PENN Entertainment, Inc. (PENN) Q1 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Penn National Gaming First Quarter Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thank you, Demetra. Good morning, everyone, and thank you for joining Penn National Gaming's 2014 First Quarter Conference Call. We'll get to management's comments momentarily, as well as your questions and answers. But first, I'll review the Safe Harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as expects, believes, estimates, project, intends, plans, seeks, may, will, should or anticipates or the negative or other variations of these or similar words or by discussions of future events, strategies or risks and uncertainties, including future plans, strategies, performance, developments, acquisitions, capital expenditures and operating results. Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. Risk and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q. Penn National assumes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release, as well as on the company's website. With that, I'll now turn the call over to the company's CEO, Timothy Wilmott. Tim?

Thank you, Joe. Good morning, all. We're together here at Wyomissing. After my comments, I'm going to turn it over to our Chief Operating Officer, Jay Snowden; and then to our Chief Financial Officer, Saul Reibstein, to provide some further color on what we're seeing as we close out the first quarter and the balance of 2014. And we have a number of other people in the room today that will be available to answer questions regarding their areas of expertise after our 3 comments are made. Let me start by talking about the first quarter results, and clearly, especially the first 6, 7 weeks of the year, we saw very difficult weather conditions. And I want to commend our operations. I thought our properties reacted well and delivered bottom line results, given very soft revenue levels, that were encouraging by preserving their margins, and Jay is going to cover that in more detail. And so that's my only comments on the first quarter. I do want to comment on 2014 as a whole. As we got into the year, we clearly knew it was going to be a transitional year with the absorption of a lot of new supply coming on, putting pressure on Lawrenceburg and Charles Town, but it's obviously proven to be a more challenging year than originally expected. And we continue to see persistent softness with our regional consumer base that has us lowering our expectations for the balance of 2014, and Saul is going to get into more details about the thought process behind the guidance that we've provided in this release. But what does have me optimistic about Penn National going forward is our development pipeline for 2015 and 2016. We have the openings this fall of our VLT racing operations in Dayton and Mahoning Valley, both in Ohio. They are right on schedule and on budget for early fall openings. Also in the quarter, we were fortunate enough to be selected by the Massachusetts Gaming Commission for the Category 2 slot license in Plainville, Massachusetts. It's a terrific location right off Interstate 95 and Route 1. It's a $225 million proposal. We've started construction there. We had groundbreaking in March, and we expect to open this facility in the second quarter of 2015. And we have started construction with the Jamul Indian Village of our development with them in San Diego County. That is expected to open in the early part of 2016. Also, very recently, we announced our intentions to partner with The Cordish Companies in New York State, and specifically, last week, we received local approval in a community in Orange County for a proposed $750 million development. And we're just beginning the process there. We filed our $1 million application yesterday with the State of New York, and our final application is due on June 30, so there's a lot more to come in New York. But I believe we're off to a good start there. And love our site and think we have a very compelling application to present. So with all that, let's get into more details regarding operations in the first quarter, what we're seeing in the beginning part of the second quarter. And I'll turn it over to Jay.

Thanks, Tim. I'll mention a few words about Q1 and what we experienced in Q1 and then tee up the remainder of the year before I hand it off to Saul. Q1, there were a number of offsetting factors that allowed us to come in right at our Q1 guidance number. The consumer environment remains very challenged and fragile, similar to what we experienced the second half of 2013, most notably at the lower-end worst segments of the database, below $100, where we continue to lose visitation and trips. Secondarily, we continue to contend with saturation shock in a number of our key markets, most notably Charles Town, Lawrenceburg and I will throw in the State of Illinois now that there are over 15,000 video gaming terminals at bars and restaurants throughout the state. And we experienced anomalous weather conditions in the first half of the quarter, unprecedented in some markets like Toledo, where we had record snowfall and actually had to close our facility for 75 hours between January and March. Now the good news, despite all of that, property level margins were largely unchanged on a year-over-year basis despite revenues 15% down on a year-over-year basis. We actually experienced margin improvement in 2 of our regions, the Southern Plains and the West. REIT adjusted, corporate overhead expenses were down 20% on a year-over-year basis, so the property leadership teams continue to do a great job managing in this challenging environment and so does the corporate team here in Wyomissing. We believe the 20% reduction year-over-year is sustainable for the remainder of the year. And the last piece of good news in the first quarter is that the average daily spend per customer in our database throughout the portfolio actually increased 5% on a year-over-year basis in the first quarter. So those are the offsetting factors, the good news and the low lights that allowed us to come in at our Q1 guidance. With all that said, the last 3 to 4 weeks, particularly in the month of April, visitation trends have been very concerning across our portfolio of properties, most pronounced, I would say, in Lawrenceburg and Charles Town, but we are seeing it in all of our mature markets. The newer markets are holding up fine, but some of the more mature markets are soft. These concerning trends are what are prompting us to lower our guidance for the remainder of the year. I would add that, of the lower guidance, that about 50% of that is 2 properties in particular, Lawrenceburg and Charles Town. Just to give you a quick snapshot of what we're seeing here in April. If you look at Easter weekend, Friday to Sunday, it was last weekend here in 2014, it was the end of March in 2013, we're seeing visitation trends and revenue trends down 20% on a year-over-year basis. So I'm hopeful that we look back at this reforecasted guidance and say that we were playing a bit alarmist or the prophets of doom. But at this point, based on the trends that we're seeing in the business, we felt it was the prudent thing to do. So with that, I'm going to hand it over to Saul to walk you through some additional details on the guidance.

Thanks, Jay. As always, we have performed extensive property-by-property, line-by-line review of 2014 results to date and the trends we currently see. We've actually reviewed our quarterly trend results all the way back to 2011 in preparation of this year's guidance. We continue to forecast that our margins will hold at existing levels throughout the year, but most significantly, March ended very soft and April continues in that direction. Until consumer spending gains traction, we have to forecast the trends as we see them today. A few of the comments -- a few comments on the guidance bullets. Jay and Jim -- Tim and Jay have spoken about the new competition -- continued competition in Lawrenceburg and Charles Town. We have taken Sioux City out after June 30 of this year given the conditions at that property. We have revised preopening expenses for 2014 to include Massachusetts, which was not in prior guidance. And our blended tax rate -- our blended GAAP basis tax rate of 63% reflects the impact of permanent differences at a lower income base. We expect our cash basis tax rate to be the more usual in the range of 40%. A couple key statistics. Cash on hand at the end of the quarter of $288 million. Our maintenance CapEx for the quarter was $24 million, and we have adjusted, downward to $80 million, our expected maintenance cap for the year. Project CapEx in the quarter was $38 million, led by our $25 million license fee in Plainridge. And finally, weighted average shares are at 88.7 million. And with that, we'll take your questions.

[Operator Instructions] And our first question comes from the line of Joseph Greff with JP Morgan. Joseph Greff - JP Morgan Chase & Co, Research Division: Thank you for your elaboration and comments on the guidance for the balance of the year. Within the guidance, and I guess this is a directional comment and you can elaborate as much as you want, did you change your assumptions with respect to the 2 Ohio tracks? And if you didn't, I guess, why not?

We really didn't -- we didn't, Joe, change our assumptions on the Ohio tracks in terms of its overall performance. And in fact, I had a chance to look at the Churchill Downs results last night and -- out of Miami Valley, and I thought they were very solid. So we continue to believe that our Dayton and Mahoning Valley openings this year will be very successful. Joseph Greff - JP Morgan Chase & Co, Research Division: Great. And Saul, would you be able to quantify the impact from Sioux City in the 3Q and 4Q from an EBITDAR perspective?

Yes. Sure, Joe. Actually, the -- we're just not going to give individual property information, Joe. But what you have to remember or maybe consider is that, as a result of the closing, there will be a rent credit adjustment under our master lease terms that we have negotiated. So that will soften some of the impact of the closing in the rest of the year.

Joe... Joseph Greff - JP Morgan Chase & Co, Research Division: And that's obviously...

I'm sorry, Joe. It's Tim. In our master lease agreement, we negotiated this with GLPI, we knew the risk of Sioux City was there. So we agreed, between the 2 companies, that there'd be an adjustment in our rent obligation when we knew Sioux City was going to close. So that's what Saul is referring to with the offsetting -- rent expense affecting the loss of EBITDAR.

And our next question comes from the line of Steven Kent with Goldman Sachs.

It's actually Afua Ahwoi for Steve. Question -- just 1 question for you. How do you think, over the long term, of balancing growth by either managing contracts, which is obviously low CapEx, high, high -- high cash flow business, versus doing at it alone and owning and operate into higher CapEx needs business? And how do you think, over the long term, Penn will look like? Will you have a mix -- an equal mix of ownership properties or will you look towards more management?

I think I'll answer that first, and B.J., if you want to follow-up, please do. I think it's all based on the opportunities. We are certainly encouraged with the opportunity we have in southern San Diego County with the Jamul Indian Village. And really, really like the attractiveness of that opportunity and the ability to manage that facility for a 7-year period. If we get other deals like that, we'll take them all the time. That said, if we have opportunities like we're seeing in New York State, in an attractive location, 60 miles north of New York City, that require us to use capital to get very attractive returns on those developments, we'll do both. So I don't think we're going to favor 1 path over the other.

Our next question comes from the line of Joel Simkins with Crédit Suisse. Joel H. Simkins - Crédit Suisse AG, Research Division: Tim, we were obviously talking there before regarding upstate New York. I'm just curious in terms of how you're seeing the lay of the land evolve there. As you see, there's a number of decent cap -- decently capitalized folks targeting that opportunity. In terms of your relationship with Cordish, is this a property that you guys would sort of manage for them? Is there sort of an asset-light opportunity? And then following up, just again, what are you seeing in the capital region as well?

B.J., I'll let you take that one.

This is B.J. Fair. I think that with respect to -- we're looking at 2 different opportunities with The Cordish group in New York. In the Catskill Region/Orange County, I think we're very excited about the site down there. It is the -- we're currently finalizing the agreements, but the agreement as it currently stands, the property we managed dually by both entities, so it's not a capital-light investment per se. It is a 50-50 joint venture arrangement with them. With respect to the capital region, we are in -- we're looking in and around Albany for additional sites. I think it's very competitive landscape up there as well. A lot will depend upon what the minimum capital expenditure that comes out of the state requirement is, as well as making sure that we can find communities that we have to sell and host communities support in. So I think we're excited in both of those areas. I think we're very excited about the opportunity. And I think that in -- especially down in the Orange County region, I think we have a fantastic site that is very competitive with all the other known sites that we know out there that we're reaching against.

Joel, one of the things I do want to comment on New York that makes the Capital district a little bit more challenging for us is the requirement that there's protection on first supplements with the racetracks in those regions. And that's something that certainly dampens our enthusiasm in that region and is causing us to watch the level of capital requirement very closely. It just makes the investment threshold lower, from our perspective, to get the right returns when you have that obligation to preserve first supplements. Joel H. Simkins - Crédit Suisse AG, Research Division: Sure. And in terms of Plainridge, obviously, to say the least, things remain pretty fluid in Massachusetts. How long do you guys think you could have a runway in terms of you being open before the next full service -- at least the full-service casino opens up in that state?

It's difficult to predict. I'll ask Eric, after I'm done, to comment on the recall efforts. We've obviously watched closely MGM's desire to delay their award. But the western part of the state is not going to affect our location in Plainville, Mass. We believe right now that -- we open in the second quarter of '15. We probably have a 2- to 3-year runway of operating at that location before Boston opens up and then probably even a couple more years before the other location in southeastern Mass opens up. Very difficult to predict. We're moving forward as quickly as we possibly can. We certainly understand the recall effort, and we're getting the job started, 1,000 construction jobs with our development. And we're moving quickly to get this facility open to take advantage of this window of opportunity we'll have, being the only operation in the Commonwealth. But those are our expectations right now. Eric, do you want to comment on what we're doing from an effort with the recall?

Sure. Yes, there -- as many may know, there is a hearing in May at the State Supreme Court that will decide whether or not the issue of recalling the gaming act will appear on the November ballot. And there is a lot of speculation from both sides as to what the court will do. We're not taking anything for granted. We are out there full steam ahead, as Tim said, talking about the very real jobs that have already been created on our site in terms of construction, as well as the operating jobs that will be created that we are starting to partner with the community colleges in terms of training programs. And all of those are positive messages that we're sharing with the public. And should the Supreme Court decide that this goes on the ballot, we're very confident that voters will understand that the 10,000 jobs that this industry will create and the nearly $1 billion that floods across the border every year to Connecticut and Rhode Island are both points that the voters will readily understand are important to preserve the gaming act to protect and defend. So these laws have been challenged in other jurisdictions. We have mounted defenses against these in other jurisdictions. And again, we're confident that we will succeed should the court decide it goes to the ballot.

Our next question comes from the line of Felicia Hendrix with Barclays.

This is actually Dimitri [ph] for Felicia. I was just curious -- congrats again on the Massachusetts license, guys. I just was curious what your initial win per day metrics and expectations were in the interim when you're operating without any competition. And then after, what kind of impacts could we see going forward?

We actually -- and this is public as it was part of our application. This is Jay Snowden speaking. We anticipate, in the first couple of years, to produce revenue in the range of $250 million. So you can work backwards from there on the win per unit. It's around $500. Obviously, peaking on weekends, a little bit lighter than that on weekdays. And then once you get through to years 3, 4 and 5, depending on what the competitive dynamics are, we still believe, long term, this is a property that will be producing north of $120 million, $130 million for the long term even once the casinos in Boston and the southeast zone are up and running. So the first 2, 3 years are going to be the high watermark, and it potentially could last longer depending on the timing of the Boston and southeast zone licenses.

Okay, great. That's helpful. And on that topic, now that we have some more color on the Jamul position counts, what can we -- how should we be thinking about that property when it opens?

The win per unit assumptions for that market are obviously less than what we are were anticipating for Massachusetts given the competitive dynamic in San Diego County, at least South San Diego County with Barona, Viejas and Sycuan as 3 competitors. I think it's safe to use $200 to $250 win per unit assumptions for the slot business in that market.

All right, great. And one final one question. 2013, we saw position counts in some markets seemed to slip down a little bit. Are there any markets that you think we could see further capacity reductions in 2014 and then 2015?

I do. I think you're going to continue to see that in several markets, particularly the ones that have additional supply coming, such as the Cincinnati market with Belterra Park opening in a number of weeks, as well as Horseshoe Baltimore in that Baltimore D.C. market and quite frankly, even markets like Illinois, that I touched upon in my opening remarks, where you now have over 15,000 video gaming terminals in what is a pie of gaming revenue in the state that is largely flat to where it was last year but many more slices being taken out. Video gaming terminals in Illinois represented, just a year ago, under 10% of total gaming revenue in the state. And as recent as March of 2014, those video gaming terminals represented 27% of overall gaming revenue in the state and to the tune of $53 million in the month of March. So these are certainly acting as parasites on the bricks-and-mortar business in the state of Illinois, and I think you'll continue to see supply reduction consideration in markets like those and others where visitation trends continue to be a bit of a concern.

Our next question comes from the line of Thomas Allen with Morgan Stanley.

On New York, I know you -- I think you said in the past that your kind of threshold for ROI in Massachusetts is about 20%. Is that -- do you have a similar thinking around that $750 million investment for the Orange County property?

Thomas, when we look at ground-up developments, we look for free cash flow return of 7% or better. And that's what we used in Massachusetts, and that's what we have used in New York. And we feel very comfortable that we're going to be hitting or exceeding that threshold for the proposed development we have with The Cordish Companies in Orange County.

Okay. And then just in terms of initial investing. I mean, there's obviously the $1 million kind of bidding fee. A, is that refundable? And then b, are you -- in the past, people had to spend a lot of money on kind of consumer outreach and stuff like that. So how much do you think you have to spend in New York for these 2 potential properties before kind of winning anything and in case you don't win?

B.J., why don't you to start? And Carl, if you can supplement anything that is needed.

With respect to the application fee, the State of New York has made it very clear that the $1 million application fee is primarily for suitability purposes. And so the partnership has submitted -- we've submitted one for the Orange County area and one for the Capital Region area. To the extent that the -- when the minimum capital expenditures come out, there are 5 days after those numbers are made public that the application fee is fully reimbursable to the extent that they're -- the minimum capital expenditures are higher than you'd like to see. And as we said earlier, those fees, the state has been very clear about it, are really for suitability purposes. And so the cost will be what the cost will be. And to the extent that the suitability is conducted and it's not -- and that money is not spent, then there'll be some reimbursement. To the extent you spend more, there'll be more on that side. With respect to the predevelopment and the application fee and all the other -- I'm sorry, the cost of the permitting and application, I think that is typical to any of the standard type of developments that we would do in any of the jurisdictions going forward. Saul?

And I'll just note -- this is Eric Schippers. A lot of the expense for these types of projects are lobbying expense because you're out there seeking public votes. Here, you just need a resolution of support from your host community. You do not need a public vote locally. So there are less expenses related to securing host community support.

And we've already secured our local vote.

And as we look at -- again, in the Orange County region, we're looking -- we anticipate that it's probably somewhere between a $3 million to $5 million application -- or investment to be able to get to the point of submitting our application. And if and when we decide to submit an application or proceed in the Albany region, I think it would be a comparable amount there as well.

And in each instance, according to the JV documents, those would be split by the 2 JV members.

Helpful. The lobbying point is worthwhile just because, I think, for most of us, our recent experiences here have been around Maryland, which was a much more contentious situation, where there's a lot more money spent. Just on -- just one other question, just on the Hollywood St. Louis. The renovation is complete it appears, but then the first quarter got impacted a lot by weather. How should we think about the return on the renovation investment now going forward? And how long will it take to kind of start to get the benefit from it?

Sure. Thomas, this is Jay. What I would tell you is that the first quarter results -- and again, remember that Missouri is one of the states that reports on gross gaming revenues, not on net gaming revenues, so there are, obviously, delta between the 2. We are reinvesting less from a marketing perspective than we did a year ago with that property because we were under major construction at that time. So the headline number that's reported by the state may not be as exciting as what we're seeing on the net side and certainly, on the EBITDAR margin side. We're very happy with the results of that property. We actually had a record March there with record margins. And we are anticipating continuing to build on the visitation side of the business as well. But our overall trends are actually pretty similar, in some months, better on a net basis than what you see on a gross basis for St. Louis.

Our next question comes from the line of Cameron McKnight from Wells Fargo.

A question perhaps for Tim or Jay. Circling back to your guidance, just wanted to get a sense of what's changed in the outlook since you last gave guidance 2.5 months ago? I mean Q1 was obviously severely impacted by weather. Has the consumer weakened a little bit since Q4? Or is there a little more concern on your supply? If you could give us some additional thoughts there, that would be very helpful.

Sure, Cameron. What I would tell you, this is sort of how Q1 played out. There were obviously significant weather impacts the first 6 weeks of the quarter, taking you through, call it, mid-February. Mid-February to mid-March, business was quite strong, and weather had subsided so we benefited there. And really, toward the end of March to where we are now in April, business has softened up to concerning visitation patterns that would have prompted us to lower our guidance for the remainder of the year. So with all of that said, it's a relatively small sample size that prompted us to lower guidance. But nonetheless, the consumer visitation and the operating environment has softened up to the point where we felt it prudent to lower guidance. Hopefully, we look back and reflect and say that perhaps we were a little ahead of ourselves and that this was a conservative approach. But we're comfortable it's the right thing to do given what we're seeing in the business right now.

Right. Got it, Jay. So is it fair to say that guidance perhaps reflects more April run rate or Q1 run rate?

I think you're looking at a blend of the 2, but more April than Q1.

Okay, got it. And just as a follow-up, could you give us a little more color on the impact of Easter on April, April to date and how that's impacting comparisons?

Sure. Well, the comparison that I provided earlier really was an apples-to-apples, same-store, same Easter weekend, though it actually -- they were in different months. Easter, from a calendar perspective, was the very end of March last year. And as you know, it was last weekend here in April '14. And visitation and revenues, apples to apples, same store, were down 20%, so that gives you a feel. Now not -- the entire month of April hasn't been down to the tune of 20%, but I'm just trying to give you some perspective on what we're seeing and trying to look at it on a comparable basis year-over-year.

The -- we have talked about this that Easter week was a confluence of 3 things. One is April 15 and tax day, which obviously doesn't change year-over-year, but it included Easter and it also included Passover, which, we know from our experience in this business, certainly does dampen visitation. So as Jay said, that was just a quick snapshot of Easter year-over-year. We certainly watch daily, property by property, our revenue trends, and hopefully, things will get better from what we've seen in the first 3 weeks of April.

Our next question comes from the line of Carlo Santarelli with Deutsche Bank.

Most of my questions have been answered. But Saul, would you mind just outlining project CapEx spend for the balance of this year?

Sure, Carlo. Our budget for the rest of the -- for the full year looks like about $72 million in Massachusetts, $70 million in each of Dayton and Youngstown, as well as the other big item, of course, will be Jamul at about $84 million.

Okay. And that $70 million spend, that's not inclusive of any incremental license fees or any of those things, right?

It includes, in Massachusetts, the license fee that we've already spent, but nothing in addition to that, correct.

Got it. And then really quickly, if I could, I know you guys bucketed it a little bit, but if we think about the revision of adjusted EBITDAR, obviously, you're saying half is coming from the cannibalization of the other 2 properties. We could make our own assumptions for the impact of Sioux City, but let's say roughly 1/4 of it is left over. If we looked at the 1Q levels and you didn't have the information that you have already on April, do you think that last quarter of the revision, so to speak, would have been roughly unchanged?

Carlo, this is Jay. I do. We felt fine. We've had analyst and investor meetings as late -- as recent as mid- to late-March and felt fine with where we were. This really is a bit of a reaction to what we're seeing in the business right now. There is noise in April. Tim went through some of the details around tax day and Easter and where it landed. Some of those factors are comparable year-over-year and others are unique to April of 2014. But nonetheless, it's been enough of a concern that it did push us to conclude this was the appropriate thing to do. But sitting here a month ago, we felt pretty good about where we were for full year guidance.

[Operator Instructions] Our next question comes from the line of George Smith with Davenport Asset Management.

Changing subjects. I was wondering, if we have the opportunity to participate in a deal alongside the folks at Gaming and Leisure, is it anticipated that Penn itself would have to put up much in the way of capital or that GLPI would shoulder basically the majority or all of it?

Yes. I think it's a case-by-case basis, George. There could be opportunities where Penn would not have to put up any capital, it can just be purely a manager, or there could be the situation where we put up capital and acquire all of the non-readable assets, like gaming equipment and FF&E and such. So I think it's a case-by-case basis. If we were to do something with GLPI, it certainly would be an asset-light model or it could be just a pure management contract.

And as far as just Penn as an acquirer of assets on its own, are you seeing anything new in the market? Any change in expectation on the part of sellers?

No, not really. I think we saw, in 2013, with the coming on of GLPI, that we saw an elevation of multiples in the regional gaming space for the public companies. But nothing has really changed from what we saw in 2000 -- last year in 2013.

Our next question comes from the line of Chris Daniello with Centerbridge.

Can you give me a sense of sort of how you think about the weather-related impact on revenue for this quarter versus a year ago? Any sort of color there would be helpful.

Sure. This is Jay. There was noise in Q1. It's very difficult to parse through the results and have a good feel for how much of it was weather. Certainly, the first 6 weeks of the year, January's -- broadly speaking, January's results we think were significantly impacted, the first couple of weeks of February. But then we had a very nice run from mid-February to mid-March, where that may have been some pent-up demand from cabin fever of the first 6 weeks of the year. So it's very difficult to put your finger on exactly what the impact was for weather. We tried to stay focused on the areas that we can have control over, which is why we certainly speak a lot about our property level and corporate overhead expense reduction initiatives and certainly, our focus on operating margins. But there was also the noise of the consumer. It's still -- they're fragile. It's a pretty weak environment and difficult to predict, as well as you've got saturation in key markets. So it's, I would say, a confluence of all of those factors. Very difficult to put your finger on exactly what the impact of the weather was in Q1.

We do know, Chris -- we do track property-by-property weather-impacted days year-over-year, and we probably had 25% more weather-impacted days in the first quarter of 2014 over 2013. Certainly, it's there. We just don't spend a lot of time trying to quantify it because you just can't get a good handle on what pent-up demand comes back to you when the weather turns good.

Our next question comes from the line of Kevin Coyne with Goldman Sachs.

Most of my questions have been answered. But I was just wondering what the segment that you're calling out for customers spending less than $100 per visit. Can you give us a sense of what percentage of your revenue mix that they comprise?

Sure. This is Jay. That segment represents approximately 25% of our overall rated business. And it's not that we're seeing necessarily positive trends just ahead of that work segment. That's just where the softness in visitation is most acute right now in our database. We are actually seeing some nice trends at the $400-plus segment, which we consider to be VIP, $400-plus average spend per trip. But it's the lower end where we're losing the majority of the trips in our database.

That's helpful. And just as a follow-up to that, so the -- I guess the metrics for that segment are trending lower, but is it safe to assume that their frequency is down in addition to spend per visit? And secondly, can you give us a sense -- in that group, is that like a working-class group? Or is it mostly seniors? Or can you give us any demographics on that?

Sure. To answer your second question, first, it's a mix. You have some of your senior elderly customers and you have demographics across the board. I think that comprise the bulk of that group there. We really haven't seen much of a degradation in spend per trip in any of these segments, including the less than $100. This is purely a visitation issue. Visits are down beyond what we're seeing in terms of spend. Spend is largely either flat or in many cases, particularly as you work your way up the work[ph] segments in our database, we're seeing nice increase in spend per trip. We're just losing trips.

Kevin, we've done some research out there with regard to these consumers. And clearly, we've talked about a new norm. The customers are saying that they're not fully employed. They don't have the discretionary budget that they had either because they have made large ticket purchases last year or they're not getting enough employment. I think households under $75,000 out there in our regional markets are still hurting and making a conscious decision not to engage in our products for budgetary reasons.

One thing -- to tag on to Tim's comments, in some of the surveying we've done of our customers, the good news behind what we heard is that their enthusiasm around gambling is where it's always been. It's more of a dollars and cents is what they have available to them in the form of disposable income, but they enjoy gambling. And when the disposable income picture changes, they anticipate their behavior to go back closer to what it was in the past.

Our next question comes from the line of David Hargreaves with Sterne Agee. David Hargreaves - Sterne Agee & Leach Inc., Research Division: I wanted to find out if you had any reaction to the Harrah's intention to close their Tunica property. It's a big reduction in capacity, but it's also a very good location. And I'm just wondering if you have any thoughts about whether repurposing that location makes sense from your standpoint.

This is Jay. I'll take the first stab at that and see if Tim or anyone else wants to respond. Listen, I think you're going to see closures like this in oversupplied markets, of which Tunica currently is. Atlantic City is another example of that. With regards to how to repurpose that asset, I think it depends on what the potential uses are. I think that Caesars did a fine job trying to make that property work as a casino and hotel, but you've got too much supply in the market. And if you're EBITDA negative operating a property, then you have to seriously consider whether staying open makes sense to your business.

And we know, David, that a lot of that Memphis business that previously visited the Tunica market 10, 8 years ago, the growth of the Delaware north operation in west Memphis, Arkansas, clearly has taken a big bite out of the Tunica market, as Jay suggested. There's just an imbalance between supply and demand. So I personally don't see a repurposing of that asset because that market doesn't need any incremental supply coming back to it. It needs the opposite. David Hargreaves - Sterne Agee & Leach Inc., Research Division: Okay. And one more thing. If we could talk for a minute about Toledo and what you see in terms of where that property is in terms of penetration into the Detroit market and what you expect this year conceptually, I appreciate it.

Sure. Well, Toledo, interestingly enough, is following several of our previous openings in terms of ramp and difficult, again, looking at just Q1 because of the weather noise. But absent weather -- again, I've mentioned earlier that Toledo had the most snowfall on record in the history of that city, and we had to close for 75 hours between the 3 months in the first quarter. You pull those factors out and we had a very nice first quarter and that property continues to ramp similar to what we saw in markets like Grantville, Pennsylvania and the like. So we're happy with what we're seeing there. We don't have any new competition in the near future, whether you're speaking to Michigan or on the Ohio side of the state line, and so we're encouraged by what the future potential is of that property. David Hargreaves - Sterne Agee & Leach Inc., Research Division: Do you think you're growing the immediate surrounding area? Or are you taking more away from the Detroit casinos? I'm just -- I'm wondering how that shift is going.

Sure. I think Detroit has held up quite well as you look at it in relation to other regional markets. So there certainly was some movement of business depending on where you live and proximity and the length of your drive to Detroit versus Toledo. But I think for the most part, you're seeing Detroit hold up fine and that Toledo has largely grown that combined Detroit, Toledo market.

Our next question comes from the line of Dennis Farrell with Wells Fargo.

Tim, I was wondering if you could comment on the public reports out there of the sale process for the Cosmo in Las Vegas and your potential interest there and how you would finance that.

Well, we certainly have read the news reports about the potential sale, and we've seen reports of interest at $2 billion level. We think that's a bit above the worth of the asset. If we had to do it, we'd probably need a partner to do it to make it work, given our current capital structure. But I think there's a lot more to come there. It's still very early, and we have not actively engaged in looking at that asset to date.

Okay. Is there anything in else from Las Vegas that is of interest at this time? Or is it still tough to find a good asset for Penn?

It is, and we're going to continue to look over time. We actually like the attractiveness of the opportunity in New York and the returns that are associated with our proposed development with -- in Orange County and obviously, the other things we have in the pipeline that we highlighted previously. So we still have an interest to get the right asset on the Strip in Las Vegas. Our database continues to grow and get stronger as each month passes. Eventually, we're going to get there. It's just difficult to say where and at what price.

There are no further questions registered. Mr. Wilmott, I'll turn the call back over to you.

Thank you, everyone, for your attention during this call. We look forward to getting back together in about 3 months. And hopefully, the consumer starts to rebound, and we can talk about, as I said at the start of the call, our expectations for 2015, 2016 as our development pipeline materializes. Thank you, everybody.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.