Nevada Gold & Casinos Inc Reports Operating Results (10-Q)
Nevada Gold & Casinos Inc has a market cap of $8.8 million; its shares were traded at around $0.68 with and P/S ratio of 1.3. Highlight of Business Operations:Total operating expenses. Total operating expenses decreased 58% or $3,100,000, for the three month period ended January 31, 2009 compared to the period ended January 27, 2008. This was primarily due to the $2.4 million impairment of notes receivable and accrued interest related to a development project during the three months ended January 27, 2008. The remainder included decreased marketing expenses of $158,000 due to the temporary downturn of casino business at the Colorado Grande, $81,000 decrease in legal expense as the result of lower legal costs related to litigation, and $402,000 lower corporate expense due to our continued efforts to reduce staffing and expenses, which includes a $272,000 reduction in payroll due to staff reductions and stock options expenses as well as an $118,000 reduction in professional and audit fees.
Net income (loss). Net income (loss) was ($467,000) and $27,000,000 for the three month periods ended January 31, 2009 and January 27, 2008, respectively. The decrease of $27.5 million is primarily related to the $39.2 million pre-tax gain on the sale of ICBH, elimination of $0.9 million of earnings from IC-BH, an income tax benefit of $0.2 million versus a tax expense of $8.2 million all offset by reduced corporate and legal expenses of $0.5 million, and net interest expense of $0.7 million. The effective tax rate for the three month periods ended January 31, 2009 and January 27, 2008 was a benefit of (34.0%) and 23.3%, respectively. The decrease in the effective tax rate is due to our pretax loss for the three months ended January 31, 2009.
Interest income (expense), net. Interest expense, net consists of a net balance of interest expense and amortization of loan issue cost, offset by interest income. Interest expense decreased 67.2%, or $2.3 million, for the nine month period ended January 31, 2009 compared to the nine month period ended January 27, 2008. The decrease is primarily due to a lower weighted average debt balance. Interest income decreased 40.1%, or $606,000, for the nine month period ended January 31, 2009 compared to the nine month period ended January 27, 2008. The decrease is primarily due to our decision to write off the $1.5 million note receivable due from the La Jolla Development at the end of fiscal 2008, the collection of the $4.6 million note from RCI in August 2008, and only accruing interest for $4 million on the BVD receivable versus the $14.8 million note previous. Amortization of loan issue costs was $96,000 and $645,000 for the nine month periods ended January 31, 2009 and January 27, 2008, respectively.
Net income (loss). Net income (loss) was $(2.9 million) and $26.9 million for the nine month periods ended January 31, 2009 and January 27, 2008, respectively. The decrease of $30 million is primarily related to the recording of a pre-tax $40.5 million gain on the sale of ICBH in January 2008 and American Racing in June 2007, decreased casino earnings of $0.6 million, elimination of $4.1 million of earnings from IC-BH and American Racing, all offset by $1.5 million of reduced corporate and legal expenses, reduced net interest expense of $2.3 million, and recording a $1.5 million tax benefit versus an $8.2 million tax expense for the nine month periods ended January 31, 2009 and January 27, 2008, respectively.
Investing activities. Net cash provided by investing activities during the nine month period ended January 31, 2009 decreased by $29.5 million compared to the nine month period ended January 27, 2008. The decrease of funds provided is primarily due to our prior year receipt of $66.8 million from the sales of ICBH and American Racing offset by the establishment of the $13 million Project Fund compared to $16 million received from the sale of BVD, $4.6 million from the sale of RCI, $1.1 million received from the notes on the sale of American Racing, and $3 million from the maturity of restricted cash, and the $1 million certificate of deposit that was released in the American Racing sale.
On June 14, 2007, we sold our membership interest in American Racing and Entertainment. We received $2.1 million in cash and two notes for $1.1 million each. The notes bear interest of 5% per annum and are due on June 14, 2008 and 2009, respectively. In June 2007, we used the proceeds from the sale of American Racing to repay $2.2 million of our previously held $55 million Credit Facility (“Credit Facility”). In addition to the cash received from the sale of American Racing, certificates of deposit of approximately $1.1 million pledged as collateral for a bank line of credit for American Racing was released to us on July 13, 2007. We used $950,000 of the certificates of deposit proceeds to pay down the Credit Facility. On June 26, 2007, we drew down $1.0 million from the Credit Facility. In addition, in conjunction with the sale agreement we were indemnified by the purchasers in connection with the guarantees of approximately $11 million of debt or any other obligations of American Racing. On March 31, 2008, the $11 million debt was refinanced and the Company was released from being a guarantor. On June 14, 2008, we received a $1.1 million payment on these notes.
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