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Pinnacle Entertainment reports 2013 Q4 results13 February 2014LAS VEGAS, Nevada -- (PRESS RELEASE) -- Pinnacle Entertainment, Inc. (PNK) today reported financial results for the fourth quarter and full year ended December 31, 2013. 2013 Fourth Quarter Highlights: Net revenues increased by $280.3 million or 110% year over year to $535 million, and Consolidated Adjusted EBITDA increased by $84 million or 148.9% year over year to $140.5 million. These results include the operations of Ameristar for the entire 2013 fourth quarter. On a same store basis, with the Company's current continuing operations applied to both periods, management estimates that 2013 fourth quarter EBITDA increased by 2.8% and margins expanded by 118 basis points year over year despite a 1.8% decline in net revenues. Management estimates that approximately $26 million of recurring annual cost synergies from the Ameristar merger were implemented at the end of the 2013 fourth quarter. Income from continuing operations increased by $39.7 million to $8.6 million from a loss of $31.1 million in the prior year period. 2013 fourth quarter income from continuing operations included $7.6 million of amortization related to the acquired Ameristar player lists and non-cash write-downs of the carrying values of various assets. Operating income was $69.8 million in the 2013 fourth quarter versus $22.9 million in the prior year period. Income from continuing operations increased by $39.7 million to $8.6 million in the 2013 fourth quarter from a loss of $31.1 million in the prior year period. 2013 fourth quarter income from continuing operations included $7.6 million of amortization related to the acquired Ameristar player lists and non-cash write-downs of the carrying values of various assets. GAAP net income per share was $0.25 in the 2013 fourth quarter versus a loss of $0.72 in the prior year period. Adjusted income per share increased by $0.24 to $0.31 in the 2013 fourth quarter from $0.07 in the prior year period. Anthony Sanfilippo, Chief Executive Officer of Pinnacle Entertainment, commented, "The fourth quarter capped a very successful 2013 for Pinnacle Entertainment, a year that was highlighted by the completion of our transformational acquisition of Ameristar Casinos. Since closing the acquisition, we have made substantial progress integrating our businesses. "We faced the same challenges that others in our industry and other consumer businesses experienced during the 2013 fourth quarter. Despite this, we executed very effectively and our Company delivered same store EBITDA growth through an intense focus on operational efficiency and a realization of synergies from the Ameristar merger. We made thoughtful adjustments to the expense structures of our properties, principally through marketing reinvestment and promotional spending reductions and the elimination of non value added expenses. On a same store basis, assuming the Company's current continuing operations are applied to both periods, our 2013 fourth quarter EBITDA increased by 2.8 percent or approximately $3.8 million and our margins expanded by 118 basis points year over year. This result was achieved despite a 1.8 percent or $9.9 million decline in net revenues. We have continued to prudently manage our operating cost structure in the 2014 first quarter, and will maintain that discipline throughout 2014. "Our L'Auberge Baton Rouge property began to ramp up meaningfully in the 2013 fourth quarter. The property is increasingly attracting regional high end play, all while continuing to build its local guest visitation and market presence. On the expense side, refinements have been made to the property's cost structure and its marketing efficiency has improved. These factors have led to the property's cash flow more than doubling in the 2013 fourth quarter, with margins exceeding 20 percent. "At River City in St. Louis, the 2013 fourth quarter was the first full quarter of operations with its full amenity set. The 200-room hotel and event center, which was completed in September 2013, has enhanced the property's entertainment value and its ability to attract and reward its best guests. Both revenue and cash flow grew in the 2013 fourth quarter, and we believe the expansion of this facility will allow us to further ramp up the property's financial performance. "At Belterra Park Gaming and Entertainment Center, we are progressing rapidly toward its scheduled May 1, 2014 opening date. We are very excited about the prospects for this project given its great location and site access, and proximity to nearby entertainment venues such as the 22,000-seat River Bend concert center and Coney Island Amusement Park. The property will be an excellent addition to the dining and entertainment options in metropolitan Cincinnati," concluded Mr. Sanfilippo. 2013 Fourth Quarter Operational Overview Midwest Segment In the Midwest segment, revenues increased by $196.9 million or 231.1% year over year to $282.1 million in the 2013 fourth quarter. Adjusted EBITDA increased by $62.4 million or 298.4% to $83.3 million. Adjusted EBITDA margins were 29.5%, an increase of 500 basis points year over year. The addition of Ameristar properties contributed $196.8 million to Midwest segment net revenues in the 2013 fourth quarter. In the 2013 fourth quarter, Midwest segment results were negatively affected by a generally challenging revenue environment in its core gaming markets. Belterra experienced year over year declines in its key metrics as a result of a new competitor in Cincinnati, Ohio ramping up its operations. However, a focus on cost control permitted the property to produce EBITDA growth and margin expansion during the 2013 fourth quarter. The new competing facility opened in March 2013. South Segment In the South segment, revenues increased by $29.1 million or 17.2% year over year to $198.3 million in the 2013 fourth quarter. Adjusted EBITDA increased by $23.2 million or 57.9% to $63.2 million. Adjusted EBITDA margins were 31.9%, an increase of 822 basis points year over year. The addition of an Ameristar property contributed $25.9 million to South segment net revenues in the 2013 fourth quarter. In the 2013 fourth quarter, South segment results were driven by strong revenue and cash flow performance at the Company's L'Auberge Lake Charles and L'Auberge Baton Rouge properties. Lake Charles delivered solid revenue, EBITDA and margin growth in the 2013 fourth quarter through a combination of strong regional demand trends and cost discipline. L'Auberge Baton Rouge continued to ramp up its revenue with further penetration of the Baton Rouge gaming market and increasing high end regional gaming volume. EBITDA and margin performance at the property was a record in the 2013 fourth quarter, driven by cost efficiencies and revenue growth. Boomtown Bossier was impacted by the addition of a new competitor in the Bossier City/Shreveport gaming market in June 2013, which negatively affected its financial performance. West Segment West segment revenues were $52.6 million in the 2013 fourth quarter, and Adjusted EBITDA was $17.1 million. Segment Adjusted EBITDA margins were 32.6%. Ameristar properties comprised 100% of total West segment revenues in the 2013 fourth quarter. 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 $18.7 million year over year to $23.1 million in the 2013 fourth quarter. The increase in corporate overhead expenses in the 2013 fourth quarter was driven by the acquisition of Ameristar and due to the change in allocation methodology for corporate expenses implemented in the 2013 third quarter. Divestiture Update On November 22, 2013, the Company completed the sale of its equity interests in the entity developing the Ameristar Casino Lake Charles project. At closing, the Company received approximately $180 million in cash, which excludes approximately $35 million of deferred consideration. The Company used the net cash proceeds received at closing to repay approximately $180 million of aggregate principal amount of its Term Loan B-1 under its Amended and Restated Credit Agreement. On August 16, 2013, the Company entered into a definitive agreement to divest Lumiere Place Casino and Hotels 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. The Company began accounting for Lumiere Place Casino and Hotels as a discontinued operation in the 2013 third quarter. Ameristar Integration Making Solid Progress Carlos Ruisanchez, President and Chief Financial Officer of Pinnacle Entertainment, commented, "Our Company achieved several key integration objectives during the 2013 fourth quarter. First, we have made big strides in marrying the cultures of Pinnacle and Ameristar and unifying the Company's key leaders and team members. Second, we made progress on the integration of our marketing infrastructure and have begun implementing the best practices we identified across the entire portfolio. Third, we rationalized the cost structure of our corporate service center operations, and are also beginning to enjoy some of the benefits and efficiencies of our larger scale. At the end of 2013, we estimate that we have implemented approximately $26 million of recurring annual cost synergies, and we expect to have meaningfully more as we implement changes in 2014. "As we look further into 2014, we are focused on keeping our positive momentum with the integration, and have several key objectives in front of us. We are currently in the process of rolling out hotel and database yield management tools to the legacy Ameristar properties. We expect to relaunch our guest loyalty program in April 2014 to qualifying guests of both legacy companies. The relaunch will bring unique and exciting benefits to the members of the combined Company's player affinity program. These efforts, along with other operating initiatives, will continue to improve our financial profile. "On the balance sheet, we continued to demonstrate our commitment to prudently managing our debt and leverage by deploying asset sale proceeds and cash flow from operations to debt reduction. We are very enthusiastic about the future prospects for our Company and value creation opportunities that lie in front of us," concluded Mr. Ruisanchez. Liquidity, Capital Expenditures and Interest Expense Liquidity At December 31, 2013, the Company had approximately $191.9 million in cash and cash equivalents. As of December 31, 2013, $493.6 million was drawn on the Company's $1.0 billion revolving credit facility and approximately $8.6 million of letters of credit were outstanding. Total debt at the end of the 2013 fourth quarter was approximately $4.38 billion. During the 2013 fourth quarter, the Company repaid approximately $230 million of term loans, principally with proceeds from the divestiture of the Ameristar Casino Lake Charles development project, for a net reduction of total debt of approximately $116 million after giving effect to incremental revolving credit facility drawings during the quarter. Upon completion of the divestiture of Lumiere Place Casino & Hotels, the Company plans to use the net proceeds received in the transaction to reduce outstanding borrowings under its Amended and Restated Credit Agreement. Capital Expenditures Capital expenditures totaled approximately $107.2 million during the 2013 fourth quarter. In the 2013 fourth quarter, cash expenditures totaled $3.1 million for the River City expansion, $27.9 million for the Belterra Park redevelopment project, and $7.1 million for the Ameristar Lake Charles development project. Excluding land and capitalized interest costs, the Company has incurred approximately $80.1 million of the $82 million budget for the River City expansion project and $92.2 million of the $209 million budget for the Belterra Park redevelopment. During 2014, the Company expects to spend between $90 million and $110 million on capital expenditures associated with its existing operating properties, corporate initiatives and the Ameristar integration. The Company expects to incur the remaining expansion capital expenditures for Belterra Park and the Boomtown New Orleans hotel during 2014. The Company expects to fund capital expenditures principally with internally generated cash flow. Interest Expense Gross interest expense before capitalized interest was $65.6 million in the 2013 fourth quarter, compared to $29.1 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. Capitalized interest in the 2013 fourth quarter was $1.1 million versus $2.6 million in the prior year period. In the 2013 fourth quarter, the Company capitalized interest expense on its expenditures related to the Belterra Park redevelopment project, the Ameristar Casino Lake Charles development project, and Boomtown New Orleans hotel tower. GAAP net income per share was $0.25 versus a loss per share of $0.72 in the prior year period. Adjusted income per share increased by $0.24 to $0.31 from $0.07 in the prior year period. 2013 Full Year and Additional Highlights: On August 13, 2013, Pinnacle completed the acquisition of Ameristar Casinos, Inc. for $2.8 billion including assumed debt. The transaction added eight properties to the Company's portfolio. Full year 2013 net revenues increased by $485 million or 48.4% to $1.5 billion, and Consolidated Adjusted EBITDA increased by $120.4 million or 48.1% to $370.7 million. These results include the operations of Ameristar for 141 days. On November 22, 2013, the Company completed the sale of its equity interests in the entity developing the Ameristar Casino Lake Charles project. The Company received approximately $180 million in cash, which excludes $35 million of deferred consideration. The sale of Lumiere Place Casino and Hotels for cash consideration of $260 million remains on track for completion in the first half of 2014. The Company began accounting for Lumiere Place Casino and Hotels as a discontinued operation in the 2013 third quarter. In January 2014, the Company opened the hiring center for Belterra Park Gaming & Entertainment Center in Cincinnati, Ohio and paid the initial $10 million installment for its video lottery terminal license to the Ohio Lottery Commission. Belterra Park's construction budget remains $209 million, and is scheduled to open on May 1, 2014 pending required regulatory approvals. During the 2013 fourth quarter, the Company repaid approximately $230 million of term loans, principally with proceeds from the divestiture of the Ameristar Casino Lake Charles development project, for a net reduction of total debt of approximately $116 million after giving effect to incremental revolving credit facility drawings during the quarter. In the 2013 fourth quarter, revenues increased by $280.3 million or 110% to $535 million, while Consolidated Adjusted EBITDA was $140.5 million, an increase of $84.0 million or 148.9%, as compared to the same period in 2012. |