United Parks & Resorts Inc (PRKS) 2015 Q3 法說會逐字稿

Good morning ladies and gentlemen and thank you for standing by. Welcome to SeaWorld Entertainment's third-quarter 2015 financial results conference call. My name is Jamie, and I will be your conference operator today.

(Operator Instructions)

I would now like to turn the conference call over to Mark Trinske, Vice President of Investor Relations.

Thank you operator.

Good morning everyone, and welcome to our third-quarter 2015 earnings conference call. Today's call is being recorded and will be webcast live.

Our 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 Joel Manby, our President and Chief Executive Officer, and Peter Crage, our Chief Financial Officer. On today's call we will review our third-quarter 2015 financial results and the important factors impacting our business and then we will open the call to your questions.

Before we begin I'd like to remind everyone that our comments today will 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 the actual results to be materially different from those forward-looking statements, including those identified in the risk factor section of our annual report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2015. These factors may be updated from time to time and will be posted in our filings with the SEC and made available on our website. We undertake no obligation to update any forward-looking statements.

In addition, on the call we will 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 also be found in our filings with the SEC.

Now I would like to introduce Joel Manby. Joel.

Thanks, Mark. As we announced earlier this week, Mark joined us on just this past Monday as Vice President of Investor Relations, and we're very excited to have him on the team. Welcome, Mark. With the addition of Peter and Mark I feel very confidence in the future of our Financing and IR teams. So excited to have them both.

Good morning, everyone and thanks for joining us today. Our results in the third quarter give us early indications that our efforts to improve revenue and profitability are taking hold, but we recognize that we clearly have more work to do to fully stabilize and restore sustainable growth. As noted in our earnings release published earlier this morning, for the third quarter we are reporting growth in total revenues, adjusted EBITDA, net income and net income per diluted share, despite a slight decline in attendance. Attendance increased at all but two of the park locations. However, these gains were offset by decreases in attendance in California and Texas.

Peter will speak to these factors that we believe affected our performance at these two locations. I can say, though, that the rate of decline in California is slowing dramatically as we continue our long-term reputation campaign. In Texas, we are implementing plans to improve results with changes to the past products and through our upcoming attractions plans.

While we generate a growth in key performance metrics during the third quarter, weather has again impacted our business. During the last six weeks unusually heavy and frequent storms resulted in park closures at our locations in Virginia, Texas and Pennsylvania during key Halloween event weekends. In addition, while our cost saving initiatives are having an impact on the bottom line, these savings are being offset by increased costs from legal matters and associated reputation initiatives. Due to these factors, we are updating our full-year 2015 adjusted EBITDA guidance to be in the range of $360 million to $370 million.

I want to make it very clear that I am not pleased with this. In the second quarter call I reaffirmed guidance. It's very disappointing to me to have to adjust our range. However, I also want to put it into perspective.

In 2013, this company earned $439 million in EBITDA and dropped $69 million the next year in 2014, or about 16% in one year. Given our current guidance range of $360 million to $370 million for 2015 and given a $10 million pro forma adjustment last year, the cash generation of this Company will essentially be flat to last year assuming we hit our guidance. Therefore, even though we've adjusted our full-year 2015 outlook and I am not pleased with that, we are clearly seeing signs of stabilizing our portfolio and improving our business fundamentals as evidenced by our third-quarter results, which is the largest quarter of the year. We will end the year dramatically slowing the rate of decline and adjusted EBITDA versus the prior year.

As I previously mentioned, we have seen a meaningful reduction in the rate of attendance decline in California. Our reputation campaign continues to produce encouraging results, as our employee testimonials, social media campaign and television ads continue to drive positive sentiment and resonate well with our guests, as well as with potential guests.

We remain committed to sharing the facts and correcting misinformation about SeaWorld through our ongoing reputation campaign. We've learned quite a bit about what works in this regard and believe that going forward; we can be more effective at relatively equal spending levels as this year.

I am also excited about how we plan to evolve the SeaWorld brand to generate a more positive connection with the changing expectations of our guests. We will have more to tell you about this at our upcoming investor webcast on Monday.

On the investment side, I am excited about the additions to our 2016 attractions lineup, including two new roller coasters coming to Florida and our new Discovery Point attraction in Texas. We are committed to targeted and disciplined investments in our parks through unique new attractions and compelling consumer events.

These new attractions will broaden our appeal and improve our competitive positioning in these key markets. We look forward to introducing Mako, our record breaking hyper Costa in Orlando, and Cobra's Curse, our new family friendly spin coaster in Tampa next year, as well as Discovery Point, our new dolphin habitat and interaction in Texas.

Now I would like to take a moment to update everyone on our Blue World project. Last month the California coastal commission approved the coastal development permit for our Blue World project, but with conditions that we believe are unacceptable. The attempt by the coastal commission to grant a conditional permit that restricts breeding and transport of our whales at SeaWorld San Diego, is beyond the scope of their authority and we will challenge it in court.

We will keep you updated on the status of both the legal action and the Blue World project in future communications. At this point, the lawsuit is about precedent on the future projects built by SeaWorld or really any other zoo or aquarium in the state of California.

Over the past seven months I have been working hard with our team on a thorough analysis of the business, including our strengths and the challenges we facing moving forward. SeaWorld has solid business fundamentals and significant growth potential. I believe we can overcome our challenges with effective long-term planning, evolving our brands with guest evolving expectations and targeted capital investment and disciplined execution at all levels.

Looking ahead, we developed a comprehensive and strategic plan to build on our unique strengths, which includes a new approach to our brand commitment and an intensified focus on financial discipline and capital allocation. I look forward to sharing additional information about how we will execute on this plan and achieve our objectives during our upcoming investor webcast on November 9th.

With that, I will turn the call over to Peter to walk through the third-quarter 2015 financial results.

Thanks, Joel. Good morning, everyone. Before I review our third-quarter financial results, I would like to briefly remind everyone of the seasonal nature of our business. Typically our Company generates the highest revenues in the second and third quarters of each year, due in part, to the seasonal operation of six of our theme parks. Approximately two thirds of our attendance and revenues are generated during the months of April through September with the third quarter being the most significant.

Turning to our financial results, for the third quarter of 2015, the Company generated revenue of $496.9 million, an increase of $1.1 million from 2014. The slight increase in revenue was driven by a 0.6% increase in total revenue per capita, partially offset by a 0.4% decrease in attendance for the quarter. The increase in total revenue per capita to $59.36 in the third quarter of 2015 from $58.99 in 2014 was a result of a 2% increase in in-park per capita spending, which improved primarily due to pricing increases and culinary offerings, offset slightly by a 0.2% decrease in admission per capita.

During the quarter, we reported increased attendance at all but two of our park locations due to additional promotional offerings and favorable operating schedule, resulting from the later timing of Labor Day holiday in 2015. However, overall attendance for the third quarter declined slightly due to decreased attendance in California and Texas.

We believe the decline in attendance in California was related to our continued challenges with the SeaWorld brand in that state. As Joel mentioned, we are addressing these issues through our ongoing reputation and fact sharing campaign. We plan to reveal more about the evolution of our brand at our investor webcast on Monday. A shift, we believe, will more favorably position us to attract both past and new guests.

The decline in attendance in Texas was related to a reduction in promotional offerings and passholder visitation, along with a lack of significant competitive offerings at this location. We believe changes in promotional offerings and changes to the design of our fun card, along with adverse weather in the second quarter, negatively impacted the sale of fun cards at this location.

As we mentioned on our last earnings call, we expected the Texas location to be impacted by the lingering effect of record levels of rainfall experienced early in the operating season, a time that is typically the peak sales period for our fun card and annual passes. Going forward, we are making changes to the fun card and other ticket products in Texas and as Joel mentioned, we expect the new Discovery Point attraction, which will open in May of 2016, will help counter competitive pressures.

On the expense side, cost of food, merchandise and other revenues decreased 3% to $37 million in the third quarter of 2015, from $38.2 million in 2014. These costs represent 19.2% of related revenue in the third quarter of 2015, compared to 20.2% of related revenue in the prior year quarter. This improvement is a result of our active cost initiatives including executing on our leverage buying efforts.

Operating expenses decreased 2% to $196.9 million in the third quarter of 2015 from $200.9 million in 2014. The decrease in operating expenses was a result of cost saving initiatives implemented in December 2014.

SG&A expenses decreased 3% to $47.7 million in the third quarter of 2015 from $49.2 million in 2014. The decrease in SG&A expenses was principally related to a decline in noncash barter transactions, partially offset by a small increase in incremental noncash equity compensation and increased legal costs.

Adjusted EBITDA increased 4% to $217.5 million in the third quarter of 2015 from $209.1 million in 2014, reflecting the results of increased revenue and our continued cost saving initiatives. Depreciation and amortization expense remained relatively flat at $44.5 million in 2015.

Total interest expense decreased 28% to $15 million in the third quarter of 2015 from $20.9 million in 2014, due to the early redemption of our 11% senior notes earlier this year, which were replaced by our new 4.33% term B-3 loan. This refinancing is expected to generate about $14 million in annual interest savings. Net income increased 12% to $98 million in the third quarter of 2015 from $87.2 million in 2014, while diluted earnings per share increased $1.14 in the third quarter of 2015 from $1.00 in 2014.

Turning to the balance sheet, we ended the third quarter with $119.7 million of cash and no amounts drawn on our revolving credit facility. Total long-term debt including current maturities was $1.62 billion. Our net leverage ratio is defined in our credit agreement at the end of the quarter was 4.13 times adjusted EBITDA. We also made a prepayment of $30 million on our term B-3 loan in accordance with our credit agreement in October using cash on hand.

Based on our quarter end leverage ratio, we have $120 million of restricted payments capacity in 2015 of which $32.3 million remains available. Through November 4th, we declared $72.7 million in dividends and repurchased $15 million of our shares in September 2015, at an average price of $17.92 per share. At this time, we have $220 million available for future share repurchases under our share repurchase program.

This brings me to the outlook. The following guidance is based on current management expectations and is subject to change. As Joel previously discussed, due to adverse weather impacts over the last six weeks, along with increased costs from legal matters and associated reputation initiatives, we now expect our 2015 adjusted EBITDA to be in the range of $360 million to $370 million. We are also updating our capital expenditures guidance for 2015, which we now expect to be in the range of $165 million to $175 million.

Now I would like to turn the call back over to Joel.

Thanks, Peter.

Before we open up the call to your questions, I want to reiterate that while we are disappointed to be adjusting the outlook for the year, we are seeing signs of stabilization in our portfolio. We have established a strategic plan that we expect will capitalize fully on our many, many opportunities. We will continue to take the necessary action to deliver results and drive shareholder value.

I want you to know many, many good things happening here and I am very, very excited about our future. We look forward to communicating our plan to you at our investor webcast on Monday, November 9th.

With that, I will now open the call to your questions.

(Operator Instructions)

Tim Conder, Wells Fargo Securities.

Thank you, gentlemen. A couple of easier ones here and then Joel I don't want to steal your thunder, but I may ask you for a little more color.

The SeaWorld branded park trends, you talked about only two parks that were down in attendance. In Texas, particular granted there has been weather issues and Peter, you alluded to that impacted some of your season pass related sales. We didn't see as much of an issue from other regional operators in that market, so any color, additional color from that perspective?

Then on the international front, did you see in Orlando -- granted Orlando was up -- but did you see impact from international guests, have you see that year to date, given the effects of exchange rates potentially impacting Brazilian and European visitors?

Good morning. On the Texas park and more broadly the company, to put it into perspective, we identify these two parks as being soft for the year. If you were to assume for the time being that those two parks were flat year-over-year, the company would have, in fact, driven stronger EBITDA and we'd likely had produced adjusted EBITDA in the third quarter in the mid-$220 million range. So, those two parks -- we really want to isolate for investors and ourselves where we are seeing our softness.

Texas particularly, had weather issues, no question. As we went through the third quarter, we saw the weather that impacted past sales earlier in the year. Obviously impacted attendance and revenue as the quarter went on, but we also saw some other things as we mentioned in the release and in our prepared remarks. That being changes in the pass program, as well as, our competitive position in the market as we ramp up for 2016, 2016 CapEx. Hopefully that answers the question.

Tim, good to hear your voice. Let me add to that. I think in Texas, definitely weather was an issue. I can't speak to other competitors, certainly Six has a park there. They have 30 parks to offset around the world and country. However, it wasn't just weather. We did have some marketing misstep, I think, which we are correcting.

We not only had weather in the spring which really hurt our season pass sales and fun card sales in the spring. And when you sell predominantly in the spring and you have huge weather issues, it hurts you the rest of the year.

To address that, we have a basically revised pricing philosophy, which I will share more on Monday. But we have, basically moving to an advanced purchase philosophy, very heavy fall marketing for the following year making it best price, buy early and save, fairly typical strategy. They did not have that as a heavy focus going into 2015 and we were really hurt by the weather.

And we split the fun card there and had a fall fun card and basically it was a brand-new product. I think there was confusion in the marketplace and we're going back to a more typical full year fun card, full year season pass and we're also trying to move people from the less -- not less effective but less profitable fun card into our season pass. So, that could be part of the reason. And also we didn't have product there which Six had a very strong coaster in Dallas -- yes, in Dallas, but also in San Antonio as well.

So, look, we don't want to say its all weather. It's all three of those factors caused San Antonio -- but I want to reiterate at a higher level, that basically if Texas and San Diego had been flat we would have had an incredibly strong quarter from the other parks, as Peter articulated.

On the international front, to your question, we have admitted in the past and I think the data would show that we are losing some share in international to our competitors. However at a broad level, we think it is because, frankly, in Orlando it's Harry Potter for the most part. We are going to continue our efforts there and it is broadly about 15% of our business.

As you see on Monday, we have a strong strategy to make sure we maximize and fix our issues on the 85% of the business that is local, drive and overnight and domestically first and then we'll have more specifics to fix, any issues that remain in international. But we can only do so much at one time and we are focusing on fixing where we can have the biggest bang for the buck.

Agreed and very helpful, gentlemen. I think you've answered one of those other questions through what you just said there. Last question as it relates, again, staying on the international front and Joel, I know you are working, tongue in cheek, 36 hour days, but any update on the international park development, the asset light approach? Or should we wait on Monday for that?

Well, I will say -- I know this is frustrating to hear it because we said it the last three calls -- I have been on two others. We are progressing. We don't have an announcement of a definitive agreement deal however; I will say that it's progressing well.

In fact, they were just, that organization that we are working to partner with was just here in Orlando about three weeks ago. I met with them all, Jim Atchison was meeting with them. We are making progress, but these things take -- they are incredibly complex and take time. I think Disney Universal negotiated for about 10 years. We will do better than that but they are not easy deals. I don't want anyone to think they have stopped but we are not quite at a -- we are not at a definitive agreement level.

Okay. Thank you. We will see you on Monday and later on in that week.

All right, good, Tim, thanks.

Afua Ahwoi, Goldman Sachs.

Hi, good morning, a few questions from me. First, on the -- we appreciate the EBITDA guidance or impacts from Texas and California. Could you maybe translate what that implied for attendance or maybe pricing, what that sort of $8 million delta would have meant that San Diego and Texas attendance was down?

And then on the -- sort of, for the legal costs and the reputation cost you mentioned, how should we think about that going forward and especially on the reputation? I think you had indicated in the past that there was sort of a $15 million market and spend associated with that brand. Should we think of that as $15 million plus some more or what is the run rate to using forward?

Peter, why don't you take the first one and I will take the reputation.

Sure. Good morning. Triangulating that, we don't as you know, for competitive reasons, we don't provide attendance revenue per capita data by park. It was my intent to sort of tease out where we are having our issues and, so, with respect to specific attendance numbers by park, we don't break that out. I just wanted to give a sense of where we were having our issues. As I said at the risk of repeating myself, if those two parks had been -- two locations had been flat, we would have delivered adjusted EBITDA in the mid-220 range.

As far as the reputation spend, good to hear your voice, Afua, I would think of it this way, we were in that range and that's what communicated about $15 million. As we look forward to 2016, we have learned a ton about our reputation spend and its effectiveness. As we said earlier, when we get the facts out, it's very impactful, our potential guests resonate with the facts and it does make people more inclined to support us, more inclined to visit us and their overall view of us definitely improves. We will share some of that data on Monday.

I think in 2016 we are hoping -- I don't want to commit that we can do more with less but I would say, if we spend the same amount of money and apply it to earnings, we will be even more effective in 2016 through our spending. Even if we keep those expenses the same at a broader level, which may be the question behind your question, I do think this company -- we have opportunities on the cost side elsewhere and we will try to apply that even if our reputations spend is flat. We have to find efficiencies elsewhere in the company if that continues.

Okay. Thank you. Maybe just one more follow-up. On the promotional offerings that you indicated or promoted led to the -- contributed to attendance growth. Last quarter, you had indicated in the back half you would be positive of revenue per capita admissions.

How much do you think the promotions weighed on admissions per capita growth? I think we actually saw that you increased prices in Orlando. Talk to us about increases in organic versus the promotional cadence?

Peter, do you want to take the first half? I will take the philosophy after you hit the numbers.

We did see an improvement in per capita on the admission side, if you carve it out, about a dollar improvement on a net basis. So, we saw a slight per capita improvement over all of which that was driven quarter-over-quarter by about a dollar in admissions.

And that we were -- that was definitely heading in the right direction. Philosophy wise, heading into 2016, we definitely are putting guardrail's on the number of offers we have out there. Sometimes there is confusion if you have too many.

We are going to simplify -- getting to the purchase, we are going to simplify people's ability to upgrade to more profitable fun cards and season passes versus daily, kind of a good, better, best. You will hear more about that on Monday from our head of marketing.

Even though we had some improvement, it's not as good as we want it to be. But I think we have a philosophy and a way to look at the business that will get us there over time. I'm glad it's heading in the right direction.

Okay. Thank you.

Barton Crockett, FBR Capital Markets.

Thanks for taking this question. I wanted to talk a little bit about the impact on public perception from the continuing back and forth legally in California. So, you are challenging this California Coastal Commission decision which makes sense.

You know, last year I think it was publicity -- the management team last year said the publicity around the legislative effort to ban orcas at the park was what drove the attendance weakness last year at San Diego, which was the biggest culprit in the 5% decline you had last year. Here we've got the prospect of an extended legal situation with the California Coastal Commission. A few questions around that.

Are you seeing the type of press coverage around that you saw last year or is it somewhat less? How long do you think it goes on?

Then I also want to understand what are you trying to say you do with the San Diego Park as this thing is in limbo? Do you have to wait for a decision to go ahead and build and if you don't get the decision, how would you react?

Let me answer it in reverse order. As far as the last part of your question, no we are not going to stay in limbo at all. We felt like we had to challenge Blue World from a precedent standpoint, not only for Blue World project specifically, for any project we do with the coastal commission moving forward, but also really for any zoo or aquarium in California. If this precedent goes, it's a very dangerous one, I think, for the entire industry. We don't like it. We're going to fight it, period.

In the meantime, what I will talk about a little bit on Monday, but I will give you the headline, we are going to move forward with other capital there. We're going to reallocate a portion of that $100 million. It will be much less, but we can do a very effective attendance driving return generating attraction. I am excited about the alternatives that we are coming up with and we're definitely going to still hit that 2018 window on that.

As far as the broader question, look, we don't like that kind of press. We had hundreds of employees and guests filling that room there. We had a positive recommendation from the coastal commission to build it under our specifications. You can never predict the political process and it was disappointing, and yes, there was negative press.

I think broadly, the San Diego park is definitely stabilizing. The attendance decline a year ago was quite dramatic. This year it's very, very much lower, like -- from a double digit to a low-single digit or mid-single digit kind of range. So, it is definitely stabilizing and the profitability is stabilizing.

Will it continue going forward, I can't predict, but I will say we will do whatever we need to do. I do believe with the roughly flat amount of money from this year we can be effective in California, continuing to get our message out. When we get our message out, what we care about is the consumer response. We are stabilizing our attendance. We can't worry about some of the -- what the politicians are doing there as much as we got to worry about what the consumers are saying and are they coming to the park.

Okay. If I could switch gears -- and thank you for that. If I could switch gears to another quick question. Labor Day was later this year. How much did that lift your third-quarter attendance and revenues would you say?

Well, Barton, it's Peter. As we pointed out earlier on, the issues affecting the two locations, San Diego and San Antonio, obviously muted the lift that we saw, you know, company wide. We did see a lift in the remaining locations. That's why we would have delivered, if not for those two parks, would have delivered strong results. So, we were satisfied with the lift that we received from that extra week and the other parks. But again, the two parks that caused us the most pain this year neutralized that almost completely.

Okay. I guess, we'll take it offline. I appreciate it.

James Hardiman, Wedbush Securities.

Hi, good morning, thanks for taking my call. A couple quick follow-ups on this Coastal Commission issue. Just so I understand it, you gave us great color on where the San Diego Park was previously and presumably where it was during the third quarter in that low to single digit decline range.

So I understand, the commission's ruling was in the fourth quarter. Has there been another leg down since then, as that negative press presumably got out there, or has it continued to maintain that sort of low to mid-single type decline?

Well, I'm not -- I can't comment on the specifics going forward with the percentages but even though the decision was in that quarter, there was a lot of discussion, a lot of press, a lot of things out there before that. It was an ongoing, kind of public issue that got a lot of attention. So, a big picture, we definitely see things stabilizing. Has it completely stabilized? No. It's definitely heading in the right direction and we do have plans to keep spending on our reputation campaign there because the facts do help us when we get them out there.

Fair enough. Then, just help us -- obviously there is some disagreement with respect to what their jurisdiction is. Help us understand, do did you need to gain their approval on any and all construction projects or just certain types of construction projects? And is it possible that they hold the orca issue over your heads even for projects that have absolutely nothing to do with Blue World or anything like that?

Well, I think the main thing about that lawsuit is precedent and I really think it's about -- the whole issue was about orcas and that project. I wouldn't extrapolate out, at all there. We worked with the Coastal Commission for 20 years, we've never had any problem. This is the first time we ever had any project with what we would call an unacceptable condition. And I think it is really tied to that orca issue and breeding specifically. I think I would not personally extrapolate.

Okay. Just so we understand, if you build a new roller coaster in SeaWorld, San Diego, do you need to go in front of that commission every time you do that?

We do. But again, in the 20 years association of our company, we have never had issues before. And, again, the coastal commission was very positive, positive recommendation. We don't anticipate this as ongoing issue for anything other than the breeding issue or with an orca.

Okay. Thanks. Then last question, maybe just give us a little bit more color. You talked about closures over the past six weeks at three of your parks. Obviously we understand some of what was going on in Texas earlier in the year.

But can you just walk us through those three closures, how significant were they, how long did we see closures? I'm assuming most of that is the fourth quarter. But help us quantify some of that over the past six weeks?

Sure. Sure. Mark has some of that info. I will let Mark jump in.

This is Marc Swanson, how are you?

We saw some closures at our location in Texas. So, that was, if you recall, just a couple of weeks ago. They had the big rain that came up through Mexico, Patricia, and ultimately spread into Texas. So, unfortunately, that closed the park on the Saturday before Halloween which traditionally can be one of your biggest Halloween days of the season.

Then prior to that, early year -- a couple of weeks before that we had the Joaquin remnants that were going up the east coast, you probably recall that. That also impacted our park in Williamsburg and our park in Langhorne, Pennsylvania. And again, both of those were closures of the Halloween event.

So, in the case of Williamsburg, the park was able to open slightly for the day but then at night when they get the big Halloween attendance, they had to shut down on a pretty significant Halloween night. Similarly for Sesame Place, which is more of a daytime event. When you add those three up, that had a significant enough impact that we had to -- coupled with some of the expenses, things that we talked about, we had to relook at our guidance.

What were the dates on the Williamsburg and Sesame Place? What was the timing of that?

I can get you the exact dates. It would have been when Joaquin was moving up the East Coast. That was the storm that ultimately shifted out to sea, but it dropped a lot of rain, if you remember, in the Carolina's. They had severe flooding and that kind of moved up into Virginia and into Pennsylvania rain and what not.

Okay. It was early to mid-October -- fourth quarter.

I think it was the second week.

Texas was the weekend of the 24th of October.

The weekend before Halloween.

Weekend before Halloween, traditionally a big weekend.

It's, usually the biggest weekend.

Got it. Thanks for the color, guys.

Felicia Hendrix, Barclays.

Thank you for taking my question. Peter, I have a question for you on your revision of your full year guidance.

Sure.

I was wondering if you could go through the assumptions you are making there. So, EBITDA was about $10 million light in the quarter relative to where consensus was and you are lowering your full year EBITDA to mid-point by $10 million. You called that weather for the past six weeks and Halloween closings and we talked about that now extensively.

I'm just wondering, given miss in the quarter and then weather issues, I would have thought that maybe your guidance would have come down a bit more. Can you help us understand what you are seeing in the fourth quarter to give you confidence in your forecast?

Obviously we've gotten through October and we talk about those impacts. We also talked about the cost impacts that we see and we see as likely continuing through the end of the year. So, those are the bad guys, if you will.

We also have taken a really close look, now that I'm 60 days into the job, at the remainder of the year. As you know in this business the remainder of the year doesn't have a lot of upside, we have a lot of concentration risks, primarily risk around the Christmas -- the Christmas time frame. So, what we did, really, quite frankly, was look at our worst and best over the last several years.

Given the two things we already know, costs and the impacts that we had in October, and as well as handicapping where we will be the rest of the year, we felt comfortable with this revised guidance. Now, to put it into perspective, last year in the fourth quarter we did just under $50 million in adjusted EBITDA our range now, given our EBITDA for the trailing nine months, our range puts us between $46.2 million to $56.2 million for the last quarter.

So that midpoint is right around $51 million, $51.5 million. That would give us about 2 1/2% growth. So, we did 4% growth in the third quarter. If we do 2 1/2% growth in the fourth quarter, we will be at the midpoint. We believe that range is appropriate given what we know and what we don't know.

Does it assume growth in attendance and [rev] per cap because based on our estimates it would need to?

It does. It does some in the later part of the year because we have the cost pressures. That doesn't mean we're not going to try to find opportunities here to beat this if we can. I'm not suggesting we will.

If there are cost opportunities over the next two months, I tell the team is hard at work to make sure that if we are challenged by weather again, whether that be El Nino or La Nina, I don't know which pattern is coming through the southern United States over the next couple of months, we're looking at costs as well to make sure that whether it be the top line or on the cost line that we do everything we can to hit these numbers.

Okay, thank you. And then just this next question, can be for Peter or Joel or both. I think we have tried to touch upon it throughout the call, but I just wanted to get back to, in maybe a different way talk about the pricing power that you have at your resorts. It seems like a constant theme that attendance is sensitive to pricing and promotions. I know, Joel, you said you we're going to talk about a lot of strategic things to talk about Monday and you've been looking at your marketing and evaluating it and looking at it critically, but can you help us understand the headwinds you face in terms of raising prices and as we think about your parks going forward, are we going to continue to hear about this sensitivity to promotions issue that has been a theme for so long now? Thank you.

That's a good question. Basically in our -- a couple of our biggest markets in the southern California market and certainly in Orlando, our competitors, our very rational competitors and some of them made recent announcements on fairly significant price increases. So, I do think we have opportunity. However, I don't think our greatest opportunity is raising price as much as increasing our yield and being more sophisticated and stable and straightforward in our -- the way we market and the way we try to get people in to our season pass products, our bundled products, multi-day, multi-park and we have incredible good value versus our competitors. I actually think we will continue to increase that spread overtime as we have a value philosophy that we can carve out versus very rational competitives. If we simplify our purchase, simplify our upgrade and packaging, I think we have a strong opportunity to increase our net on our per capita without necessarily increasing our daily rate.

If anything, our daily rate may come down but we're going to shift more people to other packaged products. That's where I think that's where we'll get an increase in per cap. And that's basically the broad philosophy that we have moving forward.

Okay, great, thank you.

(Operator Instructions)

Alexia Quadrani, JPMorgan.

This is James in for Alexia. I have a branding question, this is a bit of a follow-up to the previous one about pricing. I assume you will talk about branding at investor day. I want to ask if your [theme] with the opportunity to differentiate in Orlando and Southern California, as competitors continue to raise ticket prices, given there is some talk, meaning the competitors might be pricing some middle-class families out of the market. Do you see an opening at all in terms of the value proposition for your Orlando and California properties as it peers continue to drive up ticket costs? Arguably, almost incessantly. It's more about branding and positioning that I would like to hear your thoughts, more than just specifically, your goals on pricing.

Actually the answer to your question is yes. I do see an opportunity. I tried to articulate that a little bit in the previous question, is that I think being a strong value player in Orlando and even in Southern California is a great opportunity for us because our competitors are increasing prices dramatically, especially on season pass product and we have an opportunity there. Again, it's about clearly simplifying what our value is.

Right now, even the way we market, I think we can improve that. We are making great improvements. I think our -- Pete Fry will show on Monday some of the way we just simplifying so the customer understands the value they're getting versus just focusing on price. There is a difference between price and value and moving people up to season passes.

Yes, we see an opportunity. We need to get people to buy early and understand that value and we need to simplify our message. And we also need to limit our offer so it's very straightforward and clear what we're trying to accomplish. In the past when we had some of the brand issues, we have put too many things out there where it can be confusing to the customer and that's what our research showed. So, all of that combined I do believe we have an opportunity to create value for the guests.

Got it. Great, and a quick follow-up. I'm curious, specifically about the consumer events. Could you provide little bit more color on to where you're getting the best traction and maybe what strategies are working, certain types of events and where you see an opportunity to drive revenue going forward in those events?

We have incredible events. The Halloween event and Christmas event I would put up against any. In fact, the Tampa Halloween event was rated the best Halloween event in Florida even with Universal's Incredible event and Disney's. We were very proud of that. I just went with my daughters and got the daylight scared out of me. They are great products.

I think where we can continue to evolve as a company, is have more stability throughout the rest of the year and get the same kind of repeat ability and basically the experience for the guest to plan on it every year, have it be part of the family culture to go see all of our events throughout the year and have more stability in the spring and summer. And I think over time then we can continue to increase our attendance, increase season pass sales to have really strong events throughout the year. That is definitely part of what we are doing moving forward. Having said that, we already have some incredible, incredible festivals.

Great, thank you very much.

Tim Conder, Wells Fargo Securities.

One quick follow-up on the CapEx. You mentioned obviously that you lowered that guidance for the year. Are we talking just timing or a little more color on the reasons behind that, gentlemen?

Yes, Tim, this is Peter. That is just timing. Nothing other than timing there. Of course on Monday, we will talk a little bit more about CapEx and how we view that going forward.

Okay, great, thank you.

There are no further questions at this time. I will turn the call back over for Mr. Trinske for closing remarks.

Before I turn it over to Mark, this is Joel.

I just want to thank everybody for your support. Again, I do feel like we are making solid progress and stabilizing our business. And we do have a foundation that once we have completely stabilized our complete portfolio, where we are having some issues in the two SeaWorld parks we mentioned. I am very excited where we can go for the future and I look forward to either talking to some of you or seeing some of you on Monday.

Go ahead, Mark.

Thanks, Joel. Thanks, everyone for joining us on today's call.

As a reminder, we're going to be presenting and webcasting our 2015 Investor and Analyst day on Monday at 1:15 PM, Eastern time. For details on how you can listen in to the webcast, you can go to the events and presentations section of our Investor website which is seaworldinvestors.com. And the complete details about the live webcast and also the corresponding materials that we'll be working off of will be posted there on Monday morning.

We look forward to speaking with you again in February when we report our full-year 2015 results. And this concludes our call for today. Thanks again for your time.

This concludes today's conference call. You may now disconnect.