PENN Entertainment Inc (PENN) 2002 Q2 法說會逐字稿

We're getting ready to begin the second quarter earnings conference call.

During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question and answer session. At that time if you have a question, please press the one, followed by the four on your telephone.

As a reminder this conference is being recorded Thursday, July 25th, year 2002.

I would now like to turn the conference over to . Please go ahead.

Thanks, operator. And thanks, everyone, for joining us for Penn National's second quarter earnings conference call.

And before we begin we need to read the following cautionary statements. Except for historical information, management's discussion with you today may contain forward-looking statements, including the guidance concerning the results for this third quarter and full-year 2002. Within the meaning of Section 27A, the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended.

Some of these statements are those regarding our prospects for future growth, our expectation of continued acquisitions, and our optimism in light of current economic conditions. These statements are subject to a number of risks and uncertainties that could cause the statements made to be incorrect and the actual results to differ materially.

The company describes certain of these risks and uncertainties in its filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31st, 2001. Some of these risks include those relating to the ability of the company to integrate and manage facilities it acquires, risks relating to the development of properties, risks of increased competition, and risks relating to the fact that we are heavily regulated by gaming authorities.

Furthermore, the company does not intend to update publicly any forward-looking statements except as required by law.

The cautionary advice in this paragraph or this statement is permitted by the Private Securities Litigation Reform Act of 1995.

A replay of today's conference call is available for 30 days, and replay details are included in today's press release. If you need a copy of that, please call me. I'm at 212-835-8500. However, the call does remain the property of Penn National Gaming, and any other taping or redistribution of calls is prohibited without the prior authorization of Penn National Gaming.

I am now very happy to turn the call over to Peter Carlino, Penn National's Chairman and Chief Executive Officer. Peter?

Thank you, Joe, and welcome, everyone, to our second quarter conference call.

This was another great quarter for Penn National. We had, as you've seen, record revenues, record cash flows, and record second quarter earnings. So, we're very, very pleased that we're right on target with our projections.

Performance at each of operating units was strong. Even at St. Louis -- where as you know, we just opened our new hotel, and we had, of course, significant pre-opening expenses.

You will recall that our guidance for the year 2002 was and remains two dollars a share. Now, with our two for one stock split, that makes it an even dollar. I'd like to point out that this is even in light of our recent equity and high-yield offerings earlier this year, which had a significantly dilutive effect. But, our earning power -- something I want to emphasize strong enough, that we're able to retain our two-dollar, now our one-dollar target. So, we feel pretty good about what's happening at Penn.

With the respect to the interest rate swap charge that we outlined, this is a non-operating charge. I call it a paper charge, if you will, that reflects the fact that we paid off, with our high-yield offerings, all of our floating rate debt, yet, elected to keep our two existing swaps in place. It was our judgment at the time that over the life of the swaps, the company would probably be better off, from a cash point of view, in letting them run to maturity, or, just as likely over the next years that remain, another financing transaction would occur and would negate the need to mark the swaps to market every quarter. We stand by that judgment, but still, we have to -- according to accounting rules -- reflect this non-current, and if you will, a perspective charge, but it's reflected in this quarter's earnings.

I'm gonna ask Kevin Desanctis to just give you just an outline of property performance -- kind of going through the properties one at a time and give you kind of a state of where they are. And, I think you'll be pleased with his summary.

Go ahead, Kevin.

Thanks, Peter.

I think across the board, as Peter indicated, our property performance was actually quite strong. And we are pleased to today say that two areas of the company that we were very concerned about last year, no longer hold that same concern for us. The first property, as you can see, our has definitely come a long way in our view in starting to hit the type of performance levels we would want to see from that particular unit. And, second: racing has really come a long way -- Rich Orbann's with us here today -- and racing is really starting to come back from where we thought we were in on racing. We believe that racing has been stabilized and now we feel much more comfortable on a go-forward basis. At least we can be a lot more predictable with our racing forecasts. Today the operation -- we're very happy to talk to you today about, and say that we think that they are back on track.

In terms of Charles Town -- as you know is our flagship -- we ended up 580 machines just a few weeks ago, and again, are very, very pleased to report that in last three to four weeks of operation, we are now on a win-per-unit basis, ahead of our win-per-unit with 500 less machines last year. So, that additional 500 machines added on to Charles Town has very quickly absorbed on a win-per-unit basis, and we are -- we feel we're in very good shape with Charles Town right now.

When you look at Casino Magic -- we just opened a 300-room hotel at Casino Magic in looking at the numbers there was a little bit of a concern that it's not performing up to speed. We feel completely differently. Casino Magic opened in June, probably the worst month we could possibly open. And, as we come into July, what we're seeing -- first, we have a very strong management team there that we're very happy with. Second, we're noticing that the weekends are very strong. Mid-week is where we have to focus our efforts, which is being done. And on a year-to-year basis, we're starting to see growth year-over-year -- not only in the revenue line, but in the EBITDA line.

So, Casino Magic is coming along just fine. We're very please with the product. We're very pleased with the way management is performing down there. And we really -- as we've said consistently, not only in our road show, but in our calls -- we see Casino Magic, really as a 2003 story, but I think as you go into the end of 2002, we'll start to see a nice trend developing there. But Casino Magic we're very pleased with right now.

Boomtown continues to perform well. As we've said all along, Boomtown is a wonderful little property on the in Biloxi. It continues to perform well, really because of its size and the character of the operation. Really, you're never gonna see any tremendous growth there, but we see a very nice, stable, predictable growth in that property. And it also, as you can tell from the numbers, exceeded last year's performance.

In terms of Rama, our Rama we ended up opening our hotel just recently. We have our entertainment center. We have a very nice management team up there. And Rama -- again, in a very, very difficult competitive environment, it continues to perform. So, that operation again, while in a very competitive environment, performs well for us.

I've already talked about racing. The only other number that we'll talk about a little bit, perhaps -- if you have some questions -- is the corporate expense. On a corporate expense basis, we had some non-recurring charges due to some folks leaving the company, and so, that's a little higher than we would have anticipated.

But, overall, from an operational perspective, we are generally very, very pleased with each of our operations is headed.

The only operation I didn't mention was Bullwhackers, which as you know, came on line a couple of months ago. Still very early days for Bullwhackers. We're in the process of putting in some new equipment, doing some renovations, and we wouldn't anticipate much happening there until 2003. I think everybody has the numbers on that, but frankly, that's a 2003 story for us.

So, I think that's generally it from an operational perspective. Peter?

Kevin, I think you covered it pretty well. We're very happy with where we find ourselves.

One of the unmentioned -- or Kevin touched on it -- are some of the people issues. I can tell you from my point of view -- an having been at this, now, as Penn has grown and developed over the last eight and a half years as a public company -- we've assembled a tremendous staff here at Penn, both corporately and out at our properties -- just a lot of wonderful people who are doing a great job. And, I think it's reflected in the kind of performance that you're seeing.

So, things are good from our point of view. And I'll open the phones to questions.

OK. We will now begin the question and answer session. If you would like to ask question, press the one, followed by the four at this time.

One moment please for the first question.

with Merrill Lynch. Please go ahead.

Thank you.

a little more color on the and, you know, what marketing you've done to date? Do you feel like -- do you need to do more marketing, less marketing? And also, can you comment -- I think you purchased some land in Biloxi. Could you comment on that as well?

OK, Dave. I think I'll handle Charles Town. is a term that we have never been particularly enamored with, but we will respond to it.

We hate it, in fact. But go ahead.

But, I'll speak to Charles Town, and then Peter can talk to the land in Biloxi.

Charles Town we actually opened very, very low-key, which -- it's probably a little bit unusual for gaming companies to open that way -- but, just from a company's philosophy perspective, we're opening an additional 500 machines. You know, that's a fairly large compliment of machines to bring on line. And, we tried to keep it, frankly, as quiet as we could just so we could get it up and running before we tried to bring any more people into the facility.

It opened very well. The staff did a great job. And, right after opening we increased our awareness campaign. As you know, we have a very, very aggressive marginal tax rate there, and so our marketing is really pretty focused on awareness and bring as many bodies into the operation as we can, as opposed to a database orientation that's normal in this industry.

If you look at the weekly results, which I know are public coming out of West Virginia, you'll see that each week as our awareness increased, our win-per-unit increased versus not only the previous week, but also the previous year. So, I think it's a combination of letting people internally know through some awareness database campaign, and also through consumer promotions and ads. That's fundamentally the way we market that property, and it seems to be working at this point.

Hopefully I've answered your question. I'll turn it over to Peter for the Biloxi land question.

Dave, before I get to Biloxi , if I may, to add to Charles Town.

You'll recall that what we've done is opened this facility in phases will evolve through all the balance of this year and into next year. What we have done in opening with the new machines that we have is open just a partial section. In many ways, some of the most exciting and best parts are yet to come, and we expect that the Slot City area of that facility -- which is very cool, I mean it's really a great spot -- will open somewhere in September. I call it mid to late September -- Kevin's saying late. We'll call it late September. That's the point at which we take machines from the temp -- or our so-called temporary facility -- move them inside, and set up. So, you can expect that there's really nice things happening over the couple of months, and that impact hasn't been felt -- new machines and replace machines. And then, of course, as we go forward, construction continues again in the area where the temporary facility was, and we move in to roll out the balance of those machines.

So, the story really isn't even told to this current round of expansion. Remember, too, that the new garage, which is a dramatic, large, 1500 space, high-speed ramp kind of a ride, which you don't see anywhere in this part of the world. I mean, you see it in perhaps out west. It's a very unusual structure to have that kind of convenience. Frankly, we've got to educate our customers more to use it. People are still sticking with surface parking -- partly it's just the way construction has evolved.

What we're feeling is -- the numbers are great. I think if people figure out just how when Slot City opens, which is tied directly to the garage, you're gonna see a whole different dynamic down there in Charles Town. So, we're very bullish there.

With Biloxi -- frankly, I cannot tell you a whole lot. Suffice it to say, or try to leave it this way, that we've bought ground immediately adjacent to the property that allows us to expand. We're very land-constrained there. We get, at the very least, new parking and an opportunity -- it's been in the papers -- if we wish, to move our gaming in a fashion that would give us a little bit more flexibility to do some things there that we think will be helpful to our overall operating performance.

That's really all I'm able to say right now. We're happy to grab that piece of ground. We got it at a fair price. And, assuming -- that is, assuming we get all the approvals that we wish, I think that we're all gonna be very happy to have that piece of property as part of our program there.

So, I'm gonna leave it at that, because that's really all I can tell you, but we're quite excited to be charging ahead there.

Great. Thank you very much.

You're welcome.

with . Please go ahead with your question.

The question is one: can you give an update on what you think right now is the political situation/fiscal situation in Pennsylvania and how you think that will sort out? And second: even given the abuse that the markets -- given your stock and some of your friends -- would you be interested in those properties in Colorado? That's kind of just the sort of thing you guys do pretty well.

Boy, that's an interesting couple of questions.

Look, on a public phone call, I've got to be careful about what we say here in Pennsylvania. But, I'll try to be as candid as I can.

The fiscal situation in Pennsylvania is still not good. There -- to make it real simple -- there are many pressing needs here in the commonwealth that just aren't gonna be met under the current budget. They've put together a little stopgap, if you will, with cigarette taxes, and have done a few things that are keep them going for a while. But, essentially, the problems that -- the problems that exist in Pennsylvania are gonna remain. Now, we feel very positive right now -- and we've never said that before -- simply because both candidates for governor have made it very plain that they support slot machines at a racetrack.

Our legislature in the past has demonstrated a willingness to vote for slot machines at racetracks -- but only at racetracks. There's not the same support for riverboats and all the other sort of junk that appears over time. Obviously, people who have those interests are anxious to try to coattail, if you will, the strength of our support.

But, the candidates have been very clear. They're only willing -- I couldn't be happier about that -- to support slots at the racetrack. We think that if either candidate is elected, you will see a very, very strong and immediate effort to put slot machines at each of the state's four racetracks, period.

Now, does that mean that there'll be legislation at the end of the day? Who knows in politics, and I wouldn't be presumptive enough to say that. But clearly, what's been missing in the past is a lack of leadership around those issues. And I can assure you one thing: with legislative support, it's virtually impossible to get slot machines at a racetrack in any state. And that applies to Maryland, anywhere else, all these other speculative places -- if you don't have a leader -- a governor -- who's willing to stand up and say, "I support this issue."

So, I think, as I've said before, the stars are probably better aligned today than they have ever been around this issue. So, we're very bullish, and I assure you very much engaged on that question.

With respect to Colorado, quite honestly, it's been our policy -- and I think that of most companies -- simply not to comment on acquisition prospects. So, I just won't address that issue. But, thank you.

Does that answer your question?

Sure. That's great.

. Please go ahead with your question. your line is open. Please go ahead with your question. . Please go ahead with your question.

I'm sorry, ma'am. I can't hear you. But, I did hear it's my turn for a question.

Peter, I was wondering if you could give me the capitalized interest, if there was any, in the quarter, and secondarily, if you could continue on your comments of a minute ago. You mentioned Maryland. It looks as if the governor's race is almost a dead heat right now. Do you think that the stars are aligned there for any movement, especially considering filing in here recently.

Before we get to the end , we think the stars are poorly aligned in Maryland, and give that a very, very low probability. Again, anything's possible, but we don't think that's gonna happen in Maryland for a whole bunch of reasons. And again, in a public forum, I'm reluctant to comment on people or individuals and what they might be thinking. But, suffice it to say that we spent a lot of time to trying to understand motivations and kind of who's involved, and our sense is that that's not going to happen. I've said it before every time that kind of comes up, and so far we've been correct, and I think we're correct this time as well.

Bill, do you want to talk about capitalized interest?

Yeah. Capitalized interest for the second quarter was basically $900,000.

OK. Peter, if you'll let me just get one more. With the tremendous success you received and tremendous absorption of the new 500 plus units, you talked about in late September -- I'll repeat Kevin's comments -- that you'll be moving equipment around putting it in a permanent home. When do you get to the next supply addition?

We're looking in as far out as the second quarter of '03 right now. I don't think it'll be worse than that. Construction, as they say, can't start until we make the move into Slot City. We might be able to pick up a few more machines -- that is net gain of machines -- when Slot City opens. But, by and large, it's gonna be an exchange of machines from the temporary structure into that facility.

But, that's gonna keep us plenty occupied, because at the same time, or shortly thereafter, we open a very large food court that is kind of a neat place. There'll be a whole lot happening at the Charles Town facility that will keep our customer much entertained over the ensuing months.

So, I think we have a long way to go. We can get much better performance from our existing machines once the whole thing comes together. But, don't look for significant machine ads until into '03.

. That would be additional 500?

Well, we can do much more. We've kind of always said the introduction of machines kind of depend on what the market tells us. We'll all know a whole lot more. There's a lot of growth to come -- which we're happy about, I mean, I suppose in a backwards way, we're kind of glad we have that in reserve, if you will, because it's a great '03/'04 story, as much as we've been telling people that Charles Town has a very long way to go.

So, we're not necessarily in a hurry. We're gonna do it very patiently and very carefully, and the space will be there and the room will be there. So, getting the machines in at any time will be just a matter of what the market tells us.

And if I might add -- keep in mind that we have the ability to go up to 3500 machines. I think Peter commented exactly on target. Even though we're very pleased in the early days here of the win-per-unit increases, we'd like to give traditional 500 machines that work 25 percent increase in the capacity. We're trying to make sure that it has very solid underpinnings.

And then, as we move forward, I would see us really -- even though we may have the ability to go with more machines -- probably another 500 somewhere around the second quarter of next year. That seems to be the right amount of capacity or supply to throw out to the market.

And, we'll wait and see what happens with that. And then, if that absorbs very quickly, you know, we'd be coming right into the summer. So, we'll take a real hard look at that point to see if it made any sense, because if we put more equipment on the floor -- I reiterate Peter's thoughts -- we're in no hurry to do that.

If -- I think Joe is there. Can he update us on any changes that may have occurred in New Jersey in the last 90 days?

. This is Rich Orbann.

We're really kind of in a holding pattern. We're discussing -- we're in discussions with the authority. I really don't have anything positive, nor negative to report at this point. Like I say, we're continuing discussions in the participation agreement. Hopefully by our next meeting, I'll have something. But right now, you know, I'd have to classify it -- we're on hold.

It's been -- I mean I think you can all see -- a two year or three year project. It's been amazing project. I won't politics in New Jersey, but it's been a very tough process. It's really not directly affecting us. It really has much more to do with the inner workings of the state's operations and the operation of its facilities.

We will get there, I guess, once they get serious and want to get there. Rich is much engaged on that question, but right now, our operations there are strong and we'd sure like to get underway.

and may you have some better luck in this next quarter. Thank you, Peter.

Thanks very much. By the way, racing operations -- as Kevin pointed out -- are very strong. So, we're very pleased with the way things are looking there.

With that as the background, you'd think New Jersey -- who needs revenue -- would get that together and take advantage of your proposition.

You would think that, wouldn't you.

Maybe they'll wake up to their new governor.

We certainly hope so.

Thank you, Peter.

You're welcome.

Larry with . Please go ahead with your question.

Most people beat me to my questions. Hey, guys. Good results.

My question is: the conversion of the older machines -- have you guys got the kits yet, or are you still waiting for that stuff?

Larry, you know what? I haven't even -- I haven't spent five minutes on that with the addition of the other machines. So, if you call offline, we'll give Jim, the Accountant a call and he can let us know.

OK. The next thing is, you know, as far as what you guys see in Baton Rouge, do you see -- isn't stuff opening up around you to give you some more upside?

What do you mean by stuff opening up around us?

the hotel, all that stuff around the ...

Oh. I see. Yeah, you know, the state office across the street is what you're talking about. That's been scheduled to open for a while. I'm not sure of the exact date -- sort of like the New Jersey situation, as we see it. It's gonna open, I guess, in due time.

Really, you know -- and that will be a lot of walk-in business. It's a fairly large structure across the street. But, really what we're focusing on in Baton Rouge are the fundamentals. It's a nice -- you know, it's about $173 million market. We think we ought to own somewhere in the range of 60 percent of it. And, that's really our total focus and goal. We've got a new -- I guess he's not that new anymore -- G.M. down there, , who we think is doing a great job putting together a nice team. And, we're hearing all the right things from Baton Rouge.

So, I think in general, we're just pleased with where the property's headed, and yeah, I think that there are some potential upside opportunities as the state office buildings open across the street. But, that's probably -- we're just gonna have to wait and see on what the overall impact of those buildings are for us. It's not a negative, that's for sure.

The last question, I guess, is: so, how's July looking for the whole company?

July opened, actually, very nicely. That's a nice . I appreciate that. June was a month where we saw across the board a little weakness throughout the company. June is always weak, and it's a month that we worry about every year, just like September. But July's sprung back very nicely, and I'm very pleased to say that each of our operations is performing very nicely, early days in July. We'd love to see Magic come along a little quicker, but it's performing well against last year. So, we're just seeing constant progress. So, we're pretty pleased at this point with July.

All right. Thanks, guys.

OK. If you'd like to announce a question, please press the one, followed by the four on your telephone. And if you are using a speakerphone, please lift your handset before entering your request.

with Securities. Please go ahead with your question.

It's already been asked. Thank you very much.

David with Merrill Lynch. Please go ahead with your follow-up question.

Hi. It's in for David .

Just a quick follow-up question: would you guys just briefly touch on the number of machines in your temporary facility, and what the differential between the temporary facility and your permanent structure?

Sorry. Are you talking about tent?

Yeah.

OK. Interestingly enough, there is not a huge differential in the tent -- between the tent and the permanent structure. Some of our folks down at Charles Town actually would like to keep the tent. So, I'd like to tell you that there's gonna be a huge difference in win-per-unit, but there's not. It's convenient. It's easy to get to. And our clientele down there seem to be very pleased with it, even though you can actually walk in. You don't even have to smoke. You can just breathe in the air and you'd be fine.

So, it has it's niche, and, you know, we're sure that people are going to transfer into the new building, but there is no differential that we're, you know, willing to talk about in terms of any upside potential on the win-per-unit.

And can you just remind me of how many machines are actually in the tent?

Sorry. 500.

Perfect. Thank you.

You bet.

Ryan with . Please go ahead with your question.

Thank you.

Could you guys just provide the gaming revenue for the quarter at Charles Town, and also the pre-opening expenses you incurred at St. Louis?

Let me pre-opening expenses, and then I'll work back to the other one.

The pre-opening expense for St. Louis from the second quarter was 800,000.

OK.

118. Well that's total revenues. Gaming revenues -- Bill, do you have gaming revenues?

For the quarter?

For the quarter, yeah. Hold on a second. I can't give you that number right now. I only have the six-month number.

OK.

But if you call, we'll give you that number.

OK. Great. Thank you.

Sure.

with J.P. Morgan. Please go ahead with your question.

Hi. Could you just go through cap ex in the quarter, and your debt and cash balances at the end of the quarter?

Sure. Cash on hand at the end of June 30th was 48 million, which is obviously a little higher than what we'd like it to be -- no, not what we'd like to be -- the reason I said that is because we've got -- we have 5.5 million outstanding on the revolver, which is part of the reason for cash and the content of the cash. The reason that was a little higher we have revolver timing, issues relative to the end of the month. The end of the month ended on a Sunday. We had a lot of revenues, or a lot of cash on hand that we needed to get deposited in the bank. And we also got some construction payments at Charles Town that we were required to fund down there.

So, that's 5.5 million on the revolver. The bonds are 375 million for total debt with 380.5. Capital expenditures for the quarter were 33 million 500, which was roughly broken out between 30 million in new projects, and 3.6 million of maintenance cap ex. And that breaks out roughly 11 million with St. Louis, 17.5 million for Charles Town. We've spent a little bit over a million and quarter, a million and a half at Bullwhackers for what we talked about doing earlier, which was the new facility, as well as some minor equipment purchases.

OK. And what is your estimated spending for next year?

Next year's cap ex expenditures -- we're in the process right now of going through a strategic planning session with all of our properties. We're really not prepared at this time to get guidance relative to next year's cap ex expenditures. We'll be doing that on the next call.

OK.

Well, suffice it to say, other than completing Charles Town, there are no major plans anywhere in the company.

I've got the -- sorry -- I knew I could find it -- the gaming revenues for Charles Town for the second quarter were 53,500,000.

Thanks.

Tim with Merrill Lynch. Please go ahead with your question. tim: Hi. Good morning.

Can you tell us how much higher the win-per-unit was in Charles Town and really, what drove that, given the additional machines were there?

Well, it's all public information. What you saw, I think, at the last information release by West Virginia was the week of the 13th, and I believe the win-per-unit was $240 versus last year at $232 a day. Last year we had 2000 machine. This year we have 2580, plus or minus.

So, that trend seems to be continuing. On a year-to-date basis, Charles Town was winning about 275 on a win-per-unit basis with the 2000 machines prior to the addition. And, you know, we'd like to see that continue to ramp up closer to that territory. But, at this point, we're performing a bit ahead of our expections.

By the way -- it's worth mentioning historically -- we've tended to add machines in roughly 500-unit . And the impact has always been the same -- for those of you who have followed us over a period of time -- some dilution initially -- actually this is one of the quicker ramp-ups in absorption that we've seen, and we do feel that that trend will continue, and hope that it will going forward.

OK. And can you talk more generally about your expectations for Colorado? You didn't say too much about the market and, you know, what you expect to happen over the next year or so there.

Yeah. I think Colorado is pretty straightforward. We have a wonderful little operation there. I think the market growth was around 11 percent in Black Hawk the last time I looked for the most recent month.

It has a lot of new capacity in the marketplace with the Hyatt opening. I think the market's gonna have to take a little time to absorb the new operation that Hyatt opened. And, I see us coming in for the remainder of the year making sure that we do what I'll term the "lipstick" renovation on the place, rearrange the equipment. We just put in a new slot system. We're in the process of putting together an order of new models from the slot equipment standpoint, and then, rearranging our thought process on where we're gonna head from a strategic plan standpoint.

So, I would say the rest of this year, sort of getting the operation in shape, making sure management's aligned, and focused on our objectives. And, I would see 2003 as a nice year for Colorado. So, it's sort of a straighten-up and clean-up year. You know, we've given some initial estimates on what we thought the operation would do, which was below what they did last year because we anticipated that there would do a lot of activity going on up there, relative to trying to get this operation aligned with our thought processes.

Kevin, I might add that one of the things that we want to do there in this fix-up process is try to create an identity for Bullwhackers. Those of you who have followed that market since the beginning know that it started as lot of mom and pop, small storefront operations, and it is now much more an institutional, typical gaming kind of product. While we have a series of what I'll call cute little buildings sort of loosely tied together in a place we call Bullwhackers, we clearly need to add some central identity -- kind of make a place there. And, our work will include, sort of, tying the facade together architecturally in a manner that we've now studied, and actually approved, and we're costing out at this very moment, with the goal to actually create a more unified architectural identity, so that when you drive down the road and you go you'll see it, actually what looks like a destination called "Bullwhackers."

So, that's underway. And, I think Kevin's answered the rest.

I'd like to add one other minor point. If you've looked at the company over the last year or so, what we've done with each operation is that we've sort of been very methodical in approaching our operations. If you will recall, maybe nine or ten months ago -- 11 months ago -- Casino Magic was our issue and we focused on Casino Magic -- made sure we're comfortable with the management, the strategic though process, the overall property. We got that done and we moved on to Casino Rouge with the same thing. And I think you'll see the same process going on with Bullwhackers. And, I'm pretty pleased to comment that in these situations, we sort of have been very, very thorough in fixing what we saw as the issues. And we're very comfortable with where Magic and is going. Same with Rouge, and I think you'll start to see that start happen in Bullwhackers probably around the end of this year and coming into next year. I just think you'll see an operation that's focused, has a very good management team, knows what their objectives are, and starts to achieve them. So, I think that's where the overall company thought process is.

Great. Thanks very much.

with . Please go ahead with your follow-up question. Mr. , your line is now open for questions.

I'm sorry. Kevin, you mentioned that you were pretty pleased with the way that the St. Louis Hotel opened up. Can you give us any color at all for where the occupancy, or as it might be recently, and where you think you might be able to get it to?

Yeah, . I'll -- I was actually in the shower thinking about this question this morning and how the right way to answer this is. I mean, you know from our perspective, occupancy and are only important relative to the number of gaming customers that are in there. So, really, I'm more interested in knowing that the rooms are full of gaming customers, and is sort of irrelevant.

From a budgetary standpoint, we're looking in the 80 to 85 percent occupancy range, and probably in the high 70s from and . But, frankly, that's sort of an irrelevant number for me. I'm really more interested in are we pushing revenue? What's our gaming revenue for occupied rooms? And the operation is a little bit more focused on that. And, I'd like to tell you that we have a targeted number at this point for that hotel, but we don't. We're driving purely based on promotional activities right now. We're doing a lot of, what I would call, very effective customer building promotions. We're bringing in like, Billy Ray Cyrus and people like that, who come in. They'll do an event for us. And we'll fill the hotel up with people -- with gaming customers -- to let them see the new property, experience the rooms, experience the renovated facilities. And I think next year, we can have a much more defined thought process on what that means in terms of gaining revenue per occupied room.

Right now, we're pushing business to the extent that we can. And I think , who is our general manager down there -- he's doing a pretty effective job at filling in the gaps.

Where you will start to see a little bit of a move towards and occupancy is starting in September, we have some group business that's coming in down there, which we're pretty comfortable with. We're filling some of the gaps as we hit the shoulder months. And that may become a little bit more relevant at that point. But, at this point, I just wouldn't be too focused on occupancy and in the traditional hotel sense.

Maybe I could just flesh the question just a little bit more in that you have a phenomenal golf course at that location. You know have a real good hotel product. Are you presenting it as a destination resort, or is the hotel really a part of the casino, or how does the whole thing play together?

We look at St. Louis more in fundamental product and one ancillary product. One fundamental product is slot machines. Our customers are people that play slot machines. If we can get customers who play slot machines, that want to play golf to come in because of that, that's great. But, we're not confused by what we're trying to accomplish down there. We're not interested other than on an off-season basis -- on a shoulder basis -- to entertain golfers. Golfers are very nice, but we're really more interested in people that play slot machines, and happen to like golf.

So, we're not confused with operating a destination resort. We will have an overnight destination that caters to customers that play slot machines or table games. That's really where our heads are.

Best-looking slot casino I've ever seen, Kevin.

Thank you.

at this time I'm showing no additional questions. Please continue with your presentation or any closing remarks you may have.

Well, if that's it for questions, then we thank you all very much. I trust that you get the idea that we're very enthused here at Penn. And, please feel free to give any of us a call if we've failed to answer any of your questions today.

Thanks very much. See you next quarter.

Ladies and gentlemen, that does conclude our conference call for today. We thank you for your participation and ask that you please disconnect your line.