Boyd Gaming Corp (BYD) 2015 Q2 法說會逐字稿

Good afternoon, and welcome to the Boyd Gaming second-quarter 2015 earnings conference call.

(Operator Instructions)

Please note this event is being recorded.

I would now like to turn the conference over to Josh Hirsberg, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, Amy. Good afternoon everyone, and welcome to our second-quarter earnings conference call.

Joining me on the call this afternoon is Keith Smith, our President and Chief Executive Officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in 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. There are certain risks and uncertainties that are included, but are not limited to, those disclosed in our earnings release, our periodic reports, and our other filings with the SEC, that may impact our results.

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, today's 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. Keith?

Thanks, Josh. Good afternoon, everyone. Welcome to our second-quarter earnings call.

This was an exceptional quarter for our Company, as the positive trends that we've been seen since the second half of last year continue to strengthen across every segment of our business. Across the country, we see consumers growing more confident, and showing a greater willingness to spend. And thanks to more effective marketing programs, upgrades to our non-gaming amenities, and outstanding execution by our property management teams, we successfully generated strong revenue growth, and even stronger EBITDA growth.

Total revenue increased nearly 4% in the second quarter, marking our fourth consecutive quarter of top line growth. This revenue growth was broad-based, as we grew both gaming and non-gaming revenues, and generated solid revenue gains in all five of our business segments. We also continued to improve our cost structure by driving additional efficiencies throughout our business. The combination of revenue growth and cost efficiencies allowed us to produce very strong flow-through and increased profitability.

Company-wide EBITDA increased 17% during the second quarter, our third straight quarter of double-digit EBITDA growth. And it was also the fifth straight quarter of margin improvement for our Company. Additionally, every business segment achieved EBITDA growth, with 19 of our 22 properties going EBITDA year over year, and 16 of these properties achieving double-digit EBITDA growth. We're making solid progress as a Company, and every segment of our business is moving in the right direction.

Now let's walk through what we saw in each of these segments. Our Las Vegas locals business had a solid quarter growing revenue by more than 3%, and EBITDA by more than 15%. All four of our major locals properties achieved year-over-year EBITDA growth during the quarter.

Non-gaming revenues grew for the eighth consecutive quarter in our locals business. And importantly, we grew gaming revenues as well, with strong gains in table games. These results are particularly impressive when you consider that both Suncoast and Sam's Town were disrupted by major road work throughout the quarter. While this negatively impacted gaming revenue at these properties, we still achieved year-over-year EBITDA growth at both. We expect road work to be completed at both properties by Labor Day, which should contribute to further strengthening in our locals business in the fourth quarter.

At the two properties not impacted by road work, the Orleans and Gold Coast, results were more reflective of the underlying strength of our locals business. On a combined basis, the Orleans and Gold Coast generated revenue growth of more than 6%, and EBITDA growth of more than 20%. This was the best second-quarter EBITDA performance for these properties since 2008.

The Orleans and Gold Coast saw growth throughout the business, with increases in gaming revenue, non-gaming revenue and cash ADR. In downtown Las Vegas, solid revenue growth and lower fuel costs at our Hawaii charter service drove an EBITDA gain of more than 40%.

This was the fourth consecutive quarter of EBITDA growth for our downtown business. Both gaming and non-gaming revenues were up, as all geographic segments of our downtown customer base saw growth, including continued strength among our core Hawaiian customers.

Importantly, we saw increases in both table game and slot volumes in our downtown operations. We are also benefiting from significant growth in visitation to downtown Las Vegas. 2015 has been a great year for downtown and the Fremont Street, as ongoing re-investments and improvements in the area continue to draw more visitors.

Outside of Nevada, we're seeing growth throughout our operation, as well. On a combined basis, the Midwest and South and Peninsula segments achieved revenue growth of more than 3%, and EBITDA growth of 15%. Of our 12 regional properties, 11 were up year over year on the EBITDA line, with 9 of these properties growing EBITDA at double-digit rates. Leading the way was the IP, which turned revenue growth of $3 million into an EBITDA gain of more than $4 million. Thanks to refinements to our operations, our casino floor and our marketing, the IP team has now delivered three consecutive quarters of double-digit EBITDA growth.

In New Orleans, Treasure Chest has an impressive quarter, posting 11% higher revenues and a 24% EBITDA gain. Treasure Chest generated strong gaming revenue growth during the quarter, particularly among casual players.

Evangeline Downs had a strong operating performance, as well, with 12% EBITDA growth year over year. The property successfully grew EBITDA every month during the quarter, while improving operating margins by nearly 270 basis points.

Delta Downs also continued to perform well in the face of new competition, achieving record EBITDA for the month of April. However, the severe rainfall and flooding that hit the Houston area in late May and June impacted the entire market, resulting in a slight year-over-year decline in EBITDA for the quarter. Despite this, Delta Downs continues to perform well ahead of our expectations since the opening of the Golden Nugget last December.

In Indiana, Blue Chip grew revenue and EBITDA for the fourth consecutive quarter, successfully leveraging its market-leading amenities to continue increasing market share. Blue Chip out-paced the market with year-over-year admission growth, and was the only Northwest Indiana casino to grow year-over-year slot volume and revenue during the quarter.

In Iowa, Diamond Jo Dubuque significantly outperformed its conditions, gaining substantial share in a flat market. As a result, the property was able to grow revenue by 4% and EBITDA by 15%.

And in Kansas, the Kansas Star achieved record second quarter EBITDA, with a year-over-year EBITDA increase of nearly 10%. The Kansas Star team is taking full advantage of expanded non-gaming amenities to drive visitation to the property. Revenues rose 5% during the quarter, with increases in both gaming and non-gaming business. And impressively, the Kansas Star improved its operating margins by 130 basis points during the second quarter, to 46.5%. This represents the highest operating margin achieved by the property since the fourth quarter of 2012, when it moved into its permanent facility.

Finally, in Atlantic City, Borgata posted its fifth consecutive quarter of EBITDA growth. Revenue increased nearly $10 million year over year, as every segment of Borgata's business showed healthy growth. As the region's leading entertainment resort, Borgata continues to gain an outside share of the market. Borgata expanded its lead in the Atlantic City gaming market by nearly 400 basis points year over year, to more than 27%.

And looking at the quarter, remember that last year's results included a one-time benefit of approximately $12 million, related to last year's property tax settlement with the city. Excluding that benefit, EBITDA at the Borgata grew by about 45% year over year, including $1.6 million in EBITDA from our online operations. Gross gaming revenue rose nearly 3% at Borgata. And while table hold was down more than 200 basis points year over year, net slot win rose nearly 10%.

We also saw strong revenue increases away from the casino floor. Borgata sold nearly 5,000 additional room nights during the quarter, and food and beverage business was up across the board. During the quarter, we continued to invest in Borgata's non-gaming offerings, with the opening of Festival Park las month.

This 5,000 capacity outdoor venue adds an attractive new entertainment offering to Borgata, enabling the property to further capitalize on the busy summer season by driving increased visitation, ticket sales and food and beverage revenue. We successfully launched the venue with a sold-out performance by The Killers in June, and will be hosting concerts by Megan Trainor, Tiesto and Counting Crows in the coming weeks.

In all, the second quarter reflected an exceptional operating performance by our management teams nationwide. We are growing gaming and non-gaming revenue, achieving strong flow-through, and further improving our operating margins. We are clearly making significant progress on our strategic initiative to refine and strengthen our operations.

We're also making continued progress on our initiative to reposition, expand and enhance non-gaming amenities, in markets with high growth potential. Our objective here is twofold, to generate additional business from our existing customers, and to expand the appeal of our properties to attract new customers.

We saw the potential of this initiative during the second quarter, as non-gaming revenue grew across the portfolio. Almost all of our Company's strongest performers, properties like The Orleans, Borgata, Blue Chip, IP and Kansas Star, offer customers a broad selection of gaming, dining and entertainment offerings. We expect similar results from our planned expansion of Delta Downs, which we announced last month. As one of our most popular and successful properties, Delta Downs simply doesn't have enough hotel rooms to meet all the customer demand we are seeing today, especially on weekends and during other peak periods.

And more demand is coming. With billions of dollars of infrastructure activity planned for this region, a significant portion of which has already started, Southwest Louisiana is poised for continued growth. With this project, we will be adding 167 hotel rooms and suites to Delta Downs, redesigning the property's existing 200 rooms, and expanding and enhancing our food and beverage offerings. We will be expanding our event center, as well, allowing Delta Downs to better accommodate meetings, banquets, live entertainment and special events. We will also be adding an expanded outdoor pool and event area.

By expanding Delta Downs, we will be better able to capitalize on the growing demand, hosting more customers than we can accommodate today. We will also look to generate additional business through the enhancement of the property's amenities, giving customers new reasons to visit Delta Downs for the first time. Of course, Delta Downs isn't the only project on the drawing board. As noted previously, we also have several hotel renovations now underway, and we are continuing work on the 20 new food and beverage concepts we plan to open over the next 12 months.

Next week, we will be celebrating the grand opening of the newest concept in this campaign, The Filament Bar at the Fremont. Located just inside the Fremont's 3rd Street Entrance, The Filament is well-positioned to take advantage of the significant pedestrian traffic along the Fremont Street Experience. And in September, we plan to debut a new casual fine dining brand at Evangeline Downs, as we look to expand that property's appeal in a very competitive market.

Even while we are making smart investments for the future, we continue to make steady progress strengthening in our balance sheet. During the quarter, we successfully refinanced $500 million in high coupon senior notes that were coming due in 2018, pushing out our maturities at a lower cost. We also continued our focus on paying down debt.

In summary, I'm proud of what our management team has achieved in the second quarter. We delivered strong results for our shareholders, with significant revenue and EBITDA growth throughout the portfolio. And we are starting to see solid results from the investments we are making to enhance the long-term appeal of our portfolio and drive further growth.

As a Company, we have made considerable progress so far this year, and we are well-positioned to benefit from improving economic trends across the country. Through renewed focus and intensity, we are optimistic about the remainder of the year, and our ability to continue enhance results for our shareholders.

Thank you for your time. I'd like to turn the call over to Josh.

Thanks, Keith.

During the quarter, we continued to make progress in strengthening our balance sheet. In May, we successfully issued $750 million of senior notes, at an attractive rate of 6 7/8%. We used the proceeds of the new issuance to retire $500 million of 9 1/8% senior notes, maturing in 2018, and reduce outstanding borrowings under our revolving credit facility.

In addition, as Keith mentioned, we continued to reduce debt. In the second quarter, we paid down approximately $45 million. Our debt reduction in the second quarter would have been similar to first quarter, if not for fees related to debt financing. Debt reduction, year to date, totals approximately $125 million.

Our quarter-end debt and cash balances were provided to you in our earnings release. In terms of capital expenditures during the quarter, we invested $39 million, including $5 million at Peninsula. Year to date, we have invested $58 million between Boyd and Peninsula.

As Keith mentioned, we announced a $45-million expansion project at Delta Downs. We expect to spend about $10 million this year on the project, and the remaining portion of the budget in 2016. This project is slated to be completed by year end 2016. Separately, Borgata's capital expenditures were $10 million during the quarter.

In terms of EBITDA guidance, we are raising our guidance to incorporate second-quarter performance, and to reflect the positive trends we are seeing in our business. As noted in our release, we expect to report adjusted EBITDA, including Peninsula and 50% of Borgata's EBITDA, and after corporate expense, in the range of $575 million to $595 million for the full year of 2015.

This guidance incorporates the following expectations. Wholly owned net revenues are expected to grow in the second half of the year, consistent with the first half of the year, with EBITDA benefiting from a 65% to 70% flow-through. More specifically, in the Las Vegas locals segment, including the impact of road construction through the summer at Suncoast and Sam's Town, we expect our Las Vegas locals business to grow EBITDA by about 5% to 5.5% for the full year.

For our downtown businesses, we expect full-year EBITDA to grow about 14% over 2014 levels. In the Midwest and South and Peninsula segments, we expect to grow full-year EBITDA, on a combined basis, by about 7% to 8%. At Borgata, we are increasing our EBITDA expectations to $170 million for the year, of which we will record 50% in our results. Our expectations for Borgata include an assumption of increased property taxes for 2015.

Borgata has performed impressively in a highly competitive marketplace. Borgata's leverage at the end of the second quarter was approximately 4 times. Beyond its capital program, excess cash flow will continue to be used to deleverage Borgata's balance sheet. Last week, we announced that Borgata has entered into a new $650 million term loan commitment that will be used to refinance Borgata's remaining high-yield debt, when the call premium steps down in mid-August. And further provides incremental capacity to refinance the existing term loan, should Borgata decide to retire that loan within the next 12 months. Retiring Borgata's 9 7/8% secured notes will save over $12 million in interest expense annually.

In conclusion, everything came together to create a great second quarter. Our operations team executed seamlessly across the portfolio, driving both gaming and non-gaming revenue growth, while continuing to find ways to reduce operating costs, yielding strong flow-through and continued margin improvements. And our capital plans are successfully capturing how our customers are spending their money. With that, operator, that concludes our remarks, and we're now ready to take any questions.

(Operator Instructions)

Joel Simkins, Credit Suisse

Good afternoon, guys. Nice quarter here. You've obviously seen some pretty strong demand here in Las Vegas, and phenomenal flow-through. Keith, could you just talk a little bit about what you're seeing on the hotel side? Do you feel like you're capturing some ADR opportunities, as the Strip continues to reoccupy? And to extent you can talk a little bit about the summer, that would be helpful. I'm obviously mindful this is a softer period for demand from tourists, perhaps, in that market.

Sure. Yes. A couple of comments. So on the ADR side, I think, for the last several quarters, we've seen nice growth in cash ADR, and good occupancies throughout the portfolio, here in Las Vegas. And so I think we are -- we have a demonstrated ability to capture some upside there, and it is flowing straight to the bottom line. From a summer perspective, I think the trends that we are seeing, not just here in Las Vegas, but frankly around the country, are very similar to what we saw in Q2. We have three weeks of July behind -- or under our belt at this point, so it's a limited snapshot. But those three weeks are basically consistent with what we are seeing in Q2

That's very helpful. And then Josh, in your prepared remarks, you mentioned some road work, as well, at Sam's Town, that sounded a little incremental to Suncoast. Do you guys have any sense of when these projects will wrap up? I know we were hoping some of them would be done by the end the second quarter. I know that is out of your control, obviously.

Right, Joel, I think -- these projects are driven by factors and circumstances that are really out of our control, and so we go by what we are told. I think we originally expected Sam's Town and Suncoast to be done and behind us at the end of the second quarter. But they seem to be dragging on, so we are now thinking by Labor Day. That the best guess we have now. Keith may know a little bit more about it.

Yes, Joel, it is an iterative process. Every time we think it is going to be done, something comes up, and the project gets extended. Our best guess is Labor Day. And so we would have thought they would have been done by now, but that isn't the case.

Sure, and one final question. Obviously, GLPI Pinnacle looks like it's come to a conclusion here. With that in mind, how does that change your mindset, in terms of your ability to go out and do acquisitions at attractive multiples? Do you feel like you're going to be continuing to compete against GLPI? Or do you feel like you can find some additional -- or incremental opportunities out here?

We've always felt that we have been a Company that has grown through acquisition, and been able to execute those successfully. And we, to date, have not been -- seen any impediments or any factors that would suggest to us that that's going to change. I think we continue to have opportunities that we are considering. And I would say, really, what the REIT conversation has done to our industry is, opened the eyes to some folks that may not have previously been considering selling to have those conversations.

So there was a period of time, right after we acquired Peninsula, where we said we were going to take a hiatus or a vacation from acquisitions for a little bit. And we regrouped around that, and really focused on integrating Peninsula. And I would say, today, we see -- have as many constructive conversations around potential opportunities as we've had pre-Peninsula. So I think up until now, we don't feel like we have been thwarted from our ability to acquire other assets.

That's very helpful, thank you.

Sure.

Felicia Hendrix, Barclays.

Good afternoon and thanks. So you guys beat your guidance quite nicely. Josh or Keith, I was just wondering if you could walk us through where the biggest surprises came from, versus what you thought was going to happen in May, when you provided that guidance?

Sure, Felicia, thanks for noticing the beat. It was a nice quarter for us. I think the revenue growth that we achieved was generally in line with our expectations, maybe just slightly better, but generally in line with our expectations. I think the real surprise came through on the flow-through, where it was just a quarter where it all came together for us, and had very strong flow-through of those incremental dollars. And so that's where the real positive news came from.

Okay. And then when you think about your guidance, then, for the second half, how would you rate your -- the conservatism around that?

I think we are providing guidance that we believe is certainly achievable. We're not trying to be aggressive, but we are not trying to be conservative. We're trying to provide something that is based on our internal conversations with the operations folks that are close to it every day, closer to it than myself, in particular. And so we are trying to give you our best view, but we also are cognizant of the fact that we want to continue to be able to deliver on the results that we put forth for the marketplace.

So we are balancing all those things. I think what we have tried to do is tell you that the consumer is getting stronger. We want to continue to get a little bit more history under our belt, from how they're willing to spend and how they are willing to interact with us, as a provider of their entertainment dollars. But in the context of what we have seen today, we've tried to give you the factors that we have used in the framework of providing the guidance, around both flow-through as well as revenue growth.

And on that point, just in terms of the consumer getting stronger. Can you just give us a little bit more color what you are seeing, maybe up and down the spectrum?

So I think that as you -- as we look through the database, we look at our rated play and our unrated play, look at our mid and our upper levels, play remains strong. And we're seeing good growth in both spend and frequency. Customer spend is up across the portfolio in that respect. Unrated play is also showing year-over-year growth. And that was the first business to go away during the tough times, and has been the last business to come back. But we are beginning to see it come back.

Not at all properties, but frankly at most of our properties, we are seeing growth in the unrated play. In the casual play, the lower end of the database, we're also seeing some strengthening there. And so, once again, I think the consumer is getting healthier. We are seeing better spend patterns from them. But we have a good quarter under our belt, and we've seen some good trends. I don't think we're going to take the second quarter and multiply it by 4 to annualize it. But I think we feel good about the direction of the business.

Great. Thank you so much.

Shaun Kelley, Bank of America Merrill Lynch

Good afternoon, guys. I just wanted to talk a little bit more, maybe, about some of the strategic options in front of you. So I was curious to -- on your current thinking around Borgata, you're putting into place a decent refi, the property tax stuff has generally worked out. You have posted some very good results, and are clearly consolidating market share. But you still have the joint venture relationships. So is there a chance -- or what would be your appetite, in terms of renewed interest in possibly trying to buy in, maybe the other side of that partnership? And what do you think about how Atlantic City, or doubling down in that market, fits into your priorities right now?

Shaun, this is Josh. I'll take the first shot at it, and then if Keith wants to add something, he can jump in. I think generally, we like our position in Atlantic City. Borgata obviously is the market leader, and not only competes well in the marketplace, but in the entire region. And competitively, we don't see that changing for quite some time, if at all. And so overall, the circumstance of our competitive positioning, and our operating position within Atlantic City, in the form of Borgata, is something that we are pleased with.

Would we make additional investments in Atlantic City? Only in the sense of Borgata, I believe. I think we are happy with the partnership that we have with MGM. I think MGM -- and you would have to ask them -- but I believe they are pleased with it, and want us to continue to have a presence in Atlantic City for their own strategic reasons. And so, while we would certainly be interested in having more of Borgata, I'm sure they would perhaps say the same thing. So I think that's where -- how it lines up.

Yes, Shaun, just to echo what Josh said. First of all, MGM has been a great partner since the JV was created back prior to 2003, and the property does quite well. Would we be interested in buying the other half? Certainly.

We have confidence in Atlantic City, we have confidence in that property. If it came to us at the right price, we'd look at it like any other acquisition. It's got to be the right price, but we would be interested. But MGM has been a great partner, the property is running well, and we will continue to try to maximize the profitability out of that asset.

Perfect, thanks for the color there guys. And then the other question, I guess, is bigger picture, but perhaps along the same lines. So it was already asked a little bit about the whole GLPI Pinnacle concept, in terms of what it does to the acquisition landscape. But the other way to think about it is, where they came out as a financing source for different operators, including yourselves. So I'm curious, could you give us your read, or your thoughts, on your own cost of capital at this point? And would you ever consider -- would you reconsider sale lease-backs, given where pricing on that deal ultimately ended up? And how do you think about that construct?

Yes, I don't think we will comment specifically on the GLPI Pinnacle transaction. That was a transaction that made sense for both of those companies, and they ultimately agreed to a price and a transaction that made sense for them. And I think even as GLPI mentioned in their comments, each company is different, and each transaction will be different for them.

From our perspective, I think we strictly make decisions based on what makes economic sense for us. Our cost to capital has some competitive advantages, versus a sale lease-back transaction, but we have to -- it's hard to answer that question without knowing what the terms or the specifics are. So that -- I really can't go much beyond saying that. We will evaluate whatever is available for us to consider.

Perfect. Thanks for trying.

Thanks for the question, Shaun.

Steve Wieczynski, Stifel Nicolaus.

Good afternoon, guys. So with downtown Vegas, can I ask a question about -- you point out in the press release about the fuel cost going down. And Josh, I don't know if there's any way -- could you quantify how much that helped the margin in the quarter?

Steve, this is Keith. I don't know that we can quantify, sitting here today, how much it helped the margin. I mean, we called it out because it was a factor in the overall increase in the profitability downtown. It wasn't the factor, it wasn't the majority. It was a small piece, but big enough for us to call out

Okay, that's what I was just wondering, thanks. And then with Borgata, I noticed your promotional spend there was down a decent amount, year over year. Could you just talk about the environment, in terms of what you're seeing there? And is that more a function of a lot of your competitors essentially not having money to spend? Or is it -- that's something on your end, in terms of making those decisions?

I think that it is a combination. I think both of us continuing to dial in our marketing programs, and our marketing spend. I think it's a function of, we are getting an outsized, I think, portion of some of the displaced customers from the closures last year, looking for a new home.

Not all of that is rated play, some of that is unrated. So we're seeing a benefit there, in terms of, when you look at dollars as a percentage. I think part of it is, generally speaking, a fairly normal promotional environment. On any given month, or any given week, competitors will do something a little more aggressive. But generally, it hasn't been too promotionally aggressive in Atlantic City. So I think it's a combination of factors

Okay, great. Thanks, Keith.

Thanks, Steve.

Thomas Allen, Morgan Stanley.

It's Mark Savino on for Thomas. Just digging into the Las Vegas locals market a bit further. Can you give us your updated thoughts on the margin opportunity there? Obviously, a really solid revenue growth in the quarter, and it looks like expenses were still down year over year. So just wondering where you're finding the cost savings? And is that something that we should expect to continue? Thank you.

Look, I think we've -- the management team, both in the Las Vegas locals market, as well as around the country, have done a great job taking cost of this business. And we've got a number of quarters in a row of increasing margins. Every time we think we are at the end of that, we challenge the team, and they seem to come up with more. Clearly, all the low hanging fruit has been picked.

And every quarter that goes by, it's a little tougher and tougher to extract more savings, yet the team is able to do it. So are we at the end of the road? No, I don't we are. Are the current levels of margins, or the current margins, sustainable? Yes, I think they are. And we will continue to push our operating teams to find new and creative ways to take costs out of the business.

Great, that's helpful. And then just switching gears, just on capital allocation. Can you guys help us understand how you're thinking about maybe prioritizing your use of capital going forward? Obviously, there is a lot of expansion and repositioning going underway right now. But how should we think about those opportunities versus the opportunity to pay down debt? And then just in addition to that, for projects like the Delta Downs expansion, at a high level, how should we think about the type of return that you are targeting from an investment like that?

Mark, I will try to answer all those questions. I'm not very good at keeping up with multiple questions in one --

Sorry, I squeezed a few in there.

It's all right, I'll give it a shot. And then if I leave anything out, just let me know. I think from a use of free cash flow perspective, we are using the repositioning capital opportunity to really improve the overall performance of the business, and expecting, when we look at that $45 million that we've allocated, not every project will generate a return. But we think, as a bulk, when you think about that $45 million, we have in mind a level of return that we expect from that investment.

And so the excess return that we expect to get from that capital makes it worth investing, and actually positions our properties long-term to be competitive, and positions us long-term to attract new customers. And even, in some cases, a demographic that we are not seeing today, in big -- large amounts, and that's that younger demographic, as well. So we see that capital, and that overall program, which is really, as we've talked about before, really a multi-year program, really as much reinvesting in ourselves and position ourselves competitively today. But also push, as a strategic initiative, for the longer-term.

We expect to continue to stay focused on deleveraging. And I know that can sound like we are trying to do two things that are at the opposite ends, but we expect to continue to pay down debt. And key to that component is the part that you're seeing now. We're delivering higher levels of EBITDA, as well, at the same time. So while we may not pay down as much debt as we paid down in 2014, we are going to continue to pay down debt. And that is going to be through managing how much we reinvest in these programs, how successful those programs are, as we watch them being rolled out, and how successful we are in the core business. In terms --

In terms of Delta Downs, you need to -- we think of Delta Downs as more offense than defense. Delta Downs right now has -- is capacity constrained, from a hotel product and from an amenity product -- from an amenity standpoint. And we think that adding the rooms, and adding the amenities, allows us to grow that business from where we are at today. So it's offense; it's not defense. And we will get a very healthy return on those capital dollars invested.

Very helpful. Thank you.

Thanks, Mark.

James Taylor, Bank of America Merrill Lynch.

Just a few outstanding things. Now that you guys have are consistently profitable, on a net income basis, can you remind us of your tax position and NOLs?

Sure, we have just under $1 billion of NOLs. About $982 million, I think is the exact number.

Okay, very good. And obviously, we talked about the Delta Downs expansion. But with trends seeming to get better, and EBITDA expectations going up, would you expect that your maintenance capital to increase some? And I guess specifically, do you have any intention of increasing your slot purchases?

No, I think maintenance capital will stay pretty much where we have had it budgeted, and where it's been over the last year or two. We have what I think is a fairly healthy amount of maintenance capital, to keep our properties current and modern and competitive. I don't see that going up at all. So I think it's going to stay as is, from a slot product standpoint. We've had a fairly -- once again, fairly consistent budget for buying new product for our slot floors. I don't see that changing very much at all, just because EBITDA is going up.

Very good. And then just to circle back, Josh, on your commentary about potential acquisitions and the environment. Can you just tell us, big picture, how you think about the balance sheet? I know historically, you've always said that an acquisition would have to make sense strategically, and be cash flow accretive. But what is your tolerance on leverage? You guys have done a great job of paying down debt, and starting to get leverage moving in the right direction. Are you wiling to take leverage up again at this point? Or do you still want to get down to a lower number before doing a transaction?

Yes I think transactions happen when -- are things you can't really time. So having -- saying that, and then putting it aside, what I would say is that philosophically, we would be looking to, at worst-case, do something leverage-neutral, and hopefully be able to do things that would continue to be deleveraging for the Company. I think Peninsula was a great example of a strategic transaction, generates a lot of free cash flow, and was not leveraging to the Company. And for us, it continues to create opportunities, going forward, in terms of actually operating more efficiently, and generating more free cash flow.

So I think people should look at Peninsula as an example. I think our preference would be to do it under one balance sheet. I think doing it under separate balance sheets complicated things, but it made sense at the time. So I'm just trying to give you how we think about it, from a big picture framework perspective. And depending on how strategic it is, how significant of a transaction it is, we will try to work within those guideposts, I think.

All right, very good. Thank you.

Yes.

Kevin Coyne, Goldman Sachs.

Thanks for taking my questions.

Sure.

Most of them have been asked and answered. But Josh, as a follow-up to what you just mentioned, you have discussed combining the Peninsula restricted group with the Boyd restricted group in the past. And with the 8-3/8% notes having a call price that just stepped down, is this something we should expect in the near term? Or maybe you can give us some color on that.

Yes, Kevin, I guess it depends on what you define as near term. But basically, I would say that certainly, with the call premium stepping down, and depending on where the markets are when we are able to go to the market, we will just evaluate that, in terms of what makes economic sense, and weigh the costs associated with the interest savings. And then ultimately, if it doesn't make sense today, maybe with the step down, and markets stay good for a while, may make sense, as we approach the next call step down, which is when it steps down next August, at par.

So I think sometime between now and that time period would be a generally reasonable expectation for us to consolidate the two balance sheets. We definitely want to do it. We run the businesses as one today. It's just a matter of trying to simplify our balance sheet, and our capital structure, by being able to take advantage of markets that makes sense for us. We don't feel like we need to do something that doesn't make sense for us, and so we will be looking to do that when it does make economic sense.

Great. That's helpful. Just a housekeeping question. Since you gave us the NOL number, I was just wondering, do you have an updated restricted payment basket amount?

(laughter) No, I may or I may not, but I'm not giving it out. (laughter)

Okay. No worries. And just one final one for -- just related to downtown. Can you remind us how many charters you are running now, versus how many you were running at the peak?

Today, we run four charters a week; we used to run seven. The way to think of it is, at its peak, we moved north of 100,000 people into Las Vegas on the charters. Today, it is south of 50,000. That's because the commercial airlines have picked up the lift, and therefore there is no reason for us to have the additional lift. That's the reason it's gone down. It has northing to do with the structure of the business, or anything else. It's just that when it was at 100,000, it was because there wasn't enough commercial lift into the market

We've always managed it based on the availability of capacity.

So would you say your rated play from Hawaii is flat?

No, the rated play from Hawaii is up.

Okay.

And once again, they don't all come on our charters. The people who are on our charters are rated players. But there are just as an equal amount of rated players coming in on Hawaiian Air or Delta United, or all the other airlines. We really -- we've been in the airline business for a few years now, maybe a decade. And if we could ever get out of it, it will be great, if they ever had enough lift, but they don't.

So the packages we sell are not just for our own charter. They're for -- they can combine and buy for other domestic carriers, as well.

Great. Thanks for the help.

Sure.

Carlo Santarelli, Deutsche Bank.

As you guys think about the Las Vegas locals business, and you think back to the peak years, when it was a $300 million plus EBITDA business, clearly, a lot has changed since then. But as you think about how the market has evolved, albeit with new supply and an evolving consumer, different competitive -- a different type of competitive environment. What do you guys think is the new peak for your portfolio in that market, relative to the heyday of the locals market?

I think what we've -- Carlo, it is an interesting question, and it is very difficult to answer, given it's really dependent on the consumer's behavior from here on out. I think what we generally thought of is that the number of people in our buildings hasn't really been the issue; it's been their willingness to spend. And what we are seeing is that trend starting to pick up. And whether it gains momentum or plateaus at some point is very difficult.

But I think as an intermediate target for ourselves, or as a way to think about it is, we felt like in 2008, 2009, we were 20% off of the peak, in terms of ability to drive our business. And so I think we feel like we can try to get to those levels over time. But it will be very dependent on how the consumer chooses to spend, and how they develop, and all of that stuff. It is not going to happen overnight. It's a much longer timeframe that we would be able to get to those kind of levels.

Great, thank you, Josh. And then if -- I know in the past you provided some CapEx guidance for the year. I believe, when last we spoke, it was $100 million for Boyd and $15 million Peninsula maintenance, and I want to say $45 million in project CapEx. Is it fair to just add the $10 million of Delta this year to that $45 million, and assume the maintenance stays the same?

Yes, that's exactly right. You got the numbers correct, and then you just add the $10 million to it for the Delta Downs project.

Okay, great, thank you.

Chad Beynon, Macquarie Research Equities.

Thanks for taking my questions.

Sure.

Keith, in your prepared remarks, you highlighted some pretty incredible results down at The IP. I believe you said $4 million of EBITDA, over 100% flow-through. And I know that you've owned the property now for three or four years, and made some changes, and there have been some additional changes just to the market. I was wondering if you could provide some color around, is this a one-time -- was this a one-time opportunity? Or do you think the team has done some things to really change the positioning of the property, and we could continue to see some outsized results that really move the needle for that region? Thanks.

Yes, I think it is the latter. I think that the team has, in the last couple of quarters, done an exceptional job of repositioning it, from a marketing standpoint. And creating some efficiencies in some of those marketing programs that had been baked into the property for years. They have done a good job managing other costs, as well. And we -- once again, we have a couple of quarters at this level under our belt. And while we never project 100% plus flow-throughs, and I wouldn't carry that into the future, I think we do project strong -- continued strong flow-throughs at that property.

Okay. Switching subjects, some of your competitors are now talking about social and fantasy sports. Given the size of your database, and the geographic reach, could you give us your view on those segments of gaming/entertainment?

Sure. On the fantasy sports side, it is an interesting conversation. And as you look as the landscape across the US, you have states that have made it clear that it is a legal activity within the state. You have states that made it clear that it's not legal. And other states that just haven't addressed it, where it's -- I'd refer to it as gray states. When you listen to people talk about fantasy sports, they use words like betting, and making bets. So in our view, it is gambling at its core, and should be regulated, just like other forms of gambling. Today, it is not. And so that is our view on that.

With respect to the social games and social gaming, I think it is something that we've been paying attention to. We've dipped our toe in the water here and there. Obviously, having a market-leading position in online gaming in New Jersey, we are interested in continuing to expand that. And so we are very interested in the social gaming aspect of it.

Okay. Thank you. And then Josh, a housekeeping one. The appeals court that upheld your property tax refund in Borgata, I believe $63 million. Could you provide some guidance for when that payment comes into your bank?

Yes, this is Keith. I'll take that. So it was a great ruling, obviously strengthened our case. But it doesn't -- we don't have any more clarity on when we will get paid, either that amount or the $88 million that was the settlement amount from last year. So we are still waiting to have some active dialogue with the city or state on these matters, and we will update on it when we have them. But at this point, we actually don't have any clarity on that.

Okay. Thank you.

This does conclude our question-and-answer session. I'd like to turn the conference back over to Mr. Hirsberg for closing remarks

Thank you, Amy, and thank you to each one of you for joining the call today. And should you have any other questions or follow-up, please feel free to call the Company, and we will make ourselves available to address those questions. Thanks for joining.

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