Boyd Gaming Corp (BYD) 2003 Q4 法說會逐字稿

Good day and welcome everyone to the Boyd Gaming fourth quarter 2003 earnings results conference call. Today's call is being recorded. With us today from the Company is the President, Mr. DO Snyder and the Executive Vice President and Chief Financial Officer, Mr. Ellis Landau. At this time, I would like to turn the conference over to Mr. Landau. Please go ahead, sir.

Thank you, good afternoon and welcome to our fourth quarter earnings conference call. Before I begin, let me make a few comments and announcements. Today's call may contain some forward-looking statements. We want to let you know that the actual results may vary from what is contained in those statements. The variances could be material and we refer you to our public filings for the risk factors you need to know before you invest. In addition, we're broadcasting this call on our website at boydgaming.com, as well as firstcallevents.com.

Joining me today on the call are Don Snyder, our President; Keith Smith, our Chief Operating Officer, and Bob Boughner, who is CEO of the Borgata. Don, Bob and I will make some remarks and then all four of us will be available to answer your questions.

A short while ago, we released our fourth-quarter financial results. We reported adjusted earnings per share of 19 cents versus 24 cents per share in the fourth quarter 2002. Last year, 2002, we adjusted out certain items that were nonrecurring. These are listed in the release. In the fourth quarter of this year of 2003, there were no adjustments.

Back to discuss the results for the quarter for our wholly-owned properties, and then have Bob discuss the results of Borgata, our joint venture in Atlantic City. We would also like to talk more about our pending acquisition of the Harrah's property in Shreveport, Louisiana and Don will do that.

Back to our operating results. The nine operating units that comprise our wholly-owned group of properties reported revenue of $308 million in the quarter; that was a couple of million dollars higher than in the prior fourth quarter. EBITDA for the quarter was 62.4 million for that group; that is down just under 10 million from the prior year. About two-thirds of that declined, about $6.5 million can be traced to tax increases or increases primarily in gaming taxes that occurred in some of our important states -- Illinois, Indiana and Nevada. Going to the properties and looking at some of our larger producing properties, Sam's Town in Las Vegas had a great quarter. It did $8.7 million of EBITDA and that's up from 8.1 in the prior fourth quarter. Except for the first quarter of '03, that 8.7 million was the best quarterly results in almost six years. The downtown Las Vegas properties had their best quarter of the year at 11.7 million of EBITDA. Last year, they had a blowout quarter of a little above 14 million, so the comparison was tough, but these properties remain very good producers for us. For all of 2003, if you take out the Hawaiian travel agency comparative results, the three properties themselves came pretty close in '03 to their record-breaking year in '02, so we're very pleased with the performance of that group.

Par-a-Dice has declined in the central region. Their quarterly decline was mainly from the Illinois gaming tax increase. That tax is due to sunset in the middle of next year and that come can't come soon enough. Blue Chip, absent this gaming tax increase, would've had an up quarter, topping last year’s very good fourth quarter, which was 23.3 million. They actually came in a bit below that this year, but that was all the gaming tax increase. Delta Downs had another strong quarter. It actually finished its first full year of slot operations at just under $30 million of EBITDA, and we're quite pleased with that result.

And speaking of the full year, 2003 EBITDA from our wholly-owned properties after corporate expense was $248 million; that is down from $274 million in 2002. Just about all of that decline can be traced to increasing gaming taxes. The increase was $24 million for the year and they occurred in the three states that I mentioned earlier. Adjusted EPS in 2003 was 83 cents a share versus $1.06 reported in 2002. 2002 was our best year ever and '03 was our second-best ever.

Let's talk for a moment about growing the business and a couple of things that are going on are happening in our central region. First, our Delta Downs Casino expansion will be done in a few months. That will significantly enhance customer experience there. Secondly, there is a pending acquisition of the Harrah's Shreveport property. Don will talk about these two developments in just a minute, but let me just say we feel very good about the acquisition that we have made in Shreveport. It's an excellent facility and a first-rate operation. It's a solid number two in the market behind Horseshoe just across the river. We bought it at a very attractive price -- 4.2-4.4 times EBITDA. We know that some nervousness in the marketplace right now, but we believe the market will soon stabilize. The deal is nicely accretive and we're very anxiously awaiting the closing of the transaction so we can begin operating there. We expect the closing to come fairly soon; it is awaiting regulatory approval.

Now for Borgata, things just keep getting better there. Just under 34 million in EBITDA and just under 24 percent profit margin, we just really improved very nicely from our opening quarter. And that third quarter when we opened it actually seasonally a much stronger quarter in Atlantic City, but we did better in the fourth quarter. The first quarter of 2004 is off to a great start. Bob Boughner will tell you more about this, but let me just say a couple of things before I turn it over to Bob.

First, the business model that we have there is working. Borgata is as complete and well rounded a resort operation as there is in Atlantic City, by far. Borgata is attracting new customers to Atlantic City, just as we said it will do. What was working well from day one in July when we started is still working well and what started out a little more slowly is building up very nicely. As we told you, expenses, which were high at first in our opening quarter, came under control in the fourth quarter, having getting more under control all of the time. As we suggested, having fun is not a seasonal happening. Bob will tell you about December and January business.

Next, it's better to have more of a good thing. We and our partner are beginning to look at expanding Borgata in the areas of strongest demand. And finally let me just say that from the beginning, we've been saying that Borgata has as a goal, we're going to be in the upper quartile in EBITDA; it was going to be an upper quartile property by being in the top three in EBITDA reporting properties in Atlantic City.

Now that the fourth quarter results are coming in, it appears that Borgata came in second in EBITDA in this marketplace in the fourth quarter, barely missing out being number one, just a few hundred thousand dollars behind Harrah's. Regarding hitting our upper quartile goal for the full year, let me just say that 2004 is the property's first full calendar year of operations. We think we have a very good chance of taking rookie of the year honors and getting there on our first try. With that, I would like to turn it over to Bob Boughner, CEO of Borgata, to tell you more about that property. Bob?

Thanks, Ellis, and good afternoon everybody. In our prior call, we talked as we did for the past couple of years very simply about developing property. The plan was very simple. We developed it, we executed it and it is working well. Our focus in our first phase or our launch phase, which was really Q3 of '03, we focused on topline revenue, market share, customer trial, customer service, customer intent to return -- those were the drivers of how we ran our business. We focused on service, getting trial at the property, taking care of the onslaught of customers as best as we possibly could and we feel we delivered very well.

Our second phase, which started in October, was what we call our refine, adjust and fine-tune phase. That will take a couple quarters as we go through that. Refine the operations, adjust for operating and personnel issues and make the necessary adjustments to fine-tune the operation in the face of the revenues that we obtain at the property. And then lastly, the last eight months of 2004 is our run rate phase, the point in time where we actually hit our run rate margins. It was very gratifying for us in Q4 of 2003 to achieve a 23.9 percent EBITDA margin for the property. What was even better about that is how we did it.

In October, our margin was 19 percent. In November, we were just a touch under 26 percent. And then finally in December, we've beat that at 26.5 percent cash flow margin. That was very gratifying to us because not only did we continue to improve the quality of the revenue coming into the building, we continued to improve quality of our earnings. We continue to have a lot of confidence, and our belief as we have stated many times that we will perform in the upper quartile of the market, as Ellis alluded to. All indicators now point to achieving this, and that was our plan all along.

What is the interesting to note as well is that in the month of January, our revenues were up handsomely in January, gaming revenues, when compared to our July results. More importantly, however, so were our margins when compared to December. And we should see approximately 200 basis point pickup in our January cash flow margins when compared to our December results.

The property continues to perform with market share premiums. In the fourth quarter, we had a 10 percent market share premium in slots, about a 24 percent market share premium in poker, and in our table games area, we had a 70 percent market share premium. We are uncertain as to what transpired in Q4 with our competitors as it relates to the amount of coin and other promotional dollars that they put out into the marketplace. But when we look back to the third quarter, what we see was very clear. Borgata on a pure slot revenue basis was number six in the market. But when you adjust that for the amount of coin put out in the marketplace, our position the ratchets up to the third position in the marketplace. And we were very pleased with that result.

These are the immediate financial results. We also want to talk briefly about some nonfinancial indicators which are very positive for us. We solicit customer feedback all the time. And in a very recent poll of our customers done by independent third parties, 84 percent of those customers said Borgata is nearly exclusively my place to play. And we have an amazing 98 percent intent to return amongst all patrons surveyed and a 98 percent intent to recommend Borgata as a place to go amongst those same customers as well.

Lastly, Ellis touched on an expansion. We have formally started the design process for an expansion of Borgata. The leading indicators all point towards increasing our capacity in several areas, including our restaurants, our bars, our gaming space, our meeting and conference facility, our retail shops, and of course, parking. We currently contemplate an expansion of about 500,000 square feet under roof. With continuing strong demand, high-quality revenues and improving margins, we feel very good about increasing our supply to meet that current and future demand. Additionally, we believe over the long-term as Borgata and Atlantic City may face competitive forces from other jurisdictions, we believe that the Borgata we have built and the Borgata we envision for the future will remain a very, very strong competitor down the road. Thank you very much. I would like to turn the conference back to Don.

Thank you, Bob. Ellis provided at thorough review of the numbers today, so I'm not going to recover that ground. And Bob also is you just heard provided a lot of additional color on Borgata and its very strong performance and the progress it's making. I will comment a bit more on the Borgata, but in the context of Boyd as a proud parent and what it means for us Boyd Gaming in a more strategic sense, I would like to focus my comments on a look forward, both in terms of growth and in terms of strategy. And to do that, I need to take a quick look back and share some of the things that we've discussed with you in past conference call us.

Our growth strategy has been relatively straightforward in recent years. First, opportunistic acquisitions. The Harrah's Shreveport acquisition will be our fifth in the past seven years. And then secondly in terms of growth strategy is a marquee development project, the Borgata, our 50-50 joint venture with MGM Mirage, a type of project that we did not have the reputation for doing before we built the Borgata. We feel very good about how these strategies have served the Company and our shareholders, and importantly, for what it says about where we go from here. Both strategies have significantly transformed our company in the past few years in ways that we are very proud of.

In terms of acquisitions, the last four acquisitions have played an essential role in growing our earnings and significantly diversifying the earnings base of the Company and providing organic growth opportunities as we move forward. As you will recall, we acquired Par-a-Dice in 1996, at the very end of 1996; Treasure Chest in 1997, Blue Chip in 1999 and Delta Downs in 2001, but opened the gaming operation in 2002.

Delta Downs is the most immediate example of the organic growth opportunities which came from these acquisitions. We are well underway with our $50 million project. As we've shared with you before, this project will substantially enhance the customer experience and provide the opportunity to grow that business. It includes a reconfigured casino and player's club area which will substantially enhance the gaming experience. This phase, including some of the restaurant spaces, will be done around the end of this month. We're very pleased with the progress of that portion of the project and look forward to introducing this aspect of the new and improved Delta Downs to our customers here in the next few weeks.

The final phase, which will include 203 guestrooms, a food court, an entertainment loans and banquet area, could be done as early as December. This expansion is a very important part of realizing the potential of Delta Downs. As Ellis said earlier, we are very pleased with the first full year of slot operations at that property. The opportunity to grow the business feels very good to us as our very capable management team at that property moves forward with this enhanced property.

Let me turn to another part of Louisiana for a minute, and that's Shreveport. As Ellis said, we're very excited about the addition of the Harrah's Shreveport property to our family of properties. This will be our 14th property in six states. We're also pleased to announce for the first time today that that property will be proudly named Sam's Town. Sam's Town Shreveport will join Sam's Town Las Vegas and Sam's Town Tunica in wearing that very strong brand. Under the popular Sam's Town brand, customers will be able to expect the same great entertainment and service that have been such an important part of our other Sam's Town properties.

As you might know, we're celebrating 25 years at our Sam's Town Las Vegas property; that's where it all began. Our Sam's Town properties are widely known as some of the friendly places around, offering a first-class gaming experience, both in terms of value and in terms of atmosphere. Sam's Town Shreveport will be no exception.

We feel very good about this transaction. We have a record of buying properties right at low multiples of cash flow, of effectively transitioning those new properties into the Boyd Gaming family and then positioning the property to effectively compete. This acquisition certainly fits with the first of those characteristics, buying it for a very attractive multiple cash flow. And our track record with our other acquisition makes us very confident that the transition will be smooth and that we will be well prepared to compete.

As Ellis said, this property has been a solid number two perform in the marketplace, reflecting an excellent physical plant and a first-rate operation. The operation is all about the people. We've been extremely impressed with the people of that property at all levels and are pleased that virtually all of the management team will stay to direct that employee team which has made this property so successful.

One of the Harrah's Shreveport employees, Lynn Seegers (ph), was quoted in the Shreveport Times recently just after we announced the transaction as saying "we realize the employees made this building." And she goes on to say "employees make the building a success." Well, we realize that also and will be proudly welcome them into the Boyd Gaming family. They are clearly part of the reason we decided to acquired his property. If things go as we expect, we hope that the regulatory approval in the second quarter and then properly introduce Sam's Town Shreveport to the marketplace.

I would like now to turn to the development side of our strategy and focus on the Borgata and where it may lead. Just as our acquisition strategy had served us well, so has the development of the Borgata, adding earnings, further diversifying our earnings base and as Bob said, providing for future growth opportunities through expansion. As both Ellis and Bob said, the performance of the Borgata is very satisfying from the perspective of both the operator and the very capable management team that runs this impressive property. We're clearly a proud parent and we know our partner shares that view. That's a definite pride of ownership here at work there. Beyond the positive feelings we have about the Borgata's operating results and the trends which give us high expectations for the future, the Borgata is very much a transformational project for Boyd Gaming, providing growth opportunities both in Atlantic City as Bob as discussed, but also beyond that. Borgata has redefined the type and size of the product Boyd Gaming can be expected to deliver at a time when we begin to focus more attention on the Las Vegas strip and our 60 acres of developable real estate at the Stardust. We have said for several years that we have a long-term strategic opportunity with the Stardust property. We have also said that the future is very bright for this end of the strip with Win Las Vegas, the fashion show mall expansion and other projects which combine to create real energy and momentum.

We have also said that we don't anticipate making any specific announcements until after Win Las Vegas opens. That all said, it is reasonable for you to expect that next year after Win Las Vegas opens, we will be prepared to talk a lot more specifically about our plans to develop this very attractive real estate sitting in the heart the neighborhood, which is changing in a very favorable way. On the heels of the Borgata, we feel very comfortable with our ability to do what is right for this incredibly positive piece of real estate.

In summary, I would like to just close by saying that we feel very good about the operating and strategic position of the Company, both in terms of the confidence in the shorter-term performance of the Company, specifically for 2004, but also in terms of the longer-term growth and the performance over a longer period of time. And now we would be pleased to take your questions or expand on any of the information we just provided you this afternoon.

(Operator Instructions). Larry Klatzkin, Jeffries & Co.

Hi guys, good earnings. A couple of quick questions. One housekeeping -- CapX going forward and such, and what your expectations are?

We had the two projects that we have discussed with you, the Delta Downs project and the Blue Chip project. This is above our normal maintenance CapX, which runs in about the $70 million, $75 million a year range. The Delta Downs project, there has been some spending on it, but the lion's share of the spending will take place in '04, probably $35 million or so of the total project cost. And then in Blue Chip, we are just getting that project started. So you may look for $40 or $50 million being expended this year in '04 and the balance coming in '05.

Great. As far as when you think the Blue Chip expansion opens, what is your timing on that?

Keith, you want to address that?

It's probably, if everything goes according to schedule, late '05.

Okay.

You meant Blue Chip as opposed to Delta Downs?

Yes.

Blue Chip project is late '05, if all goes according to schedule.

On the Borgata, you took no money out of your EBITDA share. Is that going to be what we should forecast going forward for the rest of this year?

You talking about distributions and dividends when you say take money out?

You had 17 million that I guess you could have taken out and you took nothing out. Is that going to be the case going forward?

The plan there is that all the money that is generated there is used to pay down debt except for distributions for taxes, so we did not take anything out in '03, but in '04, we may very well take out, or we can take out, enough to cover both owners, their tax liabilities.

That's good. Shreveport, as far as how are you going to account for it and I guess you are saying timing-wise, you should put it at the end of the second quarter, but accounting-wise, just put it 100 percent owned, and as far as you will have no debt at that level, you will just fund it through bank debt at the parent company?

That is correct. The Company generally funds itself all through the parent, so you will not see subsidiary debt. We don't of course report the individual balance sheets. But you will not see anything at the subsidiary company. It will all be done at the parent level and then the funds would be downstreamed.

The Texas governor proposed (indiscernible) racetrack slots, and it looks like a longshot. Can you talk about that? That would obviously affected you two markets on the border of Louisiana.

We would probably be a nervous wreck if we listened to what was the latest information coming out of all these markets, as you know, because it ebbs and flows. We feel very good about the properties, our properties' ability to perform, both the existing properties as well as the new one. These markets, as you know, particularly Shreveport in this case, is a substantial market with substantial operations and substantial depth to it, and we think that helps to attract no matter what happens, but we obviously monitor that, but it is just too early to tell.

Last question, corporate expense. It seems that was a little bit lower than we were expecting. What would you recommend for corporate expense for '04?

I would go with our typical corporate expense number is about 6 or 6.5 million per quarter, I'd stay with that using a probably 25-$26 million full-year number. It was lower this quarter because there were some adjustments relating to the corporate incentive plan and things like that that we do in the fourth quarter. So it is not a -- this quarter, it was a lower expense quarter typical.

Thanks, guys.

Steve Kent, Goldman, Sachs.

Good afternoon. I'm trying to understand what the CapX would really look like if you pursued some of the things you just mentioned again on this call this afternoon. If you pursue Stardust, if you expand Borgata, it seems to me that in Shreveport, you're probably going to do have to convert from a boat to a barge. Do you need outside capital? Do you need to go to the markets to do all of this, or is this going to take not two years, but more like four or five years to roll out? Maybe you could give us a little bit more color on that. And then also on the Borgata, I know you were in design phase and you're just thinking about it, but are we talking room towers, are we talking amenities, how big it is this really going to be?

Let me talk about the funding first. The internal expansions, expanding our existing properties, Blue Chip and Delta Downs, we handle (ph) them pretty much from cash flow, from free cash flow. We feel that we will able to do that and we've been saying that over the period of time the way we're spread out, we will be able to do that. So those particular expansions will be from internally-generated funds.

Shreveport will require incremental financing. We have most of the funds available already available in our bank line, but that could easily be expanded to accommodate additional borrowings for the Shreveport acquisition. So that will be done through incremental borrowing of the purchase price. Borgata is a stand-alone financing as you know. The expansion there as Bob mentioned in the very early stages of planning. But when that comes along, we will have to deal with that through Borgata's own cash flow and Borgata's own bank financing agreements to fund that. You mentioned Stardust, Stardust we just mentioned that we would by next year have some more to say about the planning process and some of our intentions there, but that is well off in the future, so we don't know how we're going to do that, whether we're going to do it alone, with partners. It's really -- we're not at the point where we can discuss how it will be financed. So every one of those things has a different response. But within the company, you have the internally generated funds for the expansions and you have the new borrowings for Shreveport, and that is really all the Company has to deal with. Let me also mention the -- (indiscernible)

Steve, you made a comment about barges in Louisiana as it relates to Shreveport. In the Louisiana marketplace, it is still required that it be a riverboat, not cruising, it's dockside. The state-of-the-art in riverboats you can build those on one level these days, but it still needs to be a riverboat facility. It's not our intention to replace the boat that's at Shreveport today. While it is an older boat, it is clean, attractive and is generating the type of revenues and EBITDA that you see Harrah's report right now. So we are comfortable with the existing assets and don't have any immediate plans to replace that boat.

The hotel and the land-based facilities are in wonderful shape. We're very impressed with what is there and how they have been maintained.

From a competitive standpoint, it's not the same as some of the others in that market, so it just seemed to me that at some point, you do have to put capital in.

We will evaluate that once we get in, so we will keep an eye on that, but we have no current plans to do anything other than acquire what is there and run with it.

And change the name. Any more color on, as I said room tower amenities -- what are you really trying to achieve with an expansion of the Borgata, other than satisfying demand for more rooms?

To answer the question is -- we have the opportunity to generate incremental gaming revenue and incremental non-gaming revenue and what we believe would be a high yielding investment on the property. Our restaurants consistently are booked well in advance, we have a demand for more bars at the property. We would need to add more gaming space based on our current analyses. We have a significant demand for meeting and conference base which would help us drive midweek room occupancy and room rates. And so we're looking very seriously at that. We have a demand for more retail shops. We think there's great opportunity there. So this plan does not contemplate adding any incremental hotel rooms, but having the opportunity to increase occupancy and as the appropriate, increase room rate.

Thank you.

Joyce Minor, Lehman Brothers.

A couple of follow-up our questions for you, Bob, on Borgata. In terms of that expansion, can you give us a sense for maybe how much you might think that would cost in total and how soon that could be open?

It is not a schedule-driven project. We feel the best approach to take is to think through it very carefully and thoughtfully, present it to the owners in great detail. After we have developed a scope, we will develop a schedule and we will develop the budget. So it is premature at this point in time to give really any detail, other than to say we have actually formally started the design process and to give you a feel for the types of amenities that we're looking at.

Can you tell us what it might be in terms of a percentage increase in gaming positions at all?

We haven't really formulated that since we started, but as that is developed and that information becomes available, we can probably follow-up as we make those announcements.

You're holding out on me on, that, alright. Maybe can you speak to the margins that you're seeing, very strong, very impressive, but would you expect that sequentially, seasonally, you would expect February and March margins to be as good or better than January margins?

I really cannot comment on what we think necessarily would happen in February and March. We believe that the great result that we saw in January was not only a function of strong revenues in the first four days and very strong revenues in the last two days, but it was also great revenue and expense management during the middle 25 days of the month. That is not changing in February. We have made aggressive steps and with the very capable team that we work with here on a daily basis and understand the business, refining, adjusting and fine-tuning the operation so that we can generate incremental cash flow on what has turned out to be increasing revenues.

Okay. I will try Don. Don, if we look at Shreveport, can you maybe give us a sense, have you guys at all modeled a decline when the Harrah's brand goes away and the Harrah's database goes away and help us out in understanding kind of what that number might be? And then can you also talk -- will there be any costs involved in renaming the property to Sam's Town?

Let me start in a more general sense and then let Ellis pickup the more specifics. We obviously have looked at cash flow and we certainly understand some of the factors that are creating some nervousness in the marketplace. And the fact that we have bought it the way we have suggests that we have a probably a little bit of flexibility on the downside and probably think that could happen a bit, but there are some other things that we think help to stabilize that market and provide both shorter and long-term benefits. This is a substantial market. There's broad-based gaming operations there with high-quality amenities, and we think that gives it resilience, resilience over the longer-term, and we think that will happen. We're also used to dealing with the factors which cause nervousness, and we don't necessarily overreact to short-term circumstances in that regard. We also feel that there is an aspect of new blood coming into the marketplace that is healthy, particularly when the market has been a little been soft. New blood at the Horseshoe -- the Harrah's folks are going to be very aggressive at marketing their new property, as well as marketing their existing property, the racetrack. And we're certainly going to be new blood in that marketplace that is interested in promoting our position there with the Sam's Town brand, as well as generally being in that marketplace. So we think that provides some energy which will be helpful to the marketplace as a whole and that we will benefit from it.

We also feel that competition is a good thing and that when names change on tops of buildings, it creates some interesting dynamics and we expect that there will be kind of throughout that marketplace. But we feel very good about positioning Sam's Town Shreveport to compete in that sense. So we feel that we have been opportunity to pick up some business at various places as we move into that marketplace. So in the final analysis, it's difficult to be too specific. Not having been in that marketplace, it doesn't give us as much visibility as we would like, but we spend a lot of time looking at the dynamics and relating them to what we've seen in other markets and feel comfortable with the type of cash flow that has been produced by that property, but obviously have some flexibility because of the way we bought the property. Ellis?

I think you mentioned (indiscernible) how would we do with the loss of the name in the database. We will get the databases there, so I don't want to give the impression that -- you should not have the impression that the Harrah's name and database is all going away and we're coming in with nothing. We will be coming in with very strong Boyd operating management, which has been around for years and is very good, the Sam's Town name which is good, and we will start with the Harrah's database and we will built upon that. So I don't want to have the inference that what they're taking is necessarily a big negative, because we're coming in with a lot of positives. And in terms of the cost of rebranding, we don't see it to be that much. We factor that in of course into our analysis, but obviously we have signs changes that need to take place. But most of what is there will easily be converted and there won't be tremendous cost to rebrand it.

That's helpful. Thank you.

Kent Green (ph), Boston American Asset management.

I just had a question about Stardust and relating it to the Borgata success. Does this mean that you're preliminary thinking about building and managing a property out there because your success at Borgata?

The comment that I made specifically related to the type of product that we have now developed with the Borgata that positions our company in a different way than people have oftentimes looked at our company. The Borgata is a market leading type, very leading-edge type of property and being very large, (technical difficulty) opportunity that exists at the Stardust. Beyond that, I did not intend to send any broader signals, other than the Borgata positions us to do the type of project, whether it is by ourselves or in conjunction with someone else, there's a different type of product than the Company has introduced before the Borgata.

A follow-up question on Shreveport. We all know that one of the properties is in very much limbo at the current time, as well as the Indian reservation over in Oklahoma siphoning some of the Dallas crowd out. Is it really your expectation going forward that that market will settle down? And then what do you think about what is going to happen to that license? I don't know whether that is an opportunity or whether that license will go up for sale or what?

We do think the market will settle down, Ken. It did have some disruptions. December wasn't particularly good of course, but we think that going forward, we do expect stabilization. In terms of what goes on next door, obviously, there is somewhat in limbo and it is hard for us to say anything at this point. Our goal at this time is to get involved with the property and see how things evolve next door. I think a stronger effort or stronger different operator next door could work very well and have a very good concentration of the two properties side-by-side, marketing aggressively and bringing business to that particular location. So we don't really have any sense about the Hollywood situation at this time, other than just watch it like you are.

Harrah's says second quarter on Binion's (ph), and could you make your transition right away right after that?

I think we need to make our transition probably even before that. Part of their purchase of Horseshoe was to have this property make transition from them and I think we would probably expect to be first.

Thank you.

Smedes Rose, J.P. Morgan.

Can you just update us if there's anything new on the, I believe it is the Patawami (ph) tribe who are trying to build a casino in Michigan relatively near to you guys? And then the other thing is -- could you just remind me what the total project CapX is for the Delta Downs buildout, as well as the Blue Chip? I know you gave the '04 expenditures, but what was the total project cost for each of those?

In terms of the (indiscernible) and Patawami Indians that are in Southwestern Michigan, they are still in various legal processes, one involving a land and trust issue where they were sent to work, back to work on the environmental study. We understand that that was recently refiled with the court, but there has been no determination that we are aware of from the court, in terms of that issue. The other issue relates to the validity of the compact with the state of Michigan. That is now scheduled to go before the Supreme Court of the state of Michigan, which said they would take the case, so there is no resolution on whether they even have a valid compact or not. So it has been taking them quite long period of time as we have observed over many years, and it still appears that the legal processes continue and nothing of course until some of the legal work (indiscernible) can be developed on the site. In terms of the cost of the projects, we have indicated that the Delta Downs' full cost for the expansion and for the hotel is right around $50 million. It may go a touch above that, but that is the general range of it. We have not been real specific on the Blue Chip cost because we have not -- it is not totally final yet. I've talked in the range publicly of about $100 million. It could go a bit above that, but that is a general idea of where it should come in.

Thank you.

Todd Scott, Morgan Stanley.

Good afternoon guys. One question on the Borgata. Bob, you mentioned that you're still seeing some expense management going into February. Can you give us an update on where we are? Are we in the ninth inning of the expense management and kind of the 28 maybe you squeeze a little bit more out this quarter and 28 percent type margins are what you are thinking for the long run, or should we expect to see continued margin improvement through the year?

I would have to characterize it as we're probably at the top of the six. We have more opportunities, we work very carefully when we do that and very methodically and we feel we still have more opportunity. And to some degree, the actual margin result is a function of revenue of course, as well as it is expense. Atlantic City properties, generally speaking when their highest margins of course is the summer months as we would anticipate, would be the case here. What was very gratifying for us was to be where we were, in terms of percentage for the fourth quarter, built as I described it and then coming right around in January and seeing a nice uptick there. So we are feeling very good about the progress we have made, and we also feel that we have more opportunity in front of us.

Great. Just a quick follow-up on the Stardust. That return to profitability, which is nice to see, just like you guys had said it would. What was surprising was you actually saw some revenue growth there. Was there anything in particular done in the quarter, or have you stemmed the revenue loss there? Should be expect that to continue to decline?

We did see some nice revenue growth in the fourth quarter. Most of the decline was always in the third quarter. We changed up some marketing programs, we did put some new systems in place. We talked throughout a lot of '03 about some disruptions that was incurred at all of our properties as we installed new slot systems and some new marketing systems, and we're beginning to see at all of the properties, the advantages of those new marketing systems being able to market a little bit different to our customers, have better information on our customers. And frankly, specific to the Stardust, we've got a little more aggressive with respect our marketing. We would hope going forward to be able to continue to drive the revenues, but bring more of those revenues to the bottom line.

Thanks, guys.

(Operator Instructions). Joe Greff, Fulcrum Global Partners.

Good afternoon guys. Most of my questions have been asked and answered. Ellis, what is the deposition of Borgata at the end of the fourth quarter?

The debt position, approximately $585 million, give or take a little bit of (indiscernible) precise number. But as you know, there's a $630 million line that was our construction loan, and that -- all of the bills are paid now to contractors and we're down to at the end of the year, it was about 585.

Okay. And then with respect to your outlook for the year and maybe for the first quarter, I know you did not talk about specific EPS targets or ranges, but are you comfortable with consensus estimates for the first quarter and the full year '04?

We're really not doing any guidance at this point. So we I think expressed some good confidence the way Borgata is starting out and in general, some of the other properties. But we haven't made any specific guidance estimates and we're not going to do that.

Okay, thank you.

Ray Cheeseman (ph), Jeffries & Co.

Ellis, you mentioned during your presentation that you were aware of the sunset provision in the Illinois tax in July '05. With Illinois, assuming you have a process underway to try to move that license so to speak, do you think it's going to take all of the way to July '05, or do you think there's a chance it could happen sooner?

The other condition for the tax to sunset is the opening of the boat associated with the tenth license, not the granting of it or any other legal conclusion. So I think it is, assuming it will take awhile to get the bidders selected and then to get it built, it will probably be until the middle of '05 anyway.

Do you think there's any chance that the ultimate owner would use a temporary to get the law to kick in sooner?

We're all in favor of it. We're in favor of anything that brings a tax back to a more reasonable level. So it is hard for me to surmise what may be in other people's or negotiations, but we're all hopeful that the more rational tax pressure comes back quickly.

Thank you.

Having no further questions, Mr. Landau, I would like to turn the conference back over to you for any additional or closing comments.

Thank you everyone for being on the call and we will in just a couple of months or 2.5 months be back with you on our first quarter call. So thank you very much for listening today.

This concludes today's conference. Thank you for your participation.