Boyd Gaming Corp (BYD) 2002 Q4 法說會逐字稿

Thank you for standing by and welcome to the Boyd Gaming fourth quarter earnings result conference call. This call is being recorded. With us today from the company is the President, Don Snyder, and the Executive Vice President and Chief Financial Officer, Ellis Landau. At this time I would like to turn the conference over to Mr. Landau. Please go ahead.

Good afternoon, everyone. And welcome to our fourth quarter and 2002 year end conference call. Let me just caution you that our discussion today may include some forward-looking statements.

Actual results may vary from what's included in those statements. The variances may be material and we refer you to our public filings for the risk factors you need to know before you invest. I would also like to say that in addition we are broadcasting this call at our web site at www.boydgaming.com and at www.firstcallevents.com. Joining me today is Don Snyder. As you know, he is the President of our company, and also here today is Keith Smith, our Chief Operating Officer and Bob Boughner, the Chief Executive Officer of Borgata, our development in Atlantic City, and the latter two will be available in our question and answer period.

A short time ago we released our fourth quarter and full-year earnings, and we are pleased with the results.

Our fourth quarter EPS -- and I will use adjusted numbers to eliminate from GAAP accounting, pre-opening expenses and certain nonrecurring items, was our third best ever topped only by the first and second quarters of 2002 and a penny share better than the third quarter of 2002. For the full year, we exceeded a dollar a share for the first time.

We had record revenues, record EBITDA, and record EPS. Every operating unit contributed, as we had all eight that operated in both years. [have] post year over year gains. In the year we also made great construction and development progress at Borgata, our new Atlantic City resort that we own with our partner, MGM Mirage, and that we expect to open months from now. We reduced our debt during the year and we completed three successful financings, one with our bank group and two in the public note market, and they extended our maturities considerably and lowered the coupons that are on our outstanding notes.

We also saw our stock go up 116% for the year, one of the best stock performances not only in our industry but among all equities in 2002.

Let me briefly review the results that you saw in our press release. For the fourth quarter, we reported 24 cents per share fully diluted, and that's on the adjusted basis that we will be using when we discuss our numbers.

That compares to 15 cents a share in the fourth quarter in 2001. That's a 60% EPS increase. Revenue in the quarter was up almost 15% year over year, with the drivers being Delta Downs slot operations that started just a year ago today, Blue Chip [dockside] operations that began in August, and good strong business at our downtown Las Vegas properties.

The properties generated EBITDA in the quarter of $72 million before corporate expense and $65.5 million after corporate expense. Both about 15% increases over the prior year.

Taking out Delta Downs to look at a same store basis, EBITDA numbers are up in the 4% to 5% range.

The year over year comparative strength came for the most part from our Nevada operations where the Stardust EBITDA was up a bit, Sam's Town Las Vegas was up very nicely, meaning about 13%, and where downtown Las Vegas really knocked the cover off the ball, a record both in revenues and in EBITDA.

In fact, EBITDA beat the prior record which was in the December quarter of '01 by 12.5% and actually went over $14 million for the quarter.

Central region properties were a bit more mixed. Blue Chip was the best performer of the group, revenue was up 17%, and with the full effect of the tax increase that came with Dockside in August not yet showing up, that will happen in 2003, EBITDA was up 23% over, $23 million.

Sam's Town [Tunica] had a tough quarter. We added 225 rooms next door. At the beginning of the quarter when we acquired the old Isle of Capri property. At the same time we took out about 200 rooms from the main building for refurbishing so we really didn't have the benefit of the room anchor during the full quarter.

We promoted fairly heavily, we got the revenues up, but profits did fall. In Illinois, the tax increase that occurred in July was the main reason for Par-A-Dice to show an EBITDA decline but softer revenues also contributed to that decline.

And Delta Downs didn't show the sequential quarter to quarter earnings growth we had hoped for, but there were extenuating factors, the weather, which was a hurricane alert in October that disrupted business for a number of days, and construction along I-10, both of those were negative factors, and we do expect to improve on these numbers as we get into 2003. For the year, we earned $1.06 per share.

That's up from 48 cents in '01. That's a gain of 120%. It was by far our best year ever. EBITDA from our properties before corporate expense broke through the $300 million mark. And after corporate expense, we did $274 million for the year. That was up 23% over the prior year and 12% when you take out Delta Downs and look at a same store comparison.

As I mentioned, all units were up year over year, led by Blue Chip which did over $90 million in the year, Par-A-Dice which did almost $54 million, topping the year before even though we had half the year with the higher taxes.

Downtown Las Vegas, which did close to $47 million in the year and Sam's Town Las Vegas which came back very nicely and did 31 million.

So we think that's quite an impressive performance for 2002. In the fourth quarter, just to give you some other information, we had preopening expenses, they were 3.6 million. That related all to Borgata, our Atlantic City development. We also wrote down assets in the quarter as we decided to sell them, and we also, in our refinancing that we did in the quarter, we took a loss on the early retirement of debt, and the press release goes into this in some more detail, so I won't do that here, but those were some of the other factors that appeared in the numbers.

With higher capital expenses in the quarter, together with the costs of the refinancing, both the issuance and the call of the old debt, actually paying interest on the debt that was tendered, our debt went up in the quarter about $33 million. That is, by the way, adjusting for the notes that had been called by netting out the cash that we segregated for the call. That really wasn't done until the end of January.

So it went up 33 million to $ $1.124 b. Another reason the debt was high -- didn't go down as much at the end of the quarter or -- I should say went up by that amount was the New Year's Eve effect, because our properties need a lot of cash at the last day of the fourth quarter, the bank debt rises at that particular measurement date, so debt did go up by that amount in the quarter.

The refinancing we did in December was quite successful. We issued $300 million of senior subordinated notes with a coupon of 7 and three quarters, and we called $250m of our senior subordinated notes with a coupon of nine and a half.

So not only did we lower our coupon but we extended our debt maturities, in this case by over five years.

Let me give you a few statistics before we get into the Borgata. Fourth quarter cap ex was $48m, $40 million of that was for maintenance cap ex, and the other $8 million was for expansion.

It was the purchase of the Isle of Capri property in Tunica, Mississippi. Cap interest for the quarter was $4.2m, that's capitalized interest, and that was Borgata related. It is on the investment we have made in that joint venture. Cash at the end of the quarter was $92 million. That is abnormally high, as I mentioned.

It had a lot to do with the timing of the end of the quarter at New Year's Eve. We did not buy back any stock in the quarter. Stock buy-backs were zero. And there was very little equity issuance pursuant to options. The actual number of shares outstanding at quarter end was 64,800,000, and the average diluted shares during the quarter, for the calculation of earnings per share was 66.7 million shares.

Now to mention the Borgata which we are now in the home stretch. We continue to look for a summer opening. We hope it's earlier in the summer rather than later, but it is scheduled for this summer. We will probably come in a little over the original budget of $1.035 billion, but we didn't build the original Borgata. Upgrades and scope changes have made this property better than what we originally planned and designed.

Had we built the original Borgata, it would have come in under 1.035. We feel the property will set a new standard in Atlantic City and in very many ways and we're very excited about how things are going there.

I would like to turn the discussion over to Don Snyder now who will talk more about Borgata and other matters, after which we'll open it up for questions. As I mentioned we have both Keith and Bob here and in the question and answer period they will be able to address matters related to Borgata and our other properties.

I'll turn it over to Don Snyder.

Thank you, Ellis, it is a pleasure to be with you all today. This company is doing very well and the results I think reflect that. That it's doing well in terms of our strategy which was tested on September 11th of '01, as all of you know, and the events and the aftermath of that tragedy on September 11th. But also, in view of economic and competitive conditions that have been significant. So we feel very good about the strategy and how it's serving the company and our shareholders. We also feel extremely good about operations. That's reflected in the numbers. We have Keith Smith here. He has a tremendous amount to do with the operations and the quality of that side of our business, and so his being here to answer any specific questions you have I think is a reflection of the confidence that we have and the respect that we have for the job that he's doing. And then finally, in terms of growth, and particularly the Borgata, as we have told you consistently over the past several quarters, the Borgata is our number one focus in terms of growth, and we're very pleased with the way that project is moving as we head into the home stretch, and Bob Boughner and his team have done a spectacular job and we're pleased that he's here to answer any specific questions that you have related to the Borgata as we enter this last few months of construction. In terms of operations, as Bill Boyd stated in our press release, we are extremely proud of our company's results for the full year 2002, not only for being, by far, the best ever in terms of revenue, EBITDA, and adjusted net income, but also for the breadth of the year over year gains. Every unit recorded increased EBITDA, as Ellis mentioned, and that was in tough economic and competitive environments. Our Nevada operations were particularly impressive, given the difficult business conditions, and that segment reported its highest annual EBITDA in six years operating out of the same basic properties. In terms of growth, the Borgata, as I mentioned before, continues to be our focus, but there are other things that perhaps are on the horizon that I'll touch on just briefly that speak to opportunities as we move forward. But the Borgata I will talk about first and just reinforce what Ellis has said and what I think you'll hear Bob say in response to any questions that you have. We are extremely pleased, and you saw that in Bill's comments had in our press release with regard to the way the Borgata is coming out. We had very high expectations for that property and in any regard that you look at the property our expectations are being met and/or exceeded. Whether you look at the construction progress and the process that's been put in place to manage that project, whether it's the physical plant -- if you've been in Atlantic City recently you can see at least from the outside, whether it's the management team, which from the very top down is a first-class management team and gives us great optimism for the operating side of the business as we move forward. We're extremely pleased with the interest that we've had from a general employment point of view. We have had something now approaching 40,000 applicants file for positions at the Borgata. That is something that encourages us and reinforces what we have felt from the beginning, and that is that we will have the ability to hire the quality of people that will be able to deliver a type of experience that is extremely important as we open this new property. I think finally, as you look at the Borgata and see how it's coming together, those of us that have been close to it and watched it and been in the building recently, there will be a feel or a style to that building, in terms of how the customer experiences the Borgata, that we feel very good about, and we are extremely excited as we now move into the final few months. The physical plant is progressing very nicely, as I said. We feel very good about both what we have built in terms of what we had planned but also the enhancements to the property that Ellis alluded to, make us feel very good about both how the property looks as well as how it will be received and how it will operate. The exterior of the building is virtually complete in terms of the glazing and so on, the elevators are being installed and in many cases fully operational. The tower itself -- the inside of the tower is progressing extremely well. The mill work is being done through the 37th floor. The flooring is installed. The F and the E is installed through the 25th floor-or close to the 25th floor, and the rooms in the lower part of the tower are fully complete, and those of you that have seen the mockup rooms that we did at the outset, the renderings of the room, I think you'll be incredibly impressed by how they actually came out, for those rooms that are already complete. So we feel extremely good about the room product. This is going to be a very impressive room product in any market and certainly it will have an impact in the Atlantic City marketplace. The low-rise, the casino, is equally impressive in terms of the impact that we feel it will have in the marketplace and how it will impact the customer. It is progressing exactly as we had hoped, both in terms of scheduling but also in terms of impact. The restaurants -- and some of you have perhaps seen some of the previewing that we have done, with an event in New York City with our chefs and with our food and beverage product, but as you see the physical plant that those facilities will operate in, I think you'll come away with an even better feel for how that product will be positioned in the marketplace and the excitement that will be created from it. So with the Borgata, we are incredibly enthusiastic and very pleased with the progress to date and look forward to these final few months. In terms of looking beyond the Borgata, and we try not to do that too much, but we do have a company that has substantially expanded its base of business, with some very well timed and very well executed acquisitions in the past few years and those properties do provide us as we look at master planning, those properties, the opportunity to continue to grow those businesses. We feel good about the most recent addition to our portfolio, that's the Delta Downs property, and particularly the opportunities continue to grow that business as we look forward and as we look at the potential of adding a hotel to that property as we move forward with the master planning of that particular property. The Stardust, we have said consistently over the past couple of years, that we consider that to be a long-term strategic asset, that 61 acres that we have here at the Stardust continues to improve in terms of how we see the market developing and the opportunities that that particular asset presents in a market that continues to improve with obviously Larev and other improvements to the north end of the strip. We continue to monitor, as I think all of you know, the new jurisdictions in the country that are looking to expand gaming are numerous. We follow those opportunities. We're not going to jump at something that doesn't make sense, but we're certainly monitoring what is going on in that world. With that, we'd be pleased to answer any questions that you have and take at any comments that you have for us.

Today's question and answer session will be monitored electronically. If you would like to ask a question you may do so by pressing your star key followed by the digit one on your touch tone phone. Once again that is star one for a question, and we'll pause for a moment. We will take our first question from Larry Klatzkin, with Jeffries and Company.

Hey, guys.

Hi Larry.

A couple questions here. Delta Downs, any idea to quantify what the effect of the road construction and the hurricane preparation might have been?

Not a lot of precision, Larry. I think the hurricane was several days' worth of business. If you know - if you've seen the numbers that were released, our only under two hundred dollar win per day month in October and I think we lost several days before and after the hurricane coming into that area, it's tough to be precise, but that clearly was the driver of October's -- October being down. The road construction's hard to quantify. There is clearly a lot of -- if you've driven in that area, some of what we're -- what were small and short trips got greatly extended into an hour, two hours, for a half-hour trip. So I think that could have kept some people away.

That's finished as of when?

That's not finished.

No. The road construction, we believe, based on talking to the State, both Texas and Louisiana, will run through Q 2.

Through Q2. We should expect, not a 17 and change margin, but something reduced because of that or revenues lower, or both? ^.

It's hard for us -- we can't really quantify it so we don't really want to forecast anything as to how that will play into all the other factors that were in there. It did have an effect in the fourth quarter. Tough to say how much it will be going forward.

Okay. Well, let me ask you this. If the road construction is all finished and done and obviously you're not preparing for a hurricane during the summer, could your margins be in the -- would you hope to have your margins above 20%.

We said all along our goal was to have the margins well into the 20s. We're making progress and we're a little disappointed that we got to the point where we didn't get to show that progress in Q4, but as our hope as we go into the year is to resume that progress. It's hard to say when it will happen but our goal remains to be well into the 20s with Delta Downs.

Okay. Then as far as Illinois goes in additional positions, if that happens, do you get a benefit at Par-A-Dice? Does that mean a lot for Par-A-Dice, and what do you think the chances are?

First of all, we would love to have more positions and I think that's a way of saying that we do benefit from it. That property has been very, very productive. It could benefit from additional positions, particularly on the weekend, and we certainly hope that the legislature sees the wisdom of increasing the position.

Do you guys think -- are you up on what's happening? What do you think the chances are?

We have learned -- we have learned it's very difficult to predict that and particularly in Illinois perhaps.

Good point. New Jersey taxes. I mean we've had everything from giving a long speech to [inaudible] saying it's not going to happen. Do you have an opinion on what you'd like to state, what may or may not happen?

I think -- this is Bob Boughner. Clearly the governor has some real and legitimate tax issues that he has to solve, but he has reached out to the only industry in the state that pays a gross revenue tax to solve that problem, and it's our view that while there is some support in the legislature for finding additional sources of tax revenues, that what's on the table now is unlikely to be affected in the next few months.

Okay. Okay. You're not worried about it.

Any increase in taxation certainly would have an adverse impact on operating results, but at this point in time, our view is that what has been proposed by the Governor in its present form will not likely pass the legislature.

Okay, good, good. I agree with you. I wanted to get your opinion. As far as the scope changes in the Borgata. Can you just talk about some of the things? Obviously they are positive. Could you just talk about some of them?

Surely. We felt that the original Borgata plan did not contemplate having a race book or a large poker room, and after our assessment of the current marketplace and also the timing of the entry of MGM Mirage into the marketplace, we went ahead and increased our gaming capacity in order to facilitate a 36-table, approximately, race book and -- rather, poker room, and a 50-seat race book. We have also added an employee parking garage to provide the optimum position for employee parking rather than having a lot of surface parking for employees employees, we'd put them in a garage. We also have determined to deploy ticket in/ticket-out technology, using the ACSE platform, to provide for a much more state-of-the-art transaction processing for jackpot payouts, so that our customers' bank roll becomes extremely portable for them, because we really believe that with the great success that the easy-pay system has achieved in Atlantic City marketplace, that that's the way to go, only we chose a little different platform for a variety of reasons. We also are in the process of, in conjunction with MGM Mirage, developing a surface parking lot, which will push our total parking count to over 7,000 spaces at or about the time of our opening.

Okay. That's good. That's good. I guess -- I guess the last question is, you know, you guys have always looked at acquisitions and stuff, and I know you have your hands full with the Borgata. If some opportunities are maybe coming up, are you guys still looking or at this point you want to get through the next year and what's going on and you've kind of taken a step back?

We, I think, as you know, we constantly monitor what's going on. We have conversations from time to time. But we have nothing specific to discuss at that point in time as you suggested the Borgata's extremely important to us. I think the acquisition that we made of Delta Downs came at a good time, but I think that our eyes are very much on the ball in Atlantic City and we expect to stay there.

Do you guys have any guidance at all you can give us as far as earnings go for maybe the first quarter for '03?

No.

Okay. Thanks, guys. I appreciate it.

All right. Thanks, Larry.

Next question comes from Ken Green, Boston American.

Yes, a question for Bob. A lot of analysts have said that you're breaking the bank by the pay schedules, offering six- six-figure numbers for catchers, high-end rollers, that kind of stuff. I just wondered if you would talk about whether you will see any escalation? And then how much will you overstaff before you start .

Let me break your question into two parts. If I understand the first part of the question, is that we're ratcheting up the pay base, in Atlantic City, do I understand it corr--?

That is correct.

That would not be our view. There are certain positions where we went after certain discrete individuals. We identified them as being the best fit for Borgata, and there are a number of other -- we have a staff now that approximates a little over 200 people, and we are very comfortable that we've been able to attract the talent to the project within the numbers that we felt were going to be required. I feel that those reports, should they be the case, are probably a bit misguided.

I would like to just enhance that a little bit by saying that we have found consistently that the product that we're building is much more important to attracting the right quality of people than the salary structure that goes with it. And so I think that what Bob says is something we feel very strongly about.

And the second question is --

The second question is, while I don't remember how many applications you had -- what, 60,000 or something like that?

We have just a tad under 40,000 --

Okay. 40,000. How many employees at the start and how many will it be overstaffed to make sure the opening is good where you can gear it down later?

We don't intend to overstaff the property at all. We don't believe that overstaffing the property with regular full-time employees makes any sense. It really doesn't enhance the guest experience and creates a level of disappointment in the operation going forward. What we do intend to do, of course, as all other operators in Atlantic City do, is to capitalize on the seasonal work force that will come in to be a part of our opening, and then also make, where appropriate, use of part-time employees. But in terms of our staff overall, we do not intend to overhire to get us through the opening. One other way that we will get through that opening is by borrowing employees from Boyd Gaming Corporation properties. We have a number of volunteers that will come out and fill in some of those roles. That's planned regardless of what happens going forward. Our staff size will be approximately 5,000 people at opening.

Approximately 4000, 4100 of which will be regular full-time employees.

And then a question being about who you're trying to capture, you know, in the marketplace? I mean, there's been a lot of reports written about all of these [recinos], if they're within a hundred miles, are going to be huge competition. Are you trying to capture a lot of middle-gamers, high-end gamers? And, you know, what will you be doing about say, you know, beverage margins, room margins, all that kind of stuff vis-à-vis the other people? Because some people have said these properties won't even EBITDA what some of the other properties will in the city, which is kind of being harsh?

Yeah, I would agree, it is being harsh. With regard to the competition from Recinos, I'll answer the question this way -- Borgata is a property that has been positioned to attract customers who want to trade up. We did substantial research before we drew a line on paper in Atlantic City to determine the optimum proposition for us. And what we learned was that at every level of the market -- from the bluest of collar to the whitest of collar, they all want to go to the next level. So we positioned Borgata as a trade-up. And that is at every level. Yes, we will get a substantial amount -- we would anticipate a substantial amount of mid-level business and we are certainly going to take advantage of the opportunities that our facility and operation will afford us with respect to attracting some of the higher-end business as well.

And then one final question regarding, you know, the total Boyd operation. What -- you know, will you be doing as far as, you know, one-lining, obviously the profit? But further down the road, will you continue to one-line it, or will you break out enough of a detail to see what the contribution on a property EBITDA will be net to Boyd Gaming?

You're talking about the Borgata?

Yes.

The GAAP income statement will have one line, it will be the income from the - our unconsolidated facility. But we will, in the body of our releases, let you know a lot of information about Borgata. It's very important to our over overall earnings and it will be important to the company, so we will make a lot of information available. But on the income statement, it will be one line.

And then, just kind of an overview question again. Once -- I mean, without any new jurisdictions and with a hotel and a little build out of the racetrack, the company will be generating significant amounts of cash flow, would you kind of, [inaudible] to put that into perspective, in how, you know, that cash flow will be used to enhance shareholder value?

We said over the years that if we don't have an acquisition that makes sense, that we're going to use that to pay down debt, and that certainly is a way of enhancing shareholder value. We said consistently, strategically, our focus is on operations is job number one, and making sure they produce the best possible results. We're extremely pleased with the progress that has been made on that front. We said we will selectively and strategically look at growth opportunities. We have done that through the acquisitions over the course of the past four or five years and we're doing it very effectively in the case of the development in Atlantic City. But within - finally we said the third leg of our strategic positioning is that we're going to continue to enhance the financial position, the financial structure, and if we don't have the right opportunity on the growth side, paying down debt's a good alternative.

And we also have a [2 million share] buy back program, so we will be using some of the free cash flow for some of that.

Thank you.

Our next question will come from Michael Rosenthal with Chicklin Capital.

Good afternoon. Given you don't have a lot of significant projects going on outside Borgata, can you go through what the cap ex in this quarter was and how you got to 40 million just for the maintenance side?

Yes, that includes, and I think we point out in the release, the acquisition -- the purchase of a new corporate aircraft. That was sixteen. So the maintenance cap ex that you're familiar seeing in the -- that goes into our properties was 24 million. That was high, but that was just, I think, a timing issue. The number for the three quarters up to that point was fairly low. I believe it was $29 million. And we did 24 in the fourth quarter. So you take the 24 that was just sort of a catch-up in the maintenance cap ex, add 16 for the plane, that's the 40, and then, of course, there was the acquisition of the Isle of Capri property in Tunica. To get you to the total.

Okay. Perfect. And then in terms of the very strong performance downtown, are you benefiting at all from the problem at Horseshoe and maybe Las Vegas Club, or just, this is where the business is?

No, the business levels at the Horseshoe and Las Vegas Club has been depressed for some time now. We're not really seeing any benefit from the trouble that those properties -- this business level has been here for a number of years [as you've been able to follow it]. We've been able to build this business over the last several years quite nicely and it continues to grow as we refine our marketing programs and continue to refine our cost structures downtown, so it's really not a result of the competition as much as it is our ability to grow the business and our properties.

Our charters ran full during the quarter and the relationships with that Hawaiian market remains very strong.

I see. In terms of the Hawaiian market, are you seeing any impact on bookings given the heightened alert?

No, we have not seen a significant change in the booking patterns as a result of any of the ongoing activity out in the world these days.

I see. In terms of the aircraft, will that only be used for Boyd, or would it be shared with Borgata as well?

The current charter aircraft that's running?

The [inaudible] is primarily a Boyd gaming aircraft but it could be utilized for Borgata use, if -- as required -- Borgata would compensate Boyd for the use of it, if that's the case.

Okay. I see, Thank you very much.

Thanks, Michael.

We'll take our next question from Mike Warner with Kennedy Capital.

Hi. Great year for you guys.

Thank you.

I just had a quick question. Outside of any tax -- any tax issues that may or may not come to fruition in New Jersey, could you possibly tell me what type of incremental return you were expecting for the Borgata within, I don't know, its first year of operation?

What we have said about Borgata's contribution is that we've referred people to the upper quartile of properties currently operating in Atlantic City, the top three properties do approximately $175-180m of EBITDA per year.

Our feeling as we look at the Borgata is that this property -- it clearly would be an upper quartile property and we feel good about that. That is not necessarily an opening number because there is some ramp up. Keep in mind -- you mentioned the first year. It takes some time to get to that point. But we do feel that the Borgata will be an upper quartile property in terms of its -- eventually in terms of the EBITDA run rate.

In terms of contribution, as you know, it's in a joint venture that is not directly on our balance sheet, it is not consolidated, there will be a deduction for depreciation and interest, and we will pick up on our income statement half of the pre-tax income, MGM Mirage will pick up the other half of the pretax income.

Okay. Any -- I don't know if you can answer this or not. But any degree of what type of discount I should assume for the first year of operations?

No, we don't really get into forecasting specifically. I think it's just safe to say that, at least for the first couple of quarters, there's going to be a time where we need to ramp up as it has been true with other properties, the efficiencies on both the marketing side and employee side and so forth is just not there in the early days as you get into this.

So I think you just need to expect that it will take a little bit of time to get to our eventual run rate, and that's not unusual.

One other thing. Would you care to comment on what you might have in terms of debt levels by the end of this year, this calendar year?

Well, we've talked a lot about our pre-cash flow before we expand being somewhere in the $100 million dollar range. That's a rough number, but it's been typical of these levels of operation.

As you know, we won't be taking money from the Borgata. The Borgata cash flow will go to reduce its own debt. But in terms of Boyd Gaming's other properties, somewhere in those levels.

The call on those funds, we talked about, expansion cap ex, of course, one of those is to finish up the Borgata. The Borgata does have a $25 million contribution remaining to be made for equity. As we mentioned, if we are over the 1.035, we will end up putting a little more in.

So there is Borgata capital to be required and then we've talked about starting a hotel at Delta Downs sometime this year. So, some of that $100 million will be used up for the expansion of our business and then beyond that would go to debt reduction and share buy-back.

So we started the year with 1.124b -- you can just do the math to see where we may end up at the end of the year.

Fair enough. Great. That takes care of me and good luck with the opening.

Good. Thanks, Mike.

We'll take our next question from Ray Chestman with Jeffries & Company.

Congratulations on an excellent year. I had three questions. When you are able to -- or maybe you already have, I don't know for sure, bring the 200 main building rooms back on in Tunica and you've got the extra rooms you purchased from the Isle, where do you think the Tunica property can gather momentum and power into 2003.

The rooms came back online right at Christmas time so we had them in place for the first of the year and for New Year's Eve. So we had the full complement of slightly over a thousand rooms at that point in time. And given the full complement with the thousand rooms, we certainly are looking for much better results at [inaudible] Tunica in '03 than '02.

Do you have to take a very large discount to go across the -- I know you provide transportation over to the Isle Capri hotel. What kind of discount is there in rates?

Actually, the way we're selling those rooms is we're doing a lot of packaging of those rooms with different types of offers. There's a golf course there. We're selling some golf packages.

Half of the rooms have Jacuzzis suites in the rooms. So we're able to offer a different product and offer them as packages. So there has not been a significant discount for those rooms.

Has the company taken all of the actions it believes it can to offset the Illinois tax boost at that property?

I think that as we operate the Par-A-Dice property and as we've operated it since we acquired it, we continue to work at it and refine it and work on the marketing programs.

The tax increase certainly took a bite off of the bottom line, but we continue to find ways to improve that property and improve the results there.

Keep in mind, that property was -- has been a very efficiently run property. Margins were close to 40% before the tax went up, and it's pretty hard to squeeze much out of such a high-returning property. It's always efficient and it's not -- hard to cut some waste out. For the most part, this tax increase is tough to offset. We keep trying to do it all the time, but there are not a lot of obvious places just to cut things down.

So you're telling me this took a bite at the bone, not just the fat?

That's why we would like to see some position increases approved.

The last was, for 2003, you've mentioned hopes to build a hotel in the Delta Downs. We know you have an extra $25 million at the Borgata and you've got maintenance. What does that total up to for the year? For capital expenditures?

Well maintenance cap ex we've talked about being in the $65 million, $70 million range is the normal run rate for our properties. The Borgata has a $25 million contribution remaining at the 1.035b level. We mentioned we could go somewhat over that which would cause a little more contribution there. Half is our, half MGM Mirage. We talked about the hotel at Delta Downs. If we started there could be some expenditures there. You could be talking $120 million if you add all those together, 150, 120, somewhere in that range of total capital spending. When I mentioned free cash flow before, that was after maintenance cap ex. You can't add those together. After maintenance cap ex, if there was somewhere around a 100 left, you would talk maybe 40 or 50 of that going to those other matters I mentioned.

Ellis, I didn't see it in the press release, but the revolver revolver -- rollover balance at the end of the year?

They were at -- what? About 130 in the revolver and about 100 million on a term loan so about 230 altogether out of a bank loan of $500m

Thank you very much.

Thanks.

Our next question will come from Matt Jacob with UBS Warburg.

Hi. I was just wondering how far in advance would you need to announce the Borgata opening date in order to get the proper advance marketing and room opening bookings?

We're uncertain of the date that we will announce the opening, but we are very confident that in early June we will be opening our customer care center which will begin to take reservations for the general public, and given the short booking nature of hotels in Atlantic City, we believe that that will adequately meet our needs. We have alternatively begun to book business on the group side, which we would tell you has been very successful for us, for single property meetings, groups, incentives and so on, and we have approximately $16 million in business already booked starting September 1st.

Okay. Thank you.

Next question will come from Joe Greff with Fulcrum Global Partners.

My questions have been asked and answered. Thank you.

We'll take a follow-up from Kent Greene from Boston American.

Yes. I had a question about -- you know, about the -- you know, about the other properties and then the tax rates in the other jurisdictions that you may be looking at. A lot of people have, you know, suggested that you're going to have down EBITDA, particularly in the central areas of the country, which would be, you know, all the way down to, I guess, to Louisiana, with the exception of Delta Downs. I just wondered if you would comment what other things will be done besides, you know, some upgrades, and how long will it take to get a hotel at Delta Downs, roughly?

Kent, if you're saying people are predicting we're going to have a down EBITDA year in our central region. That did not come from the company. I don't know where you're hearing that. We did not make forecasts. And I just wanted to clarify that. We have talked about the impact of a gaming tax at Blue Chip that is kicking in 2003, at least the accounting impact will be in 2003 when we have the full year on the graduated tax schedule. We pointed out in our last release that that will mean 6% of gaming win will go to [additional] taxes. We have also talked about needing a revenue increase in the 12-14% range or so to offset that. With a good revenue increase, we have an opportunity to offset much of that tax increase. That is the only thing that I think the taxes will come in other than sort of the second half of the Illinois tax which came in July 1st. We have no other forecast on how taxes will play out this year in the legislatures and so forth, but outside of those two particular tax matters, we haven't talked about any other EBITDA issues that would give rise to your comment.

You know, a lot of people said that you're going to have to go to ticket-in/ticket-out. How fast are you moving other properties or are you marshalling efforts to go to a company-wide program or are you too small or the individual properties are not lending themselves to that?

Currently most of our properties have some degree of their machines on ticket in/ticket out, and we're migrating more and more of those machines as time goes on. None of our properties are 100% ticket in/ticket out today, nor will they be there in the near future.

Do you think that -- you know, a lot of people have said a lot of their properties will be converting this year. Park Place has stated that, I know you compete with them particularly in Tunica and other areas, Harrah's I guess hasn't set a date yet, but I know that Mandalay Bay is heading in that direction too.

Once again, many of our properties have ticket-in/ticket-out. Tunica is one of the properties that does. We have a number of machines there that do. We continue to add machines on the ticket-in/ticket-out platform in Tunica and at our other properties. But we will not be 100% at any of our properties this year in terms of ticket in ticket out.

And then one final question about the 61 acres at Stardust. I guess in the [Reev] there was a prospectus, there was a commentary about excess land across the street at the Desert Inn of having a value as high as $10 million an acre. I don't know whether that is an appropriate number, but at least it was in writing.

It's a wonderful number.

You said you saw that in a prospectus?

I think there was speculation about that, 15 acres, you know, that they were going to use for the Reev, and they were speculating on the strip -- I don't know whether it was just right on the strip or what.

It wasn't in a prospectus from us, it could have been someone else.

No, no. There was speculation that it was worth $150 million, and I think it was ten acres or fifteen acres, which obviously would be on a per-acre basis, a pretty well high watermark for 15 acres on the strip.

We certainly can't speak to values. As you know, there's a lot of things that impact that. But we can speak to the fact that there is activity on the north end of the strip that we feel very good about and makes us feel good about the asset that we have on the north end of the strip. It is a big part of it. It goes beyond that. The expansion of the Fashion Show Mall, is significant, the planned extension of the monorail that has been under discussion and is progressing quite well, is another important consideration, and there just is -- there's a direction on the north end of the strip that we feel good about.

You know, you're doing joint ventures in Atlantic City which a much bigger company. Have you, you know, decided that, you know, it might be worthwhile to develop that piece of property yourself, or are you still talking about, you know, joint ventures? Who would you ever joint venture with? Would you joint venture with some kind of a theme company, you know, out there, or somebody who would -- I don't know what they would bring to the table that you wouldn't bring, and I'm just asking what kind of conditions on a joint venture?

I think it's safe to say that we just aren't that far advanced in our conversations at all under any condition. But the property offers us a lot of flexibility in terms of what we do and how we do it and if we were to do it with somebody else, but we just haven't advanced to that line of thinking at all. We're very much focused on the billion dollar project that we have going on in Atlantic City.

You have a follow-up from Larry Klatzkin with Jeffries and Company.

Guys, just a quick question on Tunica. Do you think you could actually get back to last year's number in the third quarter of $3.8 million or do you think it is going to take longer ramp up than that?

Are you saying for the first quarter this year be 3.8?

Yeah. That's what you did in '02. Could you do '02's number, or is it going to take a little longer to ramp up to get that back to where it was.

As you know we did in that 3-4 range for the first three quarters of last year and we had that falloff in Q4. And we do hope as we've said before, we do hope to continue growing that number. I think we mentioned that the 11 and a half or so we did in 2002, we hope to exceed that in 2003. How that will break down quarterly, I don't want to get into that. It's too hard to forecast such small tolerances. It remains our goal to continue to grow EBITDA, [inaudible] and we feel that this year is going to be the first year of that growth.

Do we ramp it up from the fourth quarter or do we go back to where you were in the third and the first three months of the year -- first three quarters of the year, I mean?

Larry, it's tough to do specific property forecasting. I'd rather not do that.

All right. Sorry to bother.

No bother.

There are no further questions at this time. I'd like to turn the conference back to you, Mr. Landau, for a closing remark.

Thank you all for your attention and interest in the company. As always, we're available to speak to you at any time, and we will be announcing our first quarter earnings in April and look forward to speaking with you all again at that time. So good-bye.

Thank you.