Boyd Gaming Corp (BYD) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Boyd Gaming Second Quarter Conference Call. My name is John and I will be your coordinator for today. [OPERATOR INSTRUCTIONS.]

I would now like to turn the presentation over to your host for today's conference, Mr. Ellis Landau, Executive Vice President and Chief Financial Officer. Please proceed, sir.

Thank you, John, and good afternoon, everyone, and welcome to our second quarter conference call. First, let me make a couple of comments. Our presentation today may contain some forward-looking statements. Actual results may vary from what is contained 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. Our presentation today includes the use of non-GAAP financial measures, reconciliations for which are contained in the press release that may also be found on our website.

Today's call is being webcast on BoydGaming.com and StreetEvents.com. Joining me today are Keith Smith, who's our President and Chief Operating Officer of Boyd Gaming, and Bob Boughner, our Chief Executive Officer of Borgata. They will join me in making some remarks about our results and our future development plans. And following that, we will all be available to respond to your questions.

A short while ago we issued a release of our second quarter financial results. Once again, and I hope I never get tired of saying this, it was another powerhouse quarter. Our combination of excellent properties and strong markets, run by focused and talented management, once again delivered excellent results, and results that continued our streak, a run of 4 quarters in a row in which we more than doubled our earnings per share. That makes this the grand slam of earnings reports.

For the second quarter, we reported adjusted earnings of $0.56 per share. That's a 107% increase over the $0.27 per share that we reported in the second quarter last year. And we did that EPS increase with 22 million more shares outstanding. That's 33% more than we had for last year's second quarter.

And once again, the gains were broad-based across our Company. We have five great businesses and they all played a part in the gains. Going back to our streaks, that was the fourth straight quarter in which all operating units reported higher EBITDA than in the comparable quarter the year before. We are very proud to report not only the size of our gains, but also the breadth of our gains.

EBITDA in the second quarter was $159 million. That's up 87% over the prior year. Same-store EBITDA -- that's properties we operated fully in both quarters, so it takes out Coast and Sam's Town Shreveport -- that was up an impressive 14.1%.

Now let me run through the operating units. We operate our Las Vegas locals business through both our Boulder Strip unit, principally Sam's Town, and the Coast Casinos unit. The Las Vegas economy is very strong. Population growth, job growth, income growth are all drivers for our business.

Second quarter revenues were up 8.4% for the Boulder Strip and 10.9% for Coast. That was excellent expense control. That is all the incremental Boulder Strip revenue and most of the Coast incremental revenues fell to the bottom line and both units reported a very impressive 32% increase in EBITDA over the prior year.

EBITDA margins were up 5.6 points at the Boulder Strip properties and 5.5 points at the Coast properties. With little supply growth and strong demand, the Las Vegas locals business model is in great shape. And when new Las Vegas supply does come on, as it will in 2006, half of it will be ours. And that's our South Coast property now under construction in one of the fastest growing parts of the Las Vegas metropolitan area.

What Sun Coast did for Summerland, we think South Coast will do for the residents of the many communities in the southern part of the Las Vegas area. Construction is going well and we are looking forward to an opening sometime after the first of the year.

Borgata had another excellent quarter, with revenues up 11.8% over the prior year. Both gaming and non-gaming revenues contributed to the gains at Borgata, which again led the market in casino win and in wins per unit in both slots and tables. Borgata continues to lead the market in EBITDA. In the second quarter, the property produced EBITDA of $56.7 million, an increase of 8.5% over the prior year. The property's expansion of the public space is on schedule to open next spring.

Stardust had another good quarter, with EBITDA of 23% over last year. Downtown Las Vegas had a record quarter. Actually, you can think of our downtown business, and its Hawaiian visitor business model, like a Las Vegas locals business model. It's just that our Hawaiian visitors have to travel farther. But it is strong relationships with loyal customers who make repeat visits to a place where they feel comfortable. The strong Hawaiian economy helped fuel the increase in downtown revenues. It was also helped by strong Las Vegas visitation that provided more visits to downtown. When you couple a 13.9% revenue increase with excellent expense control, you get record EBITDA and great margin expansion. This group may sometimes be overlooked, but it's a steady and important contributor to our Company.

Our Central Region produced good results in the quarter. On a same-store basis, taking out Sam's Town Shreveport, EBITDA was up 5.8%. The standout was Delta Downs, where its new addition really made a difference. EBITDA was up 45% in the quarter.

Our property in Tunica continues to struggle, but we're working hard to turn that one around. Sam's Town Shreveport passed its first anniversary with us in May. Shreveport Boulder City remains a tough market, but we're making progress. Treasure Chest had a good quarter, with an impressive EBITDA gain and both Blue Chip and Par-A-Dice turned in solid performances in the quarter.

On the financial side, we renegotiated our bank debt in the second quarter to make several improvements to our credit facility. Significant among the changes were an increase in the bank commitment and a reduction in the interest rate. We now borrow at the lowest rates for any non-investment grade company in the gaming industry today, and we cross-redemption, which will take place on August 1, for our 9.25% notes, which we will refinance with lower cost bank debt. I just want to report that our capital structure is quite favorable.

Before I go forward, I want to look back for a moment. Our last 12 months have been exceptional for our Company. About a year ago, a lot of things really went right. Borgata completed its startup year and hit its stride. The locals market in Las Vegas took off and we acquired Coast Casinos. A lot of changes we made at the Stardust took hold. The downtown Las Vegas business unit benefited from both a stronger Las Vegas and a stronger Hawaiian economy. Our essential region remains solid.

Let me just run through some statistics for the 12 months ended June 30, 2005. Coast Casinos EBITDA for the 12 months after the July 1, 2004 merger was $235 million, much more than what we told you we expected when we bought it. The $235 million was up 31% over the prior 12 months before the merger. At $235 million, our purchase multiple comes out around 5.5 times, close to half of the market multiple today.

Boulder Strip's LTM EBITDA of $55 million is up 28% over the prior 12 months. Stardust's EBITDA was over $20 million for that period and up 72%. Downtown Las Vegas reported an EBITDA of $45.5 million. That's up about 20 percent. Our Central Region same-store was up almost 6% versus the prior year.

And Borgata, at $237 million for the 12 months, was up 51% over its first 12 months. When you look at our half of operating income, it was up 80% in the comparable 12-month period. Borgata, at $237 million of EBITDA, produced about a 21.5% cash-on-cash return on investment in its second full year of operation. That's pretty impressive.

And finally, for earnings per share, our last 4 quarters was about $2.06 versus about $0.88 in the 4 quarters before.

We may never see another Tiger Woods. We may never see another Lance Armstrong. We may never see another Secretariat. We may never see another year with the explosive growth rate of July 2004 to June 2005 at Boyd Gaming, but it was really something and it shows what we can do. And we hope to keep impressing you as we go into the future.

Now looking forward. The third quarter is usually not one of our stronger quarters, seasonally that is, but is starting off well with a strong July calendar. Given current trends, we expect third quarter EBITDA to be between $150 million and $160 million, and adjusted earnings per share to be between $0.53 and $0.56 per share. Keep in mind that in the third quarter, all of our properties will be open in both periods, so all comparables are same-store.

We may not be doubling earnings, but at the midpoint of our estimates, EBITDA will be up 16% and EPS will be up 43%. Not bad, while we're waiting for three major projects to come online in the first half of next year.

I would now like to turn the presentation over to Bob Boughner to talk about Borgata.

Thanks, Ellis, very much. I'm pleased to offer some comments on our recent quarter at Borgata. We had an outstanding quarter, with EBITDA of about $57 million, which exceeded the Atlantic City market's second quarter record EBITDA of $52 million, which incidentally, we set last year. The year-over-year increase in EBITDA was 8.5%.

Borgata's casino revenue of $170 million was 13% above last year and set a new second quarter city-wide record. Our table-drop of $425 million and slot handle of over $1.5 billion were also second quarter city-wide records. Despite increased competition for non-gaming revenue, ours increased 8% to a hefty $61 million. Net revenue for the quarter was $184 million or 11.8% ahead of last year.

And most importantly for us, we have not dropped a business. While we compete aggressively at Borgata, we compete efficiently. Our promotional allowances as a percentage of revenue remained flat year-to-year as well. Table-drop, table-win, slot-handle, slot-win market share and wins-per-unit market share premium have all increased considerably when compared to the comparable quarter in the prior year.

Overall, we captured a 13.7% gaming market share. This is 100 basis points above our 12.7% market share in the second quarter of 2004. Our 11.7% slot market share grew 80 basis points from the prior year. Our slot-wins per unit per day was $334, second only to the $349 we achieved last year in the third quarter.

We continue to dominate the table games market despite the addition of 90 additional games. Our drop per table per day market share premium is 99%. It doesn't get much better than that. Our table-win per unit per day market share premium was a little less than that at 81%, which increased a remarkable 24 percentage points from the second quarter of last year and 13 points over the first quarter of this current year. Our table-hold percentage was down slightly from the same period last year on a much larger drop. The table-win per unit per day was $4,737, which is 13% above our second quarter of 2004.

Even with market additions of hotel rooms, restaurants, beach bars, entertainment venues and lounges, our non-gaming revenues grew nicely. Our hotel occupancy was 96% in the quarter and the average daily rate flat with the prior year of $132. Food and beverage revenue grew 3% despite substantial supply increases in the market. Our spa revenues grew 27%.

Our performance to date and year-over-year comparisons provide great momentum as we enter the last half of this year and begin to focus on our Phase 1 expansion opening, which is less than one year away.

To sum it up at Borgata, quality matters. We have a quality facility that is only getting better as it gets bigger. We have quality associates who serve our quality customers. Our quality entertainment programs, which my colleague Larry [Mullen], along with Larry Magid of Electric Factory Concerts, produce is second to none in the market, perhaps in the country. The quality of our revenue stream results in the quality of cash flows and the earnings we have achieved. Quality matters.

And with that, I'd like to turn the call over to our quality president, Keith Smith.

Thanks, Bob, and good afternoon, everyone. As you heard from both Ellis and Bob, our second quarter results were extremely strong, with many of our properties achieving record or near-record results. What was more impressive than our strong second quarter results is the fact that this is the continuation of a trend. This is the fourth consecutive quarter we have achieved quarter-over-quarter EBITDA gains in all six of our operating units. And while Ellis and Bob highlighted many of our achievements in the second quarter, they bear repeating as each of our operating units performed very well.

In the Las Vegas locals market, both our operating units posted EBITDA increases of 32% and the second best EBITDA in those units ever, second only to the record first quarter. On the Las Vegas strip, the Stardust reported a 23% increase in EBITDA, the sixth straight quarter-over-quarter increase. In Atlantic City, the Borgata continued to lead the market and reported an 8.5% increase in EBITDA. Our Central Region properties posted an approximately 6% increase in EBITDA on a same-store basis. And our downtown properties reported record EBITDA of $14.3 million, a 63% increase over the prior year.

One of the most impressive accomplishments during the quarter and the first 6 months was the significant increase in our operating margins. Our strong operating management has been able to leverage solid revenue gains, and through a combination of effective cost controls and marketing programs, bring a substantial portion of these revenue gains to the bottom line.

The best example of this is at our downtown properties where we were able to take a 14% increase in revenue, which itself, is remarkable in such a mature market, reduce our expenses and achieve a 63% increase in EBITDA. [John Repetti], who leased these properties for us, and his entire team, continue to do a superb job in running these properties.

But beyond our outstanding operating performance, we also made significant progress on our many growth initiatives during the quarter. In the next 12 months, we'll see three of our current development projects come online. All three of these projects are in strong markets, where we are expanding or adding capacity to already strong operations.

As we said in the press release, we are expanding into our strengths. The first project to come online will be the South Coast, sometime after the first of the year. The South Coast, which is located in one of the fastest growing areas of Las Vegas, will add to our already impressive portfolio of properties in the strong and growing Las Vegas locals market, and it will be our fifth property in the Coast division.

As many of you know, this property was master-planned for more than 2,000 rooms and three towers. The original project included only one of the three towers. However, in mid-May, we approved and started construction of the second tower, which will be completed approximately 3 to 4 months after the opening. At that point, we will have approximately 1,350 rooms at the South Coast.

Next to open, sometime in the first quarter, will be the expansion and renovation of our extremely successful Blue Chip property. When complete, the new Blue Chip vessel will have all gaming on one floor, enhanced amenities in virtually all the public space and all the restaurants will be renovated. The new vessel will be the largest of its kind. During the second quarter, the vessel, which is being constructed on site, was floated out of its dry dock. We also opened our new 950 space parking garage on July 3, and just last week, we opened our new steakhouse.

Last to open, in the second quarter of next year, will be our Phase 1 expansion of the Borgata. As Bob indicated, we'll be adding both public space and casino space, as well as several new restaurants and nightclubs. Beyond these projects, we are currently focused on two longer-term projects -- first, the Phase 2 of the Borgata, which will add a new 800 room hotel and other amenities, and that's due to open in the fourth quarter of '07.

Second, we are continuing to work on and make progress on the master plan for the 63 acres of the Stardust. We continue to believe we have some of the best and most valuable real estate on the Las Vegas strip and we're excited to be part of the next wave of strip development.

As I said last quarter, it will take most, if not all, of the remainder of '05 to complete the research and conceptual design phase for this project. We hope to have something to tell you be the end of the year. While we are excited about the opportunities created by this site, we will take our time to ensure we design the property developments.

In closing, we are extremely pleased with our results in the second quarter and we're excited about the many growth initiatives we have ahead of us. We continue to build upon our strong operating foundation and solid capital structure with new projects and some of the best markets in our industry. And we are well positioned to take advantage of other opportunities that may come our way.

With that, I will turn it back over to Ellis Landau.

We will be glad to take any questions you have, Operator.

[CALLER INSTRUCTIONS.] And we'll take our first question from the line of Larry Klatzkin of Jeffries and Company. Please proceed.

Hello, Ellis. Congratulations on a good quarter.

Thanks, Larry.

Couple of questions. One, the Mayor of Vegas just came out and said that he's reemphasizing the honor roll project for downtown. Does that mean your phase across to the Stardust also may come back alive?

Larry, I'm not familiar with the mayor's comment specifically. We're excited to have it come downtown. I'm not sure where the Stardust Spur is in the planning right now.

Okay. Second, some of your competitors have talked about the Windstar really hitting Shreveport. Is that something that's going to be a longer-term effect? What are you guys feeling on that?

The Windstar property in Oklahoma certainly is taking some of the Dallas business, some of the daytrip business there. It is a little closer. As you know, the Shreveport market has not been growing recently and I believe it will have a long-term effect on that market. I don't think it will come back anytime soon.

All right. As far as -- Blakes Entertainment's been claiming, as they do every quarter, that the Indians are any day now in Michigan. Should I just ignore that like I have the last 5 years?

Well, Larry, we continue to focus on running our business and building our project and that's what we're focused on.

All right, and last one. For the rest of the year, housekeeping, what you see in the construction CAPEX, corporate and interest expense.

Larry, the two projects we're working on for expansion, CAPEX -- first, let me say maintenance CAPEX, as you saw in the first half, ran around $25 to $30 million a quarter. That should continue at those rates for maintenance. We have two projects we're working on extensively now, Blue Chip and South Coast. I would say that probably about $270 million of development dollars will go into those two in the second half of the year, evenly split between Q3 and Q4. And the balance of those projects will be completed in '06.

Okay. And then how about the interest expense with the new financing and depreciation?

First, you mentioned about corporate expense. Corporate expense seems to be in the range right now of about $10.5 a quarter, $10.5 to $11 million per quarter. The depreciation, there's nothing changing in the second half of the year in terms of (inaudible) additions. I think you can look at a past run-rate for depreciation to try to forecast the future.

Okay. Are there other plans for revitalization of downtown? I heard something about some reworking and improvement down there, and obviously, you guys don't need that, but it wouldn't hurt.

There's quite a bit of activity downtown with relation to the 61 acres and also the World Market Center that opened yesterday, so I think we are beginning to see some signs of the revitalization of downtown.

Yesterday's announcement by the developers of the World Market Center talked about speeding up the development to get an extensive Furniture Mart there within the next 7 years, with millions and millions of square feet of space.

All right. Congratulations on a good quarter, guys. Thanks.

Your next question comes from the line of Joe Greff of Bear Stearns. Please proceed.

Hello, everyone. A question for you, Bob, in Atlantic City. Could you just comment on the promotional environment in Atlantic City so far in July?

I think what's going on in the month of July is pretty well representative of what's been happening. Some operators who have a challenge with their product are more aggressive with the soft dollars. Our point of view is pretty much stick to our knitting, as I said earlier in my comments, where we compete aggressively. We have since we opened the doors, but we compete efficiently and we really don't react to what anybody in particular might be doing

Is it your sense that so far in July that some of the promotions have abated since June or is that really not the case?

I wouldn't characterize there to have been a whole lot of activity earlier in the year, other than what we've seen since the opening of the quarter.

Okay. Fair enough. Thanks.

And your next question comes from the line of [Steven Raggio] of CRT Capital. Please proceed.

Yes. Good afternoon. Real quickly. Perspectively, how are you going to market the Boulder Strip highway property as compared to the Coast properties? Can you just give a flavor on that?

Currently, we have no plans to change the marketing of the Boulder Strip properties. Again, those include Sam's Town, Jokers Wild and the Eldorado. They've been marketed consistently, or Sam's Town has, since 1978 or 1979 and it will continue. If the question is, is there intent to integrate them under the Coast flag or Coast brand, that's not the case at this point.

Okay. Great. Thank you.

Your next question comes from the line of Jake Fuller of Thomas Weisel. Please proceed.

Good afternoon. Can you talk about how the rollback in the Illinois tax rate will impact you moving forward? How will you account for that?

Jake, we were spreading what we anticipated to be the sunset over the full year, so we were actually anticipating with the June 30 sunset, an $8 million pickup in the second half of the year. That was spread $2 million per quarter throughout the year. Going into the second half of the year, we now see that there will be a payment next June 15 relative to the hitting the minimum threshold of payment. So we are actually accruing an extra $1 million a quarter to account for that. So there's a $2 million savings year-over-year, just now in the second half going to be offset by a $1 million charge for a $1 million pickup each quarter to account for the lower rates with the minimum payment. I hope that's clear.

[CALLER INSTRUCTIONS]. And your next question comes from the line of Dennis Forst of Keybanc. Please proceed.

Good afternoon. Ellis, I had a question about pre-openings. South Coast is moving along. Pre-opening was a little higher in the second quarter than the first. What does it look like for the second half, total pre-opening?

We don't have a forecast for that, Dennis. Let me look into that. I'm going to have to get back to you because I don't really have a forecast of pre-opening numbers.

Okay. And then I had a question for Bob related to operating costs at Borgata. I was a little surprised because the revenues were a little higher than my model, but the operating costs of $128 million was also well higher than I was envisioning. Was there anything one-time in there or was that a normal operating quarter, Bob?

I think it was a pretty normal operating quarter. We did have a little lower table games hold percentage, which depressed our table games revenues a bit, but we had all of the costs associated with hosting those customers. So I think that had an impact on things. There were some other reserves which were impacted and some increase in culinary benefit costs. But other than that, I think what you would see would be pretty much consistent with the prior year.

With the cost of hosting these high-end players, would that be an operating cost or in promotional allowances or some in both?

Some in both. Some of it was entertainment related. We conducted more entertainment events due to our aggressive programming this year, which was more aggressive last year. And entertainment events have a lower operating margin than do other aspects of our business.

Okay. That being said, the third quarter obviously is the peak revenue quarter for Atlantic City. Would operating costs then likely be higher in the third quarter than the second quarter?

What I would anticipate is a more normalized -- rather, EBITDA margin uptick in the third quarter, similar to what you've seen previously.

Yes, because the EBITDA margin was about 225 basis points lower than the first quarter. I guess that's what got my attention. Where it had been up year-over-year, it was down in the second quarter by 100 basis points. Now I'm looking at the third quarter and wondering if revenues are up as much as they've been the first half of the year, whether EBITDA would also have a higher percentage than a year ago.

I would be looking to a higher EBITDA margin in the third quarter than you saw in the second quarter.

Okay. And also higher than a year ago's third?

I can't comment on that.

Okay. Thank you.

Your next question comes from the line of Celeste Brown of Morgan Stanley. Please proceed.

Hi, guys. Can you discuss a little bit what you envision is the impact to Sun Coast next year as you have some new competition opening up there? And also it appears that there was a slowdown in the locals business. Obviously, still a great growth rate in the quarter, but can you talk about what you see going forward there as well?

Sure, Celeste. This is Keith. I would expect the impact on the Sun Coast of future competition. The good news is Sun Coast has been opened for a number of years now and the population in that part of town that supports that property has, by the way, almost doubled since it opened. We believe that there's plenty of demand out in that part of town and that part of town will continue to grow in future years. So while there may be some short-term impact, we don't believe there will be any significant long-term impact to that opening.

With respect to slowdown in the locals business generally, I guess I'd have to say I think you're looking at something I'm not. We feel good about the locals business and think it's been the strongest ever. We haven't noticed any slowdown.

I think the math, Celeste, that you're comparing to higher and higher numbers, given the past growth rates, you just may not see the same level of rates. They may not stay up in the double-digit range for good, but I think you'll still see strong growth rates in the mid-to-high-single-digit range.

Okay. Thank you.

And your next question comes from the line of Kent [Green] of Boston American Asset Management. Please proceed.

Yes. Great quarter. My question contains to Tunica. With the obviously spate of recent mergers, everybody north of you is of the large casino (inaudible) and you're kind of left down south with an unbranded Harrah's or a new [Cara's] and Hollywood and yourself. Any thoughts here of relocating that property or possibly closing it down? And is it a lost cause?

Kent, this is Keith. No. I don't believe it's a lost cause. We certainly have had our challenges at that property over the years and we're working hard to turn that around. We understand the market that we operate in down there with, as you say, a new property in the form of Resorts, an old Harrah's property and then the Hollywood property. Moving the property is really not feasible. Getting that barge back out of the Mississippi is really not a financially feasible alternative.

We also have, in the last 6 months, put some new management in place at that property. We have a lot of confidence in their abilities and we look forward to some good things to come. We're working hard to turn it around.

And then a question for Bob. House of Blues, has that pulled a little bit of entertainment away since it's been open? I know it's only been open a very short period of time.

House of Blues has been open for a short period of time, so it's difficult to judge. The only way that we can judge the impact on us is at the attendance at our shows. And our shows are generally, fully sold out on a regular basis and we have been very, very aggressive with entertainment this year, and plan on continuing to be very aggressive with entertainment.

I would say the House of Blues activity is all additive to the benefit in the marketplace and is continuing to help diversify the revenue stream and the customer base coming into the market. So we see it as a plus and we intend to be aggressive going forward.

And I'm a little surprised about the room rates. Since you have a superior room there, flat room rate, is that a function of you giving away as promotions more free room nights, or when or would you ever try to drive rev PAR with room rates at the hotel?

There are really two parts to the answer. Number one with regard to complimentary room sales, complimentary room sales are up year-over-year. As our databases continue to grow, we have seen more and more complimentary rooms at Borgata. We think that's a positive since we tend to yield the hotel based on overall revenue and profitability.

On the cash room side, we have made some judgments to maintain a certain range of dollars with regard to our room pricing, which is consistent with the prior year. While demand continues to be very strong, we don't believe it's in our best interest long-term to take our standard room pricing much above $459 per room. We have competitors in the marketplace that for an inferior product, charge more on a regular basis during peak demand periods. But I'm more focused now on making certain that the 800 rooms and suites that will open in the last quarter of 2007 has plenty of demand as well.

And finally, help us out a little bit. That property was originally set up for three major casinos, the total property. Obviously, MGM Mirage, Mandalay Bay has allowed you to infringe in part of that central space over there, while still keeping part of the property by doing Phases 2 and 3. How many more acres are you including on the original plot, Phases 2 and 3? And do you think that's expandable in the future for a possible Phase 4?

The way that we crafted our lease agreements with MGM Mirage, we only put under lease the specific areas that we needed for what we currently have under construction. There was no reason for us to do anything beyond that. And you'd have to direct the rest of your question to MGM Mirage to determine their plans. Borgata is set. Borgata has sufficient real estate under lease and owned in order to facilitate the expansions that we have planned which will take it well into the future. And anything beyond that you'd have to direct your comments to our joint venture partner.

Well, then, kind of a follow-up with whatever's there in the lease arrangement now, could you do some additions to the property by either building on top of parking garages or etc., etc.?

No. We did not structure those parking structures in that capacity. And quiet frankly, even if we had, it would have been a mistake. It's our view that these facilities have a limit to their size in order to function in terms of their efficiency. They have a limit to their appeal. At some point in time, it would be time to change schematically or otherwise what it is you do. We don't believe that there's an infinite amount of expansion that can occur at a particular property. We've sized Borgata at the size we think it needs to be. It will have 2,800 rooms and suites. It will have over 4,000 slot machines. It will have 175-ish gaming tables, an 85 table poker room, 15 restaurants, 3 nightclubs. We think it's in pretty good shape. Beyond that, we think it starts to become a bit less intimate than it needs to be.

Finally, this may be a detail question. How will you make that big poker facility more profitable? Poker facilities have never really been that profitable as a casino floor. It drives other business. Or is that a goal there? I don't know if you got the world poker tour in there, whether that's expandable, or other areas because Harrah's is talking a lot about poker these days.

Well, with regard to the world poker tour, yes, we are on the world poker tour and we have had two very successful tournaments so far and anticipate having a very large and successful tournament this year.

With regard to poker room profitability, our poker room runs a 51% margin before the application of complimentaries and after the application of complimentaries, a 31% margin. In as much as our poker tables generate at Borgata at or slightly higher than the average 21 table in Atlantic City, our poker operations today compete effectively with other people's traditional casino. Now we expect our win per unit to decline somewhat, but in the aggregate, we see tremendous upside potential in terms of our poker operation, not only for what it does in the poker room, but what it does for expenditures in non-gaming areas such as restaurants and in other areas such as traditional table games such as blackjack and craps.

Thank you very much.

Your next question comes from the line of [Steven Krull]. Please proceed.

Hi, guys. Good quarter. Could you provide just a little more color on your Stardust expansion? Do you foresee that being a JV project or do you foresee going it alone? And, two, do you foresee that being kind of a Borgata-type project or a master plan expansion on top of the existing facility? Thank you.

[Steven] this is Keith Smith. We really don't have much more to add than what I said earlier. We truly are in the data gathering and the research and the conceptual process now. I can safely say that we haven't ruled anything out and we haven't ruled anything in and that it's a wide-open plate. We're trying to narrow it down. We hope to have something to announce by the end of the year, something to tell you by the end of the year. But at this point, we really don't have anything else to talk about. I wish we did. It would make for a little more of an exciting call, but that's all we have for now.

Great. Thanks, Keith.

Your next question comes from the line of Joe Greff of Bear Stearns. Please proceed.

Hey, guys. A couple of follow-ups. I guess it was in the early part of June in a locals market, one of your competitors launched a new jumbo jackpot initiative and I was just wondering if you saw that have any impact on the Coast results in June at all. Can you just talk about what you're seeing from that perspective, if you're seeing anything at all?

I think I know who that competitor is. No, we actually haven't seen any impact of that promotion on our business. There's a tremendous number of promotions that happen all the time in the locals business. It's a very competitive marketplace, as you well know, and we didn't see anything specific happen in June.

Okay. And I think in response to another question, somebody referenced a mid-to-high-single-digit revenue growth rate for the locals market. Am I correct? Did I hear that correctly?

Yes, I think Ellis mentioned when he spoke earlier about that.

Okay. And that's really for the back half of this year and is that -- when you talk about a same-store growth, does that include the benefit of the additional rooms, which I know that anniversary's sometime in the fourth quarter?

I didn't really mean to get into quarter-specific projections, Joe. I just really wanted to make the point that the double-digit rate that we've been seeing will be hard to maintain as we cycle through anniversaries of those, and rates like that don't go on forever. So I wanted to come down to show some more long-term rates that I thought would be sustainable, given the strength of the economy here and the growth rates and some of these measurements and metrics that we've seen.

So mid-to-high-single-digit revenue growth timeframe is over the next couple of years then?

Yes. I think that we could say that given the way Las Vegas is growing, I think that it's safe to say, and the Las Vegas economy and the way it is tracking, I would think that those types of growth rates that I mentioned are sustainable longer term -- not the double digits, the mid-to-high-single-digits, given what we're seeing here in the economy.

Got you. And then a question back on Borgata. The lower than average hold percentage on the tables at Borgata, what's that cost in terms of property level EBITDA in the quarter?

In round numbers, probably about $3.5 to $4 million. That is the measurement on revenue applying the tax rate.

Just the tax rate and that would just blow through to the EBITDA.

Right. It probably takes you into that $3.5 to $4 million range at the property level not --

Because you already got hit with the expenses. Okay. Great. Thank you.

Ladies and gentlemen, this concludes today's question and answer session. I'll now turn the call back over to Mr. Ellis Landau for closing remarks.

Well, thank you, everyone, for your attendance on the call today and we look forward to reporting our third quarter earnings in October. Thank you.