Aug. 14--Stung by disappointing attendance at its parks in Orlando and San Diego, SeaWorld Entertainment Inc. said Wednesday that it will continue battling controversy over its captive killer whales as it makes new investments in its attractions.
SeaWorld discussed its strategy as it reported lower-than-expected earnings for the second quarter that led to a 33 percent plunge in the company's stock price. The stock closed Wednesday at $18.90, lower than the initial price when the company went public last year.
Orlando-based SeaWorld dramatically lowered its financial projections for the year as it reported profit of $37.3 million, or 43 cents per share. That was an improvement over a $15.9 million net loss during the second quarter of 2013, but it fell short of analysts' forecast of 59 cents per share.
Despite a boost from a late Easter, overall attendance at the company's 11 parks increased just 0.3 percent. Visitors shelled out less money, too. Revenue dropped to $405.2 million from $411.3 million.
The company owns three SeaWorld and two Busch Gardens parks. Its smaller parks include Aquatica and Discovery Cove.
SeaWorld parks in Orlando and San Diego had weak attendance, Chief Financial Officer James Heaney told analysts Wednesday.
The company cited several reasons, including publicity surrounding its captive killer whales. Though not mentioning "Blackfish," a 2013 documentary critical of SeaWorld's practice of keeping orcas in captivity, the company acknowledged that it took a hit from media coverage of killer-whale legislation in California. That affected its San Diego park, CEO Jim Atchison said.
In Orlando, Atchison said, attendance was affected by a late start of summer break for many Northern schools and competition from Walt Disney World's Fantasyland expansion.
Earlier this year, a California panel decided to study a bill that would ban keeping orcas in captivity, delaying a vote by at least a year. In San Diego, People for the Ethical Treatment of Animals put up anti-SeaWorld billboards at the airport.
Two California congressmen also recently filed legislation that would put new restrictions on the way captive orca whales and other animals are treated at theme parks.
Wednesday was the first time SeaWorld had acknowledged that controversy about its whales had taken a toll on attendance, FBR & Co. analyst Barton Crockett said in a research note.
Tuna Amobi, an equity analyst at S&P Capital IQ, said that in the past, the company "tended to downplay" the whale issue. "The legislation looming in California seems to be something that brought the issue even more to the forefront. ... I'm concerned it's getting more and more out of their control."
Atchison said the company is continuing "to ramp up our communications initiatives" through what it calls its "truth campaign." It has websites disputing points made in "Blackfish" and has promoted its animal-care efforts.
SeaWorld must become more competitive as rival parks such as Universal Orlando add big new attractions, executives said.
"We really want to invest more aggressively in our destination markets," Atchison said. "I think the competitive stakes and a bit of the arms race in Southern California and Orlando in particular, those two markets, is not going to wane, so I think that's a more enduring challenge for us.
Atchison said there will be "a significant announcement in the next couple of days" about a new attraction at one of the parks.
A later-than-expected opening of nearby Universal Orlando's new Harry Potter land, Diagon Alley, was "not ideal," SeaWorld executives noted. Some analysts think SeaWorld can benefit from Diagon Alley as it brings new visitors to Orlando. It was expected to debut by June but did not open until July 8.
Other problems for the company included a delay in its Falcon's Fury ride at Busch Gardens. The company had expected the drop-tower ride to debut May 1. As the crucial summer season winds to a close and kids head back to school, however, Busch Gardens still has no opening date for the thrill ride.
For the year, SeaWorld said it expects revenue to decline 6 percent to 7 percent. It expects earnings before items such as interest and taxes to drop 14 percent to 16 percent. SeaWorld had previously forecast revenue to increase 2 percent to 4 percent. It had expected earnings to jump 3 percent to 6 percent.
By cost-cutting in other areas of the company, SeaWorld hopes to generate money it can funnel into new attractions at its parks. SeaWorld also hopes to boost its share price with a $250 million stock buyback next year.
The company did not provide details about cost cuts, but Amobi said they will likely involve job reductions.
SeaWorld told analysts that better days are ahead.
At its major parks, SeaWorld "saw the attendance decline kind of bottom out in June, and then it's begun to recover -- not to prior-year levels, but the trajectory's improved since then," Heaney said. "We kind of view it as stabilized at this point."
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