MTR GAMING GROUP ACQUIRES BINION’S HORSESHOE
HOTEL & CASINO AND ENTERS INTO JOINT OPERATING AGREEMENT
WITH HARRAH’S
Management to Conduct Conference Call on Friday, March 12
at 10:00 am ET CHESTER, WV – March 11, 2004 – MTR Gaming Group,
Inc. (Nasdaq National Market:MNTG) today announced that its
wholly owned subsidiary, Speakeasy Gaming of Fremont, Inc.,
completed its purchase of the assets of Binion’s Horseshoe
Hotel & Casino in downtown Las Vegas and entered into a
Joint Operating License Agreement with an affiliate of Harrah’s
Entertainment, Inc. (NYSE:HET) pursuant to which Harrah’s
will serve as the primary day-to-day operator of the property
on an interim basis.
The purchase price of the property is $20 million, free and
clear of all debts, subject to increase by $5 million if, at
the termination of the Joint Operating Agreement, Harrah’s
has achieved certain operational milestones. Separately, the
Company purchased for $1.8 million a parcel previously ground
leased for $232,500 per year.
The Joint Operating Agreement will have an initial term of
one year, which Harrah’s may extend for up to an additional
two years. During the term of the agreement, MTR will receive
the following payments from Harrah’s: (i) $2.4 million
for the initial one-year term; (ii) if Harrah’s extends
for the second year, the greater of $4.8 million or 50% of
EBITDA; (iii) if Harrah’s extends for another six months,
the greater of $2.7 million or 50% of EBITDA; and (iv) if Harrah’s
extends for the final six-month period, the greater of $2.7
million or 50% of EBITDA. MTR will seek to hire a majority
of the approximately 900 employees displaced by the January
closing of the property, but during the term of the Joint Operating
Agreement, Harrah’s will be responsible for all of the
property’s operating expenses, including payroll and
insurance, approximately $6 million per year in rent for parcels
that are ground leased, and for funding the necessary operating
capital.
While Harrah’s will be the day-to-day operator of the
property, the operations and capital expenditures are subject
to certain oversight and review by a joint committee of the
two companies.
Pursuant to an Intellectual Property License Agreement, Harrah’s
will retain the rights to certain intellectual property, including
the names "Horseshoe" and "World Series of
Poker," while MTR will retain the right to use the name "Binion’s" in
Clark County, Nevada. Harrah’s has agreed, however, to
hold the World Series of Poker at the property in 2004 and
at least the final two rounds of the tournament in 2005, irrespective
of whether it elects to extend the Joint Operating Agreement
for a second year. Upon termination of the Joint Operating
License Agreement, MTR will take over operation of the property
and will re-brand the property in accordance with the Intellectual
Property License Agreement.
Binion’s Horseshoe Hotel & Casino is located in
the heart of downtown Las Vegas, and generated over $70 million
in revenues (unaudited) in 2003. The property has approximately
80,000 square feet of gaming space, 360 hotel rooms, restaurants,
and a rooftop swimming pool.
Edson R. (Ted) Arneault, President and CEO of MTR Gaming Group,
stated, "While our primary external growth strategy remains
the pursuit of racetrack and racino opportunities, we believe
the Binion’s transaction complements and enhances our
existing business for a number of reasons:
- We feel strongly
that this is a property we can manage well after the joint
operating agreement ends as it attracts a similar
type of customer as Mountaineer.
- Binion’s
is a Las Vegas landmark and is situated in what we
consider to be the best location in downtown Las Vegas.
- It will enable
us to leverage our management team and provide critical
mass within the Nevada market, thus improving
overall financial performance.
- "Binion’s" is
an internationally known brand name.
- We anticipate that
the acquisition will be immediately accretive to EBITDA
and earnings per share.
Mr. Arneault continued, "We are pleased to be working
with Harrah’s, and are enthusiastic about re-opening
the property on or about April 1st and hosting the 35th Annual
World Series of Poker beginning April 22nd. While our primary
growth strategy continues to be building or acquiring other
middle-market gaming and/or parimutuel businesses, we are very
optimistic about the Binion’s opportunity and look forward
to reporting on its developments. Apart from the business opportunity,
we are proud to be part of a transaction that reemploys so
many people and restores an important landmark. We wish to
express our appreciation to the City of Las Vegas, the Nevada
State Gaming Control Board and Nevada State Gaming Commission
whose expedited consideration allowed the transaction to proceed.
Reconciliation of Non-GAAP Measures to GAAP
EBITDA or earnings before interest, taxes, depreciation and
amortization is not a measure of performance or liquidity
calculated in accordance with generally accepted accounting
principles ("GAAP"), is unaudited and should
not be considered an alternative to, or more meaningful than,
net income or income from operations, as an indicator of
our operating performance, or cash flows from operating activities,
as a measure of liquidity. We have included EBITDA in our
discussion because it is a widely used measure of performance
and basis for valuation of companies in our industry. Uses
of our cash flows that are not reflected in EBITDA include
capital expenditures (which may be significant), interest
payments, income taxes, and debt principal repayments. Moreover,
other companies that provide EBITDA information may calculate
and define EBITDA differently than we do.
Conference call
Management will discuss this transaction in greater detail
during a conference call scheduled for 10:00 a.m. ET on Friday,
March 12, 2004. Interested parties may participate in the
call by dialing 973-317-5319 – please call in 10 minutes
before the call is scheduled to begin, and ask for the MTR
Gaming call. The conference call will be broadcast live over
the Internet via the Investor Relations section of the Company’s
web site at www.mtrgaming.com. To listen to the call please
go to the web site at least 15 minutes early to register,
download and install any necessary audio software. If you
are unable to listen live, the conference call will be archived
on the Company’s web site.
About MTR Gaming Group
MTR Gaming Group, Inc., through subsidiaries, owns and operates
the Mountaineer Casino Racetrack and Resort in Chester,
West Virginia; Scioto Downs in Columbus, Ohio; the Ramada
Inn and Speedway Casino in North Las Vegas, Nevada; Binion’s
Horseshoe Hotel & Casino in Las Vegas, Nevada, which
the Company operates jointly with Harrah’s; and holds
a license to build Presque Isle Downs, a thoroughbred racetrack
with pari-mutuel racing in Erie, Pennsylvania. The Mountaineer
facility, the Company’s primary source of revenues,
currently encompasses a thoroughbred racetrack with off-track
betting and export simulcasting, 3,200 slot machines, 359
hotel rooms, golf course, spa & fitness center, theater
and events center, convention center and fine dining and
entertainment. MTR is included on the Russell 2000® and
Russell® 3000 Indexes. For more information, please visit
www.mtrgaming.com.
Except for historical information,
this press release contains forward-looking statements concerning,
among other things,
the Company’s expected return on investment from the
Binion’s transaction during the term of the Joint Operating
License Agreement with Harrah’s, anticipated successful
management of the property upon termination of the Joint Operating
Agreement, and the impact of the transaction on overall financial
performance. Such statements are based on the Company’s
current plans and expectations. Such statements are subject
to a number of risks and uncertainties that could cause the
statements made to be incorrect and/or for actual results to
differ materially. Those risks and uncertainties include but
are not limited to Harrah’s performance of its obligations
under the Joint Operating Agreement, our ability to operate
the property profitably and integrate it with our existing
businesses when we take over operations, and our ability to
enforce our intellectual property rights The Company does not
intend to update publicly any forward-looking statements, except
as may be required by law.
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