Gaming and Leisure Properties Inc (GLPI) 2017 Q2 法說會逐字稿

Ladies and gentlemen, greetings, and welcome to the Gaming and Leisure Properties Second Quarter 2017 Earnings Conference Call. (Operator Instructions)

It is now my pleasure to introduce your host, Hayes Croushore. Thank you. You may begin.

Thank you, Adam. Good morning, everyone. We'd like to thank you for joining us today for Gaming and Leisure Properties Second Quarter 2017 Earnings Call and Webcast. The press release distributed earlier this morning is available in the Investor Relations section on our website www.glpropinc.com.

On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

Examples of forward-looking statements include those related to revenue, operating income and financial guidance as well as non-GAAP financial measures such as FFO and AFFO.

As a reminder, forward-looking statements represent management's current estimates, and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release.

On this morning's call, we're joined by Peter Carlino, Chairman and Chief Executive Officer; and Bill Clifford, Chief Financial Officer of Gaming and Leisure Properties, Inc.; also joining are Steve Snyder, Senior Vice President of Development; Desiree Burke, Chief Accounting Officer; and Brandon Moore, Senior Vice President, General Counsel and Secretary.

And now I'd like to turn the call over to Peter. Peter?

Thanks, Hayes. Good morning, everyone. And we are pleased to present another quarter in line with our projections. Our earnings are happily tracking along with more inconsistency (sic) [consistency] until at least our next transaction. And we're pleased that the market has finally begun to recognize that consistency is reflected in the growth of our stock price. I'll say that we remain committed as always to responsible growth. And as always, we're pursuing kind of anything that's breathing and maybe actionable, but it's always about responsible development.

So with that exciting preamble, I think we pretty well covered the details that you would want in our release, but let's go directly to any questions you might have, and see if we can fill any gaps.

(Operator Instructions) Our first question comes from the line of Patrick Scholes from SunTrust.

Earlier today, Penn noted on their earnings call that they are -- it appears to be that they're actively looking at some acquisitions. I would imagine you're not completely in the dark and what's going on there. I'm wondering, if it is fair to assume that you might -- any such acquisitions be involved as well? That's the first question. Second is, any update on looking at non-gaming assets or real estate?

Let me take a whack at that and Bill and others may have some comment. No, we're not necessarily aware of anything that those folks are up to. I mean they -- and I wouldn't presume that they're going to want us in every transaction. There's certainly -- we maintain a contact with them and talk about our availability to assist them in a number of things, but they're under no obligation, of course, to work with us unless they feel like it or think they need us. So that's, I guess, the quick answer. Second question was -- oh, non-gaming.

Non-gaming, what is your most recent thoughts on that?

Yes, I mean, it's pretty much the same and maybe Steve will add something to it. As it has always been, certainly, over the last quarter, we've looked at a number of things, went out to couple of different cities and being understandably vague to look at other entertainment concepts, but nothing has even come close to the top of something that we'd be prepared to recommend to shareholders and so forth. I think, look, responsibility we have to, as I say, we kiss lots of frogs, ugly looking buggers, too, but we're still looking for the princess. We every now then you'll find one. But it's -- we're not close to anything that we recommend. Steve?

No, I wouldn't have anything to add to that conversation.

I think that kind of covers it.

(Operator Instructions)

We're not hearing. No more questions, operator?

We do -- we have one that just came in, just now. Our next question comes from the line of Dan Donlan from Ladenburg Thalmann.

So just really 2 questions from me. You were active with the ATM program this quarter. We're just kind of curious if you are kind of at the level that you want or if you'll continue to kind of issue via that facility? And just kind of curious as to what level you feel comfortable with. A lot of the net lease peers are kind of in the mid- to high 5 range, but then there is a handful that are kind of under the 5x net debt plus preferred EBITDA range. I'm just kind of curious how far you're going to take that down?

Sure. Yes, during the quarter, we issued enough equity to cover the acquisitions for The Meadows as well as the Tunica at a 5.5x leverage. Having done that and with our new normal paydown from the free cash flow that we don't distribute in dividends, we're projecting to be around 5.1x. We think that over the natural course of debt paydown and free cash flow that will get under 5x next year. And that certainly kind of our target zone. So I think our expectations is that our leverage would basically fit between the range of 5x and 5.5x. New transactions getting down at 5.5x, which would take our leverage back up over the 5x leverage level. As relative to the ATM, we don't expect to, short of a new transaction coming along, we don't expect to be issuing any more equity this year out of the ATM program. So hopefully that answers your questions. I think our target goal is, as a company, we think 5x is the optimal level. And we're prepared to take it higher for transactions back at -- take it above 5x, but 5x being kind of the target zone and that's based on some analysis we've done that shows that companies that trade at 5x and just slightly below 5x seem to have the optimal return levels in terms of expectations of being able to deliver value to shareholders. And it's a level that going below doesn't seem to have any kind of a meaningful impact on your cost of borrowing. So being in the 5x range is kind of our new stated expectation.

Okay. That's helpful. And then as we look at the balance sheet, you have quite a bit of debt coming due in 2018. So I realize that we're ways away from that. But we're just kind of curious how are you guys -- think about tackling that as they kind of continue to be -- is a 10-year paper, is it a mix of 5 and 7? One of those pieces of debt is, I think, a term loan. So just kind of curious your thoughts there and what should we expect from a timing perspective maybe in '18?

Yes, I think that we have 2 components to the debt: One is the term loan, which is comprised of what was a $300 million drawn facility and a $700 million revolver. The revolver as it stands today is undrawn. We paid -- and it's highlighted in the press release, we paid an additional $60 million of debt, which was the remaining $15 million on the revolver and the rest went towards the $300 million funded piece. It's our expectation, we're going to approach our bank probably in the fourth quarter with the goal to probably coming to an understanding resolution of how we're going to extend or redo the bank facility with sufficient capacity to be able to handle the bonds that are maturing in November of next year. Our expectation, however, is that we would issue new bonds next year, but we will have enough capacity within the revolver to be able to take care of that as the bond market should happen to go sideways on us. I think we manage our -- pretty conservative on how we think about that. So one of the things that we've talked about doing is increasing the amount of revolver to cover a $1 billion maturity that happens in '20. So obviously, again with the goal that we would not draw on the revolver, but have the insurance behind us so that should we end up in a difficult bond market, which can happen during, I mean, most recently, during the elections, the whole bond market kind of went a little bit skewed for probably, I would say, it was 4 months. We don't want to get ourselves caught in that kind of situation, and the way our bonds work, at least the next ones that are maturing is, that are due on the end date. There is not a grace period. We put a grace period in on the ones that we just issued with the -- when I say grace period, I mean that we can fund or pay down -- pay off the bonds without a penalty early with the bonds that we just issued back with the Pinnacle transaction.

(Operator Instructions) Ladies and gentlemen, it appears we have no questions in queue at this time. I'd like to turn the floor back over to management for closing comments.

Operator, thanks very much, and thank all of you for dialing in today. We realize it's a busy earnings release day, and people are wandering in other places as well. I'd like to thank that the consistency of what we're doing and what has been, I think, pretty well explained in our release is a good reason for people just to read it at their leisure. So thanks again. We'll be back next quarter. Thank you.

Thank you, ladies and gentlemen. This does conclude the teleconference for today. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.