NEWPORT BEACH, Calif., Nov. 9 /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
nine month periods ended September 30, 2007 and 2006, Condensed
Consolidated Statements of Cash Flows for the nine month period ended
September 30, 2007 and 2006 and Condensed Consolidated Balance Sheets as of
September 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 nine month
periods presented below.
The net revenue for the three-month period ended September 30, 2007
totaled $89.2 million compared to $82.2 million for the three-month period
ended September 30, 2006, an increase of $6.9 million or 8.4%. FEC revenues
increased $0.3 million or 1.4% over the same period in 2006. Good weather
in the Texas, New York and Georgia locations in particular combined with
pricing initiatives 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 $6.6 million or 11.4% over the
same period in 2006. The WP revenue increase includes $2.0 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 initiatives, heavier season pass
revenue and increased attendance.
Our park level operating expenses totaled $42.8 million for the three
month period ended September 30, 2007 compared to $40.9 million for the
same period in 2006, an increase of $1.9 million or 4.6%. Operating
expenses as a percentage of revenue decreased to 48.0% in 2007 compared to
49.7% in 2006. The primary drivers in each expense category were as
follows:
-- Cost of products sold increased $0.3 million or 4.6% for the three
month period ended September 30, 2007 compared to the same period in
2006 primarily due to revenue driven incremental food, beverage and
merchandise costs.
-- Salaries and benefits increased $0.7 million or 4.2% for the three
month period ended September 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 8.4%, 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 increased $0.4 million or 3.4% for
the three month period ended September 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.
-- Rent and property taxes increased $0.4 million or 6.8% for the three
month period ended September 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 $8.8 million for
the three month period ended September 30, 2007 compared to $7.6 million
for the same period in 2006, an increase of $1.2 million or 16.3%. The
primary causes were a $0.7 million increase in M&A costs relating to the
Transaction previously announced as of October 3, 2007, a $0.4 million
increase in bonuses due to an expectation of a better year than 2006, and a
$0.1 million increase in professional audit and legal fees attributable to
being a public company.
The net revenue for the nine month period ended September 30, 2007
totaled $155.7 million compared to $145.1 million for the nine month period
ended September 30, 2006, an increase of $10.6 million or 7.3%. FEC
revenues increased $2.0 million or 3.1% 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
$8.6 million or 10.8% over the same period in 2006. WP revenue includes
$3.0 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
initiatives, heavier season pass revenue, and the increase in attendance.
Our park level operating expenses totaled $100.2 million for the nine
month period ended September 30, 2007 compared to $96.3 million for the
same period in 2006, an increase of $3.9 million or 4.0%. Operating
expenses as a percentage of revenue decreased to 64.3% in 2007 compared to
66.4% in 2006. The primary drivers in each expense category were as
follows:
-- Cost of products sold increased $0.7 million or 6.6% for the nine month
period ended September 30, 2007 compared to the same period in 2006
primarily due to revenue driven incremental food, beverage and
merchandise costs.
-- Salaries and benefits increased $1.4 million or 3.3% for the nine month
period ended September 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 7.3%, 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 $1.1 million or 3.8% for the
nine month period ended September 30, 2007 compared to the same period
in 2006. The primary factor driving this change was increased revenue
and a $0.8 million increase in the general liability self insurance
reserve.
-- Rent and property taxes increased $0.6 million or 3.9% for the nine
month period ended September 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 $21.0 million for
the nine month period ended September 30, 2007 compared to $17.2 million
for the same period in 2006, an increase of $3.7 million or 21.6%. 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, an increase in professional audit and legal fees
attributable to being a public company, and an increase in M&A costs
relating to the Transaction previously announced as of October 3, 2007.
"EBITDA" (1) for the three months ended September 30, 2007 was $37.4
million versus $33.8 million in the same prior year period. For the nine
months ended September 30, 2007, EBITDA was $34.4 million versus $31.6
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 totaled $4.3 million for the
three-month period ended September 30, 2007 as compared to $4.7 million
during the same period in 2006, a decrease of $0.4 million or 9.4%. This
decrease is due primarily to assets that have been fully depreciated.
Depreciation and amortization expenses were comparable for the nine-month
period ended September 30, 2007 to the same period in 2006.
Interest expense, net was comparable for the three-month period ended
September 30, 2007 to the same period in 2006. Interest expense, net
totaled $13.4 million for the nine month period ended September 30, 2007
compared to $15.0 million during the same period in 2006, a decrease of
$1.7 million or 11.0%. 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.
The Company recorded an income tax provision of $11.5 million for the
three-month period ended September 30, 2007 compared to $9.5 million for
the three month period ended September 30, 2006. The primary difference was
a valuation allowance of $1.6 million that was included in the income tax
provision 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 Company recorded an income
tax provision of $6.9 million for the nine month period ended September 30,
2007 compared to an income tax provision of $9.6 million for the same
period in 2006. The income tax provision included $3.9 million in valuation
allowance. 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 income from operations for the three-month period ended
September 30, 2007 was $17.4 million compared to $15.3 million for the
three-month period ended September 30, 2006. The net income from operations
for the nine month period ended September 30, 2007 was $0.6 million
compared to the net loss from operations of ($6.5) million for the nine
month period ended September 30, 2006.
The Company's Chief Financial Officer, Cynthia P. Kellogg, commented:
"We are quite pleased with the fiscal performance of the Company in the
critical third quarter of the year. The Water Park segment demonstrated
strong growth in both attendance and per capita spending over the same
quarter last year. We believe that our new Daycation advertising campaign
effectively conveyed our exciting offering to potential guests as did our
group sales focus. In addition, we are pleased with the increase in season
pass sales for next year. The FECs continued their trend of revenue growth
over the comparable quarter last year in spite of weather challenges at
most of the California parks. The Company capitalized on these revenue
increases by tightly controlling variable costs and increased operating
income significantly for the quarter. We look forward to continuing to
drive strong results for 2008 and beyond."
CONFERENCE CALL
In conjunction with this release, Palace Entertainment has scheduled a
conference call, which will be held on Thursday, November 15, 2007 at 11:00
a.m. Eastern Time (8:00 a.m. Pacific).
What: Palace Entertainment Earnings Conference Call
When: Thursday, November 15, 2007- 11:00 a.m. Eastern Time
How: Live via phone - By dialing:
(888) 293-1201 for North American Callers
00 1 (415) 908-4753 for International Callers
44 (0) (870) 001-3123 for UK Callers
Ten minutes prior to the start time. Participants will be asked to give
their names and company affiliations. The conference ID number is 21354480.
For those who cannot listen to the live call, a replay will be
available through November 29, 2007, and may be accessed by calling (800)
633-8284 using Reservation #: 21354480.
(1) Non-GAAP Financial Measures
PALACE ENTERTAINMENT HOLDINGS, INC.
NON-GAAP RECONCILIATION OF EBITDA
($ in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
COMBINED
2007 2006 2007 2006
Net income (loss) $17,420 $15,333 $560 $(6,535)
Add back: Interest expense, net 4,230 4,216 13,392 15,044
Income tax provision 11,452 9,520 6,933 9,564
Depreciation and
amortization 4,283 4,728 13,512 13,506
EBITDA $37,385 $33,797 $34,397 $31,579
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 SEPTEMBER 30, 2007 AND 2006
Successor Successor
For the three For the three
month period ended month period ended
September 30 September 30
2007 2006
REVENUES - net $89,158 $82,220
OPERATING COSTS AND EXPENSES
Cost of revenue (exclusive of
depreciation and amortization
shown below) 42,761 40,865
Selling, general and administrative 8,791 7,558
Depreciation and amortization 4,283 4,728
Loss on disposal of assets 221 -
Total operating costs and
expenses 56,056 53,151
OPERATING INCOME 33,102 29,069
OTHER EXPENSE
Interest expense - net 4,230 4,216
Total other expense - net 4,230 4,216
INCOME BEFORE INCOME TAXES 28,872 24,853
INCOME TAX PROVISION 11,452 9,520
NET INCOME $17,420 $15,333
See Notes to Condensed Consolidated Financial Statements
PALACE ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited / in thousands)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2007 AND 2006
Successor Combined Successor Predecessor
For the For the
nine nine For the
month month period For the
period period April 13 period
ended ended to January 1
September September September to
30 30 30 April 12
2007 2006 2006 2006
REVENUES - net $155,695 $145,079 $121,682 $23,397
OPERATING COSTS AND EXPENSES
Cost of revenue (exclusive of
depreciation and amortization
shown below) 100,154 96,262 70,072 26,190
Selling, general and
administrative 20,958 17,238 13,030 4,208
Depreciation and amortization 13,512 13,506 9,028 4,478
Loss on disposal of assets 186 - - -
Total operating costs
and expenses 134,810 127,006 92,130 34,876
OPERATING INCOME (LOSS) 20,885 18,073 29,552 (11,479)
OTHER EXPENSE
Interest expense - net 13,392 15,044 8,370 6,674
Total other expense - net 13,392 15,044 8,370 6,674
INCOME (LOSS) BEFORE INCOME
TAXES 7,493 3,029 21,182 (18,153)
INCOME TAX PROVISION 6,933 9,564 9,564 -
NET INCOME (LOSS) $560 $(6,535) $11,618 $(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 SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
September 30, 2007 December 31, 2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents $16,648 $2,090
Inventories 2,672 2,124
Prepaid expenses and other current
assets 8,248 5,316
Deferred income taxes - 1,171
Total current assets 27,568 10,701
Property and equipment - net 114,092 114,150
Goodwill 86,504 86,504
Other intangible assets - net 18,359 19,032
Other assets - net 6,424 7,307
TOTAL $252,947 $237,694
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $3,256 $1,791
Accrued interest 7,596 3,518
Accrued wages and payroll taxes 3,267 2,513
Other accrued liabilities 11,688 10,170
Unearned revenue 2,673 1,323
Current portion of long-term debt 37 848
Total current liabilities 28,517 20,163
Long-Term Debt - Less current portion 150,073 150,008
Deferred income taxes 7,900 2,032
Other long term liabilities 7,297 7,296
Total liabilities 193,787 179,499
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
Common Stock, $.01 stated value,
1000 shares authorized,
100 shares issued and outstanding
Additional Paid-in Capital 55,038 54,633
Accumulated (deficit) earnings 4,122 3,562
Total Shareholder's equity 59,160 58,195
TOTAL $252,947 $237,694
See Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2007 AND 2006
(unaudited / in thousands)
Successor Combined Successor Predecessor
For the For the
nine nine For the
month month period For the
period period April 13 period
ended ended to January 1
September September September to
30, 30, 30 April 12
2007 2006 2006 2006
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $560 $(6,535) $11,618 $(18,153)
Adjustments to reconcile net
loss to net cash
provided by operating
activities:
Depreciation and
amortization 13,512 13,506 9,028 4,478
Loss on disposal of assets 186
Amortization of deferred
financing costs 578 1,160 364 796
Financed Interest Payments 3,515 3,515
Share based compensation 391 667 667
Deferred rent expense 177 254 218 36
Deferred income taxes 5,868
Changes in net operating
assets and liabilities:
Inventories (548) (279) (65) (214)
Prepaid expenses and other
current assets (1,760) (2,279) (3,384) 1,105
Other assets 306 9 1 8
Accounts payable 1,501 (961) (2,121) 1,160
Accrued interest 4,078 8,091 7,655 436
Accrued wages and payroll
taxes 754 (226) (59) (167)
Income taxes payable 9,504 9,504
Other accrued liabilities 1,498 1,502 2,849 (1,347)
Unearned revenue 1,350 (386) (380) (6)
Other long-term
liabilities (3) (98) (120) 22
Net cash provided by
(used in) operating
activities 28,448 27,444 35,775 (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 (12,906) (10,129) (6,178) (3,951)
Payments for disposal of assets (149)
Net cash used in
investing activities (13,055) (47,728) (43,777) (3,951)
CASH FLOWS FROM FINANCING
ACTIVITIES:
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 (22,000) (189,862) (189,095) (767)
Payments for cost of financing (5,575) (5,575)
Payments on capital leases (849) (773) (655) (118)
Distributions to member (57) (57)
Net cash (used in)
provided by
financing activities (835) 34,093 21,935 12,158
NET INCREASE (DECREASE) IN CASH
AND
CASH EQUIVALENTS 14,558 13,809 13,933 (124)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,090 5,240 5,116 5,240
CASH AND CASH EQUIVALENTS,
END OF PERIOD $16,648 $19,049 $19,049 $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 Holdings, Inc., +1-949-797-9757
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