Pinnacle Entertainment announces Q2 2016 financial results

On April 28, Former Pinnacle completed the spin-off of its operating businesses and some real property into Pinnacle, a new publicly traded entity, which was followed by the sale of substantially all of the its real estate assets to Gaming and Leisure Properties, Inc. The company operates its gaming entertainment businesses subject to a 35-year triple net Master Lease with GLPI for the real estate assets sold in the transaction. The company began accounting for the GLPI Master Lease as a financing obligation upon the closing of the transaction.

2016 Second Quarter Highlights:

• Net revenues were $566.2 million, a decrease of $15.8 million or 2.7% year over year. Management estimates that abnormally low table hold percentage at the Company's L'Auberge Lake Charles and Ameristar East Chicago businesses negatively impacted Net revenues by approximately $9 million.
• Loss from continuing operations was $489.2 million versus income of $15.8 million in the prior year period. GAAP diluted net loss per share was $8.04 versus income per share of $0.34 in the prior year period. Loss from continuing operations and GAAP diluted net loss per share were negatively affected by multiple items recorded in the 2016 second quarter related to the completion of the GLPI transaction, which are detailed in this press release.
• Consolidated Adjusted EBITDAR was $157.0 million, which is presented before the impact of Lease Payments, an increase of $2.7 million or 1.7% year over year. Management estimates that abnormally low table hold percentage negatively impacted Consolidated Adjusted EBITDAR and Consolidated Adjusted EBITDA, net of Lease Payments by approximately $6 million.
• Consolidated Adjusted EBITDAR margin increased by 122 basis points to 27.7%. 2016 second quarter results were driven by broad-based operational efficiencies, with strong Adjusted EBITDAR and Adjusted EBITDAR margin performances at L'Auberge Baton Rouge, Belterra Park, Ameristar Black Hawk, River City and Ameristar Council Bluffs.
• Consolidated Adjusted EBITDA, net of Lease Payments was $63.0 million, which gives effect to the cash rent payments made to GLPI under the Master Lease as if it were in place for the entire 2016 second quarter and the prior year period, an increase of $2.7 million or 4.5%.

Additional Highlights:

• Since inception in May 2016, the Company repurchased 4.53 million shares of its common stock for $50 million or $11.05 per share, including the repurchase of 2.2 million shares for $24.7 million in the 2016 second quarter. The Company's shares of common stock outstanding as of August 8, 2016 were approximately 57.1 million, a reduction of approximately 7.4%.
• The Company repaid $21 million of principal amount of Conventional Debt since the closing of the GLPI transaction. As of June 30, 2016, the Company had a total principal balance of Conventional Debt of $839 million, which currently carries a weighted average interest rate of approximately 4.3%.
• The Company expects to complete the previously announced acquisition of The Meadows Casino and Racetrack ("Meadows") in September 2016, subject to regulatory approvals and customary closing conditions.

Anthony Sanfilippo, Chief Executive Officer of Pinnacle Entertainment, commented, "We are very pleased with the progress made across our portfolio of businesses and at our Las Vegas service center with the execution on our operational improvement initiatives so far in 2016 and are very optimistic about the future of Pinnacle Entertainment. We have been diligently focused on providing memorable experiences to our guests through quality service experiences, as well as through outstanding facilities and amenities.

"In the 2016 second quarter, we generated $2.7 million or 1.7% Consolidated Adjusted EBITDAR growth despite a $15.8 million or 2.7% decline in net revenue"

"Our revenue performance was impacted by low table games hold percentage at L'Auberge Lake Charles and Ameristar East Chicago, persistent flooding in southeast Texas, and highway interchange work near Ameristar St. Charles. Excluding the properties impacted by these factors, net revenues were essentially unchanged year over year and Adjusted EBITDAR increased by $8 million or 8.8%. Broader core consumer demand trends moderated in the 2016 second quarter, however, we saw improvements in several key areas of focus. Table game drop and spend per trip both increased at a mid-single digit pace in the 2016 second quarter. Additionally, we experienced our sixth consecutive quarter of growth in unrated play, with volume increasing at a low single digit pace in this segment in the 2016 second quarter.

"Our Consolidated Adjusted EBITDAR and margin performance was driven by additional progress on efficiency initiatives and the continued build out of our operating capabilities. Our Consolidated Adjusted EBITDAR margin increased by 122 basis points year over year to 27.7% in the 2016 second quarter. We achieved this outcome through a combination of marketing expense efficiencies, general and administrative cost reductions, and by leveraging our scale to reduce input costs in our non-gaming businesses. Marketing efficiency was a significant positive driver in the 2016 second quarter, with our marketing reinvestment expenditure declining by 7% year over year and our reinvestment rate declining by 100 basis points year over year.

"The Adjusted EBITDAR and margin growth we generated in the 2016 second quarter was broad-based, with twelve of our fifteen gaming entertainment businesses producing year over year increases. We believe this highlights the operational improvements we have made are driving growth and strong financial outcomes across our entire portfolio.

"Our efforts made in systems and operational efficiency initiatives are producing tangible results. We believe the changes are sustainable improvements to our cost structure and the way we operate our businesses. We are focused on continuing to improve our operating efficiency and financial performance, while enhancing the entertainment experiences we provide to our guests," concluded Mr. Sanfilippo.