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