Caesar's reported a 5.1% YoY increase in Adjusted EBITDA; however, excluding the $23.5MM property tax accrual included in the IL/IN region, Adjusted EBITDA actually declined 1.7% YoY.
HIGHLIGHTS FROM THE RELEASE
- "The company's 2010 fourth-quarter revenues increased approximately 1.0 percent to $2,121.0 million from $2,099.1 million in the 2009 fourth quarter, due primarily to revenues associated with our February 2010 acquisition of Planet Hollywood, offset by the continuing impact of the weak economy on customers' discretionary spending. However, certain markets, including Las Vegas, have shown signs of stabilization and improving operating margins."
- Same store net revenues declined 2.4% YoY in 4Q10 compared to a 2.7% YoY in 3Q2010
- "During the quarter, we initiated a new program to streamline our operations further, and I'm confident we will end this year with an even leaner, more efficient and responsive organization"
- "While most markets in which we operate showed modest revenue gains or stabilization in the fourth quarter, Atlantic City did remain challenged"
- "Our new joint venture with Rock Gaming, LLC, broke ground earlier this month on casino projects in Cleveland and Cincinnati that will operate under the Horseshoe brand name. The two casinos combined will offer about 4,100 slot machines, 180 table and poker games, and exciting dining, retail and entertainment venues to an
estimated 14 million visitors annually." Both projects are expected to open in 2012, pending receipt of required regulatory approvals." - "On a consolidated basis, when compared with the respective periods of 2009, visitation by our rated players decreased 5 percent for the fourth quarter 2010 and decreased 1 percent for the full-year 2010. The amount spent per rated-player trip increased approximately 1 percent for the fourth quarter 2010 and decreased approximately 2 percent for the full-year 2010. Average daily room rates and occupancy were generally flat for both the fourth quarter and full-year 2010."
- 4Q Las Vegas YoY trends:
- "Visitation by our rated players increased 15%"
- "Amount spent per rated-player trip decreased 5%"
- "Hotel occupancy remained above 90 percent"
- Hotel revenues increased 16%: Occupancy +3.5%; ADR: Flat
- 4Q AC YoY trends:
- "Visitation by our rated players decreased 9%"
- "Amount spent per rated-player trip decreased 5%"
- Hotel revenues remained relatively flat: Occupancy -3%; ADR: +4%
- 4Q all other US markets YoY trends:
- "Visitation by our rated players decreased 8%"
- "Amount spent per rated-player trip increased 4%"
- 4Q Las Vegas YoY trends:
- IL/IN: "Revenues in the region increased for the 2010 fourth quarter from the 2009 comparable period, primarily due to increased visitation... Income from operations prior to consideration of impairment charges, and property EBITDA increased for the fourth quarter and full year of 2010 from the 2009 periods as a result of reduced marketing expenses and the benefit of a $23.5 million property tax accrual adjustment recorded in the fourth quarter 2010."
- "Revenues from our managed properties decreased for the fourth-quarter and full-year 2010 due to the continued impact of the current economic environment on our managed properties. Revenues from our international properties for the fourth-quarter and full-year 2010 increased from 2009 due to increased visitation and increased spend per trip at our Uruguay and London Clubs properties."
CONF CALL NOTES
- Group bookings are strong in Las Vegas
- In the US, they remain committed to legalization of online poker on the federal level
- Implemented priority Prism system that allows them to customize marketing programs
- Significant opportunities remain to streamline their organization and cut more costs
- 2010 was a challenging year for CZR and the gaming industry
- For the first time, both revenues and property EBITDA increased...
- Not if you exclude the Planet Hollywood acquisition and the tax accrual... oh well gotta love creative accounting GAAP measures
- New $153MM cost saving initiative by end of 2011
- I love how they mention the reasons behind their property level EBITDA but manage to exclude the single largest driver of the increase - since it's a one time item that should never be in adjusted EBITDA to begin with
- The $23.5MM tax adjustment was related to the Hammond property
Q&A
- 1Q2012 opening of the temp facility in Cleveland and a 4Q2012/1Q2013 opening of the Cincinnati property. $65MM was contributed to the JV so far.
- Think that stabilization is their ambition in AC given the regulatory changes there. Think that Revel will reinvigorate Showboat and that they need to reposition Bally's.
- $550MM of cash at OPCO and no R/C draw
- 2011 Capex plan? $425MM - includes maintenance and growth capex including OH and equity into the LINK project and Octavius Tower ($100-150MM of their equity + financing raise that they announced)
- RevPAR growth in LV ex PH: Occupancy was up 3pts and ADR was down 1%. They are against resort fees.
- Group booking trends in Vegas:
- Began seeing a pickup of group booking trends a year ago. Both volumes and pricing are much improved from what they saw in 2008-2010.
- They are working very hard to make their marketing spend more efficient. In AC they have been substantially cutting back on marketing.
- Why is now the right time to invest in Vegas?
- They are not trying to game good timing, rather they are trying to attract customers to their strip real estate that has suffered from loss of visitation. Think that the Wheel will drive a lot of traffic - ala the London Eye.
- Believe that people's desire to visit their facilities hasn't diminished but their ability to spend has... believe that spend per visitor is starting to rebound a little
- Planet Hollywood acquisition is really helping them draw more traffic to Vegas
- Thinks that the London Eye does 3MM visitors a year - each which pay $20 to take a ride. Intend to offer a more modern version and offer F&B. Believe that this will be a highly remunerative project. The Stratosphere also is a big draw.
- Retail area will have 190,000 SQFT of leaseable space
- Wheel capacity 10MM / year
- Update on i-gaming legislation:
- They would prefer to focus on the federal level until those efforts are exhausted
- He is cautiously optimistic that they can have a successful passage of online poker in this congressional session
- If the federal effort is not successful, then they can go the State route. However, given the lack of liquidity, the State efforts are limited unless a number of states legalize and join efforts.
- US poker market is about $6BN with no promotion from the large operators
- Think that it would be a fixed cost driven market with high margins
- Thinks that New Orleans should have a great 2011 - with lots of events and big resurgence of tourism
- MS has been very tough. Tunica is in its 5th year of decline.
- Business in Chicago is a monster and that market is quite vibrant
- St Louis has had too much supply, but is starting to see some stability
- The competitive behavior has been quite favorable. ASCA has done some innovative work on their marketing front.
- How did they identify another $150MM of cost savings?
- Consolidation of mgmt activities in AC and Tunica, marketing activities in the midwest region
- Strength in the Asian play in Vegas continues to be very strong
- $220MM tax return was received in the 4Q but not at HET OPCO
- What are they doing to get that incremental spend per visitor?
- In Vegas - they are trying to make their network of properties more valuable to their players - trying to incentivize players to see them in multiple properties during their visit
