Should Disney be jealous?

[Mouseaholic!!!]

I bet after reporting a 26% drop in profits, the Disney folks may be a bit jealous of US right now.

I found this after another thread made reference to this. I had no idea.





Form 8-K for UNIVERSAL CITY FLORIDA HOLDING CO. I


--------------------------------------------------------------------------------

7-Aug-2009

Regulation FD Disclosure



Item 7.01 Regulation FD Disclosure
A. Limitation on Incorporation by Reference

B. Supplemental Information

On August 7, 2009, the Registrant held a telephonic conference call. During the call, the following information was discussed by Tracey L. Stockwell, Principal Financial Officer, Universal City Florida Holding Co. I & II ("Holdings").

Thank you, and welcome to our second quarter earnings conference call. Let's start with our attendance trends. During the second quarter, our paid attendance decreased 14% versus the prior year. Although our 2009 results benefited from the timing of Easter, comparisons to the prior year are difficult due to the impact of the global economic slowdown, which we believe has adversely impacted our business, in addition to the grand opening of The SimpsonsTM attraction in May 2008. Attendance for the first half of 2009 was down 16% versus 2008. The first half results of 2008 benefited from two extra days due to the timing of our fiscal calendar. In the second quarter, our domestic market experienced percentage attendance decreases in the upper-teens when compared to the prior year, while our international market attendance was down in the mid-single digits compared to 2008. For the first half of 2009, attendance in our domestic market was down in the upper-teens compared to 2008, while our international market experienced a decrease in the low-teens.

Let's turn to our financial results. During the second quarter, our total revenues decreased $26 million, or 11%, which was driven by the decrease in attendance and, to a lesser extent, lower revenues from our travel company and CityWalk operations. Combined per capita spending on admission passes, food and beverage, merchandise and other theme park related items increased by 3%. This increase was primarily due to strong admission pass per capita results predicated on management's yield improvement initiatives. During the second quarter, our total operating expenses decreased by $33 million, or 17%, as all categories of operating expenses experienced favorability compared to 2008. This favorability was driven chiefly by selling, general and administrative savings of almost $15 million resulting from management's cost savings initiatives in addition to volume related savings in theme park cost of goods sold and other operating costs and expenses, which mainly includes expenses related to CityWalk, our travel company and corporate special events. Despite the decrease in total revenue of $26 million, our operating income during the second quarter increased almost $7 million, or 15%, compared to 2008. This reflects an increase in our operating income percentage of 5 percentage-points.

Heading into the third quarter, we will continue to focus on our cost initiatives while maintaining our strong guest satisfaction. Additionally, we are still investing significantly in new content for our parks. For instance, Hollywood Rip Ride RockitSM will open soon. We are also making progress on our construction and are looking forward to the opening of the Wizarding World of Harry PotterSM, a fully-immersive themed-area containing multiple attractions, shops and eating establishments. We believe this continued investment will position us well for an economic recovery. Our July 2009 attendance trends are similar to those of the second quarter.

 

[ChrisFL]

 

[zulemara]

I already knew about it and have ranted about it several times. All I have to say is alcohol=high profit margin

Citywalk is doing well
Pleasure island is empty.

 

[Mouseaholic!!!]

I already knew about it and have ranted about it several times. All I have to say is alcohol=high profit margin

Citywalk is doing well
Pleasure island is empty.

I saw your note so I did a little research.

Perhaps because they are smaller they are more...nimble and able to slide through this better than Disney. I have to admit I was absolutely surprised to see it....I assumed the profits were down like Disney's.

Well....as the earlier poster noted..... Stay tuned for next quarter!

 

[tjkraz]

Universal earned $27 million in profits at its parks during the 2nd Quarter vs. Disney's $521 million in profit for Parks & Resorts.

First question that comes to mind: How did Universal manage to make only $21 million in profit last year vs. Disney's $643 million?

Second question that comes to mind: Universal increased the profit thru aggressive cost-cutting measures (layoffs, reduction in hours, reduction in services, etc.) Aren't those the same sort of cutbacks for which you have been vilifying Disney for the last 8 months?

Universal's attendance is down something like 16% this year. A 3% increase in per-head spending isn't much of a silver lining when you've lost 16% of your heads.

 

[Mouseaholic!!!]

Perhaps I was misunderstood.....we are talking about profits. Sure, Disney BETTER bring in more than US - they are much bigger....just in Orlando alone....but they have parks around the World. Disney had to work harder for each $ they earned....not an efficient business model and their profits fell as US profits grew in a recession.

It's a common business mistake I have watched for over 10 years from my little chair and with clients. A new account is going to set the world on fire and slash prices on everythng....they will make their first cool million in the blink of an eye on volumn not margin. In the end, they KILL themselves with work while other people continue to make a profit with a better business plan and a smaller staff. Which company is more successful - the one with higher expenses and payroll?

Disney did indeed make more CASH than US, but US saw a profits increase. Can you imagine what Disney's bottom line $$$ would have been if the had matched US's success in the last quarter!!


The bottom line is margin....always will be.

 

[tjkraz]

As stated in another thread, it's impossible to applaud Universal for an increase in profit without questioning both sides of the comparison. Specifically, what mismanagement lead to their two Florida parks only earning $21 million in profits during the same period a year ago?

And how has the long-term viability of their product been damaged by the aggressive cost cutting undertaken this year? Disney certainly could have made a greater profit by cutting more jobs, reducing park hours further, cutting back on parades and nighttime shows, running fewer ride vehicles, enacting more seasonal ride closures, reducing meal portions, raising ticket prices more aggressively, and so on.

Funny how Disney makes cuts and everybody rushes to the conclusion that they're shooting themselves in the foot....will only be hurt later...isn't the company it once was, etc. Universal makes cuts and suddenly they're setting the standard Disney should be following.

 

[Mouseaholic!!!]

As stated in another thread, it's impossible to applaud Universal for an increase in profit without questioning both sides of the comparison. Specifically, what mismanagement lead to their two Florida parks only earning $21 million in profits during the same period a year ago?

And how has the long-term viability of their product been damaged by the aggressive cost cutting undertaken this year? Disney certainly could have made a greater profit by cutting more jobs, reducing park hours further, cutting back on parades and nighttime shows, running fewer ride vehicles, enacting more seasonal ride closures, reducing meal portions, raising ticket prices more aggressively, and so on.

Funny how Disney makes cuts and everybody rushes to the conclusion that they're shooting themselves in the foot....will only be hurt later...isn't the company it once was, etc. Universal makes cuts and suddenly they're setting the standard Disney should be following.

I'm sorry - I made no comment about payroll cutbacks. There is absolutely no question that they are nothng short of agony for staff - they certainly were for Disney's divisions in January and March. In addition, large layoffs generally result in a reduction in quality of the product----if the payroll cut is big enough. I don't envy anybody at US (staff or guests) if this is the only way they controlled expenses.

It just came as a total surprise to me that US eeked a profit in a tough quarter in a recession. I'm not calling out the marching band and cheerleaders.....just found it interesting.

 

[lugnut33]

So, US made 7 million in a quarter and Disney made over 500 million on their parks alone, I think they are doing just fine.

Also, park attendance declines at Disney were actually less that what US posted as a percentage. Here's what Disney said:
On a conference call to discuss the results, Disney executives said attendance at Walt Disney World remained flat with last year's levels, while attendance at Disneyland in Anaheim, Calif., rose 10 percent.
I think you're pinpointing one area of good news for US and pumping up the whole company.

 

[Mouseaholic!!!]

So, US made 7 million in a quarter and Disney made over 500 million on their parks alone, I think they are doing just fine.

Also, park attendance declines at Disney were actually less that what US posted as a percentage. Here's what Disney said:
On a conference call to discuss the results, Disney executives said attendance at Walt Disney World remained flat with last year's levels, while attendance at Disneyland in Anaheim, Calif., rose 10 percent.
I think you're pinpointing one area of good news for US and pumping up the whole company.

As I said, Disney BETTER make a whole bunch more $$$ than US - it's David and Goliath.

The bottom line still remains - US made a profit - Disney reported a reduction in profits. Sure they made $$ and more than US - but they had a downturn vs. US.

I don't get it. I'm not saying Disney is the boogy man or the bad guy here. I'm just curious how US managed to report an INCREASE in profits in a recession when Disney had a LOSS in profits. What on earth is US doing better than Disney right now.

 

[Mith]

I don't get it. I'm not saying Disney is the boogy man or the bad guy here. I'm just curious how US managed to report an INCREASE in profits in a recession when Disney had a LOSS in profits. What on earth is US doing better than Disney right now.

Both companies are making profit. Disney's profit is down by 26%, mainly due to all the discounts they've offered. But my understanding is that they are doing that to maintain park attendance(which I think they have). Universal is increasing profit, but losing some of their attendance. I guess you can say they are doing that "better" than Disney right now, but it sounds more like a difference in philosophy.

With such a large gap in profits, I find it hard to really compare the two companies and declare who is doing "better". Sure if you want to compare percentages, US did better than Disney. But in the end, a profit that is around 20x more is probably what really matters.

 

[Mouseaholic!!!]

I

Give

Up!


So much for discussion about HOW they did it........fine, I throw in the towel.

YES DISNEY MADE MORE $$$ ---- DISNEY IS PERFECT.

 

[Mouseaholic!!!]

I

Give

Up!


So much for discussion about HOW they did it........fine, I throw in the towel.

Yes Disney made more money - less successfully than US....but.....


Disney is perfect in every way. Universal Studios is evil.

Thanks for the reminder.

 

[tjkraz]

Disney is perfect in every way. Universal Studios is evil.

Thanks for the reminder.

Oh, come on now. Nobody ever said that. The point here is that simply stating that US profits are up from last year is pretty meaningless unless you can make the numbers into something meaningFUL.

And individual makes $100,000 per year. In one year he puts $5,000 of those earnings in a savings account. The next year he puts $10,000 of those earnings in a savings account. Should he be lauded for doubling his savings or should we be asking "What the heck happened the first year that caused you to save so little?"

It's the same with any business. US profits are up in a year-to-year comparison. All that tells us is that the business was managed much better in 2009 than it was in the same time period 2008. The reality is that that US execs could have been making poor business decisions in '08 which lead to the low earnings in the first place. If they spent too much on staffing, advertising or general park overhead, all of that would have eaten into their 2008 profitability.

Universal clearly did a much better job of running their operation (at least from P&L standpoint) in 2009 than they did in 2008. But that's the only valid comparison you can make. But that fact alone does not mean that Disney should be "jealous" or that US, as a whole, is any more effective than DIS management. That's a separate topic altogether.

And P&L numbers don't take into account how the guest experience suffered due to the cutbacks.

 

[Mouseaholic!!!]

And P&L numbers don't take into account how the guest experience suffered due to the cutbacks.[/QUOTE


Just like some of the trip reports I have seen of recent visits to WDW.


It's funny, you don't see many negatives on the DL thread.....which is where we head next!

 

[lugnut33]

As I said, Disney BETTER make a whole bunch more $$$ than US - it's David and Goliath.

The bottom line still remains - US made a profit - Disney reported a reduction in profits. Sure they made $$ and more than US - but they had a downturn vs. US.

I don't get it. I'm not saying Disney is the boogy man or the bad guy here. I'm just curious how US managed to report an INCREASE in profits in a recession when Disney had a LOSS in profits. What on earth is US doing better than Disney right now.

Well, I never said anything bad about Universal as I've never been there (I do want to go, hopefully next year if the Dis does their land sea package they are talking about), so I don't know where the evil comment came from.

I was just pointing out that you seemingly took an innocuous number from an article and used it to make an even less meaningful statement. That's all.

 

[DisDreaminMom]

I'm gonna jump in here on Mouseaholic's behalf because I think I know what the important part of the story here is. I just read on the AP newswire that Productivity surged in the United States by the largest amount in 16 years (6.4% in the April-June QR) and unit labor costs dropped 5.8% for the same period. This means companies are getting more out of every worker and it justifies NOT hiring back all those people they just laid off. Companies might be selling less Stuff, but the workers who still have jobs are busting their humps to sell more Stuff than they used to. This adds dollars to the bottom line of a company and makes shareholders happy. As a general rule, if you can squeeze more productivity out of fewer workers, then this is a bad sign for the workers waiting to be rehired, as it shows that the jobs they had were perhaps non-essential.

Universal's strategy was to (apparently) accept falling ticket sales/attendance and then push more product, which they did successfully. With sales that high, it shows that the employees that are there really SOLD.

I think Disney thought they could boost ticket sales/attendance by discounting and pushing more product, which didn't work out comparatively as well. Who knows what the problem is? (i.e. lack of stimulating/value added merchandise OR lack of people to successfully sell it OR deeply discounting, thereby attracting "cheap" people). And it doesn't add the cushion to the bottom line that says, "Hire everyone back! We need more expenses!"

Those of you who are comparing Disney's profit to US's profit are headed down the wrong path. We are missing several important factors here, like what previous years' numbers look like for US and what their goal really was. But to compare the two number wise instead of percentage wise FOR THE SAME ACTIVITY is not relevant.

Plus, I'm not sure we can draw any real comparison because US has such a different structure than WDW. The most they have in common is that these sales figures are based on behaviors of relatively similar consumers ("theme park attendees"; though age and alcohol could be a factor, unless we had the percentage that alcohol plays into profits at US, it's a moot point because enough of the restaurants at WDW sell liquor).

Takeaway message from this thread is that US was extremely successful at selling merchandise to the GUESTS they HAD in the gate. Disney, not so much. Don't think they don't know it, too...

 

[DisDreaminMom]

Oh, and just wondering, how many of US's employees are union? Are they a union shop at all? Because if they are the same percentage wise as WDW, then that would really be a story. If not, then that's my guess for why Disney just isn't ever going to be able to make the numbers work the way it's set up now. SEIU, flame away...

 

[tjkraz]

Takeaway message from this thread is that US was extremely successful at selling merchandise to the GUESTS they HAD in the gate.

Compared to the one prior quarter under scrutiny, yes, that is true. But again that's still not any basis for a meaningful discussion. Without having a means to evaluate the 2008 figure, it's difficult to give them credit for the '09 figure.

Were there any one-time charges taken in 2008 which lowered profits? Did they run costly promotions or ad campaigns which did not result in an expected uptick in attendance? How did the 2008 profit compare to similar quarters in 2007, 2006 or 2005?

Citing the year-to-year increase makes for a nice blurb in a news story, but that's about the only purpose it serves. It isn't particularly meaningful information.

The 3% increase in average guest spending is encouraging (for US), but it could also simply be a byproduct of their attendance drop. US is losing guests at a 16% clip compared to last year. If the low-spenders (i.e. day guests) are the ones that dropped off, averages would naturally increase. Is this part of US' master plan or merely coincidental? US still seems to be doing everything possible to get guests into their parks ($99 week-long tickets, removing blackout dates for FL residents, running hotel/park packages similar to Disney in the spring, etc.)

And, yes, how they perform against competitors in the same industry is certainly relevant--albeit extremely difficult for people in our positions given limited data available. Don't tell me Universal execs aren't "jealous" (to borrow another's words) of Disney's ability to get over $1 billion worth of profit out of their parks annually. Board members and investors will certainly want to know how the US parks' profitability compares to Disney and other industry leaders.

 

[TDSAXX]

Universal may have had a good quarter relative to last year, but cost-cutting can only help you for so long. A 14% drop in attendance is not a good thing no matter how you spin it.