• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.



"The fourth quarter was a tough one for us, and we're disappointed.  While the first half of the year was solid, the continuing deterioration of the economy resulted in less visitation and lower play per customer. We started to feel the economic downturn in late summer and we increased our marketing efforts. As a result, we maintained or increased market share in many of our larger markets, but our margins declined."

- John Giovenco, Pinnacle Entertainment's interim chief executive officer

Highlights from the Release

  • "As we enter 2010, we are focused on our commitment to increasing shareholder value. We're concentrating on operating efficiency and, in particular, effective marketing. We're evaluating our underperforming and non-strategic assets; reducing corporate overhead costs; taking a disciplined approach to capital spending; and developing Sugarcane Bay and Baton Rouge in Louisiana."
  • "To achieve these goals, we redesigned both our Sugarcane Bay and Baton Rouge projects, resulting in a reduction of more than $100 million in Sugarcane Bay's cash construction costs; restructured corporate and property marketing to result in a significant net reduction in headcount; subsequent to year-end decided to put our Atlantic City assets up for sale; listed the company airplane for sale; hired two highly experienced general managers for Boomtown New Orleans and Lumiere Place; moved to consolidate our three Las Vegas offices into one; reduced corporate overhead; and plan to institute a new compensation program that rewards executives for increasing long-term cash flow and EBITDA. We believe these actions will improve operating results."
  • "Separately, the board has engaged the international recruiting firm Heidrick & Struggles to help conduct the search for a new executive to succeed Pinnacle's former chief executive officer... The search is well underway, and we will announce a resolution at the appropriate time."
  • "Banc of America Securities LLC and J.P. Morgan Securities, Inc. have been selected as Joint Lead Arrangers for this new credit facility, which has a maturity date of March 31, 2014. Commitments from banking institutions toward the new credit facility have been received in the amount of $375 million. The Company expects that the new credit facility will close in the next few business days."
  • Property specific commentary:
    • "L'Auberge du Lac's market share improved to 52.6% in the period from 50.2% in the prior-year period. While the overall regional economy was softer in the 2009 fourth quarter compared to the 2008 period, unemployment statistics remain more favorable in this region than the nation as a whole."
    • "Market share at Lumiere Place climbed from 17.1% in the 2008 fourth quarter to 20.5% in the 2009 period."
    • "Boomtown New Orleans was affected by market softness as reduced Katrina relief efforts and related spending, reduced construction activity, reduced discretionary income, and weaker economic conditions have dampened operating results throughout the region. As such, marketing efforts by the competition have increased dramatically. The Property's increased marketing programs did not produce intended results"
    • "These results reflect the opening of expanded and enhanced casinos at two competing facilities, as well as softer general economic conditions. As a result of competitive pressures in the market, 2009 fourth quarter results at Belterra reflect increased marketing spend to compete against the augmented competition."
    • "We were able to maintain market share; however, revenues in the Bossier City/Shreveport market were down 13% for the fourth quarter of 2009 compared to the prior-year period."
    • "Boomtown Reno has been affected by significant competition from northern California Native American casinos, as well as weak economic conditions in both the region and northern California. Employee headcount as of December 31, 2009 has decreased 11% from December 31, 2008. The Company has targeted additional areas at Boomtown Reno to further reduce costs in 2010."
    • "Revenues have decreased due to a recent decline in the value of the Argentine peso, as well as weakness in the Argentine economy. The decrease in Adjusted EBITDA reflects the currency decline and inflation of certain costs, principally payroll costs."


  • Other properties start to feel the pressure of the recession at the end of the 3rd quarter and in response they increased marketing. So they had a double hit to earnings, lower revenues and higher marketing
  • Attacking costs at the corporate and property level, continuing to reduce headcount throughout the company
  • Recently the board separated the roles of Chairman and CEO.  The committee is currently interviewing CEO candidates


  • How much costs can they take out of corporate and property level expenses?
    • More of a question on can marketing become more efficient.  So costs will get reduced as a function of increasing efficiency (marketing is the largest cost opportunity)
  • Pricing on bank facility will be at L + 400 bps based on current leverage levels, may close today or Monday. No LIBOR floor (now its 23bps).  Intention is to close the facility at $375MM in size. Covenants in new deal will be more "accomodative" to their current operating plans
  • Spent $75MM on cash capex in 4Q09, $57MM was River City. $9MM on Sugarcane & Baton, rest was maintenance
  • 2009 cash spend $213MM, $157 on RC, $15MM Sugarcane Bay & Baton Rouge
  • Belterra: What happened there? What are they doing to improve things, given that the competitive environment isn't going to change?
    • Had increased competition with several boats (Lawrenceburg) in the area and increased marketing costs in response - to a level that they shouldn't have
    • It all comes down to spending marketing dollars in an effective way, have been focused on implementing those processes over the last two months and will see some results
  • How to think about cannibalization from River City on Lumiere Place?
    • View those two properties as a singular portfolio.  Don't worry about the cannibalization, but rather how much they can do as a whole.
  • AC: hope to sell it as soon as a reasonable bid comes in. They just put it up for sale
  • CEO search has been narrowed to a smaller group of people including some internal people
  • Why move forward in Baton Rouge, given how under pressure that market has been?
    • Feel like they have a locational and product advantage
    • Economic pressures are likely to be short term in nature and by the time they open there should be a different environment
  • The R/C will not entirely complete their financing needs, but it is a large part of it. Still need some capital which they will get to on an opportunistic basis
    • Sugarcane is not quite fully financed at this point either (self imposed liquidity needs)
  • Impact of low hold on L'Auberge? $1.5MM
  • River City opening will not impact corporate overhead
  • New CEO will be more of an operating than a development guy/or gal
  • Total capex spend for 2010: $35-40MM of maintenance, completion of RC + Sugarcane & Baton Rouge and some smaller projects
  • Are they going to move the corporate office closer to their operations? No, they already have leases in place, and would need to relocate everyone
  • Why haven't they hired investment bankers to pursue strategic opportunities
    • Think they can do a better job operating their assets and thereby grow their share price
  • Free play in Indiana?
    • Monitoring it, but no idea of the chances
    • Tables games at Betteroff would have a negative impact on them
  • Have until March 31 to submit a construction contract for Baton Rouge and have no intentions to extend that deadline
  • Bossier City, what to they attribute their success to in that market?
    • Have good efficient marketing
  • Try to keep the Sr. Secured leverage low
  •  No more room on the Sugarcane budget