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Pinnacle Entertainment's second quarter revenues rise 9.3%3 August 2011LAS VEGAS, Nevada -- (PRESS RELEASE) -- Pinnacle Entertainment, Inc. (NYSE: PNK) today reported record financial results for the second quarter ended June 30, 2011, as summarized in the table below. Second quarter revenues increased 9.3%, or $25.5 million, to $299.1 million from $273.6 million in the second quarter of 2010. Consolidated Adjusted EBITDA(1) increased 39.9%, or $19.7 million, to $69.1 million compared to $49.4 million in the 2010 second quarter, inclusive of $0.3 million and $2.8 million of severance and corporate office consolidation costs, respectively. Income from continuing operations was $5.5 million compared to a loss of $40.7 million in the 2010 second quarter. Pinnacle's healthy second quarter results, including a 510 basis point improvement in Consolidated Adjusted EBITDA margin(1), reflect the significant improvements we are driving throughout the organization. Through operating efficiencies, industry-unique revenue growth strategies, and a focused commitment to offer quality entertainment experiences and enhanced guest relationships, we continue to strengthen Pinnacle's competitive position," said Anthony Sanfilippo, president and chief executive officer of Pinnacle Entertainment. The second quarter results include another strong quarterly performance from Pinnacle's St. Louis segment, which consists of Lumiere Place and River City. Revenues for this segment increased 13.1% and Adjusted EBITDA rose nearly 59%, or $8.4 million, to $22.6 million. Adjusted EBITDA margin of 23.4% for the St. Louis segment compares to 16.6% in the year-ago period. Of note, the Company's combined monthly market share for its two St. Louis properties continues to improve over comparable periods in 2010, reflecting the further ramp-up of operations for the segment. L'Auberge du Lac Casino Resort also continued to generate significant improvements as property revenues rose 14.9%, or $12.5 million, to $96.1 million and Adjusted EBITDA rose 38.5% to $30.6 million. L'Auberge du Lac's Adjusted EBITDA margin improved 540 basis points to 31.8%. Adjusted EBITDA for Boomtown New Orleans grew 9.5% to $11.4 million despite a modest decline in revenues. Belterra Casino Resort's Adjusted EBITDA rose approximately 5% to $8.0 million on flat revenue and Boomtown Bossier City's Adjusted EBITDA and revenue were in line with results in the prior-year period. The Company's Boomtown Reno property posted modest declines in revenues and Adjusted EBITDA while River Downs Racetrack in Cincinnati, which was acquired in the first quarter of 2011, contributed $3.5 million in revenues and an Adjusted EBITDA loss of $0.7 million in the 2011 second quarter. Corporate expense also improved with second quarter 2011 levels 23.3% lower than the prior-year period. The property level improvements and lower corporate expense contributed to an improvement in Consolidated Adjusted EBITDA margin, which rose to 23.1% in the 2011 second quarter from 18.0% in last year's second quarter. Re-Launched Guest Loyalty Program and Facility Refinements Contributing to Growth Mr. Sanfilippo commented, "Pinnacle is simultaneously enhancing the overall guest experience and elevating our property brands through initiatives such as our recently re-launched mychoice guest loyalty program. The mychoice program has been extremely well received by our guests since its launch in April 2011 and is achieving our goal of driving profitable revenue growth. Overall, while still early, the mychoice program is off to a very solid start and contributed to our strong second quarter results. We believe this innovative program will drive further progress over the balance of 2011 by increasing play consolidation at our properties, attracting new in-market customers and generating continued yield improvements on our marketing spend. "In addition to the initial benefit from the relaunch of mychoice, our quarterly results also reflect the successful implementation of strategies to improve our operating execution. Our shared services operating arrangements for both the St. Louis and Louisiana markets are proving effective in leveraging management experience and excellence across multiple properties. When combined with operating leverage on the higher revenue levels, we have seen significant Adjusted EBITDA improvement that has outpaced our growth in revenues. "We continually evaluate and implement financially prudent enhancements at our existing properties in order to create more enjoyable guest experiences. Recent changes include modifications to our casino floors, including the addition of a poker room at L'Auberge du Lac and the relocation of the poker and high-limit rooms at River City. We have also re-examined our restaurant mix, and recently rebranded the steakhouses at both River City and L'Auberge du Lac, and converted the former steakhouse at Lumiere Place into the new Stadium Sports Grill and Bar. Also at L'Auberge du Lac, we recently opened a new beach entertainment area. Each of these enhancements are proving popular with our guests and offer examples of our focus on increasing guest loyalty by ensuring our casino properties remain fresh which furthers their position as entertainment destinations of choice in our markets." Expanded Development Pipeline Focused on Diversification and Return-Focused Growth "Pinnacle's improving operating results provide added financial resources to advance strategies to utilize our solid balance sheet and significant free cash flow for return-focused growth projects," said Carlos Ruisanchez, executive vice president and chief financial officer of Pinnacle Entertainment. "Significantly, during the second quarter, we entered into an agreement whereby Pinnacle will enter the attractive Southeast Asian gaming market through its investment in Asian Coast Development (Canada) Ltd. (ACDL), the owner and developer of the Ho Tram Strip beachfront complex of integrated resorts and residential developments located approximately 80 miles southeast of Ho Chi Minh City in southern Vietnam. Upon closing this transaction, Pinnacle will also enter into a management agreement through 2058 (with the potential for a 20-year extension) for the second integrated resort of the multi-phase Ho Tram Strip project, Vietnam's first destination integrated resort and gaming complex. The first phase of the Ho Tram Strip, MGM Grand Ho Tram, is expected to open in 2013. This transaction represents a risk-measured entry into a market with many attractive characteristics, including a fast-growing economy and increased tourism in the region, that we believe will potentially result in very significant returns on our invested capital. "Construction of L'Auberge Casino & Hotel Baton Rouge recently fully resumed as historically high Mississippi River water levels have receded to a point where all work can proceed. The Baton Rouge project is expected to open in summer 2012. Given the project's scope, attractive location and high-quality amenities, we believe the L'Auberge Baton Rouge facility will become the leading casino entertainment option in the city and prove equally attractive to potential guests in the wider region. "Our development pipeline also benefited from the recent legislative approval of up to 2,500 video lottery terminals at Ohio racetracks, including at our River Downs Racetrack in southeast Cincinnati. We are currently creating a master development plan to re-develop River Downs into a premier racing and gaming entertainment destination for guests in the region. We believe the convenient location of River Downs, the luxury of our Belterra Casino Resort approximately one hour away, and the mychoice guest loyalty program that unifies both properties will enable us to maximize Pinnacle's financial contributions from this region. "Pinnacle's strong financial performance, disciplined approach to capital spend and a new $410 million credit facility – which increased our borrowing capacity, lowered our borrowing rates, and extended our maturity profile – well-position the Company to execute on its current pipeline of growth projects and potential new opportunities that would create added value for shareholders." Additional Recent Developments Construction on the Company's L'Auberge Casino & Hotel Baton Rouge project in Louisiana recently fully resumed. Despite construction delays caused by several months of unusually high water levels, the Company continues to expect L'Auberge Baton Rouge to open in the summer of 2012. As of June 30, 2011, approximately $273 million of the $357 million construction budget (excluding land and capitalized interest) remains to be invested. A complete project fact sheet and project webcam can be found at www.pnkinc.com under the "New Developments" section. In May 2011, Pinnacle entered into an agreement to acquire a 26% equity interest in Asian Coast Development (Canada) Ltd. (ACDL), the owner and developer of the Ho Tram Strip beachfront complex of destination integrated resorts and residential developments in southern Vietnam. The $95 million transaction is expected to close in the third quarter of 2011. On August 2, 2011, Pinnacle amended its existing credit facility. Among other items, the Company extended the credit facility's maturity to August 2016 from March 2014, reduced the interest rate spread for any outstanding borrowings by 125 basis points, and amended leverage covenants to reflect Pinnacle's financial strength and accommodate its planned growth pipeline. Additionally, the size of the credit facility was increased to $410 million from $375 million. Liquidity At June 30, 2011, the Company had approximately $142.2 million in cash and cash equivalents, an estimated $70 million of which is used in day-to-day operations. As of the end of the 2011 second quarter, $10 million of the Company's recently-amended $410 million credit facility was drawn and approximately $9.8 million of letters of credit were outstanding. The Company expects to continue drawing on its credit facility as construction on its L'Auberge Baton Rouge project further ramps up. Interest Expense Gross interest expense before capitalized interest was $27.0 million in the 2011 second quarter versus $27.4 million in the prior-year period. Capitalized interest in the 2011 second quarter, related to the Company's L'Auberge Baton Rouge growth project, was $1.4 million. There was minimal capitalized interest in the prior-year period. Discontinued Operations Discontinued operations consist of the Company's Atlantic City, New Jersey operations, which are listed for sale; its former President Riverboat Casino in St. Louis, Missouri; its former Casino Magic Argentina operations; its former Casino Magic Biloxi, Mississippi operations; and its former Bahamian operations. For the three months ended June 30, 2011, Pinnacle recorded a loss of $23.5 million related to its discontinued operations. This loss reflects the write-down of land holdings and other assets in Atlantic City, totaling $14.3 million in the second quarter, and an increase in accruals of $6.0 million. For the prior-year period, Pinnacle recorded a loss of $8.6 million, net of income taxes, related to its discontinued operations. |