Boyd Gaming Corp (BYD) 2012 Q4 法說會逐字稿

Good day and welcome to the Boyd Gaming fourth quarter full year results conference call. All participants will be in listen-only mode.

(Operator Instructions)

After today's presentation, there will be an opportunity to ask questions.

(Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over to Josh Hirshberg, Senior Vice President, Chief Financial Officer. Please go ahead.

Thank you. Good morning, everyone, and welcome to our fourth quarter earnings conference call. Joining me on the call this morning are Keith Smith, our President and Chief Executive Officer, and Paul Chakmak, our Executive Vice President and Chief Operating Officer. Our comments today will include statements relating to our estimated future results and other market, business and property trends that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements and our comments are as of today's date and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement as a result of certain risks and uncertainties including but not limited those noted in our Earnings Release, our periodic reports, and our other filings with the SEC.

During our call today we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures please refer to our earnings Press Release and our Form 8-K furnished to the SEC today and both of which are available in the investor section of our website at Boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Finally, as a reminder, today's conference call is also being webcast live on our website at Boydgaming.com and will be available for replay on the investor relations section of our website shortly after the completion of this call. I'd now like to turn the call over to Keith Smith, our President and Chief Executive Officer. Keith?

Thanks, Josh and good morning everybody. Thank you for joining us for this morning's call. I'd like to start this morning with a few comments of our announcement earlier today that we entered into a definitive agreement to sell the Echelon site on the Las Vegas Strip to the Genting Group for $350 million in cash. First this transaction was actually completed earlier this morning and all funds have been received. Second, the sale of the Echelon site is yet another important step in a comprehensive strategy focused on achieving our number one priority which is strengthening our balance sheet and improving our financial position. Whether it's through repaying debt, making strategic acquisitions, or realizing improvements to our core business, we are keenly focused on this goal. As you look back over the last 18 months, we have made a number of significant steps toward this goal.

One was our acquisition of the IP, our market leading property we purchased a little more than a year ago at a multiple of less than 7 times its current LTM EBITDA. Another was the acquisition of Peninsula Gaming last November which further diversified our operations and greatly expanded our ability to generate free cash flow. And just last week, we announced an agreement to sell Dania Jai-Alai in South Florida for $65.5 million in cash, further strengthening our balance sheet. The sale of the Echelon site, like these previous transactions, has compelling benefits for our Company and was made only after a thoughtful analysis of our options for the site. This analysis took into account our current business strategy, the current and future direction of business on the Las Vegas Strip, anticipated return on investment and our overall financial position. In the end, we concluded that developing a large scale project on the Strip from the ground up was not consistent with our current strategy. As a result, we made the decision to sell this site and significantly strengthen our financial position.

With the sale of the Echelon site we will realize $157 million in net proceeds or approximately $1.80 per share in equity value, a value that is not included in our current market valuation. We intend to use the proceeds from this sale to repay debt. In addition to the net proceeds from this sale there are other benefits as well. With this sale we will eliminate approximately $16 million in annual recurring costs associated with this site. That represents an additional $1.60 per share in equity value. We also expect to realize substantial long term tax benefits against future taxable income. As noted in our Press Release we will record a one-time non-cash charge of $994 million in the fourth quarter related to Echelon. This charge will create a tax loss carry forward of approximately $750 million.

Of course acquisitions and divestitures represent only one component of our overall strategy to strengthen the financial position of the Company. Improvements to our core business are also key to achieving our goal. We remain committed to constant innovation and improvement of our core business with the aim of generating both revenue and EBITDA growth. As customers have once again grown cautious with their spending in recent months now more than ever it is essential we continue to improve and refresh the product we offer our customers. And during the fourth quarter we made notable progress on this front.

On our last call, we outlined a new approach we are taking in the Las Vegas Locals market. We refined our marketing and advertising programs and made significant changes on our casino floor. And we began to see the benefits of this in the fourth quarter as visitation strengthened month by month across our Locals business. In 2013, we will continue looking for ways to improve our core business, not just in Nevada but across our portfolio. Our success as a Company begins with delivering an exceptional experience to every customer and on challenging ourselves to keep improving what we do best.

Finally, we believe our portfolio of future growth opportunities will further strengthen our financial position in the long term. Our online gaming strategy is starting to pay off as states like Nevada and New Jersey have begun to establish the framework for internet gaming. We are in the early stages of this exciting opportunity but we believe we have the brands, the partnerships and the infrastructure to become a major player in this market. We're optimistic that online gaming will be a compelling long term growth opportunity for our Company. Additionally our agreements with the Wilton Ranch Tribe in Northern California and Sunrise Sports Entertainment in South Florida could provide significant growth opportunities for our Company in the next several years as well.

So as you look back over the last year, it is clear, we have made significant progress in moving our Company forward. We have an experienced and skilled Management team, focused on controlling costs and improving the core business. We have employees dedicated to providing first class service to our guests and we have high quality assets. We have the right strategy in place, we are executing on it and I am confident that it will deliver compelling long term results for our shareholders. Thank you for your time this morning. I'd now like to turn the call over to Paul who will review our operating results. Paul?

Thanks, Keith. Hello, everybody. As other companies in our industry have already reported gaming customers nationwide pulled back in the fourth quarter due largely to economic uncertainties surrounding the elections and the fiscal cliff. While we actively worked to mitigate the impacts of these trends on our business, they did affect our operations. These trends continued into the first quarter. Our customers are now adapting to the impact of higher payroll taxes that took effect January 1. Continued uncertainty from Washington over federal spending and taxes is affecting consumer behavior as well.

In our Las Vegas Local segment these issues were compounded by unusually low hold at our sports books as players enjoyed a lucky run this fall. This low hold accounted for a significant portion of the decline in our Locals business. However, we saw reasons for guarded optimism in this region later in the quarter as business trends started to improve. The declines we saw in October to November moderated in December and that positive trend has continued into the first quarter. The targeted marketing and advertising initiatives we discussed in our last call are starting to pay off driving new visitation to our properties. Once on property, casual gamers are responding positively to the new products we've rolled out in our casino floors.

We introduced about 1,000 new penny themes across our Las Vegas Locals properties in recent months, concentrated in high profile areas called Penny Lane. This initiative helped drive increased slot play and visitation among casual players in the fourth quarter. We also saw significant uptick in new Be Connected memberships as new customers signed up for cards to qualify for our promotions. At the same time the promotional environment in the Locals market appears to be stabilizing as our competitors are generally adopting a more rational marketing approach. Finally, we are encouraged by signs of continued improvement in the Southern Nevada economy. The unemployment rate has been declining in recent months and home prices rose substantially throughout 2012. Las Vegas is still far from the boom years but the trend is in the right direction and we believe we will see modest improvement throughout this business in 2013.

Now let's review Downtown Las Vegas where business from our core operations was flat year over year. On a segment basis, revenue declined due to the recent reduction of our Hawaiian flight schedule from five flights per week to four, and on the EBITDA side, results were impacted by several one-time charges. Having said this, we were pleased with the performance at the operating level, the long term direction of this business remains positive. Visitation remains solid especially among our Hawaiian customer base and we gained 250 basis points in market share from the third quarter to the fourth further expanding our leading position in the Downtown market. We believe those positive trends will continue, our Hawaiian business remains strong and we will benefit from the ongoing redevelopment of Downtown which continues to draw new business, new visitors and new residents into the area.

Now let's move to our regional properties including our existing Midwest and South segment and the Peninsula properties. As you know consumers have been more cautious in recent months and our properties are not exempt from this trend. While business from our core players remains solid we saw declines in both visitation and spending among casual players. In addition we saw growing competitive pressure in certain markets. The Peninsula segment did report substantial growth in the fourth quarter driven entirely by the addition of a full quarter of operation from Kansas Star. On a same-store basis EBITDA declined modestly year over year in the Peninsula business segment due to softness in casual play.

Despite these challenges, there were some bright spots. A number of properties grew market share during the quarter including Delta Downs, Paradise and Blue Chip. Despite a highly competitive market, Blue Chip has grown its share of the market for 10 of the last 12 months and it was the only property in Northern Indiana to show year over year gaming revenue growth in 2012. In fact, the market would have declined by 3% year over year without Blue Chip. To the South, Delta Downs continues to be one of our strongest performers. The property grew EBITDA by more than 10% in 2012 setting all-time annual records for both EBITDA and Coin In.

And in Kansas, the Kansas Star opened its hotel, permanent casino and five new food and beverage outlets in mid December. Thanks to hard work and great planning, the transition from the temporary to permanent casino cause flawless with very little disruption to our business. With the permanent casino open, the property is now on track to open a 4,200 seat arena by mid year. Looking ahead to the first quarter, Kansas Star will be comparing to a strong introductory period when it was able to generate robust visitation with very little marketing spend, that is obviously not sustainable and customer reinvestment has increased to more realistic levels. Winter weather has presented more of a challenge in the first quarter of 2013 as well but we remain quite optimistic about Kansas Star's long term potential and we expect that Kansas Star's margins will remain the highest in the Peninsula portfolio and project that the property will generate about $100 million in annual EBITDA going forward.

Finally I'll conclude with Borgata, which was severely impacted by Superstorm Sandy and its aftermath. We began seeing an impact from Sandy a week before landfall, and we were forced to close from October 28 to November 2. Shortly after we reopened business was once again disrupted by a second nor'easter. The impact of the closure and lost business was substantial. We recorded more than 5,000 room night cancellations in October and November and saw business levels decline sharply in both months. We did see some stabilization in December and the property has been successful in rebooking much of its lost group business. However it's difficult for us to estimate how this year's summer season will be impacted.

Many of our summer customers stay in vacation homes along the Jersey Shore. While many shore homes around Atlantic City sustained significant damage, there was less damage in communities to the South and we understand the booking pace for available shore homes has been brisk. The availability of nearby vacation homes will have an impact on our second and third quarter results but is impossible to say how significant that will be at this time. Despite these challenges, Borgata continues to maintain its longstanding leadership role in Atlantic City, growing its market share by 160 basis points in the fourth quarter and achieving a 23% market share in January.

So to recap, we encountered some headwinds in consumer spending in the fourth quarter and based on what we've seen so far in the first quarter, customers have had to adapt to the impact of higher payroll taxes that took effect January 1. Our regional operations saw the most significant year over year impact as they faced more challenging comparisons. That trend is likely to continue especially in markets facing heightened competition. These issues are affecting Las Vegas as well but we are encouraged by the trends we are seeing in our Locals and Downtown business.

Our refocused marketing strategy is starting to pay off in our Locals business and Downtown should continue to benefit from a vibrant economy in Hawaii. And in Atlantic City we remain the market's dominant operator and expect to benefit in the coming months as the area recovers from Sandy. We cannot control external factors like the economy or the competitive environment but we can control how well we execute our operations and our core business and we will remain keenly focused on finding new innovative and cost effective ways to drive new visitation to our properties. Thanks for your time today and now I'll turn it over to Josh.

Thanks, Paul. During the quarter we completed bank amendments for each of Boyd and Borgata's credit facilities that provided additional flexibility with respect to covenants. We appreciate the continued support we have received from our lenders as we have managed through this challenging economic environment as well as the more recent impacts of Superstorm Sandy. As you know during the quarter we closed the Peninsula transaction. Our financial statements reflect Peninsula's property results for the stub period since November 20th, the date of the transaction closing. We have provided as additional information GAAP income statements for the full quarter and year in the back of our Earnings Release.

The preliminary purchase price accounting for this acquisition has been completed and the impacts are reflected primarily in two places, depreciation and amortization and interest expense. I will point out the impacts as we discuss these line items in more detail in a few minutes. Additionally we are required to present Peninsula going forward consistently with our reporting methods. One change you will note relates to corporate expense. Peninsula will now allocate a portion of their corporate expense to property operations. Previously, Peninsula did not allocate any of their corporate overhead. We expect about $3 million to be allocated to the Peninsula properties in 2013 that would have previously shown up at Peninsula as corporate expense.

Now let's move to the balance sheet and then I will discuss items from the income statement and provide guidance. Our total debt balance at the end of the year was approximately $4 billion which includes $1.2 billion related to peninsula. $1.5 billion was outstanding under our credit facility providing approximately $250 million of incremental availability. The cash balance at year-end was $158 million of which $32 million was related to Peninsula. From a financial covenant perspective as calculated under the terms of our credit agreement, insured leverage was approximately 3.89 times compared to a covenant of 4.25 times and total leverage was approximately 7.35 times versus a covenant of 7.75 times. The transactions to dispose of the Echelon site and Dania will result in our leverage improving by over half a turn this year. Borgata's debt balance was $811 million at year-end of which $20 million was outstanding under their $60 million credit facility. Their cash balance at the end of the quarter was $34 million.

Moving to the income statement. Corporate expense excluding share based compensation expense was $10.2 million in the quarter compared to $10.4 million last year in the quarter. This corporate expense number includes $375,000 for Peninsula. For 2013 we expect corporate expense to be approximately $46 million which includes about $4.5 million for peninsula. Peninsula's 2013 corporate expense reflects a reduction of about $4.5 million from 2012 levels.

Depreciation expense in the quarter was $63.2 million, an increase of about $13 million over last year due to the inclusion of Peninsula. Peninsula's depreciation expense is greater than its historical run rate due to purchase price accounting effects. As a result, Peninsula's depreciation expense in 2013 is going to be higher than you probably expected at approximately $90 million. $46 million of this is related to purchase price accounting.

Boyd's depreciation expense should be similar to 2012 levels at about $137 million and Borgata should be around $60 million. Excluding the impact of Las Vegas Energy, our interest expense was $63 million which includes $10 million for the stub period that we owned Peninsula. Borgata's interest expense was $21 million, about $700,000 below prior year. For 2013, Boyd's interest expense, including about $86 million for Peninsula should run about $285 million. This may be higher than you were expecting as this estimate also includes about $15 million related to purchase price accounting for the Peninsula seller note. Borgata's interest expense should be about $84 million.

Our Capital Expenditures in the quarter were approximately $17 million. In 2013, we are budgeting a little over $100 million of CapEx which we will modify depending on how the business environment develops this year. At Peninsula we expect to spend about $15 million on maintenance and about $11 million related to the continued expansion of the Kansas property. Borgata's capital expenditures should approximate $20 million. In the fourth quarter we incurred write downs of approximately $1.1 billion related to our land on the Strip, our land the Company had acquired for potential developments and charges related to our annual impairment testing. These were all non-cash charges that are not included in the calculation of adjusted earnings per share.

In terms of guidance in addition to the information I have provided above, we will provide separate quarterly EBITDA guidance for Boyd and Borgata. Boyd's guidance will include Peninsula. We will provide adjusted EPS for the consolidated business which includes our wholly owned segment, Peninsula and Borgata. So with that we expect wholly owned EBITDA after the deduction for corporate expense to be in the range of $125 million to $130 million. We expect Borgata to generate EBITDA of $25 million to $27 million in the first quarter. Assuming a 35% tax rate and with this range of EBITDA guidance, adjusted EPS for the first quarter is expected to range from a loss of $0.05 to a loss of $0.10. This guidance includes $15 million of purchase price adjustments that represent about $0.11 per share. Operator, that concludes our remarks and we're now ready for any questions from participants on the call.

(Operator Instructions)

Shaun Kelley, Bank of America.

Hi guys. It's actually Matt in for Shaun today. Just want to start with Atlantic City real quick. With all of the recent news of the online gaming developments there, I'm getting quite a few questions on market size and timing. Do you mind commenting on expectations for the market there and the timeline going forward? And/or the ability to enter that market through a partnership with Be Win or under the Borgata brand there?

Sure, Matt. With respect to timing for the market it really is up to the regulators to decide that. We know that they're anxious to get the process going and to get online gaming started in New Jersey. Our job is really to be ready to launch a product once the regulators approve it and we will be ready. We will be leveraging up our relationship with Be Win to do that, and so we look forward to the opportunity to participate there. But I don't have an exact date for you because regulators haven't shared that with us.

With respect to market size, I think it's been reported moving anywhere from $200 million to north of $1 billion in New Jersey. We, certainly, with our brands and our partnership with Be Win, would expect to get more than our fair share of the market so we're excited about the opportunity, and we look forward to it.

Perfect, thanks. I appreciate the color. And then back on Kansas Star, I was hoping you could revisit your expectation for Peninsula after three full months since the transaction closed and with the expansion fully open now. I was trying to get an idea of what you're seeing there, if it slowed a bit or if it's more the general consumer trends you're seeing across the other regions, just trying to get an idea of where your head's at going forward.

I think as it relates to Kansas Star and maybe Peninsula more broadly they certainly are impacted by the same issues we're seeing throughout the Midwest and South. With that said, the Kansas operation near Wichita is a very strong business. The expansion added necessary components that were part of the overall bid, that Peninsula ultimately was successful in obtaining that license, that are not efficient from the standpoint of EBITDA margin and EBITDA generation necessarily. Food and beverage outlets have a very different contribution, for example, than the gaming operation which opened very successfully and very strong. So we'll need to drive more revenue to achieve similar results, and that's really the trend we're seeing. Very nice product, but with that said, a property that had already developed a very strong following.

Perfect, thanks, I appreciate the color.

You're welcome.

Felicia Kantor Hendrix, Barclays.

Hi, good morning. Wondering first if you could just give us, help us or quantify for us the impact to EBITDA from the sports book. I'm just trying to kind of parse that out from what the flow through might have been from your new initiative?

Hi, Felicia. It's Paul. I think as it relates to sports, everybody in the fourth quarter talked about kind of the luck of the consumer, and football in particular, and if you look at the year-over-year comparison, I think my comment was a substantial portion, it was near half of the difference year-over-year in EBITDA.

Okay, great, and then should we expect to see a pick up in flow through from your initiatives? Should it ramp, or are you kind of all implemented out?

Well, I think it will ramp relative to the prior year comparison. We are fully implemented in Nevada. We think it gives us opportunities outside of Nevada, as well, and we're formulating those plans but whether you look at it from a year-over-year perspective we believe it's an important part of our marketing initiatives for 2013.

I was kind of thinking, obviously, adjusting for any seasonality just on a sequential basis. But you answered my question there. Thank you. And then just with Echelon sold, just wondering if we should think about any kind of long term strategy you might have for Las Vegas Strip offerings for your regional customers?

Well right now, our current strategy is really focused on the financial position of the Company and shoring that up. Long term we're certainly are committed to Las Vegas. We have two large businesses here, both in the Downtown area and Las Vegas Locals market and have over 9,000 team members here in the market. So we're very committed to Las Vegas and longer term do see ourselves back on the strip, it's just in the current process and the current term it's not the right move for us.

Okay, great. And finally for Josh, you guys talked about a little bit in your prepared remarks some of the things you obviously, you guys have done a lot to improve your balance sheet so far. But just kind of going forward can you help us think through some other things you might do to continue to reduce the debt other than just growing EBITDA?

Yes, sure. Thanks, Felicia. I think we are not going to layout the specific plans, just like we wouldn't on a historical basis do that. I think we continue to be very focused on improving the balance sheet. We have a lot of initiatives that we are considering implementing over the near term future that will accomplish that. So that's what we're really going to focus on and we'll let you guys know as we kind of accomplish those rather than lay them out today.

Okay, all right. thanks guys.

Sure.

Joe Greff, JPMorgan.

Good morning, guys. Paul you made some encouraging commentary about trends in the Las Vegas Locals market, and just to make sure I understood them correctly, you're talking more about visitation and customer counts? Can you talk about what you're seeing on a spend per visitor, or a spend per trip basis? And then I have a follow-up.

Sure, customer counts are up. Spend per visitor is down and I think that ties back to really my opening comments about the economy broadly speaking. Same exact trends we've seen in prior quarters. The higher end of our database, we referred to as emeralds and sapphires, continues to do very well, and more challenging as people with certainly less disposable income, or less of a propensity to see a casino as a form of entertainment are impacted by the broader economic issues.

Excellent. And then it might be early, but going back to the New Jersey online topic, can you give us a sense of what you estimate the set up costs might be, and what might your proportionate share of those costs would be?

Well in New Jersey, the license will be held by Borgata and they will incur the cost. We don't have a handle right now, or I guess we are not prepared to discuss set up costs. They will not be significant. I think most of the cost will come in the launch of that, and the marketing of that product, as opposed to the set up itself. And so, once again, we're just preparing ourselves to be ready as soon as the regulators get everything approved and are ready to welcome us to offer a product.

Joe, I would add to that just briefly and say that the set up that you may be thinking about really comes from the relationship of Be Win. They provide all of the technology and the back of the house infrastructure, and then it becomes a Marketing business after that.

Great. Thank you guys.

David Farber, Credit Suisse.

Good morning guys, how you doing? I've got a couple questions. On the Peninsula acquisition, I was just curious, can you guys remind us the Management fee structure you have with that entity? And then I have a couple follow-ups, thanks.

Sure. The Management fee is structured as 2% of net revenues and 5% of EBITDA.

And did that come in the quarter post the closing? Just the partial quarter?

Yes, its come since the day we've closed the transaction. You can actually see it in the financial statements in the elimination section of the deconsolidated income statement that shows the amount of the Management fee.

Okay, that's helpful, thanks. And then on the Echelon sale, congratulations there. I was just trying to get some understanding around the numbers you provided. So you sold it for $350 million with net proceeds of $157 million. Can you just walk us through the math there that gets you to $157 million, given how the LVE Energy, and any works, that would be helpful for me. And then I just have one other.

Sure. There are a lot of components to it. I think I'd break it down into basically the biggest component is obviously LVE. They will receive basically $187 million and then the remaining portion is just bits and pieces of transaction costs. That's as simple as it is.

Okay, maybe I'll follow-up with you offline. And then you mentioned there were $16 million of costs that are going to be eliminated. Can you just parse us through what of that $16 million shows up in the cash flow statement, and then what shows up in the income statement?

Well the $16 million was all recorded as pre-opening, recurring pre-opening costs. So they represented the storage costs, security, insurance, property taxes, things of that nature that we will no longer be required to cover owning that asset.

Okay so it sounds like all income statement.

Right.

That's it for me. Appreciate it and congrats again.

Sure, thanks.

Thomas Allen, Morgan Stanley.

Hi, guys. On the Echelon sale, how did you come up with the sale price? I think it's around $4 million per acre, and were there other bidders? Thanks.

Sure. Well, look. We're very excited by this sale and being able to monetize this non-core, non-strategic asset and like a lot of transactions the final sale price is always a process of negotiation. And at the end of the day we think it's a very fair price for the site. It allows us to de leverage, pay down some debt and it's going to offload some recurring maintenance costs that we have on the site, and focuses us on our number one goal of improving our balance sheet. So, overall we're very pleased with the transaction.

Thanks, and then I think some other companies have been talking about how delays to tax refunds really impacted them in January. Are you seeing, do you think you felt that impact and are you seeing any recovery now that refunds are coming back? Thanks.

I think tax refunds do definitely spur some spending by the consumer, a little bit like found money. Clearly, they came in, or started to come in much later this year and I think it does filter through to everyone in our business, as well as, frankly, other areas like retail as those refund checks come in. It is a positive and it was delayed. It was not in January at all this year.

Okay, thank you.

Kevin Coyne, Goldman Sachs.

Hi, thanks for taking my questions. Just one on the Borgata, regarding business interruption insurance. I was wondering if you could put an estimate around what you expect to receive, and the timing of the cash proceeds?

Kevin, as we all learned with respect to these hurricanes and storms these are very long complicated processes, the reality is we just settled up in the fourth quarter of 2012 from the hurricane that struck that area in August of 2011, so we're just in the beginning processes of assembling the data, and talking to the insurance companies, and working through that. We would expect it will be probably into next year before anything happens. It's a very long complicated process as we've all come to learn.

Okay, thank you. Regarding the sale of LVE, Josh, I know you mentioned the $16 million of Echelon cost savings, but I guess with LVE, there was a $11 million annual projected fee. Is that included in the $16 million, or maybe you could give a little color as to whether that will be another cost savings?

Thanks for pointing that out, Kevin. That is part of the $16 million.

Okay.

It's the biggest part of it.

Okay, and then can you give us a sense as to the sale of Dania, what that will have on run rate EBITDA going forward, so that we can normalize that out?

Dania was running at a loss of about $4 million per year, so that will be eliminated.

Okay, that's helpful, thank you. And I know, Josh you've mentioned in the past that you wanted to perhaps address the near dated subnotes, in terms of refinancing. Is that something we should expect in the near term?

Might be a reasonable assumption.

Okay, and then just a bigger picture. With some recent announcements in addition to your Echelon project with MGM building the arena, any sense you have as to when the Locals market will start seeing the benefit of these jobs that could potentially pick up? Is it something we could start to see in '13, or will there be more an inflection in '14?

Well certainly a lot of positive news out there with respect to Las Vegas whether it's the sale of the Echelon site, and a buyer whose going to start a project in the near term and create thousands of construction jobs, or whether it's MGM building an arena, whether it's record visitation to Las Vegas in 2012 or the convention authority announcing a $2.5 billion project. There's an awful lot going on that will all serve to strengthen the economy here and to strengthen the local market, and so we're looking forward to that. If those projects start in 2013, and we certainly hope that they do, then I think we'll see an immediate benefit. And if those projects start in '14 then the benefit will be delayed until '14. But there's an awful lot of positive momentum here in Las Vegas with projects I just talked, about so we're excited.

Great. If I could just squeeze one more in on online gaming. If MGM is able to get its license back in New Jersey how does it work? Is there only, does Borgata only have one online license, where you would collectively operate a website and share in the earnings of that? Or could you each individually operate a website? I'll listen to the answer, thanks.

I'm not exactly sure of your question, Kevin but there can be multiple websites through that license would, be the contemplation, so--

Borgata will have the license. As the operator of Borgata, we will operate that product. Once again, there could be multiple brands as part of that, or multiple sites. But it will be operated under the Borgata license and we will head that up, so--

To the extent that MGM obviously owns 50% of Borgata, and Borgata is the licensee, then MGM participates in that site.

Okay, thank you.

Lawrence Haverty, GAMCO.

Yes, hi Josh. I'm just thinking what is the total of all your NOLs as you go forward?

Well, they could be quite large. I believe the number related to Echelon is about $750 million. We will also have a tax loss related to Dania, as well, and I think that number is on the order of $60 million. So, those are obviously going to be the two big components of any tax loss carry forwards going forward.

Now, were they all against operating EBITD?

Well, yes, in effect, yes.

And then what's the average interest cost on the Borgata notes, or the Borgata debt?

Well about half. There's $800 million round numbers, about $400 million at 9.5%, and about $400 million at 9.75%.

So I mean, just casually looking at Borgata, it's very hard to see that there's a whole lot of equity value in the situation. Do you contemplate perhaps a resolution of the partnership? Or now with the -- because I guess that had gone into a trustee or something or other, and now with MGM's licensing, that's all stirred up the pot, if you will?

I guess our view would be that there is in fact equity value there, and we would view that it's only enhanced going forward, not only by the operations of the asset and the positioning of Borgata relative to the market in general. But the opportunity with online gaming also further provides benefit to that asset but absent that, even the online benefit, we would say that there's equity value there.

We believe there's equity value there and we had stated our view that we would be willing to buy the other half of Borgata, had MGM had to sell it. Now they're a great partner of ours, and have the opportunity to potentially come back in as our partner and we welcome them in. And for the long term kind of positioning perspective of Borgata, we continue to like its position in the market, and our ownership of it and continue to be supportive of that asset.

So, but currently their share is in a trusteeship or something or other?

Yes.

And is there a clock ticking? I mean does the trustee have to act before perhaps MGM could recoup its license, and then can MGM do something to get the thing back from the trustee? I'm just thoroughly confused.

I think you need to ask those questions to MGM, but their plan is to get relicensed and it's my understanding that any clock that was ticking has stopped.

Okay, that's helpful.

Okay, while they go through that process.

Okay, great. Thanks very much, Josh.

Thanks, Larry, for the questions.

John Maxwell, Jefferies.

Good morning guys. Paul just wondering, the estimates that you've kind of factored in for Borgata going forward? Obviously, Revel didn't seem to have any impact on you in '12. But any thoughts as to what you would think if, obviously, they step up marketing now that they're going through a restructuring. Has that been factored into your thoughts on how Borgata will perform in '13?

Well I would say that first off Revel opened in April, and it absolutely had an impact on Borgata and the entire Atlantic City market. It wasn't terribly successful in growing overall gaming revenue in the market, but it certainly had an impact on taking away and impacting efficiencies that all of the properties had. Obviously, as they go through their second, really, restructuring, the first was during the construction phase, they will come out of it.

I'm sure that team there is a good team. They have thought a lot of different ways to market that property. They obviously have some challenges and they are not going to go away, and we expect they will continue to be as competitive as they possibly can be, both before and after the restructuring.

Okay, thanks and then maybe just on the Delta Downs a little bit. You had a nice pop there in 2012. Was that anything specific to what you were doing there, or you just saw the overall growth, because it does seem to be one of the outperformers this past year.

Well the team at Delta Downs is really an outstanding team, and we were able to continue to ratchet up a very effective marketing strategy to drive gaming revenue. And as you can see in the cost structures that we've developed at our properties when we can achieve some, even to some extent modest gaming revenue growth, it really flows through on the EBITDA side.

Now the South, Southern Louisiana in particular, has been the strongest market in the country, and that is based on broader economic things that are happening in Texas and Louisiana related to oil and gas. And, I think it is a foreshadowing of what an expectation can be on our Business to the extent we can get some help from a macroeconomic issue around the country.

Okay, appreciate it and Josh, not sure if you could answer but in the Press Release you break out what IP provided for the three months of December '11. Do you have 2012 numbers that we can comp that to?

No, we don't, John, sorry.

Okay. All right, that's all I had. Thanks guys.

Dennis Farrell, Wells Fargo.

Good morning guys. Two questions. One, in regards to Borgata, could you provide us an update on the property tax appeal, and the potential outcomes there? And my second question is in regards to capital allocation of free cash flow, the next couple of years what are your thoughts on debt pay down, incremental acquisitions or greenfield opportunities?

So, in regard to the property tax appeal at the Borgata, I think the only thing I can really say is it is going to trial in late March, and we won't provide any commentary other than the fact it's going to trial in late March. And we're hopeful of a positive outcome. So we will see what happens when we go to trial.

With respect to capital allocation going forward over the next several years, I think you'll see us use our free cash flow in two main areas. One is maintenance capital, and we usually provide some guidance on where we think maintenance capital is. But beyond that it will be debt repayment to continue to strengthen the financial position of the Company. I think acquisitions are probably a little further in the future, as we once again continue to look to shore up our financial position.

And I think your last question about greenfield development probably is the furthest down that list, given just current dynamics.

Okay, and then just to follow-up, in regards to some of the other players in Atlantic City, what has been the outcome of their property tax appeals?

The other players in Atlantic City, I think, have all settled with the city in some form or fashion and received substantial tax credits, if you will, or substantial reductions in their overall valuations. We are certainly expecting or hopeful that we will receive something similar. But once again this is going to trial in late March and it wouldn't be appropriate to comment given the fact it's going to go to trial.

Thank you.

This concludes our question-and-answer session. I would now like to turn the conference back over to Josh Hirsberg for any closing remarks.

Thank you for participating in the call today. If you have any follow-up questions feel free to reach out to the Company. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.