growth through technology initiatives, the projects that we have launched and the ones that we have in our pipeline, we feel, they concurred, were well-positioned to help the Company.

Thanks, guys.

(Operator Instructions)

Barton Crockett, FBR Capital Markets.

Great, thanks for taking the question. On the competitive environment in Orlando, you didn't really have any new attractions this year at SeaWorld. Are you planning to really step up the pace of new attractions next year so that might be a favorable comp?

Also on the topic of comps, how would you have described the weather impact this year, particularly in the Orlando market, which I think might have been a bit rainy?

Barton, I'll comment on the attraction schedule first. We really have a number of levers to drive volume at our parks. It's not just the attractions that we're launching, but it also has to do with pricing, it also has to do with our advertising spend and marketing spend overall.

So to focus on that for just a moment, as we signaled, we're going to step up our investment in marketing by $10 million of new investment and that will be targeted at our destination markets, which, obviously, would include our Orlando park. So we feel that's a meaningful investment and we expect to have the desired outcome of attractive returns on that investment, relative to helping to position the park in its very competitive environment.

With respect to new attractions, we have the line-up that we shared around our parks. We also have smaller attractions that will be quite meaningful to the local nearby markets, our passholder basis, things like that will also be part of our attraction line-up throughout our parks.

But for major attractions, we're always contemplating new ones. We're always looking at new ones and the timing of which is something that we'll look to announce as we move along.

The one thing I'll say is the Orlando market and our year round parks, they're not just limited by launching attractions and just the summer months or the spring month, being in a year-round market. There could be arguments made for opening attractions at different times of the year and still benefiting from them because of the year-round nature of the park.

Okay and then on the weather?

Sure. With respect to weather, we had some beneficial weather impact, if you will, in the early part of the summer because we had a difficult weather season last year in June. So Jim can add a little more color on the weather impact that we've seen for the rest of year, though.

In regards to Q3 and the weather, as you recall last Q3, we had some negative weather effects. So we had some fairly easy comps. This quarter's weather was slightly better, probably not ideal, but from a year-over-year basis, it was a neutral to slightly positive, but still not ideal.

Okay, great. I'll leave it there. Thank you.

Robert Fishman, MoffettNathanson.

Good morning. Can you share with us anything you've learned about your brand, specifically in San Diego and Orlando, since this summer? Have you seen any general sentiment improvement with any of your new social media campaigns or from the announcement of expanding the orca tanks?

Yes, I'll provide some general commentary on that, but that'll probably be as much as we're able to provide at this point. We have conducted a considerable amount of research around our brand and perceptions thereof, both from the SeaWorld brand broadly and our California park, more specifically to your question. We're kind of modifying our advertising campaigns, our messaging, and kind of how we position the parks to reflect the inputs that we've learned through that process.

From what we've learned and seen is that we have beloved brands that are 50 years old and have great experience and a great positioning in the American vacation and theme park landscape. The attacks that we've had on our brand, although we disagree with the nature or premise of them and unfounded nature of them from the animal rights community, we don't see as lingering and lasting and we were pleased that some of our guests reflected that same sentiment.

So we're pleased with the research we gained. We've tweaked our messaging and advertising plans accordingly and we'll continue to work through that.

With respect to the social media efforts, we are very pleased with the performance of those campaigns, those efforts to better tell our story and build our brand, if you will. So we will have more of that to come. We'll have more efforts along those lines and in other ways that are designed to continue to work on a brand rebuilding campaign that we feel is well underway.

Thank you. Can you discuss the possibility of starting to recognize any international licensing fees ahead of these parks openings?

We can't just yet. That's still an important piece of our ongoing negotiations to finalize these deals, but hopefully, we'll be able to circle back on that soon.

Okay, thank you.

James Hardiman, Longbow Research.

You maintained your full year guidance. That said, third quarter was beneath, at least, street expectations. Can you talk about how trends have gone versus your own internal assumptions over the past three or four months?

Has this basically progressed as you thought it would and it's us that sort of got the timing wrong? Or have things been a little bit worse and you were able to get maybe some incremental costs out of the business versus how you thought about it?

I apologize if you've spoken to this, but can you just speak specifically to the post-3Q trends that you've seen in October and early here in November? Are things still trending similar to where they were late 3Q or have we seen any improvement?

James, this is Jim Atchison. I'll talk about the attendance trends and maybe Jim can address your first question.

So if you look at Q4 for us, the biggest portion of the quarter is December. We have robust Christmas programs in all of our parks and that tends to drive that month. The other piece really relates to our Halloween season and again, where we have kind of strong programs throughout our parks.

So in terms of our Q4 trending, it's consistent with the guidance we've provided, obviously, because that's the only quarter left in our year, so we feel that it's kind of built into that. But what I'll say is, we are encouraged by the trends in our Halloween program and we have good expectations for our Christmas success. November's a much smaller month overall and we're too early in it to really gauge. But a strong Halloween and expectations for a good Christmas.

To address the other question, as you know, we don't provide quarterly guidance and we work with all of the analysts to guide how the quarters might rollout, but the expense timing can be difficult to model sometimes. The top line came in right in where everybody expected. The business is progressing, really, how we saw it rolling out for the rest of the year. That's why we've reaffirmed guidance.

I think it's really -- the differential this quarter was really around expense timing in the third quarter. We had some expenses around new attractions that maybe weren't contemplated by the street, but they were contemplated in our models. The good news is, at this point is with full-year guidance and year-to-date Q3, so the next quarter kind of falls out from that.

Great. $185 million to $195 million in CapEx for 2015, you've given us a few new rides and attractions, but given the fact that the Blue World Project doesn't really kick in until 2016, how much of that $185 million to $195 million do we currently know about and how much is left to announce?

Secondly, just quickly on the CapEx guide, last quarter you talked about sort of 13% of revenues for next year. You've now given us a number, $185 million to $195 million.

You do the math and it suggests 7% sales growth next year. I know you're not going to give us guidance at this point, but are those two sets of guidance consistent with one another in terms of how you guys are thinking about next year?

No, I wouldn't try to connect those dots. Because over the long term, a percentage of revenue in guiding CapEx makes sense, but given the volatility of the business, we thought it was more appropriate to shift away from that and provide actual dollar guidance. So I wouldn't try to connect those two data points and extrapolate out a revenue projection.

The 2015 CapEx is impacted by attractions that open in 2016. For an attraction, more than half of the CapEx can be in the year prior to when it opens. So 2015 is being impacted by attractions that open in 2016 that have not been announced.

In terms of 2015, is there a significant number of rides and attractions built into that $185 million that we don't know about yet at this point?

I don't want to comment on the term significant, but there are substantial rides and attractions that open in 2016 that are unannounced and are contemplated in the guidance we gave.

Got it. Thanks, guys.

Thank you. We have no further questions in the queue at this time. I would like to turn the floor back over to Management for any closing remarks.

Great, thank you. Thanks, everyone, for your questions and your continued interest in our Company.

Before I close the call, in honor of Veterans Day yesterday, on behalf of our entire team, I'd like to pay tribute to all the veterans working here at SeaWorld Entertainment and to any veterans who joined us on our call today. I also wanted to express my gratitude to all of our team members for their ongoing dedication and commitment to our mission and values during this busy summer season.

Rest assured that I and the entire SeaWorld team are focused on overcoming the challenges facing our Company. We are resolute in our belief that our brands, parks, attractions, and mission remain compelling and that we will emerge from this period stronger than ever. That concludes our call and thank you again for your time.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.