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Golden Entertainment announces fourth-quarter and full-year results11 March 2016(PRESS RELEASE) -- Golden Entertainment, Inc. today announced financial results for the fourth quarter and year ended December 31, 2015. Key Highlights and Recent Developments On July 31, 2015, Sartini Gaming, Inc. merged with a subsidiary of Lakes Entertainment and the Company was subsequently renamed Golden Entertainment. Fourth quarter of 2015 marked the first full quarter of inclusion in the Company’s results of the distributed gaming and casino businesses of Sartini Gaming. Net revenues for the three months ended December 31, 2015 were $86.4 million, compared to $12.8 million in the prior year quarter, with the increase due primarily to the merger. Adjusted EBITDA for the three months ended December 31, 2015 was $9.4 million, compared to $0.2 million in the prior year quarter, with the increase due primarily to the merger. For the quarter ended December 31, 2015, net income was $23.4 million, or $1.06 per diluted share, compared to a net loss of $(0.1) million, or less than $(0.01) per diluted share, in the prior year quarter. In December 2015, the Company completed the sale of a subordinated promissory note from the Jamul Indian Village for $24.0 million in cash, and the Company’s fourth quarter net income included a $23.6 million gain on recovery of impaired notes receivable resulting from the sale. In January 2016, the Company completed the acquisition of approximately 1,000 gaming devices from a distributed gaming operator in the state of Montana, as well as certain non-gaming assets and the right to operate within certain locations, for total consideration of approximately $20.1 million. Announced planned openings of six new taverns in 2016 in the Las Vegas Valley, including a new Sierra Gold, the Company’s flagship tavern brand, and the successful opening of a new brewery concept, PT’s Brewing Company, which opened on February 10, 2016. “We ended 2015 with strong quarterly results that reveal the initial benefits of the Merger. In addition, we are now operational in Montana as a result of closing our distributed gaming acquisition during the month of January,” said Blake L. Sartini, Chief Executive Officer of Golden Entertainment. “Going forward into 2016, we continue to focus on our unique growth opportunities, while enhancing productivity within each of our business segments.” Combined Results for the Three and Twelve Months Ended December 31, 2015 Given the merger, the following illustrates for each segment the net revenues and Adjusted EBITDA for the three months ended December 31, 2015, and the unaudited combined net revenues and combined Adjusted EBITDA for the Company and Sartini Gaming on a combined basis for the twelve months ended December 31, 2015, and the three and twelve months ended December 28, 2014, presented as if the Merger had occurred on the first day of each period presented. These unaudited combined financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results that actually would have resulted had the Merger occurred on the first day of the periods presented, or of the future results of the Company. The unaudited combined results do not reflect any operating efficiencies and associated cost savings that may be achieved as a result of the merger. Results for the Three Months Ended December 31, 2015 Net revenues for the three months ended December 31, 2015 were $86.4 million, an increase of 574% compared to the prior year period, due primarily to the Merger. Adjusted EBITDA for the current year quarter was $9.4 million, compared to $0.2 million in the prior year quarter, with the increase being due primarily to the merger. For the quarter ended December 31, 2015, net income was $23.4 million, or $1.06 per diluted share, compared to a net loss of $(0.1) million, or less than $0.01 per diluted share in the prior year quarter. The current year quarter results included the results of operations of Sartini Gaming for the full quarter. During the current year quarter, the Company incurred approximately $0.9 million in merger expenses and recognized a gain on recovery of impaired notes receivable of approximately $23.6 million. The results for the prior year quarter included approximately $0.5 million in merger expenses and a gain on sale of cost method investment of $1.4 million. Results for the Twelve Months Ended December 31, 2015 Net revenues for the twelve months ended December 31, 2015 were $177.0 million, an increase of 221% from the prior year period, due primarily to the Merger. Adjusted EBITDA for the current year period was $18.3 million, compared to $1.4 million in the prior year period, with the increase being due primarily to the Merger. For the 12 months ended December 31, 2015, net income was $24.5 million, or $1.43 per diluted share, compared to a net loss of $(24.8) million, or $(1.86) per diluted share, in the prior year period. The Company has reported the operating results of Sartini Gaming in the consolidated statements of operations for the period from August 1, 2015 through December 31, 2015. During the current year period, the Company incurred approximately $11.5 million in merger expenses, recognized a gain on recovery of impaired notes receivable of approximately $23.6 million, and had an income tax benefit of $10.0 million. The results for the prior year period included approximately $0.5 million in merger expenses and were impacted by impairments and other losses of $21.0 million related to an investment in Rock Ohio Ventures, a $2.5 million charge related to an arbitration award and a $2.4 million gain on sale of a cost method investment. Balance Sheet, Liquidity and Capital Expenditures As of December 31, 2015, the Company had cash and cash equivalents of $69.2 million, which included approximately $23.6 million in net proceeds related to the sale of the Jamul Note. Pursuant to the terms of the merger agreement relating to the merger and subject to applicable law, the proceeds received from the sale of the Jamul Note, net of related costs, will be distributed in a cash dividend to the Company’s shareholders that hold shares as of the record date for such dividend (other than shareholders that have waived their right to receive such dividend). Under the terms of the merger agreement for the Merger, Sartini Gaming’s former sole shareholder, for itself and any related party transferees of its shares (which total approximately 8.0 million shares in the aggregate), waived their right to receive such dividend with respect to their shares, except for a potential tax distribution, if any, unless their shares are sold to an unaffiliated third party prior to the record date for any such dividend. Also in connection with the Merger, holders of an additional approximately 0.5 million shares waived their right to receive such dividend, unless such shares are sold to an unaffiliated third party prior to the record date for any such dividend. The Company anticipates that the net proceeds received from the sale of the Jamul Note will be distributed to shareholders during the summer of 2016. The record date for such dividend will follow the Board of Directors’ declaration of any such dividend and will be announced at such time. As of December 31, 2015, total debt outstanding of $148.6 million included a $118.5 million senior secured term loan and $25.0 million drawn under the Company’s $40.0 million senior secured revolving credit facility. The Company’s senior secured term loan and revolving credit facilities mature in July 2020. As of December 31, 2015, the weighted average effective interest rate on outstanding borrowings under these credit facilities was approximately 3.2%. In December 2015, the Company entered into agreements to acquire approximately 1,000 gaming devices from a distributed gaming operator in the state of Montana, as well as certain non-gaming assets and the right to operate within certain locations, for total consideration of approximately $20.1 million, including the issuance of 50,252 shares of the Company’s common stock. The Company is required to pay $2.0 million of the total purchase price in cash in four quarterly installments beginning in September 2017, subject to certain potential adjustments. The transaction closed on January 29, 2016 and the Company funded the cash portion of the purchase price paid at closing using excess cash and $15.0 million in borrowings under the Company’s senior secured revolving credit facility. Investor Conference Call and Webcast The Company will host a webcast and conference call at 5 p.m. Eastern Time on March 9, 2016, to discuss fourth quarter 2015 results. The number to call is 1-888-378-0320 (domestic) or 1-719-457-2085 (international). A live webcast will be available in the Investors section of the Company’s website (www.goldenent.com). A replay of the conference call will be available through March 16, 2016, by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international) and entering the passcode 9357450. |