PNK 2Q2010 CONF CALL NOTES

Solid quarter and secular margin thesis remains intact. Management says all the right things on the conference call. Here are our notes.

 

 

"Year-over-year improvements in second quarter total revenues and Consolidated Adjusted EBITDA reflect a full quarter's contribution from River City and initial benefits of a strategy focused on achieving company-wide operating excellence and best-in-market guest experiences. Our teams are already achieving success with multiple initiatives, which helped drive higher Adjusted EBITDA margins in five of our six markets."

- Anthony Sanfilippo, president and chief executive officer

 

 

CONF CALL NOTES

  • Less interested in masses and more interested in "profitable customers."
  • The margin improvement that they saw this quarter is just the beginning of their efficiency efforts. Want to get to a level where they balance great guest service and efficiency.
  • Removing non-value added assets
  • Focused on maximizing free cash flow
  • They are exploring future potential growth opportunities
  • They have not seen any impact from the oil spill in the Gulf
  • They are refining their design in Baton Rouge. Will have a very high quality casino in that location.  Believes that a lot of customers in the Baton Rouge area don't game there because there are no "attractive" facilities there. Even if TX legalizes gaming they don't believe that Baton Rouge would be impacted.
  • Look at Texas as a potential gaming market - if it does develop, they would want to be there.
  • Food and beverage is margins are going to improve going forward and will be more consistent with higher volume.
  • They overstaffed in River City and had a worker's comp claim there too. Will be fixed over the next quarter or 2. 
  • Have over $500MM of liquidity at the company today
  • Maintenance capex was $10MM in the quarter and $22MM for the first 6 months
  • Atlantic City - engaged a broker to sell the site.  Pleased to see that some land traded in AC (MGM land). Hopeful that they will be able to sell the land within a quarter or two.
  • Ramp up in St. Louis will take them 2-3 quarters. They aren't interested in unprofitable revenues
  • They are taking a close look at their properties to see if they have the right mix of products on their floor
    • This should be good for new slot orders

Q&A

  • Which properties have the most margin upside?
    • All of them have room for improvement
    • Belterra: they continue to have new and expanded competition all around them. Trying to figure out who the right customer for that facility is. 
    • New Orleans: Have a new GM there. Very focused on the West Bank. Struggle with the second floor of that facility which customers don't want to access - so they are trying to improve the first floor.
    • Reno: finally turned a profit
    • Looking at taking cost out of corporate that get allocated to the properties
    • Thinks that the largest opportunity is at L'Auberge
  • How overstaffed was River City (RC) and what was unusual in the quarter?
    • They are down a few hundred people from when they first opened
    • They haven't been aggressively marketing, although their competitors have been
    • They are putting the parking garage on hold. They are looking to added a covered parking valet area before winter hits.
    • They are focused on putting together a focused marketing strategy
  • They are rebuilding their IT database; they are looking at all of the systems/ processes/ reward process.  They are at very early stages. Do think that the new systems will allow them to make better marketing decisions. They currently don't have a CRM system.
  • Any other AC land transactions recently, aside from MGM?
    • No. They recognize that they there will be a material discount to what they purchased the land for.
    • They will be taking a capital loss to use for later 
  • Tax rate going forward? maybe 10% or less
  • Corporate expense going forward - should roughly be inline with 1Q2010

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more