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Pinnacle Entertainment, Inc (NYSE:PNK)

Q2 2013 Earnings Call

July 25, 2013 8:00 am ET

Executives

Vincent J. Zahn - Vice President of Finance & Investor Relations

Anthony M. Sanfilippo - Chief Executive Officer and Director

Carlos A. Ruisanchez - President and Chief Financial Officer

Analysts

Joseph Greff - JP Morgan Chase & Co, Research Division

Carlo Santarelli - Deutsche Bank AG, Research Division

Anthony F. Powell - Barclays Capital, Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Richard A. Hightower - ISI Group Inc., Research Division

Chad Beynon - Macquarie Research

Parag Vora - HG Vora Capital

Justin T. Sebastiano - Brean Capital LLC, Research Division

Operator

Good morning. My name is Roshaira, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2013 Conference Call. [Operator Instructions] Thank you. Mr. Zahn, you may begin your conference.

Vincent J. Zahn

Thank you, Roshaira. Good morning, everyone. My name is Vincent Zahn, Vice President of Finance and Investor Relations for Pinnacle Entertainment. Thank you for joining Pinnacle Entertainment's 2013 Second Quarter Earnings Conference Call, and thank you for your interest in our company.

Earlier this morning, we released our 2013 second quarter financial results. If you don't have a copy of the announcement and would like one sent to you, please contact us by e-mailing investors@pnkmail.com.

On the call with us today are Pinnacle Entertainment's Chief Executive Officer, Anthony Sanfilippo; and our President and Chief Financial Officer, Carlos Ruisanchez. We'll begin the call with prepared remarks from Anthony and Carlos, and then we'll open up the call for your questions and answers.

Before we get to that, we'd like to remind you that during the course of this conference call, management may state beliefs and make projections or other forward-looking statements regarding future events and future financial performance of the company. We wish to caution you that such statements are just projections and expectations, and that actual events or results may differ materially. We refer you to the Safe Harbor statement that's included in the press release and to our annual report on Form 10-K, quarterly reports on Form 10-Q and to our press releases and documents filed with the SEC.

In addition, today's call may include non-GAAP financial measures within the meaning of Regulation G. A reconciliation of all such non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release.

It's my pleasure to turn the call over to Pinnacle's Chief Executive Officer, Anthony Sanfilippo.

Anthony M. Sanfilippo

Thank you, Vincent, and good morning, everyone. We appreciate you joining us on our second quarter earnings discussion for 2013. I'm pleased to have in the room with me a number of Pinnacle team members. You're going to hear from Carlos Ruisanchez, who, I'm proud to say, was recently promoted to President of Pinnacle Entertainment. Carlos has done a terrific job. He will continue on as our Chief Financial Officer.

Ginny Shanks is normally with us for these calls. She is celebrating a milestone family event this week and is in beautiful Hawaii. So we miss Ginny with us, but we're happy for her and her family as they take the week off and spend some time together. Ginny also was promoted. Ginny has been promoted to Chief Administrative Officer, and that she'll continue to have multiple functions that report to her, which will include our marketing function, our human resource function and our information technology function.

Now we're doing this for a couple of reasons. One, and probably foremost, it's well deserved for both Carlos and Ginny. But two, we have been working diligently for the last 6 months to position the company to be a much stronger and larger company, and we're very excited about that. We -- we'll talk a little bit about that. We'll talk about our operating results, and then we'll open up the call to any questions that you may have.

We, yesterday, received our final state regulatory approval in Missouri. It was a milestone day for us to complete the state regulatory process. Carlos and I and some others, including Jack Godfrey, our General Counsel, are today in St. Louis because of the meeting that we had yesterday. And ironically enough, we're at our Four Seasons property, a beautiful property that, as you all know, as part of our agreement with the Federal Trade Commission, we will be selling. We'll talk about that in just a few minutes.

This morning, we announced that we have come to an agreement with Tilman Fertitta, who -- one of the assets that Tilman and Landry's owns is the Golden Nugget, which is really a story casino asset that has been around for quite a long time. And Tilman and company have really rejuvenated it with properties not only where it started, in Las Vegas, but also in Atlantic City and recently in Biloxi.

We're really pleased that we were able to reach an agreement with Tilman. I had the chance to get to know Tilman some over the last few weeks, and he truly is a gentleman who has a great entrepreneurial spirit and has some terrific restaurant brands in addition to the Golden Nugget brand that we know he'll be bringing to the Lake Charles complex. And while we wish that the Federal Trade Commission would allow us to operate that property, we think that having the Golden Nugget next to L'Auberge in Lake Charles will be a great outcome, and it will create an appealing destination resort for guests who come from, really, South Texas. And Tilman and the Golden Nugget organization are based in South Texas. They have a big presence there, and we fully expect that they're going to be a company that's going to even bring more customers from the South Texas market.

So we're very excited about that. The, really, final step that we have to come to closure is the remaining financing that we have. Carlos will touch on that, as well as what we have with completing our FTC agreement, and we expect to close this transaction in the early part of August. That's our hope. So we're moving along.

The integration process has gone extremely well. We have spent a lot of time with team members from both Ameristar as well as from our company. We are, in fact, this past week and this week, we are selecting department leaders who, at a corporate level, will lead the organization. And we're working, I think, in a very smooth manner to look at organizational structure of the combined organization. We plan on fairly quickly having an organizational structure in place. We know we'll continue to make adjustments. But having an organizational structure in place that will help facilitate a company twice the size as what we've been and what Ameristar has been in really a very efficient manner.

We still believe that we're going to be able to not only meet the goal of $40 million in synergies, but we believe that from what we've had exposure to up to this point, we're going to be able to exceed that. Many of you know that Ameristar released their earnings this morning and despite soft revenues that we're all seeing in different parts of the business, they were able to, as we were able to, really focus on operating our properties, their properties well. So they had great results today, which we're pleased to see, proud to see. And we believe that as our companies move together, that there are going to be things that both Ameristar does today and we do that will make for a stronger company.

Carlos will talk a little bit about our operating businesses and the results from those businesses, and then we are going to open up to any questions that you may have. It's a pleasure to turn the call over to the President of Pinnacle Entertainment, Carlos Ruisanchez. Carlos?

Carlos A. Ruisanchez

Thank you, Anthony, and good morning to all in the call. We have had a very productive second quarter marked by very meaningful progress towards completing our acquisition of Ameristar. Operationally, we faced the somewhat soft revenue environment but made great strides in adjusting our business accordingly. Let me provide you with a few points of interest on our operating results.

Over the course of the quarter, April saw a growth in EBITDA, but those gains were offset by softness in May and June. Trends so far in July reflect a rebound from May and June levels but are not quite as strong as levels we saw in March and April. July performance to date is currently pacing at a better than the second quarter's as a whole.

On a same-store basis, marketing and investment as a percentage of revenue was essentially flat year-over-year. This was the case even with the local issues that we experienced in Lake Charles and Belterra. In terms of guest behavior in the second quarter, we saw trips declined at a greater rate than spend per trip. Meaning that people came less often, but their spend per trip was pretty much in line with historical levels. Let me now provide you some color on the specific property performance during the quarter.

First, the L'Auberge Baton Rouge continues to ramp up and establish itself as one of the premier resorts in the southeast region. We continue to see strong guest acquisition and growing loyalty among our guests. Repeat visitation is very strong, with over 55% of our guests returning for multiple trips. The hotel continues to be a good story with occupancy now in the mid-90s consistently. And our regional high-end business continues to grow every month, although at a lower pace than we had originally anticipated. We remain encouraged by the long-term prospects of this property given the feedback from our guests and the steady progress we continue to see every day in the business.

At L'Auberge Lake Charles, similar trends were seen in terms of revenue softness, although this was exacerbated on a low hold in the quarter. In the first half of the second quarter, we completed the first phase of the room renovation at the property, which displays about 5% of the available room nights. The second phase of the renovation will begin this fall after the busy summer season. However, notwithstanding the challenges in the second quarter with normalized hold levels, the second quarter was in the top 5 quarters of all time in terms of gaming levels at the L'Auberge Lake Charles property.

In St. Louis, despite considerable softness during the quarter, both Lumiere and River City managed through these lower business volumes very well. EBITDA and EBITDA margins for the segment set an all-time record in the second quarter. Margins increased 170 basis points despite a declining revenue environment. This was accomplished with disciplined cost controls and rational marketing spend.

At Belterra, we continue to see the impact of new competition in Ohio affecting visitation. However, The Horseshoe Cincinnati has been less than anticipated -- the impact of Horseshoe Cincinnati has been less than anticipated so far. We remain focused in differentiating Belterra with its unique destination resort amenities and positioning. We recently completed an extensive buffet remodeling project and opening a new Stadium Sports Bar, a brand that we've had at multiple properties, at the end of the second quarter. And we now have the internally created and very successful concept at 3 of our casinos across our portfolio.

And finally, in New Orleans, we continue to see an improvement in the operating performance of this property every month. While the revenue was down to modest 3% in the second quarter, cash flow improved 5%. Across the portfolio our team responded well to lower business levels, with a focus on cost containment and operating efficiencies. These actions will help us look forward into the second half of the year as we look to integrate the Ameristar properties into our portfolio.

Talking about Ameristar, we have made tremendous progress towards bringing that transaction to a close in August. We look forward to bringing together the 2 terrific teams into a combined company that implements and advances best practices and enjoying a larger, more diverse scale that will produce increasing cash flow on a stronger operating base.

At Ameristar Lake Charles, as Anthony mentioned, we're pleased to have entered into an agreement to divest a project with the Golden Nugget. We will continue building the facility until the closing of that transaction, which we expect will be before the end of the year. This is an important milestone and complying with the agreement in principle with the Federal Trade Commission staff.

Turning to our development pipeline. On River Downs, the facility is well underway, and we're excited about bringing the property into our portfolio in the second quarter of 2014. In this quarter, we had increased operating expenses associated with the live racing season, which this year is taking place at Beulah Park while our property is under construction. However, we're excited about the prospects of River Downs given the outstanding location and the interplay between this facility and our Belterra facility about an hour south of it.

At River City in St. Louis, the hotel will open by Labor Day this year, completing the $82 million expansion of this facility. This project is on budget and on schedule.

Turning back to Pinnacle as a whole, and in summary, we continue to be focused on maximizing the opportunity right in front of us with Ameristar through the integration and utilizing a very strong, diversified and growing cash flow base of the combined company to repay debt after completing the acquisition.

With that, I'll turn the call back to Anthony.

Anthony M. Sanfilippo

Carlos, thank you. And operator, at this point, we're going to open up to any questions that any caller may have.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Joe Greff with JPMorgan.

Joseph Greff - JP Morgan Chase & Co, Research Division

I was hoping with regard to the Ameristar transaction, maybe you can give us or give us a scrubbed synergies target post the sale of Lumiere and the development in Lake Charles. Previously, it was $40 million.

Anthony M. Sanfilippo

Yes. Joe, we -- we still believe, as I said, in my comments that we will achieve $40 million in synergies. We think that it can be greater. We're not going to put a target out there above that. We have spent a lot of time together, a lot of time with the leadership of Ameristar. Carlos and I and Ginny have visited all the properties on multiple occasions. We -- as I mentioned, we're developing the new leadership team, and we stay true to best practices. And really focusing on people, we think, will be the best fit from both companies going forward. We're very bullish on our ability to run both companies better than they're run today. Our eyes are wide open. Ameristar, really, this quarter is a great indicator of how well they look at margins, and we think there's opportunity for us to improve our margins based on some of their practices. And we are confident we will achieve $40 million as we initially stated in synergies and believe there's the opportunity to go beyond that.

Joseph Greff - JP Morgan Chase & Co, Research Division

Great. Excellent. And then with regard to your agreement to sell to Tilman Fertitta, can you talk about the science behind the price, particularly with the $37 million credit? How did you arrive at that? Or is that just price discovery in the sales process?

Anthony M. Sanfilippo

Well, I mean, it's probably a much longer discussion than we would have on this call. We believe it's a fair outcome for both Tilman and the Landry's organization and Pinnacle Entertainment, and there's a lot of factors that went into that. We believe, as I stated, they're going to be complementary neighbors. I like very much how they do business and how they think about it and the brands, really, the very strong brands that they have in that organization that they'll bring to Lake Charles. And as opposed to getting into the science of how we came up with the sales price, we both feel that it's a good outcome for both companies.

Operator

And your next question comes from Carlo Santarelli with the Deutsche Bank.

Carlo Santarelli - Deutsche Bank AG, Research Division

Really quickly just on the other process that's going on in, obviously, in St. Louis at Lumiere. I see you guys have obviously updated the statistics associated with the LTM. How should we be thinking about the interest in that? Obviously, you've indicated an August agreement. But just in terms of the tone of your discussions around that property per se, is there any light you could shed on that?

Carlos A. Ruisanchez

Carlo, obviously, we're going through a sales process. So our commentaries are going to have to be very limited. Needless to say, certainly, there's a lot of interest in the property. There have been multiple parties that continue to be involved. And from our perspective, we're making great strides towards bring that to a conclusion. It obviously is a bit behind the process that we undertook down in Lake Charles, but we expect to have further information we can share with the market in over the next few weeks.

Carlo Santarelli - Deutsche Bank AG, Research Division

Great. That's helpful. And just on the comment you made earlier, Carlos, about trips being down more so than spend per trip, something that we heard from a competitor of yours earlier this week as well. I was just wondering if you possibly could be a little bit more granular on that, not respect to the numbers -- with respect to the numbers, but more so with respect to regionally, is it -- are you seeing those trends in Louisiana? Are you seeing them in Missouri? Or is it concentrated in one place, or is it broadly widespread?

Carlos A. Ruisanchez

Yes, I would add that in the Midwest, it's a little bit more pronounced than down south. But nonetheless, it's softness that we're seeing pretty much across the portfolio.

Operator

And your next question comes from Felicia Hendrix with Barclays.

Anthony F. Powell - Barclays Capital, Research Division

It's actually Anthony Powell here for Felicia. Just a quick question on St. Louis. The margin growth there was pretty impressive. How much of that was at River City alone? And how much more room do you think you have to improve margins there over time?

Anthony M. Sanfilippo

Well, we're not specific on results in a segment like that. So I'll just tell you broadly that part of what you're seeing is we are very bullish on our management teams that we have. They're very talented. And here in St. Louis, they just continue to get better, and it's very thoughtful management. It's -- I think anyone can come in and take a lot of expense out of the business. We've been telling you for the last number of years now that we are very much focused in creating a great guest experience, a great team member experience and rewarding our shareholders. And it's a -- what you're seeing is a continuation of work that has been done by Neil Walkoff and the management team here in St. Louis. And I stated earlier, the complementary of putting both Ameristar and Pinnacle together, we think, is going to be very powerful. We think it's -- we don't know everything there is to know, and we know what we do know in our world. And as we get exposure now to another company that has been a terrific company, we think it's just going to make us all that much better. So it's more than you ask for from an answer standpoint, but it really is we've run both of these properties here very well. We'll continue to run Lumiere in this complex to the last second that we own it, to the best of our ability, and I'm proud of the work that's being done. If you look at Belterra. If you look at other parts of our company, New Orleans is a great example, we're seeing great work done there. Lake Charles, we are continuing to see great work there. Carlos stated we're unlucky and we were unlucky for a long period of time. So on the flip side to that, we had some guests that were pretty happy. So we feel good about how the businesses are running. And with our focus on the combining of the 2 companies, I'm very proud of the results that we've had throughout our organization of leaders in our organization doing great work to run our day-to-day businesses.

Anthony F. Powell - Barclays Capital, Research Division

Great. So as a follow-up, in Belterra, you had very similar kind of margin increases year-over-year, despite some new competition in a market that's being very promotional. How sustainable do you believe your margin growth there is, and how do you view the overall competitive environment in southern Indiana?

Anthony M. Sanfilippo

Yes, I'll start on that, and we'll have Carlos talk about it. Carlos talked about we opened up both a buffet recently there and then also a new -- a concept called Stadium, which is our third Stadium concept, which our guests like a lot. We are very confident that, that business is competing well with enhanced competition in the region, and that it's a unique business. It's a resort destination. And so we are very confident that we've got the ability because of the physical assets that we have there to continue to be a place that customers would want to go to. And we're seeing great results there because of what I just talked about, the focus on management of making really smart decisions on how we run the business.

Carlos A. Ruisanchez

I would add, as far as the competitive environment there, clearly there -- it is -- there is a heightened promotional environment in that market given the additional competition. That's pretty clear by the numbers that have been reported out there. Having said that, we continue to have a differentiated product, as Anthony mentioned, and that has helped us to remain disciplined about how we go after the business and control what we can control. And so far, that formula has put up better than we originally thought given the competition. But frankly, it will be a very good ad for us when we open up River Downs in that market, both from a convenience standpoint and the location and there will be a great interplay between the 2 facilities that are there in the southern Indiana, southeast -- southwest Ohio market.

Operator

[Operator Instructions] Your next question comes from Shaun Kelley with Bank of America Merrill Lynch.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

So Carlos, this is probably mostly for you, but I'm just curious or trying to understand, to the extent you're receiving probably a large chunk of cash proceeds for Lake Charles at some point close to the end of this year, how does that flow through or change the kind of the merger financing structure? Like, is that -- is there a way for you guys to apply that to the highest interest components there? Or just, how is that going to kind of waterfall through the cap structure of the combined company?

Carlos A. Ruisanchez

We have made a commitment when we got the consent on Ameristar bonds that they will have the permanent reduction of capital when the asset sales take place, that will tell me [ph], what, plenty of [ph] prepayable debt, and I would expect that to be in the form of paying down the term loans.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

So it'll largely go to the term loans, not to the higher interest rate bonds?

Carlos A. Ruisanchez

It certainly -- what -- it is difficult -- we can't really mention much on regards to the financing. So I will refer you to the announcement that was made by the company about 10 days ago or maybe it was 2 weeks ago. And certainly, we can follow up. But shortly, you'll have better visibility as to how that will work.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Okay. And just maybe like the 10,000-foot level question. Kind of with this transaction, obviously, you won't be -- with this piece now in place, you won't be spending as much capital next year in terms of kind of project CapEx. How do you anticipate this will kind of impact your kind of peak leverage ratio, if you will, I guess, which probably would be around the fourth quarter this year right before you ended up divesting Lake Charles?

Carlos A. Ruisanchez

Yes, we think that we will have very robust cash flow. And as you mentioned, we will have limited expenditures really -- it's really limited at that point to River Downs, which would be opening at that point within 6 months. As a result of that, you should see us both deleveraging by virtue of realization of synergies as well as having the ability to pay down debt because of that cash flow. And those -- that's going to be the focus for us.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Is the peak leverage ratio lower than it had been before this component?

Carlos A. Ruisanchez

Not sure that I follow your question, Shaun.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

I can take it offline. Just lastly, I guess as you think about the competitive impact of now having someone else in the Lake Charles market, can you just talk a little bit about whether or not if there's any scope or scale change to the Golden Nugget component of the project?

Anthony M. Sanfilippo

Well, the Golden Nugget -- Tilman's committed to building what's been promised or what are conditions of the license. I think what you'll see will change is the brands he brings in, and he operates some terrific brands, some well-known brands. And we're actually excited about that. We think that both us and the Golden Nugget in one complex will be very powerful. It will attract a lot of people. We have demand issues there at our facility. We run out of hotel rooms. So from the standpoint of more rooms to fill, I mean, obviously, we wanted to do that project. We believe that Houston is underpenetrated. So we think, of any competitor that could come in, we think he's going to be a good competitor. We think that he'll bring great products into the complex and that will continue to grow the market.

Carlos A. Ruisanchez

Shaun, before you leave, with regards to your question on leverage, clearly, this is -- the proceeds from the sale in Lake Charles will go down to pay down debt for an asset that -- and not contribute to EBITDA to us nor will it given that it will be sold before it opens. So definitively, our leverage will be lower as a result of that. But happy to take it offline to the extent that you want further clarification.

Operator

Your next question comes from Rich Hightower with ISI Group.

Richard A. Hightower - ISI Group Inc., Research Division

Just a quick question back to the $40 million synergy assumption. Can you just dig into that a little bit? Maybe could you talk about the assumptions between fixed and variable in that number? And has the number -- you said it hasn't changed, but the changing revenue picture, I'm wondering if that's impacted your forecast at all there?

Carlos A. Ruisanchez

Yes, let me answer that. It's certainly -- we are very confident in our ability to achieve $40 million of synergies. There were -- there was a large portion of that, that is entirely driven by combinations of public company costs, i.e., one board, one set of financials, as well as integrating the teams in, effectively, mostly down in Las Vegas. We have done enormous amount of work on this. And while there is some effect on the margin by virtue of Lumiere, the reality is that the scale of the company and our ability to realize savings through better procurement, a better marketing program that will look to do best practices, it really remains largely unchanged. So we are very confident in our ability to do that. And as it's been mentioned, I think, a number of times, we actually expect to be materially better than that.

Richard A. Hightower - ISI Group Inc., Research Division

Okay. And then finally, there wasn't an update in the press release on Vietnam, and I know that you guys wrote the investment down to 0 last quarter. But just wondering if there's any update for us on that front?

Anthony M. Sanfilippo

Yes, I appreciate you bringing that up. The property itself is scheduled to open tomorrow, and we're cautiously optimistic that it will open well and do well. We have written our investment down. We still actively participate, both myself and Carlos, with me on the board, but Carlos alongside me as we look at being all that we can from a support standpoint to help that property and that company become a success. So it's planning to open tomorrow, Friday in Vietnam, which would be tonight for us. And it will be terrific to see -- to prove out the concept. Based on how it opens and how well it does, we have the opportunity to be the manager of the second complex that's there, and it's still moving forward. It will be opened by the Asian Coast Development Team. So it is going to be a new brand. It's going to be the brand at Ho Tram Strip. So we'll see how it does. We are -- again, the best I can tell you is I'm cautiously optimistic that there will be high demand, it will do well and we'll see that project grow.

Richard A. Hightower - ISI Group Inc., Research Division

Okay. And just to clarify, is there any potential for a further capital call on Pinnacle's part with that investment or...

Anthony M. Sanfilippo

We are so focused on Ameristar and having a -- really putting all of our resources, both personnel and financial, into the successful integration of Ameristar. It is highly unlikely that you will see us participate in a capital call. With that, I don't want to say never, but we'd love to see it do well. But we are being prudent and diligent and focused on what's before us and that's combining what we believe will be 2 great companies into one fantastic company.

Carlos A. Ruisanchez

And just to add one thing, there are no obligations on Pinnacle's behalf to provide any additional capital.

Operator

Your next question comes from Chad Beynon with Macquarie.

Chad Beynon - Macquarie Research

Regarding Baton Rouge, you talked about more marketing success with some of the local regional players as well as cost containment measures at the property, which led to 180 bps of margin improvement. Could you talk about how efficient the property is currently running and if there are still opportunities to increase the margins if revenues remain flat in the upcoming quarters?

Carlos A. Ruisanchez

Sure. The short answer is absolutely. Certainly, the team there has really done a terrific job of continuing to fine-tune the operations. Certainly, the property makes strides every single month, and we see that not only in the actual execution at the outlets that are there in the hotel, but certainly in the key operating metrics that we see and the caliber of both the revenue and how the team members there are executing. The -- our expectation is this property is still in the, call it, the early side of the ramp-up period. As we mentioned, some aspects have gone a bit slower than we thought on regards to building some of that revenue. But you should absolutely expect improvements in the margin as well as the overall ramp up of that facility.

Anthony M. Sanfilippo

And I'll add, Carlos and his comments talked about the high occupancy we're now running there. We have been very disciplined in making sure that the type of guest that we're marketing to is going to be a guest that long term will provide value to that property. And you've got to be disciplined when you do that. You -- if you go in, in a highly discount product, then you completely change the tenor of a property. And Mickey Parenton is our General Manager there, and the team that's there has been very methodical in how we think about running that business. It's got already a great reputation. We announced, I don't know how public it was, but AAA named that property, as well as our L'Auberge and Lake Charles, as one of the best resort properties in the South, and it's not even 1 year old yet. And that's really a testament to how well, in both markets, our team operates our facilities there. So we're -- I am bullish on Baton Rouge. I think Baton Rouge is a city that's going to continue to grow. It's a city that has a lot of growth potential, and we have got a product, a project, a property that's there that is a terrific property. And I think long term, it's going to prove out to be a very good investment for us.

Chad Beynon - Macquarie Research

And then a housekeeping follow-up for Carlos. Could you provide the amount of NOLs at the end of the quarter?

Carlos A. Ruisanchez

Yes. We -- I think that number was $270 million, not including impact out of Atlantic City when that sale does get completed. Our expectation is that will happen this quarter. And as a result, we should end up in the, call it, about $0.5 billion. And that certainly, that will be somewhat augmented, I suppose, with whatever happens with the disposition of Lumiere.

Operator

Your next question comes from [indiscernible] with HGV.

Parag Vora - HG Vora Capital

This is actually Parag Vora from HG Vora. Most of my questions have been answered at this point. I was actually going to focus on the NOLs for a minute. Can you just remind us what the tax basis is in Lumiere Place?

Carlos A. Ruisanchez

Well, originally, if you account for everything that's been spent in that facility, that number approaches $600 million. Some of that has been depreciated obviously, as the property's been open for about 5 years. Roughly about 2/3 of that are still in the books.

Parag Vora - HG Vora Capital

Got it. So it's around $400 million-ish, and then any sales price that you achieve would increase your NOLs by the delta?

Carlos A. Ruisanchez

That -- I think that's a fair assessment.

Parag Vora - HG Vora Capital

Great. And for Lake Charles, when Ameristar sells that, I don't know if that's going to be sold once the deal closes, will there be any NOL creation there? Or would it just be the $37 million approximately, which is the discount from cost?

Carlos A. Ruisanchez

Well, that -- it certainly will create a loss. However, it is an asset -- it's not an asset sale that is going to be specifically a stock sale. It will be a, obviously, a higher basis on that given the discount. But it should not materially change things from what we said.

Parag Vora - HG Vora Capital

Got it. And then I think, Carlos, you made a comment earlier about July. I just didn't quite catch it. Did you say that the July quarter was looking relatively favorable versus the second quarter overall? Do you mind just repeating the statement you had made earlier?

Carlos A. Ruisanchez

Sure. The trends so far in July reflect the rebound on May levels and June levels, but not quite as strong as what we saw in, like, in March and April. But overall, July so far is at a better place than what the second quarter was as a whole.

Operator

And your final question comes from Justin Sebastiano from Brean Capital.

Justin T. Sebastiano - Brean Capital LLC, Research Division

So Carlos, you mentioned that trips declined, but the spend per visit has been at historical levels. And you've done a good job of preserving EBITDA for the company now. But have you -- so have you continued to lower the reinvestment in the low end, maybe less profitable customer? In other words, is the soft revenue environment that we're seeing? Is it -- you guys not going after that less profitable customer as well as the softness? Or if you could help us out there a little bit.

Carlos A. Ruisanchez

Sure. Certainly, we have been looking to focus on profitable revenue, and that has led to reinvesting with folks that both are loyal and have exhibited the ability to continue to come and to see the basis to our facilities. Certainly, there's been -- the impact has been more pronounced at the lower tiers, and I would tell you, it's probably a combination of both of those factors. We have been very disciplined about the marketing investment. And broadly speaking across the portfolio in the markets that we're in, we think that's been the case with the environment that we're in. But having said that, certainly, there is a broad softness being across the markets that we're in and certainly, you've seen it everywhere in the industry.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Okay. And just some housekeeping for corporate expense. If we back out the onetime severance in the quarter, what should we be looking for, for corporate expenses as a run rate?

Carlos A. Ruisanchez

It's certainly, we've been running right around $5 million or so to, call it, to mid-5s on the current set of portfolio and assets that we have. Clearly, we'll look into that as it relates to the combined company. So while I don't expect if we were to -- without the acquisition that, that number will change in any material way in that 5 to 5.5 per quarter. Certainly, we'll recalibrate that and give you some parameters once we complete the acquisition.

Anthony M. Sanfilippo

Justin, thank you for being the final caller. And to all that's on the call, if you're a team member of Pinnacle, thanks for the great job that you're doing. If you're an Ameristar team member, we look forward to soon having you on the Pinnacle team and being a great company together. And for all of our investors and others, thank you for your continued interest in our company. We will continue to be diligent and work hard to make this a good investment for you. For those that are on the debt side, I want to thank them, too.

So thank you all. We look forward to really the next call because we, at the next call, should have even much more to share with you. So thank you, all, and hope you all have a terrific day.

Operator

This concludes today's conference call. You may now disconnect.

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