SeaWorld Shares Sink as Park Operator Slashes Guidance -- 4th Update


By Michael Calia

SeaWorld Entertainment Inc. reported disappointing second-quarter results and slashed its revenue guidance for the year, saying the recent media debate about its treatment of captive orcas has hurt attendance.

Shares of SeaWorld--down 22% over the past year through Tuesday--lost about a third of their value Wednesday.

"The company believes attendance in the quarter was impacted by demand pressures related to recent media attention surrounding proposed legislation in the state of California," SeaWorld said in its earnings release.

Two members of the U.S. House from California are proposing a federal study on the impact of captivity on large marine animals, citing "serious concerns about the psychological and physical harm" to orcas in captivity.

The proposal comes as SeaWorld faces increased pressure and protests over the company's treatment of its captive orcas, also known as killer whales. The growing call to discontinue the orca attractions was spurred by the 2013 documentary "Blackfish," an expose of SeaWorld's practices that inspired debate throughout national media.

SeaWorld, for its part, has continued to defend its practices, saying it considers the welfare of the animals a top priority.

Nonetheless, the debate appears to be affecting SeaWorld's results. The company, which owns three of its namesake parks as well as two Busch Gardens, said it expected its full-year revenue to fall by 6% to 7%. The low end of its previous guidance range of $1.49 billion to $1.52 billion would have represented revenue growth of 2.1%.

SeaWorld shares ended the day down 32.9%, or $9.25, at $18.90.

Blackstone Group LP, the company's biggest shareholder, was particularly hard hit. The New York private-equity firm controls about 20.2 million SeaWorld shares, according to securities filings, which lost more than $187 million in value on the day. Some of the shares Blackstone controls are owned by parties that invested in the buyout alongside the firm.

It could have been worse for Blackstone, which has been an aggressive seller of SeaWorld shares since taking the company public in an April 2013 stock offering, less than four years after buying it from theme-park operator Anheuser- Busch InBev NV. Sales before Wednesday's swoon have ensured that Blackstone will more than double its money on its SeaWorld investment no matter what happens to the stock.

SeaWorld on Wednesday said it would pursue cost cuts in a bid to trigger growth as it expects sluggish revenue trends to continue. The company said it intends to reinvest savings generated by the cuts into new attractions at its destination parks. Overall attendance for the year fell 4.3% through June 30, SeaWorld said.

The company also announced a new $250 million share-buyback program,

Late last month, Southwest Airlines Co. and SeaWorld ended their 26-year-old marketing relationship because of " shifting priorities" after animal-rights groups had accused the airline of supporting animal cruelty. Southwest, however, called the move "strictly a business decision."

The company said attendance at its parks grew 0.3% in the second quarter compared with the year-before period. Typically, the company's revenue for the year is driven by its results in the second and third quarters. Chief Executive Jim Atchison said that lower attendance at destination parks partially offset the benefits of a shift in Easter's timing and favorable weather conditions.

"We were pleased to report attendance growth in the quarter despite a challenging industry and competitive environment and a tough comparison to the prior year quarter, which included the attendance benefit from opening our largest expansion ever at SeaWorld Orlando," he added.

Overall, SeaWorld reported a second-quarter profit of $37.3 million, or 43 cents a share, compared with a year- earlier loss of $15.9 million, or 18 cents a share. Revenue declined 1.5% to $405.2 million.

Analysts had projected 59 cents a share in earnings and $445 million in revenue, according to Thomson Reuters.

Revenue generated per theme-park visitor fell 1.8% to $61.54.

Ryan Dezember contributed to this article.

Write to Michael Calia at michael.calia@wsj.com

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