ISLE F3Q 2014 CONF CALL NOTES

Still have time to blame the weather but cost cutting is a positive step

CONF CALL

  • One of most brutal weather years ever
  • Weakness in December moved into January
  • Improved EBITDA margins at half of the portfolio
  • Davenport sale:  $12m reversal in tax provision
  • 6.6x leverage ratio

Q & A

  • February trends: same as Jan
  • Upper end of customer database: trends remain ok
  • Retail spending in FQ3: -3%, consistent with previous Qs
  • Pompano: better results due to more favorable racing schedule, poker room doing well; looking at opportunities for expansion; net of promotional, higher in every customer segment; retail play down a little bit; some pressure from opening of Dania Jai Alai.
  • MS: revenue battle ongoing; impact on new competitor in Natchez; competition from Arkansas
  • Bettendorf: down in-line with the Quad City market
  • Promotional environment: MS esp Vicksburg aggressive in free-play (ISLE market share up)
  • Cape Girardeau: ramp was slower; taking out labor/food costs to match with lower volumes
  • Firm sale? No comment on rumors.
  • Potential to go land-based in Bettendorf
  • MO, IA, CO:  most impacted by weather
  • 135% increase in # of days impacted by weather
  • In markets not impacted by weather, revenue trends flat or a % of points lower
  • Golden Nugget Q4 opening in Lake Charles: as much as 70% supply increase to market.  Will be a battle
  • Higher promotions line: promotions up in Cape Girardeau due to comps, also in Nemacolin; but advertising $$ lower
  • Philly license will be awarded in April   
  • How to get out of negative EBITDA in Nemacolin: revenue decline based on seasonality; PA market tough; trying to mitigate $10 entry fee; cut wages; repaired games 
    • In dialogue with govt to see if entry fee can be eliminated
  • Cash equivalents:  A1, P1 paper or better
  • Cage cash: $40-50MM
  • Lake Charles: employment relatively stable 
  • May have flooding concerns as winter ends
  • Nemacolin: Pay $150k rent,  pay a % fee if revenue > $35MM
  • Apart from Bettendorf project, primary focus is on delevering
  • Maintenance capex run rate: $40-50MM (closer to $40s)
  • D&A run rate:  $80-85MM