RENO, Nev.-- Eldorado Resorts, Inc. (NASDAQ:ERI) (“Eldorado,” “ERI,” or “the Company”) today reported operating results for the first quarter ended March 31, 2017.
“The year-over-year decline in Eldorado’s first quarter results reflects the impact of significant weather disruption at our Reno Tri-Properties’ operations. The impact of decreased visitation at the Reno Tri-Properties resulting from all-time record snowfall in the region was partially offset by continued strong performance of Eldorado Scioto Downs, and the benefit from cost reductions implemented at Mountaineer which drove a significant double digit increase in the property’s Adjusted EBITDA, the first such year-over-year improvement in 12 quarters,” said Gary Carano, Chairman and Chief Executive Officer of Eldorado.
“Snow storms during eleven of the fourteen weekends in the 2017 first quarter significantly hampered drive-in visitation from important California feeder markets, impacting visitation and revenue for our Reno Tri-Properties. Notwithstanding the first quarter weather challenges, we expect to continue to leverage the ongoing organic growth opportunities we have in Reno to deliver improvements in our Tri-Properties’ results going forward. During the quarter we made significant progress on our comprehensive $50 million facility enhancement plan that should allow us to further benefit from the region’s continued economic resurgence and positive long-term outlook. Our capital plan for the Reno Tri-Properties is creating a more integrated guest and a luxury resort experience. In the first quarter, we completed the renovation of 300 guest rooms at Circus Circus Reno, representing approximately 19% of the property’s room base, and opened Kanpai Sushi and El Jefe’s Cantina. Property enhancements currently underway include a new poker room and Canter’s Delicatessen at Silver Legacy, a new food court with Habit Burger, Piezzetta Pizza Kitchen and Panda Express, a 6,700 square foot video arcade, party rooms and bar, the renovation of approximately 600 guest rooms, and a new Madame Butterworks Café at Circus Circus Reno, the renovation of approximately 160 guest rooms at Eldorado Reno and new public spaces across all three properties.
“Complementing our organic growth plan across our legacy property portfolio, earlier this week we completed the accretive acquisition of Isle of Capri Casinos. The addition of Isle’s twelve casino-resorts to our property portfolio transforms Eldorado into a premiere, diversified regional gaming operator with many opportunities for near- and long-term growth. The acquisition of Isle of Capri significantly expands the scale of our gaming operations and minimizes market-specific risk.
“With this acquisition now complete, we have created significant value for our shareholders as we have grown our operations from two wholly-owned properties and a 50% interest in a third property in two states, to a company that now operates 19 properties across ten states in which we feature approximately 20,000 slot machines and VLTs, more than 550 table games and over 6,500 hotel rooms in addition to many leading food and beverage offerings. Our ongoing expansion, combined with an unwavering enterprise-wide commitment to guest satisfaction including exciting gaming and other entertainment, best in market food and beverage offerings and other amenities and services, has in just a few short years elevated Eldorado to become a leading regional gaming company.
“We have made significant progress with the Isle integration prior to the completion of this transaction and we believe our history of successful integration of acquired properties prior to the completion of the Isle of Capri transaction will serve us well.”
Balance Sheet and Liquidity
At March 31, 2017, Eldorado had $44.6 million in cash and cash equivalents and $378.8 million in restricted cash, which included $376.8 million of escrow cash related to the Isle of Capri Casinos acquisition. Outstanding indebtedness at March 31, 2017 totaled $1.2 billion, including $23 million outstanding on the Company’s revolving credit facility and $375 million in borrowings that were placed in escrow pending the closing of the acquisition of Isle of Capri Casinos. Upon consummation of the acquisition of Isle of Capri Casinos on May 1, 2017, and the completion of financing transactions in conjunction with the acquisition, the Company’s outstanding debt is $2.3 billion, comprised of $375 million of Senior Notes due 2023, $375 million of Senior Notes due 2025, a $1.45 billion Term Loan B and outstanding borrowings under a new $300 million revolving credit facility. Capital expenditures in the first quarter of 2017 totaled $6.2 million.
“With the completion of the acquisition of Isle of Capri, we expect that our free cash flow will position Eldorado to reduce leverage while maintaining the financial flexibility to evaluate and pursue additional growth opportunities,” said Tom Reeg, President and Chief Financial Officer of Eldorado. “We remain confident that we will exceed our $35 million synergy target and are off to a great start, realizing more than $20 million of annual cost synergies immediately upon closing. During the quarter, we also raised the debt financing for the Isle transaction. Pro forma annual interest expense will be less than $100 million, approximately $15 million less than anticipated at the time of the transaction announcement.”
Consistent with prior disclosures, Eldorado expects the $134.5 million sale of Isle of Capri Hotel Lake Charles to close later in 2017, subject to regulatory approval, and the Company intends to allocate all of the net proceeds from the sale to debt reduction.
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