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PENN Q1 2014 - EARNINGS PREP

Consensus estimates, management guidance and commentary, and questions for management in preparation for the earnings release/call tomorrow.

1Q14 CONSENSUS ESTIMATES

  • Revenues: $646 million
  • EBITDA:  $71 million
  • EPS: $0.04

MANAGEMENT GUIDANCE

PENN Q1 2014 - EARNINGS PREP - penn1

QUESTIONS FOR MANAGEMENT

  • Are spending trends improving in April among the different tiered customers?
  • How much of the weakness is macro related versus demographics? i.e. only baby boomers playing slots.
  • New obstacles in Jamul deal?
  • Sioux City as discontinued ops?
  • Is the promotional environment still rational despite horrible GGR trends in Q1?
  • Lower budget for refresh of casino (slot) floors? 
  • Outlook on Toledo/Columbus before and after more racinos come into the market
  • Outline the New York opportunity

RECENT MANAGEMENT COMMENTARY

Dayton/Austintown: 

  • Fall 2014 opening
  • Opening up with 1,000 in Dayton and about 850 in Austintown and be able to grow beyond that as demand warrants.
  • Still looking at margins in those two racinos in the high 20%s or better.

Jamul:

  • Early 2016 opening

Philly: 

  • Expect a decision in 2Q

Consumer trends:

  • Relatively soft and cautious consumer environment, particularly at the lower end worth statements of our rated database, those who typically spend a $100 or less per gaming visit.

Promotional environment:

  • Promotional environments remain mostly rational in our competitive markets

Plainridge:

  • Feel comfortable with a 20% stabilized ROI
  • (03/14/14) broke ground on the property

New Competitors:

  • Starting in Charles Town, clearly the opening of Horseshoe Baltimore in the August-September time period will have far less effect from what PENN saw with Maryland Live opening up in 2012 and then adding table games in 2013. 
  • Similarly in Lawrenceburg, the Horseshoe Cincinnati effect on Lawrenceburg will certainly have a much greater effect on the Miami Valley opening, which occurred about a little less than two months ago, and a less of effect of what's going to happen with River Downs or Belterra Park opening up. 

Cost efficiencies:

  • There are still some additional operating efficiencies out there to pursue...That includes, obviously, payroll. We still have approximately 25% of our labor costs remain variable, so there's opportunities there. 
  • [Marketing] tend to be very disciplined.

Capex:

  • Capex budget for 2014 includes maintenance CapEx of about $88 million.  Continue the historic spend of about 60% of that on gaming floor refreshment and the project CapEx for new projects is $176 million for the year.

Toledo/Columbus:

  • Expect Toledo to grow because PENN don't really have any other supply affecting that business as they go into the balance of 2014 into 2015.

  • (Columbus) there's going to be an effect of the opening of our Dayton operation later this year and the recent opening of the Miami Valley on the Dayton customer.So that's going to have some dampening effect on Columbus as PENN absorb that supply.