PNK 4Q REPORT CARD

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

OVERALL:  WORSE - Even after adjusting for low hold, property EBITDA missed our Street low estimate by $2 million.  Demographical headwinds remain while the consumer is even more descriminating with higher payroll taxes and gas prices.

CONSUMER METRICS

• WORSE:  Spend per visit was similar YoY while overall trip frequency declined.  Retail segment was very weak.  Softness seen in 4Q has continued into January.
• PREVIOUSLY: “In terms of the spend per visit increase, it is coming largely from our top three tiers, the quality of the guests that are visiting our properties and the incentives that we're providing to them are yielding higher spend per visit.”

MARGIN UPSIDE

• WORSE:  "4Q Consolidated Adjusted EBITDA margin fell 158bps to 21.0%, principally due to L'Auberge and Baton Rouge still being in its operational ramp up period.  On a same store basis, Consolidated Adjusted EBITDA margin was essentially unchanged YoY at 22.5%."
• PREVIOUSLY: “We continue to improve our margins, not only in this property, but all of our properties.  We believe margins this quarter are sustainable going forward.”

MARKETING EFFICIENCIES

• SAME:  In 4Q, marketing reinvestment was down 70bps YoY, excluding Baton Rouge.  With Baton Rouge, reinvestment increased slightly, up 10bps YoY.
• PREVIOUSLY: “These results are being delivered with more efficient and effective marketing spend. For the quarter, marketing expense as a percent of gaming revenue was down 60 basis points. This marks the third consecutive quarter where marketing reinvestment has been reduced versus prior year.”

L'AUBERGE BATON ROUGE RAMP

• SAME:  Overall, L'Auberge is pleased with the visitation trends.  Baton Rouge has not materially impacted play at other PNK's properties.  
• PREVIOUSLY: “L'Auberge Baton Rouge...we have seen strong visitation as evidenced by over 48,000 new mychoice sign-ups during the first month of operations. VIP business has opened up ahead of pace and we're optimistic about our ability to drive continued pace in this segment given the high quality amenities at this property... We're pleased with what we see in October and most important, we really feel like we nailed this facility." 

L'AUBERGE DU LAC

• WORSE:  Low table hold affected results but PNK did see some softness at the property.  Some hotel rooms have been out of service; remodeling will pause in the summer months and resume in September.
• PREVIOUSLY: “Houston is a very underpenetrated market where we think that there is a lot of unmet demand, and we've been able to yield that facility – meaningfully better over the last couple of years mostly by having more profitable guests that come through our place but given the depth of that market. So we think that there is certainly room to go there and we've made enhancements to our facilities to make sure that we can take advantage of that demand.”

BELTERRA PERFORMANCE

• WORSE:  $0.5MM unusual expenses (flooded room) in 4Q.  The market has been more competitive and the trends have been soft.  PNK is upgrading some amenities (e.g. buffet) that will the Spring and early Summer in hopes of helping position the property.
• PREVIOUSLY: "We continue to grow admissions in a declining market, and we remain focused on leveraging our unique assets while maintaining marketing spend discipline.”

BOOMTOWN NEW ORLEANS

• WORSE:  Property continues to be challenging.  4Q revs fell 5% while EBITDA tumbled 13%.
• PREVIOUSLY: “In New Orleans, the property and the market are clearly struggling, but underlying trends at Boomtown got progressively better throughout the quarter, notwithstanding the impact of Hurricane Isaac.”

RIVER DOWNS UPDATE

• SAME:  Demoition will be completed shortly.  Plans to open 2Q 2014. PNK predicts a 15% ROI on River Downs.
• PREVIOUSLY: The project's expected to cost $209 million, excluding license fees, land and capitalized interest. We expect to begin construction this year with the entire facility scheduled to open in the first half of 2014. We have master planned this facility for future expansion should demand conditions warrant the additional investment.”

RIVER CITY EXPANSION  

• SLIGHTLY BETTER:  Multipurpose center will come online in Summer 2014 and the hotel will open in 3Q 2014.  Project is slightly ahead of schedule.
• PREVIOUSLY: “At River City in St. Louis, the $82 million expansion is progressing rapidly with the parking garage expected to open in about a month. The multipurpose event center is expected to come online before the end of next summer, and the hotel will open in the second half of 2013.”

ACDL INVESTMENT 

• WORSE:  PNK took a $25MM (23% of investment) cash writedown on its ACDL investment. Process has been taking longer than expected.
• PREVIOUSLY: “To date, we have contributed about $14 million of the $15.6 million, and we expect the remaining funds to close in the fourth quarter. ACDL continues to make meaningful progress on the development. And while there is work to do on the regulatory front, the project remains on track to open the first quarter of next year."