Add
MNTG to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| MNTG > SEC Filings for MNTG > Form 10-Q on 9-Nov-2009 | All Recent SEC Filings |
9-Nov-2009
Quarterly Report
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements include
statements regarding our strategies, objectives and plans for future development
or acquisitions of properties or operations, as well as expectations, future
operating results and other information that is not historical information. When
used in this report, the terms or phrases such as "anticipates", "believes",
"projects", "plans", "intends", "expects", "estimates", "could", "would", "will
likely continue", and variations of such words or similar expressions are
intended to identify forward-looking statements. Although our expectations,
beliefs and projections are expressed in good faith and with what we believe is
a reasonable basis, there can be no assurance that these expectations, beliefs
and projections will be realized.
There are a number of risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements which are included elsewhere in this report. Such risks, uncertainties and other important factors include, but are not limited to:
º •
º changes in, or failure to comply with, laws, regulations or the
conditions of our West Virginia and Pennsylvania gaming licenses (or
the failure to obtain renewals thereof), accounting standards or
environmental laws (including adverse changes in the rates of taxation
on gaming revenues) and delays in regulatory licensing processes;
º •
º competitive and general economic conditions in our markets, including
the impact of the Rivers Casino, which opened in August of 2009 in
downtown Pittsburgh, Pennsylvania and implementation of casino gaming
in Cleveland and Columbus, Ohio, which was approved on November 3,
2009 by referendum;
º •
º the enactment of future gaming legislation in the jurisdictions in
which we operate our casinos or in competing jurisdictions,
particularly the recent developments regarding video lottery terminals
at racetracks in Ohio and table games at casinos in Pennsylvania;
º •
º the success and growth of table gaming at our West Virginia casino;
º •
º the success of non-taxable promotional credits (commonly referred to
as "free play") at our West Virginia casino;
º •
º construction factors relating to maintenance and expansion of
operations;
º •
º general economic and market conditions;
º •
º volatility and disruption of the capital and credit markets;
º •
º dependence on our West Virginia and Pennsylvania casinos for the
majority of our revenues and cash flows;
º •
º dependence upon key personnel and the ability to attract new
personnel;
º •
º the ability to retain and attract customers;
º •
º weather or road conditions limiting access to our properties;
º •
º our substantial indebtedness;
º •
º the ability to refinance existing debt, or obtain additional
financing, if and when needed, and the impact of leverage and debt
service requirements;
º •
º certain covenants in our debt documents;
º •
º the integration and performance of acquired businesses;
º •
º the effect of war, terrorism, natural disasters and other catastrophic
events; and
º •
º the effect of disruptions to our systems and infrastructure.
º •
º the other factors as set forth in Part II Item 1A Risk Factors
Additional factors that could cause our actual performance to differ materially from that contemplated by such forward-looking statements are detailed in our Annual Report on Form 10-K, as amended on Form 10K-A, for the year ended December 31, 2008, as well as other recent filings with the Securities and Exchange Commission. We do not intend to publicly update any forward-looking statements, except as may be required by law.
OVERVIEW
We own and operate Mountaineer Casino, Racetrack & Resort in Chester, West Virginia; Presque Isle Downs & Casino in Erie, Pennsylvania; and Scioto Downs in Columbus, Ohio. We consider these three properties, which are located in contiguous states, to be our core assets. Scioto Downs, through its subsidiary RacelineBet, Inc., also operates Racelinebet.com, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of AmericaTab LTD.
On November 3, 2009, the voters of Ohio approved a proposal for a casino to be located in each of Cleveland, Cincinnati, Toledo, and Columbus. A casino in Cleveland will increase competition at both Mountaineer Casino and Presque Isle Downs commencing approximately in 2013. A casino in Columbus will increase competition at Scioto Downs. We intend to be proactive in our efforts to mitigate the effects of such competition, including continuing our efforts to introduce gaming at Scioto Downs as the Governor of Ohio has proposed and table gaming at Presque Isle Downs, providing first-class customer service at all of our facilities, and further reducing our costs. See "Part II, Item 1A, Risk Factors-We face significant competition from other gaming and racing facilities, and increased competition could have a material adverse effect on us; recent passage of a referendum authorizing four casinos in Ohio will create significant new competition."
Through May 27, 2009, our wholly-owned subsidiary, MTR-Harness, Inc., owned a 50% interest in North Metro Harness Initiative, LLC ("North Metro"), which operates Running Aces Harness Park in Anoka County, Minnesota. We relinquished our interest in North Metro to North Metro's lender pursuant to a settlement agreement with North Metro's lender executed on May 27, 2009. Reclassifications have been made to the prior period presentation to reflect the assets, liabilities, operating results and cash flows of MTR-Harness, Inc. and its interest in North Metro as discontinued operations. See additional information as discussed below.
Through our wholly-owned subsidiary, Jackson Racing, Inc., we own a 90% interest in Jackson Trotting Association LLC ("Jackson Trotting"), which operated Jackson Harness Raceway in Jackson, Michigan. On December 4, 2008, Jackson Trotting ceased the racing and simulcast wagering operations at Jackson Harness Raceway and surrendered its racing license to the Michigan Racing Commission. Reclassifications have been made to the prior period presentation to reflect the assets, liabilities, operating results and cash flows of Jackson Racing, Inc. and its interest in Jackson Trotting as discontinued operations.
Through March 7, 2008 and June 3, 2008, we owned and operated Binion's Gambling Hall & Hotel ("Binion's) in Las Vegas, Nevada, and the Ramada Inn and Speedway Casino ("Speedway") in North Las Vegas, Nevada, respectively. We sold Binion's on March 7, 2008, pursuant to a Stock Purchase Agreement executed between the Company and TLC Casino Enterprises, Inc., and on June 3, 2008, we completed the sale of the Speedway pursuant to the terms of an Asset Purchase and Sale Agreement executed between the Company and Lucky Lucy D, LLC.
The following table sets forth a reconciliation of income (loss) from continuing operations, a GAAP financial measure, to EBITDA from continuing operations, a non-GAAP measure, and income (loss) from discontinued operations, a GAAP financial measure, to EBITDA from discontinued operations, a non-GAAP measure, for each of the three and nine months ended September 30, 2009 and 2008.
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(unaudited, in thousands)
Continuing Operations:
MTR Gaming Group, Inc.
(consolidated)-continuing operations:
(Loss) income from continuing operations $ (2,108 ) $ 3,471 $ 311 $ 314
Interest expense, net of interest income 11,840 10,163 31,281 30,695
(Benefit) provision for income taxes (2,779 ) 1,622 3 261
Depreciation 7,443 7,396 22,031 22,394
Loss on disposal of property 31 1 169 1
Loss on debt modification and
extinguishment 2,773 - 2,773 3,356
Other 39 - 39 -
EBITDA from continuing operations $ 17,239 $ 22,653 $ 56,607 $ 57,021
Mountaineer Casino, Racetrack & Resort:
Income from continuing operations $ 14,314 $ 6,651 $ 20,410 $ 16,093
Interest expense, net of interest income 1,056 2,253 5,522 6,771
(Benefit) provision for income taxes (6,858 ) 2,902 127 7,264
Depreciation 3,672 3,646 10,849 11,151
Loss on disposal of property 30 - 123 -
Loss on debt modification and
extinguishment 773 - 773 -
EBITDA from continuing operations $ 12,987 $ 15,452 $ 37,804 $ 41,279
Presque Isle Downs & Casino:
Income from continuing operations $ 12,889 $ 4,833 $ 18,476 $ 10,524
Interest expense, net of interest income 170 361 292 1,221
(Benefit) provision for income taxes (6,287 ) 2,122 115 4,751
Depreciation 3,561 3,439 10,560 10,313
EBITDA from continuing operations $ 10,333 $ 10,755 $ 29,443 $ 26,809
Scioto Downs:
Loss from continuing operations $ (1,093 ) $ (368 ) $ (1,692 ) $ (1,265 )
Interest expense, net of interest income 22 27 70 83
Provision (benefit) for income taxes 675 27 (11 ) (571 )
Depreciation 203 227 608 679
Other 39 - 39 -
EBITDA from continuing operations $ (154 ) $ (87 ) $ (986 ) $ (1,074 )
Corporate:
Loss from continuing operations $ (28,218 ) $ (7,645 ) $ (36,883 ) $ (25,038 )
Interest expense, net of interest income 10,592 7,522 25,397 22,620
Provision (benefit) for income taxes 9,691 (3,429 ) (228 ) (11,183 )
Depreciation 7 84 14 251
Loss on disposal of property 1 1 46 1
Loss on debt modification and
extinguishment 2,000 - 2,000 3,356
EBITDA from continuing operations $ (5,927 ) $ (3,467 ) $ (9,654 ) $ (9,993 )
|
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(unaudited, in thousands)
Discontinued operations:
MTR-Harness/Running Aces Harness Park:
Income (loss) from discontinued operations $ 2,843 $ (9,742 ) $ 2,042 $ (11,432 )
Interest expense 2 6 7 8
(Benefit) provision for income taxes (2,900 ) 43 (3,314 ) (738 )
Equity in loss of North Metro Harness
Initiative, LLC - 9,682 1,000 12,107
EBITDA from discontinued operations $ (55 ) $ (11 ) $ (265 ) $ (55 )
Jackson Racing/Jackson Harness Raceway:
Income (loss) from discontinued operations $ 24 $ (1,937 ) $ (85 ) $ (2,225 )
Interest expense, net of interest income
and non-controlling interest - 1 - 3
Provision (benefit) for income taxes, net
of non-controlling interest 12 (872 ) (44 ) (1,005 )
Depreciation, net of non-controlling
interest - 9 - 25
Loss on disposal of property, net of
non-controlling interest 115 - 115 159
Loss on impairment of Jackson Trotting
Association, LLC 176 2,586 176 2,586
Other 153 - 153 -
EBITDA from discontinued operations $ 480 $ (213 ) $ 315 $ (457 )
Ramada Inn and Speedway Casino:
(Loss) income from discontinued operations $ (1 ) $ (11 ) $ 29 $ 1,477
Interest (income) expense - - (1 ) 163
Provision (benefit) for income taxes 1 (7 ) 15 1,009
Depreciation - - - 199
Loss (gain) on disposal of property - 13 - (3,603 )
EBITDA from discontinued operations $ - $ (5 ) $ 43 $ (755 )
Binion's Gambling Hall & Hotel:
Loss from discontinued operations $ (181 ) $ (21 ) $ (616 ) $ (1,308 )
Interest income, net of interest expense - - - (29 )
Benefit for income taxes (96 ) - (321 ) (879 )
(Gain) loss on disposal of property - (11 ) - 673
EBITDA from discontinued operations $ (277 ) $ (32 ) $ (937 ) $ (1,543 )
|
EBITDA represents earnings (losses) before interest expense (income), income tax expense (benefit), depreciation and amortization, loss on debt modification and extinguishment, equity in loss of unconsolidated joint venture, (gain) loss on disposal of property and loss on asset impairment. EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP, is unaudited and should not be considered an alternative to, or more meaningful than, net income or income from operations as an indicator of our operating performance, or cash flows from operating activities, as a measure of liquidity. EBITDA 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. Uses of cash flows that are not reflected in EBITDA include capital expenditures (which are significant given our expansion), interest payments, income taxes, and debt principal repayments. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do. The definition of EBITDA may not be the same as the definitions used in any of our other debt agreements.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2008
The following tables set forth information concerning our results of
operations by property for continuing operations.
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(unaudited, in thousands)
Net revenues-continuing operations:
Mountaineer Casino, Racetrack & Resort $ 68,882 $ 77,255 $ 207,716 $ 226,663
Presque Isle Downs & Casino 49,173 51,497 139,985 139,237
Scioto Downs 1,402 2,029 2,579 3,605
Corporate 21 3 30 9
Consolidated net revenues $ 119,478 $ 130,784 $ 350,310 $ 369,514
|
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(unaudited, in thousands)
Operating income (loss)-continuing
operations:
Mountaineer Casino, Racetrack & Resort $ 9,286 $ 11,806 $ 26,832 $ 30,128
Presque Isle Downs & Casino 6,772 7,315 18,883 16,496
Scioto Downs (356 ) (313 ) (1,593 ) (1,752 )
Corporate (5,937 ) (3,552 ) (9,715 ) (10,246 )
Consolidated operating income $ 9,765 $ 15,256 $ 34,407 $ 34,626
|
Mountaineer's Operating Results:
During the three months ended September 30, 2009, Mountaineer's operating results continued to be affected by competition, primarily from slot operations in Pennsylvania. Net revenues decreased by $8.4 million, or 10.8%, compared to the three-month period of 2008, which included a $5.5 million decrease in gaming revenues. Net revenues earned from food, beverage and lodging operations decreased by $1.0 million, and net revenues earned from other sources, including pari-mutuel commissions decreased by $1.2 million. Promotional allowances increased by $0.7 million. Mountaineer's overall operating margin decreased to 13.5% in 2009 from 15.3% in 2008 due to the revenue decline and increased marketing expenditures.
During the nine months ended September 30, 2009, Mountaineer's operating results were adversely affected by severe weather conditions in January and February of 2009 and the continued effect of competition, primarily from slot operations in Pennsylvania. Net revenues decreased by $18.9 million, or 8.4%, compared to the nine-month period of 2008, primarily due to a $12.7 million decrease in gaming revenues. Net revenues earned from food, beverage and lodging operations decreased by $2.7 million, and net revenues earned from other sources, including pari-mutuel commissions decreased by $1.8 million. Promotional allowances increased by $1.7 million. Mountaineer's overall operating margin decreased to 12.9% in 2009 from 13.3% in 2008.
Significant factors contributing to Mountaineer's 2009 operating results were:
º •
º a decline in the gross profit from gaming operations (as discussed
below);
º •
º an increase in marketing promotions and advertising costs of
$1.4 million and $4.8 million during the three- and nine-month periods
of 2009, respectively, related to aggressive cash promotion campaigns
prior to the implementation of free play on September 1, 2009; offset
by
º •
º an overall decrease in compensation and benefits costs of $3.3 million
and $8.5 million during the three- and nine-month periods of 2009, as
well as other cost savings programs.
A discussion of Mountaineer's key operations follows.
Gaming Operations. Revenues from gaming operations during the three months ended September 30, 2009 decreased by $5.5 million, or 8.2%, to $61.5 million compared to the same period of 2008, and gross profit decreased by $1.9 million, or 7.2%. The decline in the gross profit resulted primarily from the total gaming revenue decline. Revenues from slot operations decreased by $3.7 million to $50.0 million in 2009 compared to $53.7 million in 2008, and poker and table gaming revenue decreased by $1.8 million, generating revenues of $1.5 million and $9.9 million, respectively, in 2009 compared to $1.7 million and $11.5 million, respectively, in 2008.
During the nine months ended September 30, 2009, revenues from gaming operations decreased by $12.7 million, or 6.4%, to $185.9 million compared to the same period of 2008, and gross profit decreased by $3.2 million, or 4.3%. Revenues from slot operations decreased by $11.3 million to $150.3 million in 2009 compared to $161.6 million in 2008, and poker and table gaming revenue decreased by $1.4 million, generating revenues of $4.9 million and $30.6 million, respectively, in 2009 compared to $5.6 million and $31.3 million, respectively, in 2008.
The following tables set forth statistical information concerning Mountaineer's gaming operations.
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(unaudited)
Slots:
Average daily net win per
slot machine $ 192 $ 182 $ 184 $ 184
Hold percentage 8.7 % 9.1 % 9.0 % 9.1 %
Average number of slot
machines 2,838 3,192 2,993 3,192
Tables:
Total table drop $ 55,655,000 $ 61,661,000 $ 164,802,000 $ 170,775,000
Average daily net win per
table $ 1,631 $ 2,270 $ 1,914 $ 2,120
Hold percentage 17.8 % 18.6 % 18.6 % 18.3 %
Average number of tables 66 55 59 54
Poker:
Average daily poker rake
per table $ 411 $ 472 $ 448 $ 518
Average number of tables 40 40 40 40
|
Management attributes the decrease in slot revenue to severe weather conditions in January and February and the continuing impact on our market from gaming operations in Pennsylvania, with which Mountaineer shares some customer base in Ohio and Pennsylvania. On August 9, 2009, the Rivers Casino in downtown Pittsburgh, Pennsylvania, approximately a one-hour drive from Mountaineer, opened with 3,000 slot machines and various food, beverage and entertainment venues. Additionally, The Meadows Racetrack & Casino, a harness racetrack in Washington, Pennsylvania, which is approximately 40 miles southeast of Mountaineer, opened its permanent casino on April 15, 2009, with over 3,700 slot machines and various food and beverage outlets.
On September 1, 2009, Mountaineer began to offer its patrons the ability to play slot machines with promotional credits (commonly referred to as "free play"). Promotional credits are not subject to taxes and assessments. Management believes that free play will allow Mountaineer to compete more effectively with gaming operations in Pennsylvania which already have free play. To-date, we have converted 2,020 of our slot machines and the state's central monitoring system to accommodate free play and plan to convert an additional 189 slot machines through January 2010. Capital expenditures related to the conversion of our slot machines to accommodate free play amounted to approximately $1.7 million through September 30, 2009, and is not expected to exceed $3.0 million in the aggregate. We believe table games, and the implementation of free play, at Mountaineer will continue to enhance Mountaineer's competitive position by drawing new customers and driving increased play from our existing customers, which may contribute to Mountaineer's gaming revenue growth. On July 9, 2009, Mountaineer opened 11 additional table games to further distinguish our gaming product from slot machines in West Virginia's local bars and clubs and slot machine operations in Pennsylvania. However, gaming operations at Mountaineer during 2009 may continue to be impacted by competitive pressures from the Rivers Casino in downtown Pittsburgh, Pennsylvania and The Meadows Racetrack & Casino in Washington, Pennsylvania.
During the three-month periods of 2009 and 2008, taxes and assessments approximated 55.4% of slot revenues. For poker and table gaming operations, the tax rate was 40.5% and 39.7% for the three-month periods of 2009 and 2008, respectively. Overall, gaming taxes and assessments decreased by $2.7 million to $32.3 million during the three-month period of 2009 compared to the same period of 2008. Additionally, gaming compensation and benefits costs decreased by $0.9 million during 2009 compared to 2008 principally as a result of cost containment efforts.
During the nine-month period of 2009, the decrease in revenues from slot operations resulted in taxes and assessments as a percentage of slot revenues to be 56.2% compared to 56.7% during the same period of 2008. For poker and table gaming operations, the tax rate was 40.3% and 40.0% for the nine-month periods of 2009 and 2008, respectively. Overall, gaming taxes and assessments decreased by $7.5 million to $98.8 million during the nine-month period of 2009 compared to the same period of 2008. Additionally, gaming compensation and benefits costs decreased by $2.0 million during 2009 compared to 2008 principally as a result of cost containment efforts.
Pari-mutuel Commissions. Pari-mutuel commissions for Mountaineer, detailing gross handles less patron payouts and deductions, for the three and nine months ended September 30 were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(unaudited, in thousands)
Import simulcast racing pari-mutuel
handle $ 3,257 $ 4,132 $ 10,537 $ 13,724
Live racing pari-mutuel handle 2,539 2,851 5,904 6,493
Less patrons' winning tickets (4,575 ) (5,511 ) (12,982 ) (15,955 )
1,221 1,472 3,459 4,262
Revenues-export simulcast 2,759 3,236 7,636 8,575
3,980 4,708 11,095 12,837
Less:
State and county pari-mutuel tax (117 ) (122 ) (327 ) (335 )
Purses and Horsemen's Association (1,755 ) (2,103 ) (4,851 ) (5,693 )
Revenues-pari-mutuel commissions $ 2,108 $ 2,483 $ 5,917 $ 6,809
|
. . .
|
|