PENN 1Q 2013 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

  • IN-LINE: PENN's quarter was more or less in line with our expectations once you strip out some of the one time corporate charges and underperformance in the Southern Plains segment

 

PENN 1Q 2013 REPORT CARD - pa1

 

CONSUMER TRENDS/PROMOTIONAL ENVIRONMENT

  • SAME:  There has not been much change in spend per visit.  Any admission trends were impacted by cannibilization or weather-related.  Overall promotional activity across the regional markets have been rational.
  • PREVIOUSLY:  
    • "It certainly is more at the lower end with less trips, the retail consumers.  We are seeing some trip decline throughout all the segments of the business.  Some of that is due to cannibalization. But generally the big issue and the majority of our loss of business volumes have been at the retail end."
    • "March was clearly better than January and February, and we can talk about weather, we can talk about timing and tax returns, we can talk about the payroll tax. January and February clearly were not good months for our industry as a whole. And March, we saw a bit of recovery. Now, there couldn't have been pent-up demand from weather. Weather and timing of tax returns are two things that you would think would be just a timing issue and would come back in March. So I don't know that we're prepared to call March a consumer recovery, but it was certainly nice to see at the very least that some of the lost business from the first half of the quarter came back in March. From what I hear, we're not alone in saying that."

ST. LOUIS

  • SAME:  PENN remains on schedule and on budget with the re-branding and facility upgrade of Hollywood Casino St. Louis, which is expected to be completed later in 2013.
  • PREVIOUSLY: 
    •  "The acquisition there of Harrah's St. Louis I talked about earlier, that closed in November. We've decided to invest about $60 million in that property (this year); some new slot machines, some new carpets, facelift."

YOUNGSTOWN/DAYTON TRACKS

  • SAME:  Ohio State Racing Commission has a view of the racing environment is 'obsolete' and demand is slowing; thus, Penn is at an impasse until the Ohio commission agree to a rational amount of seating. As of now, no change in proposed 2014 opening.
  • PREVIOUSLY:   "Racing Commission has decided that they think we need more seats for the racing section of those businesses. So the process is a little bit on hold at this point. We're not changing the opening date from 2014, while we seek a resolution there."

OHIO/COLUMBUS

  • SAME:  March optimism is being extended into April.  Repeat visitation has been strong. PENN expects another build up in revenues in July/August time frame.  
  • PREVIOUSLY:  
    • "With Columbus, I'm not spending any time worrying about where Columbus is going to end up. It's going to be fine. It's showing sequential growth. It's showing increased visitation. It's showing improvements in the slot customer base. Clearly the fact that Scioto was out first in the market with very aggressive marketing upfront was not ideal. The reality is, over the long term – and I don't mean years, I mean a few more months, I think you'll see the Columbus property really come into its own in terms of getting an appropriate level of market share."

CORP EXPENSE

  • WORSE:  PENN raised corporate overhead guidance by $11MM due to higher development and stock liability expense (related to the higher share price). If we exclude development costs of $2.5 million and liability based stock compensation charges of $3.1 million, Q1 corp expense came in at $21.6MM. For Q2-Q4 2013, there will be $3.5-4MM development expenses and $5.5MM of stock liability charges.
  • PREVIOUSLY:  "I would expect corporate overhead to come back to a more normal level, probably on a normalized basis somewhere around $80 million would be our expectations."

CAPEX

  • SAME:  Q1 $62.7MM capex ($21.8MM maintenance capex, project capex: 1/2 wrap up costs at Columbus/Toledo, $6MM on tracks, rest on Hollywood St. Louis).  2013 capex will be $94.2MM maintenance capex and $277MM project capex.
  • PREVIOUSLY:  "Looking at 2013, we're expecting $275 million of project CapEx and roughly $97.9 million worth of maintenance CapEx for next year. Looking at the first quarter, I would break that down that we expect to spend roughly $49.4 million on project CapEx in the first quarter and $27.2 million of maintenance CapEx."

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