MTR Gaming Group Reports 2012 Fourth Quarter Results

MTR Gaming Group Reports 2012 Fourth Quarter Results

Reports Record Fourth Quarter Adjusted EBITDA

CHESTER, W.Va.--(BUSINESS WIRE)-- MTR Gaming Group, Inc. (NasdaqGS: MNTG) today announced financial results for the fourth quarter and full year ended December 31, 2012.


Fourth Quarter 2012 Highlights

  • Net revenue growth of 12.2%, including revenue of $32.4 million for the second quarter of operations at Scioto Downs.

  • Adjusted EBITDA from continuing operations for the fourth quarter of 2012 was $21.2 million, an increase of 6.2% from the prior-year period.

"We continue to be pleased with the ramp-up of operations at our new Scioto Downs gaming facility which generally exceeded our fair share of the Columbus slot market," said Jeffrey J. Dahl, President and Chief Executive Officer of MTR Gaming Group, Inc. "The new facility generated solid revenue and adjusted EBITDA in its second quarter contributing to our record fourth quarter adjusted EBITDA. Although our other regional gaming facilities continue to perform within our expectations, competition, weather and overall weakness in consumer spending has had an effect on them."

"Looking forward to 2013, we will continue our efforts to improve our guests' gaming and entertainment experience through thoughtful spending on capital improvements -including commencing renovation of hotel rooms at Mountaineer Park, redefining the gaming floors at our properties to improve efficiencies and guest interaction, and making other facility improvements," continued Mr. Dahl. "In addition, we will remain focused on maintaining our margins and generating operating efficiencies across our properties."

For the fourth quarter of 2012, the Company's total net revenues were $116.3 million, an increase of 12.2% compared to $103.6 million in the same period of 2011. Adjusted EBITDA from continuing operations in the fourth quarter of 2012 was $21.2 million, an increase of 6.2% from the prior-year period, and adjusted EBITDA margin from continuing operations was 18.2%, a decrease of 110 basis points from the prior-year period.

The Company reported loss from continuing operations of $5.5 million for the quarter, or $0.20 per diluted share, compared to loss from continuing operations of $6.8 million, or $0.24 per diluted share, in the same period of 2011. Excluding a $0.7 million impairment charge in the fourth quarter of 2011, loss from continuing operations in the fourth quarter of 2011 would have been $6.1 million, or $0.22 per diluted share.

Net revenues at Scioto Downs were $32.4 million during the fourth quarter of 2012 compared to $0.3 million during the fourth quarter of 2011. The property generated adjusted EBITDA of $10.8 million, compared to an EBITDA loss of $0.4 million in the same quarter of 2011. The adjusted EBITDA margin for the fourth quarter of 2012 was 33.4%. The increase in net revenues and adjusted EBITDA for the fourth quarter of 2012 was attributable to the opening of the VLT gaming facility on June 1, 2012.

Net revenues at Mountaineer Casino, Racetrack & Resort decreased 15.8% to $47.0 million in the fourth quarter of 2012 compared to $55.8 million in the fourth quarter of 2011. Revenues from slots and table games decreased by $5.5 million and $2.1 million, respectively, compared to the same quarter of 2011. The property saw adjusted EBITDA decrease to $7.2 million from $11.7 million in the comparable quarter of 2011, while the adjusted EBITDA margin at Mountaineer decreased to 15.3% compared to 21.0% in the prior-year quarter. The decrease in gaming revenues and adjusted EBITDA for the fourth quarter of 2012 was primarily attributable to increased competition from Ohio.

Net revenues at Presque Isle Downs & Casino decreased 22.3% to $36.9 million during the fourth quarter of 2012 compared to $47.5 million during the fourth quarter of 2011. Revenues from slots and table games decreased by $8.2 million and $1.7 million, respectively, compared to the same quarter of 2011. The property generated adjusted EBITDA of $5.8 million compared to $10.9 million in the same quarter of 2011, with the adjusted EBITDA margin decreasing to 15.7% compared to 23.0% in the prior-year quarter. The decrease in net revenues and adjusted EBITDA for the fourth quarter of 2012 was primarily attributable to increased competition from Ohio.

Corporate overhead costs totaled $2.6 million during the fourth quarter of 2012 compared to $2.3 million in the prior-year period, with the increase due primarily to corporate marketing costs and insurance-related expenses.

Full Year 2012 Highlights

For the year ended December 31, 2012, MTR's total net revenues increased 14.5% to $490.0 million from $428.1 million in the prior year. Adjusted EBITDA from continuing operations increased 13.6% to $93.8 million (including $2.7 million of project-opening costs) during 2012 from $82.6 million (including $2.1 million received from a mineral rights lease bonus payment and $0.2 million of project-opening costs) last year. For the year ended December 31, 2012, loss from continuing operations was $5.4 million, or $0.19 per diluted share, and included $2.7 million of project-opening costs, $7.8 million of incremental interest expense primarily associated with the Company's debt refinancing in the third quarter of 2011 (net of $1.3 million of capitalized interest), and approximately $3.6 million of income tax expense primarily attributable to additional valuation allowances on deferred tax assets. In the prior year, the Company reported a loss from continuing operations of $51.2 million, or $1.84 per diluted share, which included income tax expense of approximately $4.3 million attributable to an increase in the valuation allowance on deferred tax assets, a $34.4 million pre-tax loss on debt extinguishment associated with MTR's refinancing and $5.9 million of gaming assessment costs. Absent these charges, prior year loss from continuing operations would have been $6.5 million, or $0.23 per diluted share.

See attached tables, including a reconciliation of net loss, a GAAP financial measure, to adjusted EBITDA, as well as the calculation of adjusted EBITDA margin, each of which are non-GAAP financial measures.

Balance Sheet and Liquidity

As of December 31, 2012, MTR had $115.1 million in cash and cash equivalents and $556.7 million in total debt, net of discount. In addition, the Company has $20 million available for borrowing under its revolving credit facility.

Reconciliation of GAAP Measures to Non-GAAP Measures

Adjusted EBITDA represents earnings (losses) before interest, income taxes, depreciation and amortization, gain (loss) on the sale or disposal of property, other regulatory gaming assessment costs, loss on asset impairment, loss on debt modification and extinguishments and equity in loss of unconsolidated joint venture, to the extent that such items existed in the periods presented. Adjusted EBITDA margin represents the calculation of adjusted EBITDA divided by net revenues. Adjusted EBITDA and adjusted EBITDA margin are not measures of performance or liquidity calculated in accordance with generally accepted accounting principles ("GAAP"), are unaudited and should not be considered as an alternative to, or more meaningful than, net income (loss) or operating margin as indicators of our operating performance, or cash flows from operating activities, as a measure of liquidity. Adjusted EBITDA and adjusted EBITDA margin have been presented as supplemental disclosures because they are widely used measures of performance and basis' for valuation of companies in our industry. Management of the Company uses adjusted EBITDA and adjusted EBITDA margin as primary measures of the Company's operating performance and as components in evaluating the performance of operating personnel. 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. Moreover, other companies that provide EBITDA and/or adjusted EBITDA information may calculate EBITDA and/or adjusted EBITDA differently than we do. A reconciliation of GAAP net income (loss) to adjusted EBITDA, as well as the calculation of adjusted EBITDA margin, is included in the financial tables accompanying this release.

Conference Call

Management will conduct a conference call focusing on the financial results and corporate developments today at 4:30 p.m. EST. Interested parties may participate in the call by dialing (888) 505-4375. Please call in 10 minutes before the call is scheduled to begin and ask for the MTR Gaming call (conference ID #4371457).

The conference call will be webcast live via the Investor Relations section of the Company's website at www.mtrgaming.com. To listen to the live webcast please go to the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen to the live call, the conference call will be archived on the Investor Relations section of the Company's website.

A replay of the call will be available two hours following the end of the call through midnight EDT on Thursday, March 14, 2013 at www.mtrgaming.com and by telephone at (877) 870-5176; passcode 4371457.

About MTR Gaming Group

MTR Gaming Group, Inc. is a hospitality and gaming company that through subsidiaries owns and operates Mountaineer Casino, Racetrack & Resort in Chester, West Virginia; Presque Isle Downs & Casino in Erie, Pennsylvania; and Scioto Downs in Columbus, Ohio. For more information, please visit www.mtrgaming.com.

Forward-Looking Statements

Except for historical information, this press release contains forward-looking statements concerning, among other things the prospects for improving the results of our operations at Mountaineer, Presque Isle Downs and Scioto Downs, including the successful operation of video lottery terminals at Scioto Downs. Such statements are subject to a number of risks and uncertainties that could cause the statements made to be incorrect and/or for actual results to differ materially. Those risks and uncertainties include, but are not limited to, the impact of new competition for Mountaineer, Presque Isle Downs and Scioto Downs (including casino gaming and video lottery terminals in Ohio), the successful integration and operation of video lottery terminals at Scioto Downs, the effectiveness of our marketing programs, the enactment of future gaming legislation in the jurisdictions in which we operate, changes in, or failure to comply with, laws, regulations or the conditions of our gaming licenses, accounting standards or environmental laws, including adverse changes in the gaming tax rates that the Company currently pays in its various jurisdictions, general economic conditions, disruption (occasioned by weather conditions or work stoppages) of our operations, our ability to maintain or improve our operating margins, our continued suitability to hold and obtain renewals of our gaming and racing licenses, our ability to fulfill our obligations and comply with the covenants associated with our various debt instruments and/or our ability to obtain additional debt and/or equity financing, if and when needed, and other factors described in the Company's periodic reports filed with the Securities and Exchange Commission.The Company does not intend to update publicly any forward-looking statements, except as may be required by law. The cautionary advice in this paragraph is permitted by the Private Securities Litigation Reform Act of 1995.

MTR GAMING GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share amounts)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31

December 31

2012

2011

2012

2011

Revenues:

Gaming

$

106,184

$

94,122

$

445,848

$

385,300

Pari-mutuel commissions

2,021

1,929

10,368

10,206

Food, beverage and lodging

8,724

7,879

36,489

32,604

Other

3,251

2,610

11,392

11,067

Total revenues

120,180

106,540

504,097

439,177

Less promotional allowances

(3,904

)

(2,951

)

(14,098

)

(11,095

)

Net revenues

116,276

103,589

489,999

428,082

Operating expenses:

Expenses of operating departments:

Gaming

63,189

58,433

267,195

244,268

Pari-mutuel commissions

2,337

2,251

11,083

11,410

Food, beverage and lodging

7,442

5,669

28,554

23,697

Other

1,778

1,468

7,374

6,271

Marketing and promotions

4,090

2,932

16,936

12,610

General and administrative

16,619

12,992

62,738

52,963

Project opening costs

(13

)

36

2,705

197

Depreciation

7,532

6,863

27,511

27,939

Impairment loss

-

685

-

685

(Gain) loss on the sale or disposal of property

(48

)

682

(52

)

470

Total operating expenses

102,926

92,011

424,044

380,510

Operating income

13,350

11,578

65,955

47,572

Other income (expense):

Interest income

9

75

168

145

Interest expense

(17,351

)

(17,162

)

(67,993

)

(60,159

)

Loss on debt extinguishment

-

-

-

(34,364

)

Loss from continuing operations before income taxes

(3,992

)

(5,509

)

(1,870

)

(46,806

)

Provision for income taxes

(1,500

)

(1,256

)

(3,577

)

(4,347

)

Loss from continuing operations

(5,492

)

(6,765

)

(5,447

)

(51,153

)

Discontinued operations:

Income (loss) from discontinued operations before income taxes

-

787

(278

)

787

Provision for income taxes

-

-

-

-

Income (loss) from discontinued operations before non-

-

787

(278

)

787

controlling interest

Non-controlling interest

1

1

1

1

Income (loss) from discontinued operations

1

788

(277

)

788

Net loss

$

(5,491

)

$

(5,977

)

$

(5,724

)

$

(50,365

)

Net (loss) income per share - basic:

Loss from continuing operations

$

(0.20

)

$

(0.24

)

$

(0.19

)

$

(1.84

)

Income (loss) from discontinued operations

-

0.03

(0.01

)

0.03

Net loss

$

(0.20

)

$

(0.21

)

$

(0.20

)

$

(1.81

)

Net (loss) income per share - diluted:

Loss from continuing operations

$

(0.20

)

$

(0.24

)

$

(0.19

)

$

(1.84

)

Income (loss) from discontinued operations

-

0.03

(0.01

)

0.03

Net loss

$

(0.20

)

$

(0.21

)

$

(0.20

)

$

(1.81

)

Weighted average number of shares outstanding:

Basic

28,054,429

27,940,702

28,011,513

27,835,649

Diluted

28,054,429

27,940,702

28,011,513

27,835,649

MTR GAMING GROUP, INC.

SELECTED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31

December 31

2012

2011

2012

2011

Net revenues:

Mountaineer Casino, Racetrack & Resort

$

46,983

$

55,766

$

222,025

$