• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

ISLE F4Q12 CONF CALL NOTES

"Overall, we had a solid quarter marked by incremental revenue growth resulting from our refined business model, more favorable weather conditions than last year and an increasingly renewed asset base.  Even after adjusting for the fact that fiscal 2012 had an additional week when compared to fiscal 2011, we grew revenues and adjusted EBITDA."

- President and Chief Executive Officer Virginia McDowell

CONF CALL NOTES

  • They have now collected all of their insurance recoveries
  • No R/C borrowings outstanding
  • $0.5MM of capitalized interest for the Q and $1.1MM for the year

Q&A

  • Blackhawk, for the first time since ASCA opened, had market share growth. 
  • Have turned a corner in Vicksburg
  • Disruption impact of the consolidation of LA operations was in the range of $300k 
  • Pompano:  Coconut Creek opened recently but they have had improved promotions and the roll-out of their guest loyalty program.  Racing revenues have stopped declining.
  • Cash build is temporary as Cape Girardeau construction ramps and have notes that they will likely take out next year
  • Impact of the extra week? Just pro-rata the quarter.
  • Update on closing of Biloxi? 
    • Sometime in the summer
  • Cape Girardeau budget increase was infrastructure-related
  • New competition coming into Blackhawk over the next 6 months? 
    • They are in discussions with the new property owner next door and are going to work together to strengthen their pod of properties. They are also renovating the rooms there and using the Pompano as an example. Have done a lot to the slot floor, poker room, and putting in a new buffet.
  • No change in customer behavior/ spending patterns over the last few weeks
  • Any overly promotional markets out there?  Biloxi is really the only one there... very competitive for mid-week business.  Margaritaville opened without a big impact but is a very promotional environment there. Also saw an uptick in Kansas City.
  • Feels like there may be more M&A as companies' balance sheets are more in order and there has been compression in the bid-ask spreads.  They are always looking.

HIGHLIGHTS FROM THE RELEASE

  • "We expect to open Cape Girardeau by November 1 of this year, two full months ahead of our initial schedule, and will complete the rebranding of Vicksburg within the next several months (F2Q13).  Further, as we continue to renew our asset base and provide guests with more options and more experiences, we have an aggressive schedule of targeted capital improvements planned for our properties during the coming months, including renovated hotel rooms, new buffets and a full rollout of our enhanced customer loyalty program."
  • "Black Hawk benefited from favorable weather conditions, completed facility enhancements, including renovations to the poker room and casino floor, and a reduced gaming tax rate compared to the fourth quarter of fiscal 2011."
  • "Pompano continued to exhibit revenue growth resulting from changes to our game mix, enhanced food and beverage amenities and the rollout of our enhanced customer loyalty program during the prior quarter, while competing with a major new expansion at our nearest competitor."
  • "Waterloo showed strong growth in adjusted EBITDA margins during the quarter...as a result of operating improvements and reduced costs."
  • "Adjusted EBITDA margins decreased... primarily a result of severance and marketing costs resulting from the consolidation of our riverboat operations into a single facility.  We are benefitting from a lower cost structure in Lake Charles as a result of consolidation following the sale of our smaller riverboat in February 2012."
  • "Our properties in Mississippi continue to face difficulties stemming from a lagging economy in the area.  In particular, our property in Lula is facing increased competitive pressure from competing facilities in Arkansas.  However, in Vicksburg we benefited from operating improvements... partially offset by construction disruption associated with the ongoing rebranding of the facility."
  • "Kansas City property, however adjusted EBITDA decreased... primarily as a result of competitive market pressures following the opening of a new facility in the area during the quarter.  Our property in Boonville increased adjusted EBITDA margins... as a result of operating efficiencies and the introduction of the Farmers' Pick Buffet in the beginning of this fiscal quarter."
  • "We are currently renovating the 253 hotel rooms in the main hotel tower in Lake Charles and 237 rooms in the Isle Black Hawk Hotel.  We expect the $15 million complete refurbishment of the Lake Charles rooms to be completed by November 1, 2012.  In Black Hawk we are replacing carpet, wall coverings, and furniture at an expected cost of approximately $2.0 million, and expect to be completed by December 1, 2012."
  • "Intend to open additional Farmer's Pick Buffets in fiscal 2013 including at Cape Girardeau, Pompano, Black Hawk and Waterloo.  Additionally, we plan to add a Lone Wolf bar in our Waterloo facility."
  • "Expect to introduce [Fan Club loyalty] program to five additional properties during the first and second quarters of fiscal 2013, and intend to have it fully implemented across the portfolio by the end of fiscal 2013."
  • The expected cost of Cape Girardeau has been revised up $10MM to $135MM
  • "The appeal hearing for the gaming license awarded to Nemacolin Woodlands Resort for the final resort license in Pennsylvania was held on March 7, 2012. No date has been determined for an expected ruling on the appeal or the ultimate resolution of the matter.  We expect to begin construction on the property following a successful conclusion to the appeal process and receiving any other necessary approvals, and to open the property approximately nine months after the commencement of construction."
  • FY2012 capital expenditures were $75.2MM, of which $34.9MM related to Cape Girardeau, $0.7MM related to Nemacolin and $39.6MM related to maintenance capital and projects at our existing properties.
  • Net leverage, as calculated under our senior credit facility was approximately 5.7x 
  • Unusual items in the Q:
    • $112.6MM write-down to the value of Biloxi after the sale annoucement
    • Recorded a charge of $16.1MM related to the sale of our smaller riverboat and associated gaming license in Lake Charles, Louisiana, completed on February 9, 2012
    • Impairment charge of $14.4MM against the goodwill at our Lula property
    • Net revenues and operating income for the fourth quarter include $8.6MM of insurance recoveries 
    • Accrued approximately $2.0MM, including interest, in connection with a judgment issued in a legal case in connection with the Company's previously owned property in Vicksburg, Mississippi, which was sold in July 2006.  We are appealing the judgment and plan to vigorously defend our position.
  • FY2013 Guidance 
    • D&A: $76-78MM
    • Cash income taxes: < $5MM (primarily related to state taxes)
    • Interest expense (net of capitalized interest): $83-85MM
    • Corporate & development expenses: $40MM (including stock comp)
    • Capex: $140-150MM (including approx $85MM spent on Cape Girardeau)
    • Pre-opening of $5.5MM related to Cape Girardeau
    • FY13 will have 52 vs. 53 weeks in FY12