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Eldorado posts Q3 results

27 Oct 2015

(PRESS RELEASE) -- Eldorado Resorts, Inc. today reported operating results for the third quarter ended September 30, 2015. Net revenues and adjusted EBITDA for all periods summarized below include the operations of MTR Gaming Group, Inc., which merged with the Company on September 19, 2014, as if the merger occurred on January 1, 2014.

Total Net Revenue:
Three Months Ended September 30: Nine Months Ended September 30:
2015 — 2014 — % Change — 2015 — 2014 — % Change
($ in thousands, except per share data and percentage)
Eldorado Resort Casino: $29,002 — $28,009 — 3.5% — $79,961 — $79,294 — 0.8%
Eldorado Resort Casino - Shreveport: 34,651 — 34,629 — 0.1% — 103,919 — 102,123 — 1.8%
Scioto Downs Racino: 40,172 — 38,952 — 3.1% — 118,438 — 113,151 — 4.7%
Mountaineer Casino, Racetrack & Resort: 40,421 — 50,079 — (19.3)% — 122,619 — 144,791 — (15.3)%
Presque Isle Downs & Casino: 39,294 — 39,429 — (0.3)% — 108,687 — 110,246 — (1.4)%
Total Net Revenue (1)(4): $183,540 — $191,098 — (4.0)% — $533,624 — $549,605 — (2.9)%

Adjusted EBITDA
Three Months Ended September 30: Nine Months Ended September 30:
2015 — 2014 — % Change — 2015 — 2014 — % Change
($ in thousands, except per share data and percentage)
Eldorado Reno (2): $5,766 — $2,688 — 114.5% — $13,205 — $6,709 — 96.8%
Eldorado Shreveport: 7,639 — 6,732 — 13.5% — 22,702 — 19,984 — 13.6%
Scioto Downs: 14,024 — 12,802 — 9.5% — 41,260 — 37,794 — 9.2%
Mountaineer: 6,431 — 9,146 — (29.7)% — 18,554 — 25,172 — (26.3)%
Presque Isle Downs: 5,593 — 5,757 — (2.8)% — 15,061 — 15,745 — (4.3)%
Corporate: (3,318) — (3,813) — (13.0)% — (10,557) — (8,204) — 28.7%
Total Adjusted EBITDA (1) (3) (4): $36,135 — $33,312 — 8.5% — $100,225 — $97,200 — 3.1%

Operating Income (4): $24,092 — $2,778 — $59,235 — $11,105
Net income (loss) attributable to ERI (4): $3,334 — $(4,064) — $1,965 — $(3,488)
Basic EPS (4): $0.07 — $(0.16) — $0.04 — $(0.14)
Diluted EPS (4): $0.07 — $(0.16) — $0.04 — $(0.14)
(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 Hotel Casino - Reno (“Circus Reno”) and the 50% interest in the Silver Legacy Resort Casino 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 nine months ended September 30, 2015 reflects the reallocation of corporate expenses. If corporate expenses had been reallocated in the three and nine months ended September 30, 2014, the Adjusted EBITDA percentage increase would have been 47.6% and 38.2%, respectively.
(3) 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.
(4) 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.

“Our strong third quarter results include an 8.5% year-over-year increase in Adjusted EBITDA, driven by our continued focus on streamlining operating costs and particularly robust performances by Eldorado Reno, Scioto Downs and Eldorado Shreveport. The 2015 third quarter results also reflect the second full quarter of initial benefits from our $10 million cost savings program, continued enhancement of product and service offerings across our entire portfolio, and the implementation of Eldorado’s operating strategies across the acquired MTR properties,” said Gary Carano, Chairman and Chief Executive Officer of Eldorado.

“We continue to make significant progress with our property enhancement initiatives that target product and service offerings upgrades across our entire portfolio. At Presque Isle Downs and Casino, we’ve made significant progress with our five-phase design and facility enhancement program with the new casino center bar now complete, the high limit gaming area open and initial slot machine replacements in place. At Scioto Downs, we opened our new $5.9 million restaurant and microbrewery, The Brew Brothers, today, on schedule and on budget. In addition, in the fourth quarter, we plan to add 45 additional machines to the smoking patio at Mountaineer, which will increase the smoking pavilion’s gaming supply by over 20%.

“During the third quarter, we also entered into an agreement to acquire MGM’s 50% interest in the Silver Legacy Resort Casino and all of the assets of Circus Circus Reno. We expect that the Nevada Gaming Commission will make a determination regarding this acquisition at its November meeting and that we will close the acquisition shortly after obtaining the Nevada Gaming Commission’s approval. Upon completing the transaction, we will own the three leading downtown Reno casino resorts and expect to benefit from opportunities for synergies and operating efficiencies across the three properties. In addition, we completed the refinancing of our capital structure in July, thereby reducing our interest expense by approximately $35 million and simplifying our reporting structure.

“Our strong third quarter results continue to demonstrate the hard work and commitment of our management team and employees to efficiently implement our cost savings program, enhance our product and service offerings and integrate Eldorado’s operating strategies across the acquired MTR properties.”

Balance Sheet and Liquidity

At September 30, 2015, Eldorado had $48.8 million in cash and cash equivalents and $57.1 million in restricted cash, which included $55.5 million of escrow cash related to the proposed Silver Legacy and Circus Circus Reno acquisition. Outstanding indebtedness at September 30, 2015 totaled $816.9 million, including $18.0 million outstanding on the Company’s revolving credit facility.

In July 2015, the Company refinanced its outstanding indebtedness by issuing $375 million in aggregate principal amount of 7% senior notes due in 2023 and entering 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 in July with the SEC to offer up to $80 million in common stock.

“The third quarter was a pivotal period for Eldorado as we announced the planned acquisition of Silver Legacy and Circus Circus Reno, completed our refinancing, and continued to make significant progress on realizing our targeted annual expense reduction initiatives,” said Tom Reeg, President of Eldorado. “We expect that the acquisition of Silver Legacy and Circus Circus Reno will be immediately accretive to our free cash flow upon closing and will reduce the Company’s leverage. In addition, the comprehensive balance sheet refinancing reduced our annual interest expense by approximately $35 million, which provides us added flexibility to continue to pursue additional opportunities for growth.”

Summary of 2015 Third Quarter Property Results and Facility Enhancements

Nevada

Net revenues of $29.0 million at Eldorado Reno for the quarter ended September 30, 2015 increased 3.5% over the prior-year period while Adjusted EBITDA of $5.8 million increased 114.5% from the same period in 2014. The increase in Adjusted EBITDA for the three months ended September 30, 2015 partially reflects the reallocation of corporate expenses. If such corporate expenses had been reallocated in the three months ended September 30, 2014, Eldorado Reno’s Adjusted EBITDA would have grown 47.6% year over year and Adjusted EBITDA margin would have increased approximately 590 basis points.

Net revenues at Silver Legacy, a joint venture between Eldorado and MGM Resorts International, increased 10.2% to $38.0 million in the third quarter of 2015 compared to $34.5 million in the third quarter of 2014, while Adjusted EBITDA increased 41.7% from the prior-year period to $10.5 million, the highest quarterly Adjusted EBITDA the property has generated since 2007. 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 Eldorado’s Adjusted EBITDA.

The higher revenue and Adjusted EBITDA for both Eldorado Reno and Silver Legacy compared to the prior year reflect the overall growth in the Reno market which helped drive higher casino volumes and increased occupancy at the properties’ respective hotels. The Reno properties performance also reflects the Company’s successful management of expenses that delivered enhanced operating leverage on the higher revenues.

Ohio

Net revenues at Scioto Downs Racino increased 3.1% to $40.2 million in the third quarter of 2015 from $39.0 million in the third quarter of 2014. Scioto Downs’ third quarter 2015 Adjusted EBITDA increased 9.5% to $14.0 million from $12.8 million in the comparable prior year period with Adjusted EBITDA margin improving approximately 200 basis points to 34.9%.

The Brew Brothers, a $5.9 million microbrewery and restaurant, opened today at Scioto Downs, on schedule and on budget. The Company continues to make progress with its Phase II property expansion project at Scioto Downs that will include the opening of a new bakery and a refresh of the Dash Cafe in the 2015 fourth quarter. During the third quarter, the property added 22 VLTs to its outdoor smoking patio, bringing the total to 82 VLTs. Along with the Phase II property expansion, Scioto Downs will be rebranded as “Eldorado Scioto Downs” in the fourth quarter of 2015 with new signage added throughout the property.

Pennsylvania

Third quarter 2015 net revenues of $39.3 million at Presque Isle Downs & Casino were comparable to net revenues of $39.4 million in the third quarter of 2014. Adjusted EBITDA in the third quarter decreased 2.8% to $5.6 million from $5.8 million in the prior-year period. During the 2015 third quarter, the Company initiated a new strategic direct mail marketing program at the property aimed at attracting more profitable play from consumers in the Erie market.

The Company has made significant progress with its approximately $5.0 million program to upgrade the property as part of its commitment to food, beverage and hospitality excellence at Presque Isle. Facility enhancements already completed include the addition of a new casino center bar with flat screen televisions, sound and light features, and the opening of a new high limit gaming area.

Louisiana

Net revenues at Eldorado Shreveport rose 0.1% to $34.7 million in the third quarter of 2015. Adjusted EBITDA from the property increased 13.5% to $7.6 million from $6.7 million in the comparable quarter of 2014. Adjusted EBITDA margins improved by approximately 260 basis points to 22.0%.

During the third quarter, Eldorado Shreveport completed a comprehensive exterior refurbishment of the property and painted the hotel, boat and parking garage. In the fourth quarter of 2015, the property will complete the remodel of its casino space on the first floor including a new casino bar and relocation of the players’ club.

West Virginia

Net revenues at Mountaineer Casino, Racetrack & Resort declined 19.3% to $40.4 million in the third quarter of 2015 from $50.1 million in the third quarter of 2014. Adjusted EBITDA from the property declined 29.7% to $6.4 million from $9.1 million in the comparable quarter of 2014. Mountaineer continues to be impacted by a competitive opening in Ohio, which reached its one-year anniversary in mid-September. Net revenue and Adjusted EBITDA were also impacted by the Hancock County Clean Air Regulation that went into effect July 1, 2015 and prohibits smoking in enclosed public places.

In late June, Mountaineer opened an outdoor smoking pavilion featuring more than 200 slot machines and six gaming tables to help mitigate the impact of the new smoking ban. The new gaming area continues to be very well received by patrons and the Company plans to add 45 more slot machines to the property’s smoking pavilion during the fourth quarter.

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 net income (loss) before interest expense (income), provision (benefit) for income tax, depreciation and amortization, (gain) loss on the sale or disposal of property, equity in income of unconsolidated affiliates, acquisition charges, stock based compensation expenses, loss on early retirement of debt and other regulatory gaming assessment, 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.

Third Quarter Conference Call

Eldorado will host a conference call at 4:30 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 719/325-2435, conference ID 2754975 (domestic and international callers). In addition, a live audio webcast of the call will be accessible to the public on Eldorado’s website, and a replay of the webcast will be archived on the site for 90 days following the live event.
 
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