PENN Entertainment Inc (PENN) 2006 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Penn National Gaming first 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. (Operator Instructions). As a reminder, this conference is being recorded Tuesday, April 25, 2006. I would now like to turn the conference over to Joe Jaffoni, investor relations. Please go ahead, sir.

Thank you operator and good morning everyone. Thank you for joining Penn National Gaming's 2006 first-quarter conference call. We will get to management's presentations and comments momentarily as well as your Q&A, but first I will review the Safe Harbor disclosure.

In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements reflect the Company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations.

The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the Company's filings with the Securities and Exchange Commission, including the Company's reports on Forms 10-K and 10-Q. Penn National assumes no obligation to publicly update or revise any forward-looking statements.

Today's call and webcast may include non-GAAP financial measures within the meaning of SEC regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and comparable financial measures calculated and presented in accordance with GAAP can be found in today's news announcement as well as on the Company's web site. With that, I will turn the call over to Penn National Gaming Chairman and Chief Executive Officer, Peter Carlino. Peter?

Thanks, Joe, and good morning everyone and welcome to our first-quarter earnings call. Before I begin, let me introduce those at the table with me, going around in order -- Kevin Desanctis, Robert Ippolito, Steve Snyder, Len DeAngelo, Jordan Savitch and Bill Clifford.

We had a great quarter that we're very pleased with, obviously showing the impact of our Argosy transaction.

I will comment first that the Argosy integration in my judgment is going very, very well. Our team here has done, and with the cooperation of the folks at Argosy, a tremendous job of making this large task go very smoothly. So it could scarcely be going better at this time.

I want to mention that -- or congratulate (indiscernible) again a very summary. I think from my point of view, the format that Bill has developed in presenting these numbers is extremely complete and we hope is very, very helpful to each of you in understanding what we're doing here.

The quarter I think speaks for itself. We expect, and I'm going to get right at that, some questions about our forecast or guidance, probably the better word, looking forward. We have taken what I will describe is a realistic view of what we see ahead and I'm going to ask Bill to call your attention to a couple of items. One in particular that may not quickly occur to you is that we are undertaking a major effort in Ohio, and we have sort of put aside some significant funds to support that effort and we can discuss that in more detail. But we see Ohio as an opportunity which could occur. And if it does, we want to make sure that we are ahead of the curve and leading that effort in a manner that is good for our company and for our shareholders. So that's a big initiative for us this year.

So Bill if you to take a few moments?

Sure, thanks, Peter. I think to start with the relative to the guidance we're looking at, is that the first quarter really was an outstanding quarter, and in our view, is not sustainable. There's a lot of our reasons I suppose for the excellent performance in the first quarter, some of which -- I know we generally stay away from this kind concept of weather -- but it really was an unusually mild winter time and we don't see that that will continue. Obviously as you reach the second and third quarters, the weather becomes much less of a factor. So we think not only was the first quarter outstanding from a weather prospective, but we're also expecting that the first quarter may well have eaten into some customers' budgets and we would expect a more normal remainder of the year.

The other component we've added here, which is the updated openings for Boomtown and Casino Magic-Bay St. Louis, we have done a lot of analysis here at the corporate offices on demographics and capacity coming back into the market. And quite candidly, we see a tremendous amount of capacity returning into the Mississippi market, and we are taking a prudent view relevant to what we think is going to happen with the market. The reality is, there are fewer people in Mississippi than there were before the hurricanes. There will be -- approximately 80% of the capacity is going to be back online, and we are taking what we think is an appropriate look at what we expect those results to be.

The Casino Rouge is another item. We've pretty much -- it has tracked almost exactly where we thought it was going to forecast for the first quarter. It did come in slightly higher, but when you factor in what has been happening across the rest of the country, I would argue that our forecast -- we haven't shared with you exactly what that number was -- but (indiscernible) that number was almost exactly spot-on. What we're focusing on there as well is, we are looking at the attendance versus the win per person at Casino Rouge. The reality is, our attendance is up roughly 15%, and I would say our revenues and our win per admission is up dramatically more than that, in the order of 30 to 40%. We are not comfortable, and we never have been, but we've continued not to be comfortable that that's sustainable for an indefinite period of time.

The other items that are really affecting guidance I think that I would like to highlight is, as we bring back online Boomtown and Bay St. Louis, all of the equipment that we are purchasing to bring the properties back online is all brand-new stuff at a higher valuation, obviously, than it was on the books before because a lot of those machines were older and these will all be brand-new slot machines, as well as brand-new equipment. And all of this depreciation will start over from scratch relevant to what is happening. So what we're seeing is a climb in depreciation probably little bit above and beyond what it was before we closed the properties, offset by some of the buildings that are gone, especially at Bay St. Louis. There will be somewhat of an offset there for buildings. For instance, [The Inn] has been completely wiped out and obviously depreciation stopped on that.

The last issue I think I will talk about on the guidance is the taxes. We have a combination of factors, one of which is, we're having better results in the higher tax jurisdictions, primarily Illinois, Indiana certainly is a big one. Even Louisiana is having an impact on our tax rate because we obviously have a higher state tax rate.

Another component is the Ohio referendum, which Peter touched on, and that we are -- obviously I think the best way to put it is, we expect to win and we are planning to spend enough to win. But those expenses are not deductible for tax purposes, so that will have an impact on our tax rate.

And the last item, which is for those of you who have been following guidance, you will see that we have increased the net tax impact from stock options. It's related to -- there's two types of options. One are non-qualifying options and the other are [embedded] stock options. And for -- we misunderstood that from a GAAP perspective, we thought you could deduct both of those when we gave guidance. The reality is, you're not allowed to deduct the tax impact of ISOs from your taxes. So it ended up raising our tax rate.

And I think that will pretty much cover everything that I wanted to cover.

Okay, Bill, thank you. I think we're going to go straight to Q&A and get at the issues that you all care about. So, operator, would you take the first call please?

(Operator Instructions). Lawrence Klatzkin, Jeffries & Company.

Hey guys. So you're all ready to bid 59 on [Aztar]? So just one housekeeping -- cash and debt at the end of the period?

Sure. Cash balance for Penn National at the end of the first quarter, we were at 138.1 million debt. Our bank debt totaled 2.283 billion, with capital leases roughly of 12 million, and bonds of 450, for a total debt of 2.7, or 6 billion.

Alright, thank you. Corporate expense for this year we should use? And I assume we should lower back down for '07?

I think that's -- well, certainly the number is going to climb dramatically. That's where we plan to expense the Ohio referendum. So clearly, it will go up, and then it should come back down.

How much do you think you'd spend on Ohio, so we can just figure out what to do for the next year?

Larry, we wish we could tell you, but we can't. Obviously, we don't want that out in a public forum.

So you and [Ted] are working together on this one? You don't have to answer that.

Thanks.

Sorry. Bay St. Louis -- given how well the coast is doing, would you guys still be a possible seller of that property?

You know, Larry, the two questions aren't linked. Look, we would always consider the best handling of our assets. So that has not been on our list, we're certainly not talking to anybody and I don't expect we will sell. Let me just sort of end that right now. We're fully committed to a redevelopment of the property, like the plans, like the way it's going.

So let me make a comment about the Gulf Coast. This is my own -- others at the table might disagree, I haven't vetted this with the group. But I think there is a kind of irrational exuberance about the Gulf Coast that just doesn't make sense to me, and that is a market that was essentially tapped out for several years running after the opening of Beau Rivage. And there is nothing wonderful that has happened down there since that time. As a matter of fact, a lot of folks unfortunately have gone away. If half of the people that claim they're coming to the market do so, that may not be a good thing. Now my sense about this is, I will take a long view. A lot of this chatter about new projects will likely disappear, but you have to be cautious about that market. It's a nice market, it's a nice place to do business, but capacity is capacity. And we want to keep an eye on a possible overcapacity. As I say, it wasn't growing at the time the hurricane hit. So you can make your own judgment about that.

Alright, so you're not going to spend 1.5 billion like other people are?

I think we're going to be very cautious with capital.

Alright (MULTIPLE SPEAKERS).

Let me be clear -- we're going to do the right job and get these properties back up and running in a beautiful condition.

Now, PA, if you get a license quicker than you think, the way you are building the track right now, could you get a temporary open, and would you?

You know, we cannot really answer that question for a couple of reasons. First off, the rules haven't been defined yet, and that still remains the case. We have opened a temporary racing facility, and that facility does have the capacity to handle a very modest amount of slot machines; let's say 500. But remember, there is a 1500 -- am I correct, guys? -- I think a 1500-unit minimum. So it would take a waiver on the part of the state to allow that to occur. I have such questions as -- would the $10 million guarantee to the local municipality be prorated? Would you in fact have to charge it at all for less than a full complement of slots? And so it goes. What is the nature of a conditional license, or a temporary license, or a license? What are we actually going to get, what is the paper going to look like? So none of these questions have been answered.

On the positive side, the state is actively adhering public comment about these various facilities. Our presentation was finished a couple of weeks ago. Investigators have been in, so that process is well underway and the piles of paperwork that we have to submit to support that process has long been done. So everything is kind of moving along. But the politics of it would appear not to be settled; the issue of just how the distributorships will be handled throughout the state, and things really beyond our knowing. So we remain willing and anxious to get going as quickly as possible, and I think we've positioned ourselves within reason to do that. But, again, a caution we think is justified. Not that I have any doubt that it's going to happen, but we just don't want to get too far ahead of ourselves. Let's wait and see just how quickly the state can get this all together. So hopefully that answers your question as best we can.

That's reasonable. And my last question -- there is a proposed possible new casino in Baton Rouge. What do you think -- you think they actually get permission to do it? And, given that the coast is redeveloping, what do you think what your response will be?

Let me make the comment that I think it would be pretty difficult for somebody to come into Baton Rouge for a bunch of reasons. Needless to say, we would be opposed. But the whole concept of venue shopping; that is, the ability to say -- I kind of don't like where I am, I'm going to go try someplace else -- is just not a good idea from a public policy and a regulatory point of view. Remember, it would also require a referendum. You can assume that we would look most dimly, and that probably, only because we're on a public call, is the most mild word I can suggest about how we would look at such an effort. So we hear that kind of comment, but we think that has a very long way to go. And in any case, it's a very, very bad idea.

Okay, thanks guys.

Harry Curtis, J.P. Morgan.

I wanted to go back to your conservative, somewhat conservative, guidance. Is there an inconsistency here where you are assuming that your revenues -- your higher revenues -- recently are going to be the unsustainable, but your higher tax rate is sustainable?

Well, the tax rate is obviously a function of the results, not net income. So on a rate basis, I wouldn't say it's inconsistent. Although -- and we certainly expect to see -- as we look forward, we continue to see good results coming out of the higher tax jurisdictions relative to some of our other areas. One of the things that will probably help us is when we bring back online Mississippi, which does not have a state tax on income because of the credit relative to what you pay in gaming taxes. That will certainly help us to the extent that we have some movement there that might help the rate. What we do have also affecting the tax is clearly this Ohio piece, which does go away looking forward into next year.

My second question is -- in Baton Rouge, has there been a more permanent shift or increase in population base there?

There has, and we think that's reflected in the attendance numbers, is our position. I don't know if we'll call it a position, but that's our view.

The 15%. We're seeing the 15 -- we think the increase in attendance is attributable to the increase in the population, but we are not convinced that the increase in population is what is affecting the win per admission.

Do you have any thoughts on what is influencing that?

I think there's a combination of factors. Certainly, there is a tremendous amount of federal aid money that has come into the state. Certainly, some of this is sustainable for a period of time, but you have insurance reserves and what not. But I think, as kind of what's reflected in the media, is that the lack of attention on New Orleans is translating into a slowdown in dollars as well. We don't foresee it and we're not experts on this, but we don't foresee going forward that there is going to be the same amount of money coming into the local economy on -- certainly, it will be there for the next few quarters, but we see that trailing off as the quarters go on.

Harry, this is Kevin. If you look at the two metrics that Bill talked to a little bit earlier, and that's attendance and win per visit, the attendance number you can argue will increase as population increases. But if you go back to the win-per-visit number and go back to like 2003 and 2004 and 2005, there is not -- there is literally a dollar difference in all of those years. The win-per-visit has not changed much at all.

All of a sudden, that win-per-visit number has jumped dramatically post-Katrina, and you have to assume that that has almost nothing to do with the population that resides there. It has to the some external factor, which we assume, as Bill said, is the money coming in from the federal government or wherever.

So anyway you manipulate these numbers, let's assume that your attendance goes up, I think your win-per-visit has to come back to a more normalized number. And I guess that's where all of the discussion ends up, is okay, well, what will that be? Right now, that number has not come down. The win-per-visit number has stayed flat at a very high rate and a very high premium over what it was pre-Katrina. So that's really where our issue comes in, is at what point will that start to decline? Clearly, attendance has started to decline. Gradually, but it has declined since Katrina. So I think in a very long winded way, that is what creates the problem in forecasting where we're going with this operation.

That is helpful. Thank you.

George Smith, Davenport.

Good morning. I know formally, you guys have said that both of the Mississippi properties would be opening by year end, but you were not incorporating them in guidance. So this new guidance does incorporate some contribution from each of those properties?

That's correct.

And previously, and correct me if I'm wrong on these numbers, but I think, it looks like in '04, Bay St. Louis did about 20 million in EBITDA, Biloxi did about 15 million. Are those the type of run rates you were thinking of when trying to adjust your guidance to reflect the inclusion of these properties?

No. Actually, we are not expecting to hit the same run rate on the revenue side certainly. And we are also anticipating, quite candidly, some rather dramatic increases on windstorm coverage policies. So we expect to see a fairly dramatic increase in our premiums.

Alright. And then going over to Illinois, when we look at those properties' performance, which seem to be coming in a little better than expected, how much of that is a function of weather versus perhaps a changed approach at the Argosy properties or all of the properties as a result of a slightly softer tax environment?

I will start and Len can sort of help me out with this one. That's difficult to sort of separate which is weather and which is performance. I think if you look at both of those properties, since there has been a shift in the way we could market the properties, they have both shown improvement. And I think as time goes by, we are starting to see a little bit of a shift from the customers going over to Indiana. So I think we've started to bring some of those customers back, and I have to give a reasonable amount of credit to both of our management teams at Aurora and Joliet. So we definitely thank -- in part, that is due to the marketing approach that has been taken. As to the weather, it is very difficult to handicap how much of it's weather. Len, you want to add anything?

We don't have any specific numbers on how much is one versus the other, but clearly there's some of the shifts in marketing by lowering the tax rate back to a marginal 50%. Those allow other segments of the business to be profitable, and we have expanded back into those segments.

And I guess that with the real question -- there has been a changed approach, and you do think there has been a discernible impact associated with it?

Correct.

Last thing. I know we started off the Q&A session with a joke about this Aztar frenzy, but can you perhaps qualify how may be that has changed your perception of getting into either Vegas or Atlantic City, or desire to do so?

Well, it certainly has not changed our desire, and as you know, especially those of you who have followed us for many, many years, the words Atlantic City and Las Vegas were never in our vocabulary for all the obvious reasons. There was too much else that was more sensible and manageable for us to do. And we publicly said that now we need to be thinking about those markets and you can be sure that we have.

I'm going to make a distinction, stick my neck out here and say that I think, again, because it is closer, Atlantic City, and there are other factors as well, probably is -- I hate to say next on our list, because we have a list that is always moving and flexible. But it would certainly be our higher desire. And that's just speaking from my point of view; you might get some other comments here, Las Vegas I think is a much tougher market. It seems to me, you've got two choices there. One, it's a big-ticket approach to go head-to-head with all of the other big-ticket players, not an idea that you might assume that we are too wild about here. And I don't think that's what you're going to see. Or, you have to find a property that is a niche property -- something much smaller, but that has a special reason to be, and that's a complicated story. So if we can find the right opportunity, we might be there as well. But that is probably last on our list. We continue to look between the coasts for one-off opportunities and all of the usual stuff. But, if I had to pick between those two, it's safe to say, we would like to be in both places, but finding the right way to get there is our challenge and one that we're working hard at.

I would just like to build on something Peter said and just to clarify one point. In terms of Atlantic City valuation, I don't think our view has changed at all on Atlantic City. The factors that were present prior to this bid taking place are still there. Atlantic City is facing some more competition. Borgata has an expansion going, I believe Harrah's has an expansion going. Clearly, the Trump properties are putting some money into their properties. Pennsylvania has not started to impact that marketplace yet, so it's very difficult for us to look at this and say anything has really changed from a sort of holistic competitive perspective. You know Las Vegas is just a different animal. But no, I don't think anything has changed in our view.

How many reasonable ways are there into AC for you?

There's two probably simple ways. One is, you either acquire an existing facility or you find a piece of land that is buildable. The reality is, there's only a couple of buildable pieces of land in Atlantic City.

I think that says it very well.

Thanks, have a good day.

Joseph Greff, Bear Stearns.

Peter, you started off by saying the Argosy integration is going well and relative to our forecast in the first quarter, it looks like the Argosy, largely the Argosy properties, was responsible for the [beat]. What specifically are you doing there? What specifically, and Kevin please chime in, what specifically are you finding out there that is surprising you to the upside?

I don't know that there's any surprise. I'm going to give that to Kevin and Len.

I am sitting in trying to make up something. You know, I don't think anything is really different from any of the other situations we've been involved in. We take a very basic approach. We sit down with our managers, we tell them what we think the market can create. We expect them to perform at a certain level within that marketplace, and we give them some very specific objectives. And we've found that when you do that with your managers, they seem to respond. Len, anything?

There's not a lot to add to that. We try to give them clear goals and motivate them to reach those goals in a positive way, and it does to stimulate their brain waves and their activity in a positive manner and we do get results from that. Also, at Kansas City, you had the Garage open for the entire time, and so that has been a help to them as well. But, no, I think the management teams at Argosy are responding to the Penn National style in a good, cooperative way.

Let me say this. I think all of us have seen examples of horrible acquisition integration and some pretty awful things, and there is always the opportunity to destroy value. I think our objective has been and remains to, first, do no damage -- to be patient, to be steady, and to make sure that what you bought is at least what you get, and that building on that base, we can move slowly to make incremental improvements. That's the way we have operated, that's they way we will always operate and I think that's what you're seeing happening today.

Thank you.

Dennis Forst, KeyBanc.

First on depreciation, I noticed that the numbers in the fourth quarter and even your reconciliation of the first quarter for the Argosy properties were dramatically different from the depreciation in the first quarter of '06. Can you reconcile that for us?

I will probably have to take that one off-line.

Oh, really? Okay, I will call you back on that, Bill. Then the corporate expenses I just wanted a clarification on corporate expenses. It will include the Ohio money, but is the 12-plus million from the first quarter a decent run rate for the full year?

I don't think we're going to go there for the very reason that -- certainly from a run rate perspective, you can use -- I don't think the first quarter is quite indicative. I think we had some acceleration of some of the expenses in the first quarter on some initiatives that we're taking relative to some integration issues with Argosy. So I wouldn't say that the first quarter is the appropriate run rate, but it's probably, excluding Ohio, is certainly very close to the number that we gave inn the original guidance.

Okay, excluding Ohio. So, was there any Ohio spend in the first quarter?

No.

No, okay, very good. Thanks. I will call you right after this call.

No problem. Well give me a chance to (MULTIPLE SPEAKERS).

Ryan Worst, Brean Murray.

Just a couple of questions. One, maybe Kevin you could be more specific in Kansas City and St. Louis, the performance of the Argosy properties you acquired there, it looks like promotional expenses are significantly down relative to what Argosy was doing in the first quarter last year. Is that kind of a function of your management strategy, or is it more so maybe the market is getting a little more rational?

In Kansas City, I think when you look at Kansas City, clearly their marketing expenses were down against last year. But I don't really see that -- I see that as the management team there looking at how they were spending their money and rethinking it. Clearly on the database marketing side, there were some cutbacks. That was totally their decision. They looked at how they were spending money and revised their thought process.

St. Louis is a little different. Alton, I don't really see any huge change in Alton. So I am not really sure what are what you are seeing there. But Kansas City, there was a reduction. And I would not be prepared to really respond to the competitive forces in that market. There's two other operators in that market, in the Kansas City market, that seem to get quite emotional about this stuff. And you always have to be cautiously optimistic that they will tone that down a bit.

The marketing costs are similar on a year-to-year basis.

I don't know if you heard that, but Len said (MULTIPLE SPEAKERS).

I heard that.

Very similar, so. I don't if that helps you.

As far the market goes, it doesn't sound like you're seeing anything different, as far as the other players there?

Alton is a little bit -- I think you have to separate Alton from St. Louis a little bit. It's a little bit of a protected market, and so that's a little bit different. I wouldn't view it the same way I view St. Louis exactly. In terms of Kansas City, I think we have to sort of do our own thing in Kansas City. I don't think we can get caught up in the emotion of the marketing wars when they start. But right now, it seems to be okay. Len, do you have any --?

No, Kansas City is a competitive market, but there's no change to where it was before to where it is now.

Great, thanks. Just so far, given what you're seeing in April, have you seen the declines that you expect to see later in the year, or is that still kind of a forward-looking expectation that customer spend is going to decline, or have you seen that in April?

I would be a little bit you know, we sometimes get lost in the verbiage, but I think April is moving about as we expected. I think the first quarter was ahead of our expectations and I think April is about where we expected to be. So we are not surprised by what is going on in April, but it clearly has come down to a much more normalized marketplace. Bill?

I would agree with that. Obviously, you hate to completely rush to judgment on the first two or three weeks in a month in terms of what is going to happen for the quarter. But, I would do what Kevin is saying, is that as we've modeled it previously and our expectation levels, we are seeing the markets performing great, mostly in-line with where we thought it was going to. Now, that does not necessarily mean that we are right. We certainly missed the first quarter relative to some of our expectations. But right now, it's on track. What that is going to translate to for the rest of the quarter is obviously yet to be seen. But, it's certainly our best estimate of where we're going to be and we see no evidence so far in the month of April that would indicate their estimate is out of line.

Okay, and I guess you would have said that in the first with when you gave guidance as well, right?

It depends when it the first quarter (MULTIPLE SPEAKERS) the first quarter.

Yes, certainly, we would have said that in the first quarter.

Okay, thank you.

David Barteld, [NCPI].

I'm okay, thank you.

David Andrews, Merrill Lynch.

Great. Peter, I may have missed it, but I know you talked about, you said the regulators in Pennsylvania had been over to visit and (indiscernible) investigation. But did you give any clarification on when that could be drawing to a close? I just missed it. I'm sorry.

No, unfortunately, David, I said I haven't a clue. If it works for some of the gray areas, I would say everything is now proceeding as normal. Applications were submitted, the state police and the investigating groups are hard at work at assembling all of this information. We had a public presentation to the Board, you read about the other public presentations. [So all of this] is happening. But in the end, it's going to take votes from the commission. And I think it's safe to say that nobody, and I mean probably nobody, including the commission -- that's my (indiscernible), I'm just guessing -- has an idea of when this is going to occur, because there's votes around a couple of critical items and maybe even some items that we all don't know about that have to be settled. And the way the law is constructed, they have to come together on this all at once and with all votes affirmative. So when that is all going to align, I haven't a clue. All we can do is prepare ourselves. We've done that, but I gotta tell you that I don't think anybody knows. We are ready, willing and able. So there it is for public consumption.

Okay. Bill, as a follow-up to your depreciation commentary, so in the fourth quarter I take it, depreciation is going to step up to incorporate the two Mississippi facilities. Now you didn't put in what the costs of those facilities would be for us to calculate depreciation. Is there any ballpark on that?

I'm not sure we are prepared to discuss that today. Certainly, we have a number in terms of what we think is going to be there. We're in the process right now; quite candidly, we're just not ready to go public with that portion of it. I'll tell you that I think -- well, I will give you an easier solution. Depreciation, what we're looking for the year or is roughly -- depreciation and amortization combined, roughly $125 million.

Great, thank you.

[Rishi Parak], [KBC] Financial.

Just a quick question on your Lawrenceburg property. I see from your press release, I guess the amenities that you are building out at the property and what you have spent. Can you give us an idea of what you plan of spending for the rest of '06, and specifically what you plan on spending for the parking facility and the gaming facility? And finally, I guess with the new buildout, can you give us an idea of -- are you anticipating or are you focusing on drawing from a wider customer base? And can you give us an idea from how far out with the new property?

Let me start from the beginning. I will let Bill get the numbers, because I think -- that has been out there in our 10-K, as Robert Ippolito points out, for quite some time. My view is that we are capacity-constrained right now. There are people riding by our facility who cannot get in the door, or more critically, find a parking space to come in the door. They're going elsewhere. We succeed in some measure just simply by letting them come to us first. We are the first stop for the bulk of the population, and when they have to ride by us, they're going to see our competitors. And we would like to create the capacity for them to stay at home. So there is the easiest and first opportunity for us at that property.

And just to clarify on that, we don't expect to actually go deeper or further away, if you will. We think the market can support -- the existing market -- can support the properties. It's a capacity issue.

I think to further answer or at least what I think you're getting at is, I will give everybody an update on CapEx for the quarter and for what our projections are for the year and looking at what we're in the second quarter. Relative to the first quarter, we spent 54.4 million, broken out into 12 million for maintenance CapEx and roughly 42.4 for project CapEx. Looking at the second quarter, we're expecting to spend roughly $80 million, of which there will be 26.5 million on maintenance CapEx and 53.3 million on project CapEx. For the year, we're expecting a total of $324 million. Broken out, that's 62 million for maintenance CapEx and 261.8 million for project. That breaks down roughly by major projects. Charlestown, we expect to spend roughly 72.6 million; Penn National, we expect to spend 68 million, assuming that the license issue gets resolved, and that does include the 50 million. Bangor is 12.2 million, Lawrenceburg we expect to spend 59.8, Riverside we expect to spend 32.4 million. And the rest are just miscellaneous items at Bullwhackers, et cetera. Some of the small property issues at Baton Rouge.

Thank you, Mike thank you.

Lawrence Klatzkin, Jeffries and Co.

What is the call without me asking about table games in Pennsylvania and your expansion in St. Charles and Charlestown. I assume you are [leaving] provisions that you could fit table games in it, if you so chose?

Your question, I assume you meant table games in West Virginia. Obviously, that's not an issue this season. Yes, we've designed an expansion as you know that can take us out in a master plan to 6000 machines and have room for table games. We're not hiding around that issue. We want to make the case to the state of West Virginia that this is tremendously good for the state, that the table games add much more than the table game revenue, but in fact make us a major destination. In a sense, we become [foxwoods]. Now, we are a major market facility with all of the things that the people want, and this of course would be a tremendous economic engine for the state. It is the political question and getting support we need. Can't shed any new light on that, except to say that that is an issue that we must remain focused on. And if we can get a proper bill, and the emphasis is on proper, the right kind of tax rate, recognizing the additional cost of operating that operation, then we are all for it and we are prepared for it. So just have to stay tuned, I think. And if you have watched what we have done at Charlestown, it has been a very patient, very steady inexorable process, and this is just part of it.

Alright, thanks guys. That's all I had.

Dennis Forst, KeyBanc.

I just wanted to get a clarification on the Casino Rouge guidance. You say at the bottom that paragraph -- full-year '06 guidance assumes Casino Rouges results will approximate those of '05. That's for the full year, not just for the coming quarters?

That is correct.

Okay. But earlier I think in the commentary, you were saying that the trends continue at least for another quarter or two, meaning some amount of attendance and higher win per attendance, so --?

In other words, what we're looking at is obviously the first quarter -- fourth quarter last year was incredibly strong. First quarter this year is incredibly strong. Third quarter last year was strong, second quarter this year is going to a little bit strong. What we see is almost a bell curve approach to what we expect to happen, is that we've just come through the peaks and we expect that there will be some drop-off happening in the second quarter and continuing into the third and the fourth, into a more normalized spend pattern, is what were projecting.

Okay. And then totally unrelated -- capitalized interest in the first quarter, Bill?

Capitalized interest in the first quarter was 1.3 million. We are looking at, for the year, we're looking at roughly 15.

15. With all of the spend, obviously, it goes up dramatically. Thanks.

Ryan Worst, Brean Murray.

Just one follow-up. In Ohio on the referendum there, are you guys funding that by yourselves. or do you have partners?

I'm going to let Steve Snyder handle that. Steve's our point person in Ohio.

Right. As you can imagine, we have talked to all of the other racetrack operators in the state. We polled internally, and the reason we're pushing our initiative is that seems to poll best with slots at existing venues. As a result of that right now and for budgetary purposes for the balance of the year, we're looking at funding it internally ourselves.

Okay, thank you.

(Operator Instructions). Celeste Brown, Morgan Stanley.

I think in the past, you have said that when it comes to impact on properties driven by economic events, the thing that really impacts them negatively is employment. But, are there any properties that get hit a little bit harder from higher gas prices for any of your markets?

I think just as a general rule, the further away people would have to travel, that's probably where the impact would be seen. But frankly at this point, we have not seen any impact. It's always difficult to know whether you should have 3% growth or 3.2% growth. So we have not seen any impact at all. And I would argue I guess that as you get into the summer months, higher gas prices may not necessarily hurt our types of operations because we're very close into our customer base. We deal with pretty localized clientele. And the difference between driving another 10 miles or so is just not going to be a big factor, I think from our guest perspective. I would argue that folks, people who are thinking about going on vacation or driving around the country probably will rethink that a little bit or even getting on an airplane. So that is sort of what I would argue I am sure. Some of our competitors a little further out would argue a different way. But that's where we are thinking right now. Len, do you have anything different?

I agree.

Thank you.

Mr. Carlino, there are no further questions at this time. I will turn the call back to you. Please continue with your presentation or closing remarks.

Thanks, operator. Look, thank you all. We'll look forward to talking with you next quarter. Thanks very much.

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