Thunderbird Resorts Inc.
FRANKFURT : 4TR
EURONEXT : TBIRD

Thunderbird Resorts Inc.

November 13, 2014 14:10 ET

Thunderbird Resorts Inc.: Third Quarter 2014 Interim Management Statement October 2014 Revenue Report and Change of Auditors

PANAMA, REPUBLIC OF PANAMA--(Marketwired - Nov. 13, 2014) - Thunderbird Resorts Inc. ("Thunderbird" or "Group") (EURONEXT:TBIRD)(FRANKFURT:4TR) announces its interim results for the third quarter and nine months ended September 30, 2014.

Below is our consolidated profit / (loss) summary for the nine months ended September 30, 2014 as compared with the same period of 2013. The strengthening of the US dollar versus our operating currencies continues to have a material impact on our business as compared to the same period in 2013. For the convenience of the reader, we present: a) A summary of our consolidated results without adjustments for forex; and b) The same summary, but with our 2014 year-to-date average exchange rate applied to the same period in 2013 in order to compare results under a currency neutral scenario ("Currency Neutral").

a) Summary Third Quarter 2014 Consolidated P&L:

(In thousands, proportional consolidation)
Nine months ended
September 30
%
2014 2013 Variance change
Net gaming wins $ 34,114 $ 36,174 $ (2,060) -5.7%
Food and beverage sales 3,360 3,332 28 -0.8%
Hospitality and other sales 4,543 4,453 90 2.0%
Total revenues 42,017 43,959 (1,942) -4.4%
Promotional allowances 3,660 3,656 4 0.1%
Property, marketing and administration 30,860 32,006 (1,146) -3.6%
Property EBITDA 7,497 8,297 (800) -9.6%
Corporate Expenses 3,295 3,743 (448) -12.0%
Adjusted EBITDA 4,202 4,554 (352) -7.7%
Property EBITDA as a percentage of revenues 10.0% 10.4%
Depreciation and amortization 3,963 5,159 (1,196) -23.2%
Interest and financing costs, net 3,238 4,993 (1,755) -35.1%
Management fee attributable to non-controlling interest 12 110 (98) -89.1%
Project development 86 89 (3) -3.4%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 629 1,195 (566) -47.4%
Other (gains) / losses 1,280 1,522 (242) -15.9%
Derivative financial instrument - (18) 18 -100.0%
Income taxes 342 695 (353) -50.8%
Profit / (loss) for the period from continuing operations $ (5,348) $ (9,191) $ 3,843 -41.8%

b) Summary Third Quarter 2014 Consolidated P&L Adjusted for Currency Neutral:

(In thousands, proportional consolidation under currency neutral)
Nine months ended
September 30 %
2014 2013 Variance change
Net gaming wins $ 34,114 $ 34,210 $ (96) -0.3%
Food and beverage sales 3,360 3,150 210 6.7%
Hospitality and other sales 4,543 4,248 295 6.9%
Total revenues 42,017 41,608 409 1.0%
Promotional allowances 3,660 3,477 183 5.3%
Property, marketing and administration 30,860 30,292 568 1.9%
Property EBITDA 7,497 7,839 (342) -4.4%
Corporate Expenses 3,295 3,743 (448) -12.0%
Adjusted EBITDA 4,202 4,096 106 2.6%
Property EBITDA as a percentage of revenues 10.0% 9.8%
Depreciation and amortization 3,963 4,882 (919) -18.8%
Interest and financing costs, net 3,238 4,900 (1,662) -33.9%
Management fee attributable to non-controlling interest 12 50 (38) -76.0%
Project development 86 84 2 2.4%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 629 1,132 (503) -44.4%
Other (gains) / losses 1,280 1,521 (241) -15.8%
Derivative financial instrument - (18) 18 -100.0%
Income taxes 342 663 (321) -48.4%
Profit / (loss) for the period from continuing operations $ (5,348) $ (9,118) $ 3,770 -41.3%

Note: "EBITDA" is not an accounting term under IFRS, and refers to earnings before net interest expense, income taxes, depreciation and amortization, equity in earnings of affiliates, minority interests, development costs, other gains and losses, and discontinued operations. "Property EBITDA" is equal to EBITDA at the country level(s). "Adjusted EBITDA" is equal to property EBITDA consolidated from all operations less "Corporate Expenses", which are the expenses of operating the parent company and its non-operating subsidiaries and affiliates. "Currency Neutral" eliminates fluctuations in currency values by applying the 2014 year-to-date exchange rate average to the same period in 2013 in order to compare the Group's performance trend net of the impact of forex.

Below is the Group's Gross debt and Net Debt on September 30, 2014.

(In thousands; proportional consolidation)
Sep-14 Jun-14 Mar-14
Borrowings $ 43,848 $ 44,473 $ 45,624
Borrowings associated with assets held for sale 1,817 1,918 2,018
Obligations under leases and hire purchase contracts 829 953 1,029
Derivative financial instruments - - -
Gross Debt $ 46,494 $ 47,344 $ 48,671
Less: cash and cash equivalents (excludes restricted cash) 7,148 4,648 4,141
Net Debt $ 39,346 $ 42,660 $ 44,530

Note: Gross Debt above is presented net of debt issuance costs which is why there is an approximate $1.0 million variance with the total Principal balance below. Borrowings under assets held for sale are related to two underdeveloped real estate parcels owned by the Group's joint venture in Costa Rica. "Cash and cash equivalents" do not include $5.0 million in hold back due to the Group in January 2016 assuming no liabilities charged against the Hold back as per agreements with the Philippines buyer.

The Group estimates its debt schedule as follows starting in October 2014:

Principal Payments 2014 2015 2016 2017 2018 2019 Thereafter Total
Corporate $ 1,891,036 $ 6,978,596 $ 5,237,293 $ 4,910,903 $ 1,563,506 $ 1,375,026 $ 3,397,095 $ 25,353,454
Corporate 1,642,050 6,320,522 5,237,293 4,910,903 1,563,506 1,375,026 3,397,095 24,446,394
Guatemala 248,985 658,074 - - - - - 907,060
Costa Rica 449,614 2,826,568 1,186,286 1,201,588 1,653,274 423,445 33,168 7,773,943
Peru 306,710 1,548,761 1,492,742 1,280,140 1,386,369 6,931,464 - 12,946,185
Nicaragua 79,202 165,514 181,027 172,538 149,988 633,740 - 1,382,008
Total $ 2,726,562 $ 11,519,440 $ 8,097,347 $ 7,565,168 $ 4,753,136 $ 9,363,263 $ 3,430,263 $ 47,455,591
Interest Expense 2014 2015 2016 2017 2018 2019 Thereafter Total
Corporate $ 563,634 $ 1,866,620 $ 1,584,419 $ 822,549 $ 602,022 $ 456,979 $ 419,584 $ 6,315,807
Corporate 563,634 1,866,620 1,584,419 822,549 602,022 456,979 419,584 6,315,807
Guatemala - - - - - - - -
Costa Rica 188,597 659,990 378,990 251,902 110,090 13,356 518 1,603,442
Peru 268,029 993,872 851,029 738,274 629,632 271,233 - 3,752,070
Nicaragua 31,347 111,660 96,147 79,006 65,671 52,807 - 436,638
Total $ 1,051,607 $ 3,632,142 $ 2,910,585 $ 1,891,731 $ 1,407,416 $ 794,375 $ 420,102 $ 12,107,956

Peru Update

a) Summary Peru Third Quarter 2014 Consolidated P&L:

(In thousands)
Nine months ended
September 30 %
2014 2013 Variance change
Net gaming wins $ 16,984 $ 17,215 $ (231) -1.3%
Food and beverage sales 1,335 1,149 186 16.2%
Hospitality and other sales 4,336 4,125 211 5.1%
Total revenues 22,655 22,489 166 0.7%
Promotional allowances 2,191 1,968 223 11.3%
Property, marketing and administration 16,956 16,403 553 3.4%
Property EBITDA 3,508 4,118 (610) -14.8%
Property EBITDA as a percentage of revenues 15.5% 18.3%
Depreciation and amortization 2,443 3,015 (572) -19.0%
Interest and financing costs, net 983 942 41 4.4%
Management fee attributable to non-controlling interest (64) 82 (146) -178.0%
Project development - - - 0.0%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 368 1,374 (1,006) -73.2%
Other (gains) / losses (3) 8 (11) -137.5%
Derivative financial instrument - - - 0.0%
Income taxes - 323 (323) -100.0%
Profit / (loss) for the period from continuing operations $ (219) $ (1,626) $ 1,407 -86.5%

b) Summary Peru Third Quarter 2014 Consolidated P&L Adjusted for Currency Neutral:

(In thousands, under currency neutral)
Nine months ended
September 30 %
2014 2013 Variance change
Net gaming wins $ 16,984 $ 16,404 $ 580 3.5%
Food and beverage sales 1,335 1,095 240 21.9%
Hospitality and other sales 4,336 3,931 405 10.3%
Total revenues 22,655 21,430 1,225 5.7%
Promotional allowances 2,191 1,875 316 16.9%
Property, marketing and administration 16,956 15,630 1,326 8.5%
Property EBITDA 3,508 3,925 (417) -10.6%
Property EBITDA as a percentage of revenues 15.5% 18.3%
Depreciation and amortization 2,443 2,873 (430) -15.0%
Interest and financing costs, net 983 898 85 9.5%
Management fee attributable to non-controlling interest (64) 78 (142) -182.1%
Project development - - - 0.0%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 368 1,309 (941) -71.9%
Other (gains) / losses (3) 8 (11) -137.5%
Derivative financial instrument - - - 0.0%
Income taxes - 308 (308) -100.0%
Profit / (loss) for the period from continuing operations $ (219) $ (1,549) $ 1,330 -85.9%

Revenue for the period as compared to the same period in 2013 increase by 0.7%, recovering from the reduced revenue levels against 2013 figures reported in our Q1 2014 and Half-year 2014 Interim Management Statements. Revenues in USD were negatively impacted by forex as on a currency neutral basis revenues were actually 5.7% or $1.2 million higher as compared to the same period in 2013.

EBITDA for the period reduced as the result of higher promotional allowances and property, marketing, and administration expenses (the latter in line with inflation). The Group continues to focus on cost efficiencies.

Loss for the period as compared to the same period last year improved by $1.4 million due to decreases in depreciation and amortization and to reduced foreign exchange losses.

Key business driver - expansion: As previously announced, the Group expects to add 56 new table positions in Q4 2014 at our Luxor operation in Lima. We are also in the process of reallocating our Peru office complex to increase space for third party rentals, which is expected to have an impact late in 2014.

Key business driver - refinancing: The Group continues its efforts to refinance Peru and Peru-related debt, which includes debt on parent company books. The principal balance of Peru and Peru-related debt on corporate books is approximately $29.7 million as of September 30, 2014.

Costa Rica Update

a) Summary Costa Rica Third Quarter 2014 Consolidated P&L:

(In thousands, proportional consolidation)
Nine months ended
September 30 %
2014 2013 Variance change
Net gaming wins $ 8,177 $ 9,847 $ (1,670) -17.0%
Food and beverage sales 842 964 (122) -12.7%
Hospitality and other sales 122 128 (6) -4.7%
Total revenues 9,141 10,939 (1,798) -16.4%
Promotional allowances 219 238 (19) -8.0%
Property, marketing and administration 6,663 8,095 (1,432) -17.7%
Property EBITDA 2,259 2,606 (347) -13.3%
Property EBITDA as a percentage of revenues 24.7% 23.8%
Depreciation and amortization 1,060 1,539 (479) -31.1%
Interest and financing costs, net 431 557 (126) -22.6%
Management fee attributable to non-controlling interest 359 565 (206) -36.5%
Project development 86 63 23 36.5%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 504 (156) 660 -423.1%
Other (gains) / losses - 17 (17) -100.0%
Derivative financial instrument - - - 0.0%
Income taxes 96 100 (4) -4.0%
Profit / (loss) for the period from continuing operations $ (277) $ (79) $ (198) 250.6%

b) Summary Costa Rica Third Quarter 2014 Consolidated P&L Adjusted for Currency Neutral:

(In thousands, proportional consolidation under currency neutral)
Nine months ended
September 30 %
2014 2013 Variance change
Net gaming wins $ 8,177 $ 9,128 $ (951) -10.4%
Food and beverage sales 842 894 (52) -5.8%
Hospitality and other sales 122 119 3 2.5%
Total revenues 9,141 10,141 (1,000) -9.9%
Promotional allowances 219 221 (2) -0.9%
Property, marketing and administration 6,663 7,504 (841) -11.2%
Property EBITDA 2,259 2,416 (157) -6.5%
Property EBITDA as a percentage of revenues 24.7% 23.8%
Depreciation and amortization 1,060 1,427 (367) -25.7%
Interest and financing costs, net 431 516 (85) -16.5%
Management fee attributable to non-controlling interest 359 524 (165) -31.5%
Project development 86 58 28 48.3%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 504 (145) 649 -447.6%
Other (gains) / losses - 16 (16) -100.0%
Derivative financial instrument - - - 0.0%
Income taxes 96 93 (3) 3.2%
Profit / (loss) for the period from continuing operations $ (277) $ (73) $ (204) 279.5%

Revenue through Q3 2014 reduced mainly due to the removal of 290 gaming positions between September and October 2013 to reduce fixed gaming tax expense with the goal of improving EBITDA.

EBITDA for the period as compared to the same period in 2013 reduced by 13.3% or $347 thousand, but on a currency neutral basis this reduction lowers to 6.5% or $157 thousand. Please note the key business driver below vis-à-vis the prospective for revenues and EBITDA growth in coming periods.

Loss for the period was driven mostly by $504 thousand of non-cash forex losses and, without these forex losses, would have otherwise resulted in a gain of approximately $227 thousand.

Key business driver - new operation: The Fiesta Casino Aurola, located in the heart of downtown San Jose, opened in late June 2014 and had its formal inauguration in August 2014. This new operation is expected to increase Costa Rica EBITDA in the coming periods.

Key business driver - land sales: The Group's affiliates in Costa Rica own two undeveloped properties: a) Tres Rios, a 8.2-hectare property located on a highway off-ramp on the major highway leading from San Jose to Cartago and in front of a major shopping mall; and b) Escazu, a 2.7-hectare property located in the major commercial growth area of San Jose. Efforts to sell both parcels of real estate are underway with net proceeds projected to pay down Costa Rica debt, and to be distributed and/or used for reserves or development.

Nicaragua Update

a) Summary Nicaragua Third Quarter 2014 Consolidated P&L:

(In thousands)
Nine months ended
September 30 %
2014 2013 Variance change
Net gaming wins $ 8,953 $ 9,112 $ (159) -1.7%
Food and beverage sales 1,183 1,219 (36) -3.0%
Hospitality and other sales 15 36 (21) -58.3%
Total revenues 10,151 10,367 (216) -2.1%
Promotional allowances 1,250 1,450 (200) -13.8%
Property, marketing and administration 7,171 7,344 (173) -2.4%
Property EBITDA 1,730 1,573 157 10.0%
Property EBITDA as a percentage of revenues 17.0% 15.2%
Depreciation and amortization 413 485 (72) -14.8%
Interest and financing costs, net 103 173 (70) -40.5%
Management fee attributable to non-controlling interest 18 315 (297) -94.3%
Project development - - - 0.0%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 131 191 (60) -31.4%
Other (gains) / losses 24 2 22 1100.0%
Derivative financial instrument - - - 0.0%
Income taxes 218 217 1 0.5%
Profit / (loss) for the period from continuing operations $ 823 $ 190 $ 633 333.2%

b) Summary Nicaragua Third Quarter 2014 Consolidated P&L Adjusted for Currency Neutral:

(In thousands, under currency neutral)
Nine months ended
September 30 %
2014 2013 Variance change
Net gaming wins $ 8,953 $ 8,678 $ 275 3.2%
Food and beverage sales 1,183 1,161 22 1.9%
Hospitality and other sales 15 34 (19) -55.9%
Total revenues 10,151 9,873 278 2.8%
Promotional allowances 1,250 1,381 (131) -9.5%
Property, marketing and administration 7,171 6,994 177 2.5%
Property EBITDA 1,730 1,498 232 15.5%
Property EBITDA as a percentage of revenues 17.0% 15.2%
Depreciation and amortization 413 462 (49) -10.6%
Interest and financing costs, net 103 165 (62) -37.6%
Management fee attributable to non-controlling interest 18 300 (282) -94.0%
Project development - - - 0.0%
Shared based compensation - - - 0.0%
Foreign exchange (gain) / loss 131 182 (51) -28.0%
Other (gains) / losses 24 2 22 1100.0%
Derivative financial instrument - - - 0.0%
Income taxes 218 207 11 5.3%
Profit / (loss) for the period from continuing operations $ 823 $ 180 $ 643 357.2%

Revenue through Q3 2014 on a US dollar basis reduced because of forex, while on a currency neutral basis, revenues experienced a 2.8% increase. Gaming drop increased by almost $1.9 million over the same period in 2013, though hold percentage fell to 23.3% from 25.0% as compared to the same period in 2013, resulting in the loss of revenue. We believe the reduction in hold percentage is not a trend as there have been no material changes to our gaming rules or positions. The hold percentage of year-to-date 2013 applied to our 2014 year-to-date drop would have materially increased our revenue as compared to last year.

EBITDA for the period as compared to the same period in 2013 improved by 10.0% on a US dollar basis and 15.5% on a Currency Neutral basis as the result of cost management efforts.

Profit for the period improved because of the higher EBITDA, and reduced depreciation and amortization, financing costs, and forex exchange losses.

Other Group Updates

Below are the material changes in our business since filing our 2014 Half-year Report on August 26, 2014:

October 2014 Revenue: The Group reports the following preliminary revenues for October 2014. For a more detailed analysis of October 2014 revenue, please visit www.thunderbirdresorts.com and click on "October 2014 Revenue Report - Analysis" located on the home page under "News and Releases."

Thunderbird Resorts Inc. - Group-wide sales results by country - as reported (unaudited, in millions)(1) October
2014
October
2013
Year-over-year
increase/(decrease)
Peru(2) $2.62 $2.65 -1.13%
Costa Rica(3)(4) 0.92 1.10 -16.36%
Nicaragua 1.06 1.26 -15.87%
Total Consolidated Operating Revenues $4.60 $5.01 -8.18%

Group revenue on a currency neutral basis for October 2014 vs. October 2013. In this analysis, we apply the average exchange rate for October 2014 to the October 2013 revenues in order to compare the two periods as if there was no impact from foreign exchange whatsoever.

Thunderbird Resorts Inc. - Group-wide sales results by country - currency neutral (unaudited, in millions)(1) October
2014
October
2013
Year-over-year
increase/(decrease)
Peru(2) $2.62 $2.54 3.15%
Costa Rica(3)(4) 0.92 1.02 -9.80%
Nicaragua 1.06 1.20 -11.67%
Total Consolidated Operating Revenues $4.60 $4.76 -3.36%
1 Revenues reported are based on monthly average exchange rates, report same store revenues and are in USD millions. From month to month, exchange rate fluctuations could cause an impact on revenues as compared to the previous year.
2 2014 and 2013 revenues consist of all gaming revenue in the country plus revenue from our fully-owned Fiesta Hotel and management fees for the Thunderbird Hotel - Pardo, Thunderbird Hotel - Carrera and Thunderbird Hotel - El Pueblo, which are owned by third parties.
3 Effective January 1, 2013, IFRS 11 changed the way that joint ventures are accounted for whereby proportional consolidation is no longer allowed and equity accounting should be applied to joint ventures. Until further notice and for the convenience of the reader and for the illustrative purposes of this monthly revenue report, the Group has elected to continue to show the Costa Rican joint venture proportional revenues, which vary from the way that the Group accounts for these revenues in our Interim and Annual Financial Statements.
4 In October 2013, we reduced 290 gaming positions in Costa Rica that cost more to maintain on the floor (because of per position gaming taxes) than their respective revenue. As a result, period revenue has dropped, but should be reflected in enhanced EBITDA from the related properties. In late June, the Group soft opened the Casino Fiesta Aurola in downtown San Jose with 122 slot machines (expanding to 148 slot machines), 27 gaming table positions (non-poker), 3 poker tables, and 36 F&B seats. Formal inauguration took place in August 2014.

Funding Completion and Construction Start of the Pharaohs Casino Bolonia in Nicaragua: On October 14, 2014, Thunderbird announced the funding completion for its Pharaohs Casino Bolonia with a $1.0 million, 7-year term loan granted by a local bank. The construction of this 1,200 square meter entertainment venue with 115 slot machines and 21 gaming table positions has now commenced, and is anticipated to open for business by Q2 2015. The property is located in Residencial Bolonia, a premium area in the heart of Managua in which the government is investing heavily to promote tourism. The Company will move its Pharaohs Holiday Inn property to this new location, which is owned by the Company and which has far superior market visibility, parking and distribution for our business. The facility is also larger and has expansion possibilities. To start, we will add 32 slot machine positions as compared to the existing venue.

Resolved Litigation with Solar Entertainment: The Group announced on October 14, 2014, that the litigation with Solar Entertainment Corporation ("Solar") in the Philippines has been resolved and fully settled. The Company has received $3.35 million, which represents 100% of the financed portion of the purchase price as well as a portion of the funds held back to cover potential contingent liabilities. All settlement agreements are now fully implemented. There remain no further obligations of the Company to Solar related to the August 2013 sale transaction.

Election of Directors and Officers: On October 26, 2014, the Group held its Annual General Meeting of Shareholders. At the meeting, the shareholders elected the following directors for the ensuing year: Salomon Guggenheim, Douglas Vicari, Reto Stadelmann, Madeleine Linter, George Gruenberg, and Albert W. Atallah. The Board of Directors then held a meeting and appointed the following persons as officers of the Group for the ensuing year: Salomon Guggenheim, President and Chief Executive Officer; Albert Atallah, General Counsel and Corporate Secretary; Peter LeSar, Chief Financial Officer; and Tino Monaldo, Vice President - Corporate Development. Grant Thornton UK, LLP was appointed as auditors for the ensuing year.

Change of Auditor: Thunderbird Resorts Inc. announces as of the date of this Interim Management Statement for the third quarter 2014 that it has changed its public company auditor from Grant Thornton UK LLP to Baker Tilly Curacao for our full-year 2014 consolidated group audit. Baker Tilly Curacao is licensed by the AFM to audit companies that are publicly traded on the NYSE Euronext (Amsterdam). This change is based on factors internal to Thunderbird and is not a reflection on the quality of work provided by Grant Thornton UK LLP. None of the internal factors relate to any dispute with Grant Thornton UK LLP whatsoever. Thunderbird acknowledges and appreciates the service provided by Grant Thornton UK LLP and looks forward to working with Baker Tilly Curacao.

Document Availability: This announcement is a summary of, and should be read in conjunction with the Interim Management Statement for the third quarter of 2014, which can be found on the Group's website at www.thunderbirdresorts.com. Copies of the Interim Management Statement in the English language are available at no cost at the Group's operational office in Panama and at the offices of our local paying agent ING Commercial Banking, Paying Agency Services, Location Code TRC 01.013, Foppingadreef 7, 1102 BD Amsterdam, the Netherlands (tel: +31 20 563 6619, fax: +31 20 563 6959, email: iss.pas@ing.nl). Copies are also available on SEDAR at www.SEDAR.com.

ABOUT THE COMPANY

We are an international provider of branded casino and hospitality services, focused on markets in Latin America. Our mission is to "create extraordinary experiences for our guests." Additional information about the Group is available at www.thunderbirdresorts.com.

Cautionary Notice: This release contains certain forward-looking statements within the meaning of the securities laws and regulations of various international, federal, and state jurisdictions. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding potential revenue and future plans and objectives of the Group are forward-looking statements that involve risk and uncertainties. There can be no assurances that such statements will prove to be accurate and actual results could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Group's forward-looking statements include competitive pressures, unfavorable changes in regulatory structures, and general risks associated with business, all of which are disclosed under the heading "Risk Factors" and elsewhere in the Group's documents filed from time-to-time with the AFM and other regulatory authorities.

Contact Information