As we prepare for PNK's Q1 earnings on Tuesday, we've put together some forward looking commentary from the Q4 conference call and subsequent investor presentations.
TRENDS & OUTLOOK
Business update from Barclay’s conference on 3/26/2010:
- “The fourth quarter to be honest for us, we thought was very disappointing. The first quarter is actually so far been pretty promising. If you look at the month of February, we had the only two boats of the state that were up on a gaming revenue basis…That I will tell you, as a whole, our markets are feeling much better today than they were even a quarter ago.”
- “Our prior marketing team, I should say, had put a lot of marketing efforts out there that really weren’t moving the needle in terms of gaming revenues, but were pretty costly in terms of what we were doing. We have since fired our head of marketing, we have a new person that’s in there right now. Pretty pleased with the results we’ve seen so far. I think on top of that, we also have a lot of cost savings, which we never really had to do a year ago, because we never really felt the effects of the recession until last quarter, and I think between both of those things, you’ll see much better margins versus the fourth quarter of last year. But as a whole, the marketing environment is much improved. The customer is starting to feel a little bit better. We are hesitant to call bottom until we have a couple more months of data under our belts, but I’ll tell you, our February numbers, we thought were pretty darn good in the face of what was a very, very difficult comp last year."
- “We are selling Argentina…. We have already taken first-round bids, for what it’s worth on Argentina.”
- “I think for Atlantic City that process is going to probably take a while. I don’t actually think we got chosen a listing agent. We were deciding between four different companies… but that’s the process that easily can take a year before you see any – before you hear any news on the sale of that land fortunately”
- “That department costs us in the ballpark of three to 3.5 million bucks a year in EBITDA. Well, some of those savings will be offset as we fly commercial a little more, so the net savings are probably in the ballpark of 2.5 million savings on the EBITDA line. And a little more than that in the EPS line because of depreciation and what-not on the plane.”“
- On River City: That property really is hitting it out of the ballpark I think.”
- “Couple of things happened to Belterra in the quarter. They had increased competition from several boats in the area, which increased the marketing costs in order to -- they increased marketing costs in order to offset that increased competition,that was number one. Number two, they did increase marketing cost perhaps to a level that they should not have, realizing that after, of course, after having spent the money. It all comes down…to spending marketing dollars in an efficient manner. And that's what we're trying to focus on here… So we're focusing on those process -- we have for the last two months, focused on those processes. We're in the process of implementing them right now and hopefully, we'll see some results.”
- “The theme that John has mentioned here, it goes throughout not just at Belterra, but at other places as well. We actually spent, in absolute dollars, more money in marketing even though revenues were down. So as a result, all that falls down to the bottom line and hence, the variation that you saw in the quarter.”
Q4 CC and Earnings Release
- “We think River City should prove to be one of our most impressive and profitable casinos. “
- “Regarding corporate expense, you mentioned at the outset of the call that there was $5 million [charge] included in corporate expense this quarter, excluding that, it was $9.1 million. Is that a good run rate? And how will that change with the opening of River City?
- “That is not a good run rate for us on the corporate expenses. I would hope that our corporate expenses will be down. I can't give you what a corporate run rate would be. But with the actions that we've been taking, we should be down now. This first quarter may not be down because there'll be some expenses in there that we have not been able to eliminate during the first quarter… River City should not impact our corporate run rate at all.
- Capex for 2010: “typical 35-ish or so maintenance, potentially up to 40 of maintenance, a couple of other minor expansion projects from property to property, completion of River City, of course, and pursuit of the other two big ones.”
- Baton Rouge update from Barclay’s conference on 3/26/2010:
- “Construction process tends to be relatively light-spend at the beginning…you can go a full year without spending much more than 25 or 50 million bucks on any construction project, given that … you’re literally just getting a foundation out of the ground.”
- “In theory be open up – be open sometime in that first half of 2012.”
- “What we’ve been hearing from people is that the two existing boats are of such shoddy quality over in Baton Rouge that people in that town purposely go an hour and a half or two hours out of their way to Biloxi to go and gamble. And I think if you were to go and open up a quality facility in that town we would hopefully get a lot of those people to actually stay in town. We do have a great location.
From Q4 Earnings Release and Conference Call
- “We are concentrating on operating efficiency and in particular, effective marketing. We're restructuring our corporate and property marketing. Corporate marketing will focus on strategy and analytics. Property marketing will concentrate on strategy, customer relations and execution.”
- “We hired two highly-experienced general managers, one of whom was GM at Mandalay Bay, which, like Lumiere Place, features a Four Seasons Hotel. We're consolidating our three Las Vegas corporate offices into one. We've reduced our corporate staff and continuing to reduce staffing levels throughout the company. We've instituted a new compensation program that rewards executives for increasing long-term cash flow, as well as EBITDA.”
- “Chief Operating Officer, as well as others in the company, are devoting a lot of attention, particularly to the marketing, which represents a pretty large percentage of our total costs.”
- “Couple of things happened to Belterra in the quarter. They had increased competition from several boats in the area, which increased the marketing costs in order to -- they increased marketing costs in order to offset that increased competition,that was number one. Number two, they did increase marketing cost perhaps to a level that they should not have, realizing that after, of course, after having spent the money. It all comes down, Felicia, to spending marketing dollars in an efficient manner. And that's what we're trying to focus on here, efficiency on what you're attempting to do and efficiency later on the analysis of what you did do and how you can do it better in the future.”
- “Are seeing somewhat of a shift in the corporate strategy toward more of an operating focus or an asset-efficiency focus, while pursuing a couple of growth projects that you have left. Is that a context in which we should think about your CEO search as thinking about more of an operating guy than a development guy?”
- “The answer to that is yes.”