Boyd Gaming Corp (BYD) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Boyd Gaming Fourth Quarter Conference Call. My name is Rakin, I will be your co-ordinator today. At this time all participants are in a listen-only mode. [OPERATOR INSTRUCTIONS] I would now like to turn the presentation over to your host for today's call, Mr. Ellis Landau, Executive Vice President and Chief Financial Officer. Please proceed, sir.

Thank you. Good afternoon and welcome to our fourth quarter and full year 2005 conference call.

Our presentation today may contain some forward-looking statements. Actual results may vary from what's 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 our press release and 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, our President and Chief Operating Officer, and Bob Boughner, now Chief Executive Officer of our new Echelon Place subsidiary who has returned to Las Vegas from 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 our press release of our fourth-quarter and full-year 2005 results. For the fourth quarter we reported adjusted earnings -- adjusted earnings per share of $0.76 versus $0.51 in the 2004 fourth quarter. That's an increase of 49% and a record quarter for Boyd Gaming. That number also beat expectations by a wide margin.

Our fourth-quarter revenues of $565 million were up about 5% over fourth quarter of 2004. And we did that with Delta Downs being closed for 33 days in the quarter. While Treasure Chest was closed for 9 days, the beginning of the quarter, that was generally offset by South Coast being opened for nine days at the end of the quarter.

In the fourth quarter we reported EBITDA of $182 million, a 22% increase over the comparable period in 2004. That is also a record for the Company. All six or operating units reported an up quarter when compared with the prior year, in both revenues and EBITDA.

Our outstanding operating management continues to deliver for us and the benefits of our broad diversification were clearly evidenced in the quarter. Our biggest gainers in the quarter were first, the central region where EBITDA was up 50% year over year, mostly due to Treasure Chest and our two other Louisiana properties. And second our downtown Las Vegas properties, which is really the locals' market for our guests from Hawaii, where EBITDA was up 40% year over year. And third Stardust EBITDA increased 43% in the quarter.

Our very strong Borgata and last Vegas locals units performed well in the quarter, but they face tougher comparisons as those properties reached new levels for outstanding earnings this time last year. Borgata compared to a quarter that was up 77% in last year's fourth quarter, and that was aided by a labor strike at the competitive properties. Reported strong EBITDA in the fourth quarter of $62.6 million, an increase of 4% over the prior year. That was Borgata's best non-summer quarter ever.

The Boulder Strip properties, principally Las Vegas locals, comparing to a quarter that was up 41% in EBITDA last year still reported a 10% increase in EBITDA in the fourth quarter. And our Coast Casinos unit, also principally Las Vegas locals, was also compared to a quarter that was up 41% last year. Coast posted EBITDA of $64 million, up 6% over the prior year, a number that was hampered by a low hold in their active sports books.

So to capsulize the quarter, three units, central region downtown and Stardust reported EBITDA that was up 40 to 50% above the prior year. Really great results this fourth quarter. And the other three units, Borgata, Coast and Boulder Strip that were comparing to blowout quarters last year when they were up 41% to 77% built on that success and still reported excellent gains in EBITDA of between 4% and 10%. We are really proud of those results.

There are a few properties we want to call out for discussion, particularly our Louisiana operations, some great results in downtown Las Vegas, our South Coast opening and our very strong January 31st opening of our new boat at Blue Chip. Keith will discuss these in just a few minutes.

For the full year 2005, we really posted some great numbers. Our adjusted earnings per share were $2.49, a 68% gain over 2004. EBITDA for the year was $668 million, and we showed strength all across the company. Boulder Strip EBITDA was up 20%. Coast EBITDA was up over its 2004 number. Downtown Las Vegas was up 35%, Stardust was up 37%, Central Region was up 18%, and Borgata reported that their property EBITDA in 2005 of $252 million was up 17% over 2004. You've got to agree 2005 was one hell of a year.

Now let me turn to other financial topics. We ended the year with a little over $2.5 billion in debt and nearly $200 million in cash. Our expansion capital expenditures are winding down as we complete South Coast and make final payments for Blue Chip.

Borgata is in an unconsolidated joint venture so their spending is not Boyd Gaming CapEx. Their expansions are ongoing and have been funded largely out of their free cash flow and to a lesser extent from borrowings on their revolving credit facility. Given their under-leverage we expect to increase the distributions to both Boyd and MGM Mirage even as we build the new hotel tower. To give you a sense of this change in distribution policy that we expect to undertake, in 2005 we will receive about $30 million from Borgata, if we had gone to a 100% of net income distribution as we expect to do, we would have received about $85 million in 2005. Now back to Boyd.

To finish Boyd Gaming projects we -- we will spend about $125 million in 2006 and we'll have some early Echelon-related spending also. All in all, Boyd gaming expansion CapEx in 2006 for those products we've identified should be around $200 million.

To help those of you who do financial modeling, let me give you some guidance on some of our non-operating numbers for 2006. For depreciation for the full year, we estimate $230 million. Keep in mind that we will adjust out of our adjusted EPS about $3 million a quarter in depreciation expense or about $0.02 a share due to accelerated depreciation at the Stardust and our corporate office building in connection with that property's removal after the first of 2007. Interest expense for the full year you should use 160 to $170 million, weighted slightly to the second half due to the timing of CapEx and the direction of interest rates. The tax rate we expect 35% for the full year. 2005 was a little below that at about 34.25. The fourth-quarter rate was lower than normal due to certain benefits and credits in our state taxes in a couple of our states. That should help us next year but to a lesser extent. For stock option expense, which we will adopt in 2006, we expect to expense about $4 million per quarter in 2006 based on outstanding grants. If any grants are made later this year, that number would go up.

For earnings guidance, we take it one quarter at a time. For the first quarter of 2006 we are looking for EBITDA to fall between 198 and $205 million and adjusted earnings per share to be in the range of $0.70 to $0.74 per share. Both of these numbers exclude the stock option expense mentioned earlier.

We are very pleased to have reported another great quarter and great year and with that I'll turn it over to Bob Boughner to talk about Borgata.

Thanks, Ellis and good afternoon, everyone. Borgata closed out a very good year with very strong results. As Ellis indicated, EBITDA of $252 million and nearly 17% pick-up over the prior year.

As pleased as we were with the results in the first three quarters, we're even happier with the fourth quarter, especially since Borgata had very tough comparisons to the strike as result from last year's fourth quarter. We recorded another city-wide quarterly record for EBITDA with a fourth-quarter EBITDA of $62.6 million. That number surpassed our last year's record of $60.1 million. The property generated strong net revenues of $194 million that exceeded the prior year by 8% or $14.5 million.

Similar to the third quarter, our -- Borgata total revenues for the fourth quarter increased $15 million from the prior year, yet our promotional allowances increased by only $736,000. Or; in other words, total revenues increased by 7% and promotional allowances increased by a mere 1.8%.

We did face additional costs during the fourth quarter associated with an increased utility costs of roughly $2.2 million. And consistent with our approach towards keeping the building very fresh, we added an incremental cost of a million dollars over our plan relative to repairs and maintenance. We are working to mitigate some of the utility cost increases, but we're committed to keeping the look and feel of the property very new and not allow the building to become old and tired. Borgata generates substantial throughput each and every week and as a result of that we make incremental expenditures to keep it fresh.

For the year Borgata generated record EBITDA of $252 million of net revenues of $764 million, representing a margin of 33%. That was down slightly in the fourth quarter when compared to the prior year as a result of the increased costs associated with utilities and repairs and maintenance.

Recently the Casino Control Commission announced that Atlantic City had reached a watermark, a $5 billion gross gaming win for the year. We're pleased to announce that Borgata was the first casino in Atlantic City to reach $700 million in gross gaming win. We are especially pleased that we were able to increase our lead over our nearest competitor. In the -- pardon me, in the current year we were able to improve our results by roughly $51 million when compared to our nearest and much larger competitor. That's a significant increase on a year-over-year basis and that's continuous improvement.

In the 30 months since we opened Borgata in July 2003, we've earned $532 million in EBITDA on our initial investment of $1.1 billion. Our performance to date in year-over-year comparisons continue to provide great momentum as we enter a new year.

We are very excited about our upcoming expansion, which will open in the second quarter of this year. We are adding more gaming tables, more slot machines, more restaurants, and opening an 85-table poker room that we believe will be the largest on the East Coast, and we also believe it will be the best.

It's important to note that -- and I would want to make this comment, that I have transitioned out of operational responsibilities at Borgata effective January 1st. Larry Mullin, a very seasoned veteran of the gaming industry and the Atlantic City market is now President of Borgata. Larry's extremely well qualified for this position. We believe there will be great continuity in the operation. Larry Mullin, Audrey Cipolinni, John Leuppo, and Tom Ball, which represent the senior leadership of the property, were all part of our pre-opening organization. There will be great continuity in philosophy, strategy, and above all execution. Borgata is in great shape and in great hands.

With that, I'd like to turn the call over to Keith Smith, President and Chief Operating Officer of the Company.

Thank you, Bob. Good afternoon.

As you heard from both Ellis and Bob, we had another outstanding quarter, posting record earnings in all six of our operating -- and all six of our operating units showed revenue and EBITDA growth. Many of our operating units posted record or near-record results. This record quarter also caps a record year for the company.

You may have heard me say this last quarter, but as impressive as these results are, what is equally important to us is that these results continue a trend of improving results quarter after quarter and year after year. These results reflect the fact that we have a strong and diverse operating base anchored by operations in some of the strongest markets in our industry, Las Vegas and Atlantic City. Our strategy of diversification, both geographically and from an earnings perspective, has proven very successful. From this strong base we will continue to grow our company.

Before I talk about our current growth initiatives, I'd like to spend -- or provide some additional color on several of our operations that Ellis touched on. In Louisiana we have reopened both of our hurricane damaged properties, Treasure Chest and Delta Downs. Treasure Chest reopened on October 10th and has since opening experienced significant increases in business volumes. While we are seeing many new faces, many of our loyal customers have also returned. Much of this increase in business is due to a lack of competition in the area and as other properties reopen we would expect our business volumes to return to more normal levels.

The single biggest challenge we face is staffing. Competition for employees is fierce, driven by the fact that many residents have not returned to the area combined with the huge need for workers to assist in the rebuilding efforts. Because of these staffing challenges, we have not yet opened our buffet and the casino is not open 24 hours at this point. We're actively seeking additional employees in hope that in the next 30 to 60 days we're able to reopen the buffet and open the casino 24 hours. Kim [Etlin], our General Manager of Treasure Chest has done a wonderful job of managing our way through these issues and getting this property up and running. She and her staff have done an outstanding job of reopening this property and servicing our guests in difficult circumstances.

On the other side of the state, Delta Downs reopened on November 3rd, after probably what was a direct hit from Hurricane Rita. While the property damage at Treasury Chest was not significant, the damage at Delta Downs is extensive. While we have our casino, hotel and food court reopened, we are still in the process of repairing our buffet, our steakhouse, and our horse-racing operations. We expect all of these to be completed in the next 30 to 60 days. Much like at Treasure Chest, we have experienced increased business volume since reopening, mostly as a result of less competition, but also as a result of our renovation and expansion project we had just completed in the spring.

In Las Vegas, our downtown properties reported yet another record quarter and a record year. All three properties reported strong results and even soaring jet fuel costs couldn't keep these properties from recording record results. As you think about our downtown operations, keep this statistic in mind. For 2005, our three properties with 1635 rooms produced $52 million in EBITDA. Not something many strip properties of the same size can achieve. This is why we continue to be proud of our great management team downtown.

In addition to our record or near record operating results in the fourth quarter, fourth-quarter also represented a turning point for us with respect to our current slate of growth initiatives. With the opening of South Coast on December 22nd and Blue Chip on January 31st, we have moved from merely talking about these projects to reaping the -- reaping the rewards for these projects.

South Coast opening on December 22nd was a soft opening, as several of the amenities are still being completed. While we opened with a full complement of table games and slots and restaurants, the equestrian center, the nightclub and the second tower which includes the spa and the pool, are still under construction. The equestrian center will host its first event starting February 23rd, and we expect the hotel tower, pool and spa to be completed in the second quarter. We are pleased with the results of the property and as additional amenities are completed and as the ingress and egress -- ingress and egress issues improve, including the completion of our freeway interchange, we are confident about the success of the property. The key elements that got us excited about this project in the first place still exist, the great market, a great location, and great population growth.

In Indiana, we opened a new and improved Blue Chip on January 31st to record crowds and record results and in the first week since opening our admissions are up 77% and our gaming win is up over 80%. While one week doesn't make a trend, it's a great start to the new business. This facility without a doubt is the finest river boat casino in the country. It has a look and feel of a land-based property with a seamless transition from the moment you walk through the door all the way through the casino. The opening was flawless, Judy Campbell, the General Manager of our property, along with her team deserve a tremendous amount of credit for ensuring that the project was completed on time, on budget, and that the transition to the new operation occurred without a hitch.

As Bob Boughner described just a second ago we're looking forward to the expansion of Borgata public space expansion in the second quarter and ultimately the opening of our new hotel at the end of '07. These expansions will ensure that the Borgata retains its leadership position in the Atlantic City market.

Our other two recently announced development projects, Pennsylvania and Echelon Place are progressing nicely. At Echelon Place which we announced approximately six weeks ago, the planning and development process is actively underway for our 63-acre site on the Las Vegas Strip. And in Pennsylvania we continue our pursuit of a license in Limerick township just outside of Philadelphia.

Beyond these projects we continue to pursue growth opportunities which meet our criteria, a focusing on strong and growing markets markets with stable regulatory environments where we can be market leaders. Focusing on expanding already successful businesses, focusing on new jurisdictions, which have high density and limited license opportunities and focusing on continued diversification of our earnings stream. As always we will be thoughtful about where and how we grow. We are extremely proud of our current results and excited about what the future holds. And with that I'll turn it back to Ellis Landau.

We're ready for questions now, operator.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Larry Klatzkin of Jefferies and Company.

Hi, guys, congratulations on great results.

Thanks, Larry.

The freeway interchange, what's the timing of that opening?

Larry, this is Keith. It is -- it's probably a year off. We should have an exit ramp only before that but there won't be a full interchange for probably a year.

When could you have the exit ramp?

Sooner than that. It's -- the timing isn't in our hands we're still working with the State Department Transportation to work all that out so I can't give you a more definitive answer, Larry.

Now, since there's no real new capacity opening soon, is it safe to assume New Orleans, Lake Charles, Shreveport all should probably continue some -- maybe not this magnitude but sizeable gains for some period going forward?

Well, I think there is some capacity to come on line as best as I know. Harrahs will be opening in February and some of the Gulf Coast casinos are scheduled to open over the summer so as they open we'll begin to see our revenues, you know, go back to more normal levels. If they don't open, yeah, I think you'll continue to see them at the current levels.

All right. So -- and how is your trend in the first quarter?

The first quarter trend looks a lot like what we saw in the fourth quarter.

Okay. That's -- that's good. And as far as -- as you're seeing for the -- Ellis for the rest of the company, any way you can talk anything about the first-quarter trends and if we're already halfway through the first quarter?

Well, we gave guidance for the first quarter and that was based on the trends, Larry, so what you -- you heard in the numbers is what we're heading -- what we feel we're heading toward.

Okay. And then the last thing is you talked about your application in Pennsylvania?

Well, we applied at the end of December when applications were due for one of the at-large licenses outside of Philadelphia. We feel it's an excellent site. We -- we own the land and we -- we are hopeful of success there. We can't say much more about it but we feel that at this point we're in good shape with what we've done so far.

All right. Well, congratulations for a great quarter.

Thanks, Larry.

Thanks.

And your next question comes from the line of Celeste Brown of Morgan Stanley.

Hi, guys.

Hi.

Just -- coming back to the central region. Is Shreveport -- you talked about reduced staffing costs, is that permanent or is that just as a result of everything that's happening in the region?

No. Those are permanent staffing costs. We've been declining that operation over the last year and have been working specifically on payroll so those are permanent.

Okay. And on Coast, what would the growth have been with a normalized sports cycle?

We think that the way -- the way we look at it is I think we mentioned to look at the South Coast additions or -- offset the help of that was offset by the -- the low sports books hold. Those two taken together would have come out with a similar number that you saw on the revenue side. I think on the EBITDA side, if you -- if you did the same test and took out South Coast with the same store and put in a normalized sports book hold -- we could have seen 11%.

Finally just on your tax rate, adjusting it looks like it was probably 32%, is -- what drove it down in the quarter?

We -- we adjust back that retention credit that we called out, it was about 31.5% and that was due to lower state taxes. We had certain benefits and credits in a couple of the states in which we operate and those investment credits caused us to have a lower effective tax rate.

Thank you.

Sure.

And your next question comes from the line of Adam Steinberg of Morgan Joseph.

Hi, guys, good quarter guys. Real quick question, I want to follow up also on the taxes. If I normalized that for the 35% I get kind of the adjusted net income around 68 million or $0.63 a quarter.

Okay. I didn't -- that's your calculation. I didn't do that.

Okay. Just wanted to get it updated if that is more along the lines. And also just wanted to see if there's any news on the values in the New Orleans boat, did Columbia [INAUDIBLE] open up their wallet and pay what they owed or is that boat been taken over?

No. I'm not aware of the situation there Adam so I can't really comment on that.

Okay. Thank you.

Sure.

And your next question comes from the line of Joe Greff from Bear Stearns.

Morning -- morning, good afternoon, everyone. Ellis, Keith, can you talk a little bit more about the South Coast performance and -- in the two months or so since it's been opened. To what extent is it having an impact on the existing Coast properties and where do you think the -- the South Coast players are coming from geographically?

Geographically, there's a tremendous growth in the population in the immediately surrounding area and that is where we have -- we believe at this point the majority of the customers are coming from. We haven't seen any significant impact to any of our operations Coast or Sam's Town in terms of customer migration permanently. There's certainly visitation. But we haven't seen any -- any significant impacts.

Bob, I don't know if you can talk about the first 50 days or so in Atlantic City. It sounds like promotional environment remains very tame and it seems like you guys are having success with the Jumbo jackpot prize slot initiative. Can you talk about that a little bit.

Joe, the month of January -- I think the Commission will be announcing results probably tomorrow or the -- on Monday. But I think you'll see nice -- nice results out of the market. We had pretty good strength in our operations and we feel as if at least initially there is a positive effect associated with the prize jackpot.

Thanks, guys.

And your next question comes from the line of Steven Ruggiero of CRT Capital.

Yes, good afternoon, gentlemen. Adjusted EBITDA, your first quarter '06 guidance Does that include the $4 million of stock option expense or are you adding that back in?

No. It's -- it -- the expense is not there. It is treated as apples to apples for the fourth quarter. So the reported number would be lower, but we wanted to state it in an apples-to-apples basis the way you had been looking at it. So the number we gave you is -- does not include the expense.

Okay. Great. And also Ellis, South Coast CapEx in the first half of '06, what should we expect for that?

Probably about $110 million.

That was in the first half?

Yes. That's the first-half number. That will finish up the -- as Keith outlined, what we're still finishing. That will finish it in the first half of '06. That's correct.

Last question Ellis. What should we assume for capitalized interest in the next couple of quarters?

I don't know that off the top of my head Steve, I'll get back to you on that one.

All right. Thank you very much. Good results.

Thank you.

And your next question comes from the line of Jay Colgan of Banc of America Securities.

Yes, hi. Thank you. I got a few questions for you, Ellis. First, just go back to that comment earlier about Coast and being up 11%. I'm just trying to understand it maybe I didn't hear correctly. But did you say if you took out South Coast and if the sports book hold was normalized you would have been up 11% or did I hear that wrong.

That is correct. That's what I said. The EBITDA year over year we -- which was up in that 6% range, had we looked at a same-store basis at normalized sports hold on the right that we did this year we would have been up around 11%.

On same store. So was South Coast profitable in the quarter? I know it's only nine days but was it a profitable number in the period?

Yes. You know, clearly it had positive EBITDA and it did. I just wanted to make it helpful to -- by giving this particular statistic. We were going to add back the sports book hold I thought it would be fair just to look at it as a same-store basis, but South Coast was helpful to the -- was helpful to EBITDA, yes.

Okay. I just wanted to just clarify that. And then in regards to the depreciation and interest guidance. Can you help me understand the accelerated depreciation number again? Even as you took the write-off here in the fourth quarter why you're going to have accelerated depreciation over the course of the year and again what that number is. And then on the interest expense, I was wondering if it that includes the JV share or if that's just a consolidated number.

The -- on the depreciation issue, we are going to bring the Stardust corporate office building down to fully depreciate the -- what is left of them by the end of the year. So we will take the norm of depreciation of the Stardust, which is let's say $12 million a year, and that will be a normal EBITDA. But we wanted to adjust out what the incremental depreciation was going to be for that in the office building because that really relates to the Echelon project and shouldn't confuse and have any noise with the normal '06 number. So that $11 million of -- or $12 million a -- year of incremental depreciation we felt we would just take out when we report our adjusted number. And that is the extra depreciation we need to do to properly bring the Stardust and -- and the office building down to where they need to be at the end of the year.

The -- and the interest expense does not include anything from Borgata. Borgata's interest expense is totally on their books and it's not consolidated into our books.

Right. Except on your P&L, your share of it. So I just wanted to check --

Right. Our share is in there of course but I -- I did not include that when I talked about interest expense guidance. That was purely Boyd Gaming interest expense.

My last question maybe this is for Keith or whoever can answer this. On the Win per admission that we're seeing in Louisiana, you talk about how many of these customers are new faces and many of them are old faces. It just seems the win per admissions are just so high that we're seeing recently I was wondering if you could comment a little bit about that. Are they primarily because of your existing customer base, or are these folks coming from elsewhere, including the Gulf Coast, and we should expect to see those numbers normalize as well over time?

Well, I think the customers we're seeing -- you're seeing a good cross-section. We have a lot of our loyal customers coming back, you're seeing customers that were maybe visiting downtown and visiting the Gulf Coast, we have people coming from Florida so you're seeing a good cross-section. I believe as the revenues normalize as competition increases you'll see that win per admission normalize also. There's also a tremendous amount of play that is coming out of construction workers in the area, people that are there helping in the rebuilding process. So -- some of that business I suspect will stay around for quite a while as there's quite a bit of rebuilding that needs to happen in the the New Orleans area.

Okay. Thanks.

And your next question comes from the line of Dennis Forst of Keybanc.

Yeah. Ellis, looking at the central region and looking year over year or even looking sequentially, the revenues were not that much different but obviously the cash flow was dramatically higher. Is it simply that you didn't have the labor expense at a couple properties, or is it across the board? Can you give us some type of flavor for which properties within that central region had the biggest gains?

Yeah. We tried to point out in the release and I know it's difficult because the ups and downs of it all but on a revenue side Dennis the Delta Downs was closed for all of October and first few days of November.

Right. We get that from the States. We know those numbers.

And that -- that brought the revenue -- the reason you didn't see revenue go up a lot in the central region of the quarter was because the Treasure Chest gains were offset by the fact that Delta Downs was closed for as long as it was, and their revenue was down substantially just because of the closure, not during their operating time. So therefore that closed Delta Downs offset the strength of Treasure Chest and that's why the revenue was just up slightly. On the EBITDA side, though, Delta Downs for the time it was back open did quite well. And that had a gain in EBITDA as we pointed out. Shreveport had a gain in EBITDA as we pointed out in the release.

Even with Down gaming win.

Shreveport did have increased EBITDA and we pointed out the reason was lower payroll expenses. Delta Downs as I mentioned was up due to the fact that when it operated, it operated quite well. And -- but most of it was Treasure Chest. Most of the gain in EBITDA, as we did point out, was at Treasure Chest where the very strong revenue gains and the lower expenses due to the limited operations allowed us to run high margins and high --

On an absolute basis was Treasure Chest operating costs or labor costs actually down year over year even though revenues were up $14 million?

I'd have to do a little -- look at that. I'm sure they would be. I believe they were, but I -- but revenues -- the revenue change was -- let me just --

It was about 14.5 million.

Okay. And expenses were down.

Yes. And Tunica, was there any change in business in Tunica whether on the cost side or the revenue side year-over-year?

Tunica -- I'll just ask Keith. Tunica actually had lower revenues. They had eliminated some of their promotions and some of their marketing programs, revenues were down. And their -- their EBITDA was actually a little -- a little better than it was the year -- year before.

Great. Thanks a lot.

[OPERATOR INSTRUCTIONS] And your next question is a follow-up from the line of Joe Greff of Bear Stearns.

Ellis, just a follow-up question on the D&A. That 230 million, that's 12 million of existing Stardust D&A plus an incremental 12 million, so 24 million that comes out in fiscal year '07? Is that the way to look at it?

Yes. The 230 million includes the normal 12 million of Stardust. It also includes the additional $12 million.

Okay.

So all 24 is in that number. We'll adjust out 12 of it and leave the normal 12 in there.

Okay. And then in terms of project CapEx by quarter for this year, can you give us a sense how that works?

We mentioned we will have the -- about 110 million or so of CapEx at South Coast. Most of the expansion CapEx will fall in the first half of the year. I don't have a breakdown between Q1 and Q2 at this point, but most of it will fall on the first half because there's Blue Chip and South Coast, and then the Echelon CapEx will be throughout the year probably weighted more towards the back. I don't really have a clear break out off the top of my head but we can talk about that more.

Construction and progress account balance at the end of the fourth quarter, do you have that handy.

We don't have that yet. We'll have that out in the 10K in March.

Okay. Great. Thanks, guys.

And your next question comes from the line of John Mulkey of Wachovia.

Hi, guys, a couple quick questions. Ellis, you mentioned that dividends from Borgata may trend going forward more like 100% of net income. Is that change kind of your earlier discussion about taking kind of a one-time dividend to sort of lever up that subsidiary, or how should we look at that going forward?

Well, the only thing I referred to was the fact that our current expectation, especially with the -- redo of our bank line there is that we will go to 100% of profits there, which -- and I set it back to the '05 number to give a sense of the magnitude where that number would go from 30 to 85. The -- any talk of a one-time dividend is something that, you know, may be speculation at this point. There's been no decision made to do anything like that. The only thing we really have planned is to increase the dividend to 100% of net income from the 35% which basically covered our income taxes.

Okay. And then lastly, as far as Echelon goes, obviously we saw a big jump in project costs for MGM since they first talked about City Center or I guess the second time they talked about it late last year. Where do you stand? Like, what inning are you in from paying down your final costs and I guess another way to ask it is did you have any contingency in that total $4 billion number when you came to us in -- when was that -- whenever the analyst meeting was.

This is Bob Boughner. With respect to what inning we're in, we're in a very thoughtful, I'll put it in football terms. We're in a very thoughtful first quarter of the game. We -- as you will know, we took a considerable amount of time and effort throughout 2005 before we announced anything with regard to the project. What I will tell you is, is that there are not lots of sheets of drawings but a carefully thought through scope. And as that scope is refined and revised over time, our intention is not to refine it and revise it up. We feel very confident at this point in time that for conceptual level of estimating with some of the contingencies we have included, that we've stated the project costs as they are. And time will tell of course if that is adjusted. But at this -- at this point in time in the first quarter of the game, we've got a pretty high level of confidence in where we are and where we're headed.

You've got a pretty standard contingency in that 4 billion -- or 2.9?

We -- we take into account when we do a project, we take into account issues such as design contingency, escalation contingency and contingency as a result of latent conditions that nobody knows what might exist. And we're at this juncture, we're not going to tell you a specific amount of a contingency except to say that the company is aware of what materials cost, what labor costs and have used those estimates in calculating the projected costs of the development.

Thank you.

John, this is Ellis. Let me just clarify. The -- about the one-time dividend. I didn't mean to call too speculative. It has been talked about, it's just not imminent. It will be something well down the road. The move from paying out 35% of Borgata's profits to 100% is something that we're thinking of doing now. It's a near-term issue. A one-time dividend is not out of the question, it's just something we talked about and we talked about it well into the future after we get a completed with our -- our construction there. So I didn't want to put it off. I just wanted to tell you it's not a current issue.

Fair enough. Thanks.

And your next question is a follow-up from the line of Larry Klatzkin of Jefferies & Company.

Hi, guys. Insurance proceeds from Lake Charles, from New Orleans, Ellis, what is the timing, magnitude, how are you going to book it?

Well, we -- we feel that at Delta Downs we are covered for the work that's being done except for some extras that we are adding, but it was about $35 million or so in damage there and we expect that all to be paid over time. We have received about $15 million so far. And that covers about the bills we've been paying on our construction. The rest will come in the future as we -- as we pay out funds. That does not include the business interruption claim, which we're formulating right now. We'll put that in when it's ready and we expect to have that reimbursed also. So that's coming along pretty much as we expect.

Okay. And then second. You know, in the three Coast casinos reopened at the very end of December, have you guys seen anything lower at Treasure Chest or has the reopening of capacity in the Coast not affected you at all?

This is Keith. We have not seen a huge -- a huge change in the numbers over the last 30 or 45 days so --

So the addition of three casinos, it's so understaffed that you're not seeing anything, but you do think that the magnitude of Harrahs will have an affect in the closeness.

The only thing I can say is that there isn't much -- or likely to be much of a convention market in downtown New Orleans for the near future and that was part of their business, so I think they will probably look elsewhere to -- for customers and they're likely to look out in the the suburbs so we think there will be some impact to us.

Alright, thanks guys.

And at this time there are no further questions. I would now like to turn the conference back to Mr. Ellis Landau for any closing remarks.

Thank you all very much for being on the call. We look forward to our first-quarter call at the end of April and thank you very much for -- for being here. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.