MNTG

MTR Gaming Group, Inc. (MNTG)

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Industry: Consumer Services
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MTR Gaming Group (MNTG)

Q4 2012 Earnings Call

March 07, 2013 4:30 pm ET

Executives

William R. Schmitt - Managing Director

Jeffrey J. Dahl - Chief Executive Officer, President and Director

John W. Bittner - Chief Financial Officer and Executive Vice President

Joseph L. Billhimer - Chief Operating Officer and Executive Vice President

Narciso A. Rodriguez-Cayro - Vice President of Regulatory Affairs, Secretary and General Counsel

Analysts

James Kayler - BofA Merrill Lynch, Research Division

John Maxwell - Jefferies & Company, Inc. Fixed Income Research

David Hargreaves - Sterne Agee & Leach Inc., Research Division

Jim Devlin

Paul Strigler

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the MTR Gaming Group Fourth Quarter 2012 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. William Schmitt of ICR. Please go ahead, sir.

William R. Schmitt

Thank you, Tom. Good afternoon, everyone, and welcome. Before we get started, I just want to remind you that the company's remarks may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended concerning the company's prospects. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a variety of factors, which are described in the company's periodic reports filed with the Securities and Exchange Commission and in the company's news releases.

Additionally, the company may discuss EBITDA, or earnings before interest, taxes, depreciation and amortization, which is a non-GAAP financial measure. Such information and any disclosure required by the SEC Regulation G can be found in MTR's March 7, 2013 news release, which is reproduced on the company's website under Investor Relations.

Finally, under certain circumstances, the federal securities laws may require the company to file a transcript of this call, including your questions, with the SEC. Accordingly, if you ask a question, the company will assume that you have consented to the inclusion of your question and identity in any such required filing.

It is now my pleasure to introduce your host, Mr. Jeff Dahl, President and CEO for MTR Gaming. Jeff?

Jeffrey J. Dahl

Thanks, Bill, and good afternoon, everyone. Thank you for your interest in MTR Gaming. Joining me on the call today are several members of our senior leadership team: John Bittner, our CFO; Joe Billhimer, Chief Operating Officer; Nick Rodriguez-Cayro, our General Counsel; and Fred Buro, our Chief Marketing Officer.

2012 was a banner year for MTR with the opening of our new gaming facility at Scioto Downs in Columbus, Ohio. We achieved record adjusted EBITDA for the year of $93.8 million, which exceeded our previous records set last year by nearly 14%. Our fourth quarter saw continued strong results from Scioto despite the expansion of gaming in the Columbus market, leading to an overall 12% gain in revenue and 6% gain in adjusted EBITDA for MTR, a record for the fourth quarter. For the quarter, Scioto generated $32.4 million in revenue and nearly $11 million in adjusted EBITDA. We have maintained our market share in Columbus and continue to produce premium revenues for VLT versus the market. And it appears the market continues to develop with our revenues increasing sequentially month-over-month since the opening of the Penn property. The ramp up of operations continues apace and Scioto continues to exceed our original expectations for market share with February revenues of nearly $11 million, which is 47.4% of total Columbus market slot revenues.

Our customer database continues to grow and now nears 200,000 players. Considering the additional competition in Columbus, we believe Scioto is entrenched in a strong position and we thank the entire Scioto team for another solid quarter and continuing to provide Metro Columbus with a tremendous entertainment experience.

While Scioto continues to perform and exceed our expectations, we did see declines at our other regional gaming facilities. While those facilities are still performing within our expectations, competition, overall weakness in consumer spending and weather impacts did have an effect on their fourth-quarter results. In Mountaineer, we saw a 16% decline in revenue and a more significant decline in our adjusted EBITDA figures and margin. While we believe our marketing programs are properly positioned, the additional competition from Cleveland, Ohio has affected Mountaineer's performance. We will be watching our costs closely in order to minimize further adjusted EBITDA margin deterioration.

Presque Isle Downs saw revenue decline 22% from the prior year quarter and adjusted EBITDA also declined as the property was negatively impacted by the competition in Ohio and weather. As with Mountaineer, we will continue to focus on our marketing programs as well as any potential operating efficiencies in order to maximize our margins at Presque Isle. Our plans for 2013 are relatively straightforward. In addition to our emphasis on focus marketing, we will continue our efforts to optimize our customer's gaming and entertainment experience through targeted and thoughtful spending on capital improvements at our facilities. We will be renovating hotel rooms at Mountaineer, reconfiguring our property's gaming floors to improve efficiencies, as well as making other facility improvements throughout our suite of properties. To that end, we expect to spend approximately $19 million in capital expenditures in 2013. We believe these meaningful improvements will help prepare us to address the difficult competition from Ohio.

To sum up, we look to improve on our strong 2012 and we believe Scioto will continue to generate solid results while we focus on improving the guest experience and maintaining our margins at our other properties.

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