PENN 1Q2010 YOUTUBE

In preparation for the PENN Q2 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from the company’s Q1 earnings release/call and subsequent conferences

 

 

Q1 Conference Call

  • “The one area the country that we're seeing the most softness is in Southern Mississippi and Southern Louisiana. And it was a year ago in the first quarter in '09, it was one of the stronger markets we had. So we think it's got a bit of a lag effect and we have not seen any material signs of recovery from what's being reported by the state so far. And in addition, the level of promotional activity especially in Southern Mississippi remains -- is probably the one market in the United States or markets in the United States that continues to show the most softness.” 
  • “There's clearly a little bit of little better margins reflected in the rest of the year but also reflecting that as we get a little more cost conscious on our marketing programs some of those -- we're going to have some negative impact on our revenue as we pull out from possible customers... So I think what you're seeing is slightly improved margins for the rest of the year, but I wouldn't say that we meaningfully moved our EBITDA guidance at the end of the day.” 
  • “We're seeing…customers coming but their spend per visit has been down and that's been a trend now for about three or four quarters. So we've gone back in our businesses and looked at on a customer-by-customer basis the profitability we have against these customers given our past marketing practices and in certain segments of our business, certain groups of customers were spending less. We're redefining the terms of what they're going to get in terms of their rewards and incentives, and pulling back to make them more profitable for us to continue the relationship going forward, and it's really just as simple as that. Going in program by program down to the customer level and determining what margins we want to operate these programs against, and then making tough decisions on customers, where they got an offer before they're going to get either a lower offer or no offer going forward. And that's what you saw in the first quarter and that's what we're working on as we continue into the second quarter and the balance of the year.”
  • “Second quarter we're projecting about $1.8 million in cap interest and then $7.1 million for the year.”
  • Q: “And then corporate overhead, it's ran, what $16 million or so in the quarter? Is that a decent run rate?”
    • A:  We're projecting a little higher than that. We're on a normalized run rate looking at probably about $58 million for the year.” 
  • “We're going to certainly have some increased marketing spends in advertising and creating awareness of these two properties that table games is now being offered. For West Virginia, we're expecting sometime in July to get up and running. So probably in June, July and maybe partially in August and then it will start to burn off after that. At Penn National, probably it's going to be later in the third quarter, we're anticipating. So it would probably a third quarter kind of effort to create the awareness that table games is there as well. And then once the awareness is created and we start driving the trial, then you'll see the pullback of those advertising efforts.”
  • “Second quarter, we're projecting project CapEx of roughly $85.7 million and maintenance CapEx of $23.6 million. For the year, these numbers are highly dependent on -- or expect the inclusion of paying $100 million in license fees for Columbus and Toledo. We're looking at project CapEx for the year of roughly $439.8 million, maintenance CapEx is now looking closer to $94 million for a total of $533.8 million.”

 

Post Earnings Conference Commentary

  • “In terms of visitation we’re flat across most of our properties and it’s been flat for a long time, actually in the gaming industry in general and at our properties specifically. Where we’ve seen the decline obviously is in the spend per visit, that was down pretty significantly in ‘09….I think that sort of portfolio-wide, it’s steady as she goes and I think April and May have been sort of the same as what we’ve seen in the first quarter as well.” 
  • “I think on the Gulf Coast, we’ve seen a little bit of weakness there primarily because of the lagged effect of the hurricanes in 2005, there was obviously a big boom period there in that part of  the country and that’s starting to obviously recede now and so that’s sort of what we’re seeing there. On the other hand, there are some markets that are doing pretty well, primarily due to capital that we put into those properties, I’m thinking primarily of Lawrenceburg and Penn National.” 

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