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In-line with us but below the Street

"The second quarter was a period of achievements and challenges. Similar to other regional gaming operators, we experienced softening net revenues during September and October. Cost containment efforts led to increased adjusted EBITDA and margins at several of our properties; however we could not overcome the softness in our Mississippi business."

Virginia McDowell- CEO of ISLE

CALL NOTES

  • Miss in Mississippi; other regions performed well
  • Natchez entrance ramps have been repaired but still limited access to the property
  • Cape Girardeau - ramping up to ISLE's expectations
  • FQ2:  $2.5 million cost - sub-note offering in July
  • $75.5MM in cash; $1.18BN debt ($38MM outstanding in revolver, $300MM 7.75% senior notes, $350MM new subnotes, $4MM other debt)
  • FQ2:  debt increased by $30MM; Capex: $46MM.  
  • Leverage cap: increased a couple of tenths to 5.9x, should start to trickle down as Cape Girardeau ramps up
  • Borrowing capacity: $200MM; $1.3MM cap interest

Q&A

  • Cap interest and pre-opening will go away when Nemacolin ramps
  • No Cape Girardeau in FQ2 results
  • $1 million in increased legal costs--will not continue going forward
  • Nemacolin budget went up since previous estimate occurred when construction was on hold waiting for regulatory decision
  • REIT conversion in the future? 
    • PENN may be an one-off situation
    • ISLE doesn't have the size or leverage to do something similar
  • Nemacolin feeder markets:  Morgantown, WV and Nemacolin
  • Credit amendments:  function of timing;  before amendment, there was an expectation that Nemacolin would be open by now.  Because of the delay in Nemacolin, ISLE needed more room in their credit agreements.
  • Capex guidance:  $80-90MM (for balance of fiscal year 2013)- $20-30MM will be for Nemacolin;
  • Vicksburg essentially done; renovation of Lake Charles will be done by end of FY 2013. 
  • Cash from Biloxi: ~$50MM
  • Target leverage:  around 5x