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MTR Gaming Group (MNTG)

Q2 2013 Earnings Call

August 06, 2013 4:30 pm ET

Executives

Garrett Edson - Senior Vice President of Financial Services

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

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

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

Analysts

James Kayler - BofA Merrill Lynch, Research Division

Susan Berliner - JP Morgan Chase & Co, Research Division

Joseph Hudak

John Fleming

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

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the MTR Gaming Second Quarter 2013 Earnings Conference. Today's call is being recorded. [Operator Instructions]

I would now like to turn conference over to Garrett Edson of ICR.

Garrett Edson

Thank you, Anthony. Good afternoon, everyone, and welcome to the MTR Gaming Group Second Quarter 2013 Conference Call.

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 August 6, 2013, earnings 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's now my pleasure to introduce your host, Joe Billhimer, acting President for MTR Gaming. Mr. Billhimer?

Joseph L. Billhimer

Good afternoon, everyone, and 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; Nick Rodriguez-Cayro, our General Counsel; and Fred Buro, our Chief Marketing Officer. I will say just a few words on the second quarter of 2013 and I'll turn it over to John to discuss the financials.

Overall, the continued strength of our Scioto Downs gaming facility led to another quarter of strong double-digit revenue and adjusted EBITDA growth. For the second quarter of 2013, we had an adjusted EBITDA of $27.5 million on an increase of 11.1% in net revenue to $132.3 million. We are pleased with the continued performance of our Scioto Downs gaming facility, which celebrated its first anniversary during the quarter on June 1. Scioto Downs continues to maintain a strong market position in the Columbus slot market, and we remain extremely confident on the continued growth opportunities within that market.

Despite our strong second quarter, the expansion of gaming in Eastern Ohio along with some aggressive promotional offerings from our competitors during the quarter, have affected our Presque Isle Downs and Mountaineer Park properties. In addition, continued weakness in the consumer sector remains apparent and has negatively impacted our results, as well as our competitors and other service sectors. We have been able to offset some of this impact through a continued focus on marketing programs and operating efficiencies, as well as targeted and thoughtful capital spending. As of June 30, we have spent approximately $10 million of our planned $20 million capital improvements for 2013.

As mentioned in our press release, on May 6 of this year, JEI, our largest stockholder, filed an amendment to its 13D with the SEC. Our Board of Directors continues to review this proposal and all strategic alternatives to enhance stockholder value with our exclusive financial advisor, Macquarie Capital. As I am sure you all understand, we will not comment on this any further or address any questions during our call today. We will report updates as they warrant.

And with that, I'll turn it over to John, who will take you through our financials.

John W. Bittner

Okay, Joe, thank you. And moving on to the second quarter results. Net revenue for the second quarter of 2013 was $132.3 million, up 11.1% from $119.1 million in the prior year quarter, primarily due to the full quarter's contribution from the VLT facility at Scioto Downs, which, as Joe mentioned, opened on June 1 of last year.

For the second quarter of 2013, the company's adjusted EBITDA from continuing operations was $27.5 million, up 32% compared to the $20.8 million in the second quarter of 2012. Overall, net adjusted EBITDA margin for the second quarter of 2013 from continuing operations was 20.8%, up 340 basis points from the prior year period.

Net adjusted EBITDA margin for Scioto Downs in the second quarter of '13 was 33.6% compared to 13.5% in the prior year period. Net adjusted EBITDA margin for the second quarter for Mountaineer was 18.8% compared to 21% for the prior year period. And net adjusted EBITDA margin for Presque Isle Downs was 17.5% compared to 20.7% for the prior year period.

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