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ISLE 4Q/FY 2010 CONF CALL NOTES

 

"While we believe the economic condition of our customers improved as the fiscal year progressed, we believe the effect of an economic recovery on the gaming business will be slow and steady. As a result, we continue to trim costs where possible, improve our marketing efforts and elevate the guest experience to improve the competitive positioning of each of our properties."

- Virginia McDowell, President and COO

GUIDANCE

  • Depreciation and amortization expense is expected to be approximately $85 million to $87 million.
  • The Company expects cash income taxes pertaining to FY 2011 operations to be less than $5 million which primarily represents state income taxes.
  • Interest expense is expected to be approximately $89 million to $92 million, net of capitalized interest.
  • Total Corporate expenses for FY 2011 are expected to be approximately $46 million including approximately $8.5 million in non-cash stock compensation expense.
  • Maintenance capital expenditures for FY 2011 are expected to be approximately $45 million to $48 million, including conversion of approximately 2,500 slot machines to the Bally's slot system technology.

CONF CALL NOTES

  • Retail sales increased sequentially in 5 of the casinos
  • Little visibility of economic recovery
  • Adjusted EPS is 24 cents/share vs. 18 cents/share in 4Q FY 2009
  • Strive to bring cash level down from $90 MM to current levels
  • 6.9x leverage ratio
  • $110MM available in credit facility before busting a covenant; 300 MM undrawn
  • $6 MM capex in 4Q 2010

Q&A

  • Tax rollback in Pompano, FL- goes down by 15%
  • $400MM swapped out debt - most expires at end of 2011 with one long-term expiring at end of 2011
  • Station auction participation?
    • No
  • Florida properties:
    • have introduced penny slots in recent years
    • will take a couple of million dollars to reinvest in marketing program - to reintroduce customers to property
  • Gaming in Texas?  Thinks nothing happens until 2011.  Racino is a more likely possibility than a full-fledged casino.
  • Ameristar Black Hawk ramping:
    • doesn't think Riveria has any impact on Ameristar
    • hotel occupancy stabilized in Black Hawk.... retail expansion have driven customers to Ameristar
  • Rainbow
    • will rebrand to Lady Luck; will cost a couple of million
  • 35% effective tax rate in Florida - could be marginally higher.
  • Like the current cash level of $68MM-- though $75 MM is normal run rate.
  • Promotion environment:
    • facing pressure in Lake Charles
    • Biloxi--highly promotional environment
    • Quad cities-- tough as well
  • Depreciation decline forecast for 2011:
    • Assets getting to end of useful life; Pompano and Waterloo assets, specifically.
  • Stock compensation in 4Q 2010: $1.7 MM
  • South Florida economy seemed to have recovered: direct competition with Sugar Creek;
    • menu changes at many of the restaurants and television campaigns driving retail sales.
    • customer confidence improving "a little"
  • Credit amendment:
    • ISLE can invest in private equity projects that can leverage management fees
  • Quarterly interest coverage:
    • How close to covenant?
      • leverage: 6.9x; covenant is 7.5x.
  • Biloxi oil spill effect?
    • Nothing yet
    • BP marketing campaign to increase tourism in gulf coast area
    • Postponed the property's biggest event-- Bill Fish Tournament--to August; if oil spill doesn't improve, may cancel this event
  • Discontinued operations?
    • A little from Europe and a little from Bahamas in FY 2010
    • In FY 2011, discontinued operations will involve a little of Blue Chip from Europe
  • Davenport license:
    • nothing substantive has occurred
    • would be compensated for losing the contract if ISLE sells its property
  • Missouri 13th license:
    • interested but need to know more details
  • Gaming visitation trends:
    • For full year, visitation increased 3%; 4Q 2010 visitation is down slightly YoY.