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Seaworld Entertainment (SEAS) Enters Restructuring Program; Will Cut ~300 Jobs

December 16, 2014 4:46 PM EST

On December 12, 2014, SeaWorld Entertainment, Inc. (NYSE: SEAS) committed to a restructuring program in an effort to centralize some operations, reduce duplication of functions, increase efficiencies and accelerate execution. The restructuring is part of its previously announced company-wide cost initiative to deliver approximately $50 million of annual cost savings by the end of 2015.

The restructuring involved the elimination of approximately 300 positions across its eleven theme parks and its headquarters. As a result, the Company expects to record approximately $12 million in pre-tax restructuring charges, of which $11 million is expected to be incurred in the fourth quarter of 2014 and another $1 million in the first half of 2015, due to certain continuing service obligations. The restructuring charges (the “Restructuring Charges”) relate to severance and other related expenses incurred in connection with the restructuring program. These Restructuring Charges will be excluded from the Company’s Adjusted EBITDA calculation, a non-GAAP financial measure defined below, in the period they are recorded.

The Restructuring Charges above do not include any costs related to the previously announced separation of the Company’s Chief Executive Officer and President effective January 15, 2015 (the “Separation Agreement Costs”). The Company expects to incur approximately $3 million of Separation Agreement Costs in the fourth quarter of 2014, which will not be excluded from its Adjusted EBITDA calculation. These Separation Agreement Costs were not included in the Company’s previously provided Adjusted EBITDA guidance.

The Company also expects to incur approximately $3 million of additional depreciation expense in the fourth quarter of 2014 due in part to actions taken as part of the Company’s previously announced cost reduction initiatives.

Separately, for its 2014 Adjusted EBITDA calculation only, as previously disclosed, the Company expects to exclude approximately $10 million of additional pro forma 2014 cost savings related to the restructuring program. These pro forma cost savings are a non-GAAP Adjusted EBITDA item only that will not impact the Company’s reported GAAP net income and was included in the Company’s previously provided Adjusted EBITDA guidance. The Company’s indenture governing its senior notes and the credit agreement governing its senior secured credit facilities permit pro forma cost savings of up to a maximum of $10 million to be excluded from the Adjusted EBITDA calculation for debt covenant purposes.

Adjusted EBITDA is defined as net income (loss) before income tax expense, interest expense, depreciation and amortization, as further adjusted to exclude certain non-cash, and other items permitted in calculating covenant compliance under the indenture governing the Company’s senior notes and the credit agreement governing the Company’s senior secured credit facilities. Adjusted EBITDA is a material component of these covenants. Management presents Adjusted EBITDA because it believes that it provides additional information to investors about the calculation of and compliance with these financial covenants. Management also uses Adjusted EBITDA in connection with certain components of its executive compensation program. In addition, investors, lenders, financial analysts and rating agencies have historically used EBITDA-related measures in the Company’s industry, along with other measures to evaluate a company’s ability to meet its debt service requirement, to estimate the value of a company and to make informed investment decisions.

Item 8.01.Other Events.

On December 16, 2014, the Company issued a press release announcing that its Board of Directors approved an amendment to the Company’s previously announced share repurchase program. The share repurchase program was originally approved on August 12, 2014 and authorized the Company to repurchase up to $250 million of the Company’s outstanding common stock commencing on January 1, 2015. The amendment to the share repurchase program accelerates the start date of such program from January 1, 2015 to December 17, 2014 and authorizes the Company to repurchase up to $15 million of the Company’s outstanding common stock during the remainder of calendar year 2014. The other features of the share repurchase program remain unchanged including the total amount authorized and available under the program of $250 million.

Pursuant to the amended share repurchase program, the Company entered into a Rule 10b5-1 trading plan and a related agreement (the “Agreement”) with a broker to facilitate the repurchase of up to $15 million of its outstanding common stock during the remainder of calendar year 2014. Under the Agreement, purchases may be made in open market transactions in compliance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. All of the repurchased shares will be held as treasury shares. This 10b5-1 trading plan is expected to expire on December 31, 2014.

As previously announced, the Company’s ability to declare dividends, repurchase shares or make certain other restricted payments under the Company’s debt covenants is limited to approximately $15 million for the remainder of calendar year 2014. As a result, the Company’s Board of Directors elected to postpone the declaration of the Company’s fourth quarter 2014 dividend. The amount available for dividend declarations, share repurchases and certain other restricted payments under the covenant restrictions in the Company’s debt agreements will reset on January 1, 2015 and the Company expects to declare and pay the fourth quarter 2014 dividend in January 2015.



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