SeaWorld Conference Call Highlights
SeaWorld Entertainment Inc (NYSE: SEAS) reported its third quarter earnings on Wednesday. Shares of the company are down 9 percent.
• 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 reactions following our last earnings call and the stock's underperformance over 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.
• 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.
• We continue to move forward with our Independent Advisory Panel in developing and designing our new state-of-the-art killer whale environment.
• As we noted in our announcement, these habitats will be the first of their kind and will nearly double 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 in San Diego SeaWorld next year.
• Looking ahead to 2015, we believe our announced lineup of new attractions will deliver something for everyone.
• 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 costal wildlife.
• SG&A expense in the third quarter increased by a 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 reduction and equity comp expense.
• Adjusted EBITDA and 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 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.
• Diluted earnings per share decreased from $1.34 in the third quarter of 2013 to $1 per share in 2014.
• Adjusted net income and 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 $31.5 million voluntary prepayment and our term loan during the third quarter of 2014.
• Our net leverage ratio at the end of the third quarter was 4.09 times adjusted EBITDA.
• 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.
• 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.
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