NEWPORT BEACH, Calif., Aug. 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 and
six month periods ended June 30, 2007 and 2006, Condensed Consolidated
Statements of Cash Flows for the six month period ended June 30, 2007 and
2006 and Condensed Consolidated Balance Sheets as of June 30, 2007 and
December 31, 2006 as well as related commentary.
On April 12, 2006, the Company completed the acquisition of FFP
("Acquisition"). As a result, the Company's unaudited Condensed
Consolidated Statements of Operations for the period from January 1, 2006
through April 12, 2006 reflect the operations of the Company prior to the
Acquisition. However, for the purpose of comparing the pre-Acquisition and
post-Acquisition periods in 2006, we have combined the two periods in a
separate column in the financial statements for the three and six month
periods presented below.
The net revenue for the three month period ended June 30, 2007 totaled
$45.0 million compared to $42.1 million for the three month period ended
June 30, 2006, an increase of $2.9 million or 7.0%. FEC revenues increased
$0.2 million or 0.9% over the same period in 2006. FEC revenue increased
this quarter as compared to the same quarter in 2006 even though there was
a timing difference in the Easter break with the primary benefit of
increased revenue occurring in the first quarter of 2007 as compared to the
primary benefit occurring in the second quarter of 2006. In addition, the
growth rate for the second quarter continued to be reduced as a result of
unfavorable weather in Texas that adversely effected four FEC locations.
Good weather in California and the southeast locations combined with
pricing initiatives, increased capital spending, and last year's
initiatives to improve the park appearances and the quality of the guest
service contributed to this revenue increase. WP revenue increased by $2.7
million or 15.3% over the same period in 2006. The WP revenue increase
includes $1.0 million of revenue for Raging Waters Sacramento which is a
new park that began operations in the second quarter of 2007. The
additional revenue increase at the WPs is also attributed to pricing
incentives, heavier season pass revenue, and increase in attendance.
Our park level operating expenses totaled $33.7 million for the three
month period ended June 30, 2007 compared to $32.1 million for the same
period in 2006, an increase of $1.6 million or 4.8%. Operating expenses as
a percentage of revenue decreased to 74.8% in 2007 compared to 76.4% in
2006. The primary drivers in each expense category were as follows:
-- Cost of products sold increased $0.4 million or 12.2% for the three
month period ended June 30, 2007 compared to the same period in 2006
primarily due to revenue driven incremental food, beverage and
merchandise costs. Food and beverage costs for the FECs as a
percentage of revenue decreased which was offset by an increase for the
WPs, for the three month period ended June 30, 2007 compared to the
same period in 2006.
-- Salaries and benefits increased $0.8 million or 5.6% for the three
month period ended June 30, 2007 compared to the same period in 2006.
The primary cause of the increase was due to the newly acquired park,
Raging Waters Sacramento. With revenue increasing 7%, the Company has
controlled and leveraged labor during this period by reducing overall
hours and improving productivity. This was accomplished despite
minimum wage increases.
-- Operating and maintenance costs were comparable, increasing less than
1%, for the three month period ended June 30, 2007 compared to the same
period in 2006.
-- Rent and property taxes increased $0.3 million or 6.0% for the three
month period ended June 30, 2007 compared to the same period in 2006 as
a result of the addition of the new park, Raging Waters Sacramento.
The increase is also due to an increase in revenue, as several of the
rent agreements have rent expense based on a percentage of revenue.
Selling, general and administrative expenses totaled $7.3 million for
the three month period ended June 30, 2007 compared to $5.9 million for the
same period in 2006, an increase of $1.4 million or 24.1%. The primary
causes were a $0.3 million increase in severance related costs associated
with the corporate reorganization at the beginning of 2007, a $0.5 million
increase in bonuses due to an expectation of a better year than 2006, and a
$0.4 million increase in professional audit and legal fees attributable to
being a public company.
The net revenue for the six month period ended June 30, 2007 totaled
$66.5 million compared to $62.9 million for the six month period ended June
30, 2006, an increase of $3.6 million or 5.7%. FEC revenues increased $1.7
million or 4.1% 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, increased capital spending, and last year's
initiatives to improve the park appearances and the quality of the guest
service contributed to this revenue increase. WP revenue increased by $2.0
million or 9.1% over the same period in 2006. WP revenue includes $1.0
million of revenue for Raging Waters Sacramento which is a newly acquired
park that began operations in the second quarter of 2007. The additional
revenue increase at the WPs is also attributed to pricing incentives,
heavier season pass revenue, and the increase in attendance. In addition to
the aforementioned revenue increase, as of June 30, 2007, the Company has
increased unearned revenue by $1.4 million or 45.7% over the balance as of
June 30, 2006. This increase will be recognized in future periods. This is
primarily due to the success of selling additional WP season passes.
Our park level operating expenses totaled $57.4 million for the six
month period ended June 30, 2007 compared to $55.4 million for the same
period in 2006, an increase of $2.0 million or 3.4%. Operating expenses as
a percentage of revenue decreased to 86.3% in 2007 compared to 88.1% in
2006. The primary drivers in each expense category were as follows:
-- Cost of products sold increased $0.4 million or 9.0% for the six month
period ended June 30, 2007 compared to the same period in 2006
primarily due to revenue driven incremental food, beverage and
merchandise costs. Food and beverage costs for the FECs as a percentage
of revenue decreased which was offset against the WPs which increased
for the six month period ended June 30, 2007 as compared to the same
period in 2006.
-- Salaries and benefits increased $0.6 million or 2.7% for the six month
period ended June 30, 2007 compared to the same period in 2006. The
primary cause of the increase was due to the newly acquired park,
Raging Waters Sacramento. With revenue increasing 5.7%, the Company
has controlled and leveraged labor during this period by reducing
overall hours and improving productivity. This was accomplished
despite minimum wage increases.
-- Operating and maintenance costs increased $0.7 million or 4.1% for the
six month period ended June 30, 2007 compared to the same period in
2006. The primary factor driving this change was increased revenue and
a $0.3 million increase in the general liability self insurance
reserve.
-- Rent and property taxes increased $0.2 million or 2.3% for the six
month period ended June 30, 2007 compared to the same period in 2006 as
a result of the addition of the new park, Raging Waters Sacramento.
The increase is also due to an increase in revenue, as several of the
rent agreements have rent expense based on a percentage of revenue.
Selling, general and administrative expenses totaled $12.2 million for
the six month period ended June 30, 2007 compared to $9.7 million for the
same period in 2006, an increase of $2.5 million or 25.7%. The increase was
primarily driven by a $1.0 million increase in severance related costs
associated with the corporate reorganization at the beginning of 2007, an
increase in bonuses due to an expectation of a better year in 2007 than
2006, and an increase in professional audit and legal fees attributable to
being a public company.
"EBITDA" (1) for the three months ended June 30, 2007 and 2006 was $4.1
million. For the six months ended June 30, 2007, EBITDA was ($3.0) million
versus ($2.2) 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 were comparable for the three
month period ended June 30, 2007 to the same period in 2006. Depreciation
and amortization expenses totaled $9.2 million for the six month period
ended June 30, 2007 and $8.8 million for the same period in 2006, an
increase of $0.4 million or 5.1% for the six month period ended June 30,
2007 compared to the same period in 2006. The increase was 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 $4.7 million for the three month period
ended June 30, 2007 compared to $4.8 million during the same period in
2006, a decrease of $0.1 million or 1.6%. Interest expense, net totaled
$9.2 million for the six month period ended June 30, 2007 compared to $10.8
million during the same period in 2006, a decrease of $1.6 million or
15.4%. The decrease in interest was primarily due to lower debt levels and
lower interest rates that resulted from the new capital structure
implemented at the time of the Acquisition.
The Company recorded an income tax provision of $1.0 million for the
three month period ended June 30, 2007 compared to $0.1 million for the
three month period ended June 30, 2006. The Company recorded an income tax
benefit of $4.5 million for the six month period ended June 30, 2007
compared to an income tax provision of $0.1 million for the same period in
2006. The Company recorded an income tax benefit since it had a loss from
operations for the six month period ended June 30, 2007. The primary
difference was a valuation allowance of $2.3 million that was offset
against the income tax benefit in 2007. The valuation allowance was
determined based on the excess of the projected 2007 fiscal year net
operating losses that cannot be offset against the prior year's taxable
income recognized during the stub period April 13 to December 31, 2006.
The net loss from operations for the three month period ended June 30,
2007 was $5.2 million compared to $5.4 million for the three month period
ended June 30, 2006. The net loss from operations for the six month period
ended June 30, 2007 was $21.3 million compared to $21.8 million for the six
month period ended June 30, 2006.
The Company's Chief Executive Officer, Al Weber, commented: "We are
pleased to report that the company continued to perform well during the
second quarter of the year. The FEC segment of the company continued to
operate soundly despite unfavorable weather in Texas as guests reacted
positively to the new attractions and games that were recently added as
well as to our initiatives to raise the overall quality of the guests'
experience. These improvements have driven increased revenues. The water
park business is just getting started in the second quarter and we are
pleased to report that the water park segment has seen significant season
pass sales increases as a result of new, more aggressive sales programs
which are demonstrated by the 45.7% increase in unearned revenue as of June
30, 2007 over the balance as of June 30, 2006. In addition, the water park
business has benefited from new advertising campaigns focusing on the
Daycation(R) benefits of a visit to our water parks, and strong ongoing
group sales results that bode well for positive water park performance for
the rest of the season. Despite the slow start from our Silver Springs Park
in the first quarter, the added events and a successful season pass program
have driven a strong rebound in business. After only gaining control of the
park in early 2007, we are satisfied with the performance of our newest
park Raging Waters Sacramento which was added to the group in the first
quarter of this year. With significant changes in improving the quality of
the park and a strong partnership with our landlord CalExpo, we have opened
this park successfully and generated strong trial from a dynamic Sacramento
market. While a significant amount of company profitability is driven by
the third quarter, our solid second quarter results, continued strong
results from our FEC segment, and good advance sales and early trends in
the water park segment support our positive outlook for 2007 performance.
With the new company leadership team in place, we believe the company can
leverage the success of many new 2007 programs to continue to drive strong
results for 2008 and beyond."
CONFERENCE CALL
In conjunction with this release, Palace Entertainment has scheduled a
conference call, which will be held on Thursday August 16, 2007 at 12:00
p.m. Eastern Time (9:00 a.m. Pacific).
What: Palace Entertainment Earnings Conference Call
When: Thursday, August 16, 2007 - 12:00 p.m. Eastern Time
How: Live via phone - By dialing (800) 949-8476 ten minutes prior to the
start time. Participants will be asked to give their names and company
affiliations. The conference ID number is 21346463.
For those who cannot listen to the live call, a replay will be
available through August 30, 2007, and may be accessed by calling (800)
633-8284 using Reservation #: 21346463.
(1) Non-GAAP Financial Measures
PALACE ENTERTAINMENT HOLDINGS, INC.
NON-GAAP RECONCILIATION OF EBITDA
($ in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
Combined Combined
2007 2006 2007 2006
Net Income (Loss) $(6,211) $(5,396) $(16,862) $(21,868)
Add back: Interest expense, net 4,747 4,825 9,162 10,828
Income tax provision
(benefit) 1,011 44 (4,519) 44
Depreciation and
amortization 4,506 4,599 9,230 8,779
EBITDA $4,053 $4,072 $(2,989) $(2,217)
"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 JUNE 30, 2007 AND 2006
Successor Combined
For the For the Successor Predecessor
three three For the For the
month month period period
period period April 13 April 1
ended ended to to
June 30 June 30 June 30 April 12
2007 2006 2006 2006
REVENUES - net $45,004 $42,063 $39,462 $2,601
OPERATING COSTS AND EXPENSES
Cost of revenue (exclusive
of depreciation and
amortization shown below) 33,665 32,123 29,207 2,916
Selling, general and
administrative 7,281 5,868 5,471 397
Depreciation and
amortization 4,506 4,599 4,301 298
Loss on disposal of assets 5 - - -
Total operating costs
and expenses 45,457 42,590 38,979 3,611
OPERATING LOSS (INCOME) (453) (527) 483 (1,010)
OTHER EXPENSE
Interest expense - net 4,747 4,825 4,154 671
Total other expense - net 4,747 4,825 4,154 671
LOSS FROM OPERATIONS (5,200) (5,352) (3,671) (1,681)
BEFORE INCOME TAXES
INCOME TAX PROVISION 1,011 44 44 -
NET LOSS $(6,211) $(5,396) $(3,715) $(1,681)
See Notes to Condensed Consolidated Financial Statements
PALACE ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited / in thousands)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2007 AND 2006
Successor Combined Successor Predecessor
For the For the For the For the
six month six month period period
period period April 13 January 1
ended ended to to
June 30 June 30 June 30 April 12
2007 2006 2006 2006
REVENUES - net $66,537 $62,859 $39,462 $23,397
OPERATING COSTS AND EXPENSES
Cost of revenue (exclusive
of depreciation and
amortization shown below) 57,394 55,397 29,207 26,190
Selling, general and
administrative 12,167 9,679 5,471 4,208
Depreciation and amortization 9,230 8,779 4,301 4,478
Loss on disposal of assets (35) - - -
Total operating costs
and expenses 78,756 73,855 38,979 34,876
OPERATING LOSS (INCOME) (12,219) (10,996) 483 (11,479)
OTHER EXPENSE
Interest expense - net 9,162 10,828 4,154 6,674
Total other expense - net 9,162 10,828 4,154 6,674
LOSS FROM OPERATIONS (21,381) (21,824) (3,671) (18,153)
BEFORE INCOME TAXES
INCOME TAX PROVISION (4,519) 44 44 -
NET LOSS $(16,862) $(21,868) $(3,715) $(18,153)
See Notes to Condensed Consolidated Financial Statements
PALACE ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited / in thousands except for
per share amounts)
AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
June 30, 2007 December 31, 2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents $5,932 $2,090
Inventories 3,481 2,124
Prepaid expenses and other current assets 5,399 5,316
Deferred income taxes 6,873 1,171
Total current assets 21,685 10,701
Property and equipment - net 115,689 114,150
Goodwill 86,504 86,504
Other intangible assets - net 18,583 19,032
Other assets - net 6,506 7,307
TOTAL $248,967 $237,694
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $4,863 $1,791
Accrued interest 3,796 3,518
Accrued wages and payroll taxes 3,597 2,513
Other accrued liabilities 14,392 10,170
Unearned revenue 4,513 1,323
Current portion of long-term debt 707 848
Total current liabilities 31,868 20,163
Long-Term Debt - Less current portion 165,077 150,008
Deferred income taxes 3,142 2,032
Other long term liabilities 7,293 7,296
Total liabilities 207,380 179,499
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
Common Stock, $.01 stated value, 1000
shares authorized, 100 shares issued
and outstanding
Additional Paid-in Capital 54,887 54,633
Accumulated (deficit) earnings (13,300) 3,562
Total Shareholder's equity 41,587 58,195
TOTAL $248,967 $237,694
See Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2007 AND 2006 (unaudited / in
thousands)
Successor Combined Successor Predecessor
For the For the For the For the
six month six month period period
period period April 13 January 1
ended ended to to
June 30 June 30 June 30 April 12
2007 2006 2006 2006
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(16,862) $(21,868) $(3,715) $(18,153)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation and
amortization 9,230 8,778 4,300 4,478
Gain on disposal of assets (35)
Amortization of deferred
financing costs 385 959 163 796
Financed Interest Payments 3,515 3,515
Share based compensation 240 458 458
Deferred rent expense 118 170 134 36
Deferred income taxes (4,592)
Changes in net operating
assets and liabilities:
Inventories (1,357) (843) (629) (214)
Prepaid expenses and other
current assets (83) (66) (1,171) 1,105
Other assets 416 (110) (118) 8
Accounts payable 3,067 1,477 317 1,160
Accrued interest 278 4,277 3,841 436
Accrued wages and payroll
taxes 1,084 832 999 (167)
Other accrued liabilities 4,210 3,174 4,521 (1,347)
Unearned revenue 3,190 1,756 1,762 (6)
Other long-term
liabilities (6) (66) (88) 22
Net cash (used in)
provided by operating
activities (717) 2,443 10,774 (8,331)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payment for acquisition of
Festival Fun Parks, LLC, net (37,599) (37,599)
Purchases of property and
equipment (10,350) (7,307) (3,356) (3,951)
Proceeds from disposal of asset 72
Net cash used in
investing
activities (10,278) (44,906) (40,955) (3,951)
Issuance of common stock 54,260 54,260
Capital contribution 800
Return of capital (786) (500) (500)
Proceeds from issuance of
long-term debt 22,000 176,600 163,500 13,100
Payments on long-term debt (7,000) (180,862) (180,095) (767)
Payments for cost of financing (5,575) (5,575)
Payments on capital leases (177) (118) (118)
Distributions to member (57) (57)
Net cash provided by
financing
activities 14,837 43,748 31,590 12,158
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,842 1,285 1,409 (124)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,090 5,240 5,116 5,240
CASH AND CASH EQUIVALENTS,
END OF PERIOD $5,932 $6,525 $6,525 $5,116
See Notes to Condensed Consolidated Financial Statements
SOURCE Palace Entertainment Holdings, Inc.
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CONTACT:
Cynthia P. Kellogg, CFO of Palace
Entertainment, Inc., +1-949-797-9757
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