LAS VEGAS, Nov. 6, 2013 (GLOBE NEWSWIRE) — Pinnacle Entertainment, Incorporated (PNK) today reported financial results for the third quarter ended September 30, 2013.
2013 Third Quarter Financial Highlights:
On August 13, 2013, Pinnacle completed the acquisition of Ameristar Casinos, Inc., a transaction valued at $2.8 billion in addition to assumed debt. As a result of the transaction, the Company added eight gaming entertainment properties. The Company is divesting the Ameristar Casino Lake Charles development project & Lumiere Place Casino & Hotels pursuant to a Federal Trade Commission (“FTC”) consent order, & following the completion of those transactions, the Company will operate a total of 16 properties in nine U.S. states, in addition to 14 casinos & two racetracks.
Revenues increased by $162.8 million or 63.6% to $418.9 million, & Consolidated Adjusted EBITDA increased by $37.4 million or 57.5% to $102.6 million. These results contain 49 days of contributions from Ameristar, yet exclude Lumiere Place Casino & Hotels in all periods presented.
Combined Net Revenues & Combined Consolidated Adjusted EBITDA would have been $553.9 million & $140.5 million, respectively, had the results of Ameristar been incorporated for the whole entire 2013 third quarter instead of the 49 days included in the GAAP results.
Both Consolidated Adjusted EBITDA & Combined Consolidated Adjusted EBITDA were negatively affected by a $3.3 million non-recurring increase in legal reserves in the 2013 third quarter. The increase in legal reserves is reflected in Corporate expenses & Other.
Loss from continuing operations was $47.1 million versus income of $6.7 million in the prior year period. 2013 third quarter loss from continuing operations included $12.1 million of net write-downs, reserves & recoveries; $63.1 million of pre-opening & development expenses, principally associated with the acquisition, integration & financing of the Ameristar transaction; & a loss on early extinguishment of debt of $30.8 million.
GAAP net loss per share was $3.07 versus break-even earnings of $0.00 in the prior year period. 2013 third quarter GAAP net loss per share was additionally affected by a non-cash impairment charge of $144.6 million related to the divestiture of Lumiere Place Casino & Hotels & a benefit of $62.5 million related to a partial release of a valuation allowance applied to the Company’s deferred tax asset position. Adjusted income per share, which removes the effect of non-comparable charges & items in both periods, was $0.11 versus $0.30 in the prior year period.
Additional Highlights:
In August 2013, the Company completed a private offering of $850 million aggregate principal amount of its 6.375% senior unsecured notes due 2021 & closed a $2.6 billion amended & restated senior secured credit facility. The proceeds from these transactions were used to finance the cash consideration for the acquisition of Ameristar, refinance existing credit facilities, pay related transaction fees & expenses, redeem Pinnacle’s existing 8.625% senior notes due 2017 & provide funds for general corporate purposes.
The Company completed the divestiture of its land holdings in Atlantic City in August 2013 for cash consideration of $29.5 million.
The Company recently formally announced the re-branding of its redevelopment project at River Downs in Cincinnati, Ohio to Belterra Park Gaming & Entertainment Center. The project budget remains $209 million, excluding license fees, original acquisition costs, & capitalized interest, & is scheduled to open in May 2014.
On August 28, 2013, the Company opened a new 200-room hotel at River City in St. Louis, Missouri, which completed an $82 million expansion of the facility in that moreover added a 1,600-space covered parking structure & 14,000-sq. ft. multi-purpose event center.
Since the closing of the Ameristar transaction, the Company repaid $74 million of term loans with cash flow from operations & the net proceeds of the Atlantic City land sale.
In the 2013 third quarter, revenues increased by $162.8 million or 63.6% year over year to $418.9 million, while Consolidated Adjusted EBITDA was $102.6 million, an increase of $37.4 million or 57.5% year over year. 2013 third quarter results reflect contributions from the operations of Ameristar for 49 days, yet exclude Lumiere Place Casino & Hotels in all periods presented. Lumiere Place Casino & Hotels is reported as a discontinued operation given its impending divestiture. 2013 third quarter Combined Net Revenues & Combined Consolidated Adjusted EBITDA would have been $553.9 million & $140.5 million, respectively, had the results incorporated Ameristar for the whole entire 2013 third quarter instead of the 49 days included in the GAAP results. Both Consolidated Adjusted EBITDA & Combined Consolidated Adjusted EBITDA were negatively affected by a $3.3 million non-recurring increase in legal reserves, which is reflected in Corporate expenses & Other.
Summary of Third Quarter Results
(in thousands, except per share data)
Three many months ended September 30,
2013
2012
Net revenues
$418,927
$256,152
Consolidated Adjusted EBITDA (1)
$102,570
$65,125
Consolidated Adjusted EBITDA margin (1)
24.5%
25.4%
Operating (loss) income (2)
$(15,190)
$32,690
(Loss) income from continuing operations
$(47,142)
$6,662
(Loss) income from continuing operations margin
(11.3)%
2.6%
GAAP net loss
$(180,406)
$(358)
Diluted net loss per share
$(3.07)
$—
Adjusted income per share (1)
$0.11
$0.30
(1) For a further description of Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA margin, Combined Net Revenues, Combined Consolidated Adjusted EBITDA & Adjusted income per share, please see the section entitled “Non-GAAP Financial Measures” & the reconciliations to the GAAP equivalent financial measures below.
(2) Operating loss in the 2013 third quarter includes $63.1 million in pre-opening & development costs, principally comprised of legal & advisory expenses, severance charges, & other costs & expenses related to the financing & integration of the acquisition of Ameristar, versus $11.5 million in the prior year period, & a $12.1 million net negative impact related to write-downs, reserves & recoveries, principally comprised of a write-down of the gaming license for the Company’s Boomtown Bossier City property, versus a net negative impact of $0.1 million in the prior year period.
Significant Items Recorded in the 2013 Third Quarter
In the 2013 third quarter, the Company recorded several items in that impacted operating loss, loss from continuing operations, net loss, & applicable respective per share amounts, & affected comparability with the prior year period. These items principally represented the recognition of charges or expenses associated with, or driven by, the acquisition, financing & integration of Ameristar.
Amount
(in thousands)
of item (1)
Location
Increase in legal reserves
$ (3,260)
G&A/Corporate expenses & other
Total effect on Consolidated Adjusted EBITDA
(3,260)
Integration-related severance expense
(17,639)
Pre-opening & development
Ameristar acquisition closing costs & other
(45,447)
Pre-opening & development
Non-cash impairment of Boomtown Bossier City gaming license & other charges
(12,130)
Write-downs, reserves & recoveries, net
Total effect on Operating loss
(78,476)
PNK 8.625% Senior Note redemption costs & other write-offs from early retirement of debt
(30,830)
Loss on early extinguishment of debt
Total effect on Loss from continuing operations
(109,306)
Release of tax valuation allowance (2)
62,458
Income tax (expense) benefit
Impairment of Lumiere Place Casino & Hotels
(144,571)
Discontinued operations
Total effect on GAAP net loss
$ (191,419)
(1) The amount of the items in the table above are shown on a pre-tax basis, except for the tax valuation allowance release which is a discrete tax item.
(2) Through the acquisition of Ameristar, the Company established a deferred tax liability in that allowed for the releasing of a portion of the valuation allowance applied to its deferred tax assets, with the offset being the income tax benefit recorded in the 2013 third quarter.
Operating loss was $15.2 million in the 2013 third quarter versus income of $32.7 million in the prior year period. Loss from continuing operations was $47.1 million in the 2013 third quarter versus income of $6.7 million in the prior year period. Relative to the prior year period, loss from continuing operations was negatively affected by $12.1 million of net write-downs, reserves & recoveries; $63.1 million of pre-opening & development expenses, principally associated with the financing & integration of the Ameristar acquisition; a loss on early extinguishment of debt of $30.8 million related to the refinancing of the Company’s 8.625% Senior Notes due 2017; higher interest expense as a result of additional debt incurred to finance the Ameristar acquisition; the $3.3 million addition to legal reserves; & due to the Company no longer capitalizing interest on its investment in L’Auberge Baton Rouge effective with the property’s opening in September 2012.
GAAP net loss per share was $3.07 in the 2013 third quarter versus break-even earnings of $0.00 in the prior year period. GAAP net loss per share was additionally affected by a $144.6 million non-cash impairment charge related to Lumiere Place Casino & Hotels & a benefit of $62.5 million related to a partial release of a valuation allowance applied to the Company’s deferred tax asset position. Adjusted income per share, which removes the effect of non-comparable items & charges in both periods, was $0.11 in the 2013 third quarter versus $0.30 in the prior year period.
Anthony Sanfilippo, Chief Executive Officer of Pinnacle Entertainment, commented, “Since completing the acquisition of Ameristar on August 13th, we have made noteworthy progress in merging these two amazing companies in to one of the biggest gaming entertainment portfolios in the U.S. We now have considerably enhanced scale, distribution, & diversification, & are focused on maximizing the synergies between the two companies & the cash flow produced by this fortified platform of gaming properties.
“We are pleased with how smoothly our merger with Ameristar has gone thus far. The cultural similarities & motivated team members have been catalysts for rapid progress in achieving our integration objectives. With only 49 days of integration work, we estimate we have implemented changes in that will drive over $20 million of recurring annual yearly cost savings, or approximately half of the $40 million synergy target we indicated when announcing this transaction late last year. With the progress we made during the third quarter & continued implementation of our integration plan in the fourth quarter, we are confident we will meaningfully exceed in that $40 million synergy level over time. We are moreover more confident than ever we will create noteworthy value for our shareholders, team members & guests through the merger of these two amazing companies,” concluded Mr. Sanfilippo.
Changes to Segment Reporting Format
The Company made changes to its reportable segment disclosures beginning in the 2013 third quarter. The new reportable segments align the Company’s external financial reporting segments with its new internal operating segments, which are based on its organizational structure, operating decisions, & performance assessment. The Company’s reportable segments are comprised of the following:
The Company’s South segment consist of the financial results for the following properties: Ameristar Vicksburg, Boomtown Bossier City, Boomtown New Orleans, L’Auberge Baton Rouge, & L’Auberge Lake Charles.
The Company’s Midwest segment consist of the financial results for the following properties: Ameristar Council Bluffs, Ameristar East Chicago, Ameristar Kansas City, Ameristar St. Charles, Belterra Casino Resort & Spa, Belterra Park Gaming & Entertainment Center (formerly River Downs) & River City. Lumiere Place Casino & Hotels is accounted for as a discontinued operation beginning in the 2013 third quarter & is not incorporated in the Midwest segment’s results.
The Company’s West segment consist of the financial results for the following properties: Ameristar Black Hawk, Cactus Pete’s & the Horseshu.
Corporate expenses & Other are acknowledged separately from the results of the South, Midwest, & West reportable segments. Other operations consist of the management of Retama Park & the Heartland Poker Tour.
Change to Corporate Expense Accounting Methodology
Beginning in the 2013 third quarter, the Company changed the methodology it uses to allocate corporate expenses to its reportable segments. Historically, Pinnacle allocated direct & some indirect expenses incurred at the corporate headquarters to each property. Expenses incurred at the corporate headquarters in that were related to property operations, yet not directly attributable to a specific property, were allocated, typically on a pro rata basis, to each property. Only the remaining corporate expenses in that were not related to an operating property were retained in the Corporate expense category & acknowledged separately from the segment financial information.
In the 2013 third quarter, only corporate expenses in that are directly attributable to a property were allocated to each applicable property (and rolled up in to the respective reportable segments). All other corporate expenses were retained in the Corporate expenses & Other category & acknowledged separately from the reportable segment financial information. This methodology is generally consistent with the reporting methodology utilized by the recently-acquired Ameristar. The alter of corporate expense accounting methodology affects segment Adjusted EBITDA, yet has no impact on Consolidated Adjusted EBITDA.
Divestiture Update
On August 16, 2013, the Company entered in to a definitive agreement to divest Lumiere Place Casino & Hotels to Tropicana Entertainment for cash consideration of $260 million. The divestiture of Lumiere Place Casino & Hotels is being executed pursuant to a FTC consent order & is expected to be completed in the 1st half of 2014. Lumiere Place Casino & Hotels were accounted for as a discontinued operation beginning in the 2013 third quarter. The Company recorded a non-cash impairment charge of $144.6 million related to Lumiere Place Casino & Hotels in the 2013 third quarter.
On July 24, 2013, the Company entered in to a definitive agreement to divest the Ameristar Casino Lake Charles development project to Golden Nugget. Under the terms of the agreement, Golden Nugget will pay total consideration equal to all cash expenditures on the development up until the date of closing, & the assumption of all outstanding payables related to the project at in that time, less a $37 million credit. Golden Nugget will fund & complete the development project following the closing of the transaction. The divestiture of the Ameristar Casino Lake Charles development project is being executed pursuant to a FTC consent order, & is expected to be completed by the end of 2013.
2013 Third Quarter Operational Overview
South Segment
In the South segment, revenues increased by $31.9 million or 19.9% year over year to $192.2 million in the 2013 third quarter. Adjusted EBITDA increased by $11.5 million or 25.5% to $56.5 million. Adjusted EBITDA margins were 29.4%, an increase of 132 basis points year over year. The addition of an Ameristar property contributed $13.8 million of net revenues for the 49 days of the 2013 third quarter it was incorporated in to the South segment results.
In the 2013 third quarter, L’Auberge Lake Charles produced strong revenue & cash flow performance, Boomtown New Orleans saw continued operational improvement from cost containment initiatives & L’Auberge Baton Rouge continued to ramp up its revenue & margin performance. Boomtown Bossier was impacted by the addition of a new competitor in the Bossier City/Shreveport gaming marketing in June 2013, which negatively affected segment financial performance.
Midwest Segment
In the Midwest segment, revenues increased by $99 million or 103.5% year over year to $194.5 million in the 2013 third quarter. Adjusted EBITDA increased by $29.4 million or 113.3% to $55.3 million. Adjusted EBITDA margins were 28.4%, an increase of 130 basis points year over year. Ameristar properties contributed $106.3 million of net revenue for the 49 days of the 2013 third quarter they were incorporated in to the Midwest segment results.
In the 2013 third quarter, Midwest segment results were negatively affected by a challenging revenue environment in the St. Louis gaming market, which impacted the operating performance of both River City & Ameristar St. Charles. In addition, Belterra experienced year over year declines in its key metrics as a result of a new competitor in Cincinnati, Ohio ramping up its operations. The new facility opened in March 2013.
West Segment
West segment revenues were $30.3 million in the 2013 third quarter, & Adjusted EBITDA was $10.6 million. Segment Adjusted EBITDA margins were 35%. Ameristar properties comprised 100% of total West segment revenues in the 2013 third quarter. Severe weather & flooding constrained visitation to Ameristar Black Hawk in September 2013, which negatively affected the property’s operating performance & West segment results.
Corporate expenses & Other
Corporate expenses & Other, which is principally comprised of corporate overhead expenses, as well as the Heartland Poker Tour & Retama Park management operations, increased by $14.0 million year over year to $19.8 million in the 2013 third quarter. The increase in corporate overhead expenses in the 2013 third quarter was driven by the acquisition of Ameristar, the $3.3 million addition to legal reserves, & due to the alter in allocation methodology for corporate expenses described above.
Ameristar Transaction Financing, Balance Sheet Strategy, & Operating Trends
Carlos Ruisanchez, President & Chief Financial Officer of Pinnacle Entertainment, commented, “We are very pleased to have the acquisition of Ameristar Casinos completed. In July, we priced $850 million in senior unsecured notes at 6.375%, & in August, we closed a $2.6 billion credit facility. With the proceeds of these transactions, we financed the acquisition of Ameristar & redeemed Pinnacle’s 8.625% senior notes. The net effect of these financing transactions, & the positive benefits of the Ameristar acquisition on the combined company’s credit profile, is a reduction in our debt cost of capital of over 200 basis points.
“As we move forward, our top priorities are maximizing the synergies & cash flows produced by this larger, more diverse casino property portfolio, as well as reducing our leverage. We have already demonstrated this commitment & made progress toward this objective with the repayment of $74 million of term loans since the closing of the Ameristar transaction.
“Overall, operating trends were generally soft during the 2013 third quarter. The revenue environment was challenging across all of the Company’s key markets due primarily to macroeconomic weakness, & in some isolated instances, an increase in the number of competing gaming facilities. In response to this, we began making adjustments to operating & marketing expense levels of our properties in the third quarter, & will address any persistent revenue softness with continued expense reductions over time. Beyond these normal course operating & marketing expense refinements, the Company expects synergies & cost efficiencies from the acquisition & integration of the operations of Ameristar to provide additional support & to offset the impact of revenue softness on the cash flow produced by our properties,” concluded Mr. Ruisanchez.
Liquidity & Capital Expenditures
At September 30, 2013, the Company had approximately $196.7 million in cash & cash equivalents. As of September 30, 2013, $379.6 million was drawn on the Company’s $1.0 billion revolving credit facility & approximately $9 million of letters of credit were outstanding. Total debt at the end of the 2013 third quarter was approximately $4.5 billion. Since the closing of the Ameristar transaction, the Company repaid $74 million of term loans with cash flow from operations & the net proceeds from the Atlantic City land sale.
Capital expenditures totaled approximately $82 million during the 2013 third quarter. In the 2013 third quarter, cash expenditures totaled $8.1 million for the River City expansion, $24 million for the Belterra Park redevelopment project, & $29.9 million for the Ameristar Lake Charles development project. Excluding land & capitalized interest costs, the Company has incurred approximately $77.8 million of the $82 million budget for the River City expansion project & $55 million of the $209 million budget for the Belterra Park redevelopment. Through September 30, 2013, total capital of $260.5 million was invested in the Ameristar Casino Lake Charles project, in addition to the original purchase price, capital expenditures & escrow deposits.
Interest Expense
Gross interest expense before capitalized interest was $49.7 million in the 2013 third quarter, compared to $29.2 million in the prior year period. The increase in gross interest expense is attributable to the additional debt incurred to fund the Company’s acquisition of Ameristar & other development projects.
Capitalized interest in the 2013 third quarter was $1.0 million versus $6.0 million in the prior year period. The decrease in capitalized interest in the 2013 third quarter is attributable to the Company ceasing interest expense capitalization on L’Auberge Baton Rouge in August 2012 & on its investment in Asian Coast Development Ltd. at the end of the 2012 fourth quarter. In the 2013 third quarter, the Company capitalized interest expense on its expenditures related to the River City expansion, the Belterra Park redevelopment project & on expenditures related to the Ameristar Casino Lake Charles development project. The Company ceased capitalizing interest on the River City expansion at the end of August 2013.
Investor Conference Call
Pinnacle Entertainment will hold a conference call for investors today, Wednesday, November 6, 2013, at 10:00 a.m. Eastern Time (7:00 a.m. Pacific Time) to discuss its 2013 third quarter financial & operating results. Investors may listen to the call by dialing (706) 679-7241. The code to access the conference call is 80602681. Investors may moreover listen to the conference call live over the Internet at www.pnkinc.com.
A replay of the conference call will be available to all interested parties in the Events & Presentations section of the Company’s Investor Relations website following its conclusion. The Company’s Investor Relations website can be accessed at http://investors.pnkinc.com.
Non-GAAP Financial Measures
Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA margin, Combined net revenues, Combined Consolidated Adjusted EBITDA, Adjusted net income (loss), & Adjusted income (loss) per share are non-GAAP measurements. The Company defines Consolidated Adjusted EBITDA as earnings before interest income & expense, income taxes, depreciation, amortization, pre-opening & development expenses, non-cash share-based compensation, asset impairment costs, write-downs, reserves, recoveries, corporate-level litigation settlement costs, gain (loss) on sale of certain assets, loss on early extinguishment of debt, gain (loss) on sale of equity security investments, income (loss) from equity method investments, non-controlling interest & discontinued operations. The Company defines Adjusted net income (loss) as net income (loss) before pre-opening & development expenses, asset impairment costs, impairment of equity method investment, write-downs, reserves, recoveries, corporate-level litigation settlement costs, gain (loss) on sale of certain assets, gain (loss) on early extinguishment of debt, income (loss) from equity method investment, non-controlling interest & discontinued operations & adjustment for taxes on such items. The Company defines Adjusted income (loss) per share as Adjusted net income (loss) divided by the weighted-average number of shares of the Company’s usual stock outstanding. The Company defines Consolidated Adjusted EBITDA margin as Consolidated Adjusted EBITDA divided by revenues on a consolidated basis. Not all of the aforementioned benefits & costs occur in each reporting period, yet have been included in the definition based on historical activity.
The Company uses Consolidated Adjusted EBITDA & Consolidated Adjusted EBITDA margin as relevant & useful measures to compare operating results between accounting periods. The presentation of Consolidated Adjusted EBITDA has economic substance 'cause it is used by management as a performance measure to analyze the performance of its business & is especially relevant in evaluating large, long-lived casino-hotel projects 'cause it provides a perspective on the current effects of operating decisions separated from the substantial, non-operational depreciation charges & financing costs of such projects. Management eliminates the results from discontinued operations as they are discontinued. Management moreover reviews pre-opening & development expenses separately, as such expenses are moreover included in total project costs when assessing budgets & project returns, & 'cause such costs relate to anticipated future revenues & income. Management believes in that Consolidated Adjusted EBITDA is a useful measure for investors 'cause it is an indicator of the strength & performance of ongoing business operations. These calculations are commonly used as a basis for investors, analysts & credit rating agencies to evaluate & compare operating performance & value of companies within our industry. Consolidated Adjusted EBITDA moreover approximates the measures used in the debt covenants within the Company’s debt agreements. Consolidated Adjusted EBITDA does not contain depreciation or interest expense & therefore does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using other comparative measures to assist in the evaluation of operating performance.
Adjusted net income (loss) is presented solely as supplemental disclosure, as this is one method in that management reviews & uses to analyze the performance of its core operating business. For many of the same reasons mentioned above relating to Consolidated Adjusted EBITDA, management believes Adjusted net income (loss) & Adjusted income (loss) per share are useful analytic tools as they enable management to track the performance of its core casino operating business separate & apart from factors in that do not impact decisions affecting its operating casino properties, such as impairments of intangible assets or costs associated with the Company’s development activities. Management believes Adjusted net income (loss) & Adjusted income (loss) per share are useful to investors since these adjustments provide a measure of performance in that more closely resembles widely used measures of performance & valuation in the gaming industry. Adjusted net income (loss) & Adjusted income (loss) per share do not contain the costs of the Company’s development activities, certain asset sale gains, or the costs of its refinancing activities, yet the Company compensates for these limitations by using other comparative measures to assist in evaluating the performance of its business.
The Company defines Combined Net Revenues as revenues less corporate & other of Pinnacle Entertainment, Incorporated & Ameristar Casinos, Incorporated assuming in that Ameristar Casinos, Incorporated was a part of Pinnacle Entertainment, Incorporated from July 1, 2013 through August 12, 2013. The Company defines Combined Consolidated Adjusted EBITDA as Consolidated Adjusted EBITDA (as defined above) of Pinnacle Entertainment, Incorporated & Ameristar Casinos, Incorporated assuming in that Ameristar Casinos, Incorporated was a part of Pinnacle Entertainment, Incorporated from July 1, 2013 through August 12, 2013.
Combined Net Revenues & Combined Consolidated Adjusted EBITDA are being presently solely as supplemental disclosure, as these are methods in that management reviews & uses to analyze the performance of its business & to compare operating results between accounting periods. Management believes in that Combined Net Revenues & Combined Consolidated Adjusted EBITDA are useful to investors 'cause they are indicators of the strength & performance of the ongoing business & for evaluating the historical results of Ameristar Casinos, Incorporated & Pinnacle Entertainment, Incorporated on a combined basis assuming Ameristar Casinos, Incorporated was a part of the Company for the whole entire third quarter of 2013.
EBITDA measures, such as Consolidated Adjusted EBITDA & Consolidated Adjusted EBITDA margin, Adjusted net income (loss), Adjusted income (loss) per share, Combined net revenues & Combined Consolidated Adjusted EBITDA are not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure of comparing performance among different companies. See the attached “supplemental information” tables for a reconciliation of Consolidated Adjusted EBITDA to Income (loss) from continuing operations, a reconciliation of GAAP net (loss) income to Adjusted net income (loss), a reconciliation of GAAP income (loss) per share to Adjusted income (loss) per share, a reconciliation of Consolidated Adjusted EBITDA margin to Income (loss) from continuing operations margin, a reconciliation of Combined Net Revenues to GAAP net revenues & a reconciliation of Combined Consolidated Adjusted EBITDA to Income (loss) from continuing operations.
Definition of Adjusted EBITDA & Adjusted EBITDA Margin for Operating Segments
The Company defines Adjusted EBITDA for each operating segment as earnings before interest income & expense, income taxes, depreciation, amortization, pre-opening & development expenses, non-cash share-based compensation, asset impairment costs, write-downs, reserves, recoveries, gain (loss) on sale of certain assets, inter-company management fees, gain (loss) on early extinguishment of debt, gain (loss) on sale of discontinued operations, & discontinued operations. The Company defines Adjusted EBITDA margin for each operating segment as Adjusted EBITDA divided by revenues for such segment. The Company uses Adjusted EBITDA & Adjusted EBITDA margin to compare operating results among its properties & between accounting periods.
About Pinnacle Entertainment
Pinnacle Entertainment, Incorporated owns & operates 14 casinos, located in Colorado, Indiana, Iowa, Louisiana, Mississippi, Missouri & Nevada. In addition, Pinnacle is redeveloping Belterra Park in Cincinnati, Ohio in to a gaming & entertainment center & holds a majority interest in the racing license owner, as well as a management contract, for Retama Park Racetrack outside of San Antonio, Texas.
All statements included in this press release, other than historical information or statements of historical fact, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 & Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, in addition to statements regarding the Company’s future operating performance; future growth; ability to implement strategies to improve revenues & operating margins at the Company’s properties; the timing & completion of the divestitures required by the Federal Trade Commission (“Commission”) in connection with the Ameristar acquisition; the ability of the Company to continue to meet its financial & other covenants governing its indebtedness, in addition to in connection the divestitures; the expected synergies, cost savings & benefits of the Ameristar transaction, in addition to the expected accretive effect of the transaction on the Company’s financial results & profit; the anticipated benefits of geographic diversity in that would result from the Ameristar transaction & the expected results of Ameristar’s gaming properties, prospective performance & opportunities; the budgets, completion & opening schedules of the Company’s various projects; the facilities, features & amenities of the Company’s various projects; the ability of the Company to sell or otherwise dispose of discontinued operations, & the Company’s anticipated future capital expenditures; are based on management’s current expectations & are subject to risks, uncertainties & changes in circumstances in that could considerably affect future results. Accordingly, Pinnacle cautions in that the forward-looking statements contained herein are qualified by noteworthy factors & uncertainties in that could cause actual results to differ materially from those reflected by such statements. Such factors & uncertainties include, yet are not limited to: (a) the Company’s business may be sensitive to reductions in consumers’ discretionary spending as a result of downtowns in the economy; (b) the global financial crisis may have an impact on the Company’s business & financial condition in ways in that the Company currently cannot accurately predict; (c) noteworthy competition in the gaming industry in all of the Company’s markets could adversely affect the Company’s revenues & profitability; (d) many factors, in addition to the escalation of construction costs beyond increments anticipated in its construction budgets & unexpected construction delays, could prevent the Company from completing its various projects within the budgets & on time, in addition to the Belterra Park project & the Bowmtown New Orleans hotel project; (e) the ability & timing to complete the dispositions proposed as part of the effort to reach a resolution with the Commission; (f) the ability & timing to get required regulatory approvals in connection with the dispositions; (g) the ability & timing of the Company to achieve the expected synergies, cost savings, & other benefits of the Ameristar transaction may be affected by many factors, in addition to our ability to successfully integrate the two companies & reduce costs & expenses; (h) the Company’s ability to get future financings on the terms expected, or at all; (i) the terms of the Company’s credit facility & the indentures governing its senior & subordinated indebtedness impose operating & financial restrictions on the Company; & (j) other risks, in addition to those as may be detailed from time to time in the Company’s filings with the Securities & Exchange Commission (“SEC”). For more information on the potential factors in that could affect the Company’s financial results & business, review the Company’s filings with the SEC, including, yet not limited to, its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q & its Current Reports on Form 8-K.
Ameristar, Belterra, Boomtown, Casino Magic, Heartland Poker Tour, L’Auberge Lake Charles, L’Auberge Baton Rouge, Lumiere Place, River City, & River Downs are registered trademarks of Pinnacle Entertainment, Incorporated All rights reserved.
- financial tables follow -
Pinnacle Entertainment, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data, unaudited)
For the three many months ended
September 30,
For the nine many months ended
September 30,
2013
2012
2013
2012
Revenues:
Gaming
$ 371,624
$ 225,667
$ 847,650
$ 663,995
Food & beverage
22,692
14,623
50,228
40,026
Lodging
9,677
6,170
20,509
16,913
Retail, entertainment & other
14,934
9,692
34,414
27,138
Total revenues
418,927
256,152
952,801
748,072
Expenses & other costs:
Gaming
203,599
124,639
474,432
366,126
Food & beverage
19,858
12,649
43,807
34,731
Lodging
3,981
3,231
10,130
8,367
Retail, entertainment & other
7,416
6,005
16,744
15,905
General & administrative
84,519
46,303
185,758
136,014
Depreciation & amortization
39,528
19,058
85,183
54,502
Pre-opening & development costs
63,086
11,516
87,851
18,444
Write-downs, reserves & recoveries, net
12,130
61
14,259
201
Total expenses & other costs
434,117
223,462
918,164
634,290
Operating (loss) income
(15,190)
32,690
34,637
113,782
Interest expense, net
(48,500)
(22,960)
(105,420)
(67,346)
Loss on early extinguishment of debt
(30,830)
—
(30,830)
(20,718)
Loss from equity method investments
—
(1,367)
(92,181)
(4,206)
(Loss) income from continuing operations before income taxes
(94,520)
8,363
(193,794)
21,512
Income tax benefit (expense)
47,378
(1,701)
51,766
(3,674)
(Loss) income from continuing operations
(47,142)
6,662
(142,028)
17,838
Loss from discontinued operations, net of income taxes
(133,275)
(7,020)
(128,887)
(7,247)
Net (loss) income
(180,417)
(358)
(270,915)
10,591
Net loss attributable to non-controlling interest
(11)
—
(36)
—
Net (loss) income attributable to Pinnacle Entertainment, Inc.
$ (180,406)
$ (358)
$ (270,879)
$ 10,591
Net (loss) income per usual share—basic
(Loss) income from continuing operations
$ (0.80)
$ 0.11
$ (2.43)
$ 0.29
Loss from discontinued operations, net of income taxes
(2.27)
(0.11)
(2.20)
(0.12)
Net (loss) income per usual share—basic
$ (3.07)
$ —
$ (4.63)
$ 0.17
Net (loss) income per usual share—diluted
(Loss) income from continuing operations
$ (0.80)
$ 0.11
$ (2.43)
$ 0.29
Loss from discontinued operations, net of income taxes
(2.27)
(0.11)
(2.20)
(0.12)
Net (loss) income per usual share—diluted
$ (3.07)
$ —
$ (4.63)
$ 0.17
Number of shares—basic
58,777
61,560
58,548
62,095
Number of shares—diluted
58,777
62,027
58,548
62,498
Pinnacle Entertainment, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
September 30,
2013
December 31,
2012
(Unaudited)
ASSETS
Cash & cash equivalents
$ 196,745
$ 94,800
Other assets, in addition to restricted cash
1,612,858
268,482
Land, buildings, vessels & equipment, net
3,026,638
1,285,871
Assets of discontinued operations held for sale
508,104
459,841
Total assets
$ 5,344,345
$ 2,108,994
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities, other than long-term debt
$ 574,186
$ 199,947
Long-term debt, in addition to current portion
4,495,691
1,440,501
Liabilities of discontinued operations held for sale
69,482
21,429
Total liabilities
5,139,359
1,661,877
Total stockholders’ equity
204,986
447,117
Total liabilities & stockholders’ equity
$ 5,344,345
$ 2,108,994
Pinnacle Entertainment, Inc.
Supplemental Information
Revenues & Adjusted EBITDA,
Reconciliation of Consolidated Adjusted EBITDA to (Loss) Income from Continuing Operations,
and Reconciliation of Consolidated Adjusted EBITDA Margin
to (Loss) Income from Continuing Operations Margin
(In thousands, unaudited)
For the three many months ended
September 30,
For the nine many months ended
September 30,
2013
2012
2013
2012
Revenues:
South (a)
$ 192,223
$ 160,361
$ 549,816
$ 465,712
Midwest (b)
194,528
95,573
368,717
282,082
West (c)
30,288
—
30,288
—
Total Segment Revenues
417,039
255,934
948,821
747,794
Corporate & Other (d)
1,888
218
3,980
278
Total Revenues
$ 418,927
$ 256,152
$ 952,801
$ 748,072
Adjusted EBITDA (e):
South (a)
$ 56,483
$ 45,002
$ 150,361
$ 136,613
Midwest (b)
55,267
25,914
100,426
73,359
West (c)
10,609
—
10,609
—
Segment Adjusted EBITDA
122,359
70,916
261,396
209,972
Corporate expenses & Other (d)
(19,789)
(5,791)
(31,201)
(16,142)
Consolidated Adjusted EBITDA (e)
$ 102,570
$ 65,125
$ 230,195
$ 193,830
Other benefits (costs):
Depreciation & amortization
$ (39,528)
$ (19,058)
$ (85,183)
$ (54,502)
Pre-opening & development costs
(63,086)
(11,516)
(87,851)
(18,444)
Non-cash share-based compensation expense
(3,016)
(1,800)
(8,265)
(6,901)
Write-downs, reserves & recoveries, net
(12,130)
(61)
(14,259)
(201)
Interest expense, net
(48,500)
(22,960)
(105,420)
(67,346)
Loss from equity method investment
—
(1,367)
(92,181)
(4,206)
Loss on early extinguishment of debt
(30,830)
—
(30,830)
(20,718)
Income tax (expense) benefit
47,378
(1,701)
51,766
(3,674)
(Loss) income from continuing operations
$ (47,142)
$ 6,662
$ (142,028)
$ 17,838
Consolidated Adjusted EBITDA margin % (e)
24.5%
25.4%
24.2%
25.9%
(Loss) income from Continuing Operations margin %
(11.3)%
2.6%
(14.9)%
2.4%
(a) South segment includes: Ameristar Vicksburg, Boomtown Bossier City, Boomtown New Orleans, L’Auberge Baton Rouge, & L’Auberge Lake Charles.
(b) Midwest segment includes: Ameristar Council Bluffs, Ameristar East Chicago, Ameristar Kansas City, Ameristar St. Charles, Belterra Casino Resort & Spa, Belterra Park (formerly River Downs) & River City.
(c) West segment includes Ameristar Black Hawk, Cactus Pete’s & the Horseshu.
(d) Corporate expenses & Other includes corporate expenses, as well as the results of Heartland Poker Tour & from the management of Retama Park Racetrack. Corporate expenses & Other for the three many months ended September 30, 2013 reflect a new corporate expense allocation methodology. The historical periods have not been recast to reflect the alter of corporate expense allocation methodology.
(e) See discussion of Non-GAAP Financial Measures above for a detailed description of Consolidated Adjusted EBITDA & Consolidated Adjusted EBITDA margin.
Pinnacle Entertainment, Inc.
Supplemental Information
Reconciliations of GAAP Net (Loss) Income to Adjusted Net Income
and GAAP Net (Loss) Income Per Share to Adjusted Income Per Share
(In thousands, except per share amounts, unaudited)
For the three many months ended
September 30,
For the nine many months ended
September 30,
2013
2012
2013
2012
GAAP net (loss) income
$ (180,406)
$ (358)
$ (270,879)
$ 10,591
Pre-opening & development costs
63,086
11,516
87,851
18,444
Write-downs, reserves & recoveries, net
12,130
61
14,259
201
Impairment of equity method investment
—
—
92,181
—
Loss on early extinguishment of debt
3