PENN 4Q 2013 CONF CALL NOTES

Consistent with our "Regional Reversal" call, better than awful was good enough.

 

 

CONF CALL NOTES

 

  • 4Q:  Hollywood St. Louis refurb was completed right before Christmas holiday.  Property will be wellreceived in 2014.
  • 2 OH VLT slots only Racetracks:  On target for Fall 2014 opening
  • Jamul property: early 2016 opening
  • MA decision will come at end of February
  • PA Philly license decision: 2nd quarter of 2014
  • Relatively soft consumer environment, particularly at low end segment
  • Cannibalization impact:  Lawrenceburg, Charles Town
  • Weather hasn't helped
  • Rewards program:  75% properties live; majority of remaining property will be implemented in 2014 including M Resorts later in Feb 2014 
  • Focused on cost structure; additional efficiencies ahead
  • Currently, promotional environment mostly rational and stable
  • 4Q 2013 
    • Spin off MD/Baton Rouge:  less $25MM revenue and less $5 EBITDA 
    • Impairment charge also the result of spin-off
  • 3 annual dividend payments to PENN employees who hold stock options as a result of spin off

 

Q & A

  • 4Q Rent coverage: 1.8x
    • Guidance reflects lower rents
    • 80% master lease fixed, 20% variable (1/2 resets every 5 years, 1/2 predicated on OH)
  • Assume a 'conservative customer' in 2014; assume current trends in 2013 will continue into 2014
  • Dayton/Austintown:  may not be 20% ROI (Toledo/Columbus) but will be good returns
    • Margins in the high 20s or better
  • Jamul project:  $81MM (capex in 2014)- $360MM total budget; June/July will get going; spread on financing is excess of 10% of revolver financing 
  • <$100 per visit: segment accounts for 20-25% of database 
  • >$100 per visit segment also declined
  • Horseshoe Baltimore:  impact on Charles Town will be smaller than Maryland Live! opening
  • Columbus:  new signups 10,000 per month (over 300,000 in the database)
  • 75% full-time employees, down from 80% historically
  • Jamul mgmt agreement:  7 years 
  • 1Q 2014 lower costs:  payroll and marketing costs; better operational costs in Toledo and Columbus
  • Cash balance:  looking for further reduction in cash which will be used to pay down debt
  • 2014 capex:  $88MM maintenance capex (60% spend on gaming floor refurb); $176MM new project capex (does not include $81MM for Jamul)
  • 4Q: corporate expense $26.5MM; going forward, $80-85MM corp expense (inclusive of $12MM dividend payments)
  • Other forms of gambling entertainment playing no role on gaming (e.g. i-gaming)
  • Middle income customers being squeezed
  • On non-weather-related days, revenue levels are comparable with what has occurred in the past
  • St. Louis property:  appealed on property tax calculation
  • 2014 guidance is conservative
  • 4Q Toledo: net slot win was up 5%, encouraging sign; expect that property to grow since there will not be additional supply in that market
  • Columbus:  Dayton customer shared with Miami Valley; Dayton racetrack opening may slightly impact Columbus 
    • Over 90% customers are local
  • Promotional expenses ticked up in 4Q
    • Largely been in new competition markets. 
    • Will continue to bring that number down