NEWPORT BEACH, Calif., May 14 /PRNewswire/ -- Palace Entertainment
Holdings, Inc. ("Company") and Festival Fun Parks, LLC ("FFP"), its wholly-
owned subsidiary, one of the largest operators of water parks ("WPs") and
family entertainment centers ("FECs") in the United States is filing its
Quarterly Report on 10Q. The Company is including in this press release its
unaudited Condensed Consolidated Statements of Operations for the three
month period ended March 31, 2007 and 2006, the Condensed Consolidated
Statements of Cash Flows for the three month period ended March 31, 2007
and 2006 and the Condensed Consolidated Balance Sheets as of March 31, 2007
and December 31, 2006 as well as related commentary.
On April 12, 2006, Palace Entertainment Holdings, Inc. (the "Company")
acquired Festival Fun Parks, LLC ("FFP"). As a result of the Acquisition,
the Company's unaudited Condensed Consolidated Statements of Operations for
the period from January 1, 2006 through March 31, 2006 reflect the
operations of the Company prior to the Acquisition.
Total net revenue for the three months ended March 31, 2007 totaled
$21.5 million compared to $20.8 million for the three months ended March
31, 2006, an increase of $0.7 million or 3.3%. FEC revenues increased $1.49
million or 8.8% over the same period in 2006. This was achieved despite
unfavorable weather in Texas that adversely effected four FEC locations.
Good weather in California and the southeast locations combined with
pricing initiatives implemented in 2006, increased capital spending in 2006
and early in 2007 and last year's initiatives to improve the park
appearances and the quality of the guest service contributed to this
revenue increase. A portion of the revenue increase can also be attributed
to Easter break occurring earlier during 2007 versus 2006. Offsetting the
FEC revenue increase was a decrease in attendance and revenues at the
Silver Springs nature park. A reduction in the number of concerts combined
with a weaker concert lineup than in 2006 contributed to the revenue
decrease. In addition, a pricing increase in season passes adopted in late
2006 resulted in lower season pass sales adversely impacting attendance
during the quarter. In March 2007, the Company lowered the season pass
prices which resulted in a $0.3 million increase in season pass sales for
the month of March 2007 compared to the same period in 2006.
Our park level operating expenses totaled $23.7 million for the three
months ended March 31, 2007 compared to $23.3 million for the same period
in 2006, an increase of $0.4 million or 1.7%. Operating expenses as a
percentage of revenue, however, decreased from 111.9% in 2006 to 110.2%.
-- Cost of products sold increased $0.05 million or 2.8% for the three
month period ended March 31, 2007 compared to the same period in 2006
primarily due to revenue driven incremental food, beverage and
merchandise costs. Food and beverage costs as a percentage of related
revenues were consistent with the prior period.
-- Salaries and benefits decreased $0.1 million or 1.4% for the three
month period ended March 31, 2007 compared to the same period in 2006.
Rate increases attributable to the minimum wage increase as of January
1, 2007, were partially offset by salaried labor reductions and a
reduction in hourly labor hours. In addition, accrued vacations costs
were lower by $0.3 million as a result of the change in the Company's
vacation policy as of January 1, 2007 to accrue as earned instead of
earning 100% entitlement as of the beginning of the year.
-- Operating and maintenance costs increased $0.6 million or 8.8% for the
three month period ended March 31, 2007 compared to the same period in
2006 primarily resulting from higher revenues, a $0.3 million increase
in general liability self insurance reserve and $0.2 million increase
in insurance premiums.
-- Rent and property taxes decreased $0.1 million or 2% for the three
month period ended March 31, 2007 compared to the same period in 2006
as a result of lower common area charges. The improved liquidity of
the Company allowed for earlier payments resulting in discounts on tax
assessments.
Selling, general and administrative expenses totaled $4.9 million for
the three month period ended March 31, 2007 compared to $3.8 million for
the same period in 2006, an increase of $1.1 million or 28.2%. The increase
was primarily driven by a $0.8 million increase in severance related costs
associated with the corporate reorganization at the beginning of 2007 and
increased professional audit and legal fees attributable to being a public
company.
"EBITDA" (1) for the three months ended March 31, 2007 was ($7.0)
million versus ($6.3) million in the same prior year period. EBITDA, which
is defined as net income (loss) before interest, income taxes, depreciation
and amortization, is not a presentation made in accordance with generally
accepted accounting principals ("GAAP") and should not be considered an
alternative to, or more meaningful than, amounts presented in accordance
with GAAP, including net income (loss), or net cash from operating
activities. However, the Company believes that EBITDA is a useful measure
for assessing the performance of on-going activities, and that some
investors may use such measures as supplemental information to evaluate the
Company's ability to generate cash. In connection with the Company's senior
secured credit facility the lender permits certain non-cash, non-recurring
and other one-time add-backs to EBITDA.
Depreciation and amortization expenses increased $0.5 million or 13%
for the three month period ended March 31, 2007 compared to the same period
in 2006. The increase was due to higher depreciation and amortization in
2007 as a result of increasing property and equipment and intangibles to
fair market value and adjusting their economic useful lives in connection
with the Acquisition.
Interest expense, net totaled $4.4 million for the three month period
ended March 31, 2007 compared to $6 million during the same period in 2006,
a decrease of $1.6 million or 26.6%. The decrease in interest expense was
primarily due to the lower debt levels and lower interest rates that
resulted from the new capital structure implemented at the time of the
Acquisition. The debt extinguishment fees relating to the loans repaid as
of the Acquisition date were recorded to goodwill.
An income tax benefit of $5.53 million was recorded for the three month
period ended March 31, 2007 compared to $0 for the three month period ended
March 31, 2006, since the entity was not previously subject to taxes prior
to the Acquisition. The Company recorded an income tax benefit since it had
loss from operations for the three month period ended March 31, 2007. The
Company has recorded no valuation allowance. The Company believes it is
more likely than not that the tax benefit will be used in subsequent
periods when profitability is expected due to the seasonality of the
business.
The net loss from operations for the three month period ended March 31,
2007 was $16.2 million compared to $16.5 million for the three month period
ended March 31, 2006.
The Company's Chief Executive Officer, Al Weber, commented:
"We are pleased to report that the company produced strong results in
the first quarter, even as we reorganized key positions, adjusted pricing,
welcomed a newly acquired WP into the Palace portfolio, and launched
impactful new marketing and media programs. With greater focus on our field
operations the organization is building momentum with a renewed commitment
on improving our guest service, park facilities, group sales, information
systems, labor and expense controls. The investments in our FEC segment,
including go karts, new games, expanded birthday and meeting room space,
and restaurant upgrades contributed to revenue increases of 8.8% against
the same period last year. Our new WP in northern California has been
dramatically transformed into Raging Waters Sacramento and is ready for its
grand opening on May 19. We are proud to have partnered this past weekend
with the Susan B. Komen Race for the Cure, which featured over 30,000
participants in a charity race that started and finished at our new park on
May 12. While we were negatively impacted in first quarter WP revenue due
to previous operating decisions at Silver Springs, we took corrective
action regarding season pass pricing and were gratified to see a dramatic
increase in sales in March. In total, season pass sales for the WP are
ahead of last year as we prepare to open the season. In summary, we look
forward to continuing to drive growth in revenue and earnings with capital
investments and operational improvements focused on providing our guests a
place to escape, have fun together, and create memories."
(1) Non-GAAP Financial Measures
CONFERENCE CALL
In conjunction with this release, Palace Entertainment has scheduled a
conference call, which will be held on Thursday, May 17, 2007 at 12:30 p.m.
Eastern Time (9:30 a.m. Pacific).
What: Palace Entertainment Earnings Conference Call
When: Thursday, May 17, 2007- 12:30 p.m. Eastern Time
How: Live via phone - By dialing (888) 793-1753 ten minutes prior to
the start time. Participants will be asked to give their names and company
affiliations. The conference ID number is 21339403.
For those who cannot listen to the live call, a replay will be
available through May 31, 2007, and may be accessed by calling (800)
633-8284 using Reservation #: 21339403.
CONTACTS:
Cynthia P. Kellogg
CFO
(949) 797-9757
PALACE ENTERTAINMENT HOLDINGS, INC.
NON-GAAP RECONCILIATION OF EBITDA
($ in thousands)
THREE MONTHS ENDED
MARCH 31,
2007 2006
Net Income (Loss) $(10,651) $(16,472)
Add back: Interest expense, net 4,415 6,004
Income tax benefit (5,530) -
Depreciation and
amortization 4,724 4,179
EBITDA $(7,042) $(6,289)
IMPORTANT CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Statements in this press release regarding the Company's business that
are not historical facts are forward-looking statements, including
statements about our beliefs and expectations or any statement that may
predict, forecast, indicate or imply future results, performance,
achievements or events. Forward-looking statements include, but are not
limited to, statements generally preceded by, followed by or that include
the words "believe," "expect," "anticipate," "plan," "estimate," "intend,"
"project," "targets," "likely," "would," "could" or similar expressions.
These statements include, among others, statements regarding our expected
business outlook, anticipated financial and operating results, strategies,
contingencies, financing plans, working capital needs, sources of
liquidity, capital expenditures, amounts and timing of expenditures and
contemplated transactions.
Forward-looking statements reflect the Company's current expectations,
and are not guarantees of performance. These statements are based on
management's beliefs and assumptions, which in turn are based on currently
available information. Important assumptions relating to these
forward-looking statements include, among others, assumptions regarding
demand for our WPs and FECs, expected pricing levels, the timing and cost
of planned capital expenditures, the estimated operational costs for each
of our WPs and FECs, expected outcomes of pending litigation, competitive
conditions and general economic conditions. These assumptions could prove
inaccurate. Forward-looking statements involve risks and uncertainties,
which could cause actual results to differ materially from those contained
in any forward-looking statement. Many of these factors are beyond
management's ability to control or predict.
Investors should not place undue reliance on any forward-looking
statements. Further, forward-looking statements speak only as of the date
they are made, and the Company undertakes no obligation to update them in
light of new information or future events. These forward-looking statements
reflect the Company's current views with respect to future events, and are
based on assumptions and subject to risks and uncertainties that may cause
actual financial results to differ from expectations, which, as a result,
may adversely affect the Company's financial results and the Company's
ability to make payments on the 10 7/8% Senior Notes.
PALACE ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited / in thousands)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2007 AND MARCH 31, 2006
Successor Predecessor
For the three For the three
month period ended month period ended
March 31, 2007 March 31, 2006
REVENUES - net $21,533 $20,796
OPERATING COSTS AND EXPENSES
Cost of revenue (exclusive of
depreciation and amortization
shown below) 23,729 23,274
Selling, general and
administrative 4,886 3,811
Depreciation and amortization 4,724 4,179
Gain on disposal of assets (40) -
Total operating costs and
expenses 33,299 31,264
OPERATING LOSS (11,766) (10,468)
OTHER EXPENSE
Interest expense - net 4,415 6,004
Total other expense - net 4,415 6,004
LOSS FROM OPERATIONS (16,181) (16,472)
BEFORE INCOME TAXES
INCOME TAX BENEFIT (5,530) -
NET LOSS $(10,651) $(16,472)
PALACE ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited / in thousands except for
per share amounts)
AS OF MARCH 31, 2007 AND DECEMBER 31, 2006
March 31, 2007 December 31, 2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,577 $2,090
Inventories 2,348 2,124
Prepaid expenses and other current
assets 4,853 5,316
Deferred income taxes 7,258 1,171
Total current assets 17,036 10,701
Property and equipment - net 114,573 114,150
Goodwill 86,504 86,504
Other intangible assets - net 18,808 19,032
Other assets - net 6,576 7,307
TOTAL $243,497 $237,694
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $3,770 $1,791
Accrued interest 7,694 3,518
Accrued wages and payroll taxes 2,212 2,513
Other accrued liabilities 11,433 10,170
Unearned revenue 2,167 1,323
Current portion of long-term debt 876 848
Total current liabilities 28,152 20,163
Long-Term Debt - Less current portion 157,336 150,008
Deferred income taxes 2,588 2,032
Other long term liabilities 7,292 7,296
Total liabilities 195,368 179,499
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
Common Stock, $.01 stated value,
1000 shares authorized,
100 shares issued and outstanding
Additional Paid-in Capital 55,218 54,633
Accumulated (deficit) earnings (7,089) 3,562
Total Shareholder's equity 48,129 58,195
TOTAL $243,497 $237,694
PALACE ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2007 AND 2006 (unaudited / in
thousands)
Successor Predecessor
For the three For the three
month period ended month period ended
March 31, 2007 March 31, 2006
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(10,651) $(16,472)
Adjustments to reconcile net
loss to net cash
provided by operating
activities:
Depreciation and
amortization 4,724 4,179
Gain on disposal of assets (40)
Amortization of deferred
financing costs 193 720
Financed Interest Payments 3,386
Share based Compensation 85
Deferred rent expense 59 51
Deferred income taxes (5,530)
Changes in net operating
assets and liabilities:
Inventories (224) (104)
Prepaid expenses and
other current assets 479 442
Other assets 523 8
Accounts payable 1,883 (133)
Accrued interest 4,177 (11)
Accrued wages and
payroll taxes (301) (61)
Other accrued
liabilities 1,256 (782)
Unearned revenue 844 365
Other long-term
liabilities (6)
Net cash used by operating
activities (2,529) (8,412)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,799) (3,403)
Proceeds from disposal of assets 72
Net cash used in investing
activities (4,727) (3,403)
PALACE ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (unaudited / in
thousands)
Successor Predecessor
For the three For the three
month period ended month period ended
March 31, 2007 March 31, 2006
Issuance of common stock 500
Proceeds from long-term
debt 7,250 13,100
Payments on long-term debt (842)
Payments on capital leases (7) (2)
Distributions to member (56)
Net cash provided by financing
activities 7,743 12,200
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 487 385
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,090 5,240
CASH AND CASH EQUIVALENTS,
END OF PERIOD $2,577 $5,625
Supplemental Disclosures of Cash
Flow Information:
Cash Paid For Interest $35 $1,941
Supplemental Disclosures of
Non Cash Investing and Financing
Activities:
Property and Equipment
included in Accounts Payable $358 $360
Increase in Capital Lease
Obligation for Property and
Equipment $113 $-
SOURCE Palace Entertainment Holdings, Inc.
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Related links:
http://www.palaceentertainment.com
CONTACT:
Cynthia P. Kellogg, CFO of Palace
Entertainment Holdings, Inc., +1-949-797-9757
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