SeaWorld Entertainment, Inc.
Q1 2013 Earnings Call Transcript

Published: 23 May 2013

[Operator:]

Please stand by. Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to SeaWorld’s First Quarter 2013 Earnings Conference Call. My name is Kelsey, and I will be your conference operator today. At this time all participants are in a listen-only mode. After the prepared remarks the management from SeaWorld will conduct a question-and-answer session, and conference participants will be given instructions at that time. As a reminder, today’s conference is being recorded. And now, I will turn the conference over to our host, Mr. Gene Ballesteros, the company Treasurer and Head of Investor Relations. Please go ahead, sir.

[Gene Ballesteros:]

Good afternoon, everyone. Welcome to our first quarter earnings conference call which is being webcast. With me today are Jim Atchison, our President and Chief Executive Officer; and Jim Heaney, our Chief Financial Officer. On this call we will review our first quarter 2013 results, which we released today after the market close, if you don’t have a copy it is available on the Investor Relations portion of our website at seaworldentertainment.com. Replay information for this call can also be found in the press release and will be available on our website. Before we begin, I’d first like to remind everyone that comments made during this call may contain forward-looking statements, within the meaning of the federal securities laws. In addition, on the call we may also reference certain non-GAAP financial measures, more information regarding our forward-looking statements and reconciliations of non-GAAP financial measures to most comparable GAAP measures are included in the earnings release, it can also be found in our filings with the SEC. With that, I’d like to turn the call over to Jim Atchison.

[Jim Atchison:]

Thanks Gene. And thank you to everyone on the call for your interest in SeaWorld Entertainment. We are excited to welcome all of you to our first earnings call as a public company following the successful completion of our initial public offering in April. As reported in the press release issued earlier today, net revenue for the first quarter of 2013 was $238.6 million, up 12% from the first quarter of 2012. The success of our pricing and yield management strategies drove the majority of this improvement with total revenue per capita increasing by 10%. Attendance for the quarter was approximately 3.5 million guests, an increase of 2% over the first quarter of last year. We attribute most of the attendance increase to a shift in the timing of Easter and New Year's Eve, partially offset by the impact of our pricing and yield management strategies that reduce attendance but increase revenue and total revenue per capita. As a reminder, approximately two-thirds of our full year attendance and revenues are typically generated in the second and third quarters of our fiscal year, and we historically incur a net loss in the first and fourth quarters due to the seasonal nature of our business. We believe we are well-positioned for another strong year, contributing to our expected revenue growth in 2013 will be a number of new offerings, the largest of which is Antarctica, Empire of the Penguin at SeaWorld Orlando, which opens on Friday, May 24th. This new realm is SeaWorld Orlando’s largest expansion ever. The attraction will feature a new innovative ride component, our penguin habitat that will be home to more than 230 penguin and underwater viewing gallery and significant new cautery and retail offerings. The attraction also introduces a new animated SeaWorld character, a young gentoo penguin named Puck. We are excited to share this new technology that will offer a one-of-a-kind experience for our guest. For the first time in any theme park guest will ride an innovative trackless ride vehicle that will bring families into the penguins world and experience only SeaWorld can offer. Turning to our other parks, we are pleased to report that we are on track to open our new Aquatica Park in San Diego on Saturday, June 1st. As we previously reported, we acquired the water park in November of 2012 and have been making significant changes to transform and rebrand it as an Aquatica Park. Like its sister parks in Orlando and San Antonio, Aquatica San Diego will reflect the highest standard of quality and attractions, entertainment and theming, while also featuring guest experiences with a variety of animals. We plan to build upon our successful track record of operating companion parks near one another allowing us to reduce overhead costs, while creating revenue opportunities through multi-park ticket and other joint marketing initiatives. I’d also like to mention that this past weekend Bush Gardens Tampa premiered Madagascar live operation vacation, an original live musical show featuring the popular characters from the DreamWorks Animation, Madagascar franchise. SeaWorld San Diego will premier this show at its park later in June. We are excited to introduce these characters to our guest and look forward to working with DreamWorks Animation on developing shows in more of our parks. Turning to our education and conservation efforts, later in 2013 we will launch our third season of Sea Rescue. Sea Rescue is a top rated Saturday morning television show on ABC that was introduced in 2012 and generated more than 27 million viewers in its first season. Sea Rescue has been the top show in its time slot in a number of major U.S. markets since its debut. Our animal experts have helped more than 22,000 ill, injured, orphaned and abandoned animals with the goal of rehabilitating and returning them to the wild, and we are thrilled to have this opportunity through Sea Rescue to share some of these stories with our guest. We are pleased with our start to 2013 and excited about the potential the rest of the year has to offer. We will continue to work towards driving meaningful revenue and adjusted EBITDA growth through 2013, and beyond by growing our globally recognized parks, brands and intellectual property. Before turning the call over to Jim, I’d like to take a few minutes to thank our leadership team and all of our employees for their continued commitment to our company, our animal and our mission. With them, we completed the successful IPO, while still remaining focused on delivering interactive and educational experiences to all of our guests and driving solid revenue and adjusted EBITDA growth in the process. We are proud of our corporate identity and culture and look forward to continuing to help our guest celebrate, connect and care of the natural world we share. With that, I’d like to now turn the call over to Jim Heaney, our CFO, who will update you in more detail on our first quarter financial performance.

[Jim Heaney:]

Thanks, Jim. Good afternoon, everyone. We are pleased to report $238.6 million of revenue for the first quarter of 2013, which is an increase of $26.2 million or 12% over the first quarter of 2012. This improvement was driven by 10% increase in total revenue per capita from $62.15 to $68.19 and a 2% increase in attendance to 3.5 million guests. As mentioned earlier, the increase in attendance was primarily a result of a shift in the timing of Easter, offset by the impact of pricing and yield management strategies, which reduced attendance but increase revenue and revenue per capita. Admissions revenue increased by 14% from $33.3 million in 2012 to $152.4 million in 2013. Food, merchandise and other revenues increased by 9% from $79.2 million in 2012 to $86.2 million in 2013. The cost of food, merchandise and other revenues increased by 6% from $18.7 million in 2012 to $19.8 million in 2013, as percent of revenue these cost declined from 23.6% in 2012, 23% in 2013. Operating expenses increased by 6% from $163.4 million in 2012 to $173.3 million in 2013. This increase was driven by higher labor costs for merit and benefits expense, as well as additional labor and other costs incurred due to the impact of higher attendance and new attractions that opened after the first quarter of 2012. As a percentage of revenue, these costs declined from 76.9% in 2012 to 72.6% in 2013. SG&A expenses decreased by 6% from $42.7 million in 2012 to $40 million in 2013. This decrease was primarily a result of the timing of advertising and media, partially offset by planned increases in corporate staff either to support the company's initial public offering and ongoing public company requirement. As a percent of revenue these costs decline from 20.1% in 2012, 16.8% in 2013. Adjusted EBITDA, a non-GAAP measure defined and reconciled in our earnings release increased by $17.3 million from $6.2 million loss in 2012 to $11.1 million profit in 2013. This improvement was driven by the increase in our revenues and positive operating leverage. In the quarter, depreciation and amortization expense increased by 15% from $35.9 million in 2012 to $41.4 million in 2013. This increase is due primarily to asset additions we made after the first quarter of 2012. Interest expense increased from $27.8 million in 2012 to $28.6 million in 2013. This increase was a result of the March 2012 refinancing, which increased the balance of our long-term debt by $500 million to fund a dividend payment to our shareholders. The impact from the increase in principle was partially offset by 250 basis point reduction in interest rate on our senior notes. Of the $28.6 million interest expense in the quarter $25.8 million was cash interest expense. Income tax benefit in the quarter decreased by $5.8 million when compared to 2012 due to a $10.5 million reduction in our pretax loss, partially offset by a decrease in the effective tax rate from 39.8% in 2012 to 37.3% in 2013. Our effective tax rate decreased due to changes in our state taxes and other non-recurring tax credits that benefit the current year quarter. Net loss for the quarter improved from the net loss of $45.1 million in 2012 to $40.4 million net loss in 2013. Diluted earnings per share improve from the $0.55 loss in 2012 to $0.49 loss in 2013. We generated $24.2 million of cash flow from operations in the first quarter of 2013 compared to an $8.1 million use in the first quarter of 2012. Capital expenditures were $32.3 million in the first quarter of 2013, compared to $57.1 million in 2012. The variance in capital expenditures in the quarter is timing related as we do not expect capital expenditures to meaningfully different in 2013 than they were in 2012. As part of the company's IPO in April, these proceeds included redeeming a $140 million of our 11% senior notes and the $37 million principal payment on our Term Loan B. Redemption on the senior notes included a $15.4 million redemption premium which will be recognize as interest expense in the second quarter. The annual cash interest savings from the $177 million paydown is around $16.8 million on a go forward basis. In addition, the company made a $46.3 million payment to Blackstone to terminate our 2009 advisory fee agreement. This payment will be recognize as SG&A expense in the second quarter. I’d also like to mention that in May we entered into Amendment No. 5 on our senior secured credit facility. The amendment refinances the existing Term Loan A and Term Loan B into new Term Loan B2 that extents the maturity date of our facility to 2020, reduces the go forward annual interest expense by approximately $12 million based on current rates. The rate on the new facility is LIBOR plus 225 with 75 basis point floor. This brings me to our guidance for the full year of 2013. The following estimates are based on current management expectations, please refer to the discussion of forward-looking statements in the earnings release and related SEC filings. For 2013, we are projecting revenue in the $1.46 billion to $1.49 billion range and adjusted EBITDA in the $430 million to $440 million range. We plan to update these projections on our quarterly earnings call and initiating guidance on future years and the first quarter of that year. With that, I’ll turn the call back to Jim Atchison.

[Jim Atchison:]

Thank you, Jim. At this time, we’ll turn the call back to the operator and open up for questions.

[Operator:]

(Operator Instructions) We’ll go first to Tim Conder with Wells Fargo Securities.

[Tim Conder:]

Thank you. And gentlemen, congrats on coming out of the blocks line here in the initial call. A couple here, either one, if you could in any way quantify the benefit to attendance in the first quarter that you saw from the shift with the New Year’s Eve and Easter that you called out and then just any quantification there as to how that may pull forward a little bit on the attendance expectations from the second quarter on a year-over-year basis. And then secondly, Jim Hanney, if you could maybe quantify the non-recurring portion of the tax benefit items?

[Jim Hanney:]

Okay. Sure Tim. Regarding Easter, as Q1 benefited from Easter moving from April 8 last year to March 31 in 2013. Fortunately, next year Easter is on April 18 which should be a plus. The Easter shift did cause movement of revenue in earnings out of Q2 into Q1. We believe Easter was more than just a shift. It was a net down we think for the year due to the compression with spring break. We are not going to go on the specific on the attendance of revenue but in regards to revenue growth, the second quarter will probably have a run rate below the year. But we expect quarter three and four to be higher the run rate and that’s how we get to our guidance numbers.

[Tim Conder:]

Okay. And then anything, Jim, that you can give us as far as quantifying the non-recurring portion. I know you said there were some changes in the state taxes. But unless those are going to change again, maybe we could just sort of leave that alone but were there some one-time audit benefits or things like that that you mentioned in that non-recurring tax benefit bucket?

[Jim Hanney:]

Yeah. I think the best way to model it out is model something similar to our Q1 rate for the rest of this year and then a more normal rate of 38% and 39% at the beginning of 2014.

[Tim Conder:]

Okay. Okay. Thank you, gentlemen.

[Jim Hanney:]

Thank you.

[Jim Atchison:]

Thank you.

[Operator:]

Our next question will come from Afua Ahwoi with Goldman Sachs.

[Afua Ahwoi:]

Thank you. Perhaps, you could speak a little bit about the trade-off between the price increases and the attendance. Is there anything specific -- is there anything specific you would call out on the price increase and maybe would have deterred attendance a little bit. And how are you thinking about that split in the revenue breakdown on the go-forward? And then maybe, if you could give some examples, you mentioned the in-park spend benefited from some targeted price increase and increased offerings. Maybe you could give us an example of some of the things you did within the park to help that? Thank you.

[Jim Atchison:]

Thanks, Afua. This is Jim Atchison. I’ll address the first part of your question related to kind of the yield management initiative that we’ve been deploying. And this is a strategy that we put considerable amount of thought in planning towards that we’re pleased with the results we’re seeing thus far. And as you can see from the results we’ve announced, we’re getting very strong capital growth and strong revenue growth as well. Some of the initiatives really relates around our efforts on channel managements and how our tickets are sold through the trade. And we’ve had a concerted efforts to move more of our traffic to our own site, our own e-commerce platform, which is about 30% of our overall admissions revenue through that platform in 2012 for example. We’ve also launched a mobile site that allows us to, I guess, to buy their admissions product on smartphones and scan those products at our turnstiles taken in the park. So we have a number of initiatives around the channel management related to who is selling our tickets and they are like saving commissions through the trade versus selling them on our own site. And then also just, we put a lot of substation around some of the specific products we’re offering. We’ve eliminated some secondary three programs and some other type of programs that we weren’t feeling -- we didn’t feel we’re driving that value for us and kind of, we’re perhaps complicating our product offering, our menu offering. So we have a more streamlined simple straightforward pricing algorithm now and we’re seeing good results from it.

[Afua Ahwoi:]

And I think did you’ll also answer the question about within the park, is that to do with the increased offerings that you gave within the park to also benefit the in-park spend?

[Jim Atchison:]

Yeah. Our in-park spend was up 9% and we're very pleased with that as well. And that’s -- those are function of penetration of having new products, new offerings within the park and also some work we've done around our pricing there. Actually, there are more traffic we move to our own site at our e-commerce platform or our mobile site where we’re seeing commensurate lift on our in-park spend as well because it is more elegant upsell for us to offer it on our own site and to our own vehicle. So we feel very good about that. And the 9% growth that we’re seeing is again both from more penetration, more volume and also from pricing. So we’re pleased with that.

[Afua Ahwoi:]

Okay. Thank you.

[Operator:]

Moving on to Alexia Quadrani with J.P. Morgan.

[Alexia Quadrani:]

Hi. Thank you. Just to follow-up on the pricing question there. Could you give us a bit more color in terms of where the price -- and we look at admissions revenue and where the price increase came from. If it was more pickup in the season passed or maybe they’re just the one-time visitor gate prices. And then on that same point, the dampening effect we may see going forward from your recent acquisition of the water park in San Diego that is, I believe at a lower price point. Would it be fair to say that that’s ahead of us because it wouldn’t have been open in this quarter and therefore you may see a bit of a wait or offset a pricing in the next quarter?

[Jim Heaney:]

Yeah. Alexia, I’ll answer you second question first. That is accurate although given the size of the park, I don’t think it will be large enough to move the needle materially on our overall per cap. So yeah, it’s ahead of us but I don’t think you will notice in it our overall per cap number that’s just not big enough. And then in regards to the admission per cap growth in the quarter, we checked that on a lot of front. We eliminated discount in a lot of free programs that we had in place in the prior year. We had a second day free program in our Florida parks where tourists upon a full day admission to our parks got the second day free. We eliminated that program this year. And we saw good per cap lift, I think revenue lift from that decision. We had a pre-school pass program that was another promotion that we eliminated. And then more broadly we looked at the discounting we’re doing on our promotions we did run. We reduced those and we eliminate some promotions altogether. We also looked at our past offering. We start to introduce more blackout dates on our entry-level passes. We’re doing that for two things -- two reasons, one is to control crowding on peak days at our park and then also to encourage people to upgrade to more premium passes. So we have attacked on the admission side across a lot of front and we saw good results in that in the first quarter. Looking forward, I don’t think you’ll see quite as -- when you look our revenue growth mix, we’ll probably get a little more of that from admissions from attendance going forward and maybe a little bit less from per cap. I think we over indexed a little bit on the per cap gross side in the first quarter. But we’re very encouraged with what we saw in the first quarter and I think you’ll see the mix change a little bit in the future quarters.

[Alexia Quadrani:]

And then just a follow-up on the attendance trend in the quarter, was there any notable change in terms of what you would have expected in terms of destination visitors from out of town versus the day trippers or maybe even international mix, when you look at your Orlando Park?

[Jim Atchison:]

This is Jim Atchison. Our Orlando Park specifically -- well we’re not -- we don’t detail our visitors by destination. And also doing so, I think in the first quarter, it would be a difficult number to grasp because it has such an impact of the spring break seasons and Easter season. So on a year-over-year basis, it will be difficult to kind of map that in a meaningful way. But what we are seeing and what we are pleased with is the response we had from our local and nearby market on our past products that we have offered and the pricing decisions we made there. And then as Jim mentioned earlier, the number of pricing decisions we’ve made on our more tourist-oriented product are also being received very, very well. So we’re pleased with kind of both the resident and tourist mix that we’re enjoying right now.

[Alexia Quadrani:]

Thank you very much.

[Jim Hanney:]

Thank you.

[Jim Atchison:]

Thank you.

[Operator:]

And we’ll now hear from Michael Nathanson with Nomura.

[Michael Nathanson:]

I have a couple. (Inaudible) follow-up. People have asked about the attendance benefit from the Easter and New Year shifts, (inaudible) you talk a lot about how that weak shift is actually really good for profitability and for pricing. Can you give us any sense of, beside from pricing strategies you guys employed, how much of the benefit was from -- do you think, just a timing of those holidays and could you quantify at all. Was it therefore a dropdown benefits to profitability because of that?

[Jim Heaney:]

Yeah. Well, as you know, our company is a little bit different that we’re mix of regional and destination parks. When you are in a tourist market, an Easter shift has certain effect and when you are in a local market, it has a different effect. Again without -- there is a lot of noise in the quarter and it’s hard to isolate the impact from Easter from park to park. Again our expectation for the year is that you will see a little bit below run rate growth in revenue and EBITDA in the second quarter and then a kind of above rate, growth rate in Q3 and Q4 and that kind of gets you to our annual guidance number.

[Michael Nathanson:]

Okay. And then let me ask you a question on dividend policy. Given where the stock is moved how -- now you’re public company, what is your thoughts on your dividend policy. Is there any stated goal that you would share with us on payout ratio or stated targets. How you think about currently redoing the policies in the midyear?

[Jim Atchison:]

Michael, this is Jim Atchison and that’s a good question and obviously one we give a lot of thought too. In concert with the IPO we had with our board settled on a dividend policy of $0.80 per share dividend. And that’s a matter we intend to kind of revisit over time. I can’t say that we have any plans or prepared announcements at this point based on our early performance but it is something we will revisit from time to time and decide what the appropriate policy is going to be moving forward but we don’t have any plans that are imminent.

[Michael Nathanson:]

Okay. Thanks guys.

[Operator:]

(Operator Instructions) We’ll now hear from Tim Nollen with Macquarie.

[Tim Nollen:]

Hi. Thanks. Couple of things please, one should be a kind of soft ball, the Antarctica opening, I guess, it is this weekend. Any thoughts that you can give us in terms of incremental depend for tickets to visit your SeaWorld Orlando park on the back of that? And then secondly, you mentioned again, Sea Rescue starting a, I think, it’s a third season this fall. Can you talk about any other media opportunities you may be looking at whether it’s other TV series or anything else perhaps online or with games. I think you’ve spoken about that before. Thanks.

[Jim Atchison:]

Good questions, Tim. This is Jim Atchison. I’ll take a stab at those. With respect to Antarctica opening, the attraction does open to the public on Friday, this coming Friday, in just a few days. We are very excited about this -- this new realm for our flagship Orlando park. The space looks amazing. The animals look amazing. It’s really such a unique compelling, immersive environment. And the wide vehicle we’re using is just so compelling in its own and how it takes you through the life of this things and enables us to, to story telling and special sects tell you about this penguin talk and then you exit inside our penguin habitat. It’s really something just spectacular. So, many years in our company, I’ve probably never been more excited about an attraction opening than this one. So we feel very good about it. There is a lot of us that are going on in the media about it and as we follow close to you, what, I guess, we use for planning trips and inquiries and so forth. So, I probably can offer anything from a forward-looking view of demands for that particular attraction or that particular park. But I will say we’re very excited and enthused about it and we expect it to be a big success. So, we’re encouraged by that for sure. Your second question related to Sea Rescue, I believe. This is a show that we are delighted to have. We have had a rich history in our company of attending to ill, orphaned and injured animals in need and it’s some thing we’ve done for decade. And with over 22,000 animals, we’ve responded to is just an amazing stories behind these animals and the brave men and women who do the work to care for them. So when this opportunity -- when we begin pursuing this opportunity, we were delighted to be partnered with (inaudible) entertainment and with ABC to bring this show to fruition and we’ve been thrilled with the result thus far. And as we’ve mentioned, we’ll be launching our third season of it here soon. We really like what this does and you know our company, one of the things about our company is that we have some terrific IP to share. And the story really touches so much of that whether it’s the animal or the employees or kind of how we use this, this interesting work. So we are exploring other opportunities to look at other show concept. We don’t have any thing. We’re prepared imminently to announce that this is work that we do and we are actively engaged in our business development area of the company looking at other show opportunities. Along with that, we have really a lot of great work that we’ve done thus far in the world of consumer products licensing, be that trainer Barbie or total check out that we introduced again. We have more that we’ve been doing work on as well. We feel very good about how that’s being received. And as we work on these initiatives, we sign just more and more demands for our brands and our concepts. And so it’s a matter of that’s -- going after right one. So we are very encouraged by this space, Tim and what this kind of outside the park bid of work does for our brands and for our business overall. So we are very encouraged about it.

[Tim Nollen:]

Okay. So, fair to assume, there might be more to come there, I suppose. One other follow up, please, kind of, back to the first question. Your guidance range is really quite tight. I’m assuming you’re factoring in things like some extra attendance for Antarctica, obviously new attendance for San Diego water park. Any further comments you can give on that. I’m just trying to understand how much incremental growth you expect from those new particular openings?

[Jim Heaney:]

Yeah. I mean, to be specific of our guidance does include some of the key drivers of our numbers going forward, which would be Antarctica, the opening of the San Diego water park and then we also factored in the impact of shift of Easter. We feel pretty good about our guidance as far as we have a tighter range. But again that’s based on our current expectations. It does assume that no major weather event or some other type of event impacts our business. But based on what we’re seeing today that’s kind of what our guidance is.

[Tim Nollen:]

Yeah. Okay. Fine. I just want to make sure you were anticipating some extra attendance in sales because of those two parks, so that’s correct?

[Jim Heaney:]

Absolutely. Yeah.

[Operator:]

I’m sorry Mr. Nollen. Anything else there?

[Tim Nollen:]

No. I’m done. Thanks.

[Jim Heaney:]

Thanks, Tim.

[Operator:]

Great. Thank you so much. Our next question will come from Bryan Goldberg with Bank of America Merrill Lynch.

[Bryan Goldberg:]

Hi. Thanks. Just a follow-up on Tim’s question with Antarctica, the big investment for you guys are unique one. How are you approaching marketing this new investment. Are you doing anything differently with SeaWorld Orlando this year from a marketing prospective or even for the adjacent parks, Discovery Cove and Aquatica?

[Jim Atchison:]

Yeah. Bryan, this is Jim Atchison. That’s a good question. We’ve really taken a clean slate on everything we do with respect to an Antarctica and that began with design and the whole offering behind the concept of the attraction. And so everything embedded is is from scratch so to speak and we're proud and pleased with that. The marketing is no exception and we certainly have some of the traditional efforts we have behind visual advertising and transient radio and mainstream television and so forth. But we have done some things that are quite unique and different. We orchestrated that mobile tour of Antarctica that we conducted through this very -- winter of this primarily in January and February, hitting a lot -- many of the North Eastern Markets. Major trade shows and other things was kind of a mobile marketing presentation of Antarctica and it really telling that story. So that’s one of the many things we’ve done. We’ve also done a lot of around the social media space and how we kind of build buzz and awareness around the new attraction. So it’s been a really a very, very solid effect on behalf of our marketing team. And we’ve kind of left unturned in our efforts to get a word out and get communicated about this new offering. So we’ve tried a number of new initiatives and we’re pleased with the results we’ve seen from that.

[Bryan Goldberg:]

Thanks. So I just have a couple of housekeeping ones. With regards to your revenue guidance for the year, I know this is a detail but does that include broader revenues? And then secondly, CapEx quarterly waiting, I think you said it for the full year, your absolute level of CapEx would be relatively consistent with the prior year. How is the CapEx going to wait throughout the year?

[Jim Heaney:]

Regarding the first question, yeah, our guidance numbers does include our revenue and expense. So that’s included.

[Bryan Goldberg:]

Okay.

[Jim Heaney:]

And expect the CapEx spend pattern to be fairly heavy in the second quarter and then higher on the third quarter and then ramp down in the fourth quarter.

[Bryan Goldberg:]

Okay. Great. Thank you.

[Operator:]

And our next question will come from Jason Bazinet with Citi.

[Jason Bazinet:]

Yeah. I just have two questions, regarding -- going back to long-term dividend policy question because of your intervals, you have the luxury today of sort of generating more cash flow than you would have, if you are full cash tax payer. As you and the board contemplate your dividend payout strategy, are you sort of thinking about that in a context of ultimately paying full cash taxes or thinking about in the context of potentially pursuing other tax strategy like a re-conversion which might allow you to payout a higher portion of your untaxed cash flow because other ways you can avoid taxes? That’s my first question.

[Jim Heaney:]

Okay. To answer your question, yeah, we do look at our dividend policy over the long-term, pre-imposed NOLs, based on our current expectation the NOLs will last through around 2017, so we have some time to evaluate tax structures. That’s being said, we don't drastically change our structure and full tax payer in 2017, we’ll structure our dividend policy to, there is plenty of headroom to maintain that policy beyond the point we’ll become a cash taxpayer.

[Jason Bazinet:]

Okay. And on the, in the, regarding Omnibus Incentive Plan you sort of 15 million shares that could be issued? How should investors think about that? Is that -- is another words are we likely to get any sort of sizable, incremental share issuance over the next year?

[Jim Atchison:]

Jason, this is Jim Atchison. And well our share is that, that plan in the context of it is, emblematic of our exit out of private equity setting where management was part of a Profit Interest Plan in our private equity life. We have to translate that over into, essentially restricted stock plan in the new company. The share reservation that was made is, was at the direction of the Board and our compensation committee and I think in the four months of time we’ll evaluate the best ways to incentivize managements. But obviously having the wherewithal to have management objectives along with shareholders is a powerful connection and motivator. So we don’t have a lot of detail around that just yet, but that is a topic for compensation committee as we now move on in public way.

[Jason Bazinet:]

Well, it just such a large number and the context number of share outstanding, what would you suggest the investment community do in terms of thinking about shares outstanding. I mean, should we assume lion share of that ultimately increases your shares outstanding over the next year or is it a big umbrella that you never really broke that number how…

[Jim Atchison:]

I think it would be, well, I understand that’s a good question, Jason. It would probably be premature to kind of give any clarity on that, yeah, it’s really a Board, for our Board will determine in time and obviously, I know it’s a fair question, but being only a month and half or so passed our IPO is something that I think we still need to take up as a Board to give more clarity.

[Jason Bazinet:]

Okay. Thank you.

[Operator:]

We’ll hear again from Tim Conder.

[Tim Conder:]

Thank you. Just more of housekeeping. Gentlemen can you give us the deferred revenue number and then in context of that just remind, I guess everyone how you think about season passes relative to managing the season pass which is more of a resident pass versus a multi-day pass versus your single visitor type pass?

[Jim Atchison:]

Hey. Hi. Tim this is Jim Atchison. Maybe I can talk a little bit about the strategy, how we look at that and then, and Jim Heaney can comment on the deferred balance and so forth. We really separate our pricing strategy with respect to our, each of our individual parks on how we’re going to attract to go after the resident market and then how we’re going to attract to go after a tourist market. And for the resident market, our first priority we started are to endeavor to sell annual pass products, and then to the excess of that we don’t have, that’s not right fits for somebody in the local market will then look at promotional offers and other things, but it’s really first and foremost targeted at annual pass products. In our regional parks we have nearly 15% of our attendance is actually an annual pass products. In our destination market that number is around 30%. So now shifting to the tourist marketing side, we really in that respect we really endeavoring to sale multi-day multi-park tickets and that’s why an acquisition like our new product that will open up in San Diego is so important to us, because now for tourist we can position two and -- three and five-day tickets for those two parks combine. So, with respect to our annual pass days what I’ll say is, we feel very good about the volume that we have. We are comfortable with the mix that we have and again and those regional parks been at nearly 50%, about 50% of our total attendance. So we have made some changes with respect to pricing and I’ll let Jim talked a little bit about those and the results we’ve seen but we feel good about the volume that we’ve got.

[Tim Conder:]

Okay.

[Jim Heaney:]

Tim the deferred revenue balances at the end of the quarter is $126.2 million, that’s up about 50% was at the end of the fourth quarter, but that’s the normal seasonal growth you would see. If you compare to same quarter last year, it’s about flat. And the reason for that and I’m sure you are comparing at to some of the other regional park companies and the growth they saw. As Jim mentioned, our season park mix is kind of where we want it to be. We don’t want to grow it any higher. So we are trying to manage and temper that demand through pricing. We took our annual pass prices up in Orlando and Tampa by about 24% going into the year anticipation an Aquatica. So we feel pretty good about, where our pass business is, as far as growing deferred revenue, we don’t see it changing a lot at this point. If you are looking at there is a forward indicator, if you look at $126 million as a percentage of our revenue, total revenue in the prior year, it was up 9% and I think if you compared that to some of the other players in industry that’s more or less where they are as well. So as far as business on the books we feel good about where we are. We just didn’t see the growth of some of the other companies did, just example of what we’ve kind of already had our season pass business where we wanted to be our way.

[Tim Conder:]

Okay. Great. And then, I was kind of wanted to make sure everybody kind of understood the dynamics relative to Six Flags and Cedar Fair. Thank you.

[Jim Heaney:]

Okay.

[Operator:]

And ladies and gentlemen, that is all the time we have for question today, Mr. Atchison I’ll turn the conference back to you for closing or additional remarks.

[Jim Atchison:]

Great. Great, and thank you. We are very excited about the success of our IPO and the result of the first quarter of 2013. We believe the company is well-positioned to grow shareholder value, while continuing to deliver personal interactive and educational experiences to our guests. And we thank you for joining us on our call today and your interest in our company.

[Operator:]

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