PNK Q1 2014 - EARNINGS PREP

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

 

 

1Q14 CONSENSUS

  • EBITDA:  $151 million
  • Revenues: $548 million
  • EPS: $0.41

QUESTIONS FOR MANAGEMENT

  • Q2 trends relative to weather adjusted Q1.
  • What are the important macro variables contributing to regional gaming weakness?
  • How much of an impact is demographics playing in the soft trends? 
  • Breakdown of weakness across casino segments.
  • Have you been able to quantify the impact of the rewards sharing program with MGM?
  • What is causing the recent weakness in Louisiana?
  • Competitive environment for Belterra Park
  • Additional comments on Orange Capital's REIT push
  • What can be done to revive the lower spending segments?
  • Progress on Ameristar synergies
  • Update on Vietnam - hidden asset?

 

RECENT MANAGEMENT COMMENTARY

Integration revenue synergies:

  • Have moved quickly to put the infrastructure in place so that we can begin to realize revenue synergies during the first half of 2014.

Business Trends:

  • Similar to 2013, trip frequencies continued to decline with people visiting less often, while spend patterns have remained relatively stable.  Trip declines are particularly pronounced in the less than $100 average daily theoretical segment and end markets with new competition.

Marketing Spend:

  • Continue to be very focused on driving profitable revenue and applying a rational approach to marketing spend. Reinvestment declined both in terms of dollars and as a percentage of gaming revenue, down 240 basis points year-over-year.

L'Auberge Baton Rouge:

  • Market share increased 420 basis points from prior year with healthy growth from both the local and regional play
  • Hotel also continues to be a very good story with this property achieving the second highest RevPAR in the company.

River City:

  • Continues to outperform the market with a 230 basis point improvement in market share during the fourth quarter.

Midwest:

  • Performed pretty well in the face of a challenging environment, as our margins in the Midwest also improved despite a 4% decrease in net revenues.

Synergies

  • Feel very confident in ability to meaningfully exceed the target of $40 million of annualized merger synergies.  In fact, PNK expects to exceed this $40 million number of implemented synergies by the end of 1Q 2014, with more to come. 
  • The loyalty program will launch in April, so haven't seen any impact at the Ameristar properties along those lines. VIP marketing, house coding our branch offices, all of those efforts are very early in the execution stage. Some are still in the planning stage, but we are beginning to execute most of our revenue synergies in the first and second quarter of this year.

New Orleans hotel:

  • The project remains on budget and is expected to open early summer.

<$100 segment:

  • Decline in the less than $100 segment was driven in part by the elimination of unprofitable programming that PNK had in place in Q4 2012.  And some was driven, as you've seen across our sector just by macroeconomic issues that are affecting the lower risk segments in our business.

Database integration spend:

  • Expect this year to have roughly about $10 million or so that will be spent on that in 2014. It'll be largely done by the end of this year.

Non-operating guidance:

  • Corp expense:  continue to trend down towards $20m
  • D&A:  The real operating number should end up being in the mid-50s or so, with this player list depreciation putting it in the call it $60 million to $65 million.
  • Cash taxes:  $10m