PNK 2Q 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:  The bottom line missed expectations but hold played a material role.  With the stock down 9% into the print and the quarter better than bad, a strong feeling of relief has emerged.  PNK did exclude a whopping $17.2 million in one-time charges which seems excessive.

LAKE CHARLES

  • SAME:  In the 1st half of 2Q, they completed 1st phase of room renovation (5% of rooms available).  2nd phase of renovation will begin in Fall 2013.
  • PREVIOUSLY:  "In Lake Charles, we've been performing an extensive room renovation program with approximately 16% of year-over-year room nights out of service. This is particularly impactful on our weekends. The good news is our newly refurbished guestrooms are terrific, and our guests love what we are doing." 

ST. LOUIS

  • BETTER:  Margins and revenues were above reduced expectations.  Construction disruption was lower than expected.  Both properties continue to be cost contained.  River City hotel remain on track to open by Labor Day.
  • PREVIOUSLY:  "In St. Louis, we are on the homestretch of our $82 million expansion....We continue to look for ways to grow the market by leveraging our existing assets, such as the Four Seasons, where we increased casino guestroom utilization by 43% over prior year. And we await the completion of new assets with the Event Center at River City opening in June and the hotel coming online in late September."

BELTERRA

  • SAME:  We believe low table hold impacted EBITDA by $1MM.  Even in a heightened promotional environment, the property has been pretty disciplined in costs.
  • PREVIOUSLY:  "In Belterra, we believe we have the right strategy in place to maximize our position in a market that continues to experience increasing gaming options. We remain focused on differentiating Belterra with its resort destination positioning and have recently completed an extensive buffet remodel, are in the process of building a new Stadium Sports Bar and we'll undertake a hotel renovation project this year."

CONSUMER TRENDS

  • SAME:  Spend per visit remain at historical levels while trips declined.  However, July is shaping up to be better than 2Q, although weaker than earlier in the year.
  • PREVIOUSLY:  "In terms of guest behavior, in January and February, we saw that trips declined at a greater rate than spend per trip. Meaning people came less often, but their spend was pretty much in line with historical play levels. In March and then into April, both trips and spend patterns came back close to prior-year levels."

L'AUBERGE BATON ROUGE

  • SAME:  Adjusted EBITDA margin was 15.7% vs 13.9% QoQ.  Repeat visitation was 55%.  Hotel occupancy continued to be in the high 90s.
  • PREVIOUSLY:  
    • "Guest acquisition continues to be very strong with over 27,000 people visiting the property for the first time during the quarter. Repeat visitation is also very strong, with over 50% of those who have visited returning for a second trip. The hotel continues to be a good story, with occupancy now over 90% and RevPAR increasing over 30% since opening.  We're very pleased in the progress made by L'Auberge, Baton Rouge over the quarter and are confident of the ramp-up of that facility as we continue to go through the rest of the year."
    • "You should continue to see improved operating margins there as time goes on. As long as we continue to build the revenue we'll have corresponding margins with that revenue."

COLUMBUS IMPACT

  • BETTER:  Ohio competition on Belterra continues to affect visitation but impact from Horseshoe has been less than expected. 
  • PREVIOUSLY:  "We continue to see the impact of new competition in Columbus, affecting visitation. In terms of the Horseshoe Cincinnati opening in March, it's still too early to quantify but thus far the impact has been muted."

RIVER DOWNS

  • SAME:  will open 2Q 2014; plan for 1,600 terminals
  • PREVIOUSLY:  
    • "On River Downs, demolition of our grandstand and the other older facilities is complete and we have begun construction of the new facilities with a scheduled opening in the second quarter of 2014."
    • "The heavy spending will start going into the third quarter in reality. And really the fourth and first quarter will be the bulk of it, the fourth quarter of this year and the first quarter of next year with the property opening in the second quarter of 2014."

AC LAND SALE

  • SAME:  Transaction is expected to close by the end of 3Q 2013
  • PREVIOUSLY:  "It relates to the NOL being created, yes, that will happen as soon as the transaction gets consummated. And our expectations are that that will happen in the third quarter of this year."

LEVERAGE

  • SAME:  Proceeds from Lake Charles will be used to pay down debt - lowering the leverage ratio 
  • PREVIOUSLY:  "We think that we will be able to de-lever pretty quickly. Not only will we, following capital expenditures both in Lake Charles and River Downs, will we have cash flow to actually pay down debt. But obviously those -- our cash flow base is growing, both by virtue of Baton Rouge maturing as well as River Downs and Lake Charles adding to that base. So we have talked publicly about our targets between 3.5 and 5 times of leverage. We think that we will get there relatively quickly at a faster pace than would be normal because of the dynamics that I just talked about. And really our goal is to get to 4 times or lower within a few years."

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