In preparation for PENN's 2Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.
Penn National Gaming Files for Ohio VLT Licenses and Consent to Relocate Its Racetracks to the Mahoning Valley and Dayton (7/2/2012)
- Intention to construct new $125 million racetrack and video lottery terminal (VLT) facilities at the new locations
- PENN has agreed to pay a $75 million relocation fee for each racetrack, in addition to the $50 million VLT license fee per track.
- In addition to up to 1,500 VLTs per facility, both of the new properties will feature restaurants, bars and other amenities.
- PENN has previously indicated that it will continue to operate Beulah Park in the Columbus suburb of Grove City and Raceway Park in Toledo until the expected opening date of the new facilities sometime in 2014.
- The new Austintown facility – which will be a thoroughbred track – will be located on 184 acres in Austintown’s Centrepointe Business Park near the intersection of Interstate 80 and Ohio Route 46. It will be known as Hollywood Slots at Mahoning Valley Race Course.
- The Dayton facility – a standardbred track – will be located on 125 acres on the site of an abandoned Delphi Automotive plant near Wagner Ford and Needmore roads in North Dayton. It will be called Hollywood Slots at Dayton Raceway.
Penn National Gaming to Acquire Harrah’s St. Louis for $610 Million in Accretive Transaction (5/7/2012)
- Acquires the stock of Harrah’s St. Louis for $610 Million
- The transaction price represents a 7.75x trailing 7.75 trailing twelve month EBITDA multiple and will be funded through an add-on to PENN's existing Senior Secured Credit Facility. While the acquisition is a stock transaction, for tax purposes, it will be treated as an asset transaction which Pennexpects will provide tax benefits that will effectively reduce the purchase multiple to 6.75x trailing EBITDA. Pro forma for the completion of the transaction, PENN's total debt to EBITDA leverage ratio will increase to 3.25x from 2.75x (at March 31, 2012).
1Q CONFERENCE CALL YOUTUBE (4/19/2012)
- "Our customers are back and they're back in force, and most of our properties are doing extremely well."
- "We are seeing overall increased spend per visit slightly, and our marketing activities continue to move low-end customers away from being rated into unrated. So that has an overall effect of improving the quality of your rated play on a per trip basis."
- "There's rational promo environment out there....The recovery I think will continue to be slow, which is reflected in our guidance for the balance of the year. And we do see the strength in our VIP segment, which is good to know that we're protecting our VIP customers, even though we're able to continue to improve our margins at the lower end of our rated database."
- "It's clear that the cannibalization immediately is not as strong as what we've been indicating in our previous thought process. So that doesn't mean that the cannibalization doesn't happen. It just seems to be a little bit more delayed than we had in our original numbers."
- "Relative to what's happening in Kansas City, the ISC property obviously started off really well. And as I think I've indicated a number of other times, it's following the exact pattern that we have seen in every other opening of a property, which is that the property starts off really strong, and then it has a period of a few months where it doesn't match those initial numbers. And it takes anywhere from four months to six months to climb back to the – and I won't say the opening week, but maybe the second, third weeks' opening results. It takes about four months to six months to get back there."
- "Maryland Live! versus Charles Town, I mean, certainly we are incorporating a bit of that. We think that the cannibalization, original cannibalization thoughts may have been a little bit accelerated in terms of the immediate impact. So we have pulled that back just a little bit."
- "We're still feeling like there's a lot of room in this year's guidance for movement relative to where we may end up, just because of the fact that there are so many, again, so many issues happening this year as we've moved through these different openings."
- [Maryland] "Now there has not been a decision on when there's going to be a special session. We assume there will be. We're hopeful that that flawed piece of legislation doesn't come back up in the special session, or if gaming is included in the call, that we kind of reset the clock and that we have an opportunity to argue the merits of our proposal being included in a competitive bid, should the sixth license make it through."
- "With the opening of the tenth license in Des Plaines, we were prepared for that. We restructured our costs in both Aurora and Joliet to reflect lower business volumes that we're seeing there. Then in Lawrenceburg, the thing that we've continued to do there is continue to being the 800 pound gorilla in that market today, continue to restructure our marketing spend and reduce our marketing reinvestment, again, to the lower level of our rated database. That has continued to improve the overall margins of that business as well."
- "We started to see a little bit of improvement in the Boulder Station numbers for the Las Vegas locals. But that coupled with our continued rationalization of the cost structure, we continue to reduce FTEs where we can and adjust our hours of operation in our restaurants and our other non-gaming areas to reflect more current business demands....And continue to, as we've done with the other businesses, look at our marketing reinvestment to the low end of the rated database, and all those things continue to show improvement to the overall performance in the M. But again, we're still early on in this, and it's going to take a couple more quarters going forward into this year and into next year for this to completely take hold. So we're off to a decent start this year, but there is more to come."
- [Baton Rouge] "I think there is going to be very, very modest growth in this market, and I do think there is going to be significant cannibalization of the two existing casinos that are in that market. So we don't anticipate that there is going to be a good story in Baton Rouge once Pinnacle does open there. So we think the market is fairly well saturated and there will be modest overall growth. Probably not too different than what you're going to see in Atlantic City with the Revel opening that just occurred, given how saturated that market is, we see similar kind of effect in Baton Rouge. So we're preparing for lower business volumes and therefore ready to adjust our cost structure to accept a new paradigm of business levels."
- "We have seen in certain cases where certain manufacturers have become very aggressive in their pricing to us that has caused us to move a little bit of share over. And machine price over the last five or six years hasn't correlated well with any win-per-unit performance. So to see an operator or manufacturer, like Konami be very aggressive with their pricing is something that has caught our interest and has given them a little bit of a share shift toward their product, which has performed very well on our floors, especially in the low denom area."