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

Isle of Capri Casinos (NASDAQ:ISLE)

Q2 2014 Earnings Call

December 03, 2013 11:00 am ET

Executives

Jill Alexander - Senior Director of Corporate Communication

Virginia M. McDowell - Chief Executive Officer, President and Director

Dale R. Black - Chief Financial Officer, Principal Accounting Officer and Assistant Secretary

Arnold L. Block - Chief Operating Officer and Member of Compliance Committee

Analysts

Susan Berliner - JP Morgan Chase & Co, Research Division

Kevin Coyne - Goldman Sachs Group Inc., Research Division

Justin T. Sebastiano - Brean Capital LLC, Research Division

Chad Beynon - Macquarie Research

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

Dennis M. Farrell - Wells Fargo Securities, LLC, Research Division

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

Operator

Ladies and gentlemen, thank you so much for standing by. Welcome to the Isle of Capri Casinos Second Quarter 2013 Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded and will be made available for replay. I will now turn the call over to Jill Alexander.

Jill Alexander

Good morning. All statements made during this call that relate to future results and events are forward-looking statements that are based on our current expectations. Actual results and events could differ materially from those projected in the forward-looking statements because of risks and uncertainties, which are discussed in our annual and quarterly SEC filings and in the cautionary statement contained in our press release. We assume no obligation to update our forward-looking statements.

We are joined on the call today by Virginia McDowell, President and Chief Executive Officer; Dale Black, Chief Financial Officer; and Arnold Block, Chief Operating Officer.

I'd like to turn the call over to Virginia McDowell.

Virginia M. McDowell

Thank you, Jill, and good morning everybody. It is no secret that calendar 2013 has been a challenging year for regional gaming and Isle is certainly no exception. As we analyze the impact on our operating results in our first fiscal quarter, it became very obvious that regional gaming companies were going to continue to face significant challenges as a result of external forces, which were largely out of our collective control.

As a result, the Isle team made the decision to focus on what we could control and began a comprehensive strategic review of our business practices. In partnership with our Board of Directors, we challenged both our corporate and site operating teams to find innovative ways to control costs, while still focusing on delivering a superior experience for our customers.

The process included a detailed analysis of nearly every lease contract and business relationship across the enterprise, as well as changes to our organizational charts, including centralization of some business processes and the introduction of a regional management structure at our properties.

We issued challenges to our finance, marketing and operating divisions to find new sources of revenue, review cost of sales and streamline schedules. It'll take a few quarters to implement many of the opportunities we identified, but what we have completed to date has already started to show in improved results, including increases in margins at half the properties in our portfolio.

And as we go into the strategic budgeting process for our fiscal 2015 year, we are confident that we can continue to identify opportunities to be more efficient, while creating a better experience for our customers, including the relaunch of our Fan Club later this fiscal year.

We will continue to be a company that focuses on creating shareholder value by using the significant free cash flow we generate to pay down debt, but we are also focused on identifying opportunities to create value by leveraging our existing portfolio. We're continuing our conversations with the Kansas City Port Authority about partnering with a third-party to develop a hotel at our property. We are in the final stages of selecting an architectural firm for a land-based casino in Bettendorf, and we are evaluating our significant opportunities to develop our Pompano acreage after the state has completed their strategic review process for gaming.

We are also truly excited about our partnership with Tower Entertainment to develop the Provence, a $700 million casino entertainment complex, if selected by the Pennsylvania Gaming Control Board. In preparation for the suitability hearings in late January, which represents the last stage of the selection process, we have been working closely with Tower Entertainment to continue to develop and refine an exciting array of non-gaming amenities for the project, including exciting restaurants and bars, 60,000 square feet of retail space and entertainment venues.

And with that, I will turn the call over to Dale.

Dale R. Black

Thank you, Virginia. I'll just briefly walk through the results of our operations here. As we noted in the press release, our income loss from continuing -- income from continuing operations was $8 million or $0.20 for the quarter compared to a $4.3 million loss or $0.17 last year. However, both years had a couple of large items that impacted EPS and comparison.

This year's quarter, we were aided by the reversal of a $14.7 million litigation accrual that was assumed in the Lady Luck acquisition in 2000. Last year's quarter included $2.5 million of financing-related costs and $2.7 million in pre-opening costs related to Cape Girardeau. On an adjusted basis for these items, we would have a loss of $0.17 this year compared to a breakeven quarter last year.

Our debt at the end of the quarter is approximately $1.16 billion. We have approximately $161 million outstanding on our revolver. Our 3 note issues add up to $1 billion and about $3 million of other debt.

Our leverage for covenant calculation purposes remained flat at the quarter at about 6.6x, and our borrowing capacity is $104 million, which is just limited by the size of our revolver.

And at this time, we can open up the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question is from [indiscernible] of UBS.

Unknown Analyst

Dale, Virginia, just had a quick question. Can you give us any color in terms of trends for November. We just saw the PA numbers come out for November. And what you're seeing anything else there, is there any change at all in terms of consumer sentiment?

Dale R. Black

We really haven't seen much at all. I mean, just on an ancillary basis, we've taken looks at Thanksgiving weekend, for instance, this year compared to last, and for all intents and purposes, they were pretty similar. But I don't -- there hasn't been any real change, really not for several months, in what I would call trends or sustainable trends really in any of our markets. It's pretty much we're experiencing what we have been and what everybody else has been.

Unknown Analyst

Fair enough. And the $51 million for the sale of the Rhythm City, is that going to go towards debt payment?

Dale R. Black

Yes, initially, we will repay the revolver with it. As Virginia mentioned, we have been exploring a land-based option in Bettendorf. Eventually, the proceeds could fund that conversion. But at least initially, we'll use it just to pay down the revolver.

Operator

The next question is from Susan Berliner of JPMorgan.

Susan Berliner - JP Morgan Chase & Co, Research Division

On the Rhythm City, is that something you expect to receive prior to the end of this calendar year?

Dale R. Black

Probably not before the end of the calendar year but before the end of the fiscal year.

Susan Berliner - JP Morgan Chase & Co, Research Division

Okay. And then so can you be a little more specific is that like a third quarter or fourth quarter or is it still up in the air?

Dale R. Black

That will be a little bit up in the air depending on when the Iowa Racing and Gaming Commission decides to approve it.

Susan Berliner - JP Morgan Chase & Co, Research Division

Okay. And then I guess, just talking about the opportunities, can you remind us with Tower Entertainment exactly what you guys would be spending and how you would finance that project and what your ownership stake would be?

Dale R. Black

Yes, okay. So we -- it is a pure management contract. We would not have any ownership in the project and we would just receive a flat management fee. Our agreement calls -- we put up a $25 million letter of credit that will get drawn upon only if Tower is selected as the winner for that license. Our deal is, is that we would be repaid from the proceeds of the permanent financing, we'd be taken out and so our capital investment would be 0. We do have the option to roll the $25 million into the capital structure if we choose, anywhere except for the common equity. So in the debt structure or some sort of mezzanine piece if we would want to, but we have no capital obligation for the project.

Susan Berliner - JP Morgan Chase & Co, Research Division

Got you. And then I know you mentioned potential hotel like Kansas City. Is there any way to kind of give an amount of what that could potentially cost?

Virginia M. McDowell

No, we're still in the process of working with the Kansas City Port Authority on determining how best to use the piece of land that the Port Authority owns, and we actually rent our -- essentially our berth there for all intent and purposes. We are actually meeting with them this week, and we're in the process of doing a review and we'll probably have a little bit more information on the next call.

Dale R. Black

The idea, though, is to try to attract a third-party hotel on to that space that we lease, so to minimize or keep our capital commitment next to nothing.

Susan Berliner - JP Morgan Chase & Co, Research Division

Great. And then I just have 2 other quick questions. With regards to Pompano, what are you waiting for to potentially look to expand like what -- is there any specific dates we should be looking at or?

Virginia M. McDowell

Well, what we're waiting for is for the State of Florida to make a determination as to what they're going to do as it relates to potential expansion of gaming. Their legislative session starts in the spring and runs essentially until, I believe, May. They have been for quite some time now undergoing a strategic review process. I'm sure you're aware that they've hired outside consultants. I think they are still in the process of tweaking some of those results. They've gone through a public input process and now they have to make a determination based on all the various constituents in the state, including the pari-mutuel industry and the Seminole Tribe and the Disney organization, all the folks that have weighed in on this thus far; what they're going to do as far as expansion. Clearly, we have, throughout this process, said that what we were looking for, for our property was parity. But depending on what happens, it would, obviously, impact what we could spend or how we would develop the acreage around our existing facility. So hopefully, we'll get a little bit more clarity after legislation -- legislative session sometime this year. But we're in the process right now of continuing to look at our various development opportunities for the acreage.

Susan Berliner - JP Morgan Chase & Co, Research Division

Okay, great. And Dale, just one quick, I guess, on the other covenants in the bank line, do you have the exact for the secured debt and the coverage ratios?

Dale R. Black

I can get -- yes, I do have that, just hold on a second. Coverage is 2.2 and the senior secured is 1.1.

Operator

Our next question is from Kevin Coyne of Goldman Sachs.

Kevin Coyne - Goldman Sachs Group Inc., Research Division

I know in the release and in the commentary, you mentioned the impact of the government shutdown and certainly, some of your peers have mentioned that as well. I was just wondering if you could provide a little bit more color as to where demographically you saw more or less pressure? For instance, on your slot play, did you see more of a decline there and was tables -- table play a little more resilient or was it the, let's say, elderly part of your segment that got more concerned with the government shutdown where you saw, let's say, decline in visitation and spend there?

Dale R. Black

Yes, I think as far as -- I'm not sure if there was as much demographics as it was geographics or geography specific to the government shutdown itself. I mean, we did -- in those areas where we are close to facilities that had a large governmental employment presence like the Quad Cities, Boonville in mid-Missouri is not very far from Jefferson City, the state capital, but there's a lot of federal workers and stuff there too, are a couple of areas where we noticed particular softness during that time. But just generally, throughout the quarter, what we saw was that our retail play was down about 3%. And then rated play was essentially flat. And the increases the we had in the top couple segments of our database was offset by declining play in the lower end of the database. So would probably be kind of the more middle-market and to your point, maybe a little bit older sections of the database.

Kevin Coyne - Goldman Sachs Group Inc., Research Division

That's very helpful. Just as a follow-up, I know in Missouri, you called out growing unemployment. I was just wondering if you could expand on that? Is that a secular issue in that region or, let's say, the loss of a major employer or is it just more widespread?

Dale R. Black

I think it's just crept up a little bit, particularly in -- around Caruthersville and a little bit around Boonville. I mean, we're not talking 2009 levels here, but we did see just a slight tick up, and I think in this economy, anytime you start to see that at all, it doesn't play into discretionary spending.

Arnold L. Block

Yes, a facility did shutdown in Jeff City and their unemployment is running double digits now. They're at about 10%, which is impacting Boonville substantially.

Kevin Coyne - Goldman Sachs Group Inc., Research Division

And on the new cost-saving initiative, I note you have $2.5 million through, I guess, the first 6 months of the fiscal year and that you're targeting $10 million when fully implemented. Do you expect the $10 million run rate by the end of the fiscal year or is that a little longer?

Dale R. Black

No, it will be a little longer than the end of the fiscal year.

Kevin Coyne - Goldman Sachs Group Inc., Research Division

Okay. And then just one final one. I know you -- gaming went through a round of M&A activity, and I was just curious in terms of pitch book activity and what's out there. Is there still a lot of stuff out there to consider looking at or is that kind of slowed down at this point?

Dale R. Black

I don't know from an asset by asset type of -- if we've seen a whole lot of difference -- I mean, the things sort of come sporadically. Obviously, with the 2 Pinnacle properties that went around earlier this summer were sort of specific instances and things like that, but I wouldn't say that we've seen an increase or a decrease necessarily. It's just -- it tends to be -- you get them when there's something out there, you don't...

Operator

Our next question is from Justin Sebastiano of Brean Capital.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Can you quantify the amounts the flood impacted your Colorado EBITDA on the quarter?

Dale R. Black

Not specifically. But I would guess -- I mean, I think somewhere -- the way we've tried to look at it would be anywhere from, say, $800,000 to $1.1 million, probably. Just looking at the change in year-over-year results and then other patterns kind of in that market, but it is hard to kind of specifically pinpoint it. We did have at Lady Luck, a fair amount of external construction, renovation going on to the outside of that and repair going on to the outside of that building during the quarter, which kind of hampered access into that property for a while too.

Arnold L. Block

And then main street, right in front of our property was down for construction during that period. So there's a lot of noise around that flood and then we did an SDS, upgraded the Lady Luck property. So we had some system issues off and on. So just -- a lot happening during the time of the flood.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Okay. And you guys mentioned about a third-party hotel at Kansas City. Since it would be third-party I mean, you would have no CapEx spend in that project, is that correct?

Dale R. Black

I mean, we don't know for sure but that's what we're discussing -- the discussions have been right now. I mean, we're still kind of probably in the second inning of this game, if you will, as far as that goes. But we have been having dialogue with the Port Authority, who's our landlord there and gone back and forth with them to get ready to see what's available.

Justin T. Sebastiano - Brean Capital LLC, Research Division

So there's a chance that there won't be a third-party, is that what you're wrangling with or...

Dale R. Black

No, I don't think so. Like I said, we just haven't gotten far enough along to know how the deal might be structured.

Virginia M. McDowell

And depending on where it might be located or sited on the property, we might make some physical changes to our infrastructure as well.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Got you, okay. And then with Pompano, potential expansion there, I know it depends, obviously, on where the state goes with potential for expanding the gaming. But besides a hotel, what other things are you thinking about that would maybe increase performance at that property?

Virginia M. McDowell

We had a very, very aggressive schedule of improvements for that property. When I joined the company in 2007, it was probably the thing that I spent the most time working on. This was mixed-use retail, it was condominium development, it was office development and it included relocating the track to make the site better able to accommodate all these various things. I mean, there was one iteration of the plans that included a baseball stadium. I mean, it's an amazing piece of land, where it's located and there's really no limit to what we can do there, it's basically just finding the right partners to develop the land with us.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Okay. I mean, you mentioned 2007, that is basically a different world from where we are...

Virginia M. McDowell

No, no. I'm just talking about the fact that when you actually look at the site plans that we've already developed for this, I mean, we have the whole smorgasbord of things that we could choose from in terms of whether it's retail or whether it's entertainment or whatever it might be. At this point, it’s basically just choosing which of these is best for us going forward, and a lot of that depends on what the state decides in terms of expanded gaming.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Okay.

Dale R. Black

But a lot of what we've done in this interim time is just making sure we had the right permits and zoning and stuff like that, so that if something does present itself, it's feasible. We got all that behind us and we can go ahead and proceed. Again, this would be one we are -- depending on what the type of project is, we'd be looking for substantial commitments from other parties to -- in this development. It's not something were contemplating doing on our own.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Understood. And just lastly, looking at the slower ramp than expected out of Cape Girardeau and Nemacolin, you guys are talking about some potential development expansion plans that you have, that you potentially would be using your free cash flow for. What sort of hurdle rates are you looking at that makes that -- these potential projects more likely to occur than just using your free cash to pay down debt and have accrete to the equity holders?

Dale R. Black

I mean, I think we kind of look at each project specifically, and depending on what we view the risk or the opportunity -- set the hurdle rates sort of projects specifically. So it's hard to give you just sort of a blanket answer. Obviously, an addition or a minor type expansion at an existing property, it's going to have probably a lower rate than a new development you've -- for required IRR than a new development you go into -- where you're taking construction risk and things like that. But right now, like I said, we're being very careful in how we evaluate these things and until the right opportunity comes along, our -- the focus right now is delevering until we make sure we got something that makes sense.

Operator

Our next question is from Chad Beynon of Macquarie.

Chad Beynon - Macquarie Research

First, I just want to follow-up on Cape Girardeau. You highlighted that you recently introduced a new GM, and it'll take a little longer to hit your returns. Is the goal at that property, I guess, in the near, medium term to drive the top line to go into different markets, maybe ramp up the promotional play or is it still more in the cost containment side? Any additional color you can provide there would be helpful.

Arnold L. Block

Yes, it's really both. We think our biggest challenge is to increase top line revenue and doing it in such a way that's cost-effective. So we continue to test our mail [ph] in the surrounding areas. We were very successful in Q1. We did some further testing in Q2. The margin overturn wasn't as good on the reinvestment. But -- And then, we had some seasonality. We're just completing our first year. So we didn't know what to expect when the university let out this summer and what the ramp-up might be in the fall. So we're still really feeling our way around this first year of operations. We think as we work on top line improvement through better promotions, car giveaways, concerts and our high-end events -- hosted events, we're continually working on cost containment and better ways to be efficient in the casino and in the outlets.

Chad Beynon - Macquarie Research

Okay, and then secondly, Dale and Virginia, you mentioned some of the opportunities out there. I was wondering if you could comment on the recent enactment in Upstate New York, and if that's an opportunity you would look to pursue?

Virginia M. McDowell

Yes, I mean, we've been watching that very closely and I think that that's still kind of a work in process, obviously, in terms of legislation. But at this point, it's not anything that would be near the top of our list.

Operator

Our next question is from Ray Cheesman of Anfield Capital.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

Dale, a financial question for you. I know it's a little bit fast out-of-the-box, but with the Pen guys having completed the separates to their company and the creation of the GOPI financing vehicle, if something like that could substitute a capital structure that costs less than the capital structure you have; one, have you thought about it? Two, would you do it?

Dale R. Black

Yes, I mean, that's a -- we've thought a lot about it ever since the transaction was announced a year or so ago. I think it's incumbent on us to understand as much as we can about that process as we move forward. Our view on that is we look at it as another source of financing, just like you said, or as another source of capital. And we would consider it if the capital there is as cheap or competitive with other sources of capital that we have. But I think the real question becomes what's the implied interest rate, if you will, in the lease payment that you're adding on if you were to do a transaction like that opposed to cost of capital of a more traditional sources of financing.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

I understood. You guys highlighted in the press release the total of CapEx for this fiscal year would be between $58 million and $60 million. You then highlighted approximately $25 million and change or so was for Nemacolin. As we look forward for the next 4 quarters, 6 quarters, is kind of a $30 million, $35 million 4-quarter run rate, is that a good number for us to continue to rely upon without any projects in your current process?

Dale R. Black

No, I think more normally, our maintenance capital will be $40 million to $45 million a year. We just haven't spent quite as much in the first half of this year, which is really causing most of the change in the -- what we expect the spending to be for the fiscal year. Between -- it's a combination of things that led -- we had done sort of some substantial renovations at quite a few of our properties over the last couple of years and then just finishing some things up this year, but a normalized rate is more in that $40 million, $45 million a year range for maintenance capital.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

Okay. With Mr. Keel [ph] looking eager to move forward and get your Davenport property in his hands, and then saying he's going to spend about $100 million or thereabouts after that to move it on land and improve his market position, is $100 million kind of a number in the back of your mind as you're in that marketplace and you'd have to compete with that new guy eventually, and you talked about moving onshore, is that a working number that's realistic as that -- the evolution of that place continues to change competitively?

Virginia M. McDowell

No, I think you have to look at the fact that he is, essentially, this is a greenfield development for him and he is building from the ground up, if you haven't visited our Bettendorf property and you're not familiar with the Quad Cities, for us to go land-based is really just kind of the icing on the cake as far as our property is concerned. We have 2 hotel Tower's, we have about 500 rooms there. We've got a great position right off the interstate. We're attached to the Quad Cities riverfront convention center, we do a very robust convention business there. And we just happen to have a courtyard that's sitting right in the middle of our 2 hotel Tower's where we can develop a land-based opportunity that kind of ties all of this together. And, I believe, depending upon this architectural review that we're completing right now, that whatever it is that we do decide to spend, we will probably have more invested in our property than anyone else in the Quad Cities.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

Sounds good. One last one, if I may. As you look at the 2 newest properties, and your press release and your comments have highlighted the slower than hoped for ramp-up, is it slower than hoped for or have you guys as the prior, I think it was Kevin asked, have you reset your expectations for an IRR based upon what you've learned in the couple of quarters that you've been operational that maybe the ultimate earnings power or the ultimate market potential is different than what you thought going in?

Virginia M. McDowell

I think it’s just a very, very difficult environment to operate in right now. You've certainly seen that with pretty much any regional casino that has opened over the last couple of years. As it has become more difficult to operate in these markets as a result of all these external factors, our competitors and in some cases us, react to new openings with increased promotional activity and it just means that it's going to take a little bit longer for these properties to ramp.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

Let's hope they ramp -- we can all get back on some historical trends.

Operator

Our next question is from Dennis Farrell of Wells Fargo.

Dennis M. Farrell - Wells Fargo Securities, LLC, Research Division

Dale or Virginia, I was wondering in Florida, was the Speaker of the House, a roadblock in the past? There was an article out today saying that he might support a referendum there, just wanted to get some color on that.

Virginia M. McDowell

Yes, I'm not entirely sure and I got to be careful what I say here because I don't want to put words in anyone's mouth. I'm not entirely sure that we are correctly -- that we understand what Speaker Weatherford was saying or what's being reported right now. Based on the ongoing conversations that we've had with the Florida legislature, I think that the larger issue and what they're trying to avoid is that over and over again, they've come back to the legislature to make changes as it relates to gaming. And I think the legislature is trying to get to the point where they make a determination as to what it's going to be going forward and any changes after that have to go to the people for some type of a vote. I mean, this is very, very fluid right now. But I mean, I certainly understand that the legislature is getting a little bit tired of every single year, every single legislative session that -- they're coming back and being asked to make another determination as to what the state is going to look like.

Dennis M. Farrell - Wells Fargo Securities, LLC, Research Division

Right. And then staying on Florida, is there any update on the development of the Dana facility?

Virginia M. McDowell

Not that I'm aware of.

Dennis M. Farrell - Wells Fargo Securities, LLC, Research Division

Okay. And then I guess moving to just the size, some other companies have clarified the size of their NOLs. I was just wondering if you could put a number on that?

Dale R. Black

It's over $100 million.

Dennis M. Farrell - Wells Fargo Securities, LLC, Research Division

Okay. And then Dale or Virginia, actually this is probably more for Virginia, looking back at calendar year, this year -- this calendar year, when did you see like the big drop-off in consumer spend, was it January, March, I was just trying to get an idea for comparison reasons, where you kind of saw the weakness this year?

Virginia M. McDowell

Yes, as I had indicated the entire calendar year has been very tough for us. But I think that the biggest issue that we faced was in January, or certainly the harbinger of things to come with the introduction of the payroll tax increase. And that was a tax increase that, obviously, hit anybody who is working and getting a paycheck and they saw it the first paycheck that they got in January, and quite frankly, I think it really reset what the consumers were willing to spend as far as their leisure activity as a result of this. I mean, this was clearly, "my paycheck is less this week than it was last" and that continued for the entire year. We realized that it just wasn't going to get any better as we continue to kind of watch these economic headwinds. As I indicated in my remarks, as we looked at what was happening in the first quarter, we basically said, we've got to get in there and control what we can in terms of costs and our business processes because it doesn't look like wants happening out there is going to get any better.

Dennis M. Farrell - Wells Fargo Securities, LLC, Research Division

Right. And then just moving to Black Hawk. What is the current -- the competitive environment like with Monarch there? And also, I know they're potentially going to pursue a development of their property right next to you, if you could just give us some color there, that would be great.

Arnold L. Block

Yes, we have not seen any changes so far other than a name change on the side of the building. So we feel pretty good about how we did this past quarter. We improved our market share, and we think our plan is working well, but nothing substantial out of Monarch right now.

Dennis M. Farrell - Wells Fargo Securities, LLC, Research Division

Okay. And then my last question, in Pennsylvania, do you have the ability, if they do approve online gaming in Pennsylvania, would Nemacolin be able to participate in that? And I guess what would your share in that be, I guess, as a manager of the property?

Virginia M. McDowell

Yes, well, it's a Category 3. I think that as the state continues to look at their opportunities as it relates to online gaming, they're going to have to make a determination as to how each of the license categories can or could not participate in that. The state, or I should say the Commonwealth, has indicated, we believe, that language has been written that would enable them to form some type of a study commission next year to look at the entire gaming market in Pennsylvania. I believe that a study of online and what that might look like in the future is part of that, as well as what is happening as far as competitive pressures.

Operator

Our next question is from David Hargreaves with Sterne Agee.

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

Now that we've had some changes to the playing field, I'm wondering if you have any updated expectations you could share with respect to the Philly license?

Virginia M. McDowell

Well, it's always nice to have one less competitor, particularly one that would be considered formidable. But it hasn't changed our process in terms of what we're doing going forward. We have always, as I've said on the last couple of conference calls, we have always believed that we have the best project. That hasn't changed. And as I indicated, we're working very closely with Tower Entertainment right now in developing a really robust platform of non-gaming amenities that will complement the casino floor. And we like our location. We certainly like what we've been hearing from independent third-party, whether it's the city of Philadelphia or other studies that continue to put our project at the top of their respective lists in terms of either what it could do for the city of Philadelphia or what it could do as it relates to the Gaming Control Act. So we like where we are.

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

Is there any update to the time line?

Virginia M. McDowell

We go through the suitability process, the hearing process at the end of January. It is our belief that the Commonwealth would want to make a decision relatively quickly because this is, obviously, a valuable license for them. But we have no way of knowing when they will make that decision. Hopefully, in the spring.

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

You said New York is not in your top list of priorities. Would you mind sharing your -- what's on your radar screen right now?

Virginia M. McDowell

We're always looking at opportunities to create incremental value for shareholders. But, if you look at what's happening in Massachusetts right now, as these expansion opportunities present themselves, we look at what's it going to cost us to get in there, what's our return going to be based on whatever the requirements of the state are, and is this really the highest and best use of our capital?

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

Maybe Kentucky would be more up your alley?

Virginia M. McDowell

Kentucky would certainly be in our wheelhouse.

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

And in terms of other properties besides Kansas City, I mean, just looking at the room trends versus the gaming trends, I wonder if perhaps you guys consider yourselves to be under roomed in certain other markets? Wonder if you talk a little bit about possible room additions and what you're thinking?

Dale R. Black

I don't think it’s something that we necessarily consider ourselves short on rooms in most of our markets -- obviously, depending on what happens, Pompano would be a place that you would -- probably jump to everybody's mind as a room product might make some sense there at some point in time. But most of our properties now, if you look at our occupancy percentages and ADR and RevPAR, it hasn't changed a whole -- we're not running into issues in most -- and in too many of our properties right now.

Operator

Our next question is a follow-up from Ray Cheesman of Anfield Capital.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

I wanted to follow-up on David's question, Virginia. Strategically and opportunistically, you guys have been at the forefront of modifying your portfolio to best serve your future outlook. Are you happy with the portfolio right now? Or do you think there are any additional changes that might be coming down the road?

Virginia M. McDowell

Well, I think that we spent a lot of time talking about this on the last conference call. But as we've looked across the portfolio, one of the things that we have understood coming out of the recession is that our customers were looking for more value and we've spent a lot of time whether it was renovating our hotel rooms or introducing new food and beverage product or renovating our slot floors or whatever it might be that we identify as a specific opportunity at each of our properties, so that we can create incremental value. We will continue to do that, but as Dale had said earlier, we will do that with an eye to what our highest return is.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

So what you own now are keepers?

Virginia M. McDowell

Well, as the Executive Chairman of our board likes to say, everything is for sale but his wife and kids ...

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

Couple of things are off the table...

Virginia M. McDowell

And sometimes the kids were for sale, too. So to the extent that someone makes us an offer that we can't refuse, we will always entertain them.

Ray Cheesman - Anfield Group, LLC, Asset Management Arm

And then just more of a microscopic basis, Mississippi has become very competitive. You were very ahead of the ball on the Biloxi decisions you made. And, obviously, you've got this firm-wide strategic expense control program. Where does Mississippi shakeout? It just seems like it is what it is and it looks tough and it looks like it's going to stay tough for a long time.

Virginia M. McDowell

Yes, as Dale had indicated, part of our -- one of the big issues that we had was geographic as opposed to demographic. And Mississippi would probably be at the top of our geographic list in terms of issues. I mean, quite frankly, to the extent that there's been an economic recovery. It's been slower in the South than it has at any of our other markets. And it's largely because of the unemployment rate and the fact that a lot of industry hasn't recovered there and that's not going to change in the near future. This is why when we looked at our properties there, we looked at Vicksburg as being one of our best opportunities and certainly if you look at our operating results in Vicksburg this quarter, the investment that we made in the property and the rebranding that we did is starting to pay off, including increased market share. You can pick your places, I guess, my answer would be.

Operator

This concludes our question-and-answer session. I'd like to turn the conference back over to Virginia McDowell for any closing remarks.

Virginia M. McDowell

No closing remarks other than to say, thank you very much. Enjoy the upcoming holiday season, and we'll see you next quarter. Thank you.

Operator

To access the digital replay of this conference, you may dial 1(877) 344-7529 or 1 (412) 317-0088 beginning at 1:00 p.m. Eastern today. You will be prompted to enter a conference number, which will be 10037247. [Operator Instructions] The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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: Isle of Capri Casinos Management Discusses Q2 2014 Results - Earnings Call Transcript

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts