ST. LOUIS, Missouri -- (PRESS RELEASE) -- Isle of Capri Casinos, Inc. (ISLE) (the "Company") today reported financial results for the second quarter of fiscal year 2013 ended October 28, 2012 and other Company-related news.
Virginia McDowell, president and chief executive officer remarked, "The second quarter was a period of achievements and challenges. Similar to other regional gaming operators, we experienced softening net revenues during September and October. Cost containment efforts led to increased adjusted EBITDA and margins at several of our properties; however we could not overcome the softness in our Mississippi business."
"We continue to be hampered by several factors in Mississippi which accounted for more than 150% of our year-over-year property adjusted EBITDA decline. Some of these factors, such as construction disruption in Vicksburg, will end in the coming weeks, however others related to market conditions and operations have the full attention and focus of our team. The balance of our properties experienced an overall increase in adjusted EBITDA of 2.5%, while net revenue decreased 1.9%.
"Our new casino property in Cape Girardeau debuted on October 30, our rebranding project in Vicksburg is nearly complete and the renovation of the primary Lake Charles hotel tower will be complete by the end of December. Additionally, we have begun construction on our Lady Luck Casino at Nemacolin Woodlands Resort in Pennsylvania. We are achieving our goals of renewing our asset base and restyling our customer experiences."
Net revenues decreased $8.2 million during the period, to $223.2 million. Consolidated adjusted EBITDA decreased $3.2 million, or 7.6%, to 38.7 million. This decrease of $3.2 million is attributable to a decrease in adjusted EBITDA of $3.2 million at our Mississippi properties and a $1.0 million increase in corporate legal costs, which offset gains in adjusted EBITDA at several of our other properties.
Diluted loss per share from continuing operations for the quarter was $(0.11) compared to $(0.03) for the second quarter last year. The results for the current year were impacted by approximately $2.7 million in preopening costs associated with Cape Girardeau and $2.5 million of costs associated with the refinancing of our subordinated debt in July. Before consideration of these items, diluted earnings per share from continuing operations for the quarter would have been break-even ($0.00).
As a result of efficiencies in marketing and cost containment efforts, we had favorable results at the following properties:
Black Hawk – Adjusted EBITDA increased 2.2% to $7.7 million despite a decrease in net revenues of 3.9% to $30.7 million, resulting in margin improvement of nearly 150 basis points to 25%.
Pompano – Despite the continued year over year impact of a major expansion at a competing facility, adjusted EBITDA increased $0.4 million while net revenues increased $0.8 million to $33.7 million. In addition, construction was completed to convert the buffet to a Farmer's Pick® in mid-September.
Quad Cities and Waterloo – Adjusted EBITDA increased a combined 5.2% to $13.9 million on increased revenues of 1.5% to $51.0 million, resulting in margin improvement of over 90 basis points to 27.2%. The results were also favorably impacted by the successful implementation of Fan Club® in Waterloo and the introduction of our new Lone Wolf® Bar.
Lake Charles – Adjusted EBITDA increased $0.3 million despite decreased net revenues of $2.9 million for the quarter. Results were negatively impacted by construction disruption associated with ongoing renovation of the entire hotel tower, which caused an average of approximately 20% of our total hotel rooms to be out of service during the quarter.
Kansas City – Adjusted EBITDA remained flat at $4.1 million despite the impact of a new competitor in the market, which resulted in decreased revenues of $1.4 million.
Our Mississippi properties faced significant challenges during the quarter, which contributed to over 150% of our property adjusted EBITDA loss year over year.
In Vicksburg, our results were impacted by construction disruption associated with the on-going rebranding of the property to a Lady Luck® Casino, as we experienced an average of 200 to 400 slot machines out of service per day. The results were also impacted by an overall market decline of 6% during the quarter.
In Natchez, our results were impacted by significant weather disruption and damage, where our boat was closed for four days due to a storm that caused meaningful decreased patron count for approximately one month. In addition, the adverse weather conditions damaged each of the three entrances to the facility as well as some infrastructure components. The facility continues to face extraordinarily low river levels, causing our boat to nearly sit on the bottom of the river, which has severely impacted the entrance and overall customer experience. We are committed to mitigating the damage done to our facility, but we expect business to suffer until water levels return to a reasonable level in this section of the Mississippi River. Additionally, pending regulatory approval, a new competitor facility is expected to open in the market before the end of the year.
In Lula, the market changes that occurred following the flooding in last fiscal year have not improved. The market continues to decline, as customers continue to patronize the facilities in the Memphis and Little Rock areas that benefitted from the prior year's flooding. We are pursuing financial improvements through cost savings and operational consolidations.
Corporate Expenses and Other Items
Corporate and development expenses were $10.8 million for the quarter, an increase of $1.5 million compared to prior year. Included in the results for the fiscal 2013 quarter are $1.5 million in refinancing related costs and $1.0 million in increased legal costs offset by lower insurance costs and stock compensation expenses.
Non-cash stock compensation expense was $1.5 million for the quarter compared to $2.3 million in the second quarter of fiscal 2012.
Preopening costs associated with Cape Girardeau were $2.7 million.
Included in discontinued operations are the operating results of our Biloxi property approximately $2.1 million of charges related to Hurricane Isaac for costs incurred and a credit against the purchase price to satisfy our obligation to repair the property, as required by the purchase agreement.
We have begun preliminary demolition in advance of construction of Lady Luck Casino at Nemacolin Woodlands Resort. We currently expect to open Lady Luck Nemacolin during summer 2013. The facility is planned to include 600 slot machines, 28 table games, an Otis & Henry's Bar & Grill, and a Lone Wolf Bar. The Company currently expects the total project to cost approximately $57 million to $60 million, including the $12.5 million license fee. Several aspects of the project are currently out for bid and we expect to get firm pricing on those over the next few weeks.
In Vicksburg, our Lady Luck rebranding project is complete, and we will hold our grand re-opening ceremony tomorrow. The property is a fully-branded Lady Luck casino, as we have greatly enhanced the exterior and interior, completed the renovation of the casino floor and have introduced an Otis & Henry's Bar & Grill and a Lone Wolf Bar. The property also has implemented our Fan Club® program.
As of October 28, 2012, the Company had $75.5 million in cash and cash equivalents, $1.18 billion in total debt and $199 million in net line of credit availability.
Second quarter capital expenditures were $46 million, of which $32 million related to Cape Girardeau, and $14 million at our existing properties. The Company expects capital expenditures to be approximately $80 million to $90 million for the balance of the fiscal year, including maintenance capital, final costs in Cape Girardeau and construction costs in Nemacolin of approximately $20 million to $30 million.
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