Attached files
file | filename |
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EX-31.4 - PFO FINANCE CERT - UCDP FINANCE INC | ex314.htm |
EX-32.2 - PFO UCDP CERT - UCDP FINANCE INC | ex322.htm |
EX-32.3 - PEO FINANCE CERT - UCDP FINANCE INC | ex323.htm |
EX-31.3 - PEO FINANCE CERT - UCDP FINANCE INC | ex313.htm |
EX-32.1 - PEO UCDP CERT - UCDP FINANCE INC | ex321.htm |
EX-32.4 - PFO FINANCE CERT - UCDP FINANCE INC | ex324.htm |
EX-31.2 - PFO UCDP CERT - UCDP FINANCE INC | ex312.htm |
EX-31.1 - PEO UCDP CERT - UCDP FINANCE INC | ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 26, 2010
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number 333-108661-01
UNIVERSAL CITY DEVELOPMENT PARTNERS, LTD.
UCDP FINANCE, INC.
(Exact name of registrants as specified in their charters)
FLORIDA
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59-3128514
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FLORIDA
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42-1581381
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1000 UNIVERSAL STUDIOS PLAZA
ORLANDO, FL
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32819-7610
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(Address of principal executive offices)
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(Zip Code)
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(407) 363-8000
(Registrants’ telephone number, including area code)
Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes o No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer (Do not check if a smaller reporting company)
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x
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Smaller reporting company
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Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date. As of November 5, 2010, there were 100 shares of common stock of UCDP Finance, Inc., outstanding. Not applicable to Universal City Development Partners, Ltd.
UCDP Finance, Inc. is a wholly owned subsidiary of Universal City Development Partners, Ltd., and is utilized for the sole purpose of acting as a co-issuer of the Registrants’ 87/8% senior notes due 2015 and 107/8% senior subordinated notes due 2016. UCDP Finance, Inc. does not and will not conduct any operations or hold any assets of any kind and will not have any future revenues. UCDP Finance, Inc. met the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.
TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
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ITEM 1. Financial Statements
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3
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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16
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
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23
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ITEM 4. Controls and Procedures
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23
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PART II. OTHER INFORMATION
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ITEM 1. Legal Proceedings
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24
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ITEM 1A. Risk Factors
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24
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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
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24
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ITEM 3. Defaults Upon Senior Securities
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24
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ITEM 5. Other Information
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24
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ITEM 6. Exhibits
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24
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SIGNATURES
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25
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2
PART I — FINANCIAL INFORMATION
ITEM 1.
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Financial Statements
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Universal City Development Partners, Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
September 26, 2010
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December 31, 2009
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(In thousands)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 174,147 | $ | 45,157 | ||||
Accounts receivable, net
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27,733 | 25,144 | ||||||
Receivables from related parties
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371 | 1,137 | ||||||
Inventories, net
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53,466 | 42,984 | ||||||
Prepaid expenses and other assets
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12,014 | 8,989 | ||||||
Assets held for sale
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16,186 | 16,186 | ||||||
Total current assets
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283,917 | 139,597 | ||||||
Property and equipment, at cost:
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Land and land improvements
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488,939 | 480,181 | ||||||
Buildings and building improvements
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1,504,169 | 1,402,938 | ||||||
Equipment, fixtures and furniture
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1,323,630 | 1,154,187 | ||||||
Construction in process
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10,961 | 220,890 | ||||||
Total property and equipment, at cost:
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3,327,699 | 3,258,196 | ||||||
Less accumulated depreciation
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(1,606,704 | ) | (1,521,620 | ) | ||||
Property and equipment, net
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1,720,995 | 1,736,576 | ||||||
Other assets:
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Investments in unconsolidated entities
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9,353 | 9,920 | ||||||
Intangible assets, net
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48,728 | 51,188 | ||||||
Deferred finance costs, net
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21,986 | 24,600 | ||||||
Other assets
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8,009 | 7,723 | ||||||
Total other assets
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88,076 | 93,431 | ||||||
Total assets
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$ | 2,092,988 | $ | 1,969,604 | ||||
Continued on next page.
3
Universal City Development Partners, Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(Unaudited)
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September 26, 2010
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December 31, 2009
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(In thousands) | ||||||||
LIABILITIES AND PARTNERS’ EQUITY
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Current liabilities:
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Accounts payable and accrued liabilities
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$ | 138,337 | $ | 114,936 | ||||
Unearned revenue
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77,214 | 41,825 | ||||||
Due to related parties
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28,981 | 13,107 | ||||||
Current portion of capital lease and financing obligations
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5,005 | 5,098 | ||||||
Current portion of long-term borrowings
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6,750 | 9,000 | ||||||
Total current liabilities
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256,287 | 183,966 | ||||||
Long-term liabilities:
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Long-term borrowings
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1,487,346 | 1,495,730 | ||||||
Capital lease and financing obligations, net of current portion
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24,607 | 27,415 | ||||||
Other
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7,278 | 7,482 | ||||||
Total long-term liabilities
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1,519,231 | 1,530,627 | ||||||
Equity:
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Partners’ equity:
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Vivendi Universal Entertainment
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156,030 | 124,528 | ||||||
Blackstone
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156,030 | 124,528 | ||||||
Total Partners’ equity
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312,060 | 249,056 | ||||||
Noncontrolling interest in UCRP
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5,410 | 5,955 | ||||||
Total equity
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317,470 | 255,011 | ||||||
Total liabilities and equity
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$ | 2,092,988 | $ | 1,969,604 | ||||
See accompanying notes.
4
Universal City Development Partners, Ltd. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended
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Nine Months Ended
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September 26, 2010
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September 27, 2009
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September 26, 2010
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September 27, 2009
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(In thousands)
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Operating revenues:
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Theme park tickets
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$ | 190,259 | $ | 120,056 | $ | 405,892 | $ | 311,072 | ||||||||
Theme park food and beverage
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43,411 | 27,311 | 88,936 | 72,357 | ||||||||||||
Theme park merchandise
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48,693 | 23,860 | 92,957 | 63,664 | ||||||||||||
Other theme park related
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33,017 | 23,322 | 72,453 | 63,841 | ||||||||||||
Other
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48,187 | 30,026 | 109,396 | 93,172 | ||||||||||||
Total operating revenues
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363,567 | 224,575 | 769,634 | 604,106 | ||||||||||||
Costs and operating expenses:
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Theme park operations
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54,034 | 43,523 | 145,647 | 127,244 | ||||||||||||
Theme park selling, general and administrative
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42,229 | 28,620 | 143,641 | 92,865 | ||||||||||||
Theme park cost of products sold
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42,625 | 25,349 | 90,744 | 70,017 | ||||||||||||
Special fee payable to Vivendi Universal Entertainment and consultant fee
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24,431 | 14,665 | 51,232 | 38,568 | ||||||||||||
Depreciation and amortization
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32,029 | 26,186 | 87,655 | 79,015 | ||||||||||||
Other
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41,227 | 25,209 | 98,745 | 77,209 | ||||||||||||
Total costs and operating expenses
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236,575 | 163,552 | 617,664 | 484,918 | ||||||||||||
Operating income
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126,992 | 61,023 | 151,970 | 119,188 | ||||||||||||
Other expense (income):
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Interest expense
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30,022 | 26,043 | 86,384 | 77,239 | ||||||||||||
Interest income
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(85 | ) | (69 | ) | (122 | ) | (158 | ) | ||||||||
Expenses associated with debt refinancing
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- | - | 3,310 | - | ||||||||||||
Net change in fair value of interest rate swaps and amortization of accumulated other comprehensive loss
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- | (2,006 | ) | - | (4,217 | ) | ||||||||||
Income from investments in unconsolidated entities
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(714 | ) | (272 | ) | (1,717 | ) | (1,601 | ) | ||||||||
Total other expense, net
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29,223 | 23,696 | 87,855 | 71,263 | ||||||||||||
Net income
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97,769 | 37,327 | 64,115 | 47,925 | ||||||||||||
Less: net income attributable to the noncontrolling interest in UCRP
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505 | 197 | 1,457 | 1,409 | ||||||||||||
Net income attributable to the Partners
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$ | 97,264 | $ | 37,130 | $ | 62,658 | $ | 46,516 | ||||||||
Net income
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$ | 97,769 | $ | 37,327 | $ | 64,115 | $ | 47,925 | ||||||||
Other comprehensive income:
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Amortization of accumulated other comprehensive loss from interest rate swaps previously designated as hedges
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- | 1,139 | - | 3,464 | ||||||||||||
Total other comprehensive income
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- | 1,139 | - | 3,464 | ||||||||||||
Comprehensive income
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97,769 | 38,466 | 64,115 | 51,389 | ||||||||||||
Less: net income attributable to the noncontrolling interest in UCRP
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505 | 197 | 1,457 | 1,409 | ||||||||||||
Comprehensive income attributable to the Partners
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$ | 97,264 | $ | 38,269 | $ | 62,658 | $ | 49,980 | ||||||||
See accompanying notes.
5
Universal City Development Partners, Ltd. and Subsidiaries
Condensed Consolidated Statement of Changes in Equity
(Unaudited)
UCDP's Partners
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Vivendi Universal Entertainment
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Blackstone
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Noncontrolling interest in UCRP
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Total Equity
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(In thousands)
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Balance at December 31, 2009
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$ | 124,528 | $ | 124,528 | $ | 5,955 | $ | 255,011 | ||||||||
Distributions to noncontrolling interest in UCRP
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- | - | (2,002 | ) | (2,002 | ) | ||||||||||
Contributions from Holdings
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173 | 173 | 346 | |||||||||||||
Net income
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31,329 | 31,329 | 1,457 | 64,115 | ||||||||||||
Balance at September 26, 2010
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$ | 156,030 | $ | 156,030 | $ | 5,410 | $ | 317,470 |
See accompanying notes.
6
Universal City Development Partners, Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
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September 26, 2010
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September 27, 2009
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(In thousands)
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Cash flows from operating activities
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Net cash and cash equivalents provided by operating activities
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$ | 247,749 | $ | 161,910 | ||||
Cash flows from investing activities
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Property and equipment acquisitions
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(94,020 | ) | (102,770 | ) | ||||
Proceeds relating to capital reimbursements
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- | 2,054 | ||||||
Net cash and cash equivalents used in investing activities
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(94,020 | ) | (100,716 | ) | ||||
Cash flows from financing activities
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Payment of Partner distributions for tax liability
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- | (33,368 | ) | |||||
Payment of distributions
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- | (26,186 | ) | |||||
Receipt of contributions from Holdings
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346 | - | ||||||
Distributions to noncontrolling interest in equity of UCRP
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(2,002 | ) | (2,078 | ) | ||||
Payments on long-term borrowings, capital lease and financing obligations
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(14,518 | ) | (5,822 | ) | ||||
Payments of financing costs
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(8,565 | ) | - | |||||
Net cash and cash equivalents used in financing activities
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(24,739 | ) | (67,454 | ) | ||||
Net increase (decrease) in cash and cash equivalents
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128,990 | (6,260 | ) | |||||
Cash and cash equivalents at beginning of period
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45,157 | 87,798 | ||||||
Cash and cash equivalents at end of period
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$ | 174,147 | $ | 81,538 | ||||
Supplemental disclosures of noncash information
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Capital lease and financing obligations
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$ | 875 | $ | - | ||||
Decrease in accrued liabilities associated with capital expenditures
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25,281 | 5,529 | ||||||
Decrease in interest rate swap liability
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- | 7,681 | ||||||
Disposal of fully depreciated assets
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111 | 5,942 | ||||||
See accompanying notes.
7
Universal City Development Partners, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 26, 2010
(Unaudited)
1. General
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures which are normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the financial position and the results of operations for the interim periods. The results for the interim periods are not necessarily indicative of the results that can be expected for a full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2009 and the notes thereto, filed with the Securities and Exchange Commission under cover of Form S-4/A.
The accompanying unaudited condensed consolidated financial statements include the consolidated amounts of Universal City Development Partners, Ltd. ( “UCDP”); Universal City Travel Partners d/b/a Universal Parks & Resorts Vacations (“UPRV”); UCDP Finance, Inc. ("UCDP Finance"); Universal Orlando Online Merchandise Store ("UOOMS"); and Universal City Restaurant Partners, Ltd. (“UCRP”) (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated upon consolidation.
Through Universal City Florida Holding Co. I (“Holding I”) and Universal City Florida Holding Co. II (“Holding II”, collectively with Holding I, “Holdings”), the Company’s ultimate owners, each having a 50% interest, are Universal City Property Management II LLC (“Universal CPM”) and Blackstone Capital Partners (collectively, the “Partners”). Universal CPM is a wholly owned subsidiary of Vivendi Universal Entertainment LLLP (“Vivendi Universal Entertainment” or “VUE”), an affiliate of Universal Studios, Inc. (“USI”), which is an indirect subsidiary of NBC Universal, Inc. (“NBCU”).
Period End
The three months ended September 26, 2010 and September 27, 2009 each contained 91 days. The nine months ended September 26, 2010 contained 269 days, while the nine months ended September 27, 2009 contained 270 days.
Seasonality and other factors impacting comparability
Based on the seasonality of attendance, the results for the three and nine months ended September 26, 2010 and September 27, 2009 are not necessarily indicative of results for the full year. Additionally, on June 18, 2010, the Company opened The Wizarding World of Harry PotterTM, a sixth-themed island within Universal’s Islands of Adventure. Accordingly, the operating results and cash flows for the three and nine months ended September 26, 2010 were impacted by this event.
Inventories
The major components of inventories are as follows (in thousands):
September 26, 2010
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December 31, 2009
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Merchandise
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$ | 18,554 | $ | 10,951 | ||||
Food and beverage
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3,795 | 3,293 | ||||||
Operating supplies and maintenance parts
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33,339 | 30,862 | ||||||
Less: reserves
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(2,222 | ) | (2,122 | ) | ||||
Total
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$ | 53,466 | $ | 42,984 |
Intangible Assets
Intangible assets primarily consist of the rights to use certain characters and trademarks. Intangible assets are recorded at net present value and amortized on a straight-line basis over periods ranging from 9 to 20 years, which have a weighted-average amortizable life of 13 years. Intangible assets totaled $48,728,000 and $51,188,000, respectively, as of September 26, 2010 and December 31, 2009. This included $13,723,000 and $11,263,000 in accumulated amortization, respectively, as of September 26, 2010 and December 31, 2009. Amortization expense amounted to $1,408,000 and $405,000, respectively, during the three months ended September 26, 2010 and September 27, 2009, and $2,460,000 and $1,362,000, respectively, during the nine months ended September 26, 2010 and September 27, 2009. Amortization of existing intangible assets will be approximately $3,872,000 for 2010 and $5,646,000 for each of the following four years.
Change in Estimate
Due to the construction and renovation of new rides and attractions, portions of existing rides and attractions will be disposed of prior to their original estimated useful life. As a result, depreciation of the existing rides and attractions will be accelerated to reflect their remaining useful life. For the three months ended September 26, 2010 and September 27, 2009, the Company incurred additional depreciation expense of $609,000 and $956,000, respectively, related to accelerating the life of various ride and show assets. Similarly, during the nine months ended September 26, 2010 and September 27, 2009, the Company incurred additional depreciation expense of $2,235,000 and $2,809,000, respectively, relating to accelerating the life of various ride and show assets.
Financial Instruments
The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. The estimated fair values of other financial instruments subject to fair value disclosures, determined based on quotes from major financial institutions, and the related carrying amounts are as follows (in thousands):
September 26, 2010
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December 31, 2009
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Carrying Value
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Fair Value
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Carrying Value
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Fair Value
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Long-term borrowings (including current portion)
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$ | 1,494,096 | $ | 1,550,904 | $ | 1,504,730 | $ | 1,521,188 |
Recent Accounting Pronouncements
In June 2009, the FASB issued revisions to pre-existing guidance pertaining to the consolidation and disclosures of variable interest entities. Specifically, it changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. This guidance requires a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity is required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. This guidance is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009. As such, the guidance became effective for the Company on January 1, 2010. The Company’s adoption of the standard did not have a material impact on its financial position, results of operations or cash flows as it did not result in the additional consolidation or deconsolidation of any variable interest entities.
8
2. Long-Term Borrowings
Indebtedness consisted of the following (in thousands, except percentages):
Interest Rate
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Maturity Date
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September 26, 2010
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December 31, 2009
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Renewed senior secured credit facilities
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(1 | ) |
November 6, 2014
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$ | 891,000 | $ | 900,000 | ||||||
2015 notes
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8.875 | % |
November 15, 2015
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400,000 | 400,000 | ||||||||
2016 notes
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10.875 | % |
November 15, 2016
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225,000 | 225,000 | ||||||||
Gross principal payable
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1,516,000 | 1,525,000 | |||||||||||
Unamortized discounts
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(21,904 | ) | (20,270 | ) | |||||||||
Total debt
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$ | 1,494,096 | $ | 1,504,730 |
(1)
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The interest rate on the term loans of the renewed senior secured credit facilities is either a base rate (calculated as the highest of the prime rate in effect on such day, the sum of 1/2 of 1.00% plus the federal funds rate, and LIBOR plus 1.00%, provided that the base rate will never be less than 2.75%) or LIBOR (provided that LIBOR will never be less than 1.75%), in each case plus a specified margin. The specified margin is 2.75% in the case of base rate loans and 3.75% in the case of LIBOR loans.
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The term loans under the renewed senior secured credit facilities are subject to mandatory prepayments of 100% of the net cash proceeds from certain asset sales and from the sale or issuance of indebtedness, in each case subject to certain exceptions including the notes, and of 50% of the Company’s excess cash flow for each fiscal year on or after December 31, 2010. As of September 26, 2010 the Company is unable to determine what 50% of the excess cash flow will be. Therefore, amounts which may become payable within the next 12 months remain classified as long-term borrowings.
On April 30, 2010, the Company amended its renewed senior secured credit facilities (the “2010 Amendment”). The 2010 Amendment resulted in a reduction of the interest rate provisions of the Company’s $891,000,000 term loan, which is part of the Company’s renewed senior secured credit facilities. Specifically, the floor on the LIBOR rate was reduced from 2.25% to 1.75%, while the margin was reduced from 4.25% to 3.75%. The interest rates under the revolving credit facilities were not impacted. This modification was deemed dissimilar to an extinguishment based on the relevant accounting guidance. As such, the Company expensed $3,310,000 in advisory and consulting fees during the nine months ended September 26, 2010, while it treated $4,489,000 in fees paid to the holders of the term loan as a discount during the nine months ended September 26, 2010. The capitalized lender fees will be amortized over the remaining term of the renewed senior secured credit facilities. As of September 26, 2010 and December 31, 2009, the Company had $75,000,000 available under its revolving credit facilities.
3. Interest Rate Swaps
The Company is exposed to market risks relating to fluctuations in interest rates. The Company may mitigate this risk by paying down additional outstanding balances on its variable rate loans, refinancing with fixed rate permanent debt or obtaining cash flow hedge instruments. These financial instruments are derivatives. As of September 26, 2010 and December 31, 2009, the Company had no active interest rate swap agreements. The Company, however, historically utilized interest rate swap agreements as a risk management tool to manage a portion of its interest rate exposures. The principal objective of the swap agreements was to minimize the risks and costs associated with financial activities. The Company does not use financial instruments for trading purposes. Additionally, the Company specifically designated interest rate swap hedges of outstanding debt instruments and recognized interest differentials in the period they occurred.
The Company follows accounting standards that require the entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those assets at fair value. The fair values are the estimated amounts that the Company would pay or receive upon termination of the swap agreements at the reporting date, taking into account current interest rates and the current creditworthiness of the counterparties. Changes in the underlying market value of swap arrangements that qualify as cash flow hedging activities are recognized as other comprehensive income in the accompanying condensed consolidated statements of comprehensive income. Changes in the underlying market value of swap arrangements that do not qualify as hedging activities are recognized as a change in the fair value of interest rate swaps in the accompanying condensed consolidated statements of operations. Additionally, the accumulated other comprehensive income related to interest rate swaps that become ineffective is amortized on a straight-line basis through the change in the fair value of interest rate swaps and amortization of accumulated other comprehensive income line item in the accompanying condensed consolidated statements of operations.
If the Company enters into interest rate swap agreements in the future, the Company would be exposed to credit loss in the event of nonperformance by the other party to the derivative financial instruments. The Company would attempt to limit this exposure by entering into agreements directly with a number of major financial institutions that would meet its credit standards and that would be expected to satisfy their obligations under the contracts.
On January 1, 2008, the Company adopted accounting guidance that defines fair value, establishes a consistent framework for measuring fair value and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. This guidance specifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1.
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Observable inputs such as quoted prices in active markets for identical assets or liabilities;
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Level 2.
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Inputs, other than quoted prices included within Level 1, that are observable either directly or indirectly; and
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Level 3.
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Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
9
As of September 26, 2010 and December 31, 2009, the Company did not have assets or liabilities valued using inputs that fall within Level 1, Level 2 or Level 3 of the three-tier hierarchy. During the three months and nine months ended September 27, 2009, the Company was party to certain derivative financial instruments used to hedge its risks related to fluctuations in interest rates. All of these instruments were valued using inputs that fell within Level 2 of the three-tier hierarchy, and such fair values were provided by the counterparty. The significant inputs, primarily the LIBOR yield curves, used by the counterparty to determine fair values were considered Level 2 observable market inputs. Additionally, the Company monitors the credit and nonperformance risk associated with its derivative counterparties and believes them to be insignificant and not warranting a credit adjustment during the nine months ended September 27, 2009. The following table summarizes the changes in fair values of the Company’s interest rate swaps (in thousands):
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 27, 2009
|
September 27, 2009
|
|||||||||||||||
Recorded in statement of operations
|
Recorded in other comprehensive income
|
Recorded in statement of operations
|
Recorded in other comprehensive income
|
|||||||||||||
Swap #1 (1)
|
$ | 1,165 | $ | - | $ | 2,802 | $ | - | ||||||||
Swap #2 (1)
|
1,980 | - | 4,879 | - | ||||||||||||
Ineffective amortization (1)
|
(1,139 | ) | 1,139 | (3,464 | ) | 3,464 | ||||||||||
Total
|
$ | 2,006 | $ | 1,139 | $ | 4,217 | $ | 3,464 | ||||||||
4. Accounts Payable and Accrued Liabilities
The following presents major components of accounts payable and accrued liabilities (in thousands) as of:
September 26, 2010
|
December 31, 2009
|
|||||||
Accounts payable
|
$ | 8,213 | $ | 11,563 | ||||
Capital expenditures
|
8,911 | 34,192 | ||||||
Marketing and advertising
|
6,001 | 3,665 | ||||||
Interest
|
29,571 | 18,303 | ||||||
Compensation and benefits
|
36,359 | 19,578 | ||||||
Operating accruals
|
16,305 | 13,566 | ||||||
Consulting fees
|
7,947 | 4,523 | ||||||
Property and sales tax
|
16,393 | 2,149 | ||||||
Other
|
8,637 | 7,397 | ||||||
Total
|
$ | 138,337 | $ | 114,936 |
5. Capital leases and financing obligations
Intangible assets and equipment, fixtures and furniture included approximately $43,117,000 and $44,351,000, related to financing obligations and capital leases as of September 26, 2010 and December 31, 2009, respectively. This included $2,850,000 and $755,000 in accumulated depreciation and amortization as of September 26, 2010 and December 31, 2009, respectively. At September 26, 2010, future minimum payments due under financing obligations and capital leases totaled approximately $29,612,000 (net of $9,538,000 in interest). Future minimum payments include $5,246,000, $4,883,000, $4,392,000, $3,609,000 and $11,482,000, due in 2011, 2012, 2013, 2014, and years subsequent to 2014, respectively.
6. Related Party Transactions
Under the terms of UCDP’s partnership agreement, a special fee is payable to Vivendi Universal Entertainment through Universal CPM equal to 5.25% of certain revenue, as defined, generated by Universal Studios Florida and Universal’s Islands of Adventure. During the three months ended September 26, 2010 and September 27, 2009, the Company paid fees to Vivendi Universal Entertainment of $10,971,000 and $9,130,000, respectively, while during the nine months ended September 26, 2010 and September 27, 2009, the Company paid fees of $27,111,000 and $24,800,000, respectively, to Vivendi Universal Entertainment. In addition, at September 26, 2010 and December 31, 2009, respectively, the amount due to related parties included $16,601,000 and $8,903,000 related to the current portion of special fees payable to Vivendi Universal Entertainment.
Under the Company’s renewed senior secured credit facilities and the indentures governing the 2015 notes and the 2016 notes, the special fee can only be paid upon achievement of certain but different ratios. As applicable, these ratios were met as of September 26, 2010, and thus payments of $16,601,000 in special fees will be made during the fourth quarter of 2010.
10
7. Commitments and Contingencies
Litigation
The Company is threatened with or involved in various legal actions and claims incidental to the conduct of its business. Management does not expect these legal actions and claims to have a material impact to the Company’s results of operations, financial position or cash flows.
Consultant agreement
Under the terms of the Consultant Agreement (as defined herein) UCDP pays a fee for consulting services and exclusivity equal to a percentage of UCDP’s gross revenues from the attractions and certain other facilities owned or operated, in whole or in part, by UCDP. The accompanying condensed consolidated statements of operations and comprehensive income include consulting fee expense under the Consultant Agreement of $7,947,000 and $4,940,000, respectively, during the three months ended September 26, 2010 and September 27, 2009 and $16,690,000 and $12,999,000 during the nine months ended September 26, 2010 and September 27, 2009, respectively.
Under the terms of the Consultant Agreement, the Consultant (as defined herein) is also entitled to a fee based on a percentage of gross revenues of comparable projects, which are gated motion picture and/or television themed attractions owned or operated, in whole or in part, by UCDP, or any of UCDP’s partners or any of their affiliates, other than in Universal City, California. As of September 26, 2010, the only operating theme parks that are deemed to be comparable projects under the Consultant Agreement are Universal Studios Japan in Osaka, Japan and Universal Studios Singapore on Sentosa Island, Singapore. The Consultant may also be entitled to participate in certain sales of equity by the Company’s partners and to participate in certain real estate development activities of the Company’s partners or their affiliates. USI has guaranteed UCDP’s obligations under the Consultant Agreement for the benefit of the Consultant, and Vivendi Universal Entertainment has assumed USI’s obligations under that guarantee and has agreed to indemnify UCDP for any liability under the Consultant Agreement related to any comparable project that is not owned or controlled by UCDP. Accordingly, fees with respect to Universal Studios Japan and Universal Studios Singapore are paid by an affiliate of Vivendi Universal Entertainment and are not paid by UCDP.
On October 18, 2009, the Company executed an amendment to the Consultant Agreement (the “2009 Amendment”). Prior to the 2009 Amendment, starting in June 2010, the Consultant had the right, upon 90 days notice, to terminate the Company’s obligation to make periodic payments thereunder and receive instead one cash payment equal to the fair market value of the Consultant’s interest in the revenue streams in the Orlando parks and any comparable projects that were open at that time for at least one year (the “Put Payment”). Under the terms of the 2009 Amendment, the earliest exercise date for the Put Payment is June 2017. If the Put Payment is exercised, the Consultant will be precluded from competing or consulting with another theme park for a period of five years after exercise, and the Consultant Agreement allows the Company the right to use ideas generated during the term of the Consultant Agreement without further payment. In addition, the 2009 Amendment established a formula-based method that includes a risk premium of 6.5% with respect to the Orlando parks to determine the amount of the Put Payment and modified terms related to comparable projects so that in addition to the existing comparable parks, three contemplated comparable parks are vested immediately for purposes of the quarterly consulting fee payments but each such contemplated comparable park must still be open for at least one year at the time the Put Payment is exercised in order for such project to be included in the Put Payment. The Consultant Agreement allows the Consultant to make a one-time election to fix the values for certain, but not all, inputs into the aforementioned formula to establish a minimum amount for the one-time payment to the Consultant (the “Alternative Payment”) in the event that the date the Consultant gives notice to terminate his right to receive compensation under the Consultant Agreement is at least 90 days before March 31, 2018. Although the Consultant made this election on January 15, 2010, the actual amount of the Alternative Payment cannot be determined prior to the Consultant exercising his right to receive the Put Payment, as the Alternative Payment amount is dependent on a discount rate that will set 90 days after the date on which the Consultant exercises his right to receive the Put Payment. The discount rate is based on the actual treasury rate on such date plus a risk premium. However, based on a sensitivity analysis of possible treasury and comparable rates for the United States and Japan ranging from 0% to 15%, the Company estimates that the Alternative Payment for its parks could range from $160,000,000 to $290,000,000, and the Alternative Payment for Universal Studios Japan could range from $135,000,000 to $245,000,000. This range has been calculated based on hypothetical treasury rates, and the Company cannot assure you as to the timing or amount of the Put Payment or the Alternative Payment. These payments may be higher or lower than the range provided above and any such deviation could be material. Any such payment will only be finally determinable once the Consultant makes an election and the payment becomes due. The 2009 Amendment also provides the Consultant a second-priority lien over UCDP’s real and tangible personal property (including a mortgage on the Company’s real property up to $400,000,000) to secure the Company’s periodic and one-time payment obligations and such amendment caps the Company’s ability to incur secured borrowings to an amount equal to the greater of $975,000,000 and 3.75x UCDP’s EBITDA (as defined in the renewed senior secured credit facilities). In connection with the 2009 Amendment, NBC Universal, Inc. has guaranteed the Company’s obligations under the Consultant Agreement and the Company amended its partnership agreement to increase the special fee payable to VUE thereunder through June 2017 from 5.0% to 5.25%.
11
8. Guarantor information
The Company’s payment obligations under the 2016 notes and the 2015 notes are fully and unconditionally guaranteed, jointly and severally, by the following domestic wholly owned subsidiaries: Universal Parks & Resorts Vacations and Universal Orlando Online Merchandise Store. The following is condensed consolidating financial information as of September 26, 2010 and December 31, 2009 and for the three and nine months ended September 26, 2010 and September 27, 2009 for UCDP and UCDP Finance, Inc. (collectively “Parent”), the combined guarantor subsidiaries of UCDP (collectively, the “Guarantors”), and the combined non-guarantor subsidiaries of UCDP (collectively, the “Non-Guarantors”).
Condensed consolidating statement of operations
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Three months ended September 26, 2010
|
||||||||||||||||||||
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Consolidated
|
||||||||||||||||
Operating revenues:
|
||||||||||||||||||||
Total operating revenues
|
$ | 334,563 | $ | 39,236 | $ | 6,137 | $ | (16,369 | ) | $ | 363,567 | |||||||||
Costs and operating expenses:
|
||||||||||||||||||||
Theme park operations
|
54,034 | - | - | - | 54,034 | |||||||||||||||
Theme park selling, general and administrative
|
42,229 | - | - | - | 42,229 | |||||||||||||||
Theme park cost of products sold
|
42,625 | - | - | - | 42,625 | |||||||||||||||
Other costs and operating expenses
|
72,273 | 36,664 | 5,119 | (16,369 | ) | 97,687 | ||||||||||||||
Total costs and operating expenses
|
211,161 | 36,664 | 5,119 | (16,369 | ) | 236,575 | ||||||||||||||
Operating income
|
123,402 | 2,572 | 1,018 | - | 126,992 | |||||||||||||||
Other expense (income):
|
||||||||||||||||||||
Interest expense
|
30,014 | - | 8 | - | 30,022 | |||||||||||||||
Other income
|
(782 | ) | (17 | ) | - | - | (799 | ) | ||||||||||||
Total other expense (income), net
|
29,232 | (17 | ) | 8 | - | 29,223 | ||||||||||||||
Net income
|
94,170 | 2,589 | 1,010 | - | 97,769 | |||||||||||||||
Less: net income attributable to the noncontrolling interest in UCRP
|
- | - | - | 505 | 505 | |||||||||||||||
Net income (loss) attributable to the Partners
|
$ | 94,170 | $ | 2,589 | $ | 1,010 | $ | (505 | ) | $ | 97,264 |
Condensed consolidating statement of operations
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Three months ended September 27, 2009
|
||||||||||||||||||||
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Consolidated
|
||||||||||||||||
Operating revenues:
|
||||||||||||||||||||
Total operating revenues
|
$ | 211,276 | $ | 14,948 | $ | 4,954 | $ | (6,603 | ) | $ | 224,575 | |||||||||
Costs and operating expenses:
|
||||||||||||||||||||
Theme park operations
|
43,523 | - | - | - | 43,523 | |||||||||||||||
Theme park selling, general and administrative
|
28,620 | - | - | - | 28,620 | |||||||||||||||
Theme park cost of products sold
|
25,349 | - | - | - | 25,349 | |||||||||||||||
Other costs and operating expenses
|
53,106 | 15,004 | 4,553 | (6,603 | ) | 66,060 | ||||||||||||||
Total costs and operating expenses
|
150,598 | 15,004 | 4,553 | (6,603 | ) | 163,552 | ||||||||||||||
Operating income (loss)
|
60,678 | (56 | ) | 401 | - | 61,023 | ||||||||||||||
Other expense (income):
|
||||||||||||||||||||
Interest expense
|
26,032 | 3 | 8 | - | 26,043 | |||||||||||||||
Other income
|
(2,341 | ) | (6 | ) | - | - | (2,347 | ) | ||||||||||||
Total other expense (income), net
|
23,691 | (3 | ) | 8 | - | 23,696 | ||||||||||||||
Net income (loss)
|
36,987 | (53 | ) | 393 | - | 37,327 | ||||||||||||||
Less: net income attributable to the noncontrolling interest in UCRP
|
- | - | - | 197 | 197 | |||||||||||||||
Net income (loss) attributable to the Partners
|
$ | 36,987 | $ | (53 | ) | $ | 393 | $ | (197 | ) | $ | 37,130 |
Condensed consolidating statement of operations
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Nine months ended September 26, 2010
|
||||||||||||||||||||
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Consolidated
|
||||||||||||||||
Operating revenues:
|
||||||||||||||||||||
Total operating revenues
|
$ | 712,682 | $ | 71,256 | $ | 17,058 | $ | (31,362 | ) | $ | 769,634 | |||||||||
Costs and operating expenses:
|
||||||||||||||||||||
Theme park operations
|
145,647 | - | - | - | 145,647 | |||||||||||||||
Theme park selling, general and administrative
|
143,641 | - | - | - | 143,641 | |||||||||||||||
Theme park cost of products sold
|
90,744 | - | - | - | 90,744 | |||||||||||||||
Other costs and operating expenses
|
185,178 | 69,695 | 14,121 | (31,362 | ) | 237,632 | ||||||||||||||
Total costs and operating expenses
|
565,210 | 69,695 | 14,121 | (31,362 | ) | 617,664 | ||||||||||||||
Operating income
|
147,472 | 1,561 | 2,937 | - | 151,970 | |||||||||||||||
Other expense (income):
|
||||||||||||||||||||
Interest expense
|
86,362 | 1 | 21 | - | 86,384 | |||||||||||||||
Other expense (income)
|
1,497 | (26 | ) | - | - | 1,471 | ||||||||||||||
Total other expense (income)
|
87,859 | (25 | ) | 21 | - | 87,855 | ||||||||||||||
Net income
|
59,613 | 1,586 | 2,916 | - | 64,115 | |||||||||||||||
Less: net income attributable to the noncontrolling interest in UCRP
|
- | - | - | 1,457 | 1,457 | |||||||||||||||
Net income (loss) attributable to the Partners
|
$ | 59,613 | $ | 1,586 | $ | 2,916 | $ | (1,457 | ) | $ | 62,658 |
12
Condensed consolidating statement of operations
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Nine months ended September 27, 2009
|
||||||||||||||||||||
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Consolidated
|
||||||||||||||||
Operating revenues:
|
||||||||||||||||||||
Total operating revenues
|
$ | 562,478 | $ | 42,495 | $ | 17,152 | $ | (18,019 | ) | $ | 604,106 | |||||||||
Costs and operating expenses:
|
||||||||||||||||||||
Theme park operations
|
127,244 | - | - | - | 127,244 | |||||||||||||||
Theme park selling, general and admin
|
92,865 | - | - | - | 92,865 | |||||||||||||||
Theme park costs of products sold
|
70,017 | - | - | - | 70,017 | |||||||||||||||
Other costs and operating expenses
|
155,351 | 43,148 | 14,312 | (18,019 | ) | 194,792 | ||||||||||||||
Total costs and operating expenses
|
445,477 | 43,148 | 14,312 | (18,019 | ) | 484,918 | ||||||||||||||
Operating income (loss)
|
117,001 | (653 | ) | 2,840 | - | 119,188 | ||||||||||||||
Other expense (income):
|
||||||||||||||||||||
Interest expense
|
77,213 | 3 | 23 | - | 77,239 | |||||||||||||||
Other income
|
(5,955 | ) | (21 | ) | - | - | (5,976 | ) | ||||||||||||
Total other expense (income)
|
71,258 | (18 | ) | 23 | - | 71,263 | ||||||||||||||
Net income (loss)
|
45,743 | (635 | ) | 2,817 | - | 47,925 | ||||||||||||||
Less: net income attributable to the noncontrolling interest in UCRP
|
- | - | - | 1,409 | 1,409 | |||||||||||||||
Net income (loss) attributable to the Partners
|
$ | 45,743 | $ | (635 | ) | $ | 2,817 | $ | (1,409 | ) | $ | 46,516 |
Condensed consolidating balance sheet
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
September 26, 2010
|
||||||||||||||||||||
|
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Total
|
|||||||||||||||
ASSETS
|
||||||||||||||||||||
Current assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 150,968 | $ | 22,915 | $ | 264 | $ | - | $ | 174,147 | ||||||||||
Other current assets
|
111,420 | 2,267 | 1,373 | (5,290 | ) | 109,770 | ||||||||||||||
Total current assets
|
262,388 | 25,182 | 1,637 | (5,290 | ) | 283,917 | ||||||||||||||
Property and equipment, at cost
|
3,312,661 | 1,171 | 13,867 | - | 3,327,699 | |||||||||||||||
Less accumulated depreciation
|
(1,598,082 | ) | (1,039 | ) | (7,583 | ) | - | (1,606,704 | ) | |||||||||||
Total property and equipment, net
|
1,714,579 | 132 | 6,284 | - | 1,720,995 | |||||||||||||||
Other assets:
|
||||||||||||||||||||
Investments in unconsolidated entities
|
13,053 | - | - | (3,700 | ) | 9,353 | ||||||||||||||
Intangible assets, net
|
43,893 | - | 4,835 | - | 48,728 | |||||||||||||||
Other assets
|
29,995 | - | - | - | 29,995 | |||||||||||||||
Total other assets
|
86,941 | - | 4,835 | (3,700 | ) | 88,076 | ||||||||||||||
Total assets
|
$ | 2,063,908 | $ | 25,314 | $ | 12,756 | $ | (8,990 | ) | $ | 2,092,988 | |||||||||
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
|
||||||||||||||||||||
Current liabilities:
|
||||||||||||||||||||
Accounts payable and accrued liabilities
|
$ | 135,622 | $ | 2,378 | $ | 709 | $ | (372 | ) | $ | 138,337 | |||||||||
Other current liabilities
|
96,995 | 24,646 | 1,227 | (4,918 | ) | 117,950 | ||||||||||||||
Total current liabilities
|
232,617 | 27,024 | 1,936 | (5,290 | ) | 256,287 | ||||||||||||||
Long-term liabilities:
|
||||||||||||||||||||
Long-term borrowings
|
1,487,346 | - | - | - | 1,487,346 | |||||||||||||||
Other long-term liabilities
|
31,885 | - | - | - | 31,885 | |||||||||||||||
Total long-term liabilities
|
1,519,231 | - | - | - | 1,519,231 | |||||||||||||||
Equity (Deficit):
|
||||||||||||||||||||
Partners' equity (deficit)
|
312,060 | (1,710 | ) | 10,820 | (9,110 | ) | 312,060 | |||||||||||||
Noncontrolling interest in UCRP
|
- | - | - | 5,410 | 5,410 | |||||||||||||||
Total equity (deficit)
|
312,060 | (1,710 | ) | 10,820 | (3,700 | ) | 317,470 | |||||||||||||
Total liabilities and equity (deficit)
|
$ | 2,063,908 | $ | 25,314 | $ | 12,756 | $ | (8,990 | ) | $ | 2,092,988 |
13
Condensed consolidating balance sheet
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
December 31, 2009
|
||||||||||||||||||||
|
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Total
|
|||||||||||||||
ASSETS
|
||||||||||||||||||||
Current assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 43,313 | $ | 1,481 | $ | 363 | $ | - | $ | 45,157 | ||||||||||
Other current assets
|
96,153 | 883 | 1,031 | (3,627 | ) | 94,440 | ||||||||||||||
Total current assets
|
139,466 | 2,364 | 1,394 | (3,627 | ) | 139,597 | ||||||||||||||
Property and equipment, at cost
|
3,243,237 | 1,175 | 13,784 | - | 3,258,196 | |||||||||||||||
Less accumulated depreciation
|
(1,513,677 | ) | (1,006 | ) | (6,937 | ) | - | (1,521,620 | ) | |||||||||||
Total property and equipment, net
|
1,729,560 | 169 | 6,847 | - | 1,736,576 | |||||||||||||||
Other assets:
|
||||||||||||||||||||
Investments in unconsolidated entities
|
12,578 | - | - | (2,658 | ) | 9,920 | ||||||||||||||
Intangible assets, net
|
45,918 | - | 5,270 | - | 51,188 | |||||||||||||||
Other assets
|
32,323 | - | - | - | 32,323 | |||||||||||||||
Total other assets
|
90,819 | - | 5,270 | (2,658 | ) | 93,431 | ||||||||||||||
Total assets
|
$ | 1,959,845 | $ | 2,533 | $ | 13,511 | $ | (6,285 | ) | $ | 1,969,604 | |||||||||
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
|
||||||||||||||||||||
Current liabilities:
|
||||||||||||||||||||
Accounts payable and accrued liabilities
|
$ | 113,121 | $ | 1,214 | $ | 710 | $ | (109 | ) | $ | 114,936 | |||||||||
Other current liabilities
|
67,041 | 4,617 | 891 | (3,519 | ) | 69,030 | ||||||||||||||
Total current liabilities
|
180,162 | 5,831 | 1,601 | (3,628 | ) | 183,966 | ||||||||||||||
Long-term liabilities:
|
||||||||||||||||||||
Long-term borrowings
|
1,495,730 | - | - | - | 1,495,730 | |||||||||||||||
Other long-term liabilities
|
34,897 | - | - | - | 34,897 | |||||||||||||||
Total long-term liabilities
|
1,530,627 | - | - | - | 1,530,627 | |||||||||||||||
Equity (Deficit):
|
||||||||||||||||||||
Partners' equity (deficit)
|
249,056 | (3,298 | ) | 11,910 | (8,612 | ) | 249,056 | |||||||||||||
Noncontrolling interest in UCRP
|
- | - | - | 5,955 | 5,955 | |||||||||||||||
Total equity (deficit)
|
249,056 | (3,298 | ) | 11,910 | (2,657 | ) | 255,011 | |||||||||||||
Total liabilities and equity (deficit)
|
$ | 1,959,845 | $ | 2,533 | $ | 13,511 | $ | (6,285 | ) | $ | 1,969,604 |
Condensed consolidating statement of cash flows
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Nine months ended September 26, 2010
|
||||||||||||||||||||
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Consolidated
|
||||||||||||||||
|
||||||||||||||||||||
Cash flows from operating activities
|
||||||||||||||||||||
Net cash and cash equivalents provided by (used in) operating activities
|
$ | 224,329 | $ | 21,434 | $ | 3,988 | $ | (2,002 | ) | $ | 247,749 | |||||||||
Cash flows from investing activities
|
||||||||||||||||||||
Property and equipment acquisitions
|
(93,937 | ) | - | (83 | ) | - | (94,020 | ) | ||||||||||||
Net cash and cash equivalents used in investing activities
|
(93,937 | ) | - | (83 | ) | - | (94,020 | ) | ||||||||||||
Cash flows from financing activities
|
||||||||||||||||||||
Payment of partner distributions
|
- | - | (4,004 | ) | 4,004 | - | ||||||||||||||
Receipt of contributions from Holdings
|
346 | - | - | - | 346 | |||||||||||||||
Distributions of noncontrolling interest in equity of UCRP
|
- | - | - | (2,002 | ) | (2,002 | ) | |||||||||||||
Payments on long-term borrowings, capital lease and financing obligations
|
(14,518 | ) | - | - | - | (14,518 | ) | |||||||||||||
Payments of financing costs
|
(8,565 | ) | - | - | - | (8,565 | ) | |||||||||||||
Net cash and cash equivalents (used in) provided by financing activities
|
(22,737 | ) | - | (4,004 | ) | 2,002 | (24,739 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents
|
107,655 | 21,434 | (99 | ) | - | 128,990 | ||||||||||||||
Cash and cash equivalents at beginning of period
|
43,313 | 1,481 | 363 | - | 45,157 | |||||||||||||||
Cash and cash equivalents at end of period
|
$ | 150,968 | $ | 22,915 | $ | 264 | $ | - | $ | 174,147 |
14
Condensed consolidating statement of cash flows
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Nine months ended September 27, 2009
|
||||||||||||||||||||
Parent
|
Guarantors
|
Non-Guarantors
|
Eliminations
|
Consolidated
|
||||||||||||||||
|
||||||||||||||||||||
Cash flows from operating activities
|
||||||||||||||||||||
Net cash and cash equivalents provided by (used in) operating activities
|
$ | 161,043 | $ | (1,224 | ) | $ | 4,169 | $ | (2,078 | ) | $ | 161,910 | ||||||||
Cash flows from investing activities
|
||||||||||||||||||||
Property and equipment acquisitions
|
(102,482 | ) | (201 | ) | (87 | ) | - | (102,770 | ) | |||||||||||
Proceeds related to capital reimbursements
|
2,054 | - | - | 2,054 | ||||||||||||||||
Net cash and cash equivalents used in investing activities
|
(100,428 | ) | (201 | ) | (87 | ) | - | (100,716 | ) | |||||||||||
Cash flows from financing activities
|
||||||||||||||||||||
Payments of partner distributions
|
(59,554 | ) | - | (4,156 | ) | 4,156 | (59,554 | ) | ||||||||||||
Distributions of noncontrolling interest of UCRP
|
- | - | - | (2,078 | ) | (2,078 | ) | |||||||||||||
Payments on long-term borrowings, capital lease and financing obligations
|
(5,822 | ) | - | - | - | (5,822 | ) | |||||||||||||
Net cash and cash equivalents (used in) provided by financing activities
|
(65,376 | ) | - | (4,156 | ) | 2,078 | (67,454 | ) | ||||||||||||
Net decrease in cash and cash equivalents
|
(4,761 | ) | (1,425 | ) | (74 | ) | - | (6,260 | ) | |||||||||||
Cash and cash equivalents at beginning of period
|
83,760 | 3,719 | 319 | - | 87,798 | |||||||||||||||
Cash and cash equivalents at end of period
|
$ | 78,999 | $ | 2,294 | $ | 245 | $ | - | $ | 81,538 |
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview Related to Financial Results
On June 18, 2010 we opened The Wizarding World of Harry PotterTM. Prior to this date, our year-to-date Paid Theme Park Admissions was down 5% when compared to the same period of 2009. Our attendance and financial results improved significantly subsequent to the opening of this new content as we broke several all-time operating records during the third quarter of 2010. Specifically, Paid Theme Park Admissions, Total Operating Revenues, EBITDA (as defined herein), and Net Income during the third quarter of 2010 were the highest quarterly operating results in our 20-year history. While Paid Theme Park Admissions increased 36% when compared to the third quarter of 2009, Total Operating Revenues increased $139 million, or 62%. EBITDA totaled $159 million, which increased $72 million, or 82%, versus the third quarter of 2009. These quarterly results significantly improved our year-to-date financial results. On a year-to-date basis through September 26, 2010, Paid Theme Park Admissions increased 12% when compared to the first nine months of 2009. For this same period compared to 2009, Total Operating Revenues increased $166 million, or 27%, while EBITDA was up $41 million, or 21%. At September 26, 2010, we had $249 million in available cash and cash equivalents, including $75 million of availability under our revolving credit facility. We owed $1,516 million on our gross indebtedness at September 26, 2010, of which $7 million was current.
Seasonality
Theme park attendance follows a seasonal pattern which coincides closely with holiday and school schedules. The year begins with the end of the peak Christmas and New Year’s holiday period. When children return to school, attendance levels subside. During the March to April timeframe, spring break and Easter vacation periods drive seasonally high attendance. Since the peak spring break period fluctuates from year to year between the end of the first quarter and the beginning of the second quarter, historical quarterly financial information might not be comparable. May is a traditionally slow attendance period. June marks the beginning of the summer attendance peak when local schools are out for the summer. This peak attendance period continues throughout the month of June, as schools outside of Florida finish their terms. The peak summer period includes the entire month of July and the first few weeks in August, when the local schools begin to go back into session. Attendance levels continue to decline through Labor Day, when schools outside of Florida begin. Excluding special events such as “Rock the Universe” in September and “Halloween Horror Nights” in October, the period from September through November is seasonally slow, with an attendance spike around Thanksgiving week. Attendance falls again after Thanksgiving weekend, and does not pick up until the third week of December, when the peak Christmas and New Year’s holiday period begins. The Atlantic Ocean hurricane season begins in June and ends in November of each year. Historically, hurricanes have had little impact on Orlando theme parks. Since opening in 1990, our parks have been closed only five days due to the inclement weather caused by hurricanes, four of which occurred during the 2004 and 2005 hurricane seasons.
Based on the seasonality of our attendance, the results for the three and nine months ended September 26, 2010 and September 27, 2009 are not necessarily indicative of results for the full year.
Critical accounting policies and estimates
In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles. Results could differ significantly from those estimates under different assumptions and conditions. We believe that the application of these accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of all of our accounting policies, including our critical accounting policies, see Note 2 in our audited consolidated financial statements for the year ended December 31, 2009 filed with the Securities and Exchange Commission under cover of Form S-4/A. Besides what is disclosed within this document, there have been no material developments with respect to the critical accounting policies discussed in detail in our Form S-4/A within ”Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Period end
The three months ended September 26, 2010 and September 27, 2009 each contained 91 days. The nine months ended September 26, 2010 contained 269 days, while the nine months ended September 27, 2009 contained 270 days.
Recent accounting pronouncements
See “Note 1. General” in “Part I – Item 1. Financial Statements” for a detailed description of recent accounting pronouncements.
16
Results of operations
Three Months Ended September 26, 2010 Compared to Three Months Ended September 27, 2009
The following table summarizes our results of operations during the three months ended September 26, 2010 and September 27, 2009 (in thousands except per capita amounts and percentages):
Three Months Ended
|
% Change
|
|||||||||||
September 26, 2010
|
September 27, 2009
|
Favorable/
(unfavorable)
|
||||||||||
Operational Data:
|
||||||||||||
Paid theme park admissions
|
3,684 | 2,710 | 35.9 | % | ||||||||
Turnstile theme park admissions
|
3,856 | 2,958 | 30.4 | % | ||||||||
Theme park ticket revenue per paid admission
|
$ | 51.64 | $ | 44.30 | 16.6 | % | ||||||
Theme park food, beverage and merchandise revenue per turnstile admission
|
23.89 | 17.30 | 38.1 | % | ||||||||
Other theme park related revenue per turnstile admission
|
8.56 | 7.88 | 8.6 | % | ||||||||
Statement of operations data:
|
||||||||||||
Operating revenues:
|
||||||||||||
Theme park ticket revenue
|
$ | 190,259 | $ | 120,056 | 58.5 | % | ||||||
Theme park food and beverage
|
43,411 | 27,311 | 59.0 | % | ||||||||
Theme park merchandise
|
48,693 | 23,860 |
NM
|
|||||||||
Other theme park related
|
33,017 | 23,322 | 41.6 | % | ||||||||
Other
|
48,187 | 30,026 | 60.5 | % | ||||||||
Total operating revenues
|
363,567 | 224,575 | 61.9 | % | ||||||||
Costs and operating expenses:
|
||||||||||||
Theme park operations
|
54,034 | 43,523 | (24.2 | %) | ||||||||
Theme park selling, general and administrative
|
42,229 | 28,620 | (47.6 | %) | ||||||||
Theme park cost of products sold
|
42,625 | 25,349 | (68.2 | %) | ||||||||
Special fee payable to Vivendi Universal Entertainment and consultant fee
|
24,431 | 14,665 | (66.6 | %) | ||||||||
Depreciation and amortization
|
32,029 | 26,186 | (22.3 | %) | ||||||||
Other
|
41,227 | 25,209 | (63.5 | %) | ||||||||
Total costs and operating expenses
|
236,575 | 163,552 | (44.6 | %) | ||||||||
Operating income
|
126,992 | 61,023 |
NM
|
|||||||||
Non-operating expense, net
|
29,223 | 23,696 | (23.3 | %) | ||||||||
Net income
|
97,769 | 37,327 |
NM
|
|||||||||
Less: net income attributable to the noncontrolling interest in UCRP
|
505 | 197 |
NM
|
|||||||||
Net income attributable to the Partners
|
$ | 97,264 | $ | 37,130 |
NM
|
|||||||
NM--Not meaningful
|
Due to the success of The Wizarding World of Harry PotterTM, which opened June 18, 2010, we posted our best quarterly results in our 20-year history as it relates to Paid Theme Park Admissions, Total Operating Revenues, EBITDA, and Net Income. Paid Theme Park Admissions increased 36% when compared to the third quarter of 2009, as we saw significant growth in both our domestic and international markets. Total theme park spending on a per guest basis increased 21%, with every category of per capita spending showing growth. As a result of increased attendance and strong per capita results, our Total Operating Revenues increased $139.0 million, or 62%, versus the third quarter of 2009. Theme Park Ticket Revenue Per Paid Admission increased 17% as a result of new ticket offerings and selective price changes to maximize yield. Theme Park Food, Beverage and Merchandise Revenue Per Turnstile Admission increased 38% primarily due to guest spending on new merchandise products and food and beverage offerings related to The Wizarding World of Harry PotterTM. Other Revenue increased $18.2 million, or 61%, when compared to the third quarter of 2009 primarily due to $14.4 million in increased revenue related to higher volume at our travel company and $3.1 million in additional revenue from our CityWalk operations. Our travel company has benefited from offering guests exclusive vacation packages which include certain perks, such as early park admission to experience The Wizarding World of Harry PotterTM.
Theme Park Operations increased $10.5 million, or 24%, largely due to incremental spend on entertainment, ride maintenance and other operating costs resulting from increased attendance, the opening of The Wizarding World of Harry PotterTM, and the addition of the Hollywood Rip Ride Rockit® coaster which opened in August 2009. Theme Park Selling, General and Administrative increased $13.6 million, or 48%, primarily due to additional marketing support related to The Wizarding World of Harry PotterTM and growth in the anticipated payouts under our incentive compensation programs. While Theme Park Cost of Product Sold increased $17.3 million, Theme Park Cost of Product Sold as a percentage of Theme Park Food and Beverage Revenue and Theme Park Merchandise Revenue decreased 3.3% to 46.3%, which was primarily as a result of increased volume. Other Costs and Operating Expenses increased $16.0 million, principally due to increased operating costs at our travel company, as a result of increased volume as discussed above. Non-Operating Expense increased $5.5 million when compared to the same period in 2009. This is due to higher interest expense of $4.0 million due to our increased indebtedness resulting from our refinancing in November 2009 in which UCDP refinanced debt previously at the Holding level and changes in the fair value of interest rate swaps which benefited the third quarter of 2009.
17
Nine Months Ended September 26, 2010 Compared to Nine Months Ended September 27, 2009
The following table summarizes our results of operations during the nine months ended September 26, 2010 and September 27, 2009 (in thousands except per capita amounts and percentages):
Nine Months Ended
|
% Change
|
|||||||||||
September 26, 2010
|
September 27, 2009
|
Favorable/
(unfavorable)
|
||||||||||
Operational Data:
|
||||||||||||
Paid theme park admissions
|
7,898 | 7,046 | 12.1 | % | ||||||||
Turnstile theme park admissions
|
8,385 | 7,705 | 8.8 | % | ||||||||
Theme park ticket revenue per paid admission
|
$ | 51.39 | $ | 44.15 | 16.4 | % | ||||||
Theme park food, beverage and merchandise revenue per turnstile admission
|
21.69 | 17.65 | 22.9 | % | ||||||||
Other theme park related revenue per turnstile admission
|
8.64 | 8.29 | 4.2 | % | ||||||||
Statement of operations data:
|
||||||||||||
Operating revenues:
|
||||||||||||
Theme park ticket revenue
|
$ | 405,892 | $ | 311,072 | 30.5 | % | ||||||
Theme park food and beverage
|
88,936 | 72,357 | 22.9 | % | ||||||||
Theme park merchandise
|
92,957 | 63,664 | 46.0 | % | ||||||||
Other theme park related
|
72,453 | 63,841 | 13.5 | % | ||||||||
Other
|
109,396 | 93,172 | 17.4 | % | ||||||||
Total operating revenues
|
769,634 | 604,106 | 27.4 | % | ||||||||
Costs and operating expenses:
|
||||||||||||
Theme park operations
|
145,647 | 127,244 | (14.5 | %) | ||||||||
Theme park selling, general and administrative
|
143,641 | 92,865 | (54.7 | %) | ||||||||
Theme park cost of products sold
|
90,744 | 70,017 | (29.6 | %) | ||||||||
Special fee payable to Vivendi Universal Entertainment and consultant fee
|
51,232 | 38,568 | (32.8 | %) | ||||||||
Depreciation and amortization
|
87,655 | 79,015 | (10.9 | %) | ||||||||
Other
|
98,745 | 77,209 | (27.9 | %) | ||||||||
Total costs and operating expenses
|
617,664 | 484,918 | (27.4 | %) | ||||||||
Operating income
|
151,970 | 119,188 | 27.5 | % | ||||||||
Non-operating expense, net
|
87,855 | 71,263 | (23.3 | %) | ||||||||
Net income
|
64,115 | 47,925 | 33.8 | % | ||||||||
Less: net income attributable to the noncontrolling interest in UCRP
|
1,457 | 1,409 | (3.4 | %) | ||||||||
Net income attributable to the Partners
|
$ | 62,658 | $ | 46,516 | 34.7 | % |
Our year-to-date results through September 26, 2010 significantly benefited from the opening of The Wizarding World of Harry PotterTM. Paid Theme Park Admissions increased 12% when compared to the first nine months of 2009. Both our domestic and international markets experienced low-teen digit percentage increases versus prior year. Total theme park spending on a per guest basis increased 17% over the first nine months of 2009. As a result of increased attendance and incremental spending on a per guest basis, Total Operating Revenues experienced year-over-year growth of 27%. Theme Park Ticket Revenue Per Paid Admission increased 16% as a result of new ticket offerings and selective price changes to maximize yield. Theme Park Food, Beverage, and Merchandise Revenue Per Turnstile Admission increased 23% primarily due to guest spending on new merchandise products and food and beverage offerings related to The Wizarding World of Harry PotterTM. Other Revenue increased $16.2 million, or 17%, when compared to the same period last year, which was principally due to increased revenue related to our travel company. Our travel company has benefited from offering guests exclusive vacation packages which include certain perks, such as early park admission to experience The Wizarding World of Harry PotterTM.
Theme Park Operations increased $18.4 million, or 15%, largely due to incremental spend on entertainment, ride maintenance and other operating costs resulting from increased attendance, the opening of The Wizarding World of Harry PotterTM, and the addition of the Hollywood Rip Ride Rockit® coaster which opened in August 2009. Theme Park Selling, General and Administrative increased $50.8 million, when compared to the first nine months of 2009 primarily due to increased marketing spend of $37.0 million and growth in the anticipated payouts under our incentive compensation programs. In 2009, we reduced our marketing spend as part of our cost containment strategy, while in 2010 we have reinstated much of these marketing costs and incurred incremental marketing spend related to the launch of The Wizarding World of Harry PotterTM. While Theme Park Cost of Product Sold increased $20.7 million, Theme Park Cost of Product Sold as a percentage of Theme Park Food and Beverage Revenue and Theme Park Merchandise Revenue decreased 1.6% to 49.9%, which was primarily as a result of increased volume. Other Costs and Operating Expenses increased $21.5 million primarily due to increased operating costs at our travel company as a result of increased volume as discussed above. Non-Operating Expenses increased $16.6 million year-over-year. This is due to higher interest expense of $9.1 million due to our increased indebtedness resulting from our refinancing in November 2009 in which UCDP refinanced debt previously at the Holdings level, $3.3 million in expenses incurred in connection with the amendment of our renewed senior secured credit facility in April 2010 and changes in the fair value of our interest rate swap which benefited the first nine months of 2009.
Other performance measures
We are providing Covenant EBITDA because it is used by some investors as a measure of our ability to service debt, while we are also providing EBITDA as it is a measure of Company operating performance under our Annual Incentive Plan. While EBITDA represents earnings before interest, taxes and depreciation and amortization, Covenant EBITDA includes certain other adjustments permitted by the definition of EBITDA in our renewed senior secured credit agreement and the indentures governing the notes. Some of these adjustments include exclusion of gains or losses from the sale of assets held for sale, exclusion of impairment charges on long lived assets and adjustments related to income and cash flows derived from investments in unconsolidated entities. Covenant EBITDA and EBITDA are not prepared in accordance with U.S. generally accepted accounting principles and should not be considered alternatives for Net Income, Net Cash And Cash Equivalents Provided By Operating Activities and other consolidated income or cash flow statement data prepared in accordance with U.S. generally accepted accounting principles or as measures of profitability or liquidity. Covenant EBITDA and EBITDA, because they are before debt service, capital expenditures and working capital needs, do not represent cash that is available for other purposes at our discretion. Our presentation of Covenant EBITDA and EBITDA may not be comparable to similarly titled measures reported by other companies. For these reasons, we have prepared a two step reconciliation between our U.S. generally accepted accounting principles financial measures, EBITDA as well as Covenant EBITDA. Covenant EBITDA is the primary basis in our renewed senior secured credit agreement to determine our quarterly compliance with our secured leverage ratio and the interest coverage ratio, which is computed based on the prior twelve months. See below for related reconciliations.
18
The following is a reconciliation of Net Cash And Cash Equivalents Provided By Operating Activities to EBITDA and Covenant EBITDA for each of the periods presented above:
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
(Dollars in thousands)
|
September 26, 2010
|
September 27, 2009
|
September 26, 2010
|
September 27, 2009
|
||||||||||||
Net cash and cash equivalents provided by operating activities
|
$ | 163,928 | $ | 88,653 | $ | 247,749 | $ | 161,910 | ||||||||
Adjustments:
|
||||||||||||||||
Interest expense
|
30,022 | 26,043 | 86,384 | 77,239 | ||||||||||||
Interest income
|
(85 | ) | (69 | ) | (122 | ) | (158 | ) | ||||||||
Amortization of deferred finance costs
|
(747 | ) | (2,390 | ) | (2,614 | ) | (7,169 | ) | ||||||||
Interest on financing obligations
|
(536 | ) | (539 | ) | (1,742 | ) | (1,797 | ) | ||||||||
Changes in deferred special fee payable and related interest payable to affiliates
|
- | (759 | ) | - | (2,237 | ) | ||||||||||
Distributions from investments in unconsolidated entities
|
(710 | ) | (1,225 | ) | (2,284 | ) | (2,540 | ) | ||||||||
Income from investments in unconsolidated entities
|
714 | 272 | 1,717 | 1,601 | ||||||||||||
Accretion of bond discount
|
(1,243 | ) | (209 | ) | (2,855 | ) | (624 | ) | ||||||||
Income attributable to the noncontrolling interest in UCRP
|
(505 | ) | (197 | ) | (1,457 | ) | (1,409 | ) | ||||||||
Net change in working capital accounts (1)
|
(31,608 | ) | (22,296 | ) | (84,891 | ) | (26,421 | ) | ||||||||
EBITDA
|
159,230 | 87,284 | 239,885 | 198,395 | ||||||||||||
Adjustments to arrive at Covenant EBITDA:
|
||||||||||||||||
Income attributable to the noncontrolling interest in UCRP
|
505 | 197 | 1,457 | 1,409 | ||||||||||||
Income from investments in unconsolidated entities
|
(714 | ) | (272 | ) | (1,717 | ) | (1,601 | ) | ||||||||
Distributions from investments in unconsolidated entities
|
710 | 1,225 | 2,284 | 2,540 | ||||||||||||
Interest income
|
85 | 69 | 122 | 158 | ||||||||||||
Other
|
750 | - | (1,060 | ) | 965 | |||||||||||
Covenant EBITDA
|
$ | 160,566 | $ | 88,503 | $ | 240,971 | $ | 201,866 |
(1) Net Change In Working Capital Accounts represents changes in operating assets and liabilities, which includes Accounts Receivable (net), Notes Receivable, Receivables From Related Parties, Inventories (net), Prepaid Expenses and Other Assets, Other Long-term Assets, Accounts Payable and Accrued Liabilities, Unearned Revenue, Due To Related Parties, and Other Long-term Liabilities.
The following is a reconciliation of Net Income Attributable to the Partners to EBITDA and Covenant EBITDA for each of the periods presented above:
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
(Dollars in thousands)
|
September 26, 2010
|
September 27, 2009
|
September 26, 2010
|
September 27, 2009
|
||||||||||||
Net income attributable to the Partners
|
$ | 97,264 | $ | 37,130 | $ | 62,658 | $ | 46,516 | ||||||||
Adjustments:
|
||||||||||||||||
Interest expense
|
30,022 | 26,043 | 86,384 | 77,239 | ||||||||||||
Expenses associated with debt refinancing
|
- | - | 3,310 | - | ||||||||||||
Loss on extinguishment of debt
|
||||||||||||||||
Depreciation and amortization
|
32,029 | 26,186 | 87,655 | 79,015 | ||||||||||||
Net change in fair value of interest rate swaps and amortization of accumulated other comprehensive loss (1)
|
- | (2,006 | ) | - | (4,217 | ) | ||||||||||
Interest income
|
(85 | ) | (69 | ) | (122 | ) | (158 | ) | ||||||||
EBITDA
|
159,230 | 87,284 | 239,885 | 198,395 | ||||||||||||
Adjustments to arrive at Covenant EBITDA:
|
||||||||||||||||
Income attributable to the noncontrolling interest in UCRP
|
505 | 197 | 1,457 | 1,409 | ||||||||||||
Income from investments in unconsolidated entities
|
(714 | ) | (272 | ) | (1,717 | ) | (1,601 | ) | ||||||||
Distributions from investments in unconsolidated entities
|
710 | 1,225 | 2,284 | 2,540 | ||||||||||||
Interest income
|
85 | 69 | 122 | 158 | ||||||||||||
Other
|
750 | - | (1,060 | ) | 965 | |||||||||||
Covenant EBITDA
|
$ | 160,566 | $ | 88,503 | $ | 240,971 | $ | 201,866 |
(1) See Note 3 in Item 1. Financial Statements.
19
Liquidity, capital resources and financial position
In light of the difficult economic climate, our significant leverage and our reliance on discretionary consumer spending, our liquidity is subject to numerous risks as discussed in “Risk factors” located within our Form S-4/A filed with the Securities and Exchange Commission.
Overview
We believe our ability to generate cash flows from operations is a key financial strength as well as our principal source of liquidity. We have generated positive cash flows from operations for each of the past five years, and we believe that we will continue to generate positive cash flows from operations in 2010 and in future years. In addition to the cash flow generated from our operations, our available cash and our unused revolving credit facility under our renewed senior secured credit agreement also provides liquidity. As such, we believe that we have the financial resources necessary to meet business requirements for the next 12 months. Historically, our principal liquidity requirements have been for capital expenditures, special fee payments, debt retirements, working capital and Consultant fee payments. Our strategy includes rationalizing our land holdings, which may involve sales from time to time of non-strategic land assets. As of September 26, 2010 and December 31, 2009, we had one parcel of land held for sale and are actively evaluating our land assets for optimization potential. We cannot assure you as to the timing, size or proceeds with respect to the sale of such parcel and we may not be able to sell land assets on commercially reasonable terms or at all.
Our current business structure is heavily leveraged. During 2009, we (i) issued the original notes totaling $625.0 million in aggregate principal amounts and (ii) entered into our renewed senior secured credit facilities consisting of term loans in the principal amount of $900.0 million and a revolving credit facility in an aggregate amount of up to $75.0 million. As of September 26, 2010, our total debt was $1,494.1million. This included $875.6 million outstanding under our renewed senior secured credit agreement ($891.0 million, net of a remaining unamortized discount of $15.4 million), $396.0 million outstanding under the senior notes ($400.0 million, net of a remaining unamortized discount of $4.0 million) and $222.5 million outstanding under the senior subordinated notes ($225.0 million, net of a remaining unamortized discount of $2.5 million). As of December 31, 2009, our total debt was $1,504.7 million. This included $886.9 million outstanding under our renewed senior secured credit agreement ($900.0 million, net of a remaining unamortized discount of $13.1 million), $395.5 million outstanding under the senior notes ($400.0 million, net of a remaining unamortized discount of $4.5 million) and $222.3 million outstanding under the senior subordinated notes ($225.0 million, net of a remaining unamortized discount of $2.7 million). Our 2004 senior secured credit agreement was renewed and additional credit in the amount of $366.0 million was extended to us on November 6, 2009. The term loans under the renewed senior secured credit agreement call for quarterly principal installments of 0.25% with the remainder due on November 6, 2014. The term loans under the renewed senior secured credit facilities are subject to mandatory prepayments of 100% of the net cash proceeds from certain asset sales and from the sale or issuance of indebtedness, in each case subject to certain exceptions including the notes, and of 50% of our excess cash flow for each fiscal year on or after December 31, 2010. The maturity date of the revolving credit facility under the renewed senior secured credit agreement is November 6, 2013. The senior notes will mature on November 15, 2015, and the senior subordinated notes will mature on November 15, 2016. Our renewed senior secured credit facilities and the notes are guaranteed by our future, and certain of our existing, domestic subsidiaries. Our access to capital markets and our ability to issue various securities to raise capital could be affected by our ratings. Additionally, our Partners, their subsidiaries or their affiliates may from time to time, depending upon market conditions, seek to purchase debt securities issued by us in open market or privately negotiated transactions or by other means.
In addition to there being no amounts drawn on the revolving credit facility under the renewed senior secured credit agreement as of September 26, 2010 and December 31, 2009, we have never utilized any amounts of these revolving credit facilities. In addition, we may borrow up to $150.0 million of uncommitted incremental term loans from time to time. On April 30, 2010 we amended our renewed senior secured credit facilities, which resulted in a reduction of the interest rate provision of our $891.0 million term loan. Specifically, the floor on the LIBOR rate was reduced from 2.25% to 1.75%, while the margin was reduced from 4.25% to 3.75%. The interest rates under the revolving credit facilities were not impacted. The interest rate applicable to borrowings under our renewed senior secured credit agreement, as amended, is based, at our option, on either a base rate (calculated as the highest of the prime rate in effect on such day, the sum of 1/2 of 1.00% plus the federal funds rate, and LIBOR plus 1.00%, provided that the base rate will never be less than 2.75%) or LIBOR (provided that LIBOR will never be less than 1.75%), in each case plus a specified margin. The specified margin for the term loans is 2.75% in the case of base rate loans and 3.75% in the case of LIBOR loans. The initial specified margin for the revolving facility is 3.25% in the case of base rate loans and 4.25% in the case of LIBOR loans. Any amounts payable under our renewed senior secured credit agreement not paid when due bear interest at a default rate of 2.00% above the rates otherwise applicable. In addition to paying interest on outstanding debt, we pay a commitment fee equal to (i) 0.75% per annum for any day on which more than 50% of the aggregate amount of the revolving credit facility commitments are drawn and (ii) 1.00% per annum for any other day.
Our renewed senior secured credit facilities contain various restrictive covenants. They prohibit us from prepaying other indebtedness, including the notes, and require us to maintain a minimum interest coverage ratio and maximum total leverage ratio. In addition, our renewed senior secured credit facilities, among other things, limit our ability to incur indebtedness or liens, make investments or declare or pay dividends. The indentures governing the notes, among other things: (i) limit our ability and the ability of our subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates and (ii) place restrictions on our ability and the ability of our subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of our assets. However, all of these covenants are subject to significant exceptions. For more information, refer to the following discussions located within our Form S-4/A filed with the Securities and Exchange Commission “Description of other debt,” “Description of the senior notes” and “Description of the senior subordinated notes.”
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our renewed senior secured credit facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. Our ability to continue to fund these items and to continue to reduce debt could be adversely affected by the global recession, general slowdown in consumer spending or occurrence of other unfavorable events.
The following table summarizes key aspects in our historical financial position and liquidity (in thousands):
As of
|
||||||||
September 26, 2010
|
December 31, 2009
|
|||||||
Cash and cash equivalents
|
$ | 174,147 | $ | 45,157 | ||||
Unused portion of revolving credit facilities
|
75,000 | 75,000 | ||||||
Current portion of long-term borrowings, capital lease and financing obligations
|
11,755 | 14,098 | ||||||
Current portion of special fees
|
16,601 | 8,903 | ||||||
Total long-term obligations (1)
|
1,511,953 | 1,523,145 |
Cash flow summary
The following table summarizes key aspects of our cash flows for the nine months ended September 26, 2010 and September 27, 2009 (in thousands):
Nine months ended
|
||||||||
September 26, 2010
|
September 27, 2009
|
|||||||
Net cash and cash equivalents provided by operating activities
|
$ | 247,749 | $ | 161,910 | ||||
Net cash and cash equivalents used in investing activities
|
94,020 | 100,716 | ||||||
Cash paid for capital expeditures
|
94,020 | 102,770 | ||||||
Net cash and cash equivalents used in financing activities
|
24,739 | 67,454 |
20
During the nine months ended September 26, 2010 and September 27, 2009, net cash provided by operating activities was $247.7 million and $161.9 million, respectively. This increase in cash flow from operating activities of $85.8 million is primarily due to changes in working capital of $58.5 million and the increase in net income of $16.2 million. Additionally, we had incremental depreciation expense of $7.5 million which was included as an adjustment to reconcile net income to cash provided by operating activities. The increase in cash from working capital primarily consisted of increased cash receipts from customers and reduced payments to our vendors and related parties.
Net cash used in investing activities for the nine months ended September 26, 2010 and September 27, 2009, totaled $94.0 million and $100.7 million, respectively. For both years, the amount consisted primarily of capital expenditures. During the nine months ended September 27, 2009 these capital expenditures were partially offset by capital reimbursements totaling $2.1 million. These capital reimbursements are part of discrete transactions that may or may not occur in the future.
We make annual investments both to provide ongoing capital support for our existing park attractions and infrastructure, and also to fund the development of new park attractions and infrastructure. We believe these investments are critical in maintaining our position of having technologically advanced theme parks and to effectively compete with our competitors. These costs can vary from one year to the next, depending on the timing of the construction cycles. For instance, during 2009, 2008 and 2007, we made purchases totaling $127.2 million, $142.9 million and $80.0 million, respectively, for capital projects (excluding capitalized interest), while in 2006 similar expenditures amounted to only $40.6 million. We estimate our 2010 expenditures (excluding capitalized interest) to be approximately $75.0 million. A large portion of our estimated 2010 capital expenditures relate to the construction of The Wizarding World of Harry Potter™ themed island which opened in June 2010. We estimate our total capital investment in The Wizarding World of Harry Potter™, Hollywood Rip Ride Rockit® (which opened in the summer of 2009), The Simpsons Ride™ (which opened in the spring of 2008), and certain system enhancements primarily including the reengineering of our website and online ticket store was approximately $385.0 million. This includes all capital expenditures to build these attractions, excluding capitalized interest. This also takes into account the net present value of all license fee payments made during the initial terms of the applicable licenses, while excluding license payments made during renewal periods and merchandise royalties.
During the nine months ended September 26, 2010 and September 27, 2009, net cash used for financing activities was $24.7 million and $67.5 million, respectively. The amounts used during the nine months ended September 26, 2010 primarily related to payments of financing costs that were incurred during our amendment of the renewed senior secured credit facility or were accrued during our refinancing in November 2009. Additionally, we made $9.0 million in payments on our long-term borrowings. The amounts used during the nine months ended September 27, 2009 primarily related to distributions of $33.4 million to Partners for their respective tax liabilities from our net income in 2008, distributions of $26.2 to Holdings to fund their interest payments and $5.8 million of payments on our capital leases and financing obligations.
Consultant agreement
On October 18, 2009, we executed an amendment to an agreement (the “Consultant Agreement”) that we have with Steven Spielberg (the “Consultant”), under which we pay a fee for consulting services and exclusivity equal to a percentage of certain revenues from our attractions and other facilities owned or operated, in whole or in part, by us. Under the terms of the Consultant Agreement, the Consultant is also entitled to a fee based on a percentage of gross revenues of comparable projects, which are gated motion picture and television themed attractions owned or operated, in whole or in part, by us, or any of our partners or any of their affiliates, other than in Universal City, California. At present, the only operating theme parks that are deemed to be comparable projects are Universal Studios Japan in Osaka, Japan and Universal Studios Singapore on Sentosa Island, Singapore.
The Consultant Agreement does not have an expiration date, but starting in June 2017, the Consultant has the right, upon 90 days’ notice, to terminate UCDP’s obligation to make periodic payments thereunder and receive instead one cash payment equal to the fair market value of the Consultant’s interest in the revenue streams or, under certain circumstances, an alternative one-time payment, in each case with respect to the Orlando parks and any comparable projects that were open at that time for at least one year (the “Put Payment”), which amounts could be significant. If the Put Payment is exercised, the Consultant will be precluded from competing or consulting with another theme park for a period of five years after exercise, and the Consultant Agreement allows UCDP the right to use ideas generated during the term of the Consultant Agreement without further payment. The Consultant Agreement contains a formula-based method that includes a risk premium of 6.5% with respect to the Orlando parks to determine the amount of the Put Payment. The Consultant Agreement allows the Consultant to make a one-time election to fix the values for certain, but not all, inputs into the aforementioned formula to establish a minimum amount for the one-time payment to the Consultant (the “Alternative Payment”) in the event that the date the Consultant gives notice to terminate his right to receive compensation under the Consultant Agreement is at least 90 days before March 31, 2018. Although the Consultant made this election on January 15, 2010, the actual amount of the Alternative Payment cannot be determined prior to the Consultant exercising his right to receive the Put Payment, as the Alternative Payment amount is dependent on a discount rate that will set 90 days after the date on which the Consultant exercises his right to receive the Put Payment. The discount rate is based on the actual treasury rate on such date plus a risk premium. However, based on a sensitivity analysis of possible treasury and comparable rates for the United States and Japan ranging from 0% to 15%, we estimate that the Alternative Payment for our parks could range from $160.0 million to $290.0 million, and the Alternative Payment for Universal Studios Japan could range from $135.0 million to $245.0 million. This range has been calculated based on hypothetical treasury rates, and we cannot assure you as to the timing or amount of the Put Payment or the Alternative Payment. These payments may be higher or lower than the range provided above and any such deviation could be material. Any such payment will only be finally determinable once the Consultant makes an election and the payment becomes due. In addition to the existing comparable parks, three contemplated comparable parks are vested immediately for purposes of the quarterly consulting fee payments but each such contemplated comparable park must still be open for at least one year at the time the Put Payment is exercised in order for such project to be included in the Put Payment. In addition, the Consultant has a second-priority lien over UCDP’s real and tangible personal property, including a mortgage on our real property up to $400.0 million, to secure UCDP’s periodic and one-time payment obligations and the notes are effectively subordinated to his interests to the extent of the value of those assets. The lien securing the Consultant’s interest is junior to the lien securing our renewed senior secured credit facilities. The Consultant Agreement caps UCDP’s ability to incur secured borrowings to an amount equal to the greater of $975.0 million and 3.75x UCDP’s Covenant EBITDA (as defined in the renewed senior secured credit agreement). Our obligations under the agreement are guaranteed by NBC Universal, Inc. and USI, as successor to MCA Inc., and USI’s obligations under that guarantee have in turn been assumed by Vivendi Universal Entertainment. Vivendi Universal Entertainment has indemnified us against any liability under the Consultant Agreement related to any comparable project that is not owned or controlled by us. Under the terms of the notes and the renewed senior secured credit agreement, the lien securing our obligations under the Consultant Agreement is a permitted lien. See “Risk factors—Risks related to the exchange notes and our indebtedness— Our ability to refinance our debt obligations, including the notes, could be adversely impacted by the Consultant’s right, starting in June 2017, to terminate the periodic payments under the Consultant Agreement and receive instead one payment equal to the fair market value of the Consultant’s interest in the Orlando parks and any comparable projects or, under certain circumstances, an alternative one-time payment”, located within our Form S-4/A filed with the Securities and Exchange Commission.
Special fee requirements
Under our partnership agreement, a “special fee” is payable to Vivendi Universal Entertainment through Universal CPM. The special fee has historically been calculated at 5.0% of certain gross operating revenues, as defined in our partnership agreement, generated from each of Universal Studios Florida and Universal’s Islands of Adventure. An amendment to our partnership agreement, which was executed as of October 18, 2009, increased the applicable rate used to calculate the special fee through June 2017 from 5.0% to 5.25% of certain gross operating revenues, as defined. During the three months ended September 26, 2010 and September 27, 2009 and the nine months ended September 26, 2010 and September 27, 2009 the special fee amounted to $16.5 million, $9.7 million, $34.5 million and $25.6 million, respectively. During the three months ended September 26, 2010 and September 27, 2009 and the nine months ended September 26, 2010 and September 27, 2009, the interest incurred on the special fee payable to Vivendi Universal Entertainment and its affiliates, including both the current and long term portions, was $0.1 million, $0.8 million, $0.3 million and $2.4 million, respectively.
Historically, under the terms of our 2004 senior secured credit facilities and the April 2010 notes, the special fee related to both Universal Studios Florida and Universal’s Islands of Adventure could only be paid upon achievement of certain but different ratios (and that is still the case under our renewed senior secured credit agreement). The most restrictive quarterly covenant for payment of the special fee was a debt to EBITDA ratio (as defined in the April 2010 notes) of 5.0 to 1.0 or less related to the current special fees and 3.75 to 1.0 or less related to the deferred special fees (as defined in the 2004 senior secured credit agreement); now the most restrictive quarterly covenant is a fixed charge coverage ratio (as defined in the renewed senior secured credit agreement) greater than or equal to 1.1 to 1.0. These ratios were met as of each of our quarter end dates throughout the period from December 31, 2008 to September 26, 2010, thus allowing the special fee to be paid. Accordingly, during the three months ended September 26, 2010 and September 27, 2009 and the nine months ended September 26, 2010 and September 27, 2009, we paid total fees of $11.0 million, $9.1 million, $27.1 million and $24.8 million, respectively, to Vivendi Universal Entertainment. At September 26, 2010 and December 31, 2009, the current portion of our consolidated balance sheet included $16.6 million and $8.9 million, respectively, related to special fees payable to Vivendi Universal Entertainment. Pursuant to certain subordination agreements, the special fee may not be paid if there is an event of default (or to the knowledge of our officers a default) under our renewed senior secured credit facilities or the notes.
Distributions
Under the renewed senior secured credit agreement, for years beginning on or after December 31, 2010, distributions may be made in an aggregate amount not to exceed 25% of excess cash flow if no event of default exists and the total leverage ratio is not greater than 5.5x. Additionally, the indentures governing the notes limit distributions that may be made to an amount equal to our Covenant EBITDA for the period from the beginning of the first fiscal quarter commencing on or after September 28, 2009 to the end of our most recently ended fiscal quarter for which internal financial statements are available less 1.75x our consolidated interest expense. The notes also have an unrestricted basket of $50.0 million available as of the date of the refinancing. The above restrictions do not apply to our ability to make a distribution to the Partners in an aggregate amount equal to our hypothetical federal income tax, as provided for in UCDP’s partnership agreement.
21
Covenant stipulations
Our renewed senior secured credit agreement and the notes contain a number of covenants that, among other things, restrict, subject to certain exceptions, our ability, and the ability of our subsidiaries, to sell assets, incur additional indebtedness, repay other indebtedness (including the notes), pay certain distributions, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or consolidations, enter into sale and leaseback transactions, engage in certain transactions with affiliates, amend certain material agreements governing our indebtedness and change the business conducted by us and our subsidiaries. In addition, the renewed senior secured credit agreement contains the following financial covenants: a maximum total leverage ratio; a minimum interest coverage ratio; and a limitation on capital expenditures. We believe that we were in compliance in all material respects with all financial covenants as of September 26, 2010 and December 31, 2009.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements appearing in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are made in reliance upon the protections provided by such acts for forward-looking statements. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information. When used in this report, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” or future or conditional verbs, such as “will,” “should,” “could” or “may” and variations of such words or similar expressions, are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management’s examination of historical operating trends and data, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will be achieved.
Because these forward-looking statements are subject to numerous risks and uncertainties, our actual results may differ materially from those expressed in or implied by such forward-looking statements. Some of the risks and uncertainties that may cause such differences include, but are not limited to:
•
|
the risks and uncertainties relating to the global recession and its duration, severity and impact on overall consumer activity;
|
•
|
the substantial indebtedness of us and of our subsidiaries;
|
•
|
the Consultant’s (as defined herein) right to exercise his put option starting in June 2017 and the impact of such right on our ability to refinance our indebtedness when it matures, including the notes;
|
•
|
competition within the Orlando theme park market;
|
•
|
our dependence on Vivendi Universal Entertainment and its affiliates;
|
•
|
the risks related to the pending joint venture among Comcast, GE and NBCU;
|
•
|
the loss of material intellectual property rights used in our business;
|
•
|
the risks inherent in deriving substantially all of our revenues from one location;
|
•
|
the dependence of our business on air travel;
|
•
|
geopolitical or environmental events that could impact travel to Florida;
|
•
|
the loss of key distribution channels for ticket sales;
|
•
|
publicity associated with accidents occurring at theme parks;
|
•
|
the seasonality of our business; and
|
•
|
risks related to unfavorable outcomes of our legal proceedings.
|
There may also be other factors that may cause our actual results to differ materially from those expressed in or implied by any forward-looking statements contained in this report.
All forward-looking statements included in this report are made only as of the date of this report, and we do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. You should read this document and the documents that we incorporate by reference into this report completely and with the understanding that our actual future results may be materially different from what we expect. We may not update these forward-looking statements, even if our situation changes in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
22
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
The following is a schedule of our fixed and variable rate debt maturities and principal payments for each of the next five years, and thereafter (in thousands, except for percentages):
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
Total
|
Fair value
|
|||||||||||||||||||||||||
Debt (1):
|
||||||||||||||||||||||||||||||||
Fixed rate debt
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | 625,000 | $ | 625,000 | $ | 656,563 | ||||||||||||||||
Average interest rate
|
n/a | n/a | n/a | n/a | n/a | 9.6 | % | |||||||||||||||||||||||||
Variable rate debt
|
$ | - | $ | 9,000 | $ | 9,000 | $ | 9,000 | $ | 864,000 | $ | - | $ | 891,000 | $ | 894,341 | ||||||||||||||||
Average interest rate (2)
|
n/a | 5.5 | % | 5.5 | % | 5.5 | % | 5.5 | % | n/a | ||||||||||||||||||||||
Total gross debt
|
$ | - | $ | 9,000 | $ | 9,000 | $ | 9,000 | $ | 864,000 | $ | 625,000 | $ | 1,516,000 | $ | 1,550,904 |
(1)
|
Amounts exclude discounts and therefore represent gross maturities.
|
(2)
|
Represents the current interest rate of the renewed senior secured credit facilities.
|
We are exposed to market risks relating to fluctuations in interest rates. We may mitigate this risk by paying down additional outstanding balances on our variable rate loans, refinancing with fixed rate permanent debt or obtaining cash flow hedge instruments. We have $891.0 million of unhedged variable rate debt as of September 26, 2010. Based on these variable-rate obligations, each 1% increase or decrease in the level of interest rates would, respectively, increase or decrease our annual interest expense and related cash payments by approximately $8.9 million. The sensitivity analysis described above, contains certain simplifying assumptions, (for example, it assumes a constant level of variable-rate debt for all maturities and an immediate, across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period). Therefore, although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.
Item 4.
|
Controls and Procedures
|
Universal City Development Partners, Ltd.
The management of Universal City Development Partners Ltd. ( “UCDP”) carried out an evaluation, with the participation of UCDP’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of UCDP’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, UCDP’s Principal Executive Officer and Principal Financial Officer concluded that UCDP’s disclosure controls and procedures were effective to ensure that information required to be disclosed by UCDP in the reports that it files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the rules, regulations and forms promulgated by the Securities and Exchange Commission, and (ii) accumulated and communicated to management, including UCDP’s Principal Executive Officer and Principal Financial Officer, in a manner sufficient to allow timely decisions regarding required disclosure.
There was no change in UCDP’s internal control over financial reporting during the quarter ended September 26, 2010 that has materially affected, or is reasonably likely to materially affect, UCDP’s internal control over financial reporting.
UCDP Finance, Inc.
The management of UCDP Finance, Inc. (“Finance”) carried out an evaluation, with the participation of Finance’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of Finance’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, Finance’s Principal Executive Officer and Principal Financial Officer concluded that Finance’s disclosure controls and procedures were effective to ensure that information required to be disclosed by Finance in the reports that it files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the rules, regulations and forms promulgated by the Securities and Exchange Commission, and (ii) accumulated and communicated to management, including Finance’s Principal Executive Officer and Principal Financial Officer, in a manner sufficient to allow timely decisions regarding required disclosure.
There was no change in Finance’s internal control over financial reporting during the quarter ended September 26, 2010 that has materially affected, or is reasonably likely to materially affect, Finance’s internal control over financial reporting.
23
PART II — OTHER INFORMATION
Item 1.
|
Legal Proceedings
|
UCDP is threatened with or involved in various legal actions and claims incidental to the conduct of its business. Management does not expect these legal actions and claims to have a material impact to UCDP’s results of operations, financial position or cash flows.
Item 1A.
|
Risk Factors
|
See Risk Factors beginning on page 22 of our Registration Statement on Form S-4/A filed with the Securities and Exchange Commission on August 6, 2010, for a discussion regarding some of the reasons that our actual operating results may differ materially from those that we anticipate. There have been no material changes from the risk factors previously disclosed in our Registration on Form S-4/A.
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Not applicable.
Item 3.
|
Defaults upon Senior Securities
|
Not applicable.
Item 5.
|
Other Information
|
None.
Item 6.
|
Exhibits.
|
a) Exhibits
31.1
|
|
Certification of Principal Executive Officer of Universal City Development Partners, Ltd. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
|
31.2
|
|
Certification of Principal Financial Officer of Universal City Development Partners, Ltd. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
|
31.3
|
|
Certification of Principal Executive Officer of UCDP Finance, Inc. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
|
31.4
|
|
Certification of Principal Financial Officer of UCDP Finance, Inc. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
|
32.1
|
|
Certification of Principal Executive Officer of Universal City Development Partners, Ltd. Pursuant to 18 U.S.C. Section 1350.
|
32.2
|
|
Certification of Principal Financial Officer of Universal City Development Partners, Ltd. Pursuant to 18 U.S.C. Section 1350.
|
32.3
|
|
Certification of Principal Executive Officer of UCDP Finance, Inc. Pursuant to 18 U.S.C. Section 1350.
|
32.4
|
|
Certification of Principal Financial Officer of UCDP Finance, Inc. Pursuant to 18 U.S.C. Section 1350.
|
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
UNIVERSAL CITY DEVELOPMENT PARTNERS, LTD.
|
||||||
Date: November 5, 2010
|
By:
|
/s/ Tracey L. Stockwell
|
||||
Name:
|
Tracey L. Stockwell
|
|||||
Title:
|
Principal Financial Officer
|
|||||
UCDP FINANCE, INC.
|
||||||
Date: November 5, 2010
|
By:
|
/s/ Tracey L. Stockwell
|
||||
Name:
|
Tracey L. Stockwell
|
|||||
Title:
|
Principal Financial Officer
|
25