River Rock Entertainment Authority Announces Third Quarter 2011 Financial Results

GEYSERVILLE, Calif.--(BUSINESS WIRE)--The River Rock Entertainment Authority (the “Authority”), the operator of the River Rock Casino in Sonoma County, California, today announced third quarter operating results for the period ended September 30, 2011.

“We are pleased with our third quarter results and believe that our focus on increased marketing on high-value players has been driving incremental business and increasing wagers in both slots and table games”

Third Quarter Operating Results for the Period Ended September 30, 2011

Net revenues for the third quarter ended September 30, 2011 were $31.3 million an increase of 3.8% over the third quarter ended September 30, 2010. Casino revenues totaled $30.2 million and included slot revenue of $27.5 million and table games and poker revenue of $2.7 million. Food and beverage revenues were $1.6 million, net of promotional allowances of $0.7 million.

Operating expenses for the third quarter ended September 30, 2011 were $18.5 million. Operating expenses consisted of casino expense of $3.7 million, food and beverage expense of $1.4 million, selling, general and administrative expense of $8.8 million, depreciation expense of $2.7 million, gaming commission and surveillance expense of $0.7 million and compact revenue sharing trust fund expense of $0.3 million.

EBITDA ⁽¹⁾ for the third quarter of 2011 was $15.5 million, or 50% of net revenues. Income from operations for the third quarter 2011 was $12.8 million and represented 41% of net revenues. Non-operating expense, net, for the third quarter 2011 was $5.2 million and included $5.2 million of interest expense.

“We are pleased with our third quarter results and believe that our focus on increased marketing on high-value players has been driving incremental business and increasing wagers in both slots and table games,” said David Fendrick, Chief Executive Officer and General Manager of the River Rock Casino. “We expect to continue to focus on improving the overall appearance and the feel of the casino to meet our customer needs and aggressive database marketing programs, innovative promotions and host driven player development.”

Liquidity and Capital Resources

Net cash provided by operating activities at September 30, 2011 totaled $42.5 million. Net cash used in capital and related financing activities at September 30, 2011 totaled $21.1 million. Cash used in non-capital financing activities as of September 30, 2011 totaled $20.2 million, which represented net distributions to the Tribe. Transfers to the Tribe during the third quarter of 2011 in the amount of $9.8 million, consisted of the Easement Acquisition Price and $0.8 million to reimburse the Tribe for deposits made by the Tribe towards the purchase of the Proschold Property through September 30, 2011. Cash and cash equivalents net of restricted cash at September 30, 2011 totaled $38.0 million.

Current cash balances and operating cash flow are expected to provide the Authority with sufficient resources to meet its current budgeted capital expenditure requirements and distributions to the Tribe.

EBITDA should not be construed as an alternative to operating income, as an indicator of the Authority’s operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure determined in accordance with generally accepted accounting principles (GAAP). Moreover, our calculations of EBITDA may not be comparable to that reported by other companies. EBITDA is a basis upon which we assess our liquidity and because certain covenants in the Indenture for our $200 million senior notes are tied to similar measures. EBITDA also presents useful information regarding our ability to service and incur indebtedness. EBITDA does not take into account our debt service requirements, and accordingly, is not necessarily indicative of amounts that may be available for debt service.

The following table is the calculation of EBITDA for the periods indicated (in thousands):

	Three-Months Ended
	September 30,
	2011		2010
	(Dollars in Thousands)
Net Income before distributions to the Tribe	$	7,590	$	5,305
Add back Interest	$	5,215	$	5,214
Add back Depreciation & Amortization	$	2,691	$	2,599
EBITDA	$	15,496	$	13,118

⁽¹⁾ EBITDA provides a metric to analyze our operations that should be considered with both our GAAP results and the reconciliation to net cash provided by operating activities. EBITDA is presented solely as a supplemental disclosure because the Authority believes it provides a more complete understanding of our business, it may be used by investors to assess the operating performance of the business in comparison to other operators in the gaming industry and the Authority uses EBITDA as a benchmark to evaluate its own performance in comparison to its competitors.

Conference Call

The Authority will not host a conference call to discuss third quarter 2011 financial results due to the exchange offer.

River Rock Entertainment Authority

We are a Tribal governmental instrumentality of the Dry Creek Rancheria Band of Pomo Indians, a federally recognized self-governing Indian tribe. The Tribe has approximately 1,000 enrolled members and 93-acres of trust land in Sonoma County, California.

Forward-Looking Statements

This release contains certain “forward-looking statements” within the meaning of the Unites States Private Securities Litigation Reform Act of 1995. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we “believe,” “expect” or “anticipate” will occur and other similar statements), you must remember that our expectations may not be correct, even though we believe they are reasonable. We do not guarantee that the transactions and events described in this press release will happen as described (or that they will happen at all). You should read this press release completely and with the understanding that actual future results may be materially different from what we expect. We will not update these forward-looking statements, even though our situation will change in the future.

Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties, including:

• Our financial performance
• Our dependence on a single gaming site
• Our levels of leverage and ability to meet our debt service and other obligations
• General local, domestic and global economic conditions
• Changes in federal or state tax laws or regulations, including the Compact
• Maintenance of licenses required under gaming laws and regulations and construction permits and approvals required under applicable laws and regulations; and
• Development of new competitive gaming properties.

RIVER ROCK ENTERTAINMENT AUTHORITY
(A Governmental Instrumentality of the Dry Creek Rancheria Band of Pomo Indians)
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
	September 30, 2011			December 31, 2010
ASSETS	(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	37,955		$	36,713
Accounts receivable		423			290
Receivable from Tribe, net		293			-
Inventories		81			96
Prepaid expenses and other current assets		3,735			1,402
Total current assets		42,487			38,501
RESTRICTED CASH		4,284			4,330
CAPITAL ASSETS:
Buildings and building improvements		137,874			132,907
Furniture, fixtures and equipment		36,078			33,786
Accumulated depreciation		(73,261	)		(66,348	)
Construction in progress		73,973			77,296
Capital assets		174,664			177,641
DEPOSITS AND OTHER ASSETS		1,363			1,680
TOTAL ASSETS	$	222,798		$	222,152
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Accounts payable	$	1,572		$	1,884
Payable to Tribe, net		-			5,823
Accrued liabilities		13,124			7,977
Current maturities of long-term debt		199,972			199,719
Total current liabilities		214,668			215,403
COMMITMENTS AND CONTINGENCIES
NET ASSETS
Invested in capital assets-net of related debt		(25,308	)		(22,078	)
Restricted for capital projects		4,284			4,330
Unrestricted		29,154			24,497
Total net assets		8,130			6,749
TOTAL LIABILITIES AND NET ASSETS	$	222,798		$	222,152

RIVER ROCK ENTERTAINMENT AUTHORITY
(A Governmental Instrumentality of the Dry Creek Rancheria Band of Pomo Indians)
CONDENSED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
(Dollars in Thousands)
(Unaudited)
	Three-Month Period Ended						Nine-Month Period Ended
	September 30,						September 30,
	2011			2010			2011			2010
OPERATING REVENUES:
Casino	$	30,164		$	29,059		$	90,287		$	91,136
Food and beverage		1,607			1,499			4,742			4,422
Other		194			274			620			781
Gross revenues		31,965			30,832			95,649			96,339
Promotional allowances		(663	)		(462	)		(1,821	)		(1,281	)
Net revenues		31,302			30,370			93,828			95,058
OPERATING EXPENSES:
Casino		3,665			4,226			12,198			12,111
Food and beverage		1,368			1,914			4,444			5,420
Selling, general, and administrative		8,833			9,945			28,461			30,648
Depreciation		2,691			2,599			7,644			7,393
Gaming commission and surveillance expenses		738			854			2,167			2,389
Compact revenue sharing trust fund		333			333			1,001			1,001
Sonoma County fees		875			-			875			-
Gain on sale of assets		(2	)		-			(58	)		-
Total operating expenses		18,501			19,871			56,732			58,962
INCOME FROM OPERATIONS		12,801			10,499			37,096			36,096
NON-OPERATING EXPENSE-Net:
Interest expense		(5,215	)		(5,214	)		(15,555	)		(15,644	)
Interest income		4			20			17			48
Non-operating expense-net		(5,211	)		(5,194	)		(15,538	)		(15,596	)
INCOME BEFORE DISTRIBUTIONS TO TRIBE		7,590			5,305			21,558			20,500
DISTRIBUTIONS AND TRANSFERS TO TRIBE		(13,229	)		(3,398	)		(20,177	)		(10,194	)
CHANGES IN NET ASSETS		(5,639	)		1,907			1,381			10,306
NET ASSETS (DEFICIT) -Beginning of period		13,769			3,075			6,749			(5,324	)
NET ASSETS -End of period	$	8,130		$	4,982		$	8,130		$	4,982

RIVER ROCK ENTERTAINMENT AUTHORITY
(A Governmental Instrumentality of the Dry Creek Rancheria Band of Pomo Indians)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
	Nine-Month Period Ended September 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from gaming winnings and concessions	$	93,424		$	95,139
Cash paid for salaries and benefits		(20,738	)		(20,743	)
Cash paid to suppliers		(25,706	)		(29,932	)
Cash paid for compact revenue sharing trust fund		(1,002	)		(1,001	)
Cash paid for Sonoma County fees		(3,500	)		-
Net cash provided by operating activities		42,478			43,463
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Payments of debt		-			(492	)
Payments of offering cost in connection with refinancing of debt		(402	)		(515	)
Purchases of capital assets		(4,795	)		(4,917	)
Transfers to Tribe for development costs		(4,652	)		(5,924	)
Transfers to the Tribe for slope reinforcement		(1,581	)		(2,363	)
Change in restricted cash		46			2,768
Interest paid		(9,750	)		(9,750	)
Other		58			(88	)
Net cash used in capital and related financing activities		(21,076	)		(21,281	)
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Interest income		17			48
CASH FLOWS USED IN NON-CAPITAL FINANCING ACTIVITIES:
Distributions and transfers to Tribe		(20,177	)		(10,194	)
CHANGE IN CASH AND CASH EQUIVALENTS		1,242			12,036
CASH AND CASH EQUIVALENTS, Beginning of the period		36,713			31,618
CASH AND CASH EQUIVALENTS, End of the period	$	37,955		$	43,654

RIVER ROCK ENTERTAINMENT AUTHORITY
(A Governmental Instrumentality of the Dry Creek Rancheria Band of Pomo Indians)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
	Nine-Month Period Ended September 30,
RECONCILIATION OF INCOME FROM OPERATIONS
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:	2011			2010
Income From Operations	$	37,096		$	36,096
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation		7,644			7,393
(Gain) on sale of assets		(58	)		-
Changes in operating assets and liabilities:
Accounts receivable		(133	)		231
Related party receivable		116			-
Inventories		15			(3	)
Prepaid expenses and other current assets		(2,333	)		80
Deposit and other assets		(47	)		-
Accounts payable		(94	)		(986	)
Related party payable		-			56
Accrued liabilities		272			596
Total adjustments		5,382			7,367
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	42,478		$	43,463
SUPPLEMENTARY SCHEDULE OF NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES:
Acquisition of property and equipment through accounts payable	$	12		$	728
Acquisition of property and equipment through transfers to Tribe for development costs	$	-		$	14,398
Acquisition of property and equipment through transfers to Tribe for slope reinforcement	$	-		$	1,352