**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

|   | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|---|-----------------------------------------------------------------------------------------|

 

**For the quarterly period ended June** **28, 2009**

**OR**

 

|   | o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|---|------------------------------------------------------------------------------------------|

 

**For the transition period from**                    **to**                     

**Commission file number 333-108661**

 

**UNIVERSAL CITY****DEVELOPMENT PARTNERS, LTD.**

**UCDP****FINANCE, INC.**

**(Exact name of registrants as specified in their charters)**

 

| **FLORIDA**                                                             |   | **59-3128514**                                |
|-------------------------------------------------------------------------|--------|-----------------------------------------------|
| **FLORIDA**                                                             |   | **42-1581381**                                |
| **(State or other jurisdiction of**

**incorporation or organization)** |   | **(I.R.S. Employer**

**Identification No.)** |
|                                                                         |        |                                               |
| **1000 UNIVERSAL STUDIOS PLAZA**

**ORLANDO, FL**                       |        | **32819-7610**                                |
| **(Address of principal executive offices)**                            |        | **(Zip Code)**                                |

**(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  x    No  o

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                       |    | o      |   |    |   |    | Accelerated filer         |    | o |   |
|-----------------------------------------------|--------------|--------|--------|--------------|--------|--------------|---------------------------|--------------|---|--------|
|  

Non-accelerated filer                 |    | x      |   |    |   |    | Smaller reporting company |    | o |   |
| (Do not check if a smaller reporting company) |    |   |   |

 

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 August 6, 2009 there were 100 shares of common stock ofUCDPFinance, Inc., outstanding. Not applicable to Universal CityDevelopment Partners, Ltd.

 

----

 

**TABLE OF CONTENTS**

 

|                                                                                                     |          |
|----------------------------------------------------------------------------------------------------------|----------|
|                                                                                                     | **PAGE** |
| **PART I. FINANCIAL INFORMATION**                                                                        |          |
|                                                                                                     |          |
| ITEM 1. Financial Statements                                                                        | 3        |
| ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16       |
| ITEM 3. Quantitative and Qualitative Disclosure About Market Risk                                   | 23       |
| ITEM 4. Controls and Procedures                                                                     | 25       |
|                                                                                                     |     |
| **PART II. OTHER INFORMATION**                                                                           |     |
|                                                                                                     |     |
| ITEM 1. Legal Proceedings                                                                           | 26       |
| ITEM 1A. Risk Factors                                                                               | 26       |
| ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds                                 | 26       |
| ITEM 3. Defaults upon Senior Securities                                                             | 26       |
| ITEM 4. Submission of Matters to a Vote of Security Holders                                         | 26       |
| ITEM 5. Other Information                                                                           | 26       |
| ITEM 6. Exhibits                                                                                    | 26       |
| SIGNATURES                                                                                               | 27       |

 

UCDPFinance, Inc.is awholly ownedsubsidiaryof Universal CityDevelopment Partners, Ltd., andwasformed for the sole purpose of acting as a co-issuer of the Registrants’113/4% senior notes        due 2010.UCDPFinance, Inc. doesnot and will not conduct any operations or hold any assets of any kind and will not have any future revenues.UCDPFinance, Inc. meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format.

 

 

 

2

----

**PART I — FINANCIAL INFORMATION**

 

| **ITEM** **1.** | **Financial Statements** |
|----------------------|--------------------------|

 

**Universal City Development Partners, Ltd.****and Subsidiaries**

**Condensed Consolidated****Balance Sheets**

(In thousands)

 

 

|                                           |   | **June 28, 2009** |       |   |   | **December 31,** |   |
|------------------------------------------------|--------|-------------------|------------|--------|--------|------------------|--------|
|                                           |   | **(unaudited)**   |       |   |   | **2008**         |   |
| **ASSETS**                                     |   |              |       |   |   |             |   |
| Current assets:                                |   |              |       |   |   |             |   |
| Cash and cash equivalents                      |   | $                 | 40,130     |   |   |             | $      | 87,798 |   |
| Accounts receivable, net                       |   |              | 31,848     |   |   |             |   | 27,521 |   |
| Receivables from related parties               |   |              | 1,520      |   |   |             |   | 7,489 |   |
| Inventories, net                               |   |              | 46,016     |   |   |             |   | 42,565 |   |
| Prepaid expenses and other assets              |   |              | 15,983     |   |   |             |   | 8,899 |   |
| Current portion of deferred finance costs, net |   |              | 7,169      |   |   |             |   | — |   |
| Assets held for sale                           |   |              | 17,637     |   |   |             |   | 17,637 |   |
| Total current assets                           |   |              | 160,303    |   |   |             |   | 191,909 |   |
|                                           |   |              |       |   |   |             |   |   |   |
| Property and equipment, at cost:               |   |              |       |   |   |             |   |   |   |
| Land and land improvements                     |   |              | 476,907    |   |   |             |   | 475,021 |   |
| Buildings and building improvements            |   |              | 1,387,100  |   |   |             |   | 1,381,492 |   |
| Equipment, fixtures and furniture              |   |              | 1,107,278  |   |   |             |   | 1,112,537 |   |
| Construction in process                        |   |              | 219,083    |   |   |             |   | 157,117 |   |
| Total property and equipment, at cost:         |   |              | 3,190,368  |   |   |             |   | 3,126,167 |   |
| Less accumulated depreciation                  |   |              | (1,472,269 | )      |   |             |   | (1,426,192 | ) |
| Property and equipment, net                    |   |              | 1,718,099  |   |   |             |   | 1,699,975 |   |
|                                           |   |              |       |   |   |             |   |   |   |
| Other assets:                                  |   |              |       |   |   |             |   |   |   |
| Investments in unconsolidated entities         |   |              | 11,953     |   |   |             |   | 11,939 |   |
| Intangible assets, net                         |   |              | 51,998     |   |   |             |   | 52,955 |   |
| Deferred finance costs, net                    |   |              | —    |   |   |             |   | 11,948 |   |
| Other assets                                   |   |              | 6,834      |   |   |             |   | 6,551 |   |
| Total other assets                             |   |              | 70,785     |   |   |             |   | 83,393 |   |
|                                           |   |              |       |   |   |             |   |   |   |
| Total assets                                   |   | $                 | 1,949,187  |   |   |             | $      | 1,975,277 |   |

 

Continued on next page.

 

 

 

 

3

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**Universal City Development Partners, Ltd. and Subsidiaries**

**Condensed Consolidated Balance Sheets****(Continued)**

(In thousands)

 

|                                                            |   | **June 28, 2009** |      |   |   | **December 31,** |   |
|-----------------------------------------------------------------|--------|-------------------|-----------|--------|--------|------------------|--------|
|                                                            |   | **(unaudited)**   |      |   |   | **2008**         |   |
| **LIABILITIES AND PARTNERS’ EQUITY**                      |   |              |      |   |   |             |   |
| Current liabilities:                                            |   |              |      |   |   |             |   |
| Accounts payable and accrued liabilities                        |   | $                 | 130,393   |   |   |             | $      | 126,148 |   |
| Unearned revenue                                                |   |              | 57,578    |   |   |             |   | 45,508 |   |
| Due to related parties                                          |   |              | 10,514    |   |   |             |   | 11,696 |   |
| Interest rate swap liability, at fair market value              |   |              | 4,640     |   |   |             |   | 9,176 |   |
| Current portion of capital lease and financing obligations      |   |              | 5,561     |   |   |             |   | 5,822 |   |
| Current portion of long-term borrowings                         |   |              | 1,008,375 |   |   |             |   | — |   |
| Total current liabilities                                       |   |              | 1,217,061 |   |   |             |   | 198,350 |   |
|                                                            |   |              |      |   |   |             |   |   |   |
| Long-term liabilities:                                          |   |              |      |   |   |             |   |   |   |
| Long-term borrowings                                            |   |              | —   |   |   |             |   | 1,007,960 |   |
| Capital lease and financing obligations, net of current portion |   |              | 28,644    |   |   |             |   | 27,929 |   |
| Deferred special fee payable to affiliates                      |   |              | 93,445    |   |   |             |   | 91,967 |   |
| Other                                                           |   |              | 6,359     |   |   |             |   | 6,725 |   |
| Total long-term liabilities                                     |   |              | 128,448   |   |   |             |   | 1,134,581 |   |
|                                                            |   |              |      |   |   |             |   |   |   |
| Partners' equity:                                               |   |              |      |   |   |             |   |   |   |
| Vivendi Universal Entertainment                                 |   |              | 299,398   |   |   |             |   | 319,770 |   |
| Blackstone                                                      |   |              | 299,398   |   |   |             |   | 319,770 |   |
| Accumulated other comprehensive loss                            |   |              | (1,651    | )      |   |             |   | (3,976 | ) |
| Total Partners’ equity                                    |   |              | 597,145   |   |   |             |   | 635,564 |   |
| Noncontrolling interest in UCRP                                 |   |              | 6,533     |   |   |             |   | 6,782 |   |
| Total equity                                                    |   |              | 603,678   |   |   |             |   | 642,346 |   |
|                                                            |   |              |      |   |   |             |   |   |   |
| Total liabilities and equity                                    |   | $                 | 1,949,187 |   |   |             | $      | 1,975,277 |   |

 

See accompanying notes.

 

 

 

 

4

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**Universal City Development Partners, Ltd.****and Subsidiaries**

**Condensed Consolidated****Statements of Operations**

**(UNAUDITED)**

(In thousands)

 

|                                                                                                     |   | **Three Months Ended** |    |   |   | **Six Months Ended** |   |
|----------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|--------|----------------------|--------|
|                                                                                                     |   | **June 28, 2009**      |    |   |   | **June 29, 2008**    |   |   |   | **June 28, 2009** |   |   |   | **June 29, 2008** |   |
| Operating revenues:                                                                                      |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |
| Theme park passes                                                                                        |   | $                      | 109,239 |   |   |                 | $      | 117,017 |   |   |   | $ | 191,016 |   |   |   | $ | 216,434 |   |
| Theme park food and beverage                                                                             |   |                   | 26,350  |   |   |                 |   | 31,081 |   |   |   |   | 45,046 |   |   |   |   | 55,488 |   |
| Theme park merchandise                                                                                   |   |                   | 23,016  |   |   |                 |   | 26,829 |   |   |   |   | 39,804 |   |   |   |   | 50,148 |   |
| Other theme park related                                                                                 |   |                   | 22,474  |   |   |                 |   | 29,051 |   |   |   |   | 40,519 |   |   |   |   | 53,783 |   |
| Other                                                                                                    |   |                   | 34,663  |   |   |                 |   | 37,890 |   |   |   |   | 63,146 |   |   |   |   | 73,320 |   |
| Total operating revenues                                                                                 |   |                   | 215,742 |   |   |                 |   | 241,868 |   |   |   |   | 379,531 |   |   |   |   | 449,173 |   |
|                                                                                                     |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and operating expenses:                                                                            |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Theme park operations                                                                                    |   |                   | 43,296  |   |   |                 |   | 44,892 |   |   |   |   | 83,721 |   |   |   |   | 88,051 |   |
| Theme park selling, general and administrative                                                           |   |                   | 30,928  |   |   |                 |   | 45,550 |   |   |   |   | 64,245 |   |   |   |   | 84,702 |   |
| Theme park cost of products sold                                                                         |   |                   | 24,738  |   |   |                 |   | 29,436 |   |   |   |   | 44,668 |   |   |   |   | 56,374 |   |
| Special fee payable to Vivendi Universal Entertainment and consultant fee                                |   |                   | 13,674  |   |   |                 |   | 15,407 |   |   |   |   | 23,903 |   |   |   |   | 28,444 |   |
| Depreciation and amortization                                                                            |   |                   | 26,199  |   |   |                 |   | 28,166 |   |   |   |   | 52,829 |   |   |   |   | 57,403 |   |
| Other                                                                                                    |   |                   | 25,555  |   |   |                 |   | 33,758 |   |   |   |   | 52,000 |   |   |   |   | 65,223 |   |
| Total costs and operating expenses                                                                       |   |                   | 164,390 |   |   |                 |   | 197,209 |   |   |   |   | 321,366 |   |   |   |   | 380,197 |   |
|                                                                                                     |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                                                         |   |                   | 51,352  |   |   |                 |   | 44,659 |   |   |   |   | 58,165 |   |   |   |   | 68,976 |   |
|                                                                                                     |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other expense (income):                                                                                  |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                         |   |                   | 25,955  |   |   |                 |   | 24,754 |   |   |   |   | 51,196 |   |   |   |   | 49,701 |   |
| Interest income                                                                                          |   |                   | (45     | )      |   |                 |   | (608 | ) |   |   |   | (89 | ) |   |   |   | (1,600 | ) |
| Net change in fair value of interest rate swaps and amortization of accumulated other comprehensive loss |   |                   | (1,158  | )      |   |                 |   | — |   |   |   |   | (2,211 | ) |   |   |   | — |   |
| Income from investments in unconsolidated entities                                                       |   |                   | (530    | )      |   |                 |   | (586 | ) |   |   |   | (1,329 | ) |   |   |   | (2,071 | ) |
| Total other expense, net                                                                                 |   |                   | 24,222  |   |   |                 |   | 23,560 |   |   |   |   | 47,567 |   |   |   |   | 46,030 |   |
|                                                                                                     |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                               |   |                   | 27,130  |   |   |                 |   | 21,099 |   |   |   |   | 10,598 |   |   |   |   | 22,946 |   |
|                                                                                                     |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less: net income attributable to the noncontrolling interest in UCRP                                     |   |                   | 726     |   |   |                 |   | 863 |   |   |   |   | 1,212 |   |   |   |   | 1,614 |   |
|                                                                                                     |   |                   |    |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income attributable to the Partners                                                                  |   | $                      | 26,404  |   |   |                 | $      | 20,236 |   |   |   | $ | 9,386 |   |   |   | $ | 21,332 |   |

See accompanying notes.

 

 

 

 

5

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**Universal City Development Partners, Ltd.****and Subsidiaries**

**Condensed Consolidated****Statement of Comprehensive Income and Changes in Partners’ Equity**

**(UNAUDITED)**

(In thousands)

 

|                                                                                                          |   |   |   |   | **UCDP's Partners**                 |     |   |   |   |           |   |   |   |   |                                        |   |   |   |   |                                |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------------------------|----------|--------|--------|--------|----------------|--------|--------|--------|--------|---------------------------------------------|--------|--------|--------|--------|-------------------------------------|--------|
|                                                                                                          |   |   |   |   | **Vivendi Universal Entertainment** |     |   |   |   | **Blackstone** |   |   |   |   | **Accumulated Comprehensive Income (Loss)** |   |   |   |   | **Noncontrolling interest in UCRP** |   |   |   |   | **Total Equity** |   |   |   |   | **Comprehensive Income** |   |
| Balance at December 31, 2008                                                                             |   |   |   | $      | 319,770                             |     |   |   | $      | 319,770        |   |   |   | $      | (3,976                                      | )      |   |   | $      | 6,782                               |   |   |   | $ | 642,346 |   |   |   |   |   |   |
|                                                                                                          |   |   |   |   |                                |     |   |   |   |           |   |   |   |   |                                        |   |   |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Distributions to noncontrolling interest in UCRP                                                              |   |   |   |   | —                             |     |   |   |   | —        |   |   |   |   | —                                     |   |   |   |   | (1,461                              | )      |   |   |   | (1,461 | ) |   |   | $ | — |   |
| Amortization of accumulated other comprehensive loss from interest rate swaps previously designated as hedges |   |   |   |   | —                             |     |   |   |   | —        |   |   |   |   | 2,325                                       |   |   |   |   | —                             |   |   |   |   | 2,325 |   |   |   |   | 2,325 |   |
| Distributions to Partners                                                                                     |   |   |   |   | (25,065                             |  
) |   |   |   | (25,065        | )      |   |   |   | —                                     |   |   |   |   | —                             |   |   |   |   | (50,130 | ) |   |   |   | — |   |
| Net income                                                                                                    |   |   |   |   | 4,693                               |     |   |   |   | 4,693          |   |   |   |   | —                                     |   |   |   |   | 1,212                               |   |   |   |   | 10,598 |   |   |   |   | 10,598 |   |
|                                                                                                          |   |   |   |   |                                |     |   |   |   |           |   |   |   |   |                                        |   |   |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Balance at June 28, 2009                                                                                      |   |   |   | $      | 299,398                             |     |   |   | $      | 299,398        |   |   |   | $      | (1,651                                      | )      |   |   | $      | 6,533                               |   |   |   | $ | 603,678 |   |   |   | $ | 12,923 |   |

 

See accompanying notes.

 

 

 

 

6

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**Universal City Development Partners, Ltd.****and Subsidiaries**

**Condensed Consolidated****Statements of Cash Flows**

**(UNAUDITED)**

(In thousands)

 

|                                                                           |   | **Six Months Ended** |    |
|--------------------------------------------------------------------------------|--------|----------------------|---------|
|                                                                           |   | **June 28, 2009**    |    |   |   | **June 29, 2008** |   |
| **Cash flows from operating activities**                                       |   |                 |    |   |   |   |   |
| Net cash and cash equivalents provided by operating activities                 |   | $                    | 73,257  |   |   |   | $ | 100,429 |   |
|                                                                           |   |                 |    |   |   |   |   |   |   |
| **Cash flows from investing activities**                                       |   |                 |    |   |   |   |   |   |   |
| Property and equipment acquisitions                                            |   |                 | (70,584 | ) |   |   |   | (60,832 | ) |
| Proceeds relating to capital reimbursements                                    |   |                 | 2,054   |   |   |   |   | — |   |
| Net cash and cash equivalents used in investing activities                     |   |                 | (68,530 | ) |   |   |   | (60,832 | ) |
|                                                                           |   |                 |    |   |   |   |   |   |   |
| **Cash flows from financing activities**                                       |   |                 |    |   |   |   |   |   |   |
| Payment of partner distributions                                               |   |                 | (50,130 | ) |   |   |   | (31,290 | ) |
| Distributions of noncontrolling interest in UCRP                               |   |                 | (1,461  | ) |   |   |   | (1,874 | ) |
| Payments on long-term borrowings, capital lease and financing obligations, net |   |                 | (804    | ) |   |   |   | (375 | ) |
| Net cash and cash equivalents used in financing activities                     |   |                 | (52,395 | ) |   |   |   | (33,539 | ) |
|                                                                           |   |                 |    |   |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                           |   |                 | (47,668 | ) |   |   |   | 6,058 |   |
| Cash and cash equivalents at beginning of year                                 |   |                 | 87,798  |   |   |   |   | 127,874 |   |
|                                                                           |   |                 |    |   |   |   |   |   |   |
| Cash and cash equivalents at end of period                                     |   | $                    | 40,130  |   |   |   | $ | 133,932 |   |
|                                                                           |   |                 |    |   |   |   |   |   |   |
| **Supplemental disclosures of noncash information**                            |   |                 |    |   |   |   |   |   |   |
| Increase of property and equipment in accrued liabilities                      |   | $                    | 1,466   |   |   |   | $ | 9,430 |   |
|                                                                           |   |                 |    |   |   |   |   |   |   |
| Decrease/(increase) in interest rate swap liability                            |   | $                    | 4,536   |   |   |   | $ | (1,148 | ) |
|                                                                           |   |                 |    |   |   |   |   |   |   |
| Disposal of fully depreciated assets                                           |   | $                    | 5,795   |   |   |   | $ | 1,978 |   |

 

See accompanying notes.

 

 

 

 

7

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**Universal City Development Partners, Ltd.****and Subsidiaries**

**Notes to****Condensed Consolidated****Financial Statements**

**(UNAUDITED)**

**1. General**

*Basis of Presentation*

The accompanying unauditedcondensed consolidatedfinancial 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 unauditedcondensed consolidatedfinancial statements reflect all normal recurring adjustments which are, in the opinion of the 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        unauditedcondensed consolidatedfinancial statements should be read in conjunction with the auditedconsolidatedfinancial statements for the year ended December 31, 2008 and the notes thereto, filed with the Securities and Exchange Commission under cover of Form 10-K.

The accompanying unauditedcondensed consolidatedfinancial statements include the consolidated amounts of Universal CityDevelopment Partners, Ltd.( “UCDP”); Universal City Travel Partners d/b/a Universal Parks & Resorts Vacations (“UPRV”); UCDP Finance, Inc. ("UCDP Finance"); 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 (“Blackstone”) (collectively,        the “Partners”). Universal CPM is a wholly owned subsidiary of Vivendi Universal Entertainment LLLP (“VUE”), an affiliate of Universal Studios, Inc. (“USI”), which is an indirect subsidiary of NBC Universal, Inc. (“NBC Universal”).

*Period End*

The three months ended June 28, 2009 and June 29, 2008 each contained 91 days. The six months ended June 28, 2009 contained 179 days, while the six months ended June 29, 2008 contained 181 days.

*Seasonality*

Based on the seasonality of attendance, the results for the three and six months ended June 28, 2009 and June 29, 2008 are not necessarily indicative of results for the full year.Theweek before and after Easter are peak attendance periods. In 2008, Easter was on March 23. In 2009, Easter was on April 12. This shift in Easter moved the peak attendance period        from the first quarter of 2008 to the second quarter of 2009.

*Reclassifications*

Noncontrolling interest in UCRP (formerly known as minority interest) has been reclassified to conform to SFAS No. 160, “*Noncontrolling Interests in Consolidated Financial Statements – An Amendment of ARB No. 51*” (“SFAS 160”). See discussion below under the caption “Recent Accounting Pronouncements.”

 

*Inventories*

The major components of inventories are as follows (in thousands):

 

|                                     |   |   | **June 28,****2009** |   |   |   |   | **December 31,****2008** |   |
|------------------------------------------|--------|--------|----------------------|--------|--------|--------|--------|--------------------------|--------|
| Merchandise                              |   | $      | 16,179               |   |   |   | $      | 12,421                   |   |
| Food and beverage                        |   |   | 3,169                |   |   |   |   | 3,962                    |   |
| Operating supplies and maintenance parts |   |   | 28,639               |   |   |   |   | 28,156                   |   |
| Less: reserves                           |   |   | (1,971               | )      |   |   |   | (1,974                   | )      |
|                                     |   |   |                 |   |   |   |   |                     |   |
| Total                                    |   | $      | 46,016               |   |   |   | $      | 42,565                   |   |

8

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*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 a period ranging from 10 to 20 years, which has a weighted average amortizable life of 11 years. Intangible assets totaled $51,998,000 and $52,955,000, respectively, as of June 28, 2009 and December 31,        2008. This included $15,653,000 and $14,696,000 in accumulated amortization, respectively, as of June 28, 2009 and December 31, 2008. Amortization expense amounted to $405,000 and $519,000, respectively, during the three months ended June 28, 2009 and June 29, 2008, and $957,000 and $1,115,000, respectively, during the six months ended June 28, 2009 and June 29, 2008. Amortization of existing intangible assets will be approximately $1,768,000 for 2009 and $5,255,000 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 June 28, 2009 and June 29, 2008, and the six months ended June 28, 2009 and        June 29, 2008, the Company incurred additional depreciation expense of $937,000, $944,000, $1,853,000 and $2,203,000 respectively, relating to accelerating the life of various ride and show assets.

 

*Financial Instruments*

The carrying amounts reported in the combined 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):

 

|                           |   | **June 28, 2009**  |      | **December 31, 2008** |   |
|--------------------------------|--------|--------------------|-----------|-----------------------|--------|
|                           |   | **Carrying Value** |      | **Fair Value**        |   | **Carrying Value** |   | **Fair Value** |   |
| Long-term borrowings           |   | $                  | 1,008,375 |                  | $      | 963,730 |   | $ | 1,007,960 |   | $ | 760,240 |   |
| Interest rate swap liabilities |   |               | 4,640     |                  |   | 4,640 |   |   | 9,176 |   |   | 9,176 |   |
|                           |   |               |      |                  |   |   |   |   |   |   |   |   |   |
| Total                          |   | $                  | 1,013,015 |                  | $      | 968,370 |   | $ | 1,017,136 |   | $ | 769,416 |   |

 

*Recent Accounting Pronouncements*

*Determination**of the Useful Life of Intangible Assets*” (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “*Goodwill and Other        Intangible Assets*” and requires enhanced related disclosures. FSP 142-3 must be applied prospectively to all intangible assets acquired as of and subsequent to fiscal years beginning after December 15, 2008. FSP 142-3 became effective for the Company on January 1, 2009. Although future transactions involving intangible assets may be impacted by this guidance, FSP 142-3 did not impact the Company’s current financial statements as        the Company did not acquire any intangible assets during the six months ended June 28, 2009.

 

In March 2008, the FASB issued SFAS No. 161,*“Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No.* *133”*(“SFAS 161”). SFAS 161 expands the disclosure requirements for derivative instruments and hedging activities. This        Statement specifically requires entities to provide enhanced disclosures addressing the following: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008.        SFAS No. 161 became effective for the Company on January 1, 2009. The Company’s adoption of the standard did not have a material impact on its financial position, results of operations or cash flowsas it is primarily disclosure related.

In December 2007, the FASB issued SFAS No. 160, “*Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No.* *51”*(“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary        and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. SFAS 160becameeffective for the Company on January 1, 2009. This guidance impacts the presentation of noncontrolling interests in certain of the Company’s investments inconsolidatedentities.Specifically, SFAS 160 impacted the        Company’s financial statements by reclassifying the noncontrolling interest in UCRP (formerly known as minority interest) from the liability section into the equity section of theCondensed ConsolidatedBalance Sheets. As a result, the net income attributable to the noncontrolling interest in UCRP is no longer excluded from the determination of net income (or loss) on theCondensed ConsolidatedStatements of Operations. The determination of the income attributable to noncontrolling interest in UCRP continues to be calculated based on the underlying ownership percentage.The adoption resulted in the reclassification of $6,782,000 of noncontrolling interest in UCRP from minority interest to Partners’ equity on the December 31, 2008 Condensed Consolidated Balance Sheets and the presentation of net income of $726,000, $863,000,        $1,212,000 and $1,614,000 attributable to the noncontrolling interest in UCRP in the Condensed Combined Statements of Operations for the three months ended June 28, 2009 and June 29, 2008 and six months ended June 28, 2009 and June 29, 2008, respectively.The application of SFAS 160 is reflected in the re-issued historical consolidated financial statements of UCDP included in the Current Report on Form 8-K filed by UCDP and UCDP Finance on June 29, 2009.

 

9

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In December 2007, the FASB issued SFAS No. 141(R), “*Business Combinations”*(“SFAS 141(R)”). This statement modifies certain aspects of how the acquiring entity recognizes and measures the identifiable assets, the liabilities assumed and the goodwill acquired in a business combination. SFAS 141(R) is effective for fiscal years        beginning after December 15, 2008.AlthoughSFAS 141 (R) will impact the Company’s accounting for business combinations completed on or after January 1, 2009, SFAS 141 (R) did not impact the Company’s current financial statements as the Company did not enter into any business combinations during the six months ended June 28, 2009.

In May 2009, the FASB issued SFAS No. 165, “*Subsequent Events*” (“SFAS 165”). SFAS 165 establishes principles and requirements for subsequent events. SFAS 165 specifically sets forth guidance pertaining to the period after the balance sheet date during which management should consider events or transactions for potential recognition        or disclosure, circumstances under which an event or transaction would be recognized after the balance sheet date and the required disclosures that should be made about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. SFAS 165 became effective for the Company on June 28, 2009. The Company’s adoption of the standard resulted in additional disclosures surrounding the        Company’s subsequent events (see*note 9*below).

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, “*Interim Disclosures about Fair Value of Financial Instruments*” (“FSP FAS 107-1”). FSP FAS 107-1 extends the disclosure requirements of FASB Statement No. 107, “*Disclosures about Fair Value of Financial        Instruments*” (“SFAS 107”), to interim financial statements of publicly traded companies as defined in APB Opinion No. 28,*Interim Financial Reporting*. FSP FAS 107-1 is effective for interim or annual financial periods ending after June 15, 2009. FSP FAS 107-1 became effective for the Company on June 28, 2009. The Company’s adoption of the standard resulted in additional disclosures        surrounding the interim fair values of the Company’s financial instruments, under the caption “Financial Instruments” above.

 

In June 2009, the FASB issued SFAS No. 167 “*Amendments to FASB Interpretation No. 46(R)*” (“SFAS 167”). SFAS 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), "*Consolidation of Variable Interest Entities",*and 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. SFAS 167 will require 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 will be required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. SFAS 167 will be effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009. Early application is not permitted. The        Company is currently evaluating the impact, if any, of adoption of SFAS 167 on its financial statements.

 

In June 2009, the FASB issued SFAS No. 168, "*The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles*" ("SFAS 168"). SFAS 168 will become the single source of authoritative nongovernmental U.S. generally accepted accounting principles ("GAAP"), superseding existing FASB, American Institute of Certified Public        Accountants ("AICPA"), Emerging Issues Task Force ("EITF"), and related accounting literature. SFAS 168 reorganizes the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is relevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections. SFAS 168 will be effective for financial statements issued for reporting periods that end after September 15, 2009. This        will have an impact on the Company's financial statements since all future references to authoritative accounting literature will be references in accordance with SFAS 168.

*Liquidity*

 

As of June 28, 2009, the Company had indebtedness totaling $499,375,000 under the April 2010 notes. Additionally, $509,000,000 of debt under the term loan component of the senior secured credit facilities would become due on April 1, 2010 unless the April 2010 notes and the May 2010 notes are not refinanced or repaid prior to such date. As a result of its significant working capital deficiency, the Company        will be required to refinance this debt prior to the stated maturity date. These balances are classified as current liabilities in the accompanying Condensed Consolidated Balance Sheets as of June 28, 2009 as they either mature within a year or the maturity date could accelerate to within a year. Accordingly, the Company and Holdings intend to refinance the April 2010 notes, the May 2010 notes and the term loan; however, no assurances can be made regarding their ability to satisfy their        liquidity and working capital requirements. The Company’s liquidity could also be negatively impacted by its arrangement with the Consultant as more fully described in Note 8.

 

10

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**2. Long-Term Borrowings**

Indebtedness consisted of the following (in thousands, except percentages):

 

|                                                                                                                                                                                                                                                              |              |              |   | **As of June 28,** |   | **As of December 31,** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|-------------------|--------|--------------------|--------|------------------------|
|                                                                                                                                                                                                                                                              | **Interest Rate** | **Maturity Date** |   | **2009**           |   | **2008**               |
| Term loan under UCDP's senior secured creditfacilities                                                                                                                                                                                                            | LIBOR +3.00%(1)   | (2)               |   | $ 509,000          |   | $ 509,000              |
| UCDP fixed rate senior notes (“April 2010 notes”)                                                                                                                                                                                                     | 11.75%            | April 1, 2010     |   | 500,000            |   | 500,000                |
|                                                                                                                                                                                                                                                              |              |              |   |               |   |                   |
| Gross principal payable                                                                                                                                                                                                                                           |              |              |   | 1,009,000          |   | 1,009,000              |
| Unamortized discounts                                                                                                                                                                                                                                             |              |              |   | (625)              |   | (1,040)                |
|                                                                                                                                                                                                                                                              |              |              |   |               |   |                   |
| Total debt                                                                                                                                                                                                                                                        |              |              |   | $ 1,008,375        |   | $ 1,007,960            |
|                                                                                                                                                                                                                                                              |              |              |   |               |   |                   |
| (1)The LIBOR interest rate on theterm loan under thesenior secured creditfacilitiesis subject to a3.00%floor.                                                                                                                                                     |
| (2)The maturity date of theterm loan under thesenior secured creditfacilitiesis June 9, 2011;however, it is repayable in full at April 1, 2010, if the April 2010 notes and the May 2010 notes are not refinanced or repaid in full prior to such date. |

As of June 28, 2009 and December 31, 2008, the Company had $100,000,000 available under its revolving credit facilities.

 

**3. Interest Rate Swaps**

The Company is exposed to market risks relating to fluctuations in interest rate. 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. The Company utilizes 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 is to minimize the risks and costs associated with financial activities. The Company does not use financial instruments for trading purposes. The Company specifically designates interest rate swap hedges of outstanding debt instruments and recognizes interest differentials in the period they occur.

 

The Company follows SFAS No. 133, “*Accounting for Derivative Instruments and Hedging Activities”*(“SFAS 133”), as amended by SFAS No. 138, “*Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133*”        and SFAS No. 149, “*Amendment of Statement 133 on Derivative Instruments and Hedging Activities”*, to account for its interest rate swaps. This standard established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that 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 under SFAS 133 are recognized as other        comprehensive income (loss) in the accompanyingconsolidatedstatements of comprehensive income and changes in partners’ equity. Changes in the underlying market value of swap arrangements that do not qualify as hedging activities under SFAS 133 are recognized as a change in the fair value of interest rate swaps in the accompanyingconsolidatedstatements of operations. Additionally, the        accumulated other comprehensive income (loss) related to interest rate swaps that become ineffective is amortized on a straight-line basis, over the remaining life of the interest rate swap, through the change in the fair value of interest rate swaps in the accompanyingconsolidatedstatements of operations. In the fourth quarter of 2008, the Company’s interest rate swap agreements became ineffective in accordance with SFAS        No. 133, as amended.Accordingly, the accounting treatment for these interest rate swaps is different during the three and six months ended June 28, 2009 as compared to the three and six months ended June 29, 2008. The following table summarizes the notional values and fair values of our derivative financial instruments as of June 28, 2009 (in thousands, except percentages):

 

| ** Notional value** |    |   |   | **Expiration date** |              |   | **Fair value** |   |   |   | **Interestrate** |   |   | **Accounting Treatment** |   |   | **Terms**               |
|--------------------------|---------|--------|--------|---------------------|-------------------|--------|----------------|--------|--------|--------|------------------|--------|--------|--------------------------|--------|--------|-------------------------|
|                     |    |   |   |                |              |   |           |   |   |   |             |   |   |                     |   |   |                    |   |
| $                        | 200,000 |   |   |                | November 20, 2009 |   |           | $      | (3,258 | )      |             |   | 4.77   | %                        |   |   | Statement of operations |   |   | Fixed |
|                     | 125,000 |   |   |                | October 15, 2009  |   |           |   | (1,382 | )      |             |   | 4.41   | %                        |   |   | Statement of operations |   |   | Fixed |
| $                        | 325,000 |   |   |                |              |   |           | $      | (4,640 | )      |             |   |   |                     |   |   |                    |   |   |   |

 

11

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The following table summarizes the changes in fair value of the Company's interest rate swaps (in thousands):

 

|                         |   | **Three Months Ended**                           |   |   | **Six Months Ended**                       |   |
|------------------------------|--------|--------------------------------------------------|--------|--------|--------------------------------------------|--------|
|                         |   | **June 28, 2009**                                |   |   | **June 29, 2008**                          |   |   | **June 28, 2009** |   |   | **June 29, 2008** |   |
|                         |   | **(unaudited)**                                  |   |   | **(unaudited)**                            |   |   | **(unaudited)** |   |   | **(unaudited)** |   |
|                         |   | **Recorded** **in statement of operations** |   |   | **Recorded in other comprehensive income** |   |   | **Recorded** **in statement of operations** |   |   | **Recorded in other comprehensive income** |   |   | **Recorded** **in statement of operations** |   |   | **Recorded in other comprehensive income** |   |   | **Recorded** **in statement of operations** |   |   | **Recorded in other comprehensive  (loss)** |   |
|                         |   |                                             |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Swap #7 (1)                  | $      | 864                                              |   | $      | —                                    |   | $ | — |   | $ | 1,995 |   | $ | 1,637 |   | $ | — |   | $ | — |   | $ | (582 | ) |
| Swap #8 (1)                  |   | 1,455                                            |   |   | —                                    |   |   | — |   |   | 3,639 |   |   | 2,899 |   |   | — |   |   | — |   |   | (566 | ) |
| Ineffective amortization (1) |   | (1,161                                           | )      |   | 1,161                                      |   |   | — |   |   | — |   |   | (2,325 | ) |   | 2,325 |   |   | — |   |   | — |   |
|                         |   |                                             |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                        | $      | 1,158                                            |   | $      | 1,161                                      |   | $ | — |   | $ | 5,634 |   | $ | 2,211 |   | $ | 2,325 |   | $ | — |   | $ | (1,148 | ) |

(1) Swaps #7 and #8 became ineffective in the fourth quarter of 2008.

The Company is exposed to credit loss in the event of nonperformance by the other party to its derivative financial instruments. The Company limits this exposure by entering into agreements directly with a number of major financial institutions that meet its credit standards and that are expected to satisfy their obligations under these contracts. The Company views derivative financial instruments as a risk        management tool in the prudent operation of its business.

 

The Company utilizes SFAS No. 157, "*Fair Value Measurements*" ("SFAS 157") in relation to its accounting for assets and liabilities carried at fair value. SFAS 157, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair        value on either a recurring or nonrecurring basis. SFAS 157 clarifies 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, SFAS 157        establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

*Level 1*. Observable inputs such as quoted prices in active markets for identical assets or liabilities; 

*Level 2*. Inputs, other than quoted prices included within Level 1, that are observable either directly or indirectly; and

*Level 3*. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company’s derivative financial instruments as of June 28, 2009 are valued using inputs that fall within Level 2 of the three-tier hierarchy established by SFAS 157. Furthermore, as of June 28, 2009 and December 31, 2008, respectively, the Company did not have assets or liabilities valued using inputs that fall within Level 1 or Level 3 of the three-tier hierarchy established by SFAS 157.        Information to determine the fair values of the interest rate swap agreements is provided to the Company by the counterparty. The Company believes the LIBOR yield curves are the primary significant input used by the counterparty to determine the fair value information. LIBOR yield curves are considered Level 2 observable market inputs. Additionally, in making the fair value determination, the Company monitors the credit and nonperformance risk associated with its derivative        counterparties and believes they are not material to the interest rate swap agreements and do not require a credit adjustment at June 28, 2009 or December 31, 2008, respectively.

 

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**4. Accounts Payable and Accrued Liabilities**

The following presents major components of accounts payable and accrued liabilities (in thousands) as of:

|                      |   |   | **June 28, 2009** |   |   |   |   | **December 31, 2008** |   |
|---------------------------|--------|--------|-------------------|--------|--------|--------|--------|-----------------------|--------|
| Accounts payable          |   | $      | 8,186             |   |   |   | $      | 10,920                |   |
| Capital expenditures      |   |   | 38,183            |   |   |   |   | 36,717                |   |
| Marketing and advertising |   |   | 7,091             |   |   |   |   | 4,832                 |   |
| Interest                  |   |   | 18,963            |   |   |   |   | 19,897                |   |
| Compensation and benefits |   |   | 24,852            |   |   |   |   | 27,301                |   |
| Operating accruals        |   |   | 12,470            |   |   |   |   | 15,043                |   |
| Consulting fees           |   |   | 4,607             |   |   |   |   | 4,443                 |   |
| Property and sales tax    |   |   | 11,054            |   |   |   |   | 1,972                 |   |
| Other                     |   |   | 4,987             |   |   |   |   | 5,023                 |   |
|                      |   |   |              |   |   |   |   |                  |   |
| Total                     |   | $      | 130,393           |   |   |   | $      | 126,148               |   |

**5. Capital leases and financing obligations**

Intangible assets and equipment, fixtures and furniture included approximately $42,439,000 and $42,788,000, related to financing obligations and capital leases as of June 28, 2009 and December 31, 2008, respectively. This included$1,110,000and $761,000 in accumulated depreciation and amortization as of June 28, 2009 and December 31, 2008,        respectively. At June 28, 2009, future minimum payments due under financing obligations and capital leases totaled approximately $34,205,000 (net of $12,029,000 in interest). Future minimum payments include $5,035,000, $4,250,000, $3,950,000, $3,657,000, $3,543,000, and $13,770,000, due in 2009, 2010, 2011, 2012, 2013, and years subsequent to 2013, respectively.

 

**6. Comprehensive income**

Comprehensive income is as follows (in thousands):

 

|                                                                                                          |   |   | **Three Months Ended** |   |   |   |   | **Six Months Ended** |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------|------------------------|--------|--------|--------|--------|----------------------|--------|
|                                                                                                          |   |   | **June 28, 2009**      |   |   |   |   | **June 29, 2008**    |   |   |   |   | **June 28, 2009** |   |   |   |   | **June 29, 2008** |   |
| Net income                                                                                                    |   | $      | 27,130                 |   |   |   | $      | 21,099               |   |   |   | $ | 10,598 |   |   |   | $ | 22,946 |   |
|                                                                                                          |   |   |                   |   |   |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Amortization of accumulated other comprehensive loss from interest rate swaps previously designated as hedges |   |   | 1,161                  |   |   |   |   | —              |   |   |   |   | 2,325 |   |   |   |   | — |   |
| Change in fair value of interest rate swaps designated as hedges                                              |   |   | —                |   |   |   |   | 5,634                |   |   |   |   | — |   |   |   |   | (1,148 | ) |
|                                                                                                          |   |   |                   |   |   |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                                                                          |   |   | 28,291                 |   |   |   |   | 26,733               |   |   |   |   | 12,923 |   |   |   |   | 21,798 |   |
| Less: comprehensive income attributable to the noncontrolling interest in UCRP                                |   |   | 726                    |   |   |   |   | 863                  |   |   |   |   | 1,212 |   |   |   |   | 1,614 |   |
|                                                                                                          |   |   |                   |   |   |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income attributable to the Partners                                                             |   | $      | 27,565                 |   |   |   | $      | 25,870               |   |   |   | $ | 11,711 |   |   |   | $ | 20,184 |   |

 

 

 

 

 

 

 

 

 

 

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**7. 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% of certain revenue, as defined, generated by Universal Studios Florida and Universal’s Islands of Adventure. During the three months ended June 28, 2009 and June 29, 2008, the Company paid fees to Vivendi Universal Entertainment of $6,810,000 and        $8,715,000, respectively, while during the six months ended June 28, 2009 and June 29, 2008, the Company paid fees of $15,670,000 and $17,730,000, respectively, to Vivendi Universal Entertainment. In addition, at June 28, 2009 and December 31, 2008, respectively, the amount due to related parties included $9,130,000 and $8,861,000 related to the current portion of special fees payable to Vivendi Universal Entertainment.At June 28, 2009 and December 31, 2008,        the Company had long-term deferred special fees payable to affiliates of Vivendi Universal Entertainment of approximately $93,445,000 and $91,967,000, respectively.

Subsequent to the Company’s refinancings in December 2004, the most restrictive quarterly covenant for payment of the special fee is 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 senior secured credit agreement). As these ratios were met as of June 28,        2009, payments of $9,130,000 in special fees will be made during the third quarter of 2009.

 

**8. Commitments and Contingencies**

*Settlement of Assessment Disputes*

In June 2009, the Company settled all of the property tax assessment disputes described below for an amount that is not material to its financial statements. The following description of these disputes is provided solely for historical background information.

*2008 Assessments*

On December 5, 2008, UCDP filed complaints in state circuit court challenging the 2008 assessments by the Orange County Property Appraiser (the “Property Appraiser”) of certain real and tangible personal property owned by UCDP. On February 2, 2009, the Property Appraiser answered the complaints and also moved to dismiss the discriminatory assessment counts asserted by UCDP. On February 16,        2009, the Orange County Tax Collector (the “Tax Collector”) similarly answered the complaints and moved to dismiss the discriminatory assessment counts asserted by UCDP. UCDP paid the full assessments with respect to the 2008 real and personal property on November 26, 2008.

 

*2007 Assessments*

 

On September 18, 2007, UCDP filed petitions to the Orange County Value Adjustment Board (“VAB”) seeking review and adjustment of the 2007 assessments by the Property Appraiser of certain real and tangible personal property owned by UCDP. The Special Magistrates recommended that UCDP’s petitions be denied as to the Universal Studios Florida (“USF”) and Universal’s        Islands of Adventure (“UIOA”) tangible personal property and real property and recommended that the assessment as to UCDP’s parking garages be reduced. The VAB approved and adopted the Special Magistrates’ recommendations on February 26, 2008. On April 24, 2008, UCDP filed complaints challenging these assessments in state circuit court. On June 4, 2008, the Tax Collector answered the complaints. On June 16, 2008, the Property Appraiser        answered the complaints. Both the Property Appraiser and the Tax Collector also moved to dismiss UCDP’s discriminatory assessment claims. On November 12, 2008, the court consolidated UCDP’s complaint involving the 2007 assessments of the parking garages with a similar complaint that UCDP filed involving the 2006 assessments. On February 11, 2009, the court granted the defendants’ motions to dismiss the discriminatory assessment count in UCDP’s complaint involving        the parking garages, and it granted UCDP leave to amend that count. On March 16, 2009, UCDP filed its amended complaint, and both the Property Appraiser and the Tax Collector subsequently answered UCDP’s amended complaint. In addition, in late 2008, the Property Appraiser and Tax Collector filed a Joint Motion for Summary Judgment as to Count I of UCDP’s complaint involving its tangible personal property. On March 26, 2009, the court denied that Joint Motion. UCDP paid the        full assessment with respect to the 2007 real and personal property on November 30, 2007.

 

14

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*2006 Assessments*

 

In the second quarter of 2007, UCDP received and recorded a refund of approximately $1.0 million (the “2006 Refund”) with respect to an adjustment of the 2006 assessments by the Property Appraiser reducing the assessed property values of certain real and tangible personal property owned by UCDP.

 

Meanwhile, on April 17, 2007, the Property Appraiser filed a complaint in state circuit court challenging the reduced 2006 tangible personal property assessments. On May 16, 2007, UCDP filed two complaints challenging the Property Appraiser’s 2006 assessments for (i) real property at USF and UIOA, and for (ii) UCDP’s parking garages. The Property Appraiser and the Tax        Collector answered UCDP’s complaints and also moved to dismiss UCDP’s discriminatory assessment claims. On November 12, 2008, the court consolidated UCDP’s complaint involving the 2006 assessments of the parking garages with a similar complaint that UCDP filed involving the 2007 assessments. On February 11, 2009, the court granted the defendants’ motions to dismiss the discriminatory assessment count in UCDP’s complaint involving the parking garages, and it        granted UCDP leave to amend that count. On March 16, 2009, UCDP filed its amended complaint, and both the Property Appraiser and the Tax Collector subsequently answered UCDP’s amended complaint.

 

*Back Assessments*

 

On December 21, 2006, the Property Appraiser concluded an audit of UCDP’s 2003, 2004 and 2005 tangible personal property returns, asserting that UCDP underreported its tangible personal property in each of those years. The Property Appraiser issued back assessments resulting in back taxes, interest and penalties being charged by the Tax Collector. On February 19, 2007, UCDP filed a complaint        in state circuit court challenging the legality of the back assessments and seeking other relief. On April 25, 2007, the Court dismissed the portions of UCDP’s complaint pertaining to the back assessments on UIOA, and it also dismissed UCDP’s due process claim. On May 14, 2007, UCDP re-filed the complaint (“UCDP’s Re-filed Back Assessment Complaint”) as to UIOA. On February 15, 2008, the court denied the Property Appraiser’s        motion to dismiss UCDP’s Re-filed Back Assessment Complaint. The Property Appraiser and Tax Collector appealed the denial of the dismissal of UCDP’s Re-filed Back Assessment Complaint. UCDP opposed the appeal, and on July 3, 2008, the Court denied the appeal.

 

*Other*

 

The Company is threatened with or involved in various other 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*

 

Additionally, the Company has an agreement (the “Consultant Agreement”) with Steven Spielberg (the “Consultant”) under which it pays a fee for consulting services and exclusivity equal to a percentage of the Company’s gross revenues from the attractions and certain other facilities owned or operated, in whole or in part, by the Company. 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 the Company, or any of its partners or any of their affiliates, other than in Universal City, California. At present, the only theme park that is a comparable project is Universal Studios Japan in Osaka, Japan. It is possible that comparable projects will be created        in the future that would fall under the Consultant Agreement. For instance, Vivendi Universal Entertainment has entered into licensing arrangements for Universal theme parks in Singapore and Dubai. 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. Although the Consultant Agreement has no expiration date,        starting in June 2010, the Consultant has the right, upon 90 days notice, to terminate the periodic payments under the Consultant Agreement 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 have been open at that time for at least one year, which fair market value could be significant. If the Consultant exercises the option and the parties cannot agree        on the fair market value of the buyout option, the fair market value will be determined by a binding appraisal procedure. The Company represented under the agreement that the Consultant’s interest in each of the Company’s parks and in any comparable projects will have priority over the interests of all financiers, lenders and others who may have an interest in that park or project. The Company’s obligations under the agreement are guaranteed by Universal Studios, Inc.,        as successor to MCA Inc., and Universal Studios, Inc.’s obligations under that guarantee have in turn been assumed by Vivendi Universal Entertainment. Vivendi Universal Entertainment has indemnified the Company against any liability under the Consultant Agreement related to any comparable project that is not owned or controlled by the Company. Under the terms of Holdings’ May 2010 notes, the April 2010 notes and the senior secured credit agreement, a lien to secure the        Company’s obligations under the Consultant Agreement would be a permitted lien. This event would adversely impact the Company’s liquidity.

 

**9. Subsequent Event**

Subsequent events were evaluated through August 6, 2009 for the balance sheet date as of June 28, 2009 and for the periods ending June 28, 2009.  August 6, 2009 is also the issuance date of the financial statements.

 

 

 

15

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**Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations**

 

**Overview Related to Financial Results**

For the first half of 2009, we experienced a decrease of 16% in our paid attendance and a decrease in EBITDA (as defined) of $15.7 million when compared to the first half of 2008. These decreases were primarily driven by the downturn in the global economy. Additionally, due to the timing of our fiscal calendar, the six months ended June 28, 2009 had two less days than the six months ended June 29, 2008.        Total theme park spending on a per guest basis in the first half of 2009 was consistent with the first half of 2008, but the reduced volume contributed to a $69.6 million shortfall in revenue. Our ability to reduce operating costs, which decreased by $58.8 million in the first half of 2009 compared to the same period in 2008, helped partially offset the revenue shortfall. As a result, net income decreased by $12.3 million compared to the first half of 2008. We finished the second        quarter with $140.1 million in available cash and cash equivalents, including $100.0 million in unused revolving credit. We owed $1,008.4 million on our long-term debt at June 28, 2009.

**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 1991, 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.

The week before and after Easter are peak attendance periods. In 2008, Easter was on March 23. In 2009, Easter was on April 12. This shift in Easter moved the peak attendance period from the first quarter of 2008 to the second quarter of 2009.

Based on the seasonality of our attendance, the results for the three and six months ended June 28, 2009 and June 29, 2008 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 ourcondensed consolidatedfinancial 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 auditedconsolidatedfinancial statements for the        year ended December 31, 2008 filed with the Securities and Exchange Commission under cover of Form 10-K. Besides what is disclosed within this document, there have been no material developments with respect to the critical accounting policies discussed in detail inour Form 10-K within*Item* *7. Management’s Discussion and Analysis of Financial Condition and Results of        Operations*.

*Litigation*

We are currently involved in certain legal proceedings and, as required, have accrued the low end of the estimated range of probable costs for the resolution of these claims. This estimate has been developed in consultation with outside counsel and is based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of        operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings.See*Note 8*in*Part 1, Item* *1. Financial Statements*in this document for more detailed information on litigation        exposure.

 

*Period end*

The three months ended June 28, 2009 and June 29, 2008 each contained 91 days. The six months ended June 28, 2009 contained 179 days, while the six months ended June 29, 2008 contained 181 days.

 

*Recent accounting pronouncements*

See “*Note 1. General*” in “*Part I – Item 1. Financial Statements*” for a detailed description of recent accounting pronouncements.

 

16

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**Results of Operations:**

*Three Months Ended June 28, 2009 Compared to Three Months Ended June 29, 2008* (in thousands except per capita amounts and percentages):

|                                                                      |   | **Three Months Ended** |    |   |   | **% Change**      |
|---------------------------------------------------------------------------|--------|------------------------|---------|--------|--------|-------------------|
|                                                                      |   | **June 28, 2009**      |    |   |   | **June 29, 2008** |   |   |   | **Favorable/**

**(unfavorable)** |
| **Operational Data:**                                                     |   |                   |    |   |   |              |   |   |   |   |   |
| Paid theme park admissions                                                |   |                   | 2,495   |   |   |              |   | 2,894 |   |   |   | (13.8 | )% |
| Turnstile theme park admissions                                           |   |                   | 2,734   |   |   |              |   | 3,122 |   |   |   | (12.4 | )% |
| Theme park pass revenue per paid admission                                |   | $                      | 43.78   |   |   |              | $ | 40.43 |   |   |   | 8.3 | % |
| Theme park food, beverage and merchandise revenue per turnstile admission |   |                   | 18.06   |   |   |              |   | 18.55 |   |   |   | (2.6 | )% |
| Other theme park related revenue per turnstile admission                  |   |                   | 8.22    |   |   |              |   | 9.31 |   |   |   | (11.7 | %) |
|                                                                      |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| **Statement of operations data:**                                         |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Operating revenues:                                                       |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Theme park pass revenue                                                   |   | $                      | 109,239 |   |   |              | $ | 117,017 |   |   |   | (6.6 | )% |
| Theme park food and beverage                                              |   |                   | 26,350  |   |   |              |   | 31,081 |   |   |   | (15.2 | )% |
| Theme park merchandise                                                    |   |                   | 23,016  |   |   |              |   | 26,829 |   |   |   | (14.2 | )% |
| Other theme park related                                                  |   |                   | 22,474  |   |   |              |   | 29,051 |   |   |   | (22.6 | )% |
| Other                                                                     |   |                   | 34,663  |   |   |              |   | 37,890 |   |   |   | (8.5 | )% |
| Total operating revenues                                                  |   |                   | 215,742 |   |   |              |   | 241,868 |   |   |   | (10.8 | )% |
|                                                                      |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Costs and operating expenses:                                             |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Theme park operations                                                     |   |                   | 43,296  |   |   |              |   | 44,892 |   |   |   | 3.6 | % |
| Theme park selling, general and administrative                            |   |                   | 30,928  |   |   |              |   | 45,550 |   |   |   | 32.1 | % |
| Theme park cost of products sold                                          |   |                   | 24,738  |   |   |              |   | 29,436 |   |   |   | 16.0 | % |
| Special fee payable to Vivendi Universal Entertainment and consultant fee |   |                   | 13,674  |   |   |              |   | 15,407 |   |   |   | 11.2 | % |
| Depreciation and amortization                                             |   |                   | 26,199  |   |   |              |   | 28,166 |   |   |   | 7.0 | % |
| Other                                                                     |   |                   | 25,555  |   |   |              |   | 33,758 |   |   |   | 24.3 | % |
| Total costs and operating expenses                                        |   |                   | 164,390 |   |   |              |   | 197,209 |   |   |   | 16.6 | % |
|                                                                      |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Operating income                                                          |   |                   | 51,352  |   |   |              |   | 44,659 |   |   |   | 15.0 | % |
|                                                                      |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Non-operating expense, net                                                |   |                   | 24,222  |   |   |              |   | 23,560 |   |   |   | (2.8) | % |
|                                                                      |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Net income                                                                |   |                   | 27,130  |   |   |              |   | 21,099 |   |   |   | 28.6 | % |
|                                                                      |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Less: net income attributable to the noncontrolling interest in UCRP      |   |                   | 726     |   |   |              |   | 863 |   |   |   | 15.9 | % |
|                                                                      |   |                   |    |   |   |              |   |   |   |   |   |   |   |
| Net income attributable to the Partners                                   |   | $                      | 26,404  |   |   |              | $ | 20,236 |   |   |   | 30.5 | % |

Paid Theme Park Admissions decreased 14% during the second quarter of 2009 compared to the second quarter of 2008, which we believe is primarily due to the downturn in the global economy. In the second quarter, our domestic market experienced high-teen digit percentage attendance declines while our international market experienced mid-single digit percentage attendance declines. These decreases in volume        were offset partially by increased total per capita spending of 3%. As a result, our total Operating Revenue decreased $26.1 million, or 11%. Theme Park Pass Revenue Per Paid Admission increased 8% as a result of selective price changes to maximize yield. Theme Park Food, Beverage and Merchandise Revenue PerTurnstile Admission decreased 3%. Other Theme Park Related Revenue Per Turnstile Admission decreased 12%, principally due to a decrease in corporate special        events revenue of $5.0 million. As compared to the second quarter of 2008, our Other Revenue category was unfavorable by $3.2 million, or 9%, due to lower revenue from our CityWalk operations and our travel company of $2.5 million and $1.2 million, respectively.

Theme Park Operations was favorable by $1.6 million largely due to decreased maintenance, entertainment and operational costs resulting from our reduced attendance levels and management’s cost savings initiatives. Theme Park Selling, General and Administrative was favorable by $14.6 million due to reductions in marketing spend and management’s cost savings initiatives impacting departments        throughout the Company. When compared to the second quarter of 2008, Theme Park Cost of Products Sold decreased 16% during the second quarter of 2009, which correlates to the decrease in Theme Park Food and Beverage Revenue and Theme Park Merchandise Revenue of 15% and 14%, respectively. Similarly, Special Fee Payable to Vivendi Universal Entertainment and Consultant Fee decreased 11%, which corresponds to the decrease in Total Operating Revenue of 11%. Other costs and operating        expenses were favorable by $8.2 million due to reduced operating costs of $2.1 million stemming from the reduced number of corporate special events, in addition to lower operating costs at CityWalk and our travel company of $1.5 million and $1.0 million, respectively. These reduced operating costs correlate to the lower revenues from each of theses areas as discussed previously. Non-operating Expenses was slightly unfavorable due to higher interest expense and reduced interest income,        which was offset partially by favorable changes in the fair value of our interest rate swaps.

17

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*Six Months Ended June 28, 2009 Compared to Six Months Ended June 29, 2008* (in thousands except per capita amounts and percentages):

 

|                                                                      |   | **Six Months Ended** |    |   |   | **% Change**      |
|---------------------------------------------------------------------------|--------|----------------------|---------|--------|--------|-------------------|
|                                                                      |   | **June 28, 2009**    |    |   |   | **June 29, 2008** |   |   |   | **Favorable/**

**(unfavorable)** |
| **Operational Data:**                                                     |   |                 |    |   |   |              |   |   |   |   |   |
| Paid theme park admissions                                                |   |                 | 4,336   |   |   |              |   | 5,180 |   |   |   | (16.3 | )% |
| Turnstile theme park admissions                                           |   |                 | 4,747   |   |   |              |   | 5,577 |   |   |   | (14.9 | )% |
| Theme park pass revenue per paid admission                                |   | $                    | 44.05   |   |   |              | $ | 41.78 |   |   |   | 5.4 | % |
| Theme park food, beverage and merchandise revenue per turnstile admission |   |                 | 17.87   |   |   |              |   | 18.94 |   |   |   | (5.6 | )% |
| Other theme park related revenue per turnstile admission                  |   |                 | 8.54    |   |   |              |   | 9.64 |   |   |   | (11.4 | )% |
|                                                                      |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| **Statement of operations data:**                                         |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Operating revenues:                                                       |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Theme park pass revenue                                                   |   | $                    | 191,016 |   |   |              | $ | 216,434 |   |   |   | (11.7 | )% |
| Theme park food and beverage                                              |   |                 | 45,046  |   |   |              |   | 55,488 |   |   |   | (18.8 | )% |
| Theme park merchandise                                                    |   |                 | 39,804  |   |   |              |   | 50,148 |   |   |   | (20.6 | )% |
| Other theme park related                                                  |   |                 | 40,519  |   |   |              |   | 53,783 |   |   |   | (24.7 | )% |
| Other                                                                     |   |                 | 63,146  |   |   |              |   | 73,320 |   |   |   | (13.9 | )% |
| Total operating revenues                                                  |   |                 | 379,531 |   |   |              |   | 449,173 |   |   |   | (15.5 | )% |
|                                                                      |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Costs and operating expenses:                                             |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Theme park operations                                                     |   |                 | 83,721  |   |   |              |   | 88,051 |   |   |   | 4.9 | % |
| Theme park selling, general and administrative                            |   |                 | 64,245  |   |   |              |   | 84,702 |   |   |   | 24.2 | % |
| Theme park cost of products sold                                          |   |                 | 44,668  |   |   |              |   | 56,374 |   |   |   | 20.8 | % |
| Special fee payable to Vivendi Universal Entertainment and consultant fee |   |                 | 23,903  |   |   |              |   | 28,444 |   |   |   | 16.0 | % |
| Depreciation and amortization                                             |   |                 | 52,829  |   |   |              |   | 57,403 |   |   |   | 8.0 | % |
| Other                                                                     |   |                 | 52,000  |   |   |              |   | 65,223 |   |   |   | 20.3 | % |
| Total costs and operating expenses                                        |   |                 | 321,366 |   |   |              |   | 380,197 |   |   |   | 15.5 | % |
|                                                                      |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Operating income                                                          |   |                 | 58,165  |   |   |              |   | 68,976 |   |   |   | (15.7 | )% |
|                                                                      |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Non-operating expense, net                                                |   |                 | 47,567  |   |   |              |   | 46,030 |   |   |   | (3.3 | )% |
|                                                                      |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Net income                                                                |   |                 | 10,598  |   |   |              |   | 22,946 |   |   |   | (53.8 | )% |
|                                                                      |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Less: net income attributable to the noncontrolling interest in UCRP      |   |                 | 1,212   |   |   |              |   | 1,614 |   |   |   | 24.9 | % |
|                                                                      |   |                 |    |   |   |              |   |   |   |   |   |   |   |
| Net income attributable to the Partners                                   |   | $                    | 9,386   |   |   |              | $ | 21,332 |   |   |   | (56.0 | )% |

Paid Theme Park Admissions decreased 16% during the first half of 2009 compared to the first half of 2008. As discussed previously, we believe this was driven by the downturn in the global economy and, to a lesser extent, the two extra days in the first half of 2008 compared to 2009. In the first half of 2009, our domestic market experienced high-teen percentage attendance declines while our international        market experienced low-teen percentage attendance declines. Accordingly, our total Operating Revenue decreased $69.6 million, or 16%. Overall total per capita spending in the first half of 2009 was consistent with the first half of 2008. Theme Park Pass Revenue Per Paid Admission increased 5% as a result of selective price changes to maximize yield. Theme Park Food, Beverage, and Merchandise Revenue Per Turnstile Admission decreased 6%. Other Theme Park Related Revenue Per Turnstile        Admission decreased 11%, principally due to a decrease in corporate special events revenue of $9.0 million and $2.1 million in reduced guest spending on our Universal Express Plus product, which typically decreases in periods of lower attendance. As compared to the first half of 2008, our Other Revenue category was unfavorable $10.2 million, or 14%, due to lower revenue from our CityWalk operations of $5.7 million and our travel company of $4.1 million.

Theme Park Operations was favorable by $4.3 million largely due to decreased maintenance, entertainment and operational costs resulting from our reduced attendance levels and management’s cost savings initiatives. Theme Park Selling, General and Administrative was favorable by $20.5 million due to reductions in marketing spend and management’s cost savings initiatives impacting departments        throughout the Company. When compared to the first half of 2008, Theme Park Cost of Products Sold decreased 21% during the first half of 2009, which correlates to the decrease in Theme Park Food and Beverage Revenue and Theme Park Merchandise Revenue of 19% and 21%, respectively. Similarly, Special Fee Payable to Vivendi Universal Entertainment and Consultant Fee decreased 16%, which corresponds to the decrease in Total Operating Revenue of 16%. Other Costs and Operating Expenses was        favorable $13.2 million due to reduced operating costs of $3.7 million relating to the reduced number of corporate special events, in addition to lower operating costs at our travel company and CityWalk of $3.4 million and $3.2 million, respectively. These reduced operating costs correlate to the lower revenues from each of these areas as discussed previously. Non-operating Expenses was unfavorable $1.5 million due to higher interest expense, reduced interest income, and reduced income        from our unconsolidated joint ventures, which was offset partially by favorable changes in the fair value of our interest rate swaps.

18

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*EBITDA*

Earnings before interest expense, income taxes, depreciation and amortization or, EBITDA, is defined as net income excluding: (i) interest expense, net of interest income; and (ii) depreciation and amortization. Our management assesses operational performance using EBITDA (as defined) because it is used by some investors as a measure of our ability to service debt. In addition, it is the primary        basis in the UCDP senior secured credit agreement to determine our quarterly compliance with our funded debt ratio and the interest coverage ratio, which is computed based on the trailing four quarters. We believe the UCDP senior secured credit agreement is a material agreement as it represents a critical component of our capital structure and an important source of our liquidity. Our failure to comply with the financial maintenance covenants in the UCDP senior secured credit agreement        would result in an event of default occurring under the agreement which would give our lenders the right to accelerate all of the indebtedness then outstanding under that agreement. EBITDA (as defined) represents earnings before interest, taxes and depreciation and amortization and certain other adjustments permitted by the definition of EBITDA in the senior securedcredit agreement. EBITDA (as defined) is not prepared in accordance with United States generally        accepted accounting principles and should not be considered as an alternative for net income, net cash provided by operating activities and otherconsolidatedincome or cash flow statement data prepared in accordance with United States generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA (as defined), because it is before debt service, capital expenditures, and working capital needs, does not represent        cash that is available for other purposes at our discretion. Our presentation of EBITDA (as defined) may not be comparable to similarly titled measures reported by other companies. The following is a reconciliation of net cash provided by operating activities to EBITDA (in thousands):

 

|                                                                         |   |   | **Three Months Ended** |   |   |   |   | **Six Months Ended** |   |
|------------------------------------------------------------------------------|--------|--------|------------------------|--------|--------|--------|--------|----------------------|--------|
|                                                                         |   |   | **June 28, 2009**      |   |   |   |   | **June 29, 2008**    |   |   |   |   | **June 28, 2009** |   |   |   |   | **June 29, 2008** |   |
| Cash and cash equivalents provided by operating activities                   |   | $      | 47,464                 |   |   |   | $      | 56,959               |   |   |   | $ | 73,257 |   |   |   | $ | 100,429 |   |
|                                                                         |   |   |                   |   |   |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Adjustments:                                                                 |   |   |                   |   |   |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                             |   |   | 25,955                 |   |   |   |   | 24,754               |   |   |   |   | 51,196 |   |   |   |   | 49,701 |   |
| Interest income                                                              |   |   | (45                    | )      |   |   |   | (608                 | )      |   |   |   | (89 | ) |   |   |   | (1,600 | ) |
| Amortization of deferred finance costs                                       |   |   | (2,390                 | )      |   |   |   | (1,292               | )      |   |   |   | (4,779 | ) |   |   |   | (2,583 | ) |
| Distributions from investments in unconsolidated entities                    |   |   | (1,315                 | )      |   |   |   | (1,097               | )      |   |   |   | (1,315 | ) |   |   |   | (1,732 | ) |
| Deferred special fee and interest payable to Vivendi Universal Entertainment |   |   | (754                   | )      |   |   |   | (1,112               | )      |   |   |   | (1,478 | ) |   |   |   | (2,364 | ) |
| Income from investments in unconsolidated entities                           |   |   | 530                    |   |   |   |   | 586                  |   |   |   |   | 1,329 |   |   |   |   | 2,071 |   |
| Accretion of bond discount                                                   |   |   | (208                   | )      |   |   |   | (208                 | )      |   |   |   | (415 | ) |   |   |   | (416 | ) |
| Interest on financing obligations                                            |   |   | (634                   | )      |   |   |   | (594                 | )      |   |   |   | (1,258 | ) |   |   |   | (1,177 | ) |
| Income attributable to the noncontrolling interest in UCRP                   |   |   | (726                   | )      |   |   |   | (863                 | )      |   |   |   | (1,212 | ) |   |   |   | (1,614 | ) |
| Change in working capital                                                    |   |   | 9,478                  |   |   |   |   | (3,977               | )      |   |   |   | (4,125 | ) |   |   |   | (13,879 | ) |
| EBITDA                                                                       |   | $      | 77,355                 |   |   |   | $      | 72,548               |   |   |   | $ | 111,111 |   |   |   | $ | 126,836 |   |

The following is a reconciliation of net(loss)/incomeattributable to the Partners to EBITDA (in thousands):

|                                                                                                     |   |   | **Three Months Ended** |   |   |   |   | **Six Months Ended** |   |
|----------------------------------------------------------------------------------------------------------|--------|--------|------------------------|--------|--------|--------|--------|----------------------|--------|
|                                                                                                     |   |   | **June 28, 2009**      |   |   |   |   | **June 29, 2008**    |   |   |   |   | **June 28, 2009** |   |   |   |   | **June 29, 2008** |   |
| Net income attributable to the Partners                                                                  |   | $      | 26,404                 |   |   |   | $      | 20,236               |   |   |   | $ | 9,386 |   |   |   | $ | 21,332 |   |
|                                                                                                     |   |   |                   |   |   |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Adjustments:                                                                                             |   |   |                   |   |   |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                         |   |   | 25,955                 |   |   |   |   | 24,754               |   |   |   |   | 51,196 |   |   |   |   | 49,701 |   |
| Net change in fair value of interest rate swaps and amortization of accumulated other comprehensive loss |   |   | (1,158                 | )      |   |   |   | —              |   |   |   |   | (2,211 | ) |   |   |   | — |   |
| Depreciation and amortization                                                                            |   |   | 26,199                 |   |   |   |   | 28,166               |   |   |   |   | 52,829 |   |   |   |   | 57,403 |   |
| Interest income                                                                                          |   |   | (45                    | )      |   |   |   | (608                 | )      |   |   |   | (89 | ) |   |   |   | (1,600 | ) |
| EBITDA                                                                                                   |   | $      | 77,355                 |   |   |   | $      | 72,548               |   |   |   | $ | 111,111 |   |   |   | $ | 126,836 |   |

 

19

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**Liquidity and Capital Resources**

*Cash flows*

 

The following table summarizes key aspects of our cash flows (in thousands):

 

|                                                                |        | **Six Months Ended** |
|----------------------------------------------------------------|--------|----------------------|
|                                                           |   | **June 28, 2009**    |   |   | **June 29, 2008** |
| Net cash and cash equivalents provided by operating activities |   | $                    | 73,257 |   |   | $ | 100,429 |
| Net cash and cash equivalents used in investing activities     |   |                 | 68,530 |   |   |   | 60,832 |
| Capital expenditures                                           |   |                 | 70,584 |   |   |   | 60,832 |
| Net cash and cash equivalents used in financing activities     |   |                 | 52,395 |   |   |   | 33,539 |

 

During the six months ended June 28, 2009 and June 29, 2008, net cash provided by operating activities was $73.3million and $100.4million,respectively. This decrease in cash flow from operations of $27.2 million was largely due to the reduction in working capital of $9.8 million and the decrease in net income of $12.3 million, as discussed        previously.

Net cash used in investing activities for the six months ended June 28, 2009 and June 29, 2008, totaled $68.5 million and $60.8 million, respectively. For both years, the amount consisted primarily of capital expenditures. 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.

 

We estimate our capital expenditures, including intellectual property rights, to be approximately $110.0 million during 2009. Our capital expenditures in excess of the amount permitted by the capital covenant in our senior secured credit agreement will be funded through partner equity contributions made in 2008. A large portion of this cost relates to the design and construction of the upcoming Hollywood Rip        Ride RockitSMcoaster and Wizarding World of Harry PotterSMthemed area which we anticipate opening in summer 2009and no later than the summer of 2010, respectively. We estimate our total anticipated capital investment in The Simpsons RideTM, which opened in May 2008, and these two unfinished attractions will range from $275.0 million to $310.0 million. This includes all capital        expenditures to build these attractions except 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 or merchandise royalties.

During the six months ended June 28, 2009and June 29, 2008, net cash used for financing activities was$52.4 million and $33.5 million, respectively. The amounts werealmost entirely related to distributions made toHoldings.

 

20

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*Financial position*

The following table summarizes key aspects in our financial position and liquidity (in thousands):

 

|                                                                                                                                                                             |   | **As of**         |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|
|                                                                                                                                                                             |   | **June 28, 2009** |      |   |   | **December 31, 2008** |   |
| Cash and cash equivalents                                                                                                                                                        |   | $                 | 40,130    |   |   |   | $ | 87,798 |   |
| Unused portion of revolving credit facilities                                                                                                                                    |   |              | 100,000   |   |   |   |   | 100,000 |   |
| Current portion of long-term borrowings, capital lease and financing obligations                                                                                                 |   |              | 1,013,936 |   |   |   |   | 5,822 |   |
| Total long-term obligations (1)                                                                                                                                                  |   |              | 122,089   |   |   |   |   | 1,127,856 |   |
|                                                                                                                                                                             |   |              |      |   |   |   |   |   |   |
| (1) Long-term obligations include long-term borrowings (excluding current portions), long-term capital lease and financing obligations, and long-term deferred special fees. (1) |   |

 

At June 28, 2009, our total debt was $1,008.4 million, which included $499.4 million outstanding under the bonds due in April 2010 ($500.0 million, net of a remaining discount of $0.6 million) and $509.0 million outstanding under our term loan under the senior secured credit facilities. At June 28, 2009, we also had $140.1million in cash and cash equivalents and unused revolving        credit, consisting of $40.1million in cash and cash equivalents and $100.0 million available under our revolving credit facility. Our senior secured credit agreement and bonds contain certain customary limitations. We believe we were in compliance with all financial covenants as of June 28, 2009.The April 2010 notesare due in 2010, while our senior secured credit agreement calls for quarterly principal installments of        0.25% with the remainder due on June 6, 2011. During 2006, we made a voluntary prepayment in the amount of $30.0 million, effectively prepaying all of the principal amounts that would have been due up until the facilities maturity date. As a result of the amendment in July 2008, the senior secured credit facility is repayable in full on April 1, 2010, if the April 2010 notes andHoldings’May 2010 notes are not refinanced or repaid        in full prior to such date. It is highly unlikely that we will be able to generate enough cash to pay these balances in full prior to the specified due dates which would then necessitate refinancing our long-term debt. Furthermore, our access to capital markets and our ability to issue various securities to raise capital could be affected by further reductions in our bond ratings, which were downgraded in the first quarter of 2009.Specifically, the downgrades in        our bond rating could result in increased interest rates or other incremental borrowing costs when we attempt to refinance our long-term debt.

 

Additionally, we have an agreement (the “Consultant Agreement”) with Steven Spielberg (the “Consultant”) under which we pay a fee for consulting services and exclusivity equal to a percentage of our gross revenues from the attractions and certain 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 theme park that is a comparable project is Universal Studios Japan in Osaka, Japan. It is possible that comparable projects will be created in the future that would fall under the Consultant        Agreement. For instance, Vivendi Universal Entertainment has entered into licensing arrangements for Universal theme parks in Singapore and Dubai. The Consultant may also be entitled to participate in certain sales of equity by our partners and to participate in certain real estate development activities of our partners or their affiliates. Although the Consultant Agreement has no expiration date, starting in June 2010, the Consultant has the right, upon 90 days notice, to        terminate the periodic payments under the Consultant Agreement 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 have been open at that time for at least one year, which fair market value could be significant. If the Consultant exercises the option and the parties cannot agree on the fair market value of the buyout option, the fair market value will be        determined by a binding appraisal procedure. We represented under the agreement that the Consultant’s interest in each of our parks and in any comparable projects will have priority over the interests of all financiers, lenders and others who may have an interest in that park or project. Our obligations under the agreement are guaranteed by Universal Studios, Inc., as successor to MCA Inc., and Universal Studios, Inc.’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 Holdings' May 2010 notes, the April 2010 notes and the senior secured credit agreement, a lien to secure our obligations under the Consultant Agreement would be a permitted lien. This event would adversely impact our liquidity.

 

21

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We believe that funds generated from operations and our available borrowing capacity will be adequate to fund our debt service requirements, capital expenditures and working capital requirements up to, but not including, April 1, 2010, which is the early maturity date on the term loan component of our senior secured credit facilities. Although we believe that our current financial position and financing        options will provide flexibility in financing activities and permit us to respond to changing conditions, we cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the revolving credit facility 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 continue to reduce debt could be adversely affected by the        occurrence of unfavorable events. For more information, see*Item 1A. Risk**Factors – Risks Related to Our Indebtedness*in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

*Special fees*

Under UCDP’s partnership agreement, a “special fee” is payable to Vivendi Universal Entertainment through Universal CPM. The special fee is calculated at 5% of certain gross operating revenues, as defined in the UCDP partnership agreement, generated from each of Universal Studios Florida and Universal’s Islands of Adventure. Subsequent to our refinancings in December 2004, the most        restrictive quarterly covenant for payment of the special fee is 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 senior secured credit agreement). These ratios were met as of March 29, 2009 and December 31, 2008. Accordingly, during the three and six months ended June 28, 2009, we paid fees of $6.8 million and $15.7 million, respectively,        to Vivendi Universal Entertainment. As these ratios were also met as of June 28, 2009, a payment of$9.1million in special fees will be made during the third quarter of 2009. At June 28, 2009 and December 31, 2008, respectively, ourconsolidatedbalance sheet included$9.1million and $8.9 million classified as current liabilities related to the        current portion of the special fees payable to Vivendi Universal Entertainment.Additionally, at June 28, 2009 and December 31, 2008, our consolidated balance sheet included$93.4 million and $92.0 million, respectively, in long-term deferred special fees payable to affiliates of Vivendi Universal Entertainment.

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

Certain statements appearing in this report are “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 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, risks and uncertainties relating to the global recession and its duration, severity and impact on overall consumer activity; the dependence of our business on air travel; the risks inherent in deriving substantially all of our revenues from one location; our dependence on Vivendi        Universal Entertainment and its affiliates; risks related to unfavorable outcomes of our legal proceedings; the loss of key distribution channels for pass sales; competition within the Orlando theme park market; publicity associated with accidents occurring at theme parks; the loss of material intellectual property rights used in our business; the seasonality of our business; the substantial indebtedness of us and our subsidiaries; and the difficulty we may face in refinancing our        indebtedness due to the turmoil and lack of liquidity in the credit markets and the Consultant’s right to exercise his put option starting in June 2010. 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 attributable to us or persons acting on our behalf apply only as of the date of this report and are expressly qualified        in their entirety by the cautionary statements included in this report. We undertake no obligation to update or revise forward looking statements which may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, except as required by law.

 

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| **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):

 

|                                                                                                                                                                                                                                                                                                                                                                                         |   | **2009** |    |   | **2010** |   |    | **2011** |   |   | **2012** |   |   | **2013** |    |   | **Total** |   |    |   | **Fair value** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|---------|----------|--------|--------|----------|--------|--------|----------|---------|--------|-----------|--------|---------|--------|----------------|--------|
| **Debt:**                                                                                                                                                                                                                                                                                                                                                                                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |   |           |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |   |           |   |
| Fixed rate debt                                                                                                                                                                                                                                                                                                                                                                              |   | $        | — |   |     | $      | 500,000 |     |   | $      | —  |   |   | $        | — |   |      | $      | — |   |           | $      | 500,000 |   |   |   | $ | 470,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |   |           |   |   |   |   |   |   |   |   |
| Average rate                                                                                                                                                                                                                                                                                                                                                                                 |   |     | n/a     |   |     |   | 11.75   | %        |   |   | n/a      |   |   |     | n/a     |   |      |   |    |   |           |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |   |           |   |   |   |   |   |   |   |   |
| Variable rate debt                                                                                                                                                                                                                                                                                                                                                                           |   | $        | — |   |     | $      | — |     |   | $      | 509,000  |   |   | $        | — |   |      | $      | — |   |           | $      | 509,000 |   |   |   | $ | 493,730 |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |   |           |   |   |   |   |   |   |   |   |
| Average interest rate                                                                                                                                                                                                                                                                                                                                                                        |   |     | n/a     |   |     |   | n/a     | %        |   |   | 7.04     | %      |   |     | n/a     |   |      |   |    |   |           |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |   |           |   |   |   |   |   |   |   |   |
| Total gross debt                                                                                                                                                                                                                                                                                                                                                                             |   | $        | — |   |     | $      | 500,000 |     |   | $      | 509,000  |   |   | $        | — |   |      | $      | — |   |           | $      | 1,009,000 |   |   |   | $ | 963,730 |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |   |           |   |   |   |   |   |   |   |   |
| (1) Amounts exclude discounts and therefore represent gross maturities. The maturity date of the term loan under the senior secured credit facilities in the amount of $509.0 million is June 9, 2011; however, it is repayable in full at April 1, 2010, if the April 2010 and the May 2010 notes are not refinanced or repaid in full prior to such                        date. |   |

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The following table is a schedule of our interest rate swap agreements including notional amounts, weighted average interest rates by expected maturity dates and fair value (in thousands):

 

|                    |   | **2009** |    |   | **2010** |   |    | **2011** |   |   | **2012** |   |   | **2013** |    |   | **Total** |   |    | **Fair value** |   |
|-------------------------|--------|----------|---------|--------|----------|--------|---------|----------|--------|--------|----------|--------|--------|----------|---------|--------|-----------|--------|---------|----------------|--------|
| **Interest Rate Swap:** |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |
|                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |
| Variable to Fixed       |   | $        | 325,000 |   |     | $      | — |     |   | $      | —  |   |   | $        | — |   |      | $      | — |           |   | $ | 325,000 |   |   | $ | (4,640 | ) |
|                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |   |   |   |   |   |   |   |
| Average pay rate        |   |     | 4.63    | %      |     |   | n/a     |     |   |   | n/a      |   |   |     | n/a     |   |      |   | n/a     |           |   |   | n/a |   |   |   | n/a |   |
|                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |   |   |   |   |   |   |   |
| Average receive rate    |   |     | 1.08    | %      |     |   | n/a     |     |   |   | n/a      |   |   |     | n/a     |   |      |   | n/a     |           |   |   | n/a |   |   |   | n/a |   |
|                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |   |   |   |   |   |   |   |
| Fixed to Variable       |   |     | n/a     |   |     |   | n/a     |     |   |   | n/a      |   |   |     | n/a     |   |      |   | n/a     |           |   |   | n/a |   |   |   | n/a |   |
|                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |   |   |   |   |   |   |   |
| Average pay rate        |   |     | n/a     |   |     |   | n/a     |     |   |   | n/a      |   |   |     | n/a     |   |      |   | n/a     |           |   |   | n/a |   |   |   | n/a |   |
|                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |   |   |   |   |   |   |   |
| Average receive rate    |   |     | n/a     |   |     |   | n/a     |     |   |   | n/a      |   |   |     | n/a     |   |      |   | n/a     |           |   |   | n/a |   |   |   | n/a |   |
|                    |   |     |    |   |     |   |    |     |   |   |     |   |   |     |    |   |      |   |    |           |   |   |   |   |   |   |   |   |
| Total notional amounts  |   | $        | 325,000 |   |     | $      | — |     |   | $      | —  |   |   | $        | — |   |      | $      | — |           |   | $ | 325,000 |   |   | $ | (4,640 | ) |

 

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. As a result, we have $184.0 million of unhedged variable rate debt as of June 28, 2009. 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 $1.8 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.

We are exposed to credit loss in the event of nonperformance by the other party to the derivative financial instruments. We limit this exposure by entering into agreements directly with a number of major financial institutions that meet our credit standards and that are expected to satisfy their obligations under the contracts.

For more information about our interest rate swaps see*Note 6*to theconsolidatedfinancial statements of our annual report on Form 10-K for the fiscal year ended December 31, 2008.

 

24

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| **Item** **4.** | **Controls and Procedures** |
|----------------------|-----------------------------|

 

*Universal City**Development Partners, Ltd.*

The management of Universal CityDevelopment Partners Ltd.( “UCDP”) carried out an evaluation, with the participation ofUCDP’sPrincipal Executive Officer and Principal Financial Officer, of the effectiveness ofUCDP’sdisclosure controls and        procedures as of the end of the period covered by this report. Based upon that evaluation,UCDP’sPrincipal Executive Officer and Principal Financial Officer concluded thatUCDP’sdisclosure controls and procedures were effective to ensure that information required to be disclosed byUCDPin the reports that it files or submits under the        Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules, regulations and forms promulgated by the Securities and Exchange Commission.

There was no change inUCDP’sinternal control over financial reporting during the quarter ended June 28, 2009 that has materially affected, or is reasonably likely to materially affect,UCDP’sinternal control over financial reporting.

*UCDP**Finance, Inc.*

The management ofUCDPFinance, 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 recorded, processed, summarized and reported within the time periods specified in the rules, regulations and forms promulgated by the Securities and Exchange Commission.

There was no change in Finance’s internal control over financial reporting during the quarter ended June 28, 2009 that has materially affected, or is reasonably likely to materially affect, Finance’s internal control over financial reporting.

 

25

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**PART II — OTHER INFORMATION**

 

| **Item** **1.** | **Legal Proceedings** |
|----------------------|-----------------------|

 

See*Note 8*in*Part* *I — Item* *1.**Financial Statements*in this document for a detailed description of current legal proceedings.

 

| **Item** **1A.** | **Risk Factors** |
|-----------------------|------------------|

 

See*Part* *I — Item* *1A*of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as updated in*Part II – Item IA*of our Quarterly Report on Form 10-Q for the        quarter ended March 29, 2009, for a discussion regarding some of the reasons that our actual operating results may differ materially from those that we anticipate.

 

 

| **Item** **2.** | **Unregistered Sales of Equity Securities and Use of Proceeds** |
|----------------------|-----------------------------------------------------------------|

 

Not applicable.

 

| **Item** **3.** | **Defaults upon Senior Securities** |
|----------------------|-------------------------------------|

 

Not applicable.

 

| **Item** **4.** | **Submission of Matters to a Vote of Security Holders** |
|----------------------|---------------------------------------------------------|

 

None.

 

| **Item** **5.** | **Other Information** |
|----------------------|-----------------------|

 

None.

| **Item** **6.** | **Exhibits.** |
|----------------------|---------------|

 

a) Exhibits

|   |         |                                                                                                                                   |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------|
| 31.1   |    | Certification of Principal Executive Officer of Universal CityDevelopment Partners, Ltd. Pursuant to Rule 13a-14(a) or Rule 15d-14(a). |
|   |         |
| 31.2   |    | Certification of Principal Financial Officer of Universal CityDevelopment Partners, Ltd. Pursuant to Rule 13a-14(a) or Rule 15d-14(a). |
|   |         |
| 31.3   |    | Certification of Principal Executive Officer ofUCDPFinance, Inc. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).                         |
|   |         |
| 31.4   |    | Certification of Principal Financial Officer ofUCDPFinance, Inc. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).                         |
|   |         |
| 32.1   |    | Certification of Principal Executive Officer of Universal CityDevelopment Partners, Ltd. Pursuant to 18 U.S.C. Section 1350.           |
|   |         |
| 32.2   |    | Certification of Principal Financial Officer of Universal CityDevelopment Partners, Ltd. Pursuant to 18 U.S.C. Section 1350.           |
|   |         |
| 32.3   |    | Certification of Principal Executive Officer ofUCDPFinance, Inc. Pursuant to 18 U.S.C. Section 1350.                                   |
|   |         |
| 32.4   |    | Certification of Principal Financial Officer ofUCDPFinance, Inc. Pursuant to 18 U.S.C. Section 1350.                                   |

 

26

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**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: August 6, 2009 |   |   |   | By:                                              |   | /s/ Tracey L. Stockwell     |
|                 |   |   |   | Name:                                            |   | Tracey L. Stockwell         |
|                 |   |   |   | Title:                                           |   | Principal Financial Officer |
|                 |   |   |
|                 |   |   |   | **UCDP****FINANCE, INC.**                        |
|                 |   |   |   |
| Date: August 6, 2009 |   |   |   | By:                                              |   | /s/ Tracey L. Stockwell     |
|                 |   |   |   | Name:                                            |   | Tracey L. Stockwell         |
|                 |   |   |   | Title:                                           |   | Principal Financial Officer |

 

 

 

 

 

27