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| PNK > SEC Filings for PNK > Form 10-Q on 11-May-2009 | All Recent SEC Filings |
11-May-2009
Quarterly Report
RESULTS OF OPERATIONS
The following table highlights our results of operations for the three months
ended March 31, 2009 and 2008. As discussed in Note 8 to our unaudited Condensed
Consolidated Financial Statements, we report segment operating results based on
revenues and Adjusted EBITDA. Such segment reporting is on a consistent basis
with how we measure our business and allocate resources internally. See Note 8
to our unaudited Condensed Consolidated Financial Statements for more
information regarding our segment information.
For the three months ended
March 31,
2009 2008
(in millions)
Revenues:
L'Auberge du Lac $ 88.4 $ 81.3
Boomtown New Orleans 38.3 42.4
Lumière Place 53.1 37.9
Belterra Casino Resort 41.0 42.0
Boomtown Bossier City 24.8 23.7
Casino Magic Argentina 9.5 9.2
The Admiral Riverboat Casino 6.0 9.3
Boomtown Reno 7.6 10.7
Other 0.3 0.1
Total Revenues $ 269.0 $ 256.6
Operating income (loss) $ 18.6 $ (11.8 )
Income (loss) from continuing operations $ 1.2 $ (15.8 )
Adjusted EBITDA: (a)
L'Auberge du Lac $ 23.5 $ 17.7
Boomtown New Orleans 13.5 15.3
Lumière Place 10.6 (0.5 )
Belterra Casino Resort 7.8 7.3
Boomtown Bossier City 6.2 4.8
Casino Magic Argentina 2.8 3.2
The Admiral Riverboat Casino (0.2 ) (0.3 )
Boomtown Reno (1.3 ) (2.2 )
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(a) We define
Adjusted EBITDA
for each
segment as
earnings before
interest income
and expense,
income taxes,
depreciation,
amortization,
pre-opening and
development
expenses,
non-cash
share-based
compensation,
asset
impairment
costs,
write-downs,
reserves,
recoveries,
corporate-level
litigation
settlement
costs, gain
(loss) on sale
of certain
assets, loss on
early
extinguishment
of debt, gain
(loss) on sale
of equity
security
investments and
discontinued
operations.
Segment comparison of the three months ended March 31, 2009 and 2008 L'Auberge du Lac
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 78.4 $ 72.2 8.6 %
Total revenues 88.4 81.3 8.7 %
Operating income 16.2 10.1 60.4 %
Adjusted EBITDA 23.5 17.7 32.8 %
|
L'Auberge du Lac, our largest property, achieved increased revenues and Adjusted EBITDA during the first quarter of 2009 compared to the first quarter of 2008 reflecting improved utilization of the $72 million guestroom and amenity expansion which opened during the first quarter of 2008. The guestroom expansion increased available rooms to 995 from 743, an increase of 34%, resulting in increased lodging, gaming and food and beverage revenues. Marketing and other costs were higher than normal relative to revenues in the first quarter of 2008, due to the start-up of the hotel and amenity expansion.
Boomtown New Orleans
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 36.7 $ 40.8 (10.0 )%
Total revenues 38.3 42.4 (9.7 )%
Operating income 11.5 13.2 (12.9 )%
Adjusted EBITDA 13.5 15.3 (11.8 )%
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Results during the first quarter of 2009 at Boomtown New Orleans reflect the November 2008 opening of an additional slot facility in the area, which houses approximately 600 slot machines, as well as levee construction along the major access road to the property. Casino admissions decreased 13% in the first quarter of 2009 compared to the first quarter of 2008. To address this increased competition, Boomtown New Orleans has increased marketing promotions. Lumière Place
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 44.7 $ 33.3 34.2 %
Total revenues 53.1 38.0 39.7 %
Operating income (loss) 2.0 (11.9 ) 116.8 %
Adjusted EBITDA 10.6 (0.5 ) 2,220.0 %
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Lumière Place includes the Lumière Place Casino, which opened in late 2007,
Pinnacle-owned Four Seasons Hotel St. Louis and HoteLumière, each of which
opened in early 2008 and other amenities, comprising the Lumière Place complex.
Consistent with most new casino openings, operations at Lumière Place continued
to improve in the first quarter of 2009 as it entered its second year of
operations. Adjusted EBITDA and revenues increased in the first quarter of 2009
from the first quarter of 2008 due to the opening of the Four Seasons Hotel and
HoteLumière during February 2008, as well as the elimination of certain gaming
restrictions related to customer loss limits in November 2008. Consistent with
the ramp-up of operations at almost all new casino-hotels, marketing and payroll
costs during the first quarter of 2009 are lower than the first quarter of 2008
due to the maturation of the property.
Belterra Casino Resort
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 35.8 $ 37.1 (3.5 )%
Total revenues 41.0 42.0 (2.4 )%
Operating income 4.3 4.0 7.5 %
Adjusted EBITDA 7.8 7.3 6.8 %
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Belterra achieved an increase in Adjusted EBITDA during the first quarter of 2009, despite a decrease in revenues during the same period, due to focusing of the property's marketing efforts and cost structure. Decreases in revenue are the result of additional competition in the area. During mid-2008, two racetrack casinos in the Indianapolis metropolitan area opened, each of which operate approximately 2,000 slot machines. One of these facilities replaced its temporary casino with a permanent facility in March 2009. Another riverboat competitor plans to open a new, expanded casino in mid-2009.
Boomtown Bossier City
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 23.3 $ 22.4 4.0 %
Total revenues 24.8 23.7 4.6 %
Operating income 4.6 3.0 53.3 %
Adjusted EBITDA 6.2 4.7 31.9 %
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Boomtown Bossier has achieved increased revenues and Adjusted EBITDA despite the
competitive Bossier City/Shreveport gaming market and has improved Adjusted
EBITDA through a focus on the property's marketing efforts and cost structure.
Boomtown Bossier competes with four dockside riverboat casino-hotels and a
racetrack operation. In addition, the Bossier City/Shreveport gaming market,
which is approximately 188 miles east of Dallas/Fort Worth, competes with Native
American gaming in southern Oklahoma located approximately 60 miles north of
Dallas/Fort Worth.
Casino Magic Argentina
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 8.6 $ 8.4 2.4 %
Total revenues 9.5 9.2 3.3 %
Operating income 2.1 2.4 (12.5 )%
Adjusted EBITDA 2.8 3.2 (12.5 )%
|
Casino Magic Argentina includes a sizable casino-hotel facility in Neuquén and
several smaller casinos in other parts of the Province of Neuquén. Revenues have
increased due to the opening of all 32 guestrooms of the hotel that adjoins the
principal casino in Neuquén, Argentina in June 2008. The decrease in Adjusted
EBITDA reflects inflation of certain costs, principally payroll costs.
Under terms of our concession agreement with the Province of Neuquén, our
exclusivity rights in the Province of Neuquén are to be extended from 2016 to
2021 with the completion of such luxury hotel. We are awaiting the formal
government approval of such extension.
The Admiral Riverboat Casino
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 5.6 $ 8.5 (34.1 )%
Total revenues 6.0 9.3 (35.5 )%
Operating loss (0.9 ) (2.2 ) 59.1 %
Adjusted EBITDA (0.2 ) (0.2 ) -
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Beginning in late 2008, we eliminated mid-week table game operations at The Admiral Riverboat Casino and reduced operating hours for the entire casino mid-week. Due to these changes, as well as competition from the neighboring Lumière Place, revenues for the three months ended March 31, 2009 have decreased from the same period in the prior year. These cost-cutting measures have also resulted in Adjusted EBITDA loss for the three months ended March 31, 2009 being essentially the same as for the same period in the prior year. We are evaluating the feasibility, subject to the Missouri Gaming Commission and other approvals, of relocating The Admiral Riverboat Casino to another location. Boomtown Reno
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Gaming revenues $ 4.4 $ 5.6 (21.4 )%
Total revenues 7.6 10.7 (29.0 )%
Operating loss (2.5 ) (3.9 ) 35.9 %
Adjusted EBITDA (1.3 ) (2.2 ) 40.9 %
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Historically, the first quarter is seasonally slow for the Reno market,
primarily due to winter weather that can significantly affect traffic flow along
Interstate 80. The first quarter of 2009 saw an increase in the number of
traffic control days, on which days snow chains are required for drivers.
Average traffic counts on the major interstate alongside Boomtown Reno declined
7.8% in the first quarter of 2009 compared to the first quarter of 2008
according to the Nevada Department of Transportation. Due to the winter weather
and the highly competitive operating environment attributed to Native American
gaming in northern California, revenues decreased during the first quarter of
2009. Despite the decreases in revenues, Adjusted EBITDA loss decreased slightly
due to aggressive cost-cutting measures.
Other factors affecting income from continuing operations
The following are a description of the other costs and benefits for the three
months ended March 31, 2009 and 2008, respectively:
For the three months ended Percentage
March 31, Increase/(Decrease)
2009 2008 2009 vs. 2008
(in millions)
Other benefits (costs):
Corporate expenses $ (9.5 ) $ (9.8 ) (3.1 )%
Depreciation and amortization (26.2 ) (28.5 ) (8.1 )%
Pre-opening and development costs (5.9 ) (17.1 ) (65.5 )%
Non-cash share-based compensation (2.3 ) (1.8 ) 27.8 %
Write-downs, reserves and
recoveries, net (0.4 ) 0.1 (500.0 )%
Other non-operating income 0.1 1.1 (90.9 )%
Interest expense, net of
capitalized interest (16.7 ) (12.1 ) 38.0 %
Income tax benefit 0.6 7.0 (91.4 )%
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Corporate expenses represent unallocated payroll, professional fees, rent,
travel expenses and other general and administrative expenses not directly
related to our casino and hotel operations. Such expenses were approximately
flat during the first quarter of 2009 compared to the first quarter of 2008.
Depreciation and amortization expense decreased in the first quarter of 2009 due
to the decreased asset basis resulting from our 2008 fourth quarter impairment
of certain long-lived assets.
Pre-opening and Development Costs Pre-opening and development costs are expensed
as incurred, consistent with SOP 98-5 "Reporting on the Costs of Start-up
Activities" and for the three months ended March 31, 2009 and 2008 consist of
the following:
For the three months ended
March 31,
2009 2008
(in millions)
Pre-opening and development costs:
Atlantic City (a) $ 3.0 $ 5.7
River City (b) 1.2 0.9
Baton Rouge 1.0 4.7
Sugarcane Bay 0.6 0.5
Kansas City (c) - 0.8
Lumière Place - 3.6
Missouri Proposition A Initiative - 0.6
Other 0.1 0.3
Total pre-opening and development costs $ 5.9 $ 17.1
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(a) In late 2008, management decided to complete certain demolition projects, but to otherwise suspend substantially all development activities in Atlantic City indefinitely. Such demolition activities were completed in December 2008. The continuing pre-opening and development costs include property taxes and other costs associated with ownership of the land.
(b) Pre-opening costs at the River City project, expected to open in the first quarter of 2010, include $1.0 million and $0.5 million, respectively, for the three months ended March 31, 2009 and 2008 for non-cash, straight-lined rent accruals under a lease agreement.
(c) We withdrew our application as an applicant for the Northeast Kansas Gaming Zone in late 2008 due to deteriorating capital markets.
Non-cash Share-based Compensation Expense was $2.3 million and $1.8 million for
the three months ended March 31, 2009 and 2008, respectively. Such compensation
expense relates to the theoretical value of options on the date of issuance and
is not related to actual stock price performance. The expense has increased due
to additional options granted.
Write-downs, reserves and recoveries, net consist of the following:
For the three months ended
March 31,
2009 2008
(in millions)
Impairment of assets $ 0.1 $ -
Loss (gain) on disposal of assets 0.3 (0.1 )
Write-downs, reserves and recoveries, net $ 0.4 $ (0.1 )
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Other non-operating income consists primarily of the following:
For the three months ended
March 31,
2009 2008
(in millions)
Interest income $ 0.1 $ 0.9
Dividend income - 0.2
Total other non-operating income $ 0.1 $ 1.1
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Interest income has decreased during the first quarter of 2009 compared to the first quarter of 2008 primarily due to historically low short-term interest rates in the current period compared to the 2008 quarter, as well as reduced cash balances as we continued to minimize excess cash. The interest earned was also impacted by the traditionally conservative investment options we elect. Interest expense was as follows:
For the three months ended
March 31,
2009 2008
(in millions)
Interest expense before capitalization of interest $ 18.9 $ 19.1
Less: capitalized interest (2.2 ) (7.0 )
Total interest expense, net of capitalized interest $ 16.7 $ 12.1
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The decrease in capitalized interest was principally due to the suspension of
development activities in Atlantic City, partially offset by increases in our
River City project.
Income Tax Benefit Our effective income tax rate for continuing operations for
the quarter ended March 31, 2009 was an expense of $0.8 million, or 39.7%, as
compared to a benefit of $7.0 million, or (30.9)% for the same period last year.
Our income tax benefit for the same period last year was negatively affected by
non-deductible items such as lobbying expenses and state income tax expense,
including the impact of non-deductible gaming taxes for Indiana. In addition, it
is reasonably possible that our unrecognized tax benefits will decrease between
$4 million and $6 million during the next 12 months.
Discontinued Operations consist of our former Casino Magic Biloxi operations and
our operations at The Casino at Emerald Bay in The Bahamas. For the three months
ended March 31, 2009 and 2008, respectively, we recorded a loss of $0.1 million
and $0.4 million, net of income taxes, related to our operations at The Casino
at Emerald Bay in The Bahamas. For the three months ended March 31, 2009 and
2008, respectively, we recorded a loss of $0.2 million and a gain of
$21.2 million, net of income taxes, related to insurance proceeds from our
former Casino Magic Biloxi property.
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