Full House Resorts (NYSE Amex US: FLL) today announced results for the three- and nine-month periods ended September 30, 2009. Net income attributable to the Company for the three months ended September 30, 2009 was $3.0 million, or $0.17 per common share, compared to $0.5 million, or $0.03 per common share, in the prior-year period.
Third Quarter 2009 Highlights and Subsequent Events
* Total management fees for Gaming Entertainment (Michigan), LLC ('GEM'), a 50% owned joint venture - related to FireKeepers Casino - were $5.8 million. The property opened its doors to the public on August 5, ahead of schedule and under budget, providing for 57 days of operations in the third quarter. A soft opening allowed for lower marketing expense, resulting in strong operating margins. GEM manages the daily operations of the casino for the FireKeepers Development Authority, an agency of the Huron Band, and will be paid a management fee equal to 26% of pre-management fee income over a seven-year period which commenced with the opening on August 5.
* The Company entered into a favorable GEM member agreement which resulted in a one-time net gain of $1.4 million before tax - further details are outlined below. The after-tax impact of this one-time gain was $0.05 per common share.
* As of September 30, 2009, the company had cash and equivalents of $7.8 million, debt of $6.5 million - of which $5.8 million is an obligation of GEM - and availability on the company's credit facility of approximately $7.8 million.
'The first two months of operations at FireKeepers Casino exceeded our expectations in terms of revenue and operating margins, and we are very proud of the work accomplished by the management team,' said Andre Hilliou, Chairman and Chief Executive Officer of Full House. 'An efficient, customer-friendly designed property as well as an exceptionally smooth opening with no significant problems allowed the management team to run FireKeepers at near normal efficiency levels right out of the box. In addition, we continue to generate free cash flow, while the Company continues to have no required current debt repayments or maturities, putting us in a strong position to take advantage of acquisition opportunities going forward.'
Third Quarter 2009 Results
For the quarter ended September 30, 2009, Full House reported casino, food and beverage, and other revenue of $2.2 million, a decline of 11% from the prior-year period, primarily caused by lower casino revenue at Stockman's Casino due to general weakness in the economy and increased food and beverage competition. In addition, during the third quarter of 2009, Full House recorded GEM management fees of $5.8 million for the first 57 days of operations following the opening on August 5 of FireKeepers Casino.
The Company recorded equity in net income of unconsolidated joint venture and related guaranteed payments of $1.5 million, an increase of 6% from the prior-year period. The equity in net income of unconsolidated joint venture represents Full House's 50% ownership interest in Gaming Entertainment (Delaware), LLC ('GED'), a joint venture between the Company and Harrington Raceway, Inc. The Company expects to continue receiving a 5% increase in cash distributions over the prior year from GED. The increase this quarter is due to the timing of cash payments.
Operating expenses for third quarter 2009 were $3.6 million, an increase of 18% from the prior-year period, primarily due to an increase in SG&A expenses and amortization of contract rights related to the opening of FireKeepers Casino.
Operating income for third quarter 2009 was $3.9 million, compared to operating income of $0.9 million in the prior-year period. The 2009 results include an unrealized gain on notes receivable from tribal governments of $0.2 million, compared to a gain of $0.1 million in third quarter 2008. The 2009 results also include results from a GEM member agreement resulting in the recognition of a one-time net pre-tax gain of $1.4 million. The net pre-tax gain consists of a member agreement modification charge of $2.1 million, offset by a $3.5 million credit attributable to the non-controlling interest in GEM.
The Company reported net income attributable to the Company per common share of $0.17 for the three months ended September 30, 2009, as compared to $0.03 for the three months ended September 30, 2008. Exclusive of the one-time GEM agreement net gain of $0.05 per share, earnings per common share would have been $0.12.
Nine Month 2009 Results
For the nine months ended September 30, 2009, Full House reported casino, food and beverage, and other revenue of $6.8 million, compared to revenue of $7.4 million in the prior-year period, primarily as a result of lower food and beverage revenue at Stockman's Casino due to increased competition and lower casino revenue due to general weakness in the economy.
In addition, during the first nine months of 2009, Full House recorded GEM management fees of $5.8 million from FireKeepers Casino.
The Company recorded equity in net income of unconsolidated joint venture and related guarantee payments of $3.6 million, comparable with the prior-year period. Management expects that 2009 full-year results for GED will be lower than the 5% guaranteed increase due to payment timing variances which resulted in greater than an 8% increase in 2008. The reduced income is attributable to the decreased net income of GED which the Company recognizes under the equity method. GED's reduced net income is mostly attributable to increased competition and higher costs, including recently enacted tax increases.
Operating expenses for the nine months ended September 30, 2009 were $9.3 million compared to $9.5 million in the prior-year period, primarily due to continuing expense reduction efforts throughout the organization and lower food and beverage costs, partially offset by higher depreciation and amortization expense related to contract rights for FireKeepers Casino.
Operating income, excluding other charges, for the nine months ended September 30, 2009 was $5.2 million, compared to operating income, excluding other charges, of $3.4 million in the prior-year period. The 2009 operating income includes $0.5 million of unrealized gains on notes receivable from tribal governments compared to $2.0 million in the prior-year period, with the year-over-year decrease primarily due to the repayment of $9.3 million of notes receivable related to the FireKeepers Casino, in connection with the FireKeepers Development Authority obtaining financing for the project in the prior year. The 2009 results also include a GEM member agreement modification charge of $2.1 million as explained previously.
The Company reported net income attributable to the Company per common share of $0.21 and $0.08 for the nine months ended September 30, 2009 and 2008, respectively. Excluding other charges in the first nine months of both 2009 and 2008, and exclusive of the one-time gain on notes receivable in the first nine months of 2008 due to the repayment of the tribal receivable and the GEM member agreement net gain in 2009, net income attributable to the Company per common share was $0.16 and $0.05 for the nine months ended September 30, 2009 and 2008, respectively.
Liquidity and Capital Resources
As of September 30, 2009, the company had $7.8 million in cash and approximately $7.8 million of availability on its revolving credit line with Nevada State Bank. Debt outstanding as of September 30, 2009 was $6.5 million, of which $5.8 million is an obligation of GEM. The Company has no required principal payments on its Nevada State Bank facility until 2021.
On October 9, 2009, effective September 30, 2009, an agreement was reached between the Company and RAM Entertainment, LLC ('RAM'), both 50% members of GEM. As a result, payables due from GEM to each member were adjusted to reflect a total payable due to RAM of $8.5 million, and a total payable due to the Company of $11.9 million, resulting in the recognition of a net pre-tax gain $1.4 million, which was recorded in September 2009. The net pre-tax gain consists of a member agreement modification charge of $2.1 million, offset by a $3.5 million credit attributable to the GEM non-controlling interest.
The impact to reported earnings per share from these one-time adjustment items to GEM was approximately $0.05 per share.
In addition, the GEM members agreed that distributions to the members will be made on a 50/50 basis to both members until such time RAM's member payable has been fully repaid and thereafter 70% to the Company and 30% to RAM until such time as the remaining payable to the Company has been repaid. Thereafter, distributions to members will be made on a 50/50 basis.
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