PENN: Q4 CONFERENCE CALL NOTES

Takeaway: Strong Q4 bolstered by more than weather. In line Q1 guidance looks very conservative. Release of state Jan/Feb revs should be catalysts

Prepared Commentary

  • Very pleased with 2 new racinos in OH - performing in line with expectations
  • Results exceeded guidance - weather helped
  • Continued focus on delivering improved bottom line results
  • Employee satisfaction scores performing very well
  • Plainridge - 1,250 slots.  on budget and on schedule
  • Jamul on track for mid 2016
  • No new supply entering PENN markets in 2015
  • Optimistic about 2015
  • December was robust: better macro, lower gas prices, easy weather comparison
  • Spend per visit and visitation up - all segments
  • New Zia Park hotel performing well - did see slowdown in December and January due to energy economy
  • Q1:  better weather in January should lead to strong month.  Feb/Mar should be a better indicator of YoY performance
  • Promotional environment remains stable
  • 2015 guidance assumes continued improvement in consumer confidence, lower unemployment, unstable gas prices
  • 5% EBITDAR increase expected with slight decline in EBITDAR margin

Q & A

Sequential margin and EBITDA trends

  • Margin Trends:  consistent YoY and sequentially with the exception of the Ohio racinos which should decline as WPD moderates
  • Seasonality explains the sequential increase in EBITDA
  • Building in some lost table share from new MD casino

Jamul

  • No further obligations 
  • will look to do some interim stage financing before the opening

Rent Expense

  • increase of $13m in 2015 due to Columbus of $3m, OH tracks $13m, offset by Sioux City of $4m
  • No additional rent from MA or CA
  • rent escalation kicked in November 1st

Ohio Racinos

  • still expecting growth
  • happy with margins

Consumer Trends

  • Used the term choppy because December was terrific but November was a mixed bag
  • January looking like December but weather impacted so don't want to say anything more than choppy - Feb/Mar will be telling
  • Can't determine what % of Dec/Jan is due to better consumer but it's definitely something

Energy impact

  • isolated to New Mexico
  • no impact yet on PA, OH, WV and don't anticipate seeing anything
  • No softness in LA or MS

What drove positive Q4 variance from guidance

  • broad based
  • even M Resorts
  • October was good too, November not so much

2015 Guidance

  • projecting slight decline same store revs for mature market properties

Illinois

  • will continue to fight gaming expansion bills

Acquisitions

  • will continue to look at strategic acquisitions
  • still looking at Las Vegas
  • they're at the right leverage (6x including rent) but would go higher for the right opportunity

Slots

  • no change is slot capex or strategy

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