LAS VEGAS, Dec. 17, 2018 (GLOBE NEWSWIRE) — Nevada Gold & Casinos, Inc. (NYSE MKT: UWN) today announced financial results for the second quarter ended October 31, 2018.
Financial results for the three and six months ended October 31, 2018 are impacted by the sale of the South Dakota route, which closed June 30, 2018, and the agreement to sell Club Fortune, signed on July 27, 2018. Only two months of South Dakota operations are reflected in the current year and the Club Fortune operations are segregated as discontinued operations with the associated assets and liabilities classified as ‘Held for Sale.”
For the second quarter of fiscal 2018, the Company reported net revenues of $14.4 million compared to $16.0 million in the second quarter of fiscal 2018. Operating expenses were $13.8 million compared to $15.0 million in the prior year period. Operating income was $0.5 million compared to $1.0 million, and net income was $0.5 million, or $0.03 per share, compared to net income of $0.6 million, or $0.04 per share, in the prior year period.
Net revenues from the Washington state gaming operations increased to $14.4 million, from $13.8 million in the prior year period, and adjusted EBITDA increased to $2.0 million compared to $1.7 million in the prior year. Increased poker revenue and a higher table games hold percentage, although in the normal range, was responsible for the majority of the revenue gain. Operating cost increases were primarily attributable to the increased minimum wage.
South Dakota slot route operations provided no revenue or EBITDA in the current quarter compared to revenue of $2.2 million and adjusted EBITDA of $0.2 in the prior year quarter. Corporate adjusted EBITDA was ($0.7) million compared to ($0.6) million in the prior year and on a consolidated basis adjusted EBITDA from continuing operations was $1.4 million compared to $1.3 million in the prior year.
Club Fortune revenues were $3.2 million compared to $3.4 million in the prior year period, and adjusted EBITDA decreased to $0.2 million compared to $0.4 million in the prior year.
The Company paid down $1.1 million in debt during the fiscal year. The unrestricted cash balance at October 31, 2018 was $9.8 million, and total outstanding borrowing was $6.9 million.
On December 3, 2018 the Company filed a preliminary proxy statement concerning the merger / acquisition transaction with Maverick Casinos, LLC.
On December 5, 2018 the Nevada Gaming Control Board unanimously recommended approval of the Club Fortune sale transaction with Truckee Gaming, LLC. The matter now moves to the Nevada Gaming Commission for final consideration on December 20, 2018.
The Company anticipates closing on the Club Fortune sale on December 31, 2018, and the Maverick merger / acquisition transaction in the first calendar quarter of 2019.
For the six month period ended October 31, 2018, net revenues were $29.2 million compared to $31.0 million in the prior year period. Operating expenses were $28.5 million compared to $29.8 million in the prior year. Operating income was $0.7 million compared to $1.2 million in fiscal 2018. Net income was $0.5 million, or $0.03 per share, compared to $0.8 million, or $0.04 per share, in the prior year.
Conference Call
The Company will host a conference call at 4:30 PM ET (1:30 PM PT) the same afternoon to discuss the financial results and provide a corporate update. The call can be accessed live by dialing (888) 394-8218. International callers can access the call by dialing (323) 701-0225.
A telephone replay of the conference call will be available after 7:30 PM ET and can be accessed by dialing (844) 512-2921. International callers can access the replay by dialing (412) 317-6671; the pin number is 5792658. The replay will be available through December 24, 2018.
New Revenue Recognition Standard
On May 1, 2018, the Company adopted accounting standard update No. 2014-09 (“ASC 606”) (“new revenue standard”). The Company adopted ASC 606 using the modified retrospective method and recognized the cumulative effect of the initial application of the new revenue standard as an adjustment to the opening balance of retained earnings as of May 1, 2018.
The new revenue standard also resulted in reclassifications to and from revenues, promotional allowances and operating expenses. Pursuant to ASC 606, food and beverage and other complimentaries are now included as revenues within their respective categories, with a corresponding decrease in casino revenues, as the offsetting amount historically included in promotional allowances has been eliminated. In addition, the cost of providing these complimentary goods and services are now included as expenses within their respective categories.
Financial results for the three and six months ended October 31, 2017 have not been restated and are reported under the accounting standards in effect during that period. The Company has provided a reconciliation between the new revenue standard and the old revenue standard for the three and six months ended October 31, 2018 at the end of this release.
Non-GAAP Information
The term “adjusted EBITDA” is used by the Company in presentations, quarterly earnings calls, and other instances as appropriate. Adjusted EBITDA is defined as net income before interest, change in swap fair value, income taxes, depreciation and amortization, goodwill and other long-lived asset impairment charges, write-offs of project development costs and acquisition expenses, sale related expenses, litigation charges, non-cash stock grants, non-cash employee stock purchase plan discounts, amortization of deferred rent, and net losses/gains from asset dispositions. Adjusted EBITDA does not take into account greater or less than expected hold percentages in the gaming operations. Adjusted EBITDA is presented because it is a required component of financial ratios reported by us to our lenders, and it is also frequently used by securities analysts, investors, and other interested parties, in addition to and not in lieu of, U.S. Generally Accepted Accounting Principles (“GAAP”) results to compare to the performance of other companies that also publicize this information. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income as an indicator of our operating performance or any other measure of performance derived in accordance with GAAP.
The following tables reconcile net income from continuing operations to Adjusted EBITDA from continuing operations for the three months and six months ended October 31, 2018 and 2017:
| For the three months ended | ||||||||
| October 31, 2018 | October 31, 2017 | |||||||
| Net income from continuing operations | $ | 344,900 | $ | 626,148 | ||||
| Adjustments: | ||||||||
| Net interest expense and change in swap fair value | 75,322 | 104,187 | ||||||
| Income tax expense | 97,933 | 257,359 | ||||||
| Depreciation and amortization | 114,218 | 224,651 | ||||||
| Sale related expenses | 715,614 | – | ||||||
| Loss on sale of assets | 23,335 | 5,465 | ||||||
| Stock compensation | 12,201 | 65,382 | ||||||
| Amortization of deferred rent | (18,371 | ) | (2,675 | ) | ||||
| Adjusted EBITDA from continuing operations | $ | 1,365,152 | $ | 1,280,517 | ||||
| For the six months ended | ||||||||
| October 31, 2018 | October 31, 2017 | |||||||
| Net income from continuing operations | $ | 430,494 | $ | 699,162 | ||||
| Adjustments: | ||||||||
| Net interest expense and change in swap fair value | 182,548 | 256,202 | ||||||
| Income tax expense | 122,140 | 293,277 | ||||||
| Depreciation and amortization | 244,657 | 562,589 | ||||||
| Sale related expenses | 1,197,815 | – | ||||||
| (Gain) Loss on sale of assets | (34,356 | ) | 5,465 | |||||
| Stock compensation | 24,771 | 67,171 | ||||||
| Amortization of deferred rent | (33,256 | ) | (1,952 | ) | ||||
| Adjusted EBITDA from continuing operations | $ | 2,134,813 | $ | 1,881,914 | ||||
Forward-Looking Statements
This release contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate,” “believe,” “expect,” “future,” “intend,” “plan,” and similar expressions to identify forward-looking statements. Forward-looking statements include, without limitation, our ability to increase income streams, to grow revenue and earnings, and to obtain additional gaming and other projects. These statements are only predictions and are subject to certain risks, uncertainties and assumptions, which are identified and described in the Company’s public filings with the Securities and Exchange Commission.
About Nevada Gold & Casinos
Nevada Gold & Casinos, Inc. (NYSE MKT:UWN) of Las Vegas, Nevada is a developer, owner and operator of nine gaming operations in Washington (wagoldcasinos.com) and a locals casino in Henderson, Nevada (clubfortunecasino.com). For more information, visit www.nevadagold.com.
| Contacts: |
| Nevada Gold & Casinos, Inc. Michael P. Shaunnessy / James Meier (702) 685-1000 |
| Stonegate Capital Partners Preston Graham (972) 850-2001 |
Nevada Gold & Casinos, Inc.
Consolidated Statements of Operations
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| October 31, | October 31, | October 31, | October 31, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues: | ||||||||||||||||
| Casino | $ | 11,491,669 | $ | 14,205,937 | $ | 23,504,388 | $ | 27,457,249 | ||||||||
| Food and beverage | 2,520,548 | 2,470,121 | 5,009,925 | 4,830,535 | ||||||||||||
| Other | 342,237 | 387,414 | 720,310 | 799,011 | ||||||||||||
| Gross revenues | 14,354,454 | 17,063,472 | 29,234,623 | 33,086,795 | ||||||||||||
| Less promotional allowances | – | (1,043,293 | ) | – | (2,064,685 | ) | ||||||||||
| Net revenues | 14,354,454 | 16,020,179 | 29,234,623 | 31,022,110 | ||||||||||||
| Expenses: | ||||||||||||||||
| Casino | 5,169,139 | 7,974,289 | 11,342,078 | 15,691,086 | ||||||||||||
| Food and beverage | 2,244,719 | 1,293,078 | 4,448,208 | 2,534,873 | ||||||||||||
| Other | 55,040 | 24,082 | 113,820 | 49,936 | ||||||||||||
| Marketing and administrative | 4,393,961 | 4,357,146 | 8,868,945 | 8,716,577 | ||||||||||||
| Facility | 437,086 | 461,798 | 885,559 | 881,581 | ||||||||||||
| Corporate | 1,398,801 | 691,976 | 2,630,530 | 1,331,361 | ||||||||||||
| Depreciation and amortization | 114,218 | 224,651 | 244,657 | 562,589 | ||||||||||||
| Loss on sale of assets | 23,335 | 5,465 | (34,356 | ) | 5,465 | |||||||||||
| Total operating expenses | 13,836,299 | 15,032,485 | 28,499,441 | 29,773,468 | ||||||||||||
| Operating income | 518,155 | 987,694 | 735,182 | 1,248,642 | ||||||||||||
| Non-operating income (expenses): | ||||||||||||||||
| Interest income | 8,438 | 14,211 | 16,875 | 26,675 | ||||||||||||
| Interest expense and amortization of loan issue costs | (88,591 | ) | (163,820 | ) | (208,443 | ) | (324,335 | ) | ||||||||
| Change in swap fair value | 4,831 | 45,422 | 9,020 | 41,458 | ||||||||||||
| Income from continuing operations before income tax expense | 442,833 | 883,507 | 552,634 | 992,440 | ||||||||||||
| Income tax expense | (97,933 | ) | (257,359 | ) | (122,140 | ) | (293,278 | ) | ||||||||
| Income from continuing operations | 344,900 | 626,148 | 430,494 | 699,162 | ||||||||||||
| Income from discontinued operations, net of taxes | 194,190 | 12,829 | 56,752 | 63,816 | ||||||||||||
| Net income | $ | 539,090 | $ | 638,977 | $ | 487,246 | $ | 762,978 | ||||||||
| Per share information: | ||||||||||||||||
| Income from continuing operations per common share – basic and diluted | $ | 0.02 | $ | 0.04 | $ | 0.03 | $ | 0.04 | ||||||||
| Income from discontinued operations per common share – basic and diluted | $ | 0.01 | $ | – | $ | – | $ | – | ||||||||
| Net income per common share – basic and diluted | $ | 0.03 | $ | 0.04 | $ | 0.03 | $ | 0.04 | ||||||||
Nevada Gold & Casinos, Inc.
Consolidated Balance Sheets
| October 31, | April 30, | |||||||
| 2018 | 2018 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,784,582 | $ | 9,508,931 | ||||
| Restricted cash | 2,726,550 | 2,369,063 | ||||||
| Accounts receivable, net of allowances | 291,101 | 345,403 | ||||||
| Prepaid expenses | 1,034,600 | 1,058,726 | ||||||
| Inventory and other current assets | 345,337 | 341,299 | ||||||
| Assets held for sale | 13,890,758 | 607,180 | ||||||
| Total current assets | 28,072,928 | 14,230,602 | ||||||
| Real estate held for sale | 750,000 | 750,000 | ||||||
| Goodwill | 14,092,154 | 14,092,154 | ||||||
| Intangible assets, net of accumulated amortization | 2,274,504 | 2,289,485 | ||||||
| Property and equipment, net of accumulated depreciation | 3,142,651 | 3,254,367 | ||||||
| Deferred tax asset | 568,216 | 704,044 | ||||||
| Assets held for sale | – | 13,597,772 | ||||||
| Other assets | 213,692 | 204,672 | ||||||
| Total assets | $ | 49,114,145 | $ | 49,123,096 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 1,424,200 | $ | 1,350,263 | ||||
| Accrued payroll and related | 1,997,081 | 1,810,626 | ||||||
| Accrued player’s club points and progressive jackpots | 2,606,088 | 2,273,655 | ||||||
| Liabilities held for sale | 925,544 | 902,720 | ||||||
| Total current liabilities | 6,952,913 | 6,337,264 | ||||||
| Long-term debt | 6,822,924 | 7,895,240 | ||||||
| Other long-term liabilities | 603,951 | 637,207 | ||||||
| Total liabilities | 14,379,788 | 14,869,711 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.12 par value per share; 50,000,000 shares | ||||||||
| authorized; 18,743,185 and 18,715,985 shares issued and 16,875,382 and 16,848,182 shares outstanding at October 31, 2018, and April 30, 2018, respectively. | 2,249,191 | 2,245,927 | ||||||
| Additional paid-in capital | 27,583,038 | 27,557,151 | ||||||
| Retained earnings | 14,096,060 | 13,644,239 | ||||||
| Treasury stock, 1,867,803 shares at October 31, 2018, and April 30, 2018, at cost. | (9,193,932 | ) | (9,193,932 | ) | ||||
| Total stockholders’ equity | 34,734,357 | 34,253,385 | ||||||
| Total liabilities and stockholders’ equity | $ | 49,114,145 | $ | 49,123,096 | ||||
The amount by which each line item in continuing operations in our unaudited Condensed Consolidated Statement of Operations for the three and six months ended October 31, 2018, was affected by the new revenue standard as compared with the accounting guidance that was in effect before the change was as follows:
| For the three months ended October 31, 2018 | |||||||||||
| As Reported – With Adoption of ASC 606 | As Adjusted – Without Adoption of ASC 606 | Effect of Accounting Change Increase/(Decrease) | |||||||||
| Revenues: | |||||||||||
| Casino | $ | 11,491,669 | $ | 12,466,911 | $ | (975,242 | ) | ||||
| Food and beverage | 2,520,548 | 2,520,548 | – | ||||||||
| Other | 342,237 | 342,237 | – | ||||||||
| Gross revenues | 14,354,454 | 15,329,696 | (975,242 | ) | |||||||
| Less promotional allowances | – | (975,242 | ) | 975,242 | |||||||
| Net revenues | 14,354,454 | 14,354,454 | – | ||||||||
| Expenses: | |||||||||||
| Casino | 5,169,139 | 5,990,982 | (821,843 | ) | |||||||
| Food and beverage | 2,244,719 | 1,454,091 | 790,628 | ||||||||
| Other | 55,040 | 23,825 | 31,215 | ||||||||
| Marketing and administrative | 4,393,961 | 4,393,961 | – | ||||||||
| Facility | 437,086 | 437,086 | – | ||||||||
| Corporate | 1,398,801 | 1,398,801 | – | ||||||||
| Depreciation and amortization | 114,218 | 114,218 | – | ||||||||
| Loss on sale of assets | 23,335 | 23,335 | – | ||||||||
| Total operating expenses | 13,836,299 | 13,836,299 | – | ||||||||
| Operating income | $ | 518,155 | $ | 518,155 | $ | – | |||||
| Net income | $ | 344,900 | $ | 344,900 | $ | – | |||||