PENN Entertainment Inc (PENN) 2003 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Argosy Gaming Company third-quarter 2003 earnings release conference call. At this time, I would like to introduce Erin Williams, Vice President of Investor Relations and Treasurer who will introduce the other speakers. Ms. Williams, you may begin your conference.

Thank you, operator. Good morning everyone and welcome to the Argosy Gaming Company conference call. Speaking today are Dale Black, Senior Vice President and Chief Financial Officer, followed by Dick Glacier, our President and CEO.

Before I turn the call over to Dale, I need to remind everyone that we will be making some or forward-looking statements as defined in the Private Securities Litigation Act of 1995. We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by our comments today. These include but are not limited to competitive and general economic conditions in the markets in which we operate; construction delays related to our capital expansion project; the approval of cashless slots by the gaming boards and commissions that regulate the Company; the effects of future legislation or regulatory changes on the Company's operations, as well as other risks and uncertainties that are detailed from time to time in our SEC filings. The information in this call related to forward-looking statements may be relied upon subject to previous Safe Harbor statements as of today and may continued to be used while this call remains in the active portion of our website. Winter undertake no obligation to publicly update any forward-looking statements that we will be making today, whether as a result of new information, future events or otherwise. With that, I'd like to turn the call over to Dale.

Thanks, Erin, and good morning everyone. Similar to the second quarter, I'm going to discuss the financial aspects of our quarterly performance, and then Dick will provide a little bit more color on the operations.

On the income statement, as most of you know by now, we reported EPS of 56 cents for the third quarter versus 65 cents last year. Revenues increased 3 percent to just under 243 million, led by a 7 percent increase in Lawrenceburg. Offsetting this was a decrease in Alton of approximately 10 percent due both to competitive measures and some of the operational initiatives that we took following the Illinois tax increase, which Dick will discuss in more detail later on. Revenues in Kansas City were slightly lower, but in-line with expectations due to construction disruption, and Dick again will speak a little more on the status of our Kansas City project in a few minutes. And in Joliet, the positive impact of our VARs was offset by the higher taxes in Illinois.

EBITDA for the quarter was 63 million, versus just under 67 million last year. Included in this was an increase in our gaming and admission taxes of $9.6 million year-over-year. Our effective gaming and admission tax rate increased from 30.7 percent last year to 33 percent this year. Correspondingly, our margins were down slightly this year, primarily as a result of these taxes. Margins were 26 percent in the quarter, down from 28 percent last year. Also, included in that this year was approximately $1 million of expenses in the third quarter that were the tail end of our launch campaign for the new program in Joliet. Those expenses are behind us now and should not be included going forward. Dick will discuss, as I mentioned earlier, the operating changes that took place in Illinois as a result of the tax increase in more detailed in a couple minutes.

Depreciation increased about $1 million year-over-year during the quarter due to the continuation of accelerated depreciation in Kansas City on those items that we will be taking out of service once the new property goes in place, as well as the May opening of our new barge in Joliet. Interest expense also decreased approximately $1 million in the quarter as a result of lower borrowings. On our balance sheet a little bit, we spent $28.1 million for CapX during the quarter and we expect capital expenditures of about $40-$50 million in the fourth quarter for an annual total in the $135 to $145 million range. This is about $15 million less than our original plan as timings of the billings of our Kansas City project is later than we had originally expected and due to the fact that our maintenance capital will be approximately $7-$10 million less than what we had forecast for the year due to a couple of things. First, we've spent a little bit less than expected at the corporate level on maintenance capital this year, and also are able to secure some favorable slot pricing this year. We expect approximately $20 million of capital expenditures from the Kansas City project will spill over into 2004. That number could be slightly higher or slightly less, again, just depending on the timing of the billings near the end of that project.

Finally, we paid down $26 million in debt during the quarter due primarily to the lower than expected capital spending and our debt to EBITDA, if you take our LCM (ph) EBITDA adjusted for the barge write-off, the non-cash barge write-off in the second quarter is about 3.7 times at the end of the third quarter. And with that, I will turn the call over to Dick.

Good morning everybody, and thanks Dale. As Dale said, I'm going to talk initially about our operating situation in Illinois. The management team said both of our Illinois properties have done an excellent job in working through some rather significant operating changes that we made following the tax increase this past July in Illinois. Those operating changes took place in a relatively short period of time during the quarter. Most of them were implemented in August and we will be making additional operating changes going forward as we see the need to.

At both our properties in Illinois, the impact of the tax increase has affected our bottom-line, despite the steps that we've taken. The first action that we took in reaction to the tax increase was to change the hours of operations at our restaurants at the properties, and we did that in July. In August, we started making the more significant changes. We reduced our hours of operation on the casino floor from 22 hours to 18. Another step was to reduce the number of table games on the floor. The table games tend to be a lower margin business for us. Both the Joliet property and in Alton, we reduced the number of tables by 6 and we replaced those with slot machines.

Very significantly, at Joliet, we began charging a $5 it admissions fee to play in the casino, and that started in August. As expected, that caused a drop in player admissions. Admissions at the Joliet property this past quarter were down 14 percent compared to the third quarter of '02, and that compares to actually a 36 percent drop in the Chicago minimarket for admissions.

Fortunately, the Joliet casino barge opened this past May. That is a terrific facility that we now have and that gave us some competitive advantages and allowed us to keep more customers even with the actions that we have taken. The Joliet, in Joliet for the quarter, that was the only casino in Illinois that did not have a decline in revenues in the quarter, and we actually increased our market share in the Chicago minimarket.

The Illinois tax situation and the steps that we need to take to be as profitable as we can be is a very challenging situation for our Joliet management team. They have done a terrific job in a short period of time in a tough situation. I'll tell you that our expense structure still can be better, and we are working on that and we have made some steps and have taken some actions that we think will make ourselves even better suited to operate in Illinois in Joliet in the fourth quarter.

The situation in Alton is a little bit different than Joliet. Our nearest competitors are the Missouri casinos, and they are not operating under sort of the handcuffs that we have in Illinois right now with the tax situation. In Alton, the revenues dropped in part because of those actions that we took because of the Illinois tax situation, but also the past quarter, there been somewhat of a marketing war between Harrah’s and AmeriStar (ph), and that affected our revenues as well. We decided to adjust our marketing programs and focus really on profitability and not market share in the St. Louis market.

Our data warehouse technology, which we've talked about a few times over the past year, has been extremely helpful in allowing us to focus on individual play down to profit per player, not just looking at the revenue. For example, we have been able to explode, say, our A segment player group into subgroups and made even more detailed offerings to get the right offering to generate the highest profitability we can down to a profit, individual profit level for each of our players. We are still making changes in the marketing programs using this technology. And the good news is that what we have learned in Illinois, we're starting to implement at our other properties.

Speaking of the other properties, we are very pleased with the operations in Lawrenceburg. Earlier this year, we initiated some modifications to our marketing programs there, which we spoke about earlier. Those results have been positive. The full year impact of the 2002 tax increase, while it has offset some of the gains that we have made, our operational performance in the properties has been excellent and I'm positive about Lawrenceburg looking into 2004.

Probably our clearest growth opportunity in looking towards 2004 is the Kansas City property. The construction at the property for our new casino has gone along very nicely. The management team there, as well as our construction management, has done a terrific job. And as we indicated in the press release, the opening for this casino will now be December 11. Of course, that final date is pending regulatory approval. We're very excited about the new property there. The casino floor is now floating. Many of you have heard about the new technology that we have used in Kansas City. It is a spectacular facility and I encourage all of you to come and see the Kansas City casino once it is opened.

When we open, we will have 1800 gaming positions and essentially all new slot product, and that's a 50 percent increase in gaming positions. During this quarter in Kansas City, during the third quarter, there was a significant amount of construction disruption. We have mentioned throughout the past year that we were going to have some construction disruption. It was pretty much on track where we had expected. We lost 300 parking positions during the third quarter. These were really our best parking positions as we were doing some construction work on the exterior of the building. That work is now complete. We have the parking back, so we think that the fourth quarter, we won't have quite as much construction disruption, but there will still be a lot of things going on as we open up the facility in December.

When the property opens, the casino will be completely cashless, using the ticket-in, ticket-out technology, TITO technology. And so again, we encourage all of you to come and see the new facility. There are some surprises. Literally when you walk into the casino floor, I think you will be very impressed.

We said all along during the past year that we wanted all of our properties to be 100 percent TITO operational detail operational by the end of 2004. We're on schedule with that transition. At the end of the third quarter, over 60 percent of our machines in Lawrenceburg were TITO operational. We're about 60 percent in Sioux City and about 25 percent in both Baton Rouge and in Kansas City. And as I said, Kansas City will be fully TITO in just another month or two. In Illinois, both the Joliet and Alton properties now actually have quite a few TITO machines, but they are not operating as TITO. They're TITO capable. We are optimistic in the next month or so that we will get the final scheduling go-ahead from Illinois so that we can implement TITO in Alton and Joliet, and that will be a positive for those facilities. So if everything goes as we plan, we should be about 60 to 70 percent TITO across the enterprise by the end of this year. And we think that the industry will eventually move towards fully TITO operations. But until that happens, our properties will have a competitive advantage by offering a product that we see the customers clearly prefer.

One of the questions that we have had in the past is do we get operational savings from the TITO machines? And we said that we wanted to see how things went before we gave guidance on that. We're now seeing some significant savings at the Lawrenceburg property. Looking at just Lawrenceburg alone, we think that we will have about $2 million annually coming from our TITO operations. We will get a portion of that in '04, and we will get the full impact of those savings in 2005. We know this is a busy time for all of you, so we would like open up this call now for your questions. Operator?

(Operator Instructions). Lawrence Klatzkin, Jefferies.

Hi, guys. Couple of questions here, one little housekeeping, one capitalized interest and what you expect CapX to be for '04?

Capitalized interest was about $700,000 in the quarter. And we said at the first of the year that maintenance capital next year, we expect again to be in about the $40 million range. And as I said a while ago, Larry, we're running a little bit behind that this year due to some decisions we made, and also some pricing that we had expected -- we're still looking at that range next year. And right now, the Kansas City project is the only project on the books that might spill into '04 a little bit. We think that will be about $20 million. But as things change there, we will update you later on.

Second question is -- when K.C. -- do you see any disruption in the fourth quarter until this gets going?

Yes. I think the worst of it I think was in the third quarter, and probably still a little bit in the fourth quarter. We lost a bunch of our parking in the third quarter, and that is starting to be alleviated. So yes, I think until we get the place open, there is going to be some disruption there pretty much for the full year.

Can you say a number you hope to get out of that place with the expansion open in '04?

I think we will give you some more guidance on that at the first of the year. There was some guidance given earlier in the year, but I think it would be good if we -- let's see how we are when we open and making sure that we open up cleanly.

That's fair. And then Ohio is rearing its head again about possibly going to a statewide vote in March. Could you talk about what you guys think about that, and also if Ohio legalizes gaming, what effect it might have in Lawrenceburg?

I guess it was about 10 or 11 months ago when 7 or 8 states looked like they might pass some form of expanded gaming, and nobody has done anything yet. Maybe Pennsylvania will pass it. I think that's probably the most likely. I cannot handicap Ohio. I read what you be read. I am aware that there is some interest in trying to get some legislation done before December 3rd, so it could be on a bond (indiscernible) referendum. There's also discussion that a statewide referendum, the earliest it would be would be November of '04. And historically, those referendums have not passed in Ohio. In think it's fair to say the situation is somewhat different in the state than it was the past. So you about you know about as much as we know if you've been reading the press. And we of course read the press.

The impact on Lawrenceburg, it really depends on what that legislation would be. The current tax rate would be the highest in the country, other than maybe in New York, and it may not be economically attractive to build very much of a facility. So we we'll just have to see what the legislation looks like, in terms of trying to understand the impact, and when that might occur.

The last question is (indiscernible) Downs (ph) looks like it's going to be opening fairly soon, and any effect on Baton Rouge?

We don't expect to much. That is 80 miles from us. That market down there is pretty fragmented. So we are -- there may be some on the fringe for people that, once you get about halfway out there, but we're not going to expecting a dramatic impact on that.

Thanks guys. I appreciate it.

Robin Farley, UBS Warburg.

Thank you. I have a couple of questions. In terms of going cashless, you mentioned you have gotten favorable pricing from some of the suppliers. Can you give us a little bit more color on -- is that just tied to volumes, or is it tied to purchasing by a certain date and if that's something you're seeing from all suppliers or just one or two?

We started this initiative at the end of last year. Our operations people were a little bit ahead of the game and the entire industry. We were talking with the major suppliers early on and we made it a very competitive situation and we got in there early and did some excellent pricing and we were very cheerful with the administration of it to make sure that we had good follow-through. So I think it is fair to say that the pricing at the end of the day, the price does, from where our original expectations, and we're very pleased with that.

It sounded as if, just from the way the release is written, that your CapX budget has come and left just in the last quarter, as if there may have been a change at the pricing of those cashless units, just in the last couple of weeks here.

No, I don't think that's the case. I think this has been kind of a -- as we have watched this throughout the year, Robin, and it is also a part of -- as I mentioned earlier, part of it is due to the fact that -- we always keep a little bit of a number in our capital planning every year for sort of contingency or unanticipated things that might come up throughout the year. This year, that money was not needed. And we always put that in our planning so that you have a rainy day fund a little bit if you will, and that is part of the reason for the difference too.

So you're not seeing a change in price behavior of suppliers, nothing like that?

No. I do not think we're seeing a price war between the major slot machine manufacturers.

Okay. I wonder if you could -- moving to Illinois, I wonder if you could quantify a little bit -- you talked about some of these changes were only made partway through the quarter and you talked about some additional changes or said there may be additional changes you can make in December. Could you give us the sense -- can you quantify when all of these changes are in place, either what margin you anticipate they're, either EBITDA margin or a dollar amount that you think you can put in place to offset the tax increases in the EBITDA line, whether it is a combination of admission charges and expense reductions, but can you quantify it in some sense when all of these changes are up and running?

Most of these changes were in place at the end of August, in terms of the structure of the change. But we continue to fine-tune. We're even fine-tuning as we're sitting here looking at changes we might make in certain areas towards the end of the quarter. A lot of this is revenue-driven, so to try to quantify it in terms of dollars, it is a combination of taking appropriate cost structure changes, but making sure we get as much revenue as we can. And I will also tell you in Alton, there's a lot of moving pieces because of competitive actions in the St. Louis market. So I tell you, we have tried to come up with some simple explanations of trying to give you guidance, and it is not simple. We're going to strive to get the profitability as high as we can get it. I think we have taken some significant steps towards that. I think we're on our way. We sure wish the Illinois tax situation wasn't what it is, but it is.

It sounds as if you can at least say that your margins would be higher going forward from this quarter since all of these changes will be fully implemented in forward quarters -- is that fair?

The one you have to be careful there with, Robin, is you don't have the full year impact of the tax rate increase in this year's margins because of the blending of the rates. Our tax rate in Illinois, reported tax rate, will be higher next year than it is this year.

Within this quarter, you're saying because you're going to have to make an assumption about where your revenue -- I see what you're saying. Great. And then I guess my last question is with Ohio. Would it not make sense for Argosy, if Argosy were interested in doing something with the racetrack in Ohio, to get some kind of option in place for all of the opportunities are known just to have -- I guess to basically reserve the right -- have the right of first refusal almost (indiscernible) if things were to change?

I think in Ohio, we probably strategically could make that kind of investment, more so in that state than in any other state, if we could find the right transaction. I think I said this in our last call, Robin, we know the address and telephone numbers of all those tracks. We have been there, and we have been trying to do something, but it has got to make sense. It has to have a return, a long-term return. And so far, we have not been able to structure one yet. But you are right -- Ohio strategically would be important for us to do something, but it has got to make sense.

Great, thank you very much.

Joe Greff, Fulcrum Global Partners.

Could you just give us the effective tax rates for the two Illinois properties and the one Indiana property for the third quarter, please?

We typically have not disclosed those on a property by property basis. You can get the overall effective rate for the Company right off the face of the income statement.

Thank you.

David Anders, Merrill Lynch & Co.

Could you maybe quantify what the cash expenses or preopening expenses will be at Kansas City in the fourth quarter? And also Dale, could you comment on the corporate income tax rate? It looks a little bit higher than what we had modeled in. What is the proper number we should be using for the fourth quarter? And then maybe asked Joe's question a little differently. Could you give us -- do you have the EBITDA Joliet if the tax increase had not taken place?

As far as the Kansas City preopening goes, that will be in the neighborhood of $1-$2 million. Some of that is incremental and some of that is shifting spending out of our normal programs into something for the grand opening. As far as the effective income tax rate goes, that is the same rate -- I think we're at the same rate we've used for the last couple quarters now. This would probably be the rate in the fourth quarter as well. And kind of asking what the taxes would have been, what the impact would've been in Joliet without the change of taxes -- or without the tax increase is kind of hard, because we made some other -- we made some decisions up there that impacted revenues that probably would not have been made without the tax increase either. What I can say, David, is that on the revenues that we did in the third quarter, the taxes would have been about $1.1 million lower under the old rate than they are now.

Great, thank you.

David Vas (ph), Bank of America Securities.

Good morning, Dale and Dick. Not to beat a dead horse here, but if you exclude the 5.9 million retroactive tax increase in Indiana in the second quarter, it looks as if your tax rate accrual has dropped by 100-200 basis points in the quarter. I am wondering if that implies that we should expect your Illinois properties to be down revenue wise a little more in the fourth quarter?

We are not quite following your question, but if you want to give us call and we will work that through with you a little bit better. But rather than trying to dissect it in this call, because we are not quite sure where you are in your question, but we will be happy if you give us a call to talk to you a little bit more about it.

Fair enough. Second thing. You paid down some debt in the quarter. Current liabilities seem to increase a bit. Are we likely to see the debt creep back up a little bit in the fourth quarter?

Yes. That's mostly construction payables and tax accruals.

Last thing. It seems that the Illinois temp (ph) license situation seems to be taking some time to happen. At what point do you start to think about the likelihood of the tax either rolling back or not rolling back in 2005?

The Illinois legislation that was passed in June says that the tax will sunset back to the '02 level in '05, or when the temp license is operating (ph). You're right that there is not progress on the temp license. It did look like there was some progress. As you probably know, there was a bidding process. Those bids are in, but they don't seem to be going anywhere within the process, if you will, in Illinois. So we are optimistic that there will be a rollback 18 months from now, and it will be something from a legislative standpoint that we are involved in as we can be.

Okay, good enough. Thank you.

Harry Curtis, J.P. Morgan.

Good morning. Quick question. You should generate next year some reasonable free cash flow. Do you see paying down debt with that possibly considering a dividend, or is share repurchase more of an option?

Our management is also focused on another alternative, and that is finding development opportunities to expand the business with profitable long-term returns. And we have spent a lot of time on that this past year. The dividend is something that our Board has talked about the last three board meetings going forward. I'm sure that it will be a topic of discussion. And we also have a repurchase program in place, but we look at that as a floor situation. So we have a number of alternatives as we move through the next few quarters and see what our opportunities are to grow and add capacity, we will decide on those other alternatives.

Are there limited opportunities from a same-store development, though, in the sense that you would be adding on capacity of what you already own?

In terms of expanding at our existing casinos?

Yes.

yes. There is -- had Illinois not done what it did with taxes, Illinois was one of our biggest opportunities. And as you perhaps know, we have 300 acres of land in Joliet, probably have the best raw asset around the Chicago market. We have some opportunities in Lawrenceburg that we're looking at. We are not prepared to spend hundreds of millions of dollars in Harrisburg, even though that market is a terrific market. But under the right circumstances, we can probably get a fairly rapid return by pure expansion of the casino, and we're looking at different ways to do that.

Given the current environment, would you reward the state of Illinois with incremental investment?

No.

Thank you.

Robin Farley, UBS Warburg.

Not to beat a horse here, but there's a couple of questions about your tax rate, Dale. I think the question is really what your gaming tax rate is by property, not your income tax rate by property?

No. We have been -- to get into that is -- gets into a lot of different detail, particularly in the three properties where we have graduated rates. And we have not provided that kind of guidance in the past, or that kind of detail in the past on how we get to what the calculation is. It changes as we move through the year as our forecast changed for the full year impact, full year revenue is something.

Can you give us maybe just the basis points change by property, something like that, where it would not tell us what your formula is, but we would get a sense of what the impact was year-over-year?

I tell you what -- we're looking at some numbers here. Why don't we go to the next caller, and we will see if you can give you some input after we get organized.

Thank you very much.

Lawrence Klatzkin, Jefferies.

Hi guys. You are about a third done with the fourth quarter. Can you talk about where you are so far in the quarter? Maybe even some guidance for the fourth quarter?

I don't think we're seeing anything dramatically change. And so I think the trends that we have seen, barring -- I have to say that the Illinois situation at both properties is dynamic and, but we're not providing any additional guidance.

Alright, thank you guys.

(Operator Instructions). David Barteld, Wells Fargo.

Hi guys. In the past couple of conference calls, you have actually mentioned that you had wished you had done a better job lobbying. I have an Illinois tax increase or at least making providing a tutorial and math for the governor and some other state legislator. At this point as you're looking forward to next year and things could happen in the state, whether it is temp license or increase in positions,. etc., what are you doing now that you've learned in your past experience that you think you might make a little bit more headway to improve the situation in Illinois in the future?

I think I would like to clarify your earlier point. One of the things that think I said in the last call, and probably even other public forums, is that the industry could have done more work in both working and educating legislators about the gaming industry and its contribution that it makes in various different states, as well as maybe even some grassroots campaigns. And I know in talking to other CEOs, that is something that they have also felt that we as an industry could do more, in terms of getting our message across. And that is what we intend to do. I think Argosy has been very active in the past in certain states, but as you can see, there are a lot of political agendas, and sometimes we're successful and sometimes we're not as an industry or as a company. We need to do more as an industry, in terms of educating.

Okay. I guess my point more directly is that, with the state tax dollars in Illinois going to be significantly lower than they had projected, what are you doing now to try and use that as an opportunity to foster changes in the state?

Well, there has been some public forum discussions of that. There are always more private discussions. Nothing in Illinois in my view is about to happen in the next few months.

The Legislature hasn't been in session either. There are some things you can do, but the Legislature has not been in session to where you have a group or a ready audience there.

I think our opportunity is again next spring, and I would love to tell you that there's some opportunity to get concessions going into the next budget. I think it is too early to make any comments. There really is not a lot going on in Illinois, except that it is clear the state is not generating the revenue that it had anticipated.

Alright, thank you.

To follow back up and answer Robin's question. In Lawrenceburg, as a percentage of gaming revenue, year-over-year, our tax rate in the third quarter was up a little bit over 5 percent year-over-year due to the full year impact of the change that went in last year. And in the two Illinois properties, they were up about close to 4 percent in Joliet and about 5 percent in Alton. And that is due to two things. One is the full-year impact of last year's tax increase, as well as the impact of the latest increase on this year’s operations.

Linda Weller (ph), the Telegraph.

Hello. Congratulations on getting the license renewed for four more years. Could you describe a little more detail as to what you're doing in Alton to not only combat the tax increase, but to attract gamblers when you have the competition across the river? And also, do you plan any capital improvements here before the tax increase -- while a high tax increase is still in place?

Let me just clarify. The Alton property last week received approval for a renewal of its license for four more years, and so that is why this is mentioned. We are always fine-tuning our marketing programs and trying to get the right message and promotional values to the right guests. So that is a continuing effort. As I mentioned earlier, two of our major competitors have been very aggressive in the past three or four months in the St. Louis market. And we while we have reacted, we've not reacted in a way that we think would have ended up with us actually losing money on certain guests, so we have actually lost market share but we think we did the right thing from a profitability standpoint, and we will continue to fine-tune those programs and change those programs as market conditions suggest we should. In terms of spending money in Alton, we're always spending maintenance CapX money to keep the property as nice as it can be. But in terms of expansion money, given the tax rate situation in Illinois, we're not planning on doing that.

Okay, thank you very much.

David Vas (ph).

Hi. Getting back to capital allocation, last quarter, you guys talked a bit about possibly looking at dividends as a way to use your cash. I am wondering if you can this time rank priorities, in terms of dividends, development in new jurisdictions and expansions at existing properties?

That is an interesting question in its dynamic. We are probably working more in terms of new jurisdictions. We are doing some work, as I mentioned, particularly past Lawrenceburg. We have said, though, that we need some support from the local community there, both in terms of facilitating some zoning, as well as some financial assistance, given the tax rate structure in Indiana. As we move forward depending upon what we see in terms of development, we will always be looking at the issue of return of capital in the form of dividends or stock repurchase. So I think that is a dynamic situation.

Gotcha. Another follow-up. How do you guys see the St. Louis market shaking out over the next year or two with the possible purchase of the president by Isle Capri and the expansion of the Casino Queen (ph)?

There are several different initiatives. Isle has made an announcement that they would like to do something both for downtown St. Louis, as well as a project that's often referred to as South County. That is still in the review process. There are other initiatives, some of which we are working on, that would relate to the St. Louis market, and it will be interesting to see just how many licenses there might be over the next couple of years in the so-called St. Louis and south St. Louis market. But we are actually doing some work in that market.

I guess as far as we've been concerned in the past what we have said is -- the further south another opportunity or another license goes in St. Louis, obviously, the less impact it has on us. Those customers are not driving to Alton the way it is. It will be interesting to see a little bit now as far as timing of all of this too, because unfortunately, the county executive from St. Louis County passed away yesterday, and he was very instrumental in this process. And so I think that has thrown a little bit of a issue into the timing of what might happen in St. Louis as well.

So then I guess I'm just wondering if you think the market gets more competitive -- excluding the South St. Louis license -- if you think Isle is coming in and the Casino Queen barge expansion?

Casino Queen is going to build a barge -- they can't add units. They are at the number of units that they can have had. They have announced that they would like to expand there -- again, those are markets we compete with, but the downtown St. Louis market and that customer hasn't been a customer that we've competed that much with anyway.

The growth opportunity is to the South. And in terms of cannibalizing some of our business in Alton, I think that is fairly limited. But there is an opportunity to the South, and we would like to be a part of that.

Okay, great. Thanks.

Joe Greff.

Hi, guys. Will the accrued effective gaming tax rate in Lawrenceburg, will that have anniversaried the full year of taxes, relative to last year?

Yes.

So the fourth quarter the tax rate shouldn't be --

It's anniversaried at the beginning of '04.

Okay, gotcha. That's my question.

At this time, there are no further questions.

Thank you for joining us, and we will be here today -- the management team will be here today if you have some additional questions. And again, we would really love to see you come out to the Kansas City property. It is a spectacular facility and we're really excited about it for '04. Thank you.

This now concludes the conference call.