LAS VEGAS - Aug. 10, 2004 -- Poster Financial Group, Inc. and its subsidiaries,
the entities that own and operate the Golden Nugget Las Vegas and Golden
Nugget Laughlin (collectively the "Golden Nugget Group"), today reported
results for the fiscal quarter ended June 30, 2004.
Second Quarter 2004 Results
Poster Financial Group, Inc. ("Poster Financial Group") reported the
following amounts for the quarter ended June 30, 2004. These amounts are
compared to the second quarter in 2003 reported on a pro forma basis, reflecting
the Acquisition and related financing transactions as if they had occurred
at the beginning of 2003.
-
Consolidated revenues of $65.7 million (a 19.0% increase compared to $55.2
million in 2003).
-
Operating income of $4.4 million (a slight decrease compared to $4.5 million
in 2003).
-
Net income of $74,000 compared to $262,000 in 2003.
Poster Financial Group reported EBITDA of $8.6 million (a 13.2% increase
compared to $7.6 million in 2003). EBITDA is not a measurement of financial
performance under accounting principles generally accepted in the United
States of America ("GAAP") and should not be considered as an alternative
to cash flow from operating activities, as a measure of liquidity, as an
alternative to net income or as an indication of operating performance
or any other measure of performance derived in accordance with GAAP. A
description of pro forma adjustments is provided in Table 2, and a reconciliation
of net income to EBITDA is provided in Table 3.
The increases in operating income, and EBITDA are largely a result of
significant increases in gaming volumes, increased occupancy and higher
average daily room rate (ADR). These increases reflect the success of the
casino's promotional events, which resulted in strong operating results
for the quarter.
Acquisition Highlights
-
Poster Financial Group is a holding company that was incorporated in June
2003 for the purpose of acquiring the Golden Nugget Group from MGM MIRAGE.
The acquisition of the Golden Nugget Group (the "Acquisition") was completed
on January 23, 2004. The Golden Nugget Group consists of the former MGM
MIRAGE subsidiaries that own and operate the Golden Nugget hotel and casino
in downtown Las Vegas (and its interest in the Fremont Street Experience)
and the Golden Nugget hotel and casino in Laughlin, Nevada.
-
On January 23, 2004, Poster Financial Group completed the Acquisition at
a total cost of approximately $213.7 million, consisting of a purchase
price of $215 million (adjusted to $210.2 million for working capital and
other adjustments at the closing date) and approximately $3.5 million in
transaction fees.
-
Funds for the Acquisition were raised through an equity contribution from
Poster Financial Group's parent, PB Gaming, Inc. ("PB Gaming"), of $50
million, the issuance of $155 million aggregate principal amount of 8 3/4%
Senior Secured Notes due 2011 (the "Senior Notes"), and borrowings of approximately
$18.9 million under Poster Financial Group's $35 million bank senior credit
facility.
-
Poster Financial Group was founded and is managed by Timothy Poster and
Thomas Breitling, Poster Financial Group's Chief Executive Officer and
President, respectively. Previously, Mr. Poster served as chairman and
chief executive Officer of Travelscape.com, Inc., from March 1998 through
March 2000. Mr. Breitling previously founded Breitling Ventures, an investment
firm and served as the president of Travelscape, Inc. from March 2000 to
December 2001. Since January 2003, Mr. Breitling has served as chairman
and chief executive officer of Insomnia Entertainment, an independent film
company. Messrs. Poster and Breitling co-founded Travelscape.com and sold
the company to Expedia in March of 2000.
Golden Nugget Las Vegas Highlights
The Golden Nugget Las Vegas is the leading downtown hotel-casino and
the largest by number of guestrooms in downtown Las Vegas, offering 1,805
deluxe guest rooms and 102 suites and penthouses. Winner of the AAA Four-Diamond
Award for 27 consecutive years, the Golden Nugget is the most luxurious
resort in downtown Las Vegas. A 36,000 square-foot casino space features
more than 1,260 of the most popular slot and video poker machines, 58 table
games including blackjack, roulette and craps, as well as keno and a complete
race and sports book and a poker room. The property is a founding member
of the Fremont Street Experience, developed in 1996 to attract and entertain
visitors to the area. Amenities of the property include headline entertainment,
five world-class restaurants, a complete spa and salon, 12 meeting and
banquet rooms accommodating up to 400 people, and a year-round outdoor
swimming pool with cabanas. Additional information and online reservations
and travel packages are available at www.goldennugget.com.
Poker Room Opens: After a 16-year hiatus, high-stakes poker returned
to the historic downtown property April 20, 2004, just in time to capitalize
on the hundreds of poker players visiting Las Vegas for the Binion's World
Series of Poker. The Golden Nugget becomes only the fourth Las Vegas casino
to offer high-stakes poker in a non-smoking environment. All forms of poker
are available, including the popular No Limit Texas Hold 'Em. The 20-table
room is open 24 hours a day, seven days a week.
"The Casino" on Fox: THE CASINO, a new unscripted drama created
and executive-produced by reality titan Mark Burnett, premiered on Monday,
June 14, 2004 on the FOX network, and on CTV in Canada. The 13-episode
series provides an extraordinary 24/7, behind-the-scenes look at the real-life
dramas unfolding at the Golden Nugget, as new owners, Tim Poster and Tom
Breitling, take over the business and share their vision to bring back
the glory of its "Rat Pack" heyday. The series has been an unprecedented
marketing boon for the Golden Nugget as it brought the property to over
5 million households for one hour of prime time TV each week. The series
concludes on August 29, 2004.
High Limit Salon Opens: An intimate salon for premium players
opened to provide a larger variety of higher limit casino games including
high-limit blackjack, full-size and midi-baccarat and European roulette
("single 0"). The salon features custom-made light fixtures, gaming tables
and wall coverings, creating a gaming environment that is warm and inviting.
Convenient services for players including a plush lounge, private cashier
and plasma televisions add to the ambiance of the room.
Fremont Street Experience unveils "Viva Vision", the Biggest
Big Screen on the Planet: Viva Vision came to life in June 2004 as 12.5
million LED modules transformed Fremont Street into a state-of-the-art
theater. The enhanced capabilities of the cutting edge technology dazzles
onlookers with over 16 million color combinations, lifelike, super-sized
animation (the screen stretches more than five football fields), and the
integration of pre-recorded footage and even live video feeds. Viva Vision
represents the culmination of a $17 million investment that adds yet another
reason for people to come to a revitalized downtown Las Vegas.
Headline entertainment announced: The Golden Nugget is back in
the main stream with a roster of headline entertainment that is sure to
draw more customers to the property. Following on the heels of successful
performances at the Golden Nugget by Tony Bennett, Jewel, Aaron Lewis and
Barenaked Ladies, the following entertainers are confirmed through January
2005: Bruce Willis and the Accelerators, Kenny Loggins, Tony Bennett, Randy
Travis and Regis Philbin. These headliners will perform in addition to
the ongoing resident shows - Spirit of the Dance, Downtown Gordie Brown
and the Lon Bronson All Star Revue.
Las Vegas Woman Wins $11.2 Million at Golden Nugget: A new world
record for Wheel of Fortune(R) slot machines was set in May when a local
Las Vegas woman won $11.2 million on a Wheel of Fortune(R) dollar machine
at the Golden Nugget in downtown Las Vegas. The winner, who asked to remain
anonymous, was quoted as saying, "I am the happiest person in the world.
This will make a wonderful life. We can do anything now."
Golden Nugget Laughlin Highlights
Golden Nugget Laughlin is an intimate, 300-room resort located on the
banks of the Colorado River in Laughlin, Nevada, 90-miles southeast of
Las Vegas. The tropical-themed casino features slot and video poker machines,
which include progressive-play machines; table games, including blackjack,
craps, roulette, and three-card poker; keno; and a complete race and sports
book, which is linked to the Golden Nugget Las Vegas for the most up-to-the-minute
betting lines. The Golden Nugget's race book offers pari-mutuel betting,
providing access to major sporting events from around the world. Additional
information is available online: www.gnlaughlin.com.
Gaming Table Expansion and Increased Table Limits and Odds: Through
creative use of space, the property was able to increase the number of
table games in the casino from 13 to 21 (a 62% increase). This, along with
the company's decision to increase table limits and odds, has resulted
in a substantial increase in table games drop and win compared with the
second quarter of 2003.
Increased Volumes in Food and Beverage: The newly added Sports
Bar at Tarzan's is growing popular among the locals and tourists and is
being recognized as one of the best places in Laughlin to view daily sporting
events. Moreover, food and beverage sales continue to grow as the property
continues to adjust its menus to better cater to guest preferences. Specifically,
The Buffet continues to increase customer counts and it substantially contributed
to the increase in food and beverage revenues.
Creative Database Strategies: Mailing unique and targeted cash
redemption offers to qualified members of our database has resulted in
a considerable increase in traffic and play throughout the property, yielding
better gaming results. This, coupled with the increased attendance and
popularity of citywide events, such as the Laughlin River Run, has greatly
contributed to the company's results in the second quarter.
Residential Growth of Laughlin / Colorado River Valley: The Golden
Nugget is benefiting from the strong growth in the residential housing
market in the Colorado River valley. New home construction is growing dynamically,
and this residential growth is helping develop new customers for the Golden
Nugget.
TABLE 1
Consolidated Results of Operations for the
Quarter Ended June 30, 2004
(dollars in thousands)
Three Months Ended Six Months Ended
June 30, 2004 June 30, 2004 (a)
------------------ --------------------
Revenues
Casino
$46,917
$83,955
Rooms
12,198
22,497
Food and beverage
12,124
22,952
Entertainment, retail and
other
3,032
5,989
------------------ --------------------
Gross revenues
74,271
135,393
Promotional allowances
(8,610)
(15,850)
------------------ --------------------
Net revenues
65,661
119,543
Cost and expenses
Casino
26,347
46,722
Rooms
5,285
9,094
Food and beverage
9,101
15,368
Entertainment, retail and
other
2,463
4,815
Provision for doubtful
accounts
464
1,075
General and administrative
13,249
23,828
Depreciation and amortization
4,312
7,081
------------------ --------------------
Total cost and expenses
61,221
107,983
------------------ --------------------
Operating income
4,440
11,560
Other income (expense)
Equity in loss of joint
venture
(173)
(256)
Interest income
13
89
Interest expense
(4,206)
(8,157)
------------------ --------------------
Total other income
(expense)
(4,366)
(8,324)
------------------ --------------------
Net income (loss)
$74
$3,236
------------------ --------------------
Notes to Table 1
(a) Amounts are on a historical basis and reflect the
results of operations for the Golden Nugget Group for the one hundred sixty
day period from the Acquisition (January 23, 2004) through June 30, 2004.
TABLE 2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
DATA
The following unaudited pro forma condensed consolidated
statements of operations give effect to the Acquisition and related financing
transactions as if they had occurred on January 1, 2003. The pro forma
financial statements are presented for information purposes only and are
not necessarily indicative of the operating results or financial position
that would have occurred if the Acquisition and related financing transactions
had been completed as of the dates indicated, nor is it necessarily indicative
of future operating results or financial position.
The pro forma adjustments are based on available information
and upon assumptions that we believe are reasonable under the circumstances,
including the allocation of the purchase price to the assets acquired and
liabilities assumed.
Unaudited Pro Forma Condensed Consolidated
Statement of Operations
For the Six Months Ended June 30, 2004
Historical Adjustments Pro Forma
---------- ----------- ---------
(dollars in thousands)
Net Revenues
$119,543 $14,805 (a) $134,348
Cost and expenses
Casino-hotel operations
77,074 9,423 (a)
86,497
General and administrative
23,828 2,525 (a)
(1,565)(b)
78 (c)
33 (d)
102 (e)
(72)(f) 24,930
Management Fee
844 (a)
(844)(c) -
Depreciation and amortization
7,081 472 (g)
7,553
---------- ----------- ---------
Total costs and expenses
107,983 10,997
118,980
---------- ----------- ---------
Operating income
11,560 3,808
15,368
Other income (expense)
Equity in loss of joint venture
(256) (26)(a)
(282)
Interest income
89 (52)(h)
37
Intercompany interest
(206)(a)
206 (i) -
Interest expense
(8,157) (66)(j)
(8,223)
---------- ----------- ---------
Other expense
(8,324) (144)
(8,468)
---------- ----------- ---------
Income (loss) before income
taxes
3,236 3,665
6,901
Income tax provision
(298)(a)
298 (k) -
---------- ----------- ---------
Net income (loss)
$3,236 $3,665
$6,901
---------- ----------- ---------
Unaudited Pro Forma Condensed Consolidated
Statement of Operations
For the Three Months Ended June 30, 2003
Historical
Pro Forma
--------------------
---------
Poster
Poster
Financial Golden
Financial
Group, Nugget
Group,
Inc. Group Adjustments
Inc.
---------- ------- ----------- ---------
(dollars in thousands)
Net Revenues
$- 55,176
- $55,176
Cost and expenses
Casino-hotel operations
- 36,428
- 36,428
General and
administrative
- 10,554
325 (l)
139 (m)
422 (n)
(425)(o) 11,015
(Gain) loss on sale of
assets
- (8)
- (8)
Depreciation and
amortization
- 3,485
(230)(p) 3,255
Management fee
- 3,130 (3,130)(l)
-
---------- ------- ----------- ---------
Total costs and
expenses
- 53,589 (2,899)
50,690
---------- ------- ----------- ---------
Operating income
- 1,587 2,899
4,486
Other income (expense)
Equity in loss of joint
venture
- (201)
- (201)
Interest income
- 9
-
9
Interest expense
- (14) (4,019)(q)
(4,033)
Intercompany interest
expense
- (870)
870 (r) -
---------- ------- ----------- ---------
Other expense
- (1,076) (3,149)
(4,225)
---------- ------- ----------- ---------
Income (loss) before
income taxes
- 511
(249) 262
Income tax provision
- (163)
163 (s) -
---------- ------- ----------- ---------
Net income (loss)
$- $348
$(86) $262
---------- ------- ----------- ---------
Unaudited Pro Forma Condensed Consolidated
Statement of Operations
For the Six Months Ended June 30, 2003
Historical
Pro Forma
------------------
---------
Poster
Poster
Financial Golden
Financial
Group, Nugget
Group,
Inc. Group Adjustments
Inc.
---------- -------- ----------- ---------
(dollars in thousands)
Net Revenues
$- 116,850
- $116,850
Cost and expenses
Casino-hotel operations
- 74,875
- 74,875
General and
administrative
- 21,361
650 (l)
278 (m)
844 (n)
(878)(o) 22,254
(Gain) loss on sale of
assets
- (40)
- (40)
Depreciation and
amortization
- 6,919
(423)(p) 6,496
Management fee
- 6,620 (6,620)(l)
-
---------- ------- ----------- ---------
Total costs and
expenses
- 109,735 (6,150)
103,585
---------- ------- ----------- ---------
Operating income
- 7,115
6,150 13,265
Other income (expense)
Equity in loss of joint
venture
- (386)
- (386)
Interest income
- 19
- 19
Interest expense
- (27)
(8,037)(q) (8,064)
Intercompany interest
expense
- (1,754) 1,754 (r)
-
---------- ------- ----------- ---------
Other expense
- (2,148) (6,283)
(8,431)
---------- ------- ----------- ---------
Income (loss) before
income taxes
- 4,967
(134) 4,833
Income tax provision
- (1,560) 1,560 (s)
-
---------- ------- ----------- ---------
Net income (loss)
$- $3,407 $1,426
$4,833
---------- ------- ----------- ---------
Notes to Table 2 for 2004 Amounts
a) Reflects the addition of actual,
historical operating results for the Golden Nugget Group for the period
during the six months ended June 30, 2004, prior to acquisition by Poster
Financial Group (January 1, 2004 through January 22, 2004).
b) Reflects the elimination of the
signing bonuses paid to key executives upon completion of the Acquisition,
the cost of which are included in results of operations for the period.
Such bonuses are non-recurring in nature and not reflective of
the results of operations on a pro forma basis.
c) Reflects elimination of the management
fee historically charged by MGM MIRAGE for certain corporate functions
and for the use of the Golden Nugget name and related trademark. In connection
with the Acquisition, Poster Financial Group acquired the rights to the
Golden Nugget name and related trademarks; no fee for their use (or amortization
of the cost basis) will be incurred. Also reflects the cost of the replacement
of corporate functions previously provided by MGM MIRAGE, and
which were included in the management fee, for a period
of 22 days prior to the Acquisition (approximately $1.3 million on
an annual basis).
d) Reflects for the period of 22 days,
the net increase in base salaries and minimum bonuses for key executives
of Poster Financial Group and of the Golden Nugget Group under employment
contracts that became effective upon completion of the Acquisition ($555,000
on an annual basis).
e) The employment contracts also provide
for annual incentive bonuses in the event that post-acquisition cumulative
EBITDA
(as defined) exceeds
$30.0 million in 2004, $60.0 million in
2005 and $90.0 million
in 2006. The adjustment of $102,000
represents that
portion of an accrual that would have been
recorded in the
first 22 days of the fiscal quarter, prior to
closing of the Acquisition.
f) Reflects for a period of 22 days
the elimination of (i)
allocations for
certain customer service offices and other MGM
MIRAGE programs
that were not part of the Acquisition ($13,000
for the period)
and (ii) rent expense for slot equipment
leased from an affiliate,
and which were purchased in the
Acquisition ($59,000
for the period).
g) Reflects a net increase in depreciation
expense and amortization of an intangible asset for the players club, resulting
from the impact of purchase price adjustments.
h) Reflects the elimination of interest
earned on funds placed in escrow, pending completion of the Acquisition.
i) To eliminate 22 days of inter-company
interest on the note
payable to MGM MIRAGE,
which note is no longer an obligation
of the Golden Nugget
Group upon the closing of the
Acquisition.
j) The Senior Notes were outstanding
for the entire quarter. The accompanying adjustment reflects an increase
in interest expense, assuming that the $20.0 million term loan taken under
the senior credit facility (upon closing of the Acquisition) was drawn
as of January 1, 2004.
k) Reflects elimination of income
tax expense for earnings during the period prior to the Acquisition. PB
Gaming has elected to be treated as a Subchapter S corporation and has
elected to have each of Poster Financial Group, GNLV and GNL treated as
a qualified Subchapter S subsidiary for federal income tax purposes. As
a result, the owners of PB Gaming will be taxed on the income of PB Gaming,
Poster Financial Group and the Golden Nugget Group at a personal level
and PB Gaming, Poster Financial Group and the Golden Nugget Group generally
will not be subject to federal income taxation at the corporate level.
Notes to Table 2 for 2003 Amounts
l) Reflects elimination of the management
fee historically charged by MGM MIRAGE for certain corporate functions
and for the use of the Golden Nugget name and related trademark. In connection
with the Acquisition, Poster Financial Group acquired the rights to the
Golden Nugget name and related trademarks; no fee for their use (or amortization
of the cost basis) will be incurred. Also reflects the cost of the replacement
of corporate functions previously provided by MGM MIRAGE, and
which were included in the management fee (approximately
$1.3
million on an annual basis).
m) Reflects the net increase ($139,000
on a quarterly basis) in base salaries and minimum bonuses for key executives
of Poster Financial Group and of the Golden Nugget Group under employment
contracts that became effective upon completion of the Acquisition.
n) The employment contracts also provide
for annual incentive bonuses in the event that post-acquisition cumulative
EBITDA (as defined) exceeds $30.0 million in 2004, $60.0 million in
2005 and $90.0 million in 2006. The adjustment of $422,000
represents the quarterly accrual that would have been
recorded as pro forma expense because the 2004 target EBITDA was achieved
on a pro forma basis for the year ended December 31, 2003.
o) Reflects the elimination of (i)
allocations for certain
customer service
offices and other MGM MIRAGE programs that
were not part of
the Acquisition ($110,000 per quarter) and
(ii) rent expense
for slot equipment leased from an affiliate,
and which were purchased
in the Acquisition ($315,000 and
$658,000 for the
three month and six month period ended June
30, 2003, respectively).
p) Reflects a net decrease in depreciation
expense and amortization of an intangible asset for the players club, resulting
from the impact of purchase price adjustments.
q) Reflects an increase in interest
expense for the Senior Notes and the draw of the term loan under the senior
credit facility, including amortization of deferred financing costs.
r) To eliminate inter-company interest
on the note payable to MGM MIRAGE, which note is no longer an obligation
of the Company upon the Acquisition.
s) PB Gaming has elected to be treated
as a Subchapter S
corporation and
has elected to have each of Poster Financial
Group, GNLV and
GNL treated as a qualified Subchapter S
subsidiary for federal
income tax purposes. As a result, the
owners of PB Gaming
will be taxed on the income of PB Gaming,
Poster Financial
Group and the Golden Nugget Group at a
personal level and
PB Gaming, Poster Financial Group and the
Golden Nugget Group
generally will not be subject to federal
income taxation
at the corporate level.
Table 3
Reconciliation of Net Income to EBITDA
EBITDA consists of net income plus (i) interest expense,
(ii) income tax provision (or less income tax benefit), and (iii) depreciation
and amortization expense. EBITDA is presented as a measure of operating
performance because we believe analysts, investors and others frequently
use it in the evaluation of companies in our industry, in particular for
the ability of a company to meet its debt service requirements. Other companies
in our industry may calculate EBITDA differently, particularly as it relates
to non-recurring, unusual items.
EBITDA is not a measurement of financial performance
under GAAP and should not be considered as an alternative to cash flow
from operating activities, as a measure of liquidity, as an alternative
to net income or as an indication of operating performance or any other
measure of performance derived in accordance with GAAP.
The following table provides a reconciliation of net
income (loss) to EBITDA (dollars in thousands):
Pro Forma
Pro Forma
For the Fiscal Quarter For the Six Months
Ended June 30,
Ended June 30,
2003 2004
2003 2004
Net income
$262 $74
$4,833 $6,901
Interest expense 4,033
4,206
8,064 8,223
Income taxes
- -
- -
Depreciation and
amortization
3,255 4,312
6,496 7,553
------ ------
------- -------
EBITDA
$7,550 $8,592
$19,393 $22,677
------ ------
------- -----
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This press release may contain "forward-looking statements," within
the meaning of the Private Securities Litigation Reform Act of 1995, which
involve known and unknown risks.
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