Pinnacle Entertainment reports 2017 fourth quarter and full year financial results

2017 Full Year Highlights:

Pinnacle's net revenues increased by $183.0 million or 7.7% year over year to a record $2.6 billion. Net revenues included a $281.9 million contribution from The Meadows versus $83.9 million in the prior year. The Company acquired The Meadows on September 9, 2016.

Income from continuing operations was a record $61.7 million versus a loss of $457.9 million in the prior year. GAAP diluted net income per share was $1.02 versus a net loss per share of $7.79 in the prior year. Income from continuing operations for the fourth quarter and full year 2017 included a benefit of approximately $21.5 million related to the Tax Cuts and Jobs Act of 2017.

Consolidated Adjusted EBITDAR increased by $47.4 million or 7.2% year over year to a record $701.9 million and included growth of $9.1 million or 1.4% in the Company's same-store portfolio. Same-store Consolidated Adjusted EBITDAR margin increased by 60 basis points to 28.5%.

Consolidated Adjusted EBITDA, net of Lease Payments, was $295.6 million, an increase of $26.0 million or 9.6% year over year.

The Company repurchased 1.15 million shares of its common stock for total consideration of $22.3 million or an average price of $19.51 per share.

Conventional Debt was reduced by $131.2 million in 2017, including $12.8 million in the 2017 fourth quarter, bringing the Company's Conventional Debt balance to $821.7 million as of December 31, 2017.

On December 17th, the Company entered into a definitive agreement under which Penn National Gaming will acquire the Company. Under the terms of the agreement, Pinnacle stockholders will receive consideration of $20.00 in cash and 0.42 shares of Penn National common stock for each Pinnacle share they own. The transaction is expected to close in the second half of 2018, subject to customary closing conditions, required regulatory approvals and approval by Penn National’s and Pinnacle’s stockholders.

2017 Fourth Quarter Highlights:

Net revenues decreased by $16.6 million or 2.6% year over year to $620.8 million.

Income from continuing operations was $22.2 million versus a loss of $9.0 million in the prior year. GAAP diluted net income per share was $0.36 versus a loss per share of $0.16 in the prior year.

Consolidated Adjusted EBITDAR decreased by $1.5 million or 0.9% year over year to $168.2 million. Consolidated Adjusted EBITDAR of $169.7 million in the prior year period included a benefit of $4.6 million due to lower expense accruals from compensation program changes.

Consolidated Adjusted EBITDAR margin increased by 50 basis points year over year to 27.1%.

2017 fourth quarter Consolidated Adjusted EBITDAR and margin expansion was led by strong performance of the Company's Ameristar St. Charles, River City, Ameristar Black Hawk, The Meadows, and Belterra Park businesses.

Consolidated Adjusted EBITDA, net of Lease Payments, was $65.3 million, a decrease of $3.0 million or 4.4% year over year.

2017 was an outstanding year for Pinnacle Entertainment

Anthony Sanfilippo, Chairman and Chief Executive Officer of Pinnacle Entertainment, commented, "2017 was another terrific year for Pinnacle Entertainment's shareholders. We are very proud of the dedicated effort and work of the team members across our portfolio of businesses and at our Las Vegas Service Center, which is the driving force behind the positive financial outcomes we have been able to achieve. In 2017, we produced record net revenues and Consolidated Adjusted EBITDAR, which are the results of the many operational excellence initiatives we have implemented over the past two years along with the returns on the focused and prudent capital investments made across our portfolio of businesses. We have also strived to make continuous progress on our balance sheet, while also returning capital to our shareholders. In 2017, we repaid $131.2 million of debt and repurchased $22.3 million of Pinnacle shares at an average price of $19.51."

"Our strong 2017 financial results were driven by balanced regional same-store Adjusted EBITDAR growth and margin expansion, as well as the first full year of contributions from The Meadows. Overall, we achieved net revenue growth of 7.7% to a record $2.6 billion and Consolidated Adjusted EBITDAR growth of 7.2% to a record $701.9 million. Underlying these results is Consolidated Adjusted EBITDAR growth of 1.4% and Consolidated Adjusted EBITDAR margin expansion of 60 basis points in our same-store portfolio of businesses.

"Our 2017 financial results were led by exceptional performances from our River City, L'Auberge Baton Rouge, L'Auberge Lake Charles, and Ameristar Black Hawk businesses throughout the year. In the South segment, L'Auberge Lake Charles, the perennial thoroughbred of our portfolio, grew Adjusted EBITDAR 2.6% and expanded margins 170 basis points despite the severe hurricane headwinds the property faced in the third quarter of the year due to flooding in Houston and Southeast Texas. L'Auberge Baton Rouge grew net revenues 5.0% and Adjusted EBITDAR 9.8%, profitably expanding Adjusted EBITDAR margins by 130 basis points in 2017. River City, in our Midwest segment, expanded Adjusted EBITDAR margins by 140 basis points through profitable net revenue and Adjusted EBITDAR growth of 1.4% and 5.7%, respectively. Rounding out the segments, Ameristar Black Hawk in the West produced a superb year with net revenue growth of 3.6%, Adjusted EBITDAR growth of 5.1%, and Adjusted EBITDAR margin expansion of 60 basis points. Ameristar Black Hawk continues to benefit from our multi-year effort to reposition it as the premier gaming entertainment destination resort in the broader Denver market.

"Our focus in 2018 remains on operations and our initiatives to drive profitable revenue streams and expense efficiency. We continue to pursue prudent capital investments to maintain the high-quality businesses in our portfolio and expand the amenities we provide our guests. At Ameristar East Chicago, we have an approximately $20 million capital initiative underway to construct a new land-based high limit casino space and renovate the existing casino floors of the property. The renovation of the existing casino floors, which we expect will be completed this summer, will improve the overall quality of the gaming entertainment experience at Ameristar East Chicago, while allowing us to optimize its capacity, layout and game mix."

"The most notable moment of 2017 occurred on December 18, when we announced that we signed a definitive agreement under which Penn National will acquire Pinnacle in a landmark transaction valued at approximately $2.8 billion. Under the terms of the agreement, Pinnacle shareholders will receive $20.00 in cash and 0.42 shares of Penn National common stock for each Pinnacle share they own. As we noted on the day we jointly announced this transaction with Penn National, we believe the resulting combined company will be the preeminent regional gaming entertainment resort operator in North America, with significantly enhanced scale, geographic diversity and substantial free cash flow generation. We believe the transaction provides our shareholders with both immediate value and the opportunity to participate in the potential upside expected from the significant operating synergies anticipated to be generated by the combination."

"We will make every effort to maximize the financial performance of our gaming entertainment businesses and to repay debt on our balance sheet, with the goal of having our Company on its best financial footing at the time of the closing of the transaction with Penn National. We will also work closely with the Penn National team to obtain the necessary regulatory approvals and to plan a smooth transition and seamless integration of these two great companies upon the closing of the transaction," concluded Mr. Sanfilippo."

The full report can be found here.