Gaming and Leisure Properties Inc (GLPI) 2014 Q3 法說會逐字稿

Greetings, and welcome to the Gaming and Leisure Properties third-quarter 2014 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Miss Kara Smith of ICR. You may begin.

Good morning. We would like to thank you for joining us today for Gaming and Leisure Properties' third-quarter 2014 earnings call and webcast. The press release distributed earlier this morning is available in the Investor Relations section of our website, at www.glpropinc.com.

On today's call, Management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to revenue, operating income and financial guidance, as well as non-GAAP financial measures such as FFO and AFFO. As a reminder, forward-looking statements represent Management's current estimates, and the Company assumes no obligation to update any forward-looking statements in the future.

We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the Company's filings with the SEC, and the definitions and reconciliations of non-GAAP financial measures contained in the Company's earnings release. On this morning's conference call, we are joined by Peter Carlino, Chairman and Chief Executive Officer; and Bill Clifford, Chief Financial Officer of Gaming and Leisure Properties Inc. Also joining are Steve Snyder, Senior Vice President of Development; Desiree Burke, Chief Accounting Officer; and Brandon Moore, Senior Vice President, General Counsel and Secretary.

Now, I'd like to turn the call over to Peter Carlino. Peter?

Thanks, Kara. You took away half of my introduction (laughter) by introducing our team. Good morning, everyone. Pleased to be with you this morning, and happy to report a good quarter here at Gaming and Leisure Properties. As has been our style for many, many years, we'll skip a lot of preliminaries, and get straight to the issues that interest you.

But I will ask Bill Clifford to walk through some of the numbers, highlight the things that we think you might wish to note. Bill?

Thanks, Peter. The -- relative to the quarter, we're about $6 million over where we thought we were going to be when we gave guidance last time. That breaks down into basically four items, two of which are operational. Rents from our Columbus and Toledo properties came in about $700,000 better than we projected. Obviously, that's a good sign. And I think leads -- we're hopeful that both those properties are continuing to gain ground and continuing to penetrate their markets. And I think as Ohio stabilizes, and all the new property and capacity is online, I think we'll continue to see better than average performance. In terms -- when I say average, I mean relative to the rest of the country, I would expect to see that those two properties will continue to do well.

Our Perryville and Baton Rouge properties did better by about $1.3 million. That was really split fairly evenly between the two. Perryville, the cannibalization that we expected from the opening of the Horseshoe in Baltimore has been a little bit less than we thought. Having said that, though, we're still very cautious on that, given that it usually takes time, and there's usually a lag between the opening and when the real cannibalization sets in. And so therefore, we haven't changed our numbers going forward there. They remain the same, but we recognize that the initial cannibalization wasn't as much as we thought.

And in Baton Rouge, it has been performing better than what we expected. And not really 100% sure we know why, other than it seems like the market has become a little bit more rational around the marketing spend, and things are settling back out into the more normal type of operations. So we're encouraged with that, as well. We had a -- that's really it, from an ops perspective. We had a one-time tax true-up relative to -- for 2013, which was about $2 million, that ran through the income statement. That is not something we're going to see again, but it's a one-time item that has affected the quarter.

And then the last item is, as we accrue for executive bonuses at the corporate level, as I'm sure you're all aware from our proxy, a big part of our bonus is dependent on transactions and announced transactions. And as a result of what happened with the filing of the lawsuit, we have reversed roughly $2 million out of the corporate bonus, which was reflected in the third-quarter earnings. And that's pretty much it, in terms of what's affecting our -- or what affected our change from where we were on the original guidance, relative to actual.

So with that, I'll turn it back over to Peter.

Thanks, Bill. I understand, also, this morning that there would be several questions regarding our press release concerning the -- our previously announced transaction to acquire the Meadows Racetrack and Casino, and our previously described efforts to find a third party to operate the facility. As we discussed on our second-quarter call, interest in the property from potential third-party operators was robust, and we engaged in extensive negotiations with several parties.

However, upon discovering that the financial information provided by the Meadows was not only unreliable, but we believe knowingly and intentionally false, we were forced to end our discussion with those third parties. We have had several failed attempts to engage in a dialogue with the owners of the Meadow regarding the property's performance and the information we received, but we're left with no choice but to take legal action, since we got no response from them. And that suit, of course, is available. You can look at it in detail.

The suit includes claims based on allegations of fraud, breach of the membership interest purchase agreement that we have with them, and breach of our consulting agreement with them. We are seeking a return of the $10 million paid pursuant to our consulting agreement, and unspecified additional damages. But we will evaluate and consider all remedies available to us, including rescission of the agreements. The timing and resolutions of the claims set forth in the lawsuit, of course, are unknown. And we are not able to predict any effect this suit would have on the closing of a transaction.

I must say that filing a lawsuit like this is not something that we take lightly, and was not done without significant consideration of all the Company's various constituencies. In over 40 years of doing acquisitions, I have never experienced a situation like what we have with the Meadows, where the provision of information, information we have received from the seller, does not appear to be honest and complete, and we believe was intentionally misleading. Given the filing of a lawsuit, we will not, I emphasize, be in a position to provide additional commentary on the Meadows transaction on this call, or while the lawsuit is proceeding, other than what is required in our SEC filings.

So with that, let's, operator, open the floor to questions.

Thank you. At this time, we'll be conducting a question-and-answer session.

(Operator Instructions)

Our first question comes from the line of Joel Simkins with Credit Suisse. Please proceed with your questions.

Good morning. Peter, you saved me from asking about 10 Meadow questions, because I know I won't get any answers.

(laughter) Sorry, Joel.

That's okay. So, if we were turned to regional gaming fundamentals, if you look at your crystal ball, I would just love to have you frame out how you view the consumer right now. Obviously, when you have potential tail winds, like lower gas prices and heating oil, we've also got, hopefully, an easier winter ahead of us. What are you seeing out there? What's your view on the state of the industry?

Joel, I, like you, tuned in to the Penn call the other day. And look, I concur that it would appear there's been a bottom in the market. There has not been a robust explosion of new business, to be sure. And so much of what has affected much of East Coast gaming has been just regional competition.

But the bad news, in a sense, is the good news. I think that most of the bad things have been largely identified. And in certainly in all the markets that Penn deals with, and with the exception of an eventual facility in National Harbor that would affect Charles Town, I can tell you I was there this weekend, specifically to see and to feel the pulse of activity down at Charles Town.

It was pretty impressive. Look, it's not what it had been when we had a total monopoly at Penn, but I have got to say, there was no shortage of people on the floor. It was pretty impressive. So I think that the sense that regional gaming has somehow collapsed is way overblown. It's still a great business. These things will settle out in time.

I know there's a lot of hand-wringing up in Massachusetts about competition. They look at New Jersey. Good news is, for them, they're the last in the market, and get to cut off business from some other unfortunate state. So each of these situations has a story. I think it's a reasonable one. I think we have seen the bottom, barring some other collapse in the economy. And look, we feel pretty good about where the industry is, and are anxious, frankly, to see things settle back to a norm.

And we still see potential out there for GLP, which is really what this is all about. But any thought or concern that somehow we stay up at night worried about whether we're going to get a rent check next month, I want to be really clear, isn't -- it would take an atomic bomb to effect such a thing.

Bill, do you want to add to that?

I would agree with that. Unfortunately, I sit in the same position all of you do on the call, which is I'm pretty much relying on public information, other than two little properties, the one down in Baton Rouge and the one in Perryville, which I don't -- each one of those have unique circumstances.

Certainly Perryville, with the opening of a major new competitor, has its own issues. And Baton Rouge is still working through the transition of absorption of a big new property that was added to the market that, quite candidly, didn't grow the market anywhere near as much as would have been required for everybody to have stayed healthy. Having said that, I think, from what we're seeing with the two properties is steady as it goes. I don't think there's --

Right.

Anything that causes us to be concerned with -- at either one of those properties. And -- but I really can't say that that's indicative of what's going on in the rest of the country, because it's a very small sample of two.

Yes, I see a bigger sample, but I think it's fine. That's the long and the short of it. I think that these markets are doing fine. And you see that as you look at the performance of our -- of other gaming companies out there. So, I may be just taking this too far, but I think things are fine.

Okay, that's helpful. And in terms of the pace of deal flow, obviously, the Meadows has had a few nuances here, to be candid. How should we be thinking about your process going forward? And just how we should be thinking about the timing pace of deals, really heading into 2015 and 2016?

That's -- look, that is unpredictable. The Meadows is a special situation. It was a transaction that we entered with a great deal of enthusiasm, would love to do, but there are some unique issues with that property, and with the transaction, frankly, that, again, I think are spelled out well in our lawsuit. I don't think it has any -- makes any broader comment about our interest, or the interest of others, in doing a transaction with GLP.

Look, I think we have a general view, it's pretty consistent with the years that I was with Penn, that no deal is better than a bad deal. And we will proceed with great caution, always, protecting what we have for our shareholders. And I know that Steve and I are going to be on an airplane tomorrow, talking with some folks about a significant transaction. Those conversations still go on. I think everybody recognizes one of the issues is that, with what Penn did -- this is my view -- in splitting our company and creating this REIT, changed the industry, and maybe changed the regional gaming industry forever.

So what we had not anticipated was, not only did we elevate the value of our shareholders' interest, but we've elevated the value of others' as well. And that you've got some companies and assets trading at levels that frankly, but for what we did, they wouldn't be there. So -- and there was pressure, as you know, upon some. And others are wisely considering, can we do the same thing that Penn did? Perfectly reasonable. I think many are going to find that it's not as easy as they might have imagined. And others just simply have applied a multiple that we find utterly unrealistic. Look, all this stuff will settle out in time. We're not remotely concerned about that.

There's enough stuff that we're looking at every day. Steve's on the road, I'm on the road, Bill's on the road. We're talking to people. So I think we just have to let this play out. Granted, a year has gone by very quickly. Much of that year, by the way, has been focused on splitting the companies, building our new staffs, moving into new office space, which yet won't happen until next spring. And just making all those adjustments.

They're all going perfectly well, and in the midst of that, we're out talking to a lot of folks. The Meadows transaction would have been perfect, had it been a perfect transaction. On paper, it sounded exactly what we wanted it to be. Unfortunately, that one didn't work out, for reasons that I think we've described. But putting that aside, the beat goes on, and I still remain optimistic. Steve, you want to make any comment?

Yes, Joel, the only thing I would add to Peter's comments, we've seen no decline in opportunities from the standpoint of operators. And that really is where you should expect us -- expect to see us focus on a go-forward basis, where we identify operating partners up front and advance a potential transaction in conjunction with an operating partner.

Yes, we've said that before, that clearly, we have to know that we have a partner with us at a known price, in a situation where it's not a sale/lease back, but rather a straight-up acquisition. Now again, that wouldn't have saved what's going on with the Meadows right now. Because then, yes, we would have been linked with an operator, and both of us would be on the lawsuit, I suspect. So that is a unique situation.

But Steve is right; we're working very hard to cultivate partners for the various things we're looking at. And so that we can bring those partners to bear on the specific transactions that we're looking at. And that's an ongoing thing right now. It's as precise as we can be at the moment, but I think we recognize that if it's a straight-out purchase, we have got to do it with a partner up front.

Okay, thank you.

Thank you. Our next question comes from the line of Steven Kent with Goldman Sachs. Please proceed with your question.

Hi. Just a couple of questions. First, do you think that you need to add more people to do due diligence on a go-forward basis, given this issue? Second, can you quantify the benefit of the 2013 tax outcome that you've referenced, and the -- some of the operating statistics, right before you discuss the $2 million elimination? And then third, I guess, Peter, given some of your comments about valuation and valuation of transactions, does this accelerate your thought process towards looking at other opportunities outside of regional gaming?

Let me take the last one first. No, not really. Look, I have said that running a public company, if nothing else -- and if you care, as we certainly do, as shareholders and partners with all you folks out there. We've got to be prepared to do whatever it takes to move things forward but, it's way too early for us to bail on the gaming business. Way, way too early. Look, if we had gotten to a transaction with the Meadows, as we had hoped and expected, it would have been exactly where we would have wanted to be. But some other things we're working on, this year, next, and so forth.

So that, as I say, is an anomaly that we wouldn't expect to repeat itself. I think the diligence was -- it's really not a staffing issue. We're certainly well enough staffed, brought the usual resources to bear here. But there were some unique representations made there, and -- I can't go any further. Let's just leave it at that.

I think the question about more staffing, the reality is, we've always used outside resources to assist in the diligence process, same thing as what we did in every transaction we do. And we do that intentionally recognizing that you can never have enough people to handle the demand and the flow, that they're going to happen. Because the reality is the way deals work is, one day you're working on four deals, and the next month you find out you're working on none. So you either have -- you never -- either don't have enough people, or you've got too many people. And so we've come to the conclusion a long time ago that what we do is supplement our diligence with outside resources.

I think on the tax thing, what I was trying to help you with is, that was related to last year, 2013. And in the process of -- obviously, we accrued what we believe would be our tax liability for 2013. As we completed the tax returns, and there were a number of issues, especially because we were a combined entity for a good part of the year, and then we separated and had our own tax liability, Penn had theirs. As it all sorted itself out, there's $2 million that ran through the income statement that is -- it quite candidly won't happen again.

For one reason, if you recall last year, GLP was a tax-paying entity. It was not an REIT. So going forward, we certainly won't have any tax variances of any sizable amount. We -- the only thing that remains as a taxable entity is, obviously, the TRS, the Taxable REIT subsidiary, which was our two properties in Baton Rouge and Perryville.

Sorry, did you say that the income tax outcome was worth $2 million? I'm sorry, I didn't --

Yes. $2 million.

$2 million.

Yes.

Okay. Thank you.

Sure.

Thank you. Our next question comes from the line of Felicia Hendrix with Barclays. Please proceed with your question.

Good morning. Peter, you said you were just recently at Charles Town; good to hear the color there. Just wondering, when you -- and maybe Bill, this is for you. When you think about your guidance, just wondering what that is implying for an impact from Baltimore? And then along the same lines, can you give us any ballpark, first thoughts, on what you think National Harbor could do there?

We're not going to give specific where we're at, relative to Perryville. I think we're certainly expecting a bit of a decline, obviously, in the -- percentages would give you the same thing. But the -- I think it's a reasonably modest decline, quite candidly, and you'll be able to see it within the results that you're seeing here. I think the best way to look at National Harbor is, I don't really believe that's going to have any impact on Perryville. I think between National Harbor's location would first affect the other two properties that are in Maryland, which would be the Maryland Live, as well as the Horseshoe Baltimore.

And for customers to get all the way up to Perryville would probably be an accident, (laughter) because we get almost nobody -- a long way. It's a long way, it's mileage, and it's an incredibly long ways when you factor in traffic. So we don't really expect to see any meaningful impact next year. Now next year, couple things are a little bit interesting about Perryville is, we're going to be having to purchase -- part of what has happened is, there's a new bill. And there's a reduction in the tax rates in exchange for us acquiring all the slot machines and buying those slot machines from the state, which we're in the process right now of negotiating. So that will help offset some of the cannibalization that we expect to see next year.

Okay. Thank you. And then, just given the issues with Meadows, which I think you've laid out pretty clearly, is the property-specific thing, or a management-specific thing, however you want to look at it. But also just the pace of your announcements. I was just -- or in terms of acquisitions. I was wondering if you could just comment on the potential for having competition in the market as Pinnacle and perhaps Boyd are examining a similar structure to what you have?

Listen, I think -- I'm not convinced either one of them are going to end up being competition. It's possible. And certainly, I'm sure they're working diligently. And if I were spending oodles of money on consultants trying to make it happen. But until they actually announce that they've got -- that they're going to make it happen, I think we're going to basically plow ahead as we've plowed ahead. And even if we do get competition, obviously, it's -- it would be much better to be a monopoly than to have competition. However, I think we look forward to competing in any event.

And the reality is, they're going to find the same issues that we found, is that getting transactions done when people expect multiples that are unreasonable isn't productive and doesn't help your share price. So, I really don't expect to see anything, candidly, much different on that. And I would expect -- and again, I have no idea how they're going to get there or what form they're going to get there, what their leverage is going to be. But I would expect that we will be lower -- we will have better rated credit, and we'll have -- we should have better multiples and better rent coverage. So given those concepts, I would expect that we would be a formidable competitor for them, if they were to try to enter the REIT world.

Yes, I think that says it pretty well. I concur completely. And it is worth reminding everybody that the purchase price that we would pay, in any case, is a combination, of course, of the multiple we pay to the acquired company, blended with the lesser multiple that the operator is paying for the operating part of the business. So that you roll in there with a nine, or pick a number that sounds, by any historical standard, very high. Remember, it's higher still when you roll in -- take your -- I'm not going to lay out what we will or won't do. But it's going to be significantly less, so that the actual multiple paid by a GLP is significantly higher, and there's not infinite room.

So I think some of the euphoria around this, just looking at trading multiples and so forth, has been completely unreasoned and all of this will settle out. Everything will come in time. So, people will figure this out. We're not -- as I say, I would have preferred easy pickings, no hard work, and simplicity. Life doesn't work like that. So we're fine, and we're just going to be patient, work through the deals that we've got in hand right now. And then hang in there, as I like to say, long enough to get lucky.

Great. And then, you mentioned in the complaint that you did have some parties that were interested in the operations of the Meadows. And for reasons that you made very clear, their -- that interest waned. But could those parties be interested in partnering with you in future acquisitions (multiple speakers) relationships?

Oh my goodness, yes, but I'll let Steve get to that.

No, you're absolutely right, Felicia. We commented in the second-quarter earnings call, in terms of the level of interest, the number of parties. And they all like the business model, they understand the asset light approach, and they are looking to deploy capital and to leverage management expertise in that way. So I would not expect this to have any impact whatsoever.

Okay. Great. Thank you very much.

Thank you. Our next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch. Please proceed with your question.

Hey, good morning. Maybe a more nuanced question as it relates to the continuing M&A opportunity. But just how much financing capacity do you have available, as long as the Meadows situation is up in the air? Does that impact your ability to go out and finance or borrow to do sizeable deals elsewhere?

I think -- listen, I think -- I don't think it has any impact. The reality is, as we get ready to do a transaction, it's out expectation we'd fund it half with equity and half with new debt. I don't see us having any limiters, in terms of number or the size of the deals that we can do. Now we -- I'm going to step that back a little bit, that through November of next year, we have some limitations on the amount of equity we can issue, but that's in the billions.

So I'm not -- it's not like it's a real limit. Or it's not that it's going to really hold us back. Let's put it that way. We'd all be thrilled if we were running into that limiter. So the quick and short answer to your question is that we don't think it has any impact on our ability to get transactions done, and finding financing to make that happen.

Perfect. That's helpful. And then my second question would be on just the rent escalator. You gave some disclosure about, at least, how close you think the calculated ratio is for the first 11 months of the year. And I think there -- that is subject to a few adjustments. So the question is, just is -- I know that's been, I believe, excluded from your guidance. But is -- given how close the ratio should be, is that day to day, in terms of possibly back on the table for the coming 12 months?

Yes, let me address the escalator, the -- what we put in the press release. The press release number is an unadjusted number, based on actual results without any adjustments. And within the master lease agreement, there are items that are called for that are required to be calculated and adjusted. I think it is going to be very close, pretty much however we look at it. But I would expect -- I'm encouraged to think that there's a possibility we might still get the escalator. However, we're not going to know that until we've gotten that resolved and negotiated. And final results come in from Penn through the period ending in October.

That's helpful. My last question would just be, you mentioned before, in prior discussions, the opportunities on the non-gaming side, and it came up a little bit earlier in this call, as well. And my question is simply, could you just give us a little more background, at a high level, of what business attributes might be interesting to you? Couldn't help but notice that a large theater chain may have put themselves on the block today, for instance. So was just curious as to your thoughts there.

I think we suggested that that is not priority one, two or three for us right now. It has happened that people have introduced us to other things that could, at least nominally, be tied to leisure, if not gaming. But again, it's not a priority for us. We have looked at some other things. Again, not a priority. If we exercise caution in what we acquire in the gaming world, you can imagine that we'll take 3 times the effort to think about something outside of that. So look, anything is possible, but at the moment, it's just not on the horizon.

That's really helpful. Thank you.

Thank you. Our next question comes from the line of Thomas Allen with Morgan Stanley. Please proceed with your question.

Hey, good morning.

You talked earlier about how, going forward, you were really going to want to identify operating partners up front. Does that limit you at all, when you're looking at larger portfolio transactions? I think there have been some instances where maybe you have assessed bigger portfolios, and some operators maybe won't want to operate in every state that these three portfolios operate in. So do you think that that could be a limitation, or no?

That's a very, very fair question. And the answer is, I wouldn't describe it as a limitation. It's just a reality. But -- so yes, it's a complexity. And frankly, it's a piece of complexity that we want to demonstrate, candidly, that we can handle.

And what it requires, of course, is cultivating -- and I know Steve spends a tremendous amount of time on the cultivating side, working with partners who could participate. So the difference, as we've learned from the Meadows, although as I say, the things that occurred there wouldn't have changed it, even if we had a partner up front.

But is that we've redoubled our efforts to identify operators. There was no shortage of prospects. And would not have been a shortage, had we not run into the issues that we did. So it's cultivating people, being able to keep in a dialogue with these folks, finding out what their appetites are, and having a view about how you would carve up certain things if it got to that. So we're well down the road on that kind of a thought process, but the reality is, we've got to be prepared to do that, and we are. Steve?

Yes. And Thomas, you can draw an example from what we've done, where we've provided loans to an operator in the form of the Casino Queen guys to facilitate a transaction. So you should expect that, as we said, we would look for an operating partner. If that operating partner has limitations, either regulatory or market-wise, where they're looking at a large portfolio, and there might be a few properties that don't fit for them.

Maybe that's a situation where we could use, on an interim basis, the TRS to facilitate it. The goal, of course, to help accommodate a transaction, whether it's in the form of a loan or whether it's in the form of an interim operating presence on an -- I would almost call it an immaterial level of the portfolio.

Or bring in another operator. There is a couple situations that we are -- we've looked at, are looking at, that would require a couple of operators, and that's okay. And as I said at the outset, it is our desire to demonstrate our ability to do this complex stuff, because we're equipped to do it. So that's the --

Great, thank you.

Go ahead.

And then just talking about the loans that you've done, you talked last call about being in discussions with parties in New York about providing financing. Anything you can update us there?

We provided a sale/lease back mechanism -- or I should restate that, a build to suit mechanism on one of the southern tier New York projects. So it wasn't contemplated to be in the form of a loan; it was contemplated to be in the form of us financing the real property and entering into a lease with that operator. I can't really comment on what may or may not happen in the State of New York.

They continue to suggest they're going to do something by month end. Obviously, month end is the end of this week. I think the selection of the winning licensees will probably be delayed until after the election. But we have, to your point, provided financing support for one of the applicants.

And, listen, I think I said it at last quarter's call, that we were involved with several participants in Massachusetts who we would have been quite happy to finance and partner with, if you will, had they been successful. What's more ideal, in a limited license state, to be a partner in a well-located facility, where you know that the range of performance is between good and extraordinarily good?

That's the kind of deal that we would love to have. Unfortunately, some of the folks we're talking with were not among the winners. But, yes, we'll even do a greenfield, if it gets down to the right property, the right investment and so forth.

And apologies for my ignorance here, but have you disclosed who that partner is? And then just a follow-up question, are there other greenfield opportunities you're looking at in other states?

Yes, we have disclosed it, because it is part of the licensing process. It was the Traditions folks in Binghamton, in the southern tier. So we did participate in their application. We participated in their presentation. It's an exciting project that probably, in its region, achieves more than any others in terms of the economic development, given its location in Broom County, and really, the distressed nature of that southern tier of New York.

In terms of other greenfields opportunities, I think to Peter's point, those are more likely to be done in limited license jurisdictions, and there just aren't that many of them. We don't see a demand for additional capacity in most of the regional gaming markets. And in fact, in many of the destination markets in North America. So greenfields opportunities are going to be few and far between.

Great. Helpful. Thank you.

Thank you.

(Operator Instructions)

Our next question comes from the line of Joe Greff with JPMorgan. Please proceed with your question.

Thanks; I'm all set.

Okay.

Thank you. Our next question comes from the line of Carlo Santarelli with Deutsche Bank. Please proceed with your question.

Thanks. All my questions have been answered, as well.

This is going well. (laughter)

Thank you. Our next question comes from the line of David Hargreaves with Sterne Agee.

Hi. I think at some investor conferences earlier in the year, you had suggested that perhaps you had looked at Isle of Capri's assets. And given the passage of time, I'm just wondering if you could tell us what influenced your decision one way or another? I assume that's finished now. And I'm wondering if it was a question of pricing and expectations from multiples? Or if it was more a question of the condition of the properties, or perhaps the geographic footprint? Could you give us some color as to what factored into your decisions there?

Actually, we can't. My answer is the standard answer I've been using on our public calls for the last 20 years. You can always assume we're talking to everybody all the time. In the sense that, if it's out there, it's alive, it's a gaming property, and I don't care who owns it, we probably have designs upon it. And that's not a flip answer. That's probably true.

That doesn't mean we have any chance of getting our grubby mitts on it, but that is our desire. And so we have looked at that. We've -- anything and everything, we've looked at. Yes, so -- but we can't specifically comment on that or any other prospect.

Okay. With respect to the Meadows deal, are you able to say if you tried to re-cut the deal price-wise before things fell apart, and you ended up getting into a dispute?

Before we would even talk about something like that, frankly, you got to be able to talk to the owners. And they, from the very beginning, were less than forthcoming and willing to talk. So hard to have a one-way conversation. I think now, we'll be talking.

Or not.

Maybe through our lawyers, but we'll be talking.

(laughter) Right.

Now, I know you said that operationally, you might have some limitations in terms of visibility. But there has been some interesting conversations coming up at G2E and elsewhere, where folks are talking about demographic shifts. For example, if we look at restaurants and behaviors of millennials versus baby boomers, the behavior is dramatically different.

There's a consultant, a gaming consultant, who made a comment that said that for every 10 years that go by, the average age of slot players in the database go up as much as eight years. Are you seeing a significant amount of aging in databases? Could you -- any color you could give us would be helpful. Thanks.

I don't think we are, Bill.

No.

This gets to a fundamental question. I think you're asking, will younger people gamble, and do they -- will they gamble upon the same things that their parents did? My suspicion is not exactly so, but that the industry does, and will, evolve. New products, new ideas, so forth. And you see that happening on gaming floors, I think, every day. So I'm not imagining -- look, gambling, in one form or another, has been going on since the beginning of time, period, and is not going to disappear tomorrow. Not with this or any other generation. But Bill?

No, I think -- listen, over the course of the last 30, 40 years, there's been a tremendous ebb and flow between table games and slots. And if you go back to when I first got in the gaming industry, table games was the dominant game of choice. And then it was a big deal when Las Vegas went to 50/50, where slot machines was 50%, and then it has since gone higher. And regional gaming has certainly been higher on the slot side.

And I would agree that we're starting to see a bit of a shift back toward table games. Table games are showing to -- is showing more signs of better demographics, in terms of the younger people that are choosing games of table games. And there's been a whole bunch of new games invented on the table games side that are more entertaining than what it used to be.

In the good old days, it was basically three games. It was 21, craps and roulette. And maybe if you add somebody from Japan or Korea, they would play some baccarat. But that's in -- there's just a whole proliferation of table games.

I think televised poker has had a huge effect (multiple speakers) and these kind of games.

Right. Poker was -- it's still been -- it's gone up and down, but poker is still a relatively small percentage of the total gaming picture. I would say that, looking forward, I would expect that what you'll probably see is, to the extent that you're right about the changing demographics, is what you'll see is an increase in tables game play, and maybe to the detriment of slot play. But that doesn't mean that either one of them are going away. And I think, on a combined basis, it will continue as it has the last 3,000 years, where gaming has been an integral part of people's choice.

Thanks very much. I really appreciate your insights.

Thank you. Ladies and gentlemen, we've come to the end of our questions. I'd like to turn the floor back over to Mr. Carlino for any closing comments.

Not much to add, except we'll look forward to talking with you all next quarter. And we appreciate your questions, because -- and we clearly understand where you're going. So rest assured that we're going to work through our current legal issues, which will not affect -- I want to underscore, not affect anything we're doing going forward. So thanks again, and see you next quarter.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.