PNK 1Q 2014 CONF CALL NOTES

04/30/14 09:01AM EDT

Soft top line but very good cost controls. Comments on April softness and apparent low enthusiasm for REIT spin were only conference call negatives vs investor expectations.

CONF CALL

  • Belterra Resort:  continue to improve facility; very competitive part of country
  • Belterra Park:  within 60 mins of Belterra Resorts
    • F&B offerings received well
  • 2 primary goals:  Revenue synergies, marketing expense discipline
  • New myChoice program:  Owner's club positive response 80%, ASCA guests positive response 86%
  • 2 St. Louis properties will be connected by loyaty card program by end of June 
  • Trip frequency continue to decline, while spend per trip increased 6% YoY
  • Bad weather impacted 1Q
  • Markets with new competition:  double digit declines in trips
  • Bossier/Southern Indiana - particularly tough environment due to competition
  • Marketing reinvestment as a % of GGR:  down 380bps YoY
    • Rightsized media spend; 
    • no more launch mode out of Baton Rouge
    • Eliminated low margin programming
  • ASCA Black Hawk:  made adjustments to reinvestment that led to 28% decline in marketing spend and 11% EBITDA improvement YoY; also implemented improved hotel yield system earlier in April 
  • St. Louis
    • River City:  all-time high revenues in March
    • ASCA St. Charles:  had benefit of entire quarter with new hotel yield system; Early results are positive with a 5% increase in RevPAR and healthy increases in hotel cash revenue.  Combined both properties increased market share by over 200 points during 1Q
  • East Chicago:  highest table game share since 2011 due to increased programming; slot share increased as well
  • Vicksburg:  Heartland Poker Tour contributed to highest table share ever at 65%
  • Impact of Winter weather on 1Q EBITDA:  $5m (most felt in Midwest)
  • South segment demand performed better than Midwest
  • Broad softness in visitation in April:  Easter holidays usually softer week.  Spring Break softness but more encouraged in the past week as business picked up.  
  • Another record cash flow quarter at Baton Rouge
  • myChoice at ASCA integration for 2014 and portion of 2015:  upfront aggregate non-recurring charge of $5m
  • Synergies:  $53m as of Q1 2014 - includes $5m cost related synergies and  $11m of cost avoidance (healthcare benefit cost); expect more synergies ahead
  • Belterra Park opening this weekend alongside Kentucky Derby
  • Revamped New Orleans hotel will open this summer
  • Paid down $260m in term loans; completely paid down term loan B1 loan; term loan B2 now under $1bn
  • REIT comments:  
    • Appreciate shareholder feedback
    • REIT idea not new idea
    • Currently focused on successful ASCA integration
    • Will evaluate ways to enhance shareholder value

Q & A

  • Corporate expense: $20m per quarter, good run rate
  • Softness in beginning of April but encouraged by launch of myChoice on ASCA side (10 days into April)
  • Have not seen increased promotional activity in Belterra market
  • ASCA legacy properties:  promotions steady
  • Marketing efforts done extremely well.  Not focused on mass market guests (promotional business)
  • NY:  not focused on specific region.  cash-on-cash return: minimum of 15% required;  will explain on 2Q CC if they decide to move forward from June 30 deadline
  • Delevering a priority
  • Level of future reinvestment:  early in the program in understanding sweet spot of where marketing reinvestment % should be 
  • Japan: not interested
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