PNK 4Q 2013 REPORT CARD

In an effort to evaluate performance, we compare how the quarter measured up to previous management commentary and guidance

OVERALL:  BETTER - Certainly not better than consensus back in October when PNK reported Q3, Q4 margins were strong in the face of a difficult GGR environment.  EBITDA actually beat reduced Street margins and in-line with our recent Regional Reversal thesis, the bad was more than reflected in the stock.

PNK 4Q 2013 REPORT CARD - nk

REGIONAL TRENDS

  • MIXED:  January was a very tough month.  Negative impact on EBITDA could exceed more than the $2MM in December.  However, February is off to a better start.  Trip frequency continues to decline with spend patterns stable.  <$100 segment hit particularly hard.
  • PREVIOUSLY:  There is undoubtedly some headwinds regionally.

L'AUBERGE LAKE CHARLES

  • BETTER:  This property continues to set new EBITDA records due primarily to strong margins. Top line was also strong.
  • PREVIOUSLY:  "We experienced a very strong quarter at our L'Auberge Lake Charles property where all time records were set in cable drop, cable revenue and retail revenue. We completed the renovation of our standard hotel rooms and have received very favorable guest feedback."

RIVER CITY

  • BETTER:  230bps improvement in market share.  Cash revenue was up 15% and F&B was up 32% in Q4.
  • PREVIOUSLY:  "River City is significantly outperforming the market. Our new hotel opened on August 28, completing an $82 million project that included an event center and 1,600-space parking garage. Early results have been encouraging with guests who have stayed in the hotel showing a 37% increase when compared to prior to the hotel opening."

BELTERRA PARK

  • SAME:   Belterra Park's construction budget remains $209 million, and is scheduled to open on May 1, 2014 pending required regulatory approvals.
  • PREVIOUSLY:  "We are looking forward to the opening of our newest property, Belterra Park, in May of next year."

L'AUBERGE BATON ROUGE

  • BETTER:  Market share increased 420bps from prior year and set a new EBITDA record.  There was strong local and regional play. PNK reduced marketing spend at the property and achieved 2nd highest REVPAR.
  • PREVIOUSLY:  "L'Auberge Baton Rouge continues to be a very good story, growing the market while achieving the highest market share since opening at 53.4% in the third quarter. We are seeing the momentum of strong trial continue with over 17,000 new mychoice members visiting the property for the first time in the third quarter. Hotel demand remains high with the property now producing the second highest RevPAR in the combined company. EBITDA margins also are improving as we cycled our first year anniversary in September."

ASCA SYNERGIES

  • SAME:  $26MM of synergies realized at the end of 2014.  Revenue synergies are expected in 1H 2014.  PNK expects to reach $40MM in total synergies by 1Q.
  • PREVIOUSLY:  "Over the course of the first 49 days of the integration, we have implemented synergies that will provide savings throughout our company in excess of $20 million per year. These implemented synergies fall into three categories: public company cost, labor and scale efficiencies.
  • Every day, we continue to make progress and feel very confident on our ability to execute to meaningfully exceed our public target of $40 million in synergies to be implemented by the end of next year.
  • We will be able to achieve that (rest of $20MM) without any revenue. And we will exceed it without any revenue.
  • There is revenue opportunity for the combined company. I mentioned a few, but I'll just elaborate on them, one being the hotel yield automated system. Currently, Ameristar does not have a sophisticated hotel yield system. A second opportunity will be the combining and the unveiling of a new loyalty program in the spring of next year. One other item that I would add to the revenue mix is legacy Pinnacle has an established national casino marketing infrastructure that includes branch offices in key cities like Chicago, Dallas, Houston and others as well as a pretty expansive network of independent reps. We're now going to take that same infrastructure and leverage it across the Ameristar portfolio."