Pinnacle Entertainment, Inc. (NYSE: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
including 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 and
Lumiere Place Casino and Hotels pursuant to a Federal Trade
Commission ("FTC") consent order, and following the completion of
those transactions, the Company will operate a total of 16
properties in nine U.S. states, including 14 casinos and two
racetracks.
- Revenues increased by $162.8 million or 63.6% to $418.9
million, and Consolidated Adjusted EBITDA increased by $37.4
million or 57.5% to $102.6 million. These results include 49 days
of contributions from Ameristar, but exclude Lumiere Place Casino
and Hotels in all periods presented.
- Combined Net Revenues and Combined Consolidated Adjusted EBITDA
would have been $553.9 million and $140.5 million, respectively,
had the results of Ameristar been incorporated for the entire 2013
third quarter instead of the 49 days included in the GAAP
results.
- Both Consolidated Adjusted EBITDA and 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
and 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 and recoveries; $63.1 million of pre-opening
and development expenses, principally associated with the
acquisition, integration and financing of the Ameristar
transaction; and 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 and Hotels and 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 and 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 and closed a $2.6 billion amended and
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 and expenses, redeem Pinnacle's existing
8.625% senior notes due 2017 and 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 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, and capitalized interest, and 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 that also added a 1,600-space covered
parking structure and 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 and
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, but
exclude Lumiere Place Casino and Hotels in all periods presented.
Lumiere Place Casino and Hotels is reported as a discontinued
operation given its impending divestiture. 2013 third quarter
Combined Net Revenues and Combined Consolidated Adjusted EBITDA
would have been $553.9 million and $140.5 million, respectively,
had the results incorporated Ameristar for the entire 2013 third
quarter instead of the 49 days included in the GAAP results. Both
Consolidated Adjusted EBITDA and Combined Consolidated Adjusted
EBITDA were negatively affected by a $3.3 million non-recurring
increase in legal reserves, which is reflected in Corporate
expenses and Other.
Summary of Third
Quarter Results |
|
|
|
(in thousands, except per share data) |
Three 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 and Adjusted income per share, please see the
section entitled "Non-GAAP Financial Measures" and the
reconciliations to the GAAP equivalent financial measures below.
|
(2) Operating loss in the
2013 third quarter includes $63.1 million in pre-opening and
development costs, principally comprised of legal and advisory
expenses, severance charges, and other costs and expenses related
to the financing and integration of the acquisition of Ameristar,
versus $11.5 million in the prior year period, and a $12.1 million
net negative impact related to write-downs, reserves and
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
that impacted operating loss, loss from continuing operations, net
loss, and applicable respective per share amounts, and 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 and
integration of Ameristar.
|
Amount |
|
(in thousands) |
of item (1) |
Location |
Increase in legal reserves |
$ (3,260) |
G&A/Corporate expenses and other |
Total effect on Consolidated Adjusted
EBITDA |
(3,260) |
|
Integration-related severance expense |
(17,639) |
Pre-opening and development |
Ameristar acquisition closing costs and
other |
(45,447) |
Pre-opening and development |
Non-cash impairment of Boomtown Bossier City
gaming license and other charges |
(12,130) |
Write-downs, reserves and recoveries,
net |
Total effect on Operating
loss |
(78,476) |
|
PNK 8.625% Senior Note redemption costs and
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 and
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 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 and recoveries; $63.1 million of
pre-opening and development expenses, principally associated with
the financing and 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; and 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 and Hotels and 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 and 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 significant progress in
merging these two great companies into one of the largest gaming
entertainment portfolios in the U.S. We now have significantly
enhanced scale, distribution, and diversification, and are focused
on maximizing the synergies between the two companies and 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 and 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 that will drive over $20
million of recurring annual 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 and continued implementation of our integration
plan in the fourth quarter, we are confident we will meaningfully
exceed that $40 million synergy level over time. We are also
more confident than ever we will create significant value for our
shareholders, team members and guests through the merger of these
two great 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, and 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, and
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) and River
City. Lumiere Place Casino and Hotels is accounted for as a
discontinued operation beginning in the 2013 third quarter and 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
and the Horseshu.
Corporate expenses and Other are disclosed separately from the
results of the South, Midwest, and West reportable
segments. Other operations consist of the management of Retama
Park and 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 and
some indirect expenses incurred at the corporate headquarters to
each property. Expenses incurred at the corporate headquarters
that were related to property operations, but not directly
attributable to a specific property, were allocated, typically on a
pro rata basis, to each property. Only the remaining corporate
expenses that were not related to an operating property were
retained in the Corporate expense category and disclosed separately
from the segment financial information.
In the 2013 third quarter, only corporate expenses that are
directly attributable to a property were allocated to each
applicable property (and rolled up into the respective reportable
segments). All other corporate expenses were retained in the
Corporate expenses and Other category and disclosed separately from
the reportable segment financial information. This methodology
is generally consistent with the reporting methodology utilized by
the recently-acquired Ameristar. The change of corporate
expense accounting methodology affects segment Adjusted EBITDA, but
has no impact on Consolidated Adjusted EBITDA.
Divestiture Update
On August 16, 2013, the Company entered into a definitive
agreement to divest Lumiere Place Casino and Hotels to Tropicana
Entertainment for cash consideration of $260 million. The
divestiture of Lumiere Place Casino and Hotels is being executed
pursuant to a FTC consent order and is expected to be completed in
the first half of 2014. Lumiere Place Casino and 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
and Hotels in the 2013 third quarter.
On July 24, 2013, the Company entered into 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, and
the assumption of all outstanding payables related to the project
at that time, less a $37 million credit. Golden Nugget will
fund and 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, and 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 into the
South segment results.
In the 2013 third quarter, L'Auberge Lake Charles produced
strong revenue and cash flow performance, Boomtown New Orleans saw
continued operational improvement from cost containment initiatives
and L'Auberge Baton Rouge continued to ramp up its revenue and
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 into 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 and 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, and 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 and flooding constrained
visitation to Ameristar Black Hawk in September 2013, which
negatively affected the property's operating performance and West
segment results.
Corporate expenses and Other
Corporate expenses and Other, which is principally comprised of
corporate overhead expenses, as well as the Heartland Poker Tour
and 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, and due to the change in allocation
methodology for corporate expenses described above.
Ameristar Transaction Financing, Balance Sheet Strategy,
and Operating Trends
Carlos Ruisanchez, President and 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%, and in August, we
closed a $2.6 billion credit facility. With the proceeds of
these transactions, we financed the acquisition of Ameristar and
redeemed Pinnacle's 8.625% senior notes. The net effect of
these financing transactions, and 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 and cash flows produced by this larger, more diverse
casino property portfolio, as well as reducing our
leverage. We have already demonstrated this commitment and
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, and in some isolated instances, an increase in the number
of competing gaming facilities. In response to this, we began
making adjustments to operating and marketing expense levels of our
properties in the third quarter, and will address any persistent
revenue softness with continued expense reductions over
time. Beyond these normal course operating and marketing
expense refinements, the Company expects synergies and cost
efficiencies from the acquisition and integration of the operations
of Ameristar to provide additional support and to offset the impact
of revenue softness on the cash flow produced by our properties,"
concluded Mr. Ruisanchez.
Liquidity and Capital Expenditures
At September 30, 2013, the Company had approximately $196.7
million in cash and cash equivalents. As of September 30,
2013, $379.6 million was drawn on the Company's $1.0 billion
revolving credit facility and 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 and 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, and $29.9
million for the Ameristar Lake Charles development
project. Excluding land and capitalized interest costs, the
Company has incurred approximately $77.8 million of the $82 million
budget for the River City expansion project and $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, including the original purchase price, capital
expenditures and 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 and 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 and 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 and 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 and operating results. Investors may listen to the
call by dialing (706) 679-7241. The code to access the
conference call is 80602681. Investors may also 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), and Adjusted income (loss) per
share are non-GAAP measurements. The Company defines
Consolidated Adjusted EBITDA as earnings before interest income and
expense, income taxes, depreciation, amortization, pre-opening and
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 and discontinued
operations. The Company defines Adjusted net income (loss) as
net income (loss) before pre-opening and 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 and discontinued
operations and 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 common 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 and costs occur in each reporting period,
but have been included in the definition based on historical
activity.
The Company uses Consolidated Adjusted EBITDA and Consolidated
Adjusted EBITDA margin as relevant and useful measures to compare
operating results between accounting periods. The presentation
of Consolidated Adjusted EBITDA has economic substance because it
is used by management as a performance measure to analyze the
performance of its business and is especially relevant in
evaluating large, long-lived casino-hotel projects because it
provides a perspective on the current effects of operating
decisions separated from the substantial, non-operational
depreciation charges and financing costs of such
projects. Management eliminates the results from discontinued
operations as they are discontinued. Management also reviews
pre-opening and development expenses separately, as such expenses
are also included in total project costs when assessing budgets and
project returns, and because such costs relate to anticipated
future revenues and income. Management believes that
Consolidated Adjusted EBITDA is a useful measure for investors
because it is an indicator of the strength and performance of
ongoing business operations. These calculations are commonly used
as a basis for investors, analysts and credit rating agencies to
evaluate and compare operating performance and value of companies
within our industry. Consolidated Adjusted EBITDA also
approximates the measures used in the debt covenants within the
Company's debt agreements. Consolidated Adjusted EBITDA does
not include depreciation or interest expense and 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 that management reviews and 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) and
Adjusted income (loss) per share are useful analytic tools as they
enable management to track the performance of its core casino
operating business separate and apart from factors 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) and Adjusted income (loss) per share are useful
to investors since these adjustments provide a measure of
performance that more closely resembles widely used measures of
performance and valuation in the gaming industry. Adjusted net
income (loss) and Adjusted income (loss) per share do not include
the costs of the Company's development activities, certain asset
sale gains, or the costs of its refinancing activities, but 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 and other of Pinnacle Entertainment, Inc. and Ameristar
Casinos, Inc. assuming that Ameristar Casinos, Inc. was a part of
Pinnacle Entertainment, Inc. 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, Inc. and Ameristar Casinos, Inc. assuming
that Ameristar Casinos, Inc. was a part of Pinnacle Entertainment,
Inc. from July 1, 2013 through August 12, 2013.
Combined Net Revenues and Combined Consolidated Adjusted EBITDA
are being presently solely as supplemental disclosure, as these are
methods that management reviews and uses to analyze the performance
of its business and to compare operating results between accounting
periods. Management believes that Combined Net Revenues and
Combined Consolidated Adjusted EBITDA are useful to investors
because they are indicators of the strength and performance of the
ongoing business and for evaluating the historical results of
Ameristar Casinos, Inc. and Pinnacle Entertainment, Inc. on a
combined basis assuming Ameristar Casinos, Inc. was a part of the
Company for the entire third quarter of 2013.
EBITDA measures, such as Consolidated Adjusted EBITDA and
Consolidated Adjusted EBITDA margin, Adjusted net income (loss),
Adjusted income (loss) per share, Combined net revenues and
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 and a reconciliation of
Combined Consolidated Adjusted EBITDA to Income (loss) from
continuing operations.
Definition of Adjusted EBITDA and Adjusted EBITDA Margin
for Operating Segments
The Company defines Adjusted EBITDA for each operating segment
as earnings before interest income and expense, income taxes,
depreciation, amortization, pre-opening and 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, and 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 and Adjusted EBITDA margin to compare operating
results among its properties and between accounting periods.
About Pinnacle Entertainment
Pinnacle Entertainment, Inc. owns and operates 14 casinos,
located in Colorado, Indiana, Iowa, Louisiana, Mississippi,
Missouri and Nevada. In addition, Pinnacle is redeveloping
Belterra Park in Cincinnati, Ohio into a gaming and entertainment
center and 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 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements, including
statements regarding the Company's future operating performance;
future growth; ability to implement strategies to improve revenues
and operating margins at the Company's properties; the timing and
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 and other covenants governing its indebtedness, including
in connection the divestitures; the expected synergies, cost
savings and benefits of the Ameristar transaction, including the
expected accretive effect of the transaction on the Company's
financial results and profit; the anticipated benefits of
geographic diversity that would result from the Ameristar
transaction and the expected results of Ameristar's gaming
properties, prospective performance and opportunities; the budgets,
completion and opening schedules of the Company's various
projects; the facilities, features and amenities of the
Company's various projects; the ability of the Company to sell or
otherwise dispose of discontinued operations, and the Company's
anticipated future capital expenditures; are based on management's
current expectations and are subject to risks, uncertainties and
changes in circumstances that could significantly affect future
results. Accordingly, Pinnacle cautions that the forward-looking
statements contained herein are qualified by important factors and
uncertainties that could cause actual results to differ materially
from those reflected by such statements. Such factors and
uncertainties include, but 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 and
financial condition in ways that the Company currently cannot
accurately predict; (c) significant competition in the gaming
industry in all of the Company's markets could adversely affect the
Company's revenues and profitability; (d) many factors, including
the escalation of construction costs beyond increments anticipated
in its construction budgets and unexpected construction delays,
could prevent the Company from completing its various projects
within the budgets and on time, including the Belterra Park project
and the Bowmtown New Orleans hotel project; (e) the ability
and timing to complete the dispositions proposed as part of the
effort to reach a resolution with the Commission; (f) the ability
and timing to obtain required regulatory approvals in connection
with the dispositions; (g) the ability and timing of the Company to
achieve the expected synergies, cost savings, and other benefits of
the Ameristar transaction may be affected by many factors,
including our ability to successfully integrate the two companies
and reduce costs and expenses; (h) the Company's ability to
obtain future financings on the terms expected, or at all; (i) the
terms of the Company's credit facility and the indentures governing
its senior and subordinated indebtedness impose operating and
financial restrictions on the Company; and (j) other risks,
including those as may be detailed from time to time in the
Company's filings with the Securities and Exchange Commission
("SEC"). For more information on the potential factors that could
affect the Company's financial results and business, review the
Company's filings with the SEC, including, but not limited to, its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and
its Current Reports on Form 8-K.
Ameristar, Belterra, Boomtown, Casino Magic, Heartland Poker
Tour, L'Auberge Lake Charles, L'Auberge Baton Rouge, Lumière Place,
River City, and River Downs are registered trademarks of Pinnacle
Entertainment, Inc. All rights reserved.
- financial tables follow -
Pinnacle Entertainment,
Inc. |
Condensed Consolidated
Statements of Operations |
(In thousands, except per share
data, unaudited) |
|
|
|
|
|
|
For the three months ended September 30, |
For the nine months ended September 30, |
|
2013 |
2012 |
2013 |
2012 |
Revenues: |
|
|
|
|
Gaming |
$ 371,624 |
$ 225,667 |
$ 847,650 |
$ 663,995 |
Food and beverage |
22,692 |
14,623 |
50,228 |
40,026 |
Lodging |
9,677 |
6,170 |
20,509 |
16,913 |
Retail, entertainment and other |
14,934 |
9,692 |
34,414 |
27,138 |
Total revenues |
418,927 |
256,152 |
952,801 |
748,072 |
|
|
|
|
|
Expenses and other
costs: |
|
|
|
|
Gaming |
203,599 |
124,639 |
474,432 |
366,126 |
Food and beverage |
19,858 |
12,649 |
43,807 |
34,731 |
Lodging |
3,981 |
3,231 |
10,130 |
8,367 |
Retail, entertainment and other |
7,416 |
6,005 |
16,744 |
15,905 |
General and administrative |
84,519 |
46,303 |
185,758 |
136,014 |
Depreciation and amortization |
39,528 |
19,058 |
85,183 |
54,502 |
Pre-opening and development costs |
63,086 |
11,516 |
87,851 |
18,444 |
Write-downs, reserves and recoveries,
net |
12,130 |
61 |
14,259 |
201 |
Total expenses and 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 common
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 common
share—basic |
$ (3.07) |
$ — |
$ (4.63) |
$ 0.17 |
|
|
|
|
|
Net (loss) income per common
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 common
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 and cash equivalents |
$ 196,745 |
$ 94,800 |
Other assets, including restricted cash |
1,612,858 |
268,482 |
Land, buildings, vessels and 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, including 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 and stockholders'
equity |
$ 5,344,345 |
$ 2,108,994 |
|
Pinnacle Entertainment,
Inc. |
Supplemental
Information |
Revenues and 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
months ended September 30, |
For the nine
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 and 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 and 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 and amortization |
$ (39,528) |
$ (19,058) |
$ (85,183) |
$ (54,502) |
Pre-opening and 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 and 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, and 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) and River
City. |
(c) West segment includes
Ameristar Black Hawk, Cactus Pete's and the Horseshu. |
(d) Corporate expenses and
Other includes corporate expenses, as well as the results of
Heartland Poker Tour and from the management of Retama Park
Racetrack. Corporate expenses and Other for the three months
ended September 30, 2013 reflect a new corporate expense allocation
methodology. The historical periods have not been recast to
reflect the change of corporate expense allocation methodology.
|
(e) See discussion of
Non-GAAP Financial Measures above for a detailed description of
Consolidated Adjusted EBITDA and 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
months ended September 30, |
For the nine
months ended September 30, |
|
2013 |
2012 |
2013 |
2012 |
GAAP net (loss) income |
$ (180,406) |
$ (358) |
$ (270,879) |
$ 10,591 |
Pre-opening and development costs |
63,086 |
11,516 |
87,851 |
18,444 |
Write-downs, reserves and recoveries,
net |
12,130 |
61 |
14,259 |
201 |
Impairment of equity method investment |
— |
— |
92,181 |
— |
Loss on early extinguishment of debt |
30,830 |
— |
30,830 |
20,718 |
Addition to legal reserves |
3,260 |
— |
3,260 |
— |
Adjustment for income taxes |
(55,810) |
426 |
(62,132) |
(587) |
Loss from discontinued operations, net of
income taxes |
133,275 |
7,020 |
128,887 |
7,247 |
Adjusted net income (a) |
$ 6,365 |
$ 18,665 |
$ 24,257 |
$ 56,614 |
|
|
|
|
|
GAAP net (loss) income per share |
$ (3.07) |
$ (0.01) |
$ (4.63) |
$ 0.17 |
Pre-opening and development costs |
1.07 |
0.19 |
1.50 |
0.30 |
Write-downs, reserves and recoveries,
net |
0.21 |
— |
0.24 |
— |
Impairment of equity method investment |
— |
— |
1.57 |
— |
Loss on early extinguishment of debt |
0.52 |
— |
0.53 |
0.33 |
Addition to legal reserves |
0.06 |
— |
0.06 |
— |
Adjustment for income taxes |
(0.95) |
0.01 |
(1.06) |
(0.01) |
Loss from discontinued operations, net of
income taxes |
2.27 |
0.11 |
2.20 |
0.12 |
Adjusted income per share
(a) |
$ 0.11 |
$ 0.30 |
$ 0.41 |
$ 0.91 |
Number of
shares—diluted |
58,777 |
62,027 |
58,548 |
62,498 |
|
|
|
|
|
(a) See discussion of
Non-GAAP Financial Measures above for detailed descriptions of
Adjusted net income and Adjusted income per share. |
2013 Third Quarter Supplemental Financial
Information
Although Pinnacle Entertainment did not own Ameristar Casinos,
Inc. for the entire three month period ending September 30, 2013,
the Company believes the financial data provided below is useful to
investors to assess the value this transaction brings to the
Company and its stakeholders.
The following unaudited condensed combined financial information
for the three months ended September 30, 2013 shows the Company's
reported results for the 2013 third quarter, the results of
Ameristar Casinos stand alone operations for the predecessor period
of July 1, 2013 through August 12, 2013, and the combined Company
financial information as if the acquisition of Ameristar was
completed on July 1, 2013.
Pinnacle Entertainment,
Inc. |
Supplemental
Information |
Combined Net Revenue
and Combined Consolidated Adjusted EBITDA Including the Ameristar
Predecessor Period |
for the Three Months
Ending September 30, 2013 |
(In thousands, unaudited)
|
|
|
|
|
|
Successor |
Predecessor |
|
|
|
|
|
|
Pinnacle Entertainment, Inc. As
Reported |
Ameristar Casinos,
Inc. |
Combined
(b) |
|
|
|
|
|
July 1, 2013
through September 30, 2013 |
July 1,
2013 through August 12, 2013 |
July 1, 2013 through
September 30, 2013 |
|
|
|
|
Net Revenues: |
|
|
|
South |
$ 192,223 |
$ 13,040 |
$ 205,263 |
Midwest |
194,528 |
94,279 |
288,807 |
West |
30,288 |
27,621 |
57,909 |
Total Segment Revenues |
417,039 |
134,940 |
551,979 |
Corporate and Other |
1,888 |
— |
1,888 |
Total Revenues (b) |
$ 418,927 |
$ 134,940 |
$ 553,867 |
|
|
|
|
Adjusted EBITDA: |
|
|
|
South |
$ 56,483 |
$ 5,641 |
$ 62,124 |
Midwest |
55,267 |
30,658 |
85,925 |
West |
10,609 |
9,690 |
20,299 |
Segment Adjusted EBITDA |
122,359 |
45,989 |
168,348 |
Corporate Expenses and Other (a) |
(19,789) |
(8,040) |
(27,829) |
Consolidated Adjusted EBITDA
(b) |
$ 102,570 |
$ 37,949 |
$ 140,519 |
|
|
|
|
(a) Ameristar predecessor
period corporate expenses include all costs of the legacy Company's
corporate operations, a portion of which were subsequently
eliminated through the integration process that followed the
completion of the merger on August 13, 2013. |
(b) See discussion of
Non-GAAP financial measures for a detailed description of
Consolidated Adjusted EBITDA, Combined Net Revenues and Combined
Consolidated Adjusted EBITDA. |
|
Pinnacle Entertainment,
Inc. |
Supplemental
Information |
Reconciliation of Combined Consolidated Adjusted EBITDA
Including the Ameristar Predecessor Period |
to Loss from Continuing
Operations |
(In thousands, unaudited) |
|
|
|
Combined |
|
For the three months ended
September 30, 2013 |
|
As if acquisition was
completed on July 1, 2013 |
|
|
Combined Consolidated Adjusted EBITDA
(a) |
$ 140,519 |
|
|
Ameristar July 1, 2013 through August 12,
2013 predecessor period Adj. EBITDA |
(37,949) |
Depreciation and amortization |
(39,528) |
Pre-opening and development costs |
(63,086) |
Non-cash share-based compensation
expense |
(3,016) |
Write-downs, reserves and recoveries,
net |
(12,130) |
Interest expense, net |
(48,500) |
Loss on early extinguishment of debt |
(30,830) |
Income tax benefit |
47,378 |
Loss from continuing
operations |
$ (47,142) |
|
|
(a) See discussion of
Non-GAAP financial measures for a detailed description of
Consolidated Adjusted EBITDA, Combined Net Revenues and Combined
Consolidated Adjusted EBITDA. |
CONTACT: Investor Relations
Vincent J. Zahn, CFA
Vice President, Finance and Investor Relations
702/541-7777 or investors@pnkmail.com
Media Relations
Kerry Andersen
Director, Public Relations
337/395-7631 or kandersen@pnkmail.com
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