Seneca Gaming Reports Results - Wednesday 28th of December 2005
NIAGARA FALLS, New York – SenecaGaming Corporation ("SGC", or the "Company") today reported its consolidatedfinancial results for the three and twelve months ended September 30, 2005.
SGC is a wholly owned, tribally chartered corporation of the Seneca Nationof Indians (the "Nation") that operates all of the Nation's Class III gamingoperations on the Nation's territory in Western New York. SGC, through itswholly owned subsidiaries, Seneca Niagara Falls Gaming Corporation ("SNFGC")and Seneca Territory Gaming Corporation ("STGC"), operates two gamingoperations in Niagara Falls, New York (Niagara Territory) ("Seneca NiagaraCasino") and Salamanca, New York (Allegany Territory) ("Seneca AlleganyCasino"), respectively.
SGC was chartered by the Nation in August 2002 and opened its initialgaming operations on the Niagara and Allegany Territories on December 31, 2002and May 1, 2004, respectively. Since the Seneca Allegany Casino was open foronly five months during the 12 months ended September 30, 2004, thecomparisons discussed below between the 12 months ended September 30, 2005("Fiscal 2005") and the 12 months ended September 30, 2004 ("Fiscal 2004"),are less meaningful in some respects.
Fourth Quarter Fiscal 2005 Financial Results Summary
SGC Certain (Consolidated) Financial Results. For the three monthsended September 30, 2005 and 2004 (the "Fourth Quarter 2005" and "FourthQuarter 2004", respectively) total consolidated net revenues were $119.9million and $111.8 million, respectively, an increase of $8.1 million, or 7%.The overall increase was primarily due to an $8.1 million increase in netgaming revenues from $105.4 million to $113.5 million for the Fourth Quarter2004 and 2005, respectively, or an 8% increase. SGC's consolidated earningsbefore interest, taxes, depreciation and amortization ("EBITDA") was $34.0million compared to $41.4 million for the Fourth Quarter 2005 and 2004,respectively, a decrease of $7.4 million, or 18%. The primary reason for thedecrease was the Klewin Charges discussed below.
Results in the Fourth Quarter 2005 included a one time, non-recurring$13.3 million charge to earnings for amounts advanced to Klewin Gaming andEntertainment ("Klewin"), our previous construction manager, principally inpayment of work performed by its subcontractors and professionals on theluxury hotel at Seneca Niagara Casino and the parking garage at SenecaAllegany Casino. As previously reported, the $14.6 million that SNFGC and STGCwired to Klewin for payment of work done by its subcontractors andprofessionals was never paid by Klewin to the appropriate parties. In order toensure continued construction of the luxury hotel at the Seneca Niagara Casinoand the garage at the Seneca Allegany Casino, SNFGC and STGC distributedanother $14.6 million to compensate the unpaid subcontractors andprofessionals. The $13.3 million charge is net of $1.3 million of managementfees and retainage otherwise payable to Klewin for services performed but notbilled. SNFGC and STGC are vigorously pursuing legal action against Klewin andits bank to recover these amounts. Although we believe we have strong legalarguments to recover the $14.6 million from Klewin and its bank (the "KlewinCharges"), we can provide no assurance that we will be successful inrecovering these amounts. Adjusting for the Klewin Charges, consolidatedEBITDA was $47.3 million, an increase of $5.9 million, or 14%.
SGC reported consolidated net income of $20.7 million for the FourthQuarter 2005 against consolidated net income of $23.1 million in the FourthQuarter 2004, a decrease of $2.4 million, or 10%. The decrease in consolidatednet income was primarily due to the Klewin Charges, partially offset by a $4.6million decrease in interest expense in the Fourth Quarter 2005 due to theprepayment of SNFGC's Freemantle Term Loan in May 2005.
Seneca Niagara Casino Certain Financial Results. Net gaming revenuesfor the Seneca Niagara Casino were $73.5 million and $74.5 million in theFourth Quarter 2005 and 2004, respectively, or a 1% decrease. Total netrevenues in the comparative periods decreased from $79.2 million to $78.1million, or a 1% decrease. Seneca Niagara Casino generated EBITDA of $20.9million and $30.5 million during the Fourth Quarter 2005 and 2004,respectively, or a decrease of $9.6 million, or 31%. This decrease wasprimarily due to SNFGC's $10.0 million portion of the Klewin Charges.Adjusting for SNFGC's portion of the Klewin Charges, EBITDA for the FourthQuarter 2005 was $31.0 million, an increase of $0.5 million, or 2%.
The overall revenue decrease at the Seneca Niagara Casino was primarilyattributable to the transfer of our Class II gaming operations to the Nation'swholly owned entity, Seneca Gaming & Entertainment, on January 1, 2005. Forthe Fourth Quarter 2004, Class II revenue was $1.5 million. The overallrevenue decrease was partially offset by a $0.3 million or 1% increase in netClass III slot revenue during the comparative periods.
Seneca Allegany Casino Certain Financial Results. During the FourthQuarter 2005 and 2004, Seneca Allegany Casino had net gaming revenues of $40.0million and $30.9 million, respectively, an increase of $9.1 million, or 29%.Total net revenues for Seneca Allegany Casino during the comparative periodswere $41.8 million and $32.6 million, respectively, an increase of $9.2million, or 28%. Seneca Allegany Casino generated $14.4 million of EBITDA inthe Fourth Quarter 2005, compared to $11.4 million in the Fourth Quarter 2004,an increase of $3.0 million, or 26%. Included in the 2005 Financial Results isSTGC's $3.3 million portion of the Klewin Charges. Adjusting for STGC'sportion of the Klewin Charges, EBITDA for the Fourth Quarter 2005 was $17.7million, an increase of $6.3 million, or 55%.
Twelve Months Fiscal 2005 Financial Results Summary
SGC Certain (Consolidated) Financial Results. For Fiscal 2005 and 2004consolidated net revenues were $449.2 million and $356.4 million,respectively, an increase of $92.8 million, or 26%. Consolidated net gamingrevenues during the comparative periods also increased from $337.5 million to$433.9 million, an increase of $96.4 million, or 29% increase. ConsolidatedEBITDA increased to $157.1 million from $134.5 million during the comparativeperiods, an increase of $22.6 million, or 17%. Adjusting for the KlewinCharges, EBITDA for Fiscal 2005 was $170.4 million, an increase of $35.9million, or 27%. Consolidated net income, however, was $45.6 million forFiscal 2005, a $39.1 million decrease from Fiscal 2004. The decrease wasprimarily due to non-recurring charges of (a) $49.2 million, included inInterest Expense, related to the prepayment of SNFGC's $80 million FreemantleTerm Loan in May 2005 and (b) the $13.3 million Klewin Charges. Thenon-recurring charges were partially offset by a $26.1 million increase in netincome for Seneca Allegany Casino, due to having 7 additional months ofoperations during Fiscal 2005.
Seneca Niagara Casino Certain Financial Results. Seneca NiagaraCasino's total net revenues were $306.0 million and $305.9 million for Fiscal2005 and 2004, respectively. Net gaming revenues were $288.5 million and$288.2 million during the comparative periods, an increase of 1%. Included innet gaming revenues for Fiscal 2005 and 2004 is $1.4 million and $2.2 million,respectively, of Class II poker revenues. These Class II gaming operations, asnoted above, are no longer operated by SGC but by the Nation directly, throughSeneca Gaming & Entertainment. Seneca Niagara Casino generated EBITDA of$111.5 million and $121.8 million for Fiscal 2005 and 2004, respectively, or adecrease of 8%. The decrease primarily resulted from SNFGC's $10.0 millionportion of the Klewin Charges. Adjusting for SNFGC's portion of the KlewinCharges, EBITDA for Fiscal 2005 for Seneca Niagara Casino was $121.5 million,a decrease of $0.3 million, or less than 1%.
Seneca Allegany Casino Certain Financial Results. Seneca AlleganyCasino total net revenues were $143.2 million and $50.5 million for Fiscal2005 and 2004, respectively. Net gaming revenues for the same comparativeperiods were $136.4 million and $47.9 million, respectively. Included in thenet gaming revenues for Fiscal 2005 and 2004 is $2.4 million and $3.3 million,respectively, of Class II poker, video lottery terminal, and bingo revenues,which operations, as noted above, are no longer operated by SGC but by theNation directly, through Seneca Gaming & Entertainment. EBITDA for Fiscal 2005and 2004 was $48.3 million and $13.7 million, respectively, an increase of$34.6 million, or 253%. Adjusting for STGC's $3.3 million portion of theKlewin Charges, EBITDA for Fiscal 2005 for Seneca Allegany Casino was $51.5million, an increase of $37.8 million, or 276%. As noted above, SenecaAllegany Casino opened on May 1, 2004 and thus was only open for five monthsduring fiscal 2004. Prior to May 1, 2004, Seneca Allegany Casino was in thedevelopment and construction phases.
John Pasqualoni, President and Chief Executive Officer of SGC, stated:"Our gaming operations continue to generate excellent operating results.Before reflecting non-recurring Klewin Charges, in Fiscal 2005, we generatedAdjusted consolidated EBITDA (as defined below) and adjusted consolidatedEBITDA margin of $171.0 million and 38%, respectively. I continue to beextremely pleased with both our guests' acceptance and the operating resultsof Seneca Allegany Casino. Its operating performance has exceeded ourexpectations. All of this was accomplished while continuing construction ofthe 604-room luxury hotel at Seneca Niagara Casino, finalizing developmentplans for our 220-room hotel at Seneca Allegany Casino, and evaluatingpossible sites and breaking ground for the Seneca Buffalo Creek Casino. Withthe partial opening of the luxury hotel at Seneca Niagara Casino on December15, 2005 and the grand opening of the entire luxury hotel scheduled for theend of March 2006, I believe we will be able to attract more high valuepatrons and therefore continue to increase our net revenues. In a very shortperiod, SGC has become the leading gaming and entertainment operation inWestern New York."
During Fiscal 2005, SGC spent $171.0 million for construction and thepurchase of property and equipment, including $117.0 million at Seneca NiagaraCasino and $54.0 million at Seneca Allegany Casino.
As of this date, construction on Seneca Niagara Casino's luxury hotelremains on schedule. We continue to expect the hotel to be fully open by March31, 2006. While we previously estimated the cost to construct and equip theluxury hotel at $200.0 million, we have recently been informed by ourconstruction manager, the Seneca Construction Management Corporation, that thecost to complete the luxury hotel will exceed that amount. We had based our$200.0 million estimate on the guaranteed maximum contract sum of $153.0million provided by Klewin in February 2004. We expect the final cost to equipand construct this luxury hotel to be between $235.0 million and $240.0million. We continue to evaluate our options against the appropriate partieswith respect to the additional cost to complete the luxury hotel.
The Seneca Allegany Casino's 1,850-space parking garage, excluding thevalet portion, was opened on July 1, 2005.
The construction of the resort hotel and permanent gaming facility atSeneca Allegany Casino commenced on October 29, 2005. A partial opening isscheduled for October 22, 2006 with a grand opening on December 31, 2006. Theestimated cost to construct and equip the resort hotel is between $156.0 and$167.0 million.
The ground breaking for the Seneca Buffalo Creek Casino occurred onDecember 8, 2005. The Seneca Buffalo Creek Casino is expected to open incalendar year 2007.
As of September 30, 2005, SGC had cash and cash equivalents of $142.5million and short-term investments of $96.1 million.
Barry E. Snyder, Sr., President of the Nation and Chairman of the SGCBoard of Directors commented: "During Fiscal 2005, we continued to makesubstantial commitments of capital to upgrade, improve and expand our gamingoperations. We opened a portion of the luxury hotel at the Seneca NiagaraCasino, including gaming, retail and dining venues on December 15, 2005. Thecompletion of the Seneca Niagara Casino & Hotel is currently on schedule andis expected to be completed by March 31, 2006. Construction of our 220-roomhotel and permanent gaming facility at Seneca Allegany Casino has commencedand we expect to have the permanent casino, restaurants and two floors ofrooms opened by October 22, 2006 and the resort hotel fully completed byDecember 31, 2006. We recently completed the acquisition of 9 acres of land inthe Inner Harbor area of the City of Buffalo for the construction of our thirdClass III casino. Finally, we believe SGC and the Nation's payment ofsubcontractors was the correct action in response to the non-payment byKlewin, with funds transferred to Klewin by us, of subcontractors on ourprojects. Not only did it ensure the continuity of construction on ourprojects, but also paid subcontractors for work performed. We intend tovigorously litigate this matter against Klewin and their bank to recover thesefunds."
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