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Takeaway: Midwest margins were incredible and drove the EBITDA beat. Forward guidance unchanged despite higher margins indicating that demand is soft

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

PENN Q3 REPORT CARD - PENNH

OVERALL

  • BETTER:  Midwest margins were incredible and drove the EBITDA beat.  Forward guidance was unchanged despite higher margins indicating that demand is soft.

L’AUBERGE BATON ROUGE IMPACT

  • SAME:  Slightly lower than expected adverse impact from L'Auberge Baton Rouge on Hollywood Baton Rouge but the real impact will take about 4-5 months to materialize
  • PREVIOUSLY: "Baton Rouge, L'Auberge opened in Baton Rouge. Clearly to date that's having an impact on our property. It's fairly substantial."

IMPACT OF SCIOTO DOWNS:

  • SLIGHTLY WORSE:  expect pressure from Scioto Downs to continue.  Have reduced FTEs significantly at Lawrenceburg in Q4 due to poorer performance.
  • PREVIOUSLY: "We've clearly seen an impact from Scioto Downs opening in Columbus...on our Lawrenceburg facility. We have roughly 10% of our business comes out of the Columbus market for Lawrenceburg, and we have clearly felt the impact of that."

OHIO RAMP

  • BETTER:  Toledo exhibited a strong performance above company expectations.  Early results on Columbus are in-line with management expectations.  
  • PREVIOUSLY: "Table games play has been very strong. Similar to what we're seeing in Dayton, we saw a little bit of that in Columbus. For whatever reason, and I think maybe it's simply a function that it's a less mature market and it hasn't had a lot of exposure to gaming, but we're clearly seeing that the slot business is a little bit slower building than what we might have expected to happen. I would say at Toledo, we're basically on track, but we're well ahead of track on poker and tables. So, clearly both of those markets are a little stronger in Ohio. The slot business – for whatever reason, I think it's going to just develop over time."

CONSUMER CONFIDENCE

  • SAME:  Flat consumer trends in 3Q
  • "Generally not having any expectation that we're seeing any improvement in consumer confidence or unemployment levels as we think about the balance of 2012."

CAPEX

  • MIXED:  3Q - $147 million project capex (Columbus and Toledo mostly) and $14 million maintenance.  4Q - $155.5 million project capex and $24 million maintenance
  • PREVIOUSLY: "Project CapEx is expected to be roughly $160 million for the third quarter and roughly $88.9 million for the fourth quarter. Maintenance CapEx in the third quarter was roughly $23.7 million and maintenance CapEx for the fourth quarter were projected to be around $21.2 million."

VEGAS

  • SAME:  M Resorts continued to improve margins in spite of flat revenues.  Las Vegas Locals market continues to be sluggish and PENN doesn't see that environment to improve in 2013. 
  • PREVIOUSLY: "Generally more of the same. The locals market continues to be sluggish out there. Promotional activity is slightly more rational than what we saw a couple quarters ago. And we've certainly at the M continued to pare back our marketing expenses where we believe we can improve the profitability of our revenue streams."