Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Mark Juliano – Chief Executive Officer

Analysts

Brian Worst – Brean Murray

Shawna Millman – Alliance

Eric Green – EN Capital

John Fleming – Broadpoint Capital

Trump Entertainment Resorts Inc. (TRMP) Q3 2008 Earnings Call November 7, 2008 11:00 AM ET

Operator

Welcome to the Trump Entertainment Resorts 2008 third quarter conference call. (Operator Instructions) The company would like listeners to note that certain information discussed by management during today's call regarding the company's operations, financial results, plans, expectations, estimates and beliefs as well as other statements including words such as anticipate, believe, plan, estimate, expect, intend, will, could or other similar expressions constitute forward-looking statements under the Private Securities Litigation Reform Act which provides a safe harbor for such statements so long as they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to materially differ from those projected in such forward-looking statements.

In connection with any such statements there are various that could cause actual results to materially from those contained in such forward-looking statements and are subject to significant business, economic, competitive, regulatory and other uncertainties and contingencies all of which are difficult or impossible to predict or control.

Accordingly there can be no assurance that such forward-looking statements will be realized. Listeners are also advised that the developments subsequent to today's call are likely to cause these statements to become outdated with the passage of time or other factors which are unforeseeable or beyond the company's control The company does not intend to update the guidance provided during today's call prior to its next press release or conference call unless otherwise required to do so.

Listeners should consider these facts in evaluating the information provided during today's call and should not place undue reliance on any forward-looking statements made during today's call. Additional information concerning the potential risk factors that could affect the company's future performance are described from time to time in the company's period reports filed with the SEC and which may be viewed free of charge on either SEC's website or through the company's website.

I would now like to introduce the company's Chief Executive Officer, Mr. Mark Juliano and the company's Chief Financial Officer, Mr. John Burke.

Mark Juliano

Thank you for joining us today. Joining John and I for our call this morning are Bob Pickus, General Council, Eric Housler, Senior Vice President of Development, Dan McFadden, Vice President of Finance and Chris Latrielle, Vice President of Financial Analysis.

Similar to last quarter we have classified Trump Marina as a discontinued operation in our discussion of results so our presentation of results for our continuing operation pertains to the Taj Mahal and The Plaza.

We had two significant events since our last conference call which I will highlight before discussing our results. First, during the quarter, we partially opened the Chairman Tower at the Taj Mahal. While the financial impact was only felt for the last several weeks of the quarter, it was a significant accomplishment as the project remained on time and on budget. We expect to have The Tower fully opened by the end of the year.

Overall, the reviews from customers have been positive and we are able to attract business that before was unavailable to us based on our room inventory.

Second, we recently amended the agreement of sale for Trump Marina with Coastal Development. The revised agreement gives us immediate access to $15 million of the $17 million deposit. It is a fixed purchase price so there will be no price adjustment based on performance.

We believe that Coastal remains committed to making this transaction happen as soon as possible, and so are we and we will continue to keep you updated on this as things progress. We continue to believe the sale of Trump Marina makes strategic sense for the company.

Our results during the quarter were impacted by a variety of items including higher gas prices, the deteriorating economic and financial conditions, the bay smoking ban and continued competition in our key theater markets. Most importantly, it is clear that the gaming industry and all sectors of our economy dependent on consumer spending have been hit hard in recent months by the economic challenges occurring across the country.

Consumer confidence saw its biggest decline in nearly 30 years. Jobless claims have hit their highest levels in 25 years and the financial markets continue to remain in turmoil. That creates a difficult environment for our customers. As a result, during the quarter we continued to see spend per patron decline.

While we cannot control the economic environment, we continue to proactively manage areas that are within our control. We've reduced our marketing costs appropriately to be more in line with our current business volumes. We are also doing everything possible to save money on the operational side of the business and prudently manage our cost structure.

To that end, I'd like to take a moment to thank our employees for their continuing commitment, in particular, the executive officers and certain other executives who have agreed to a voluntary 5% decrease in base pay.

We expect to complete the Chairman Tower, but otherwise will put all but essential capital spending on hold. We cannot forecast when the Atlantic City market or the economic environment will improve. However, we do believe we are positioning the company's operations to benefit from an improvement in trends.

Our product has been substantially improved and renovated over the past three years. We have reduced our operating expenses and head count significantly, rationalized our marketing costs, implemented new technology across our company, and we have opened up new revenue channels to diversify our business.

With that, we'll take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Brian Worst – Brean Murray.

Brian Worst – Brean Murray

How much do you have remaining on the spend for the Tower?

Mark Juliano

Through September 30, we've spent $220 million on the Tower. The total budget is $255 million so there remains about $35 million to $40 million to go which will be expended from now through the fourth quarter into the first quarter of '09.

Brian Worst – Brean Murray

How much do you have to spend in the fourth quarter or how much is due in the fourth quarter?

John Burke

Roughly around $25 million and last quarter will be another $15 million to $20 million in first quarter of '09.

Brian Worst – Brean Murray

As far as the proceeds go for the sale of the Marina, what are the requirements for you? Could you just refresh me on that?

John Burke

The basic requirements which obviously may change as time goes by, but here's what we're required to do. Under the BL bank which is our senior indebtedness, they have said half the proceeds can be used however the company wants to use it be it in operations or just unfettered use of half the proceeds. The other half has to be either reinvested in the properties, invested in other gaming properties outside of Atlantic City or in Atlantic City or used to pay them down.

Under the bond indenture, the current requirements is that after the first lien debt has been satisfied as required, we can either invest it in the properties, make a life time investment or if we don't use the proceeds after one year, we're required to make a par offer. That's what the bond indenture says right now.

Mark Juliano

Obviously we are evaluating all of the options that we have to make sure that the proceeds are used in the best way possible. But we do have a year from time of closing to make that decision.

Brian Worst – Brean Murray

So there's nothing in the bond covenants that would prohibit you from using half the funds for operations?

Mark Juliano

If they are reinvested into operations, that's correct. We could do any kind of CapEx related to the properties here in Atlantic City or even if we were to determine that there was an acquisition outside of Atlantic City in another gaming company, we would be permitted to do that also.

Operator

Your next question comes from Shawna Millman – Alliance

Shawna Millman – Alliance

Can you walk me through your alternative sources of liquidity just assuming the sale does not go through? You mentioned at one point a construction loan that you have on reserve. Can you give us a little bit more detail on that?

John Burke

We currently have $25 million available under our credit line from BL bank which as we stated; we'll draw that down in the fourth quarter. There's also under the construction of the Tower, we have certain funds that are available from the CRDA under a grant that was issued a few years ago. That could be anywhere between an additional $5 million to $10 million.

Plus, under the current credit lines we're allowed to invest $20 million per property in capitalized leases.

Operator

Your next question comes from the line of Eric Green – EN Capital

Eric Green – EN Capital

Can you comment on the recent trends that you're seeing in forward bookings for the Tower and when you have all the Tower rooms out there, how does that look?

Mark Juliano

We will have the entire Tower open by the end of the year, but so far we have seen through the end of this quarter, and it's holding steady in October, $43.00 premium on the Tower. So the ADR in the Tower is about $159.00 compared to $116.00 for the Taj.

We are seeing in the Tower itself, a 60% to 40% cash to comp mix which is about what we expected, so we're seeing a good acceptance for the Tower. We are struggling a bit mid week as you can imagine to keep occupancy levels high and we've chosen rather than to lower rates to go deeper down into our data base to get a gaming customer in there.

Overall, we are satisfied with the performance of the Tower so far. We can tell you that the smoking ban which went completely, we were required to go completely smoke free in the middle of October, has been impactful and we're really relieved that we only have another week and a half of it.

Our October results will be fine, but they're going to be primarily held up by an extraordinary full percentage at the Taj. But if you look at the overall trends, you'll see that they're pretty much in line with September, and as we got closer to the end of the month, they deteriorated even further due to smoking. The good news is that we only have another week of that.

Operator

Your next question comes from John Fleming – Broadpoint Capital

John Fleming – Broadpoint Capital

I wonder if you can give us a little more clarity as to what minimum maintenance CapEx might be and a sense for what your minimum cage cash could be next year.

Mark Juliano

The CapEx we're going to limit to only essential compliant or life safety issues. We're not anticipating any more than $10 million between the three properties next year for maintenance capital.

As far as cash required in the cages, we think that it will be somewhere the same as it is this year. Obviously when the transaction at Marina would close, you wouldn't have that requirement.

John Fleming – Broadpoint Capital

Can you help us understand what the EBITDA in the third quarter was for the Marina property? I was a little confused by the note, particularly the costing code with the Trump Marina transaction.

John Burke

The Marina EBITDA was about $6 million versus $9.8 million last year. If you look at the statements you'll see that the add back, the additional write off on the Marina to reflect the $270 million purchase price and a slight bit of a credit related to the Indiana. You'll see that if you add those back, you'll see that we had $6 million in EBITDA at the Marina.

Mark Juliano

I think it's important to note also that as part of this amendment to the agreement, there is no price reduction as it would relate to EBITDA. This is a fixed price now, and it will not be adjusted based on performance.

John Fleming – Broadpoint Capital

And that could have gone down how much had EBITDA deteriorated?

Mark Juliano

It would go down for every million dollars below $22 million on a 12-month trail; it would go down by $5 million.

John Fleming – Broadpoint Capital

Are you hearing anything about Beta Field, what's going on there with the bidding process and how that might impact you?

Mark Juliano

No. It got a little bit of a push by the city by going out with that RSP, but as you can imagine in this environment, there really was not a very long line of bidders, so we don't anticipate, I think we had said all along that it's a 10 to 12 year event before the opening of the door there, so we don't see that as changing.

Operator

This concludes today's conference call. We thank everyone for calling in today and participating in the company's earnings conference call.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Trump Entertainment Resorts Inc. Q3 2008 Earnings Call Transcript
This Transcript
All Transcripts