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Eldorado Resorts reports second quarter operating results6 August 2015(PRESS RELEASE) -- Eldorado Resorts, Inc. (NASDAQ: ERI) (“Eldorado,” “ERI,” or “the Company”) today reported operating results for the second quarter ended June 30, 2015. Net revenues and adjusted EBITDA for all periods summarized below include the operations of MTR Gaming Group, Inc. (“MTR”), which merged with the Company on September 19, 2014 (“the Merger Date”), as if the merger occurred on January 1, 2014. Total Net Revenue Total Net Revenue ($ in thousands, except per share data and percentage) Three Months Ended Six Months Ended June 30, % June 30, % 2015 2014 Change 2015 2014 Change Eldorado Reno $27,206 $28,869 (5.8)% $50,959 $51,285 (0.6)% Eldorado Shreveport 34,634 32,880 5.3 % 69,268 67,494 2.6% Scioto Downs 40,547 38,415 5.5% 78,266 74,199 5.5% Mountaineer 42,522 48,783 (12.8)% 82,198 94,712 (13.2)% Presque Isle Downs 37,724 37,702 0.1% 69,393 70,817 (2.0)% Total Net Revenue (1)(5)$182,633 $186,649 (2.2)% $350,084 $358,507 (2.3)% Adjusted EBITDA Adjusted EBITDA ($ in thousands, except per share data and percentage) Three Months Ended Six Months Ended June 30, % June 30, % 2015 2014 Change 2015 2014 Change Eldorado Reno (2) $5,008 $4,089 22.5% $7,439 $4,021 85.0% Eldorado Shreveport 7,945 5,692 39.6% 15,063 13,252 13.7% Scioto Downs 14,177 13,003 9.0% 27,236 24,992 9.0% Mountaineer 6,984 8,788 (20.5)% 12,123 16,026 (24.4)% Presque Isle Downs 5,921 5,855 1.1% 9,468 9,988 (5.2)% Corporate (3) (3,669) (1,984) 84.9% (7,239) (4,391) 64.9% Total Adjusted EBITDA (1)(3)(4)(5) $36,366 $35,443 2.6% $64,090 $63,888 0.3% Operating Income (5) $23,059 $6,775 $35,143 $8,327 Net income (loss) attributable to ERI (5) $4,795 $2,909 $(1,369) $576 Basic EPS (5) $0.10 $0.12 $(0.03) $0.02 Diluted EPS (5) $0.10 $0.12 $(0.03) $0.02 (1) Revenue and Adjusted EBITDA exclude the Silver Legacy, a joint venture between Eldorado and MGM Resorts International located in Reno. On July 7, 2015 Eldorado Resorts announced that it entered into an agreement to acquire all of the assets and properties of Circus Circus Reno (“Circus Reno”) and the 50% interest in the Silver Legacy owned by a subsidiary of MGM Resorts International in a transaction that is expected to close by year-end 2015. (2) Eldorado Reno's increase in Adjusted EBITDA for the three and six months ended June 30, 2015 reflects the reallocation of corporate expenses. If corporate expenses had been reallocated in the three and six months ended June 30, 2014, the Adjusted EBITDA percentage increase would have been 2.1% and 31.7%, respectively. (3) Includes corporate expenses, excluding stock-based compensation expense, subsequent to the Merger Date related to ERI totaling $0.6 million and $1.5 million, excluding stock-based compensation expense of $0.2 million and $0.8 million, and MTR Gaming’s corporate expenses totaling $3.0 million and $5.7 million for the three and six months ended June 30, 2015, respectively, and MTR Gaming's corporate expenses totaling $2.0 million and $4.4 million, excluding stock-based compensation expense of $0.1 million and $0.6 million, for the three and six months ended June 30, 2014, respectively. (4) Adjusted EBITDA is not a generally accepted accounting principle ("GAAP") measurement and is presented solely as a supplemental disclosure because the Company believes it is a widely used measure of operating performance in the gaming industry. See "Reconciliation of GAAP Measures to Non-GAAP Measures" below for a definition of Adjusted EBITDA and a quantitative reconciliation of Adjusted EBITDA to net (loss) income, which the Company believes is the most comparable financial measure calculated in accordance with GAAP. (5) The combined basis reflects operations of MTR for periods prior to the merger combined with the operations of Eldorado Resorts, LLC. Such presentation does not conform with GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we have included the combined information because we believe it provides a meaningful comparison for the periods presented. “Eldorado Resorts had a solid second quarter with each of our properties posting EBITDA increases, with the exception of Mountaineer Park, and year-over-year Adjusted EBITDA margin increasing approximately 100 basis points. The EBITDA gains reflect our expense management programs, continued progress in the implementation of Eldorado’s operating strategies across the MTR Gaming properties and the further enhancement of the product and service offerings across our entire portfolio,” said Gary Carano, Chairman and Chief Executive Officer of Eldorado. “Our 2015 property enhancement strategy for the acquired MTR properties continues to gain momentum. For example, at Scioto Downs construction of The Brew Brothers, a $5.9 million microbrewery and restaurant, is on budget and on schedule to open in the fourth quarter of 2015. Similarly, the five phase design and facility enhancement program underway at Presque Isle Downs & Casino which is budgeted at $5.0 million remains on schedule for completion by year-end. Finally, the outdoor smoking patio with more than 200 VLTs and 6 gaming tables at Mountaineer opened in late June and is proving to be popular with players. “Early in the third quarter, Eldorado entered into a definitive agreement to acquire MGM’s 50% interest in the Silver Legacy Resort Casino Reno and all of the assets of Circus Circus Reno for $72.5 million, plus the assumption of Silver Legacy debt. The acquisition of these well-established properties is consistent with our strategy to enhance shareholder value by structuring transactions that are strategically and economically attractive. Upon completing the transaction, which we anticipate in the fourth quarter of 2015, we will own the three leading downtown Reno casino resorts at a time when the Reno market and the surrounding region is attracting new businesses that should drive long-term economic growth. “The acquisition of Circus Circus Reno and MGM’s 50% interest in the Silver Legacy Resort Casino Reno will expand Eldorado’s property portfolio to seven wholly owned and operated facilities in five markets with a total of approximately 10,850 slot machines and VLTs, approximately 310 table games, approximately 4,850 hotel rooms, approximately 36 dining options, three pari-mutuel racing facilities and approximately 8,600 team members. “Eldorado’s operating and facility enhancement initiatives are being complemented by the previously announced cost savings program implemented across the Company as well as our recent capital market activity which significantly reduced annualized interest expense, thereby enhancing free cash flow. In addition to the interest expense savings related to the recent refinancing, we have targeted and are realizing annualized expense reductions totaling more than $10 million.” Balance Sheet and Liquidity At June 30, 2015, Eldorado had $88.6 million in cash and cash equivalents, $9.6 million in restricted cash and contractual debt totaling $728.7 million. In early July, Eldorado completed a balance sheet refinancing that will significantly reduce interest expense, simplify the Company’s reporting structure and provide flexibility for continued growth. Specifically, Eldorado Resorts issued $375 million in aggregate principal amount of 7% senior notes due in 2023 and entered into a new credit facility with a $425 million term loan due in 2022 that bears interest at a rate of LIBOR plus 325 basis points, with a 1% LIBOR floor, and a $150 million revolving credit facility that matures in 2020 and bears interest at a rate equal to LIBOR plus a spread that, based on our leverage ratio, ranges from 2.5% to 3.25%. In addition, Eldorado filed a registration statement with the SEC to offer up to $80 million in common stock. Approximately $773 million of the proceeds of the debt offerings were used to refinance existing debt, while the remaining proceeds, combined with cash flow from operations, the proposed equity issuance and/or draws upon the revolver are expected to fund the purchase of MGM’s 50% stake in Silver Legacy, the assets of Circus Circus Reno, refinance the Silver Legacy debt and pay fees, expenses and accrued interest associated with the refinancing and acquisition transactions. “The recently announced agreement to acquire Circus Circus Reno and Silver Legacy and the refinancing transactions are important milestones for the company,” said Tom Reeg, President of Eldorado. “Our annual interest expense is expected to be approximately $45 million after the Circus Circus Reno and Silver Legacy acquisition is consummated, representing savings of approximately $35 million per year compared to our interest expense prior to the refinancing transactions and the acquisition. Further, we expect that the Silver Legacy/Circus Circus Reno transaction will be immediately accretive to our free cash flow upon closing. Importantly, our revised capital structure affords us the flexibility to continue to participate in consolidation in the gaming sector in the future.” Summary of 2015 Second Quarter Property Results and Facility Enhancements Nevada Net revenues of $27.2 million at Eldorado Reno for the quarter ended June 30, 2015 were 5.8% behind the prior year period while Adjusted EBITDA of $5.0 million rose 22.5% from the same period in 2014. Eldorado Reno’s increase in Adjusted EBITDA for the three months ended June 30, 2015 reflects the reallocation of corporate expenses. If corporate expenses had been reallocated in the three months ended June 30, 2015, Eldorado Reno’s Adjusted EBITDA would have grown by 2.1%, largely reflecting company-wide initiatives to reduce costs (including food cost of sales, payroll, benefits, promotional costs and legal and administrative expenses). In the second quarter of 2015, the remodel of over 200 rooms in the Skyline Tower at Eldorado Resort Casino Reno was completed on schedule. Net revenues at Silver Legacy, a joint venture between Eldorado and MGM Resorts International, decreased 9.9% to $32.0 million in the second quarter of 2015 compared to $35.5 million in the second quarter of 2014. Silver Legacy’s results, which are included in the Company’s income statement as equity in income of unconsolidated affiliates, are not consolidated in Eldorado’s income statement and are not included in Adjusted EBITDA. During the 2015 second quarter, the Reno market was impacted by visitor traffic and room night declines as visitation to the bowling tournament at the National Bowling Stadium was down versus 2014. However, the Company’s future property-level results are expected to benefit from Reno’s ongoing economic resurgence as several marquee companies – including Tesla, Panasonic, Apple, Zulily, eBay, Urban Outfitters, Petco and Amazon – have established or have announced plans to establish operations in the area are expected to drive area job growth. Eldorado is well-positioned to benefit from expected improvement in the Reno economy in the coming quarters based on its current position as the operator of one of Reno’s leading downtown resort/hotels, which will be augmented by the expected acquisition of Circus Circus Reno and the remaining 50% of Silver Legacy. Ohio Net revenues at Scioto Downs Racino increased 5.5% to $40.5 million in the second quarter of 2015 from $38.4 million in the second quarter of 2014. Second quarter 2015 adjusted EBITDA from the property increased 9.0% to $14.2 million from $13.0 million in the comparable quarter of 2014. Eldorado’s strategic revisions to the property’s direct mail marketing programs implemented at the beginning of 2015, along with ongoing cost savings initiatives, contributed to improvements in EBITDA and margins. The property also continued to benefit from enhancements such as the December 2014 addition of an outdoor smoking patio with 60 video lottery terminals which are performing at a level substantially above the existing gaming floor. Construction on The Brew Brothers, a $5.9 million microbrewery and restaurant, continues with an expected opening in the fourth quarter of 2015. Eldorado is also moving forward with a Phase II property expansion which will include the opening of a new bakery and a refresh of the Dash Cafe by the fourth quarter of 2015. Pennsylvania Second quarter 2015 net revenues of $37.7 million at Presque Isle Downs & Casino were virtually flat with the second quarter of 2014. Adjusted EBITDA in the second quarter rose 1.1% to $5.9 million from $5.8 million in the comparable quarter of 2014. Eldorado is investing approximately $5.0 million to upgrade Presque Isle Downs as part of its commitment to food, beverage and hospitality excellence. Projects include the reconfiguration of the gaming floor to allow for a new center bar with flat-screen televisions and sound and light features, the renovation of the high-limit gaming area, a full redesign of the property’s La Bonne Vie Steakhouse entrance and interior, an upgraded exterior façade and a refresh of the existing casino bar. Eldorado expects to complete these upgrades and renovations by the end of the third quarter of 2015. The Company also replaced 115 slot machines at Presque Isle Downs with the latest offerings following the casino floor reconfiguration. Louisiana Net revenues at Eldorado Shreveport rose 5.3% to $34.6 million in the second quarter of 2015. Adjusted EBITDA from the property increased 39.6% to $7.9 million from $5.7 million in the comparable quarter of 2014. Despite the flooding of the Red River and extreme weather that limited access to the property in June, Eldorado Shreveport generated strong operating results. During the quarter, a very successful “Jack is Back” casino event that honored gaming industry legend, Jack Binion, drove casino revenues and generated positive feedback among players and within the community. In addition, Eldorado’s successful initiatives to control and reduce variable costs resulted in increased margins and enhanced flow through for the increased revenue. West Virginia Net revenues at Mountaineer Casino, Racetrack & Resort declined 12.8% to $42.5 million in the second quarter of 2015 from $48.8 million in the second quarter of 2014, reflecting the continued competitive impact of a new racino in eastern Ohio which opened in the third quarter of 2014. Adjusted EBITDA from the property declined 20.5% to $7.0 million from $8.8 million in the comparable quarter of 2014. In addition to the Ohio competition, adjusted EBITDA was also impacted by a minimum wage increase which went into effect on January 1, 2015. In late June, Eldorado opened an outdoor smoking pavilion with more than 200 VLTs and six gaming tables. The new gaming area has been very well received by patrons to date. Reconciliation of GAAP Measures to Non-GAAP Measures Adjusted EBITDA (defined below), a non GAAP financial measure, has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry and we believe that this non GAAP supplemental information will be helpful in understanding the Company’s ongoing operating results. Adjusted EBITDA represents (losses) earnings before interest expense (income), income tax expense (benefit), depreciation and amortization, corporate management fee, equity in income of unconsolidated affiliates, (loss) gain on the sale or disposal of property, other regulatory gaming assessment costs, acquisition/strategic transaction costs and stock-based compensation expense, to the extent that such items existed in the periods presented. Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with U.S. GAAP, is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes, debt principal repayments and certain regulatory gaming assessments, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide EBITDA information may calculate EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements. Second Quarter Conference Call Eldorado will host a conference call at 5 p.m. ET today. Senior management will discuss the financial results and host a question and answer session. The dial in number for the audio conference call is 719/457-2083, conference ID 6171660 (domestic and international callers). In addition, a live audio webcast of the call will be accessible to the public on Eldorado’s web site, http://www.eldoradoresorts.com/ and a replay of the webcast will be archived on the site for 90 days following the live event. |