SeaWorld Entertainment, Inc.
Q4 2014 Earnings Call Transcript

Published: 26 Feb 2015

[Operator:]

Good morning ladies and gentlemen and thank you for standing by. Welcome to SeaWorld Entertainment’s Fourth Quarter and Year-End 2014 Financial Results Conference Call. My name is Rob and I will be your conference operator today. At this time, all participants are in a listen-only mode. After conducting their 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, this conference call is being recorded. I would now like to turn the conference over to Gene Ballesteros, Senior Director of Investor Relations and Corporate Treasurer. Please go ahead, sir.

[Gene Ballesteros:]

Thank you. Good morning and welcome to our fourth quarter and full year 2014 earnings conference call. Today’s call is being recorded and 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 is, David D’Alessandro Chairman of the Board and Interim Chief Executive Officer 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 federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different and we undertake no obligation to update these statements. In addition, on the call, we may reference certain non-GAAP financial measures. More information regarding our forward-looking statements and reconciliations of our non-GAAP financial measures to the most comparable GAAP measures are included in the earnings release and can be found in our filings with the SEC. Now I would like to introduce David D’Alessandro. David?

[David D’Alessandro:]

Thank you Gene. Good morning everyone and thank you for joining us today. I am going to offer some brief opening comments and then Jim Heaney will provide details of our 2014 financial performance before we take your questions. Today marks my sixth week anniversary as Interim Chief Executive Officer. As I said weeks ago, my top priorities in this interim role are two-fold. One, to lead the search for a new CEO with our Board of Directors and two, to oversee the day-to-day operations of the company. We are well in the process of conducting the CEO search. I am personally spending significant time on the search and we have retained a leading executive search firm to assist us in this effort. I won’t of course try to characterize the advancements to-date, other than to say we are making good progress and are on track to complete the search within the six to nine month timeframe announced in December. Second, regarding our day-to-day operations, as I said in December, we are focused on improving the fundamental performance of the businesses. Already with the actions taken today, we are starting to see early signs of improvements in our business trends. That being said, I need to caution everyone that we are very early in the year and need to get through the spring break and Easter before finding a view of our full year performance. With that, I’ll turn the call over to Jim to walk you through our 2014 financial results.

[James Heaney:]

Thanks David. Good morning everyone. Let me start by saying, we closed out 2014 how we expected to. Our top-line trends improved in the fourth quarter, but not where we want them to be in the long-term. Despite a very challenging year in 2014, the company was able to return significant value to shareholders to paying up $72 million of dividend, and repurchasing the $66 million of our stock. That’s an encouraging start to 2015 with the majority of the first quarter and fiscal years ahead of us. For the full year 2014, the company generated revenue of $1.378 billion which decreased 6% from the $1.46 billion in 2013. The decrease in revenue was driven by a 4.2% decline in attendance and a 1.5% decrease in total revenue per capita. Attendance for the full year 2014 declined as the negative trends that began in the second quarter of 2014 at our destination parks in San Diego and Orlando extended into the third quarter. The attendance trends for the company improved in the fourth quarter of 2014 with attendance down 2.2% versus the 5.2% decline in the third quarter. The 1.5% decrease in total revenue per capita from $62.43 in 2013 to $61.51 in 2014 was primarily a result of an unfavorable change in park attendance mix and an increase in promotional offering. Cost of food, merchandise, and other revenues decreased by 5% from a $114.2 million in 2013 to $109 million in 2014. As a percentage of total revenue, these costs increased slightly from 7.8% in 2013, 7.9% in 2014. Operating expenses decreased by 2% from $743.3 million in 2013 to $727.7 million in 2014. This decrease in operating expenses was primarily the result of a reduction in variable labor cost and other cost mitigation efforts employed by our park operations team. SG&A expense increased by 1% from $187.3 million in 2013 to $189.4 million in 2014. The increase was primarily related to marketing costs associated with new reputation initiatives and our SeaWorld 50th anniversary celebrations. These costs were partially offset by the elimination of advisory agreement fees due to the termination of this agreement in 2013 and a decrease in equity compensation expense when compared to the prior year. In 2014, we incurred $11.6 million of cost associated with our restructuring program which we announced in December. The restructuring involves the elimination of approximately 300 positions across our 11 parks and corporate headquarters and an effort to centralize certain operations, reduce duplication of functions and the increased efficiencies. The restructuring is part of previously announced company-wide cost initiatives to deliver $50 million of annual cost savings by the end of 2015. Also in the fourth quarter of 2014, we incurred $2.6 million in separation costs pursuant to the previously announced separation of our former CEO and President, on January 15, 2015. Adjusted EBITDA, a non-GAAP measure to find and reconcile in our earnings release, decreased 16%, from $439.1 million in 2013 to $370.1 million in 2014. The decline in adjusted EBITDA was primarily the result of the decrease in revenue. Depreciation and amortization expense increased by 6% from $166.1 million in 2013 to $176.3 million in 2014. This increase was due to the impact of new asset additions, along with accelerated depreciation and assets impacted by our cost reduction initiatives, partially offset by assets that are now fully depreciated. Total interest expense decreased by 10% from $90.6 million in 2013 to $81.5 million in 2014. The decrease primarily reflects the amendment of – the effect of Amendment 5 to our senior secured credit facilities, which reduced the interest rate on our term loan as well as the impact redeeming $140 million or senior notes under repayment of $37 million of our term loan with a portion of the proceeds from our IPO in April 2013. GAAP net income decreased by 4% and $51.9 million during 2013 to $49.9 million in 2014. Diluted earnings per share decreased from $0.59 in 2013 to $0.57 per share in 2014. Adjusted net income, a non-GAAP measure reconciled in our earnings release, was $59.4 million in 2014 or $0.68 per diluted share. We ended 2014 with $44 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 $1.612 billion. Our net leverage ratio at the end of 2014 was 4.25 times adjusted EBITDA. Based on our debt covenant calculations at the end of 2014, the company has a $120 million of capacity for certain restricted payments in 2015. As and update to our previously announced share repurchase program, during the fourth quarter of 2014, we repurchased a total of 156,000 shares at an average price of $17.50 per share and a total cost of approximately $15 million. This leads $235 million available for future repurchases under this program. In terms of guidance, we intend to issue full year 2015 revenue and adjusted EBITDA guidance during our first quarter earnings call in May. I then will have a view on our performance during spring break and Easter, and be in a better position to provide a perspective on our full year performance. We are refining our capital expenditure guidance for 2015 from the previously provided range of $185 million to $195 million, to $180 million to $190 million. Operating expenses are expected to be flat to down slightly in 2015, as the impact of the $50 million cost reductions is partially offset by an increase in marketing and other expenses, primarily labor. Finally, as we indicated in the past, the company still intends to pursue refinancing our senior notes. Our expectation is the refinancing will occur sometime in 2015 depending on market conditions and other factors. That concludes our prepared remarks. We will now open the call up for questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question is from the line of Alexia Quadrini with JP Morgan. Please proceed with your question.

[Alexia Quadrini:]

Thank you very much. Just a couple of questions. I guess, first you could talk about the attendee sort of tourism or sort of the traffic in general in Orlando in the December quarter and how much do you think was sort of a lift in that marketplace for assisting the efforts you guys have made internally to drive maybe a bit of better attendance in the December quarter. And then any comments on maybe any promotional activity you may be doing, that impacted the December quarter may impact the first half of 2015?

[David D’Alessandro:]

Alexia, this is David D’Alessandro. As you know, we don’t breakout our parks individually. But it’s fair to say that all the parks contributed to a stronger December, as you see our trends were up. As regarding promotion, we have been both in December and January pushing on our past promotions as we now move into fun card season as well and both of them have contributed to stronger trends for us at this stage. I’ll caution everybody that only about 8% of our business for the year in through February. But again, we are happy with the promotions we have run and with the trend line we are seeing so far.

[Alexia Quadrini:]

And just if I can phrase in one more, any insight you can give us in terms of the timing of when we should expect the realization of some of these cost savings as how they flow through the year?

[James Heaney:]

Sure, Alexia, hi, this is Jim. The $50 million target we put out there we expect to have all that back by this year. So, if you are looking at predicting our expenses for this year, all that will be realized in 2015 and – as you heard in my opening comments, we expect to see operating cost to be flat to down slightly in 2015, that’s a net effect of the $50 million cost reductions offset that some of our increases in marketing and our reputation spending.

[Alexia Quadrini:]

So kind of flat through, I mean, it’s consistent throughout the year not necessarily but in one half versus the other half?

[James Heaney:]

Yes, the $50 million we realized largely get flatly through the quarters, but some of our marketing and reputation spending will be pulled forward because the timing of when we are launching our programs, please be careful when you clear out those two factors.

[Alexia Quadrini:]

Okay, thank you very much.

[Operator:]

Our next question comes from the line of Felicia Hendrix with Barclays. Please go ahead with your question.

[Felicia Hendrix:]

Hi, good morning. Thank you for taking my questions. David, so you’ve been there for six weeks, today is your anniversary, wondering what’s changed in the six weeks since you’ve been there and in the release and in the prepared remarks, you talked about seeing early signs of improvement. Just wondering if you could be more specific there?

[David D’Alessandro:]

As I said, what we are seeing is because of the – we are running the business very close as I said back in December, through the fundamentals of blocking and tackling. So we are spending a lot of time on attendance, on the quality of attendance, and what I would call some basic marketing work in each park, depending on what the park’s needs are. And the trend lines we see, now, let’s recall that all of our parks are not open here in February, but the three major parks, Orlando, San Diego and Tampa are all trending in a positive fashion. But it’s early. So it’s one the reasons we haven’t issued guidance yet. As we’d like to see the past as and it’s through Easter and spring break, we’d like to see these promotions continuing for another six to eight weeks and we are running a lot of special events in the parks which are giving us a lift as well. We are very pleased with what we see so far, but until we have more under our belt, we are in a wait and see attitude. But every week, everyday I spent on the fundamentals of driving the business in a way we see appropriate for each of the individual parks.

[Felicia Hendrix:]

Thank you and I guess maybe I should have been a little more granular and I know it’s hard because it’s early in the year. But last year, the strategy was to kind of yield manage and try to focus more on revenue per cap and perhaps not get some of the lower paying folks get those estimates out of the park. And so, now as you are looking at your strategy, this year your yield management, clearly it seems like the past program is important, but, in terms of the mix in your parks how are you thinking about that this year?

[David D’Alessandro:]

I think, Jim and I will both answer that question. Let Jim go first.

[James Heaney:]

Sure. Hey, good morning, Felicia.

[Felicia Hendrix:]

Hi.

[James Heaney:]

The way to look at 2015 is not just a single strategy, there are different periods of the year we employ different pricing and promotional efforts. Early on, through February we’re really dependent on our past business. We kind of build our pass base. We have a lot of consumer events in the market and we are very pleased with what we are seeing. Then, as you transition into spring break and Easter, we become more towards focused, which is a whole different game and then pricing becomes a bigger player. But early on this year we really focus on building our pass base, building that base of attendance that will pay dividends for the rest of the year and then we’ll transition into the latter part of the spring where towards become more important.

[David D’Alessandro:]

I think that answers your question.

[Felicia Hendrix:]

Yes, that does. And then Jim, just a housekeeping. You lowered your CapEx guidance slightly, just is there anything to look into that?

[James Heaney:]

No, it’s really refining, we know CapEx is a big KPI and big driver of our free cash flow. We want to update that, but should anything structural in the $5 million reduction.

[Felicia Hendrix:]

Okay, great. Thank you so much.

[Operator:]

Thank you. Our next question comes from the line of Tim Nollen with Macquarie. Please go ahead with your question.

[Tim Nollen:]

Hi thanks. Couple things, please. I wanted to ask first off about your promotions. You laid out during your IPO proceedings, pretty clear plan I thought to reduce promotions and freebies and things and really to drive per capita numbers and you had very good per capita numbers in your first year as a public company. Those numbers have come down a bit since, and I just want to understand your interest in doing these promotions. Now I just wonder what the longer term thinking is on promotions versus driving per capita spending. And then secondly, if you could give us any update please on any of the new projects that you have spoken about a few times, whether it’s Blue World International expansion, anything you might want to say on any of those please?

[James Heaney:]

Well, I mean, we are certainly very conscious of our need to drive attendance to our parks and to make certain that we are getting a good spud of demographics and as well as geographies. So, some of the promotions we have put in place, some are discount promotions, some are very simple pass promotions and we are also now guiding ourselves into a more aggressive full branded marketing campaign which will launch in the coming weeks. And a new reputation campaign which we are also launching. All of them working together with some promotions and as we enter the spring season, we’ll be taking a much harder look at where we think we have pricing opportunity. But our strategy is, simply, let’s get people into the parks. Let’s re-establish our cash base and then let’s market more aggressively on the domestic side with additional marketing programs and take a look at whether or not we have pricing opportunity as we go forward. It’s not an interim process. We consider it an integrated process. As regards, few subjects of Blue World and our international programs, we continue to be in the same place I said in December which is Blue World is on track. We believe in the project and it is proceeding exactly according to plans we’ve seen in the past. On the international side, we continue to look at our Mid East projects and have recently had a series of discussions and we’ll have more to talk about in the next quarter.

[Tim Nollen:]

Okay, so no real updates on that now. Everything on track as before and you’ll update us when you have more?

[James Heaney:]

Yes, the update is only that we’ll have more to talk about next quarter.

[Tim Nollen:]

Okay, thanks.

[Operator:]

Our next question comes from the line of Tim Conder with Wells Fargo. Please proceed with your questions.

[Tim Conder:]

Thank you. Regarding the season pass as you just alluded to that a little bit, I know traditionally you focused that has not been a much of a priority of focus to say some of the – your more regional other folks in the industry, but can you give us little bit more color on how you are approaching that differently here for 2015 versus 2014? And it seems like in the past, you’ve looked at that more as a resident of the state in which the park is in and just a little more color on that would be great? And then, how do you feel, given you really don’t have anything new in Orlando this year, but – what the recent pricing by Disney in the market give you a little bit of cover and a little bit of a breathing relief room? And then finally, to follow-up on the discounting, in certain parts the discounting really makes that much difference or is it better to try to preserve the price and pair it up with some additional value-added, whether that the in-park spending credits or free parking or other things, rather than just to really to promote only on price? Thank you.

[David D’Alessandro:]

Tim, this is David D’Alessandro. Let me take your last question first. On pricing, Disney just went up this past week and Universal, I don’t believe has gone up yet, but we would fully expect them to follow. We are not interested, not necessarily following to follow just yet. But we think there maybe some room there, but again, I think we’d like to wait until we see how the quarter goes and as we rebuild the local pass base which I’ll come back to, because that was one of your questions. But, we agree with you, actually the question about there are some ways to do promotions as we have in San Diego this year where we are doing a free parking promotion associated with our pricing and it’s working very well. So, it’s a relatively low cost promotion and there are other promotions that are more discounted. It really depends on park-to-park and seasonality. One of the things we find in Orlando for example, is in Orlando, and in Florida in general, people really follow pass prices that they follow it very closely. So, you have to be careful about jumping too fast, but also you want to bring some value and people do pay attention if we are giving the way of free meal for example, or there is a pass – one of the things that’s actually working, Tim, is we’ve been doing special events in the Orlando Park. But when it was – we were right now, which has been very successful from our perspective and what it does is, people are paying our current prices, but they are often – it’s helping people to buy a pass, but we are saying, look I will buy a season pass rather than the pay the one day ticket charge and now we are getting. So we hope we will get more new business. We are having success also in San Diego doing the same thing on our lunar year promotions which are happening as we speak the last, I think it’s four weeks this year. We have two more weeks to go. So, there is a mix and match program going on depending on parks, but everything is not – we are not going to try and pull on that stream which says, let’s just go 40% or 30% on a discount. We don’t see that as wise and we don’t think we should train our pass holders and potential pass holders to just expect us to go to a lowest price. And, I think, I kind of answered your pass program question two. Did I answer that, Tim?

[Tim Conder:]

Yes, I mean, is there more of a focus on the passes at say, the outside of Orlando and San Diego or is it just across the system in general?

[David D’Alessandro:]

We think the pass program, remember we have very high percentage of locals and nearbys that’s already in the Tampa. So the pass program has always been very important there, because at the basic, if you look at it, operates more like a regional park, so it continues to be a very important program particularly when you match into our water park. And again, we see our pass programs as being reasonably healthy at this stage of the year.

[Tim Conder:]

Meaning, meaning, up – would you say single-digits, on a year-over-year basis?

[David D’Alessandro:]

Meaning reasonably healthy.

[Tim Conder:]

Okay.

[David D’Alessandro:]

We don’t want to create false expectations, because we are running the business as you might expect this to with some caution as to having positive news and not trying to extrapolate that for the year with a small percentage of our business coming in at this time.

[Tim Conder:]

Okay. And then, as it relates to how you view collective – the company collective and maybe just the brand SeaWorld and non-SeaWorld branded parks? I mean, it appears obviously, very, very clear that the problems are well documented in Orlando and San Diego. But the other parks collective were up in attendance and up in EBITDA for the year, any color on that?

[James Heaney:]

Hey Tim, it’s Jim. I mean, you are going to get the expected answer that we don’t break out individual park attendance, but when you look at the – what happened to the company in 2014 and the magnitude of the attendance drop, we mentioned before that the bulk or all of that, well that’s a two SeaWorld parks in San Diego and Orlando. So you can extrapolate from that maybe what – to answer that question, but beyond that we are not going to provide individual park numbers.

[Tim Conder:]

Okay and from a perspective of I guess, how you view the SeaWorld brand versus non-SeaWorld branded parks from a cash flow and just the overall part of the collective?

[James Heaney:]

SeaWorld parks are very profitable, extremely profitable, they are just not as profitable they were a year ago.

[Tim Conder:]

Okay, I mean, or they have been more direct here, some have put out that there could be value unlocked by separating the SeaWorld branded parks versus non. How do you view that as the non-SeaWorld branded parks as a component of the cash flow overall to the collective?

[James Heaney:]

What I would say is there is a lot of synergies and benefits and having a full portfolio of parks. There is a lot of interplay to our Tampa and Orlando parks, ticketing products across both brands. And similar things across our system with synergies on marketing, purchasing and operations. We’ve actually gone in the opposite direction, Tim, if you look at our cost savings recently, where we have consolidated a lot of functions from the parks to such a location back in Orlando which so far has been working very well for us. So, there are an awful lot of efficiencies. We've also just consolidated all of the marketing to Orlando for efficiency reasons and also to the – we get an opportunity to do cross-promotions when we need them, we are well aware of some of the theories about breaking out the parks separately or even separating out the SeaWorld brand. We just don’t see that as beneficial to the company.

[Tim Conder:]

Okay, very helpful gentlemen. And last question, a little commentary about more to come on the international. It seems like, what you just said in the answer to the prior question that was asked on that versus 90 days to go, it seems like something has materially changed. The tone 90 days ago was, well, we are looking further out with the park in the Middle East and we wouldn’t really expect a lot until maybe the back part of the year. IS there any additional color what you can give us, again, it sounds like the tone has changed more for the positive on the international front?

[James Heaney:]

I think, it is fair to say, we have made progress. On a scale of 1 to 10, I can’t tell you in any definitive way, but we have certainly made progress and expecting to know more and be able to report more next quarter.

[Tim Conder:]

Okay, great. Thank you gentlemen.

[James Heaney:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] the next question comes from the line of Afua Ahwoi of Goldman Sachs. Please go ahead with your question.

[Afua Ahwoi:]

Hi, good morning. Just two from me. First, maybe can you give us more detail on the CEO search process example, have you narrowed down the list candidates and what sort of scales are you looking for exactly? And then, second question, I think you mentioned a little bit that you were spending on, I can’t remember the exact fees in repairing the brand image or public relations, and maybe can you give us some more specifics of what that will entail, what sort of initiatives are behind that? Thanks.

[David D’Alessandro:]

Yes, we continue to – I don’t have any new news on the CEO search except what was on the release, except to say that, we continue to look at a number of industries. We are looking at people that have a wide range of skills and certainly marketing skills, financial skills and the ability to manage multiple geographies and multiple brands. And the search has dealt into all the areas, we said we are going to in December, so the cruise line businesses, resort industries, the ski industries, some of the sports and entertainment industries, the theme park industries and the hotel business in general. So we continue to go down their path. I of course can’t talk about how many candidates or where we are in the process except to say that we are – we continue to be on track for the six to nine month period. As regard to the reputation spending, we do have a little bit of news here. We have been working over the last 69 days quite diligently on pulling a marketing campaign for SeaWorld that is our normal marketing campaign which will be breaking sometime in late March and we are also – we’ve also spent a lot of time in research and marketing on the reputation side and we’ll be breaking a campaign no later than April in multiple media, in social media and print, digital. Of course, and the probability of television, a reputation campaign that helps restore some of our reputation and that can best be described as a campaign about the truth of our SeaWorld and we are very, very eager to get that into the marketplace, but we want to do it appropriately against what will be the right message. There seems to be no shortage of advice on how to do this and were been from both professional people and others and so we’ve sorted through it and we expect to be out in the marketplace by no later than April 1.

[Afua Ahwoi:]

Okay. Thank you and actually just one follow-up. For the fourth quarter, I know Six Flags did a fair and I think some of the others benefited from the way Halloween fell and maybe is there anyway you can help us quantify what that meant for you having that sort of extra weekend or extra weekend to market Halloween and if any of your holiday in the park events were bigger than last year. Just to try to get a sense of that?

[David D’Alessandro:]

What I can tell you again, our attendance trends improved in the fourth quarter, a big part of that improvement was our strong performance for both Halloween and Christmas at all of our parks, not just specific parks. And then we also benefited from the opening of Falcon's Fury which opened in September. Those were the real two big drivers of our improved attendance.

[Afua Ahwoi:]

Thank you.

[Operator:]

Our next question comes from the line of Barton Crockett with FBR Capital Markets. Please go ahead with your question.

[Barton Crockett:]

Okay, great. Thanks for taking my questions. Let me see the – first just on the improving trends that you are seeing here. I was wondering if weather has any factor in this helpful or a headwind or if it’s really not a factor in the fourth quarter and the kind of positives start you are seeing to the year?

[James Heaney:]

Hey, Barton, it’s Jim. No, I mean, weather hasn’t been a positive or a negative…

[Barton Crockett:]

Okay.

[James Heaney:]

In the fourth quarter and what we are seeing year-to-date through 2015.

[Barton Crockett:]

Okay, and I know that the trends look positive, but things have surprised us over the past year at times, so I wouldn’t expect this to happen, but just for scenario purposes, how much revenue headwind could you absorb in 2015 before you start to put some pressure on your ability to sustain the dividend?

[James Heaney:]

Well, I am not going to do the math for you. But the key numbers would be, our dividend commitment would be $76 million, our free cash flow, and you know our free cash flow was in 2015, we’ve provided guidance on our CapEx and out operating cost. So, with that information, you should be able to do the math.

[Barton Crockett:]

Okay, all right and then, the past for you guys has been that when there has been kind of animal issues, you’ve recovered sometimes pretty quickly in the following year. How do you feel about at this time, I mean, you are seeing some positive trends starting into the year. I am not hearing so much from the legislative front in California, maybe that could change. Does it feel like we could see those kind of concerns fade and in terms of the view of SeaWorld this year and maybe potential to see the kind of snap back we’ve seen in the past?

[David D’Alessandro:]

I don’t think we are taking any of those issues for granted at that. To our knowledge the bill that was introduced in California is already been announced that it is not being reintroduced. That doesn’t mean that won’t be legislative actions somewhere. I think we are assuming that there will be some anti-SeaWorld activity, which we are prepared to deal with. But again, I think, until we get into the full season of, particularly the domestic tours business, versus the local business that we are in today, I don’t think we have a real good understanding of what impacts we may or may not have, which is why you are hearing from us, what I would best call cautious optimism and I think you recognize, I hope in the release how straightforward we were with everything that’s going on. So, we are trying to set a tone here, that we believe it’s appropriate for what’s happening in the business and a wait and see attitude as we go through each quarter.

[Barton Crockett:]

Okay, that’s great. Thank you.

[Operator:]

Our next question is from the line of Jason Bazinet with Citigroup. Please go ahead with your question.

[Jason Bazinet:]

Thanks so much. In the release, in the footnote J, you are kind enough to talk about the $10 million restructuring benefits and how there is a delineation between the senior secured credit facilities versus the senior notes in terms of whether or not you can get credit. And my question was, how does that flow down to the restricted payments basket? If you could just talk about that a bit in terms of that leverage ratio test, is it more like the senior secured, or is it more like the senior notes?

[James Heaney:]

Well, the $10 million is a one-time benefit that we were able to take in 2014. We won’t have that in 2015.

[Jason Bazinet:]

Yes, but just conceptually, like it – can you have sort of the hypothetical savings benefit you on the restricted payments basket test or not?

[James Heaney:]

Well, our restricted payment basket is a function of our leverage ratio. At the end of 2014, our restricted payment capacity is $120 million and as you heard earlier, we have roughly $76 million dividend commitment per year. So at our current leverage ratio, we have plenty of headroom to pay dividend and do buybacks.

[Jason Bazinet:]

Totally agreed. But my question is a simple one, can you influence the leverage ratio test and restricted payments basket on potential savings you can on the senior credit facilities but you can on the senor notes.

[James Heaney:]

The covenants regarding that are fairly similar and if we do a refinancing, that will become less relevant.

[Jason Bazinet:]

Okay, all right. I am not sure you answered the question, but, okay, thank you.

[James Heaney:]

I’d like to – I am not clear on what exactly you are asking, we can do more on the follow-up call.

[Jason Bazinet:]

Sure.

[Operator:]

Our next question comes from the line of Robert Fishman of MoffettNathanson. Please go ahead with your question.

[Robert Fishman:]

Hi, good morning. A couple questions on CapEx. Can you update us on how many new attractions are scheduled right now for 2015 after opening the nine last year? And is there any change in how we should think about the 2016 and beyond CapEx levels? I think, previously you said for it to be in the $215 million range?

[James Heaney:]

Sure, I can talk about our CapEx profile and then maybe David can go through our attraction. We provided guidance for 2015. When you look at a longer run rate level spending with BlueWorld included, we’d expect a step-up of between $20 million and $25 million going forward on top of what we provided for 2015. And that would – that step-up would obviously run through the period when the BlueWorld projects are under development. In San Diego, we break ground in 2016 and the first one would open in San Diego in 2018.

[David D’Alessandro:]

Okay, there are a number of new attractions this year. One of our larger ones is, in Busch Gardens, Williamsburg there is a new coaster called the Tompesto and it marks the 40th anniversary of the park. In Sesame Place, we have our 35th birthday celebration festivities all year. In Busch Gardens, Falcon’s Fury really didn’t get in until September and where we saw a lot of the lift for the last quarter. So we’ll have a full season of Falcon’s Fury which is the giant rock tower which has been very, very popular in Tampa. At Adventure Island, we have a new certainly called the Colossal Curls ride and in San Antonio a new sea line habitat restaurant and a new glide and see more sea line show. In Orlando, a new glide and see more sea line show pie and a new interaction program in area for our Dolphins. And those are the main attractions in 2015.

[Robert Fishman:]

Okay, and can you share for us your updated thoughts on competition and taking share and how you think about the competitive landscape in 2015 and on a somewhat related note, is there anyway to figure out if Disney’s My Magic Plus is having a meaningful impact on your attendance, given Disney’s belief that it’s helping drive their own business in Orlando?

[David D’Alessandro:]

The good news is, there appears to be a lift in Orlando in general. So, we don’t – I think everyone is benefiting from the lift. And let’s be clear, there are a couple of colossal CapEx attractions here between Harry Potter and Disney that we’ve seen the impact from in 2014 which we’ve already talked about. And, but we expect to be holding our own in Orlando. Now each – but each of our major park cities has its own competition. And so, we have a new attraction in Williamsburg, we have a lot more weekend activity and special events at San Diego. So, from a share standpoint, it’s a lot of harder to talk about in essence, because the numbers are so sketching on share. But we feel very competitive in most of our markets. And frankly, when you are not driving a lot of big CapEx in Orlando, you don’t have a choice but to market, promote, build your pass business and do a better job in pricing. That’s why you at least got a minimum maintain share.

[Robert Fishman:]

And on the My Magic Plus?

[David D’Alessandro:]

I’m sorry.

[Robert Fishman:]

Disney’s My Magic Plus, is there anyway to figure out that that’s having any impact?

[David D’Alessandro:]

Go ahead, Jim.

[James Heaney:]

Yes, I mean, Disney has been implementing strategies to sequester guests on their property for a decade now between their ticket pricing structure, their ground transportation system. My Magic Plus is just the third or fourth in a series of those initiatives which arguably have been successful, but that individual component on its own I don’t think has probably hurt us as much, I think, it’s something turning is the cumulative impact of all those things together.

[Robert Fishman:]

Okay, thank you guys.

[Operator:]

[Operator Instructions] Your next question comes from the line of Josh Borstein of Longbow Research. Please go ahead with your question.

[Shane Rourke:]

Hi, this is Shane Rourke sitting in for Josh this morning. Thanks for taking my call. Just back on the reputation issue real quick, it sounds like you’ve got some great stuff coming this spring as far as response and just curious is there – or are there any metrics or commentary as to where you stand right now and then the progress you’ve made to say compared to a year ago, how things are going?

[David D’Alessandro:]

The one thing I can’t share with you, I can’t share the metrics, but I will say that, it’s very clear in our research that a portion of the population greatly believes in us and then another portion wants to know our side of the story. And, then there is some section of people that have been in place for some time, not just newly arrived that no matter what you say to them, they will probably never change their minds about the kind of activities we have. So we are focusing on the people who maybe wondering about SeaWorld and we have very, very clear message strategy to them and a very, very clear spend strategy and a very good media strategy, not for a month, and not for two months, but we continue it, because, the recognition in this company is that, this is an issue that has been with us a very long time. You can go back to the pre-Willy days and know that this decision has been with us and while it’s been accelerated recently, we are well aware of who we have to go after. We understand the demographics and geographies of all and we are very, very focused on it with the right messages. And it’s important to understand that this is not something you just start slapping against. It’s is precise, it is targeted properly, and it needs to be frequent and it needs to resonate and it needs to be measured as we go along. We feel we have a good baseline. We know who to go after, we know how to go after them and that’s the plan that we’ll be very apparent in the coming months. But this is not something – this is not a hit and run it as we say in the marketing world where you can just advertise for a month and hope it goes away. This is a changing mindset and making certain mindsets stay change recognizing that the opposition is not going to standstill as we do this. So, we have a much more – I think – and knowledgeable program to go after this with what we believe are some of the best people in the country working with us.

[Shane Rourke:]

Okay, great. Thank you very much.

[David D’Alessandro:]

Thank you.

[Operator:]

Thank you. At this time, I will turn the floor back to Gene Ballesteros for closing comments.

[Gene Ballesteros:]

Thanks to everyone for your questions and for your continued interest in our company. We look forward to updating you further and speaking with you again next quarter. Thanks again for your time. That now concludes our call.

[Operator:]

Thank you. You may disconnect your lines at this time and thank you for your participation.