MNTG Mtr Gaming Grp., Inc. (MM)

MTR Gaming Group, Inc. (NasdaqGS:MNTG) today announced financial results for the fourth quarter and full year ended December 31, 2013.

Fourth Quarter 2013 Results

For the fourth quarter of 2013, the Company’s total net revenues were $114.8 million, a decrease of 0.8% compared to $115.8 million in the same period of 2012. Adjusted EBITDA in the fourth quarter of 2013 was $21.0 million, a decrease of 1.0% from the prior-year period, and adjusted EBITDA margin was 18.3%, comparable to the prior-year period.

“We are pleased with our fourth quarter performance, despite increased competition, soft economic conditions and inclement weather, especially the performance at our Scioto Downs gaming facility, which generated double-digit revenue and adjusted EBITDA growth in the fourth quarter of 2013 and continues to maintain a significant share of the Columbus slot market,” said Joseph L. Billhimer, President and Chief Operating Officer of MTR Gaming Group, Inc. “Although Mountaineer Park’s operations in the fourth quarter also saw double-digit adjusted EBITDA growth, Mountaineer and Presque Isle Downs continued to be impacted by competition, in addition to the unfavorable weather. We remain focused on executing our strategy of delivering exceptional service to our customers through balanced and refined marketing initiatives, continuing to improve our facilities and effectively managing our expense structure.”

The Company reported a net loss of $7.1 million for the fourth quarter of 2013, or $0.25 per diluted share, compared to a net loss of $5.5 million, or $0.20 per diluted share, in the same period of 2012. Excluding $1.6 million in costs associated with MTR Gaming’s strategic initiatives, the net loss in the fourth quarter of 2013 would have been $5.5 million, or $0.19 per diluted share.

Net revenues at Scioto Downs increased 10.8% to $35.9 million in the fourth quarter of 2013 compared to $32.4 million in the fourth quarter of 2012. The property saw adjusted EBITDA increase to $12.2 million from $10.8 million in the comparable quarter of 2012, while the adjusted EBITDA margin at Scioto Downs increased to 34.1% compared to 33.3% in the prior-year quarter. The increase in net revenues and adjusted EBITDA for the fourth quarter of 2013 was primarily due to Scioto Downs maintaining a significant share of the Columbus slot market in the face of competition.

Net revenues at Mountaineer Casino, Racetrack & Resort decreased 2.5% to $45.4 million in the fourth quarter of 2013 compared to $46.5 million in the fourth quarter of 2012. Revenues from slots decreased by $1.0 million and revenue from table games was flat compared to the same quarter of 2012. The property saw adjusted EBITDA increase to $8.0 million from $7.2 million in the comparable quarter of 2012, while the adjusted EBITDA margin at Mountaineer increased to 17.6% compared to 15.4% in the prior-year quarter. The decrease in gaming revenues for the fourth quarter of 2013 was attributable to the combination of unfavorable weather and increased competition from Ohio, while the increase in adjusted EBITDA was primarily attributable to operating efficiencies.

Net revenues at Presque Isle Downs & Casino decreased 9.0% to $33.5 million in the fourth quarter of 2013 compared to $36.8 million in the fourth quarter of 2012. Revenues from slots and table games decreased by $2.7 million and $0.5 million, respectively, compared to the same quarter of 2012. The property generated adjusted EBITDA of $3.5 million compared to $5.8 million in the same quarter of 2012, while the adjusted EBITDA margin decreased to 10.4% compared to 15.8% in the prior-year quarter. The decrease in net revenues and adjusted EBITDA for the fourth quarter of 2013 was primarily attributable to unfavorable weather and increased competition from Ohio gaming facilities.

Corporate overhead costs totaled $2.7 million during the fourth quarter of 2013, exclusive of costs of $1.6 million associated with strategic initiatives, compared to $2.6 million in the prior-year period.

Full Year 2013 Results

For the year ended December 31, 2013, MTR Gaming’s total net revenues increased 2.2% to $497.8 million from $487.0 million in the prior year. Adjusted EBITDA from continuing operations increased 2.2% to $98.7 million from $96.5 million in the prior year. 2013 net loss was $9.1 million, or $0.32 per diluted share, which included $4.4 million in strategic transaction costs and approximately $3.5 million of income tax expense primarily attributable to additional valuation allowances on deferred tax assets. Results for 2013 reflect the full year of operation of MTR Gaming’s Scioto Downs gaming facility, which commenced operations in June 2012, offset in part by the decline in operating results at Mountaineer and Presque Isle Downs due to expanding Ohio competition. In the prior year, the Company reported a net loss of $5.7 million, or $0.20 per diluted share, which included $2.7 million of project-opening costs, a loss of $0.3 million from discontinued operations and approximately $3.6 million of income tax expense primarily attributable to additional valuation allowances on deferred tax assets.

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, 2013, MTR Gaming had $100.1 million in cash and cash equivalents, $7.3 million in restricted cash and $558.8 million in total debt, net of discount. In addition, the Company has $20 million available for borrowing under its revolving credit facility.

MTR Gaming-Eldorado Merger Developments

In connection with the Company’s previously announced strategic business combination with Eldorado HoldCo LLC (“Eldorado”) pursuant to which the Company and Eldorado will become wholly-owned subsidiaries of Eclair Holdings Company (which will be renamed “Eldorado Resorts, Inc.”) (“NewCo”), the Company has received each of the following, all of which are required to consummate the proposed combination:

• an early termination of the Hart-Scott-Rodino (“HSR”) waiting period;
• the requisite consent from holders of the Company’s 11.50% Senior Secured Second Lien Notes due 2019 with respect to proposed amendments to the indenture thereunder permitting the formation of a new holding company as a result of the transactions contemplated by this proposed combination;
• a waiver under the Company’s existing credit facility permitting the closing of the proposed combination; and
• the initial approval from the Pennsylvania Gaming Control Board for the transfer of interest in Presque Isle Downs & Casino, the Company’s gaming operations in Erie, Pennsylvania, in connection with the proposed combination.

The proposed transaction remains subject to certain conditions and approvals, including regulatory approvals from gaming regulators in Louisiana, Nevada, Ohio, Pennsylvania and West Virginia, approval by stockholders of MTR Gaming, registration and listing of NewCo shares and customary closing conditions. The transaction is expected to close in the second half of 2014. For more information about these milestones and other conditions and approvals required, please see the Registration Statement on Form S-4 initially filed by Eclair Holdings Company with the Securities and Exchange Commission on November 4, 2013, and as amended from time to time, as well as other relevant documents concerning the proposed combination.

Reconciliation of GAAP Measures to Non-GAAP Measures

Adjusted EBITDA represents earnings (losses) before interest expense (income), income taxes, depreciation and amortization, gain (loss) on the sale or disposal of property, other regulatory gaming assessment costs, loss on asset impairment, project-opening costs, strategic transaction costs, 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. EDT. Interested parties may participate in the call by dialing (888) 539-3696. Please call in 10 minutes before the call is scheduled to begin and ask for the MTR Gaming call (conference ID #1333875).

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 Tuesday, March 18, 2014 at www.mtrgaming.com and by telephone at (877) 870-5176; passcode 1333875.

About MTR Gaming Group, Inc.

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, the impact of our announced combination with Eldorado, 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   2013     2012     2013     2012     Revenues: Gaming $ 105,360 $ 106,184 $ 454,583 $ 445,848 Pari-mutuel commissions 2,231 2,021 11,163 10,368 Food, beverage and lodging 9,080 8,724 40,631 36,489 Other   3,110     3,251     12,692     11,392   Total revenues 119,781 120,180 519,069 504,097 Less promotional allowances   (4,957 )   (4,393 )   (21,278 )   (17,108 ) Net revenues   114,824     115,787     497,791     486,989     Operating expenses: Costs of operating departments: Gaming Operating 62,157 62,816 266,781 266,804 Other regulatory assessments 201 373 (78 ) 391 Pari-mutuel commissions 2,336 2,337 11,267 11,083 Food, beverage and lodging 7,386 7,442 31,795 28,554 Other 1,790 1,778 8,309 7,374 Marketing and promotions 4,301 3,601 16,249 13,926 General and administrative 15,871 16,619 64,732 62,738 Strategic transaction costs 1,642 - 4,365 - Project opening costs - (13 ) - 2,705 Depreciation 7,676 7,532 30,458 27,511 (Gain) loss on the sale or disposal of property   (30 )   (48 )   38     (52 ) Total operating expenses   103,330     102,437     433,916     421,034     Operating income 11,494 13,350 63,875 65,955   Other income (expense): Interest income 6 9 32 168 Interest expense, net of amounts capitalized   (17,395 )   (17,351 )   (69,571 )   (67,993 )   Loss from continuing operations before income taxes (5,895 ) (3,992 ) (5,664 ) (1,870 ) Provision for income taxes   (1,207 )   (1,500 )   (3,467 )   (3,577 )   Loss from continuing operations   (7,102 )   (5,492 )   (9,131 )   (5,447 )   Discontinued operations: Income (loss) from discontinued operations before income taxes - 1 - (277 ) Provision for income taxes   -     -     -     -   Income (loss) from discontinued operations   -     1     -     (277 )   Net loss $ (7,102 ) $ (5,491 ) $ (9,131 ) $ (5,724 )   Net loss per share - basic: Loss from continuing operations $ (0.25 ) $ (0.20 ) $ (0.32 ) $ (0.19 ) Loss from discontinued operations $ -   $ -   $ -   $ (0.01 ) Net loss $ (0.25 ) $ (0.20 ) $ (0.32 ) $ (0.20 )   Net loss per share - diluted: Loss from continuing operations $ (0.25 ) $ (0.20 ) $ (0.32 ) $ (0.19 ) Loss from discontinued operations $ -   $ 0.00   $ -   $ (0.01 ) Net loss $ (0.25 ) $ (0.20 ) $ (0.32 ) $ (0.20 )   Weighted average number of shares outstanding: Basic   28,386,343     28,054,429     28,272,951     28,011,513   Diluted   28,386,343     28,054,429     28,272,951     28,011,513     (a) The classification of costs related to discretionary coupons previously reported within marketing and promotions has been revised to report such costs as a component of promotional allowances for the 2013 and 2012 periods presented. The revision is not material to our financials statements, as the net effect of the revision did not impact our operating income, net income, stockholders' equity, cash flows or Adjusted EBITDA. MTR GAMING GROUP, INC. SELECTED FINANCIAL INFORMATION (dollars in thousands) (unaudited)       Three Months Ended Twelve Months Ended December 31 December 31 2013 2012 2013 2012   Net revenues: Mountaineer Casino, Racetrack & Resort $ 45,405 $ 46,546 $ 196,912 $ 219,506 Presque Isle Downs & Casino 33,525 36,845 155,231 180,681 Scioto Downs 35,894 32,396 145,648 86,769 Corporate   -     -     -     33   Consolidated net revenues $ 114,824   $ 115,787   $ 497,791   $ 486,989       Adjusted EBITDA from continuing operations: Mountaineer Casino, Racetrack & Resort $ 7,982 $ 7,187 $ 35,840 $ 43,498 Presque Isle Downs & Casino 3,479 5,808 23,336 35,092 Scioto Downs 12,223 10,801 49,441 29,561 Corporate   (2,701 )   (2,602 )   (9,959 )   (11,641 ) Consolidated Adjusted EBITDA from continuing operations $ 20,983 $ 21,194 $ 98,658 $ 96,510   Adjusted EBITDA from discontinued operations   -     1     -     (277 )   Consolidated Adjusted EBITDA $ 20,983   $ 21,195   $ 98,658   $ 96,233  

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The following tables set forth a reconciliation of income (loss) from continuing operations and income (loss) from discontinued operations, GAAP financial measures, to Adjusted EBITDA, as well as the calculation of Adjusted EBITDA margin, non-GAAP financial measures.

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  Three Months Ended   Twelve Months Ended December 31 December 31 2013   2012 2013   2012   Adjusted EBITDA:   Mountaineer Casino, Racetrack & Resort: Net income $ 5,766 $ 4,819 $ 26,976 $ 32,760 Interest income (4 ) - (6 ) - Benefit for income taxes (15 ) - (15 ) (13 ) Depreciation 2,224 2,367 8,925 10,755 Loss (gain) on the sale or disposal of property   11     1     (40 )   (4 ) Adjusted EBITDA $ 7,982   $ 7,187   $ 35,840   $ 43,498   Net revenues $ 45,405   $ 46,546   $ 196,912   $ 219,506   Adjusted EBITDA margin   17.6 %   15.4 %   18.2 %   19.8 %   Presque Isle Downs & Casino: Net income $ 655 $ 1,928 $ 12,949 $ 22,265 Interest income and capitalized interest (1 ) (22 ) (3 ) (63 ) Provision for income taxes 610 1,725 2,472 3,586 Depreciation 2,055 1,853 7,918 8,961 Other regulatory gaming assessments 201 373 (78 ) 391 (Gain) loss on the sale or disposal of property   (41 )   (49 )   78     (48 ) Adjusted EBITDA $ 3,479   $ 5,808   $ 23,336   $ 35,092   Net revenues $ 33,525   $ 36,845   $ 155,231   $ 180,681   Adjusted EBITDA margin   10.4 %   15.8 %   15.0 %   19.4 % MTR GAMING GROUP, INC. SELECTED FINANCIAL INFORMATION (continued) (dollars in thousands) (unaudited)         Three Months Ended Twelve Months Ended December 31 December 31 2013 2012 2013 2012 Adjusted EBITDA (continued):   Scioto Downs: Net income $ 8,585 $ 7,740 $ 34,553 $ 20,333 Interest expense (capitalized interest) 22 - 83 (1,227 ) Provision (benefit) for income taxes 227 (227 ) 1,224 - Depreciation 3,389 3,301 13,581 7,750 Project opening costs   -     (13 )   -     2,705   Adjusted EBITDA $ 12,223   $ 10,801   $ 49,441   $ 29,561   Net revenues $ 35,894   $ 32,396   $ 145,648   $ 86,769   Adjusted EBITDA margin   34.1 %   33.3 %   33.9 %   34.1 %   Corporate: Net loss $ (22,108 ) $ (19,979 ) $ (83,609 ) $ (80,805 ) Interest expense, net of interest income 17,372 17,364 69,465 69,115 Provision (benefit) for income taxes 385 2 (214 ) 4 Depreciation 8 11 34 45 Strategic transaction costs   1,642     -     4,365     -   Adjusted EBITDA $ (2,701 ) $ (2,602 ) $ (9,959 ) $ (11,641 )   Discontinued operations: Net income (loss) $ - $ 1 $ - $ (277 ) Provision for income taxes   -     -     -     -   Adjusted EBITDA $ -   $ 1   $ -   $ (277 )   MTR Gaming Group, Inc. (consolidated): Net loss $ (7,102 ) $ (5,491 ) $ (9,131 ) $ (5,724 ) Interest expense, net of interest income and capitalized interest 17,389 17,342 69,539 67,825 Provision for income taxes 1,207 1,500 3,467 3,577 Depreciation 7,676 7,532 30,458 27,511 Other regulatory gaming assessments 201 373 (78 ) 391 Loss (gain) on the sale or disposal of property (30 ) (48 ) 38 (52 ) Project opening costs - (13 ) - 2,705 Strategic transaction costs   1,642     -     4,365     -   Consolidated Adjusted EBITDA $ 20,983   $ 21,195   $ 98,658   $ 96,233   Net revenues $ 114,824   $ 115,787   $ 497,791   $ 486,989   Adjusted EBITDA margin   18.3 %   18.3 %   19.8 %   19.8 % MTR GAMING GROUP, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands)   December 31 December 31 2013 2012 (unaudited) ASSETS   Current assets: Cash and cash equivalents $ 100,124 $ 115,113 Restricted cash 7,255 4,088 Accounts receivable, net of allowance for doubtful accounts of $151 in 2013 and $350 in 2012 4,853 3,934 Amounts due from West Virginia Lottery Commission - 17 Inventories 4,272 4,305 Deferred financing costs 1,642 1,642 Prepaid expenses and other current assets   7,850     5,582   Total current assets 125,996 134,681   Property and equipment, net 371,364 387,015 Other intangible assets 136,080 136,094 Deferred financing costs, net of current portion 6,766 8,407 Deposits and other 1,801 1,908 Non-operating real property 10,769 10,789 Assets of discontinued operations   184     181   Total assets $ 652,960   $ 679,075     LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 2,998 $ 3,719 Accounts payable - gaming taxes and assessments 9,947 11,077 Accrued payroll and payroll taxes 5,466 5,776 Accrued interest 27,344 27,369 Accrued income taxes - 743 Other accrued liabilities 17,043 13,579 Construction project and equipment liabilities 788 481 License fee payable - 25,000 Deferred income taxes 837 1,472 Liabilities of discontinued operations   116     123   Total current liabilities 64,539 89,339   Long-term debt 558,834 556,716 Other regulatory gaming assessments 4,806 5,319 Long-term compensation 871 871 Deferred income taxes 17,412 12,620 Other long-term liabilities   497     517   Total liabilities   646,959     665,382     Stockholders' equity: Common stock - - Additional paid-in capital 65,047 63,822 Accumulated deficit (59,143 ) (50,012 ) Accumulated other comprehensive loss   (127 )   (341 ) Total stockholders' equity of MTR Gaming Group, Inc. 5,777 13,469 Non-controlling interest of discontinued operations   224     224   Total stockholders' equity   6,001     13,693   Total liabilities and stockholders' equity $ 652,960   $ 679,075  

MTR Gaming Group, Inc.www.mtrgaming.comJohn W. Bittner, Jr.Executive Vice President and Chief Financial Officer724-933-8122Jbittner@mtrgaming.com