PENN Entertainment Inc (PENN) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Argosy Gaming Company First Quarter Results Conference Call. At this time, I would like to introduce Erin Williams, Vice President and Treasurer, who will introduce the other speakers. Thank you, Ms. Williams. You may begin your conference.

Thank you, Operator. Good morning, everyone, and thank you for joining us. With me today are Dick Glasier, our President and CEO, and Dale Black, Senior Vice President and Chief Financial Officer.

Before I turn the call over to Dick, I need to remind everyone that we will be making some forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by or comments today. These include but are not limited to, uncertainties regarding regulatory approvals of the proposed transaction with Penn National Gaming, competitive and general economic conditions in the markets in which we operate, construction delays related to our capital expansions projects, the effects of future legislation or regulatory changes on the Company's operations, as well as other risks and uncertainties detailed from time to time in our SEC filings.

The information in this call related to forward-looking statements may be relied upon subject to previous Safe Harbor statements as of today and may be continued to be used while this call remains active in the portion of our website. We undertake no obligations to publicly update any of our forward-looking statements that we will be making today, whether as a result of new information, future events or otherwise.

And with that, I'd like to turn the call over to Dick.

Good morning. Net income for the first quarter was $21m, $0.71 a share. Last year, we reported $0.13 a share in the first quarter, but in the first quarter of '04, there was a refinancing charge of $0.50. Excluding special charges on an apples-to-apples basis, specifically looking at EBITDA, this quarter is up about 6 percent over last year. Dale will have more details on the operating results.

I'd just like to make a few other comments. We have 2 expansion projects that are underway. Many of you will recall that about a little over a year ago, we opened up the Kansas City expanded casino. The results of that were terrific last year and we're now into the second phase of an expansion in Kansas City that includes a new garage, as well as a 250-room hotel. The garage is well underway and we'll be starting on the hotel project next month.

We've also announced in Lawrenceburg, which is serving the Cincinnati market, an expansion there. We have been working through the approval processes with the various different regulators. We plan to build a single-level casino. Initially, it will handle at least 4,000 gaming units. We're just starting the early phases of construction in Lawrenceburg. Most of the capital will be spent in 2006 and 2007. And when we're finished, we'll have a significantly improved product, more games, more parking and better food and beveraging offerings for the Cincinnati market.

Let me just comment on our merger process with Penn. That's well underway. We're supporting Penn Gaming in getting the regulatory approvals. And just recently, they've decided to divest 1 of the 2 casinos that is in the Baton Rouge market and we're working with Penn as they proceed to sell the Baton Rouge property, which is our property.

After Dale gives you some more detail on the numbers, we'll open it up -- open up the call for Q&A and give you some more color.

Thanks, Dick. My comments are going to be real brief.

As Dick mentioned, we did report earnings of $0.71 as -- versus $0.13 last year. If you take out the fact that last year had $0.50 of financing charges in it, this year has about $0.05 worth of expenses related to our merger. So, kind of on an apples-to-apples basis if you will, about $0.76 normalized for this year versus $0.63 last year.

I want to mention that we have recorded gaming taxes at the 2 Illinois properties based on the current existing tax rates, not considering the scheduled rollback in July. If the taxes roll back as scheduled on July 1, the impact on the first quarter would have been about $0.05 a share.

Our revenues grew $7m, led primarily by Baton Rouge, up about $4m, and Sioux City, up a couple million. In Baton Rouge, we have noticed an impact from the bowling convention that's going on there that started in mid-February. And Sioux City continues to be helped on a year-over-year basis from the (inaudible) that we moved up there from Riverside last fall.

The EBITDA grew about $4m on a same-same basis without any of the -- what I'll call the special costs. It has been helped by a couple of things, the continued year-over-year impact of the TITO integration that we did last year; the rent credit that we're getting in Lawrenceburg because of the upcoming capital project; and Baton Rouge's results, as I mentioned, have been helped a lot by the bowling conference.

CapEx for the quarter were $16.8m, pretty well split evenly between project capital and maintenance capital.

Before we turn it over to questions, I do want to just remind everybody that we have agreed in the merger agreement with Penn that we wouldn't give any guidance for future events, so please limit your questions to not so forward-looking comments, I guess.

And with that, Operator, we'll turn it over for questions.

(Operator Instructions.) Your first question comes from Larry Klatzkin with Jefferies and Company.

Hey, guys. We miss you guys when you go away, but you guys have done a good job with this company. I have a couple of questions here. One would be Baton Rouge, do we assume then that it's probably -- this is if the bowling show goes away and revenues go back to a more normal level?

Without -- even what we just said on the -- not giving any guidance, but, yeah, I think there's a spike here that is definitely related to the bowling conference.

Is this going to be a regular thing or is this a one-time thing?

As far as we know, it's a one-time thing. My understanding is that this event kind of rotates between Reno one year and some other venue in other years, although from what I understand, it has been very successful and very well attended in Baton Rouge. So, there could be an instance where they could reapply for somewhere down the road, but there's no guarantees that it's coming back.

Okay. Second question would be -- so you're assuming that the Illinois tax rollback happens?

Well, we're very optimistic about it. We have been optimistic, but we can't give any assurances about Illinois.

I know. We're assuming it too, so --

But in our accounting does not take that into effect. In other words, if the taxes do roll back as scheduled, and you were to reflect that in our financials, the results would be $0.05 higher in the first quarter than what we've reported.

Right. No, I understand that. As far as -- corporate was unusually high. Is there some stuff related to the merger or is -- ?

Yeah. There's about -- there's $2.7m of costs in there related to the merger.

Okay. So that's something that's probably keeps on occurring for the next couple of quarters?

Yes.

At some level, yes.

Okay. And then, how about Missouri cutting the bet limit or getting rid of the bet limit?

Well, they have another 3 weeks in Missouri in terms of the legislature and there is discussions going on, and again, we're positive on it, but what we know is maybe a little bit more than you read in the papers, but not much more.

And that's net-net positive. It's a little negative in St. Louis, but it's nicely positive in Kansas City?

Correct.

So net-net with or what 15 -- 10 percent more revenues?

We can't give you guidance on that.

Okay. How about Ohio going somewhere with gaming?

Not much happening. The Governor is against it. The racing interests have not been well organized and it's definitely not something that appears to be on the horizon.

Good. And then, table management systems, are you looking at that for your casinos? Is that something that -- ?

We have it in Lawrenceburg and we're very happy with it. And for example, if the betting limit went away in Missouri, it might be something that we would do.

Okay. And then the last question, Racelake Park in Toledo, anything on that?

We had expected to close by now. There was some things that we felt were prudent to clean up as it related to zoning and title work and that will close either just before or just after the Penn merger.

All right. Thanks, guys.

Thanks, Larry.

(Operator Instructions)

This might be our shortest call ever.

Ms. Williams, do you have any closing remarks?

No. I'll turn it over to Dick for closing remarks.

Well, for those of you in Las Vegas, I hope you're enjoying the Wynn property and thank you for listening in today. Bye.

This concludes today's Argosy Gaming conference. You may now disconnect.