Form 10-Q

10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2006

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		42-1581281
(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 ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by checkmark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2): Yes ¨ No x

As of August 16, 2006 there were 100 shares of common stock of UCDP Finance, Inc. outstanding. Not applicable to Universal City Development 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		12
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk		18
ITEM 4. Controls and Procedures		18

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		19
ITEM 6. Exhibits		20

SIGNATURES		21

UCDP Finance, Inc. is a wholly owned subsidiary of Universal City Development Partners, Ltd., and was formed for the sole purpose of acting as a co-issuer of the Registrants’ 11³/4% senior notes due 2010. UCDP Finance, Inc. does not and will not conduct any operations or hold any assets of any kind and will not have any future revenues. UCDP Finance, Inc. meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Universal City Development Partners, Ltd. and Subsidiaries

Consolidated Balance Sheets

(In thousands)


	July 2, 2006			December 31, 2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	101,838		$	46,833
Accounts receivable, net		34,030			24,554
Receivables from related parties		4,362			4,871
Inventories, net		46,014			41,503
Prepaid assets		11,482			6,223

Total current assets		197,726			123,984
Property and equipment, at cost:
Land and land improvements		491,008			490,721
Buildings and building improvements		1,372,205			1,372,316
Equipment, fixtures and furniture		1,078,026			1,076,123
Construction in process		34,359			14,786

Total property and equipment, at cost:		2,975,598			2,953,946
Less accumulated depreciation		(1,219,572	)		(1,167,522	)

Property and equipment, net		1,756,026			1,786,424
Other assets:
Interest rate swap assets, at fair market value		8,771			1,836
Investments in joint ventures		7,763			7,972
Intangible assets, net		14,006			14,729
Deferred finance costs, net		22,500			25,130
Other assets		7,232			6,929

Total other assets		60,272			56,596

Total assets	$	2,014,024		$	1,967,004

Continued on next page.

Universal City Development Partners, Ltd. and Subsidiaries

Consolidated Balance Sheets (Continued)

(In thousands)


	July 2, 2006		December 31, 2005
	(Unaudited)
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	118,802	$	88,645
Unearned revenue		59,272		39,482
Due to Vivendi Universal Entertainment		18,204		9,510
Current portion of capital lease obligations		665		765
Current portion of long-term borrowings		5,725		5,800

Total current liabilities		202,668		144,202

Long-term liabilities:
Long-term borrowings, net of current portion		1,030,909		1,035,513
Deferred special fee payable to affiliates		77,624		74,705
Capital lease obligations, net of current portion		245		416
Interest rate swap liabilities, at fair market value		—		88
Minority interest in equity of UCRP		9,064		8,491
Other		6,959		6,973

Total long-term liabilities		1,124,801		1,126,186
Commitments and contingencies		—		—
Partners’ equity:
Vivendi Universal Entertainment		337,961		347,184
Blackstone		337,961		347,184
Accumulated other comprehensive income		10,633		2,248

Total partners’ equity		686,555		696,616

Total liabilities and partners’ equity	$	2,014,024	$	1,967,004

See accompanying notes.

Universal City Development Partners, Ltd. and Subsidiaries

Consolidated Statements of Operations

(In thousands)


	Three Months Ended						Six Months Ended
	July 2, 2006			July 3, 2005			July 2, 2006			July 3, 2005
	(Unaudited)
Operating revenues:
Theme park passes	$	121,078		$	117,315		$	209,151		$	222,665
Theme park food and beverage		33,835			28,552			55,881			53,893
Theme park merchandise		31,632			25,535			51,792			48,870
Other		63,142			57,001			114,422			112,481

Total operating revenues		249,687			228,403			431,246			437,909
Costs and operating expenses:
Theme park operations		42,091			41,188			81,246			81,135
Theme park selling, general and administrative		42,061			35,980			86,470			84,989
Theme park cost of products sold		29,992			26,689			51,923			52,037
Special fee payable to Vivendi Universal Entertainment and consultant fee		15,698			14,330			26,923			27,382
Depreciation and amortization		28,201			29,855			56,675			58,984
Other		36,460			36,525			69,993			71,052

Total costs and operating expenses		194,503			184,567			373,230			375,579

Operating income		55,184			43,836			58,016			62,330
Other expense (income):
Interest expense		27,515			26,476			54,651			53,428
Interest income		(973	)		(248	)		(1,620	)		(416	)
Change in fair value of interest rate swaps		417			(857	)		1,362			(1,039	)
(Income) loss from joint ventures		(220	)		35			(3	)		200
Minority interest in net earnings of UCRP		977			914			1,896			1,791

Total other expense		27,716			26,320			56,286			53,964

Net income	$	27,468		$	17,516		$	1,730		$	8,366

See accompanying notes.

Universal City Development Partners, Ltd. and Subsidiaries

Consolidated Statement of Comprehensive Income (Loss) and Changes in Partners’ Equity

(In thousands)


(Unaudited)	Vivendi Universal Entertainment			Blackstone			Accumulated Other Comprehensive Income		Total Partners’ Equity			Comprehensive Income (Loss)
Balance, December 31, 2005	$	347,184		$	347,184		$	2,248	$	696,616		$	—
Amortization of accumulated other comprehensive income from interest rate swaps that previously qualified for hedge accounting		—			—			222		222			222
Change in fair value of interest rate swap that qualify for hedge accounting		—			—			8,163		8,163			8,163
Partner distributions		(10,088	)		(10,088	)		—		(20,176	)		—
Net income		865			865			—		1,730			1,730

Balance, July 2, 2006	$	337,961		$	337,961		$	10,633	$	686,555		$	10,115

See accompanying notes.

Universal City Development Partners, Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)


	Six Months Ended
	July 2, 2006			July 3, 2005
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,730		$	8,366

Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities:
Depreciation		55,952			58,260
Amortization of intangible assets		723			724
Amortization of deferred finance costs		2,630			2,619
Accretion of bond discount		425			420
Change in fair value of interest rate swaps		1,362			(1,039	)
(Income) loss from joint ventures		(3	)		200
Minority interest in net earnings of UCRP		1,896			1,791
Changes in operating assets and liabilities:
Accounts receivable, net		(9,476	)		(16,807	)
Receivables from related parties		509			4,154
Inventories, net		(4,511	)		(4,085	)
Prepaid assets		(5,259	)		(6,578	)
Other assets		(303	)		570
Accounts payable and accrued liabilities		30,157			9,465
Unearned revenue		19,790			21,820
Due to Vivendi Universal Entertainment		8,694			10,980
Deferred special fees payable to Vivendi Universal Entertainment		2,919			(24,605	)
Other long-term liabilities		(14	)		(320	)

Net cash and cash equivalents provided by operating activities		107,221			65,935

CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment acquisitions		(24,912	)		(15,736	)
Proceeds related to the settlement of capital claims		—			2,500
Distributions from joint ventures, net		212			142

Net cash and cash equivalents used in investing activities	$	(24,700	)	$	(13,094	)

Continued on next page.

Universal City Development Partners, Ltd. and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(In thousands)


	Six Months Ended
	July 2, 2006			July 3, 2005
	(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions of minority interest in equity of UCRP	$	(1,323	)	$	(1,935	)
Payments of partner distributions		(20,176	)		(33,752	)
Payments on long-term borrowings and capital lease obligations, net		(6,017	)		(3,138	)

Net cash and cash equivalents used in financing activities		(27,516	)		(38,825	)

Net increase in cash and cash equivalents		55,005			14,016
Cash and cash equivalents at beginning of period		46,833			23,879

Cash and cash equivalents at end of period	$	101,838		$	37,895

SUPPLEMENTAL DISCLOSURES OF NON-CASH INFORMATION
Notes payable issued for property and equipment	$	642		$	565

Increase in interest rate swap asset	$	6,935		$	—

Decrease in interest rate swap liability	$	88		$	3,287

Disposal of fully depreciated assets	$	3,902		$	1,113

See accompanying notes.

Universal City Development Partners, Ltd. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

1. GENERAL

Basis of Presentation

The accompanying unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to those rules and regulations. The unaudited consolidated financial 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 unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2005 and the notes, thereto, filed with the Securities and Exchange Commission under cover of Form 10-K.

The accompanying unaudited consolidated financial statements include the consolidated amounts of Universal City Development Partners, Ltd. (“UCDP”); Universal City Travel Partners d/b/a Universal Parks & Resorts Vacations (“UPRV”); UCDP Finance, Inc.; and Universal City Restaurant Partners, Ltd. (“UCRP”) (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated upon consolidation.

UCDP’s ultimate owners, each having a 50 percent interest, are Universal City Property Management II, LLC (“Universal CPM”) and Blackstone Capital Partners (“Blackstone”). Universal CPM is a wholly owned subsidiary of Vivendi Universal Entertainment LLLP (“Vivendi Universal Entertainment”), a subsidiary of Universal Studios, Inc. (“USI”), which is an indirect subsidiary of NBC Universal, Inc. (“NBCU”).

Period End

The three months ended July 2, 2006 and July 3, 2005 each contained 91 days. The six months ended July 2, 2006 contained 183 days, while the six months ended ended July 3, 2005 contained 184 days.

Seasonality

The timing of Easter in relation to the Company’s quarter end significantly affects comparability of the results for the three months ended July 3, 2006 and July 3, 2005. Easter occurred during April in 2006 and March in 2005, thus shifting a peak travel season from the first quarter in 2005 to the second quarter in 2006.

Based on the seasonality of attendance, the results for the three months and six months ended July 2, 2006 and July 3, 2005 are not necessarily indicative of results for the full year.

Inventories

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


	July 2, 2006			December 31, 2005
	(Unaudited)
Merchandise	$	15,187		$	11,640
Food and beverage		4,217			3,541
Operating supplies and maintenance parts		27,723			27,384
Less: reserves		(1,113	)		(1,062	)

Total	$	46,014		$	41,503

Recent Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154 (“SFAS 154”), “Accounting Changes and Error Corrections”, a replacement of Accounting Principles Board Opinion No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, voluntary changes in accounting principles

were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. Adoption of SFAS 154 had no material impact on the Company’s financial position, results of operations or cash flows.

In February 2006, the FASB issued SFAS No. 155 (“SFAS 155”), “Accounting for Certain Hybrid Financial Instruments”, an amendment of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS 155 simplifies the accounting for hybrid financial instruments by permitting fair value remeasurement for any hybrid financial instrument that contains an embedded derivative. SFAS 155 is effective for all financial instruments acquired, issued, or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. The Company does not believe adoption of SFAS 155 will have a material impact on its financial position, results of operations or cash flows.

2. LONG-TERM BORROWINGS AND FINANCIAL INSTRUMENTS

At July 2, 2006, total long-term borrowings were $1,036,634,000, which primarily included $496,876,000 in bonds due in April 2010 ($500,000,000, net of an unamortized discount of $3,124,000) and $539,000,000 under the JP Morgan term loan (“UCDP’s senior secured credit facility”). At July 2, 2006, $5,725,000 of the total borrowings were classified as current. In addition, at July 2, 2006, the Company had $100,000,000 available under its revolving credit facilities.

During the six months ended July 2, 2006 and July 3, 2005, respectively, the Company made principal payments of $5,500,000 and $2,750,000 on the senior secured credit facility. The senior secured credit facility and bonds contain certain customary limitations. The most restrictive limitations relate to the incurrence of liens, additional indebtedness and maintenance of funded debt and interest coverage ratios. At July 2, 2006, the Company believes it was in compliance with the financial terms of the senior secured credit facility and the bonds. The senior secured credit facility and bonds also provide for tests which can restrict payment of special fees to Vivendi Universal Entertainment. At July 2, 2006, the Company met the test for the current special fees and partially met the test for the deferred special fees (see Note 4).

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. The estimated fair values of long-term borrowings and interest rate swaps subject to fair value disclosures determined based on quotes from major financial institutions are as follows (in thousands):


	July 2, 2006						December 31, 2005
	Carrying Value			Fair Value			Carrying Value			Fair Value
	(Unaudited)
Long-term borrowings	$	1,036,634		$	1,080,201		$	1,041,313		$	1,113,293
Interest rate swap assets		(8,771	)		(8,771	)		(1,836	)		(1,836	)
Interest rate swap liabilities		—			—			88			88

Total	$	1,027,863		$	1,071,430		$	1,039,565		$	1,111,545

3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The major components of accounts payable and accrued liabilities are as follows (in thousands):


	July 2, 2006		December 31, 2005
	(Unaudited)
Accounts payable	$	11,529	$	5,597
Capital expenditures		6,272		7,867
Marketing and advertising		15,841		5,875
Interest		22,095		20,899
Compensation and benefits		24,077		24,792
Operating accruals		13,380		10,615
Consulting fees		5,277		3,843
Property and sales tax		14,458		1,508
Other		5,873		7,649

Total	$	118,802	$	88,645

4. 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 July 2, 2006, the Company paid no fees to Vivendi Universal Entertainment. However, during the six months ended July 2, 2006, the Company paid fees of $7,811,000 to Vivendi Universal Entertainment. Likewise, during the three months and six months ended July 3, 2005, respectively, the Company paid fees of $19,476,000 and $37,352,000. At July 2, 2006 and December 31, 2005, respectively, the amount due to Vivendi Universal Entertainment included $18,204,000 and $7,811,000 related to special fees payable to Vivendi Universal Entertainment. In addition, at July 2, 2006 and December 31, 2005, respectively, the Company had long-term deferred special fees payable of approximately $77,624,000 payable and $74,705,000 payable to affiliates of Vivendi Universal Entertainment.

The most restrictive quarterly covenant within the Company’s debt agreements for payment of the special fee is a rolling 12-month debt to EBITDA ratio of 5.0 to 1.0 or less related to the current special fees below $20,000,000 and 4.0 to 1.0 or less related to the current and deferred special fees in excess of $20,000,000. These ratios were met as of December 31, 2005. Accordingly, during the six months ended July 2, 2006, fees were paid as discussed above. Based on the ratios at July 2, 2006, the Company will pay current fees of $10,600,000 and deferred fees of $3,000,000 during the third quarter of 2006.

5. CONSULTING AGREEMENT

UCDP has an agreement with a consultant (the “Consultant”) under which it pays a percentage of its gross revenues for consulting services. On March 15, 2005, counsel for the Consultant delivered to UCDP a report, which asserted that the Consultant is owed additional fees for the period from 1992 to 2002. On March 28, 2006, the parties agreed to a resolution in principal of all claims that could be raised in an audit (including those specifically raised in the report). The resolution was within the amount accrued for the loss contingency at April 2, 2006. The settlement amount was paid during the three months ended July 2, 2006.

6. LITIGATION

RIDE & SHOW

On November 13, 2003, Ride & Show Engineering, Inc. filed a Complaint For Patent Infringement, Injunctive Relief and Damages (the Complaint) in the United States District Court for the Central District of California, naming USJ Co., Ltd., and Universal City Studios LLLP d/b/a Universal Studios Recreation Group, affiliates of UCDP, as defendants. On February 12, 2004, the Plaintiff served a First Amended Complaint (the Amended Complaint) naming the above-referenced defendants as well as UCDP and another company, Oriental Land Co., Ltd., as additional defendants. On September 24, 2003, a similar complaint was filed in the same court against other defendants, including entities that appear to be operators of amusement parks and amusement park rides, and designers and manufacturers of amusement park rides. The Amended Complaint alleges that the named defendants have infringed U.S. Patent No. 5,527,221 (the Patent) by operating, making, using, selling, advertising, and/or offering for sale in the United States amusement park rides that embody or otherwise practice one or more of the claims of such Patent or by otherwise contributing to infringement or inducing others to infringe. The Amended Complaint did not include specific allegations concerning the location or manner of alleged infringement. However, plaintiff’s counsel has advised UCDP that the allegations of the Amended Complaint relate to rides located at UCDP’s theme parks. On February 3, 2006 USJ Co. Ltd. entered into a Settlement and License Agreement pursuant to which Ride & Show agreed to dismiss the California Case.

an impasse. Ride & Show moved for summary judgment on the Patent ownership issue and UCDP moved for summary judgment on all issues. On December 19, 2005, UCDP filed a Motion to Amend its Reply to Ride & Show’s Counterclaim to include the defense of res judicata based upon the dismissals of Moog and MTS in the California case. On February 21, 2006, the Magistrate issued a Report and Recommendation denying UCDP’s Motion to Amend and UCDP filed an Objection to Report and Recommendation. On March 6, 2006, the Court issued an Order denying UCDP’s Motion for Summary Judgment and set a hearing on Ride and Show’s Motion for Summary Judgment, which was held on March 17, 2006. The Court held a hearing on March 29, 2006 with respect to UCDP’s Objection to Report and Recommendation. As a result of the dismissal of the California Case, USJ Co. Ltd. has terminated its Joint Defense Agreement and both USJ Co. and Universal Parks & Resorts ceased sharing costs of defense of the Ride & Show claims in the California and Florida Cases as of February 1, 2006. At a mediation held on April 11, 2006, the parties agreed to a resolution in principal of all claims and the parties have now executed mutually agreed settlement documentation. On April 12, 2006, the Court entered an Order of Dismissal without prejudice and denied all pending motions as moot. The resolution was within the amount accrued for the loss contingency at April 2, 2006. The settlement amount was paid during the three months ended July 2, 2006.

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 a material impact to its results of operations, financial position or cash flows by reason of these actions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW RELATED TO FINANCIAL RESULTS

During the first half of 2006, paid admissions were down 4% compared to 2005. Although the Florida market remained strong with growth of 9%, we had softness in the outer United States and international markets, down 6% and 7%, respectively. Most of the decline in the outer United States market occurred during the early part of 2006. During May and June of 2006, the outer United States market recovered and was flat compared to 2005. Historically, United Kingdom accounts for 67% of our international market. Travel from United Kingdom to United States was down 10% in 2006 compared to 2005.

During 2006 we enhanced several of our revenue generating programs. Accordingly, despite this attendance shortfall, total revenues decreased by less than 2%, or $6.7 million. These results, in conjunction with initiatives to manage variable costs, generated operating income of $58.0 million, down $4.3 million compared to 2005. At July 2, 2006 we maintained a strong liquidity position with $201.8 million in cash and unused revolving credit, including $101.8 million of cash and cash equivalents and $100.0 million available under our revolving credit facility. This liquidity position was favorable by $63.9 million compared to our liquidity position at July 3, 2005. We also had long-term debt of $1,036.6 million at July 2, 2006.

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. Local schools begin as early as the first week of August. 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. From 1991 to 2003, our parks had been closed only once due to the inclement weather caused by hurricanes. However over the past two seasons, we have closed our parks on four days as a result of hurricanes.

Based on the seasonality of our attendance, the results for the three months and six months ended July 2, 2006 and July 3, 2005 are not necessarily indicative of results for the full year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles. Results could differ significantly from those estimates under different assumptions and conditions. We believe that the application of these accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of all of our accounting policies, including our critical accounting policies, see Note 2 in our audited consolidated financial statements for the year ended December 31, 2005 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 in our Form 10-K within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Litigation

When we are involved in a legal proceeding, as required, we accrue the low end of the estimated range of probable costs for the resolution of the claim. This estimate is 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 a legal proceeding. See Note 6 in Part 1, Item 1. Financial Statements and Part II, Item 1. Legal Proceedings in this document for more detailed information on litigation exposure.

Period end

The three months ended July 2, 2006 and July 3, 2005 each contained 91 days. The six months ended July 2, 2006 contained 183 days, while the six months ended July 3, 2005 contained 184 days.

Recent accounting pronouncements

In May 2005, the FASB issued SFAS No. 154 (“SFAS 154”), “Accounting Changes and Error Corrections”, a replacement of Accounting Principles Board Opinion No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, voluntary changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. Adoption of SFAS 154 had no material impact on our financial position, results of operations or cash flows.

In February 2006, the FASB issued SFAS No. 155 (“SFAS 155”), “Accounting for Certain Hybrid Financial Instruments”, an amendment of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS 155 simplifies the accounting for hybrid financial instruments by permitting fair value remeasurement for any hybrid financial instrument that contains an embedded derivative. SFAS 155 is effective for all financial instruments acquired, issued, or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. We do not believe adoption of SFAS 155 will have a material impact on our financial position, results of operations or cash flows.

RESULTS OF OPERATIONS


	Three Months Ended				% Change
(In Thousands, Except Percentages and Per Admission Data)	July 2, 2006		July 3, 2005		Favorable/(Unfavorable)
Operation data:
Paid theme park admissions		3,125		2,938	6	%
Turnstile theme park admissions		3,364		3,148	7	%
Theme park pass revenue per paid admission	$	38.74	$	39.93	(3	)%
Theme park food, beverage and merchandise revenue per turnstile admission		19.46		17.18	13	%
Statement of operations data:
Operating revenues:
Theme park pass revenue	$	121,078	$	117,315	3	%
Theme park food and beverage		33,835		28,552	19	%
Theme park merchandise		31,632		25,535	24	%
Other		63,142		57,001	11	%

Total operating revenues		249,687		228,403	9	%
Costs and operating expenses:
Theme park operations		42,091		41,188	(2	)%
Theme park selling, general and administrative		42,061		35,980	(17	)%
Theme park cost of products sold		29,992		26,689	(12	)%
Special fee payable to Vivendi Universal Entertainment and consultant fee		15,698		14,330	(10	)%
Depreciation and amortization		28,201		29,855	6	%
Other		36,460		36,525	—

Total costs and operating expenses		194,503		184,567	(5	)%

Operating income		55,184		43,836	26	%
Non-operating expenses		27,716		26,320	(5	)%

Net income	$	27,468	$	17,516	57	%

Three Months Ended July 2, 2006 Compared to Three Months Ended July 3, 2005

Comparisons between 2006 and 2005 are difficult as Easter occurred during the second quarter of 2006 as compared to the first quarter during 2005. Accordingly, second quarter of 2006 was favorably impacted as compared to 2005. Overall, paid theme park admissions were up 6%. The attendance increase occurred primarily in the Florida and outer United States markets, with increases of 16% and 5%, respectively. Attendance from the international market was consistent with 2005.

This favorable attendance, along with a 2% growth in per capita spend, resulted in $15.2 million, or 9%, in higher revenue from theme park passes, theme park food and beverage, and theme park merchandise. Other revenue, which was also impacted by the Easter shift, was favorable by $6.2 million, or 11%. This was driven by $4.2 million in additional revenue from passes that allow guests express access on our rides; $1.1 million in increased revenue from Universal Parks & Resorts Vacations (our wholesale and consumer direct travel company); $1.0 million in additional revenue from CityWalk; and $2.1 million from increases in other revenue sources, including special events, offsite stores and parking. This was offset by $2.8 million related to the timing of passholder redemptions.

In connection with favorable paid admissions, volume related expenses increased slightly. We also experienced an increase in theme park selling, general and administrative costs, of which $6.3 million related to the timing of our advertising campaign. As a percentage of theme park food and beverage and merchandise revenue, cost of products sold was very strong at 45.8% in 2006 as compared to 49.3% in 2005. This improvement is partially due to a change in mix toward higher margin products. Expenses related to our special fee payable and our consultant fee increased by $1.4 million due to the increase in our revenue. Other expenses were flat compared to 2005. The incremental costs related to increased revenue from Universal Parks & Resorts Vacations, CityWalk, and special events were offset by savings in 2006 from spending $2.1 million in 2005 to upgrade our environmental, health and safety procedures. Non-operating expenses were unfavorable primarily due to $2.3 million from higher interest rates. This was offset by $.7 million in additional interest income.


	Six Months Ended				% Change
(In Thousands, Except Percentages and Per Admission Data)	July 2, 2006		July 3, 2005		Favorable/(Unfavorable)
Operation data:
Paid theme park admissions		5,343		5,558	(4	)%
Turnstile theme park admissions		5,753		5,939	(3	)%
Theme park pass revenue per paid admission	$	39.14	$	40.06	(2	)%
Theme park food, beverage and merchandise revenue per turnstile admission		18.71		17.30	8	%
Statement of operations data:
Operating revenues:
Theme park pass revenue	$	209,151	$	222,665	(6	)%
Theme park food and beverage		55,881		53,893	4	%
Theme park merchandise		51,792		48,870	6	%
Other		114,422		112,481	2	%

Total operating revenues		431,246		437,909	(2	)%
Costs and operating expenses:
Theme park operations		81,246		81,135	—
Theme park selling, general and administrative		86,470		84,989	(2	)%
Theme park cost of products sold		51,923		52,037	—
Special fee payable to Vivendi Universal Entertainment and consultant fee		26,923		27,382	2	%
Depreciation and amortization		56,675		58,984	4	%
Other		69,993		71,052	2	%

Total costs and operating expenses		373,230		375,579	1	%

Operating income		58,016		62,330	(7	)%
Non-operating expenses		56,286		53,964	(4	)%

Net income	$	1,730	$	8,366	(79	)%

Six Months Ended July 2, 2006 Compared to Six Months Ended July 3, 2005

As described in the Overview Related to Financial Results section, paid admissions decreased by 4%. Specifically, the outer United States and international markets experienced decreased paid attendance of 6% and 7%, respectively, partially offset by a 9% growth in the Florida market.

Although we generated a 1% growth in per capita spend, the unfavorable attendance resulted in $8.6 million, or 3%, in lower revenue related to theme park passes, theme park food and beverage, and theme park merchandise. Other revenue was favorable by $1.9 million, or 2%. This was driven by $4.8 million in additional revenue from passes that allow guests express access on our rides and $2.0 million from increased business at our offsite stores and in special events. This was offset by $2.5 million in lower revenue from Universal Parks & Resorts Vacations and $3.4 million related to the timing of passholder redemptions.

Theme park selling, general and administrative increased largely from $2.1 million in increased advertising. As a percentage of theme park food and beverage and merchandise revenue, cost of products sold had improvement to 48.2% in 2006 as compared to 50.6% in 2005. This improvement is partially due to a change in mix toward higher margin products. Other expenses were favorable in 2006 primarily due to spending $2.1 million in 2005 to upgrade our environmental, health and safety procedures and $1.0 million in lower costs from our Universal Parks & Resorts Vacations. This was offset by $1.7 million incurred on park maintenance and the write-off of ride design costs. Non-operating expenses were unfavorable largely due to $3.6 million from higher interest rates. This was offset by $1.2 million in additional interest income.

EBITDA

We have included EBITDA because it is used by some investors as a measure of our ability to service debt. In addition, it is the primary basis in our 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 prior twelve months. We believe our 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 our 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 represents earnings before interest, taxes and depreciation and amortization. EBITDA 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 other consolidated income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA, 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 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:


	Three Months Ended						Six Months Ended
(In Thousands)	July 2, 2006			July 3, 2005			July 2, 2006			July 3, 2005
Cash and cash equivalents provided by operating activities	$	42,856		$	43,881		$	107,221		$	65,935
Adjustments:
Interest expense		27,515			26,476			54,651			53,428
Interest income		(973	)		(248	)		(1,620	)		(416	)
Amortization of deferred finance costs		(1,312	)		(1,299	)		(2,630	)		(2,619	)
Deferred special fee and interest payable to Vivendi Universal Entertainment		(1,510	)		15,348			(2,919	)		24,605
Income (loss) from joint ventures		220			(35	)		3			(200	)
Accretion of bond discount		(213	)		(220	)		(425	)		(420	)
Minority interest in net earnings of UCRP		(977	)		(914	)		(1,896	)		(1,791	)
Change in working capital		17,022			(10,247	)		(39,587	)		(19,199	)

EBITDA	$	82,628		$	72,742		$	112,798		$	119,323

LIQUIDITY AND CAPITAL RESOURCES

Cash flows

The following table summarizes key aspects of our cash flows for the six months ended July 2, 2006 and July 3, 2005:


	Six Months Ended
	July 2, 2006		July 3, 2005
	(Dollars in thousands)
Net cash and cash equivalents provided by operating activities	$	107,221	$	65,935
Net cash and cash equivalents used in investing activities		24,700		13,094
Capital expenditures		24,912		15,736
Net cash and cash equivalents used in financing activities		27,516		38,825

During the six months ended July 2, 2006 and July 3, 2005, respectively, net cash provided by operating activities was $107.2 million and $65.9 million. The increase, which totaled $41.3 million, was primarily driven by $29.5 million in lower payments of special fees to Vivendi Universal Entertainment and $17.7 million in lower payments related to our bonus plans as our 2004 long-term incentive plan was paid in 2005. These amounts were partially offset by the decrease in our net income of $6.6 million.

During the six months ended July 2, 2006 and July 3, 2005, respectively, net cash used in investing activities was $24.7 million and $13.1 million. During both periods, the balance consisted primarily of capital expenditures. During the six months ended July 2, 2006 and July 3, 2005, net cash used for financing activities was $27.5 million and $38.8 million, respectively. Both totals were comprised of distributions to our Partners, principal payments on our senior secured credit facility and distributions of the minority interest of UCRP. Distributions totaled $20.2 million and $33.8 million, respectively, during the six months ended July 2, 2006 and July 3, 2005. The principal payments on our senior secured credit facility totaled $5.5 million and $2.8 million, respectively, during the six months ended July 2, 2006 and July 3, 2005.

Financial position

The following table summarizes key aspects in our financial position and liquidity as of July 2, 2006 and December 31, 2005:


	As of
	July 2, 2006		December 31, 2005
	(Dollars in thousands)
Cash and cash equivalents	$	101,838	$	46,833
Unused portion of revolving credit facility		100,000		100,000
Current portion of long-term borrowings and capital leases		6,390		6,565
Special fees to Vivendi Universal Entertainment		18,204		7,811
Total long-term obligations (1)		1,108,778		1,110,634

(1)	Long-term obligations include long-term borrowings (excluding current portions), deferred special fees payable, and long-term capital lease obligations.

At July 2, 2006, our total debt was $1,036.6 million, which primarily included $496.9 million outstanding under the bonds due in April 2010 ($500.0 million, net of a remaining discount of $3.1 million) and $539.0 million outstanding under UCDP’s senior secured credit facility. At July 2, 2006, we also had $201.8 million in cash and unused revolving credit, consisting of $101.8 million in cash and $100.0 million available under our revolving credit facilities. Our senior secured credit agreement and bonds contain certain customary limitations. We believe we were in compliance with all financial covenants as of July 2, 2006. Our notes are due in 2010, while the senior secured credit agreement calls for quarterly

principal installments of 0.25% with the remainder due in 2011. Our senior secured credit facility is repayable in full at December 1, 2009, if the April 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 changes in our bond ratings. Although our bond rating has remained consistent during 2006, we can not be assured that future changes in our ratings will not occur.

We believe that funds generated from our operations and our available borrowing capacity will be adequate to fund our debt service requirements, capital expenditures and working capital requirements for the next 12 months. 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 our 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.

Special fees

Under our 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. Our most restrictive quarterly covenant for payment of the special fee is a rolling 12-month debt to EBITDA ratio of 5.0 to 1.0 or less related to the current special fees below $20.0 million and 4.0 to 1.0 or less related to the current and deferred special fees in excess of $20.0 million. These ratios were met as of December 31, 2005. Accordingly, during the six months ended July 2, 2006, we paid fees of $7.8 million to Vivendi Universal Entertainment. No fees were paid to Vivendi Universal Entertainment during the three months ended July 2, 2006. Likewise, during the three months and six months ended July 3, 2005, respectively, we paid fees of $19.5 million and $37.3 million. At July 2, 2006, we met the test for the current special fees and partially met the test for the deferred special fees. Based on the ratios at July 2, 2006, the Company will pay current fees of $10.6 million and deferred fees of $3.0 million during the third quarter of 2006. At July 2, 2006 and December 31, 2005, respectively, our consolidated balance sheet included $18.2 million and $7.8 million classified as current liabilities related to special fees payable to Vivendi Universal Entertainment. In addition, at July 2, 2006 and December 31, 2005, respectively, we had long-term deferred special fees payable of approximately $77.6 million and $74.7 million payable to affiliates of Vivendi Universal Entertainment.

Market risk

We are exposed to market risks relating to fluctuations in interest rates. Our practice is to utilize derivative financial instruments to manage a portion of these interest rate risks. As a result, we have $189.4 million of unhedged variable rate debt. 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 $1.9 million. Such potential increases or decreases are based on certain simplifying assumptions, including 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.

During the six months ended July 2, 2006, five of our interest rate swap agreements expired. At July 2, 2006, we had three remaining interest-rate swap agreements outstanding with an aggregate notional debt amount of $650.0 million. Two of these swaps, with a notional amount of $500.0 million, effectively fix our interest rate on our variable rate debt. The other swap, with a notional amount of $150.0 million, effectively makes the interest rate on our fixed rate debt variable.

The following table summarizes the impact of our interest rate swaps on our financial position as of July 2, 2006 and December 31, 2005 (in thousands):


	July 2, 2006				December 31, 2005
	Notional value		Fair value asset		Notional value		Fair value asset
Total interest rate swaps, net	$	650,000	$	8,771	$	910,400	$	1,748

The following tables summarize the changes in fair value of our interest rate swaps during the three and six months ended July 2, 2006 and July 3, 2005 (in thousands):


	Three Months Ended July 2, 2006					Three Months Ended July 3, 2005
	Loss recorded in statement of operations			Recorded in other comprehensive income		Gain (loss) recorded in statement of operations			Recorded in other comprehensive income
Changes in fair value of interest rate swaps	$	(417	)	$	3,306	$	2,202		$	(7,048	)
Ineffective amortization		—			—		(1,345	)		1,345

Total	$	(417	)	$	3,306	$	857		$	5,703


	Six Months Ended July 2, 2006					Six Months Ended July 3, 2005
	Loss recorded in statement of operations			Recorded in other comprehensive income		Gain (loss) recorded in statement of operations			Recorded in other comprehensive income
Changes in fair value of interest rate swaps	$	(1,140	)	$	8,163	$	3,761		$	(7,048	)
Ineffective amortization		(222	)		222		(2,722	)		2,722

Total	$	(1,362	)	$	8,385	$	1,039		$	(4,326	)

We are exposed to credit loss in the event of nonperformance by the other party to our 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 fully their obligations under these contracts. We view derivative financial instruments as a risk management tool and do not use them for speculative or trading purposes.

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. 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 general economic downturn; 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; and the seasonality of our business. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Universal City Development Partners, Ltd.

The management of Universal City Development Partners, Ltd. (collectively “UCDP”) carried out an evaluation, with the participation of UCDP’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of UCDP’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, UCDP’s Principal Executive Officer and Principal Financial Officer concluded that UCDP’s disclosure controls and procedures were effective to ensure that information required to be disclosed by UCDP in the reports that it files or submits under the Securities Exchange Act of 1934 is 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 not any change in UCDP’s internal control over financial reporting during the quarter ended July 2, 2006 that has materially affected, or is reasonably likely to materially affect, UCDP’s internal control over financial reporting.

UCDP Finance, Inc.

The management of UCDP Finance, Inc. (“Finance”) carried out an evaluation, with the participation of Finance’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of Finance’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, Finance’s Principal Executive Officer and Principal Financial Officer concluded that Finance’s disclosure controls and procedures were effective to ensure that information required to be disclosed by Finance in the reports that it files or submits under the Securities Exchange Act of 1934 is 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 not any change in Finance’s internal control over financial reporting during the quarter ended July 2, 2006 that has materially affected, or is reasonably likely to materially affect, Finance’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

RIDE & SHOW

UCDP filed a motion seeking to either dismiss the action or to transfer it to the Middle District of Florida. On May 5, 2004, the United States District Court for the Central District of California granted the Motion and dismissed, without prejudice, the case for improper venue. As a result, UCDP is no longer a party to that action. On May 21, 2004, UCDP filed a Complaint against Ride & Show Engineering, Inc. (Ride & Show) in the U.S. District Court for the Middle District of Florida. The Complaint contains counts for declaratory relief, breach of contract, conversion, unjust enrichment, constructive trust, and fraud. Among other things, the Complaint challenges Ride & Show’s ownership of the subject Patent and the validity of the Patent. In addition, UCDP sought a declaration by the Court that it has not infringed the Patent. UCDP also sought damages for Ride & Show’s use of the invention that is the subject of the Patent. On July 19, 2004, Ride & Show filed a motion to dismiss the Complaint and to transfer a portion of UCDP’s declaratory relief count to the U.S. District Court for the Central District of California. UCDP opposed the motion and on August 26, 2004, Ride & Show’s motion was denied. On September 10, 2004 Ride & Show filed its answer and counterclaim for Patent Infringement and Breach of Contract. On October 4, 2004 UCDP filed its answer to the counterclaim denying all material allegations and asserting numerous affirmative defenses. On May 26, 2005, UCDP and Ride & Show participated in a court ordered mediation, which resulted in an impasse. Ride & Show moved for summary judgment on the Patent ownership issue and UCDP moved for summary judgment on all issues. On December 19, 2005, UCDP filed a Motion to Amend its Reply to Ride & Show’s Counterclaim to include the defense of res judicata based upon the dismissals of Moog and MTS in the California case. On February 21, 2006, the Magistrate issued a Report and Recommendation denying UCDP’s Motion to Amend and UCDP filed an Objection to Report and Recommendation. On March 6, 2006, the Court issued an Order denying UCDP’s Motion for Summary Judgment and set a hearing on Ride and Show’s Motion for Summary Judgment, which was held on March 17, 2006. The Court held a hearing on March 29, 2006 with respect to UCDP’s Objection to Report and Recommendation. As a result of the dismissal of the California Case, USJ Co. Ltd. has terminated its Joint Defense Agreement and both USJ Co. and Universal Parks & Resorts ceased sharing costs of defense of the Ride & Show claims in the California and Florida Cases as of February 1, 2006. At a mediation held on April 11, 2006, the parties agreed to a resolution in principal of all claims and the parties have now executed mutually agreed settlement documentation. On April 12, 2006, the Court entered an Order of Dismissal without prejudice and denied all pending motions as moot. The resolution was within the amount accrued for the loss contingency at April 2, 2006. The settlement amount was paid during the three months ended July 2, 2006.

OTHER

We are threatened with or involved in various other legal actions and claims incidental to the conduct of its business. We do not expect a material impact to our results of operations, financial position or cash flows by reason of these actions.

ITEM 6. EXHIBITS

a) Exhibits


31(i).1		Certification of Principal Executive Officer of Universal City Development Partners, Ltd. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).

31(i).2		Certification of Principal Financial Officer of Universal City Development Partners, Ltd. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).

31(i).3		Certification of Principal Executive Officer of UCDP Finance, Inc. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).

31(i).4		Certification of Principal Financial Officer of UCDP Finance, Inc. Pursuant to Rule 13a-14(a) or Rule 15d-14(a).

32.1		Certification of Principal Executive Officer of Universal City Development Partners, Ltd. Pursuant to 18 U.S.C. Section 1350.

32.2		Certification of Principal Financial Officer of Universal City Development Partners, Ltd. Pursuant to 18 U.S.C. Section 1350.

32.3		Certification of Principal Executive Officer of UCDP Finance, Inc. Pursuant to 18 U.S.C. Section 1350.

32.4		Certification of Principal Financial Officer of UCDP Finance, Inc. Pursuant to 18 U.S.C. Section 1350.

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 16, 2006	By:	/s/ Michael J. Short
	Name:	Michael J. Short
	Title:	Principal Financial Officer and Accounting Officer

	UCDP FINANCE, INC.

Date: August 16, 2006	By:	/s/ Michael J. Short
	Name:	Michael J. Short
	Title:	Treasurer (Principal Financial Officer and Accounting Officer)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents