SeaWorld copes amid PETA pressure on whales

Chris Woodyard | USA TODAY

LOS ANGELES — At up to 32 feet long and weighing up to 22,000 pounds, a killer whale is more than a match for any human — including the CEO of SeaWorld Entertainment (SEAS).

The theme park company starts the year with a new interim CEO, David D'Alessandro, a switch just made amid a continuing outcry from animal-rights activists about keeping killer whales, the parks' biggest drawing cards, in captivity.

The company blames the controversy for deterring potential showgoers, mainly at its San Diego park, and for the resulting toll on earnings.

D'Alessandro takes the helm after CEO Jim Atchison was moved aside last month. SeaWorld offered no specifics about the change; Atchison will stay on as vice chairman of the board of SeaWorld Entertainment, which is parent to three SeaWorld marine parks in the U.S. and eight other entertainment venues.

Even without a new permanent CEO in place, SeaWorld says it has a plan to get itself out of its public-relations quagmire. It hopes that a new killer whale pen in its San Diego park that's twice the size of the existing one — its Blue World project — will mollify critics and reassure guests. But the 10-million-gallon tank isn't expected to be ready until 2018.

Until then, SeaWorld is emphasizing its care facilities for injured birds and marine mammals, and notes it's spending $10 million "focused on threats to killer whales in the wild."

SeaWorld declined to make senior executives, including D'Alessandro, available for this story.

But in the wake of of the earnings and share price declines, it's also moving to cut expenses by $50 million.

It is not, however, doing as its critics at the People for the Ethical Treatment of Animals would like it to do: creating a coastal ocean sanctuary for its killer whales, or orcas, that would "protect orcas from the misery and harassment of captivity at SeaWorld," as the organization said in a statement last month. PETA also wants the company to create virtual-reality experiences with sea life at its parks rather than providing real-life encounters.

SeaWorld has offered whale shows for decades. What changed things for the company's image was a 2013 documentary, Blackfish, that received wide attention.

In July of 2013, SeaWorld shares were trading as high as $38.92. On Friday, the stock closed at $17.97.

Blackfish was a critique of SeaWorld's practices and alleged that killer whales were abducted harshly from their natural environment and forced to live miserable lives cooped up in shallow pens. SeaWorld denies all allegations of any mistreatment, and has gone to great lengths on its website to show the care it gives its killer whales. The documentary won't go away, however, and now is showing on television. (It recently was due to air on CNN, which acquired the rights to it, until it was preempted by coverage of the AirAsia crash.)

A California assemblyman introduced legislation last year to ban killer whales from California aquatic parks. "There is no justification for the continued captive display of orcas for entertainment purposes," Assemblyman Richard Bloom, a Democrat from Santa Monica, said in a statement last April. "These beautiful creatures are much too large and far too intelligent to be confined in small, concrete tanks for their entire lives."

While the bill died, there was another flurry of negative publicity. And PETA has stayed actively involved, buying stock in SeaWorld Entertainment to advance its whale cause from within. Last month, it said it submitted a resolution to fellow shareholders calling on the company to develop the coastal sanctuaries.

PETA used the management shakeup at SeaWorld to blast the departing CEO. "Jim Atchison's watch has meant lawsuits, tanking stock, canceled performances by musical acts, falling ticket sales and continued deprivation and isolation for orcas at SeaWorld," said Delcianna Winders, PETA Foundation's deputy general counsel.

Third-quarter earnings, released in November, weren't good: Revenue fell by 8% to $495.8 million and net income declined 28% to $87.2 million, compared to the same period a year earlier. Atchison blamed negative publicity arising from the California orca bill, along with increased competition at its Orlando park.

In remarks to analysts, he said SeaWorld would spend more on marketing, with a tailored message in different markets. For San Diego, he says the focus would be on touting the company's animal rescue efforts. SeaWorld also points out that with 86,000 animals to care for, it is one of the world's largest zoological organizations.

SeaWorld also is speeding up a share-repurchasing program to boost the stock.

With attendance of 8.4 million in the third quarter, down 500,000 from the same period a year ago, SeaWorld is looking overseas for growth — possibly opening locations in the Middle East and Asia.

Analysts were generally supportive of the CEO change. Felicia Hendrix and Amanda Bryant of Barclays Capital told investors soon after the announcement that the change reflects "the perceived need for change" with a search that focuses on outsiders to run the company.

While Scott Hamann of KeyBanc Capital Markets wrote that Atchison's departure as CEO was "unexpected," in a note to investors Dec. 12 he maintains a "buy" rating on the stock. "We view the change as a positive, opening the doors to operational changes and a new approach to the business from an outsider," he says.

Timothy Condor, analyst for Wells Fargo Securities, says he thinks the stock will be a holding pattern until the middle of the year when international park agreements are signed.