By a News Reporter-Staff News Editor at Marketing Weekly News -- Affinity Gaming ("Affinity" or the "Company") announced results for the three-month and six-month periods ended June 30, 2014. Second Quarter 2014 Financial Summary Consolidated Results The Company recorded net revenue from continuing operations of $99.6 million during the quarter ended June 30, 2014, compared to net revenue of $100.3 million during the same quarter of 2013, a decrease of $0.7 million, or 0.7%. Adjusted EBITDA during the second quarter of 2014 was $12.7 million, compared to $17.8 million during the second quarter of 2013, a decline of $5.1 million, or 28.8%. Segment Results Nevada - Nevada segment net revenue declined $1.3 million, or 2.2%. Casino revenue decreased $2.5 million, or 6.6%. Increases in fuel and retail net revenue of $1.4 million, or 9.8%, and in food and beverage revenue of $0.7 million, or 9.3%, partially offset the declines in casino revenue. Casino revenue continues to be negatively impacted by a constrained consumer and an intense promotional environment. Fuel and retail revenue benefited from the new travel center at Whiskey Pete's, which was negatively impacted by construction in the same quarter of the prior year.
Nevada Adjusted EBITDA decreased $3.1 million, or 31.8%, primarily as a result of the Adjusted EBITDA contribution of casino operations, which declined $3.1 million, or 22.2%. Affinity targets local, value-oriented gaming customers who are also frequently targeted by competing local casinos with promotional campaigns and offers. In response to the competitive promotional environment, the Company increased marketing efforts, primarily focusing on driving additional revenue through incremental trips or additional spend per trip by customers in its loyalty club database. The revenue generated from the additional promotional campaigns did not offset the increase in expense, resulting in the decline in EBITDA contribution. The Company continues to analyze the effectiveness of its promotional campaigns and to refine marketing efforts in the challenging operating environment. The Adjusted EBITDA contribution from non-gaming operations, primarily from fuel and retail operations, increased $1.1 million, or 17.7%, but was almost completely offset by a $1.0 million increase in general and administrative expense. The increase in general and administrative expense was attributable to a $1 million credit to expense in the prior-year quarter from the reversal of a sales and use tax accrual which was no longer required after the state tax commission ruled that complimentary and employee meals were not subject to use tax. Midwest - Net revenue from the Company's Midwest segment declined $0.6 million, or 1.8% when compared to the same quarter in 2013, while Adjusted EBITDA declined $1.2 million, or 12.0%, to $8.9 million. Results were primarily impacted by severe weather through April 2014 and by continued softness in the regional gaming markets. Colorado - Net revenue increased by $1.2 million, or 14.0%, when compared to the same quarter of 2013 due to the recent improvements at the Golden Mardi Gras which included the expansion of the casino entry and gaming floor and the addition of other amenities designed to attract the Company's target slot customer. Adjusted EBITDA declined $0.8 million, or 42.1%, primarily due to an increase in marketing and promotional expense targeting customers who did not visit the properties while the renovation was underway. Corporate Operations Affinity's corporate expense during the second quarter of 2014 was $4.0 million, essentially unchanged when compared to the same quarter of 2013. Corporate expense, which represents unallocated payroll, professional fees and other expense not directly attributed to reportable segments, is net of fees earned under the consulting agreement with the operator of the Rampart Casino at the JW Marriott Resort in Las Vegas, from which the Company collected $0.5 million in management fees during each of the quarters ended June 30, 2014 and 2013.
"While the operating environment remains tough in our core markets, we continue to analyze the effectiveness of our marketing and promotional campaigns and expect that as we implement efficiencies, we'll be able to improve overall performance while best positioning our properties in this tough promotional and economic environment," stated David Ross, Chief Executive Officer. "The recent settlement of outstanding shareholder litigation and the amendment of the credit agreement are positive developments that will allow the Company to focus on growth and value creation." Year-to-Date 2014 Financial Summary Consolidated Results The Company recorded net revenue from continuing operations of $196.2 million during the six months ended June 30, 2014, compared to net revenue of $201.4 million during the same period of 2013, a decrease of $5.2 million, or 2.6%. Adjusted EBITDA during the six months ended June 30, 2014 was $26.6 million, compared to $35.9 million during the same period of 2013, a decline of $9.3 million, or 25.8%. Results for the six months ended June 30, 2014 were most significantly impacted by continued softness in the regional gaming markets and by the constrained discretionary budgets of the Company's target customers. Increased promotional and marketing expense, coupled with the severe weather impact through April 2014, negatively impacted Adjusted EBITDA when comparing the six months ended June 30, 2014 to the same period in the prior year. Subsequent Events On July 28, 2014, the Company announced a settlement agreement to dismiss pending shareholder litigation and reconstitute its board of directors. The Company also announced a successful amendment to the credit agreement for its senior secured term loan. The amendment modified certain financial covenants and provided additional operating flexibility for the Company. Conference Call Information Affinity Gaming will be hosting its second quarter 2014 conference call today at 10:00 a.m. Pacific Time (1:00 p.m. Eastern). The conference call number is (877) 705-6003. Please call at least 10 minutes prior to the scheduled start time. A live webcast of the conference call will also be available on Affinity's website at www.affinitygaming.com.
Keywords for this news article include: Marketing, Advertising, Affinity Gaming.
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