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In preparation for PENN’s Q4 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from PENN’s Q3 earnings release/call and subsequent conferences.



Post Earnings Conference Commentary

  • “I think going into 2011, you will probably see our CapEx about the same as it was this year. It won’t go up and in fact, it may go down a little bit. And the reason that is the case is that, over the last decade, let’s say, the price of the slot machine boxes have gone up pretty dramatically. I mean we – I think at the beginning of this decade they were probably in the 8,000 to 10,000 range and now we are looking at boxes in the $18,000 range. And I think that what we’ve decided to do is we’ve started to look a little bit more closely at our slot machine purchases to say, okay, here is what we are paying for the slot machines, here is the type of win per units that we are getting on the slot machines, they are not increasing. And in fact with additional competition that comes on the feature, win per units may go down. And so we have to adjust the number of slot machines that we actually are serious about replacing on a go-forward basis. So that’s why I think with going forward, you will probably see our number, our slot maintenance number about the same, of course slightly less than it is right now.”
  • “Gaming spend per visit and visits... have been pretty flattish on an absolute level for quite some time. I think probably what you’ll see going into the fourth quarter and the first quarter of next year is that those numbers across the country will be flattish for the first time in a long time.”
  • “What we’ve seen with West Virginia is ... numbers sort of rise and then continue to rise, and I think that has been surprising to us. I mean, I think normally when we go and we model these type of expansion opportunities, we think that table games should add about 15% to 20% or maybe 10% to 15% of your total casino win, and this one was closer to 25% for Charles Town and it continues to ramp…. We just recently added in November, a steakhouse there. I am not sure if you saw that when you were on your trip there, but we just added that. And we are – in the spring, we are going to add an entertainment venue as well and I think once we have the full package, I think we’ll be able to even further mine and market that high end table game customer, the Charles Town.”
  • [M resort] “The transfer of ownership... that’s probably going to be a first quarter, maybe early second quarter event.”
  • [Ohio slots] "The new Governor Casich ran on a platform of not increasing gaming taxes. And so when you think about what are your options in terms of reducing the budget there or the deficit, gaming is got to be one of them. And so potentially he is using this study period as a way to sort of shore up his base and find a way where additional gaming at the tracks can be palatable. He may come back and say that it’s not possible. And so I think either way, we’ll probably find out sometime by the middle of this year or by 2011."
  • “We’re encouraged by the fact that some of the numbers that we’re seeing out of some of the major Las Vegas locals operators like Station have been closer to flattish in the third and fourth quarter now on the revenue and EBITDA line rather than the double-digit declines that you’ve seen over the last two or three years. And I think that that’s probably where you stand going forward is sort of flattish to maybe modest inflationary type growth going forward in that market.”
  • [Casino Rama contract] “We’re going to be part of the new management contract there or at least we want to be a player there. We want to be potentially chosen there, and that’s probably an April or May of 2012 event.”

Q3 Conference Call

  • [Margins in Pennsylvania & West Virginia] “I’d be hesitant, though, to say that there’s going to be further improvement going forward from what you saw in the third quarter, given all the noise of the introduction of the new offerings at these two businesses.”
  • “Looking into the fourth quarter, we’re looking at total CapEx for 89.7 million, which we’ve broken down between new projects of roughly 69.3, and maintenance CapEx of roughly 20.4 million.”
  • “Some of the competitors have actually started to pull back [on marketing/promotional spending], noticeably Pinnacle, which we’ve seen in the markets we compete head-to-head with them....which is encouraging to see.”
  • “I certainly believe we’re going to see year-over-year margin improvement in the fourth quarter, Steven, as we continue to do that and fine-tune it. I would be hesitant to go into 2011 that far out until we have more data points into the fourth quarter to talk about how the P&Ls are looking in these businesses, but certainly I’m confident that you’re going to continue to see margin improvement in the fourth quarter.”