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PNK lit it up again. It gets more difficult from here on out.

"Pinnacle's healthy second quarter results, including a 510 basis point improvement in Consolidated Adjusted EBITDA margin, reflect the significant improvements we are driving throughout the organization.  Through operating efficiencies, industry-unique revenue growth strategies, and a focused commitment to offer quality entertainment experiences and enhanced guest relationships, we continue to strengthen Pinnacle's competitive position"

- Anthony Sanfilippo, president and chief executive officer of Pinnacle Entertainment. 


  • "The property level improvements and lower corporate expense contributed to an improvement in Consolidated Adjusted EBITDA margin"
  • "While still early, the mychoice program is off to a very solid start and contributed to our strong second quarter results.  We believe this innovative program will drive further progress over the balance of 2011 by increasing play consolidation at our properties, attracting new in-market customers and generating continued yield improvements on our marketing spend."
  • "Our shared services operating arrangements for both the St. Louis and Louisiana markets are proving effective in leveraging management experience and excellence across multiple properties.  When combined with operating leverage on the higher revenue levels, we have seen significant Adjusted EBITDA improvement that has outpaced our growth in revenues."
  • "Recent changes include modifications to our casino floors, including the addition of a poker room at L'Auberge du Lac and the relocation of the poker and high-limit rooms at River City.  We have also re-examined our restaurant mix, and recently rebranded the steakhouses at both River City and L'Auberge du Lac, and converted the former steakhouse at Lumiere Place into the new Stadium Sports Grill and Bar.  Also at L'Auberge du Lac, we recently opened a new beach entertainment area.  Each of these enhancements are proving popular with our guests and offer examples of our focus on increasing guest loyalty by ensuring our casino properties remain fresh which furthers their position as entertainment destinations of choice in our markets.
  • "Construction on the Company's L'Auberge Casino & Hotel Baton Rouge project in Louisiana recently fully resumed.  Despite construction delays caused by several months of unusually high water levels, the Company continues to expect L'Auberge Baton Rouge to open in the summer of 2012.  As of June 30, 2011, approximately $273 million of the $357 million construction budget (excluding land and capitalized interest) remains to be invested."
  • "Our development pipeline also benefited from the recent legislative approval of up to 2,500 video lottery terminals at Ohio racetracks, including at our River Downs Racetrack in southeast Cincinnati.  We are currently creating a master development plan to re-develop River Downs into a premier racing and gaming entertainment destination for guests in the region."
  • "On August 2, 2011, Pinnacle amended its existing credit facility.  Among other items, the Company extended the credit facility's maturity to August 2016 from March 2014 , reduced the interest rate spread for any outstanding borrowings by 125 basis points, and amended leverage covenants to reflect Pinnacle's financial strength and accommodate its planned growth pipeline.  Additionally, the size of the credit facility was increased to $410 million from $375 million."


  • St. Louis:  The top-line growth is due to increase in customer spend, cross marketing efforts, and myChoice launch
    • Shared services is really driving top line and margins in the quarter, despite tepid overall market growth
  • Some increased corporate overhead associated with corporate and legal expenses.  Somewhere between 2Q and 1Q is a good run rate to use going forward.
  • Had bad luck at Belterra which negatively impacted their results in May
  • Used $65-70MM in their daily operations
  • New facility lowered their borrowing costs by 125bps compared to their last facility
  • $41MM of capex - $27MM of that was Baton Rouge - rest was maintenance
  • In AC they had to go through an accounting review - had a $3MM writedown at AC
  • MyChoice - will be net neutral to their marketing expenses but they are refocusing on higher value customers
    • Strong play consolidation let to an 18% increase in the spend per visit at L'Auberge
    • St. Louis: double digit growth in the VIP segment
    • Belterra - double digit growth in rated play. In June, VIP rated hotel room nights increased 62% YoY
    • All properties saw increases in spend per occupied room YoY
    • Seeing a very favorable reaction from high end customers and more efficient leveraging of marketing spend
    • 18% increase in RevPAR


  • Ohio continues to move forward toward the legalization of VLTs. Still need to reach an agreement with the horsemen and how that agreement will be implemented. Think that they will reach a decision in short order - this year.
  • Continue to focus on how they can improve the business. They are still in the early stages of implementing improvements to their marketing efforts.  So they are in the middle innings of their improvements.
  • Covenants for new agreement provide them meaningful cushions
  • Capex for 2011: Other than Baton Rouge - their other capex projects are small
  • Their priority is to make sure that their existing properties are operating as efficiently as they can be
  • They aren't focused on having a property in Las Vegas - they are very pleased with their agreement with Wynn Resorts
  • Any one time items in the quarter? No, expect that MyChoice will continue to help enhance their results regardless of various events that they have
  • In AC they filled out an expression of interest which they submitted to the NJ control board. They want to keep their options open but that asset continues to be for sale.
  • Thoughts on the weaker than expected economic data that's coming in?
    • Trying to focus on the thing that they can control and the economy is not one of those things
  • What probability is there of another international development announced over the next 18 months
    • “can’t really answer that”
    • We are still a development company though, not just an operating company
  • It's not clear how much of the improvement at L'Auberge is driven by the economy vs their initiatives
  • Baton Rouge - spend will accelerate into the 4Q - $75% of what is left to spend will happen in the next year
  • Write down of $5MM in the quarter?
    • When they canceled Sugar Cane Bay, they donated some land to the City of Lake Charles.  The transfer of that asset occurred in 2Q
  • In AC - $14MM was a non-cash writedown of existing asset, the balance has to do with ongoing operations there and legal expenses.  On a run rate basis, there are $2MM of so of run rate expenses.  Said that $2-3MM was too high.
  • They have a very significant NOL, so they are not a large tax payer at the federal level. 
  • A normal tax rate would be 40% but some of that would be shielded by NOLs
  • No meaningful updates on smoking bans in their states