Telsey Advisory Group Fall 2011 Consumer Conference September 2011

Transcription

1 Telsey Advisory Group Fall 2011 Consumer Conference September 2011

2 Safe Harbor/Non-GAAP Financial Disclosures All statements included in this presentation, other than historical information or statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These forward-looking statements, including statements regarding the Company s future operating performance, future growth, anticipated milestones, completion and opening schedules of various projects, construction schedules and budgets of the various projects, amenities and features of the various projects, continued improvement of operations at our properties, the closing of the ACDL transaction, the completion of the second integrated resort of the Ho Tram Strip, the expected returns of the Company s various development projects and investments, and the ability of the Company to borrow as it constructs its various projects under its Credit Facility, are based on management s current expectations and are subject to risks, uncertainties and changes in circumstances that could significantly affect future results. Accordingly, Pinnacle cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include, but are not limited to: (a) the Company s business is particularly sensitive to reductions in consumers discretionary spending as a result of downturns in the economy or other changes it cannot accurately predict; (b) insufficient or lower-than-expected results generated from new developments and acquired properties may negatively affect the market for the Company s securities; the Company s new properties may compete with its existing properties; (c) many factors could prevent the Company from completing its construction and development projects as planned, including the escalation of construction costs beyond increments anticipated in construction budgets; (d) the Company s operations are largely dependent on the skill and experience of its management and key personnel; the loss of management and other key personnel could significantly harm the Company s business and the Company may not be able to effectively replace members of management who have left the company; (e) the gaming industry is very competitive and increased competition, including by Native American gaming facilities, could adversely affect profitability; (f) the Company s industry is highly regulated, which makes it dependent on obtaining and maintaining gaming licenses and subjects the Company to potentially significant fines and penalties; (g) potential changes in the regulatory environment could harm the Company s business; (h) the Company may not meet the conditions for the maintenance of the license that it plans to utilize for its Baton Rouge project; (i) the Company operates in a highly taxed industry and may be subject to higher taxes in the future; if the jurisdictions in which the Company operates increase gaming taxes and fees, results could be adversely affected; (j) the global financial crisis and recession has affected the Company s business and financial condition, and may continue to affect the Company in ways that it currently cannot accurately predict; (k) adverse weather conditions, road construction, gasoline shortages and other factors affecting the Company s facilities and the areas in which the Company operates could make it more difficult for potential customers to travel to the Company s properties and deter customers from visiting the Company s properties; (l) the Company may experience delays in closing the ACDL transaction or fail to complete the transaction due to circumstances beyond its control, including ACDL s inability to complete certain customary conditions provided for under its credit agreement; there can be no assurance that the transaction will in fact close; and (m) other risks, including those as may be detailed from time to time in the Company s filings with the Securities and Exchange Commission ( SEC ). For more information on the potential factors that could affect the Company s financial results and business, review the Company s filings with the SEC, including, but not limited to, its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. 2 *** Statements in this presentation may include adjusted financial measures governed by Regulation G. For a reconciliation of these measures, please see the end of this presentation or visit the Investor Relations section of our corporate website at

3 Strong Regional Presence Leading owner and operator of regional gaming resorts (7 casino resorts and 1 pari-mutuel racing facility) RENO SOUTHERN INDIANA SACRAMENTO OAKLAND SAN FRANCISCO CHICAGO INDIANAPOLIS HEADQUARTERS BOSSIER CITY ST. LOUIS CINCINNATI LEXINGTON LOUISVILLE DALLAS/FORT WORTH BATON ROUGE AUSTIN SAN ANTONIO HOUSTON Pinnacle Properties Pinnacle Development Sites 3 Large Regional Cities LAKE CHARLES NEW ORLEANS

4 Successfully Improving Operating Results $ in millions Revenue Adj. EBITDA 3 Adj. EBITDA Margin Segment 1H11 1H10 1H11 1H10 1H11 1H10 L'Auberge du Lac $184.9 $170.0 $56.2 $ % 27.1% St. Louis 1 $190.1 $157.2 $42.7 $ % 18.9% Boomtown New Orleans $70.4 $69.0 $24.5 $ % 30.5% Belterra Casino Resort $75.3 $75.2 $14.4 $ % 18.8% Boomtown Bossier City $44.3 $45.5 $10.4 $ % 24.7% Boomtown Reno $17.3 $19.2 ($0.5) ($0.5) -3.0% -2.4% River Downs 2 $4.5 - ($1.0) % - Other revenue/corporate expenses $0.1 $0.0 ($15.9) ($18.3) - - Total $586.8 $536.1 $130.9 $ % 19.3% 1 St. Louis segment consists of Lumière Place (which includes the Lumière Place Casino, the Pinnacle-owned Four Seasons Hotel St. Louis and HoteLumière) and River City. River City Casino opened on March 4, River Downs was acquired on January 28, Total Adj. EBITDA includes severance cost of $2.5mm and $1.9mm in 1H11 and 1H10, respectively, as well as $1.1 million one-time charge related to corporate office consolidation in 1H10. Key drivers of year-over-year improvement include: Focus on elevating guest experiences Re-launched mychoice guest loyalty program Evaluation of cost structure and operating leverage 4 For a description of Adjusted EBITDA and Adjusted EBITDA margin, please see the slides beginning on page 16.

5 Flexibility to Pursue Return-Focused Projects Solid balance sheet, significant free cash flow and appropriate capital structure with no near-term maturities $ in millions Maturity Date 6/30/11 Senior Secured Credit Facility ($410.0mm undrawn) 2016 $ % Senior Subordinated Notes 2015 $ % Senior Notes 2017 $ % Senior Subordinated Notes 2020 $350.0 Other secured and Unsecured Notes Payable N/A $0.7 TOTAL DEBT $1,195.7 Cash and Cash Equivalents $142.2 Net Debt $1,053.5 TOTAL LEVERAGE (1) 4.9x 5 (1) Based on Adjusted trailing twelve months EBITDA ending June 30, 2011.

6 L Auberge Baton Rouge Project Overview Project budget of $357 million, excluding land and capitalized interest $273 million remaining to be invested (as of 6/30/11) Project is fully funded Expected opening in summer of 2012 Project details: 1,500 slots & 51 table games 206 guestroom hotel Covered parking garage Multi-purpose event center with concert seating for up to 1,400 Significant quality advantage for Pinnacle facility Ease of access relative to competition Hours closer to Baton Rouge population than competing product along the Gulf Coast (approximately 2.5 hours) and in New Orleans (approximately 1.5 hours) 6

7 7 L Auberge Casino & Hotel Baton Rouge

8 River Downs Racetrack Project Overview Acquired for $45 million in 1Q11 Well-located site in southeast Cincinnati directly off I-275 Complimentary to Belterra Casino Resort 155 acres of land, 35 currently undeveloped Proposed VLT legislation for Ohio racetracks 2,500 VLTs per track Must spend $150.0mm (less $25.0mm credit for acquisition) $50.0mm license fee 33.5% tax rate Horsemen subsidy TBD 8

9 Favorable Position in Cincinnati Market Horseshoe Cincinnati Hollywood Lawrenceburg River Downs Rising Star Casino & Resort Belterra 9

10 River City Expansion Overview Property enhancements to complete guest amenities and entertainment options $82.0mm project New amenities include: 200-room hotel 10,000 square-foot multi-purpose event center Covered parking structure with approximately 1,700-spaces Construction scheduled to begin in 1Q12 Project begins after majority of spend for Baton Rouge development is complete Expected completion in 2H13 10

11 11 River City Expansion

12 Ho Tram Strip (Vietnam) Overview Asian Coast Development Limited ( ACDL ) is an international development company specializing in integrated resort destinations Developing multi-phase Ho Tram Strip in southern Vietnam Pinnacle investment in ACDL $95.0 million invested into preferred stock and common equity tranches 26.0% ownership Representation on Board proportional to ownership Management contract Second gaming resort development through 2058, with a potential 20-year extension 12

13 Benefits from Entry into Vietnam Diversifies Pinnacle into growing Asian gaming market through a measured investment Anticipated gaming tax structure will be competitive with other Asian markets with integrated resorts Long-term management contract for the second gaming resort Platform for Pinnacle in Asia to establish itself in and benefit from long-term opportunities in fastest growing gaming region Compelling location to enter the market in Asia Approximately 80 miles southeast of Ho Chi Minh City City attracts the majority of country s 5 million yearly tourists 13

14 14 MGM Grand Ho Tram Phases 1 & 2

15 Summary Successfully executing on revenue and operating margin growth strategies Focusing on operational excellence, re-launched guest loyalty program and prudent facility enhancements Driving profitable revenue growth Growing portfolio with four development projects that will deliver Diversification and favorable returns on invested capital Strong balance sheet with no near-term maturities 15

16 Definition of Consolidated Adjusted EBITDA Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA margin are non-gaap measurements. The Company defines Consolidated Adjusted EBITDA as earnings before interest income and expense, income taxes, depreciation, amortization, pre-opening and development expenses, non-cash share-based compensation, merger termination proceeds, asset impairment costs, write-downs, reserves, recoveries, corporate-level litigation settlement costs, gain (loss) on sale of certain assets, loss on early extinguishment of debt, gain (loss) on sale of equity security investments, minority interest and discontinued operations; and defines Consolidated Adjusted EBITDA margin as Consolidated Adjusted EBITDA divided by revenues. The Company uses Consolidated Adjusted EBITDA margin to be an indicator of the Company's operating trend and performance of its business in relation to its revenue growth. The Company also uses Adjusted EBITDA as a measure of performance of its operating units. The Company defines Adjusted EBITDA as earnings before interest income and expense, income taxes, depreciation, amortization, pre-opening and development costs, non-cash share-based compensation, merger termination proceeds, asset impairment costs, write-downs, reserves, recoveries, corporate level litigation settlement costs, gain (loss) on sale of certain assets, loss on early extinguishment of debt, gain (loss) on sale of equity security investments, minority interest, and discontinued operations. Not all of the aforementioned benefits and costs occur in each reporting period, but have been included in the definition based on historic activity. The Company uses Consolidated Adjusted EBITDA as a relevant and useful measure to compare operating results between accounting periods. The presentation of Consolidated Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of its business. Consolidated Adjusted EBITDA is specifically relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial, non-operational depreciation charges and financing costs of such projects. Management eliminates the results from discontinued operations as they are discontinued. Management also reviews pre-opening and development expenses separately, as such expenses are also included in total project costs when assessing budgets and project returns and because such costs relate to anticipated future revenues and income. Management believes some investors consider Consolidated Adjusted EBITDA to be a useful measure in determining a company s ability to service or incur indebtedness and for estimating a company s underlying cash flows from operations before capital costs, taxes and capital expenditures. Consolidated Adjusted EBITDA also approximates the measures used in the debt covenants within the Company s debt agreements. Consolidated Adjusted EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using other comparative measures to assist in the evaluation of operating performance. Management believes that Consolidated Adjusted EBITDA margin is a useful analytical tool as it enables management to evaluate the Company s operating trend and performance of its business in relation to its revenue growth. Management believes that Adjusted EBITDA is a useful analytical tool as it enables management to evaluate the profitability of the gaming operations without taking into account the effect of certain non-operating expenses. EBITDA measures, such as Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA margin, are not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure of comparing performance among different companies 16

17 Reconciliation of Consolidated Adjusted EBITDA to Income (Loss) from Continuing Operations ($ in Millions) 1H10 1H11 Consolidated Adjusted EBITDA $103.5 $130.9 Depreciation and Amortization (55.2) (53.2) Pre-Opening and Development Costs (11.0) (4.8) Non-cash Share-based Compensation (3.5) (3.7) Write-Downs, Reserves and Recoveries, Net 4.4 (6.6) Impairment of Indefinite-lived Intangible Assets (11.5) - Impairment of Land and Construction Costs (18.4) - Other Non-operating Income Interest Expense, Net of Capitalized Interest (48.4) (51.8) Loss on Early Extinguishment of Debt (1.9) - Income Tax Benefit (Expense) 2.1 (0.7) Income (Loss) from Continuing Operations ($39.8) $10.1 Net Revenues $536.1 $586.8 Consolidated Adjusted EBITDA Margin 19.3% 22.3% Income (Loss) from Continuing Operations Margin (7.4%) 1.7% 17

18 Reconciliation of Consolidated Adjusted EBITDA to Income (Loss) from Continuing Operations ($ in Millions) Consolidated Adjusted EBITDA $160.6 $214.1 Depreciation and Amortization (99.4) (112.1) Pre-Opening and Development Costs (16.6) (13.9) Non-cash Share-based Compensation (13.6) (6.3) Impairment of Goodwill - - Write-Downs, Reserves and Recoveries, Net (1.7) 6.0 Impairment of Indefinite-lived Intangible Assets - (11.5) Impairment of Land and Development Costs (27.0) (23.7) Impairment of Buildings, Riverboats and Equipment (16.5) (0.4) Other Non-operating Income Interest Expense, Net of Capitalized Interest (70.2) (103.0) Gain on Sale of Equity Securities Impairment of Investment in Equity Securities - - Loss on Early Extinguishment of Debt (9.5) (1.9) Income Tax Benefit (Expense) Income (Loss) from Continuing Operations ($80.3) ($39.6) Net Revenues $987.7 $1,098.4 Consolidated Adjusted EBITDA Margin 16.3% 19.5% Income (Loss) from Continuing Operations Margin (8.1%) (3.6%) 18