Full House Resorts Q3 Consolidated Net Revenues Increased 4.1%

Net Income for the Third Quarter of 2015 Rose to $2.0 Million, or $0.11 per Common Share

Full House Resorts (NASDAQ: FLL) yesterday announced results for the third quarter and year-to-date period ended September 30, 2015.

“The third quarter of 2015 continued many of the trends that we saw in the first half of the year,” said Daniel R. Lee, President and Chief Executive Officer of Full House Resorts. “Adjusted Property EBITDA(a) at the Silver Slipper continued to grow, up 39.0% from the third quarter of 2014. The property continues to benefit from marketing initiatives enacted earlier in the year and its new hotel, which began its phased opening in May and had its official grand opening on September 22. With hotel construction complete, we regained full access to our surface parking lot and introduced our guests to our newest amenity.

“At Rising Star, the property benefited from a $1.4 million property tax settlement and a careful focus on costs,” continued Mr. Lee. “Adjusted Property EBITDA increased to $2.5 million in the third quarter of 2015 from $1.7 million in last year’s period. Both periods benefited from adjustments. This year’s third quarter reflected the property tax settlement, while last year’s third quarter included a $612,000 adjustment for over-accrual of gaming taxes. Additionally, last week we unveiled some exciting holiday changes at Rising Star, transforming the resort into the region’s first-ever Christmas Casino. Through January 3, guests can enjoy a uniquely festive holiday environment, complete with animatronic displays, special holiday menus at our re-branded Mrs. Claus’s Kitchen Buffet and Yuletide Inn restaurants, live reindeer, and a crew of Santa’s helpers throughout the resort. We hosted a press event on November 5 and are pleased with the early reaction to our unique approach to the holiday season.

“Our Northern Nevada segment is also showing encouraging signs. At Grand Lodge Casino, casino volumes grew in the quarter, with our slot coin-in increasing 5.6% and our table games drop rising 11.0%. Hold percentages, however, were below last year, causing modest declines in net revenues and Adjusted Property EBITDA. At Stockman’s Casino, a careful focus on costs and new marketing initiatives helped improve Adjusted Property EBITDA, but not enough to offset the effects of adverse hold at Grand Lodge Casino.

“Lastly, Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado continues to benefit from its May 2015 expansion, and its financial results continue to rise from when we signed our purchase agreement. Simultaneous with the acquisition process for Bronco Billy’s, we are in the midst of refinancing our debt, and expect to conclude both in late 2015 or early 2016.”

On a consolidated basis, net revenues in the third quarter of 2015 were $34.3 million versus $32.9 million in the prior-year period. The prior-year results included $273,000 of revenues from a tribal management agreement that expired in September 2014. Adjusted EBITDA rose 20.5% (to $6.3 million from $5.2 million) despite the expiration of the tribal management contract. The current-period results reflect marketing improvements at Silver Slipper and the opening of our new hotel, cost controls and the $1.4 million property tax settlement at Rising Star, and a focus on expense reduction at Stockman’s Casino and at corporate.

Net income for the third quarter of 2015 was $2.0 million, or $0.11 per common share, compared to a net loss of $766,000, or a loss of $0.04 per common share, in the prior-year period.

Third Quarter 2015 Highlights and Subsequent Events

  • Net revenues at the Silver Slipper Casino and Hotel rose 23.0% in the third quarter of 2015 to $14.9 million from $12.1 million in the prior-year quarter. Adjusted Property EBITDA rose 39.0% to $2.4 million in the 2015 third quarter from $1.7 million in the 2014 period. The property continues to benefit from marketing changes enacted early in 2015, as well as the opening of its 129-room hotel. The Silver Slipper’s hotel opened in phases beginning in May 2015 and, as of late September, is now completely open. The total construction costs for the hotel, including capitalized interest, were approximately $20.5 million.
  • At the Rising Star Casino Resort, net revenues were $12.6 million in the 2015 third quarter versus $13.4 million in the 2014 period. Careful cost controls and a $1.4 million property tax settlement resulted in Adjusted Property EBITDA rising to $2.5 million from $1.7 million. The property tax settlement resolves the Company’s appeal of its real property tax assessments in Ohio County, Indiana for the tax years 2011 through 2014, establishes the real property tax assessment for the tax year 2015, and creates certain parameters affecting the calculation of the real property assessment for the tax years 2016 and 2017.
  • On November 5, 2015, Rising Star was transformed into the Christmas Casino, complete with elaborate animatronic displays, live reindeer, holiday outfits for our operations team on the casino floor, and special Christmas menus at the resort’s restaurants, which have been re-branded for the holiday season. For further information on the Christmas Casino, please visit www.TheChristmasCasino.com.
  • The Northern Nevada segment, which consists of the Grand Lodge and Stockman’s casinos, was affected by adverse hold during the third quarter of 2015. At Grand Lodge Casino, both table games and slot volumes increased versus the prior-year period, up 11.0% and 5.6%, respectively. Hold in the casino, however, was below both the third quarter of 2014 and the three-year historical average. As a result, Northern Nevada revenues declined to $6.8 million from $7.1 million in the 2014 third quarter. Adjusted Property EBITDA for the Northern Nevada segment was $2.2 million in the third quarter of 2015 versus $2.5 million in the 2014 period.
  • On September 27, 2015, the Company entered into an agreement to purchase the assets and certain liabilities of Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado for $30.0 million, subject to working capital and other certain adjustments. Targeting the approximately 700,000 people in the Colorado Springs MSA, Bronco Billy’s has approximately 830 slot and video poker machines, 13 table games, a 24-room hotel, a steakhouse, four casual dining outlets, and an outdoor amphitheater. We expect to close on this acquisition in late 2015 or early 2016 simultaneous with the refinancing of the Company’s outstanding first and second lien debt, subject to regulatory approvals and completion of other customary closing conditions.
  • The Company incurred approximately $730,000 of project development, acquisition, and pre-opening expenses during the third quarter of 2015. Of this amount, approximately $452,000 related to Bronco Billy’s Casino and Hotel, both for due diligence and the negotiation of the purchase agreement. Approximately $215,000 related to the Company’s American Place proposal.
  • The Company has made numerous presentations in Indianapolis regarding its American Place proposal, wherein it responded to a “request for proposals” (RFP) issued by the Indianapolis Airport Authority. The Airport Authority has indicated that it intends to reach a decision in its RFP process by year end. The Company’s American Place proposal involves development of a $650 million lifestyle center with, amongst other items, approximately 700,000 square feet of high-end creative retail space, unique attractions, apartments, offices, and theaters, anchored by a modest-sized, high-end casino. The proposal does not seek any public funding or financial support, but will require legislative approval to relocate approximately half of the gaming capacity currently permitted at Rising Star Casino Resort. A third-party study estimates that American Place would generate approximately $85 million per year in state and local taxes, create approximately 4,000 permanent jobs, and attract 10 to 15 million visitors per year. Additional details are available at www.AmericanPlace.us.

Liquidity and Capital Resources

As of September 30, 2015, the Company had $14.5 million in cash (including restricted cash) and $68.0 million in outstanding first and second lien debt. Of the Company’s $5.0 million revolving credit facility, $0.5 million was drawn at September 30, 2015. The Company’s other debt is principally $6.3 million that remains outstanding on the capital lease related to the hotel that opened at Rising Star in late 2013.

Reconciliation of Non-GAAP Financials

(a) We define “Adjusted EBITDA” as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, impairment charges, asset write-offs, recoveries, gain (loss) from asset disposals, board and executive transition costs, pre-opening expenses, project development and acquisition costs, and non-cash share-based compensation expense. “Adjusted Property EBITDA” is Adjusted EBITDA before corporate related costs and expenses which are not allocated to each property. Although Adjusted EBITDA and Adjusted Property EBITDA are not measures of performance or liquidity calculated in accordance with generally accepted accounting principles (“GAAP”), we believe these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity. We utilize Adjusted EBITDA and Adjusted Property EBITDA internally to focus management on year-over-year changes in our core operating performance, which we consider our ordinary, ongoing and customary operations and which we believe is useful information to investors. Accordingly, management excludes certain items when analyzing core operating performance, such as the items mentioned above, that management believes are not reflective of ordinary, ongoing and customary operations.

In addition, because Adjusted EBITDA and Adjusted Property EBITDA are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of Adjusted EBITDA and Adjusted Property EBITDA is presented below. However, you should not consider these measures in isolation or as substitutes for operating income, cash flows from operating activities, or any other measure for determining our operating performance or liquidity that is calculated in accordance with GAAP. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA and Adjusted Property EBITDA, you should be aware that, in the future, we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA and Adjusted Property EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

 

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2015   2014 2015   2014
Revenues
Casino $ 30,577 $ 29,606 $ 84,374 $ 85,136
Food and beverage 6,891 5,298 19,053 15,607
Hotel 2,020 1,314 4,836 3,830
Management fees 273 1,066
Other operations 1,208   1,098   2,890   2,737  
Gross revenues 40,696 37,589 111,153 108,376
Less promotional allowances (6,430 ) (4,672 ) (17,077 ) (13,700 )
Net revenues 34,266   32,917   94,076   94,676  
Operating costs and expenses
Casino 15,600 14,099 43,569 43,763
Food and beverage 2,282 2,170 6,632 6,492
Hotel 248 214 678 537
Other operations 372 370 1,023 996
Selling, general and administrative 9,570 10,937 30,763 32,824
Project development, acquisition costs and preopening 730 72 894 407
Depreciation and amortization 2,203 2,398 6,225 7,165
Impairment       11,547  
31,005   30,260   89,784   103,731  
Operating income (loss) 3,261   2,657   4,292   (9,055 )
Other (expense) income
Interest expense, net of capitalized interest (1,829 ) (1,614 ) (4,876 ) (4,702 )
Settlement loss (1,700 ) (1,700 )
Other   (61 ) 12   (68 )
(1,829 ) (3,375 ) (4,864 ) (6,470 )
Income (loss) before income taxes 1,432 (718 ) (572 ) (15,525 )
Provision (benefit) for income taxes (603 ) 48   (425 ) (5,186 )
Net income (loss) $ 2,035   $ (766 ) $ (147 ) $ (10,339 )
Basic and diluted loss per share $ 0.11   $ (0.04 ) $ (0.01 ) $ (0.55 )
Basic and diluted weighted average number of common shares outstanding 18,969   18,877   18,927   18,874  
 
   

Full House Resorts, Inc.

Supplemental Information

Segment Revenues and Adjusted EBITDA and

Reconciliation of Adjusted EBITDA to Operating Income (Loss) and Net Income (Loss)

(In Thousands, Unaudited)

 

Three months ended Nine months ended
September 30, September 30,
2015   2014 2015   2014
Net Revenues
Silver Slipper Casino and Hotel $ 14,894 $ 12,111 $ 42,967 $ 36,879
Rising Star Casino Resort 12,563 13,399 35,444 40,188
Northern Nevada Casinos 6,809 7,134 15,665 16,543
Development/Management 273 1,066
Corporate        
$ 34,266   $ 32,917   $ 94,076   $ 94,676  
 
Adjusted EBITDA
Silver Slipper Casino and Hotel $ 2,413 $ 1,736 $ 7,774 $ 6,009
Rising Star Casino Resort 2,455 1,650 3,251 2,503
Northern Nevada Casinos 2,227 2,463 3,269 3,847
Development/Management 273 1,066
Corporate (844 ) (936 ) (2,964 ) (3,091 )
6,251   5,186   11,330   10,334  
 
Depreciation and amortization (2,203 ) (2,398 ) (6,225 ) (7,165 )
Impairment (11,547 )
Write-offs, recoveries and asset disposals 366 (51 )
Preopening (21 ) (134 )
Project development & acquisition costs (709 ) (72 ) (760 ) (407 )
Stock compensation (57 ) (59 ) (285 ) (219 )
Operating income (loss) 3,261   2,657   4,292   (9,055 )
Non-operating expense (income)
Interest expense (1,829 ) (1,614 ) (4,876 ) (4,702 )
Settlement loss (1,700 ) (1,700 )
Other   (61 ) 12   (68 )
(1,829 ) (3,375 ) (4,864 ) (6,470 )
Income (loss) before income taxes 1,432 (718 ) (572 ) (15,525 )
Provision (benefit) for income taxes (603 ) 48   (425 ) (5,186 )
Net income (loss) $ 2,035   $ (766 ) $ (147 ) $ (10,339 )
 

About Full House Resorts, Inc.

Full House Resorts owns, develops and operates gaming facilities throughout the country. The Company’s properties include Rising Star Casino Resort in Rising Sun, Indiana; Silver Slipper Casino and Hotel in Hancock County, Mississippi; and Stockman’s Casino in Fallon, Nevada. The Company also operates the Grand Lodge Casino at the Hyatt Regency Lake Tahoe Resort, Spa and Casino in Incline Village, Nevada on the north shore of Lake Tahoe under a lease agreement with the Hyatt organization. The Company recently announced its intent to purchase Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado and has proposed American Place, a major development in Indianapolis, Indiana.