PENN Entertainment Inc (PENN) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the Penn National Gaming fourth quarter 2009 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 Thursday, February 4th, 2010.

I would now like to turn the conference over to Mr. Joe Jaffoni, Investor Relations. Please go ahead.

Good morning. Thank you, operator. Thanks to everyone for joining Penn National Gaming's 2009 fourth quarter conference call. We'll get to management comments momentarily as well as question-and-answers, but first I will disclose the Safe Harbor disclosure.

In addition, today's conference call will contain 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 over future performance. As such actual results may vary materially from expectations. The risks and uncertainties associated with these forward looking statements are described in today's news announcement and filings with the Securities and Exchange Commission including Form 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.

Again, as when we required a reconciliation of all non GAAP financial measures to the most directly comparable financial GAAP calculated, in accordance with GAAP are found in the news announcement as well as the Company's Web site. With that I will turn the call over to Peter Carlino, the Company's Chief Financial Officer. Peter?

Thanks, Joe. Good morning everyone. Well, here we are again at the end of another year. And I can't say I'm sorry to see it go. And looking forward as you can see from our guidance, we don't see a whole lot of reason for enthusiasm in 2010. But, there are nonetheless, a tremendous number of good things on the horizon for our Company. Probably more than we have accumulated in our history at one time. So it is a very, very interesting time to be in this business. And we have lots to say about all of this, But consistent with our usual practice I will forego comment and let you folks lead us to where you would like to be with the absolute confidence we will cover everything that matters. Here with me today of course is your entire senior management team as is our style so we can thoroughly address any issues that you might raise. So with that in mind, let's discover who is first on the line. Go ahead, operator.

Thank you. (Operator Instructions). One moment please for the first question. Our first question comes from Felicia Hendrix from Barclays Capital. Please proceed.

Hi. Good morn, guys.

Good morning Felicia.

I am going to start Q&A off on a really high note. Looking at the margins at your properties a bunch of them just didn't look terrible quite frankly. St. Louis, obviously the revenue environment is tough but I was hoping you could walk us through what you are seeing at some of those propertys and kind of help us think through what we should expect bottom lined for the following year.

Where would you like to start, Felicia? This is Tim. Well the ones that missed us the most were Tunica and St. Louis but every property basically missed. Well, Joliet, as you know, we are operating with just the casino right now. We don't have much to sale there, and the competitive environment has increased in the fourth quarter. Labor is being managed well. We still have opportunities to be more efficient with our marketing spend there. We did open in the beginning of this week our new parking garage there. So I fully expect to see margin improvement from what you is saw in fourth quarter. In the south, let's go to Bay St. Louis, one thing we are seeing with all consumer trends in the south, I believe it is because what we saw a year ago was that the reception was hit there can. And we are now catching up to that and we continue to see more softness in southern Mississippi and Louisiana, and specifically in St. Louis promotional spending in that market driver aren by our key competitors in Gulf Port, to protect our share but not overspend that share, but we have a very aggressive competitor in Gulf Port. That is making it very difficult for us to do business there at the spending leals that we would like. In Tunica, it was a little different. We have been improving margins there, we have some unusual adjustments that negatively affected the fourth quarter, in excess of $1 million dollars of adjustments for inventory bonus and severance, some repairs were made to the building and increased health care costs. I think those were one-time occurrences in Tunica and I don't expect that to be a recurring theme. The promotional environment in Tunica is not like it is in southern Mississippi.

Any other properties that just surprised you that you might want to highlight?

The other one continues to be the best one with where we are seeing some softness, we did have some weather effect in December, but even through the entire quarter, we still saw softness there, in the market. And it is an opportunity we continue to look at to improve, improve our efficient is city of our marking spend. Again, lay wore r is being managed well, and we did see in line performance in the month of January, in the Charlestown, but we are trying to get the right mix to give us the introduction of tax free credits in that market to make sure it is as efficient use of those marketing dollars as it can be. That's the theme for Charlestown as we get into to 20* 10 as well. If it -- pretending we are in a normalized environment in Charlestown, with the tables it would approximate pull your margins down a bit. It has been a robust margin generating property, how should we think about in a normalized environment, what margins might look like with tables. With tables?

Yes

That table tax rate is going to be 35%. So I don't think it is going to be enhancing our margins in Charlestown given the labor component there. I think net-net we are probably in the 27, 28% area.

Okay. Helpful. And then just moving on, in the release, you said that you guys have been doing a lot of studies or polling or just trying to get a gauge of where consumers sentiment is going forward. It seems slightly cautiously optimistic, but more favorable than what you have been seeing. I was wondering if you can touch upon that? Maybe what you have been seeing in January?

Well, (inaudible) stick my nose in the middle of that tip. If we gave you a sense that we think it is favorable, we probably made a mistake. And I am being cute about that, but look, the trends, you can take the view that things are, deterioration is slowing, and maybe we can say that. But, this is guess work looking forward. We said that to you on calls before. We don't have a clue. We really don't have a clue where this year is going to go. We have some optimism looking back more than a year ago that 2009 by the latter part of the year was going to be more positive. But now, having been chassen by the results of 2009, we don't see a lot of reason for enthusiasm in 2010.

Now, putting aside a lot of the good things we are doing that are going to be very, very positive for earnings and growth for the Company. I mean that's new stuff. If you look at our core (inaudible), core business, customer behave, I think I speak for most of the talking around this table. We really don't have a clue. Bill will probably spend some time talking about kind of what we are currently seeing. Maybe we can spend a little time with that. We think it is kind of in line with what we are telling you.

Now, we welcome anybody who wants to call us with a more robust and hopeful view of where this is going. We are trying to be realistic. To give you our best sense based on what we really feel. And that kind of leads us to what we presented for the year going forward. So, it is not science but it is a lot of art and maybe a smidge of prayer.

Well said. This is Bill. What we did, we said what we have done is a lot of internal trend analysis for lack of a better description of it. Which is indicating to us that the rate of decline is slowing. But rate of decline is slowing is not good news. What that just means is it is getting bad, just getting bad slower. And we're not on the break next pace to zero that we were before.

So, what we have done is taken those trends on a yearly and quarterly basis. And the fourth quarter was clearly another let down. Some of that in December, and I don't want to take a lot of comfort with this, but some of that in December was weather-related. But if we look out at January which quite candidly there wasn't really a weather problem, at least on an aggregate basis, snow days, we were down in total roughly 3%. But if you take out both Penn National and Joliet which we are doing for internal purposes, since Joliet closed last year, January's revenue numbers are down 5.3%.

Now, the good news, if there is good news relative to the reliability of the forecast, one thing we were able to do is put together these numbers in December before January started. And candidly, we were behind our own internal forecast up until the last weekend of the month. And then we came roaring back. So, if there's any good news, the only good news I have to report is that last week of January was exceptionally strong. I think that's a combination of the fact that for the most part all of our properties, we had good weather and we had no football. So, it was a pretty boring weekend for people to do stuff at home. So they seemed to come out and enjoy our facilities.

Looking forward, I will tell you that one month out is a lot easier to get a handle on than three months and three months is easier than six and six is easier than nine and et cetera, et cetera, et cetera. So, when Peter says we don't have a clue, he's absolutely correct. All we got is historical data and trends with which we are going to try to look forward. I don't see anything out there that gives me a lot of comfort that all of the sudden we will see some kind of a major up tick in the employment rate or anything else that would cause our customers to get all of the sudden have a change of heart relative to their outlook today.

Look, beyond that, there is a political overlay to all of this that we all are watching as we pick up the news papers everyday. It is not a very positive one. I am going to tell you as we look ahead and look at what Government is up to these days, it is one small moment on that subject, there's not a lot as a citizen or a business person in this country to give me a lot of comfort. There's a lot of bad stuff that overlays all of this. So, we have a very conservative, we hope, view for 2010. And Tim I see you have something you want to add.

One thing Bill said, just a correction. Emporers was not closed last year. The up tick for January was just really Lawrenceburg, and Penn National. Other than that, Bill's numbers were right. I just wanted to make that minor correction.

Can you make, Tim, can you make a comment about Lawrenceburg last weekend?

Yes, as Bill said, with the good weather, and not much on TV to occupy people's time on weekends, We continue to see reasonably good growth from our capital investment in Lawrenceburg. 8% to 9% in the fourth quarter and record attendance levels on Saturday. In fact one time in the boat we had near 6,500 customers which is all-time record attendance. And we had very strong volume from Lawrenceburg. And this is the time of year in our regional markets especially in the Midwest and east, if we have good weather, and on weekend, that's peak volumes, the peak to peak when those conditions. Yes. So we will take that as a data point. Too early to say it is a trend.

Right.

It is nice to have a data point like that, Felicia. Look, the margin issue raised is one that's always in our consciousness, one we will continue to work at very, very hard especially as we have a view about where 2010 is going. I think you have our view of the year. Has that come close to answering your question.

It has, and more. Thank you. And then just finally, is New York totally dead, or is there anything hope there?

Well, we had I will say to everybody obviously, that we had a robust discussion about New York before this call. We usually come together about 45 minutes before and decide what's important, what's not, what we can say, what we can't, quite candidly. So, New York came up, as you might guess. You read the headlines. I should get Eric Shippers some of the headlines that we follow out of New York. Eric, why don't you read that opening. We kind of like that one.

Yes, I think it was New York Daily News. And it something like "something stinks in like an aqueduct and it's not the stable"

Look. We have been mystified by the process that has gone on in New York. It speaks for itself. Decidedly in frustration. As I think many know, I did write a letter to the Governor asking please to tell us what it takes to get this thing resolved. There was a process that began quite a long time ago. We were one of a few bidders. By every measure, it was very clear, we were the winner bidder. Apparently, some people didn't like that result. So, what they did was reopen the bid. And we won the bid again. So, on a dollar point of view, we are so far ahead of whoever is in second place, that scarcely it is laughable. But more than that, nobody does more of this in the United States or does it better than we. Period. And so we scratch our head and say what is this this all about? It is intriguing for us to note the conditions laid upon the quote winner who was the loser, were met Penn National and maybe you can get there. There were a lot, as you might guess, squirrelish rumors spread around New York suggesting that somehow we couldn't fund this transaction or we didn't adequately support our unions and all kinds of silly stuff that was just shaft thrown in the way of our bid. We have answered all of that. When the question of money came up, we said fine, we'll put the money up front. We will get it in your budget this year. We'll put it in escrow, put it aside. Nobody has matched that or come close to that. We simply said, Governor, please tell us what it takes to get this resolved. Then you saw the results. Now, the Governor clearly is not the only party to this choice in this selection. And enough said on that. But, we really do scratch our heads about this. Eric, you want to make a comment?

I wanted to add there's another rumor that appears to be out there now that somehow our visual conditions on our cash flow is bad. And that is not the case. Our vision is $310 million in cash and up front (inaudible).

So, I'll leave all you to conclude whatever you can conclude about the process in New York. We are the winner. We are the best qualified. There is no number two. Period. There just isn't. So, why we are not there today, I cannot tell you. I leave to New York or whatever other investigations will follow from this process to decide. So I can't say anything else about that. We're frustrated. We're discouraged. But it is what it is.

Well, we weren't the winner obviously but we had the best bid.

We're the winner. So, we'll leave it to you all to determine what kind of happened there.

OK. Thanks, guys.

Our next question comes from the line of Larry Klatzkin with Chapdelaine. Please proceed.

Hey, guys.

Hey, Larry.

You guys got a lot of projects ahead of you. It is pretty exciting.

It is.

A couple of regulatory questions. The slot vote, do you think that's going to get voted on. What do you see the outcome? And of course you actually have a track possibility here. So, it could be a good thing for you, too. What do you view on that.

Where? Larry?

In Ohio, the slot vote.

Slots Oh. Who wants to take that, Eric?

You are talking about the May election on the relocation? Oh.

The slot vote in November.

The racetrack.

Yes.

We are watching it. As you know, they have failed to get the requisite number of signatures on the initial path and have a ten cure day period. And believe that they have sufficient signatures according to their public statement to get there. So, we do anticipate that it will be on their ballot in November. Whether or not the racetracks are going to spend enough money to try to get this approved is unclear at this point. And I am not real sure how you would handicap it given that you now got issue three out there which is going to have four casino in the state. It is anybody's guess at this point. But there has not been sort of a coalition that has formed yet to try support or oppose it.

In the past, to be clear, we have always supported slots at the racetrack, and we are not opposed today. But this is an issue. Obviously, we are now focused on the next thing that we have in front of us that is presently at hand. Where this all goes and whether the tracks, we have struggled to bring themselves together to make the coherent case will be able to get this together. We're track owners. And look, we're racetrack people.

Would you spend any money on it at Penn National?

I don't think we would spend any significant money.

We'd spend our fair share.

Whatever the group would come together to do. Yes, that says it best. We will of course spend our fair share.

All right. And then.

It won't be it 2009 like issue three campaign though.

Right. Understood on that. Now.

The tracks don't have a lot of money. That has been the struggle all along.

Unless MTR steps up and pay for it again. Second thing, on table games, potentials on Maine, and Maryland. What do you see the possibilities on that timing and outlook?

Who wants to take that? Erick?

In terms of timing in Pennsylvania, Maryland.

Maryland and Maine.

I'm sorry. In terms of Maine, there was a hearing yesterday, in the legal affairs committee, where we did discuss the issue of table games legislation. The challenge is that it would require two-thirds vote that the legislature could get it approved, in a way that it would not have to appear on the ballot. And it's a complicated technical issue, but there's another, the Oxford County Referendum is out there. And it could be viewed that a stand alone table game bill is the competing measure, and has to be placed on the ballot. So, we are kind of working through that. The committee has asked for more information on it. And so, we're putting together numbers for them about how table games can create jobs and Maine and help fill some of their budget hole. So we will see how that plays out over the coming weeks. Because that will come back to the committee in discussion.

In Maryland?

In Maryland, on table games, the Governor has said he would like to see the facilities get up and running first. There has been a bill introduced, however I will note it did not have a tax rate attached to it. And we don't see it necessarily going anywhere this session. It would have to notably go back to state wide voters and they just doesn't appear to be the appetite for r that to happen.

Ok. At least at this point in time, okay. And then,.

That's the way in the legislature, there doesn't appear to be the appetite. Whether it would pass at the statewide ballot is anybody's guess at this point.

By the way, on the other hand, in Maryland, we are moving very swiftly with our construction there. And it will open on time, it looks like, if you look at cost on budget. So, we look forward to being the first major facility open in the state. Really good news.

That would be fantastic.

Sometime in the fourth quarter of this year. Alright. Peter, are you still interested in Las Vegas. And would you consider a fixer upper like a Riviera, or something a little better than that?

Larry, that's, I see it as a churn question. Not Riviera. Because that's a tear down. We've always looked at it that way. They sort of stuck in a place that they just can't get out of. It's just not competitive any longer. But there's no economics that would allow you to tear it down and do it again. So, no, it would have to be something more substantial. Look, I think that we made the right call with them. We were right to be there in first place. And if the stars aligned and it all came together, we were willing to proceed. And by the way, over those months, we did a tremendous amount of work. More than anybody. To fully understand what it would take to develop a project there, and people questioned our numbers. I think all have found that we were exactly right. We spent a fair amount of time and money by the way, with a team of people who really really analyzed our project and costs. Bill will go into a lot more detail since it (indiscnerible) but in the end, we knew what this was going to take. And decided that Mr. Icon wanted it, then he really should have it. And now he's got it and good luck. But it will take $1.5 billion to finish it all in. I don't care what you do. If you want to have a project that's going to be competitive. And in this market, good luck. So let's put that aside. We continue to look for other opportunities in Las Vegas. We are fully engaged on that as we speak and we'll continue to be. It's one of those things, again, you get the right thing, we'll do something. If we don't, we won't.

Will you manage something like a take over Deutsche property, and manage it for them instead of buying it?

I would rather not say a lot about that. We've been asked to do a lot of things. Remember that (inaudible)-- around it and extensive data base of folks who go to Las Vegas on a regular basis, and we want to be very careful how we use that. So only for the right opportunity would we do that.

All right.

I don't think that, well, let's leave it at that.

Thank you, Peter.

Okay. Next, I guess.

Our next question comes from the line of David Katz from Oppenheimer. Please proceed.

Hi, good morning all. I wanted to just take a quick pass through the items or the assumptions that you have on your guidance. And obviously, it's in the interest of trying to reconcile, if you look at a consensus EBITDA estimate out there versus what you are guiding. And my sense is that there is a number of items that are baked into that difference in conjunction with perhaps a little more conservative outlook. Right? And so some of us might have West Virginia table games in there for a certain amount. Some of us might have some Pennsylvania table games in there. We probably wouldn't have had pre-opening expenses in there for 8/8. But on the corporate side, that has been a variable number, the last year or so. Now, that sort of the goings on in Ohio are happening, how do we think about what your corporate expense should run like as we head into next year? And are there other sort of item that is you think we should call out that we should consider in making getting to that difference or reconciling the two versus your conservatism on the properties?

Why don't you work on that.

What we have got for corporate overhead next year is around $69 million. Obviously, we continue expect, it doesn't really have any significant amount for lobbying. I mean, there's certain amounts that we have recognized that we'll be spending but it is certainly much reduced in the current level. The other items, we don't have table games in here because quite candidly, we don't really have are a good date for when we think it will be up and running. And the state regulatory process in Pennsylvania historically has proven to be incredibly lengthy. For those of you who weren't around, it took them a year to figure out whether they wanted slots distributors. So, until we get the to point where Pennsylvania has got all their ducks in line and they've got appropriate cost structure on the regulatory side, (inaudible) will get it where you can make money operating table game. I think we will hold off in terms of our expectations. Now, that doesn't mean in any way that we don't think it is coming. We do. We are not sure which quarter it's going to show up in. And it could be if there's any kind of hitches, it could easily flip into the fourth quarter or in the next year.

So just before I leave that I want to make sure I heard you right. You have said $69ish million?

Yes

Million.

Yes

And that sounds like if there is some meaningful up tick in corporate expenses as a result of lobbying et cetera that that's really not baked into what you have here.

No. That's right.

OK. I'm sorry. I didn't mean to cut you off. I just wanted to make sure I had it right.

No, that's fine. Certainly if we were to enter into a major effort, and it's not a new jurisdiction, that's not on the drawing board similar to what happened last year with Ohio, which we didn't expect for a whole bunch of reasons. When we started off the year, 2009 Ohio wasn't even, we thought that the last year it happened. Things started to unfold and we got involved and obviously, it ended up with an incredibly fantastic result. But we are not baking any effort along those lines.

All right.

Eric, we have nothing really, looking around the table. I can't think of what state would cause us.

No big ticket item.

Yes, so, I think we can rest at that.

Other than that I think it is, I am not sure I would point out, Periville, we don't have any results there. Again we expect to open in the fourth quarter. Traditionally your first month or two of operations aren't that, it takes time to work through your labor efficiencies and other cost structures. So your first month or two typically aren't that profitable anyway. So, we have basically left those out and just saying we will only have a month or two potentially of results. We'll see where that ends up. Other than that, I'd say just generally looking where we see trends developing from 2009 and looking forward to 2010. Again expecting that it is going to be a rough year.

Right. And so there's nothing particularly on the cost side because if I just take it one step further, my sense is that people are more likely closer to where your revenue is than they are to where your EBITDA guidance is. There's no items on the cost side or particular, across the portfolio profit pressure that we can point to?

No except that I'd say that in the declining revenue environment, we certainly focused on margin and we certainly focused on controlling labor costs and marketing costs. I think the reality is that we have extracted the easy stuff. (inaudible) increase and pulled out of our cost structure. And I think as we go forward, we are going to struggle to keep or basically to reduce cost to match it with the revenue decline. Because we are starting to get to the point where we're just not as effective as we have been at being able to match the revenue decline with the operating cost decline.

And at the moment, we're still not willing to give up the kind of customer experience that we think is important. I think Bill said it best. We're getting close to where we have pretty much that cost point of view about where we need to be.

OK. If I can ask a quick follow up about Ohio. We have had a couple of discussions about sort of the goings on, and potentially, moving the site. Is there a way, is there an outcome on the spectrum, whereby you put this thing back to a vote, and the whole thing goes away? Entirely, where there's one, where there's neither site?

No, this is issue specific, similarly. David, this question is going to go to the voters in early May, is just about the location. It is not about if there's going to be gambling in the City of Columbus. It's either the downtown arena district site or the west side (indiscernible) location site. It is just the location question. There will be a casino in Columbus. It is a matter of where.

Is one site more expensive to you than the other.

No, we are neutral on the site quite honestly, completely neutral. This is simply a matter of trying to accommodate local wishes. By the way, for the record, we did talk about up front, before this whole process started, and didn't protect any opposition. So, but it has arisen. We have worked as you would guess to be cooperative. All hands got together, and actually got this through legislature who is very, very positive with a lot of support. And we got on a single issue. So, I think the real reason for optimism is this will pass. But if it doesn't, we just fall back to our original site. So, this is good and good. There's no bad news for us.

Got it. Thank you very much.

Our next question comes from the line of Joe Gruff from JPMorgan Asset Management. Please proceed.

Hey guy, good morning. You talk about most of things I wanted to talk about this morning. I have a follow up on the 2010 EBITDA guidance. In round numbers for the first quarter your EBITDA, your target has declined about $20 million. And then for the full year, your targeting flat EBITDA, that obviously implies EBITDA growth in the last three quarters of the year. Can you talk about what is driving the last three quarters of year? Is that preopening expenses are hitting in the first quarter? You obviously have some contributions from West Virginia table games in the back half of the year. Can you help us understand the dichotomy between the (inaudible) and the rest of the year

Well, a big chunk of that is the fact that in February, well basically it was the the entire second quarter Joliet was closed on a year-over-year basis. And rest of that is relative to the pre-opening most of that (inaudible) back end loaded but we're picking up some revenues obviously and that will continue to grow Lawrenceburg. Should be doing better in the second quarter obviously than the third quarter. It will be year-over-year flat comparison. I think when we said this, there is some assumption that we are not expecting 5.3% revenue declines throughout the whole year. As we have seen a trend it shows those revenue declines are getting a little better. So by the end of the year, we should start to see year-over-year where the revenues are more in line with last year. At least that's our hope. That you'll start to get by the fourth quarter, if the trend line holds true, that by the fourth quarter, we should see (unaudible) flat and maybe even a slight up tick hopefully. But that's what the trend lines are indicating.

And then, Bill, I don't know if you gave this, can you just run through cash debt CapEx for the quarter and what CapEx is by quarter for 2010?

Total cash at December 31 was $713.1 million of which $555.9 million of that is in the unrestricted subsidiary debt. And it breaks out between the two revolver pieces, $85 million of the revolver which is LIBOR of 1.25 and $152.4 million of LIBOR plus 2.75. And then in the VTRAG, we have got a $1.518 billion at LIBOR plus 1.75. Capital (indiscernible) is at $1.4 million. Bonds obviously, there's two bond issues at 250 and 325. Gives us the total debt $2.335 billion. CapEx for the quarter was $61.9 million, really $62 million if I round it off representing $39 million of project CapEx and maintenance CapEx of roughly $23 million. Looking forward in the first quarter, we expect CapEx in the first quarter to be $139.5 million, which is made up of $100 million of CapEx with roughly $38 million of maintenance CapEx. And for the year we expect project CapEx to be $428 million. Maintenance CapEx of roughly $96 million. Some of that is carry over from last year, in terms of higher run rate.

Thank you.

Our next question Go ahead.

I was going to add something on Joliet, that we just haven't touched on yet or completely. Remember, that this facility is still dramatically limited. The party garage is just open. There is the boat kind of all by itself. Not a single amenity really except what is on the vessel. And we have yet to open a pretty exciting new facility there that we think in total, party garage, new facility, and so forth, will begin to have a pretty strong impact. So even though it is open and operating, we have not seen the full result yet until we deliver the full product. So, and we are excited about that.

Which is not expected to come online until the very end of this year, early 2011.

Correct. Thanks. Okay.

Our next question comes from the line of Steve Wazinski from Stifel Nicolaus. Please proceed.

Yes, good morning guys. How are you?

Good morning.

One question for Tim. And Tim, just trying to get a sense of, if you look at your broad portfolio right now, what type of customer is walking through your door today? Just basically trying to get a feel for rated versus nonrated player.

Steve, it's the same kind of customer that's been coming through our doors over the past couple of years. It is about 65% rated on average. Up slightly but not materially. It's the same customers come. Trips continue to be flat, and the continued trend of spend per visit is down. If you look at Lawrenceburg that used to do $130 win per admission, it is now, that number from the three to four years back, it's now doing $100 win per admission. Volumes are up there with the new capital, but that's generally what we're seeing across the entire portfolio properties. And that's a trend that has been running through 2009. Customers continue to save more, and are more prudent at spending their discretionary dollars. But they're coming to gamble. They're just gambling at the lower threshold. And you see it too and how they're playing the slot product. You see a continued trend to play the low denomination slots. You see former dollar players that are now playing $0.01, $0.02 games. That is just again reflective of them tightening their budgets.

One more if I can. In terms of West Virginia and what you are incorporating in your guidance for table game. If you can just give us a list of not like a hard number but try to give more of a directional guidance of how you're kind of building up of what you expect in terms of results out of there. In terms of when table games do hit.

Well, the math we are using is, typically what we see across our properties is roughly 15%, wins is roughly 15% slots, in mature markets where they have both been existing for similar periods of time. Obviously in Charlestown, what we're expecting is that it will take some time to ramp to that level. So we have to built it, assuming will start off. Obviously it will take a little bit of time to build up to where you'll generally get into that range. We're expecting some margins that is are not too far off our general property margins because of lower tax rate. We have a 25% tax advantage which should help offset a good chunk of labor difference.

Okay great. Thanks, guys.

Our next question comes from the line of Dennis Forest from Keybanc. Please proceed.

Good morning. I had a couple of questions on the totally different subject. The write down of $520 million build, can you give us the break down of that? And what is Lawrenceville on the books now for?

Lawrence, residual value is about $700 million. The challenge obviously here is that the accounting rules require that you look, When, we first acquired the property, we went through a, this goes all the way back to when we acquired Argosy, we did an allocation the purchase price of Argosy and allocated that across all the assets that we're buying. And we find certain value based on our first guess is back in that era. Then, what is required is that every year, we have to go through and re-evaluate on an asset by asset basis what we thing the residual value of the asset is relative to the fair value. And then make an adjustment to goodwill and licensing and tangibles. What's ironic here is that the Ohio initiative which is basically in my view anyway, an incredible positive event for the Company, and a positive event for shareholders, translates into when you're done with the accounting rules because you got an impairment in Ohio, you have to recognize the impairment, but you are not allowed to recognize the value creation from the very same event that's creating the first impairment. So ironically, we have a situation here where we're actually going to be improving the value of the Company. But the what the accounting results say is that we've got an enormous charge we have to take for $500 million. This is my personal pet peeve and will probably get me in trouble with all of the SEC, well hopefully not the SEC's , but certainly my friends at the accounting group. This is a perfect example of why the income statement is becoming more and more meaningless across corporate America because you simply can't use common sense. And you have to follow the rules that are put in

Look. I will be clear, Bill, this is another stupid Sarbanes requirement. So. It all rolls out of that. It's stupid. But it is what it is.

On the books at $700 million. Is does that change your quarterly depreciation at Lawrenceburg.

No, it's coming out of goodwill and license. Which weren't a part of (inaudible)

Okay. And then just moving on the $8.8 million projected preopening expenses, you don't have a separate line item for preopening. Is that just buried in G&A?

It is buried in -- it is not included in the $69 million number I gave on the corporate. It will run through gaming expenses. We will show, for those properties that are up and running, it will just get buried inside those property results. For properties such as Maryland, Toledo, Columbus, you will see a separate line item.

Okay. And that's $689 million number, is equivalent to this past year, $80 million?-

With well, $84 million.

$84 million; is that right?

Yes

Okay. So, and the $69 million can be ratably throughout, let's say $70 million split evenly throughout the year.

That's our expectation.

Okay. So that's not that far off from where you were in the first half of the year before you started spending in Ohio?

Right.

Okay. How much did you end up spending in Ohio?

About $27 million total.

Okay.

Some of that we're going to get reimbursed. Some of that is going to be, It ends up to be around $24 million.

Okay. Ok. And there was a little item of $2.5 million lost on noncontrolling interest, I guess an add back for you. That was looked like it was 10% of Toledo and Columbus you do not own.

Correct.

And who owns those 10% interests?

Lakes

Lakes is your partner there.

Yes.

All right. And I am trying to see if there's anything else I needed to ask. I think that will do it. Thanks a lot.

Sure.

Your next question comes from the line of Steven Rugerio from CRT Capital. Please proceed.

Good morning. Just one follow up on CapEx, can you give us a better sense of the timing of your 2010 project CapEx by quarter or at least how much front end loaded that would be?

Well, we have 100 -- on the project side, of 427 we have roughly $100.6 million in the first quarter, relative to. This stuff, I am happy to give you the numbers here but I will tell you that our ability to forecast exactly by quarter is a little challenging.

I understand.

We're roughly looking at $75 million in the second, $170 million in the third and another $80 million in the fourth. How ever that ties back to the number.

Great.

So, more loaded in the third quarter.

Okay. Thank you.

Our next question comes from the line of Betsy Gordon from Goldman Sachs. Please proceed.

Good morning. Can you just remind us in total what lobbying spend was in 2009 versus 2008?

Not much different. We didn't spend a lot more than we what we spent in Ohio. We spent $2.5 million in West Virginia, and I think that's it. I mean maybe (inaudible)

Okay. And then 2008?

I'd have to get back to you on that one. That was a big number. That was $38 million in Ohio.

Okay.

And another $2 million more.

Okay. I will check back. And then what are your expectations for any impact in Illinois from the VLTs being rolled out?

Well, we don't expect in 2010 to have any impact from the BLT. It's going to take the regulators I think that long and then some to try to license these operators. So, there's no effect on it. We've had other states that had BLTs and (inaudible) in small numbers. And we don't think there's a material effect it generates for the bar casino operations. There's still a question in Illinois too as different communities and different counties are voting to opt out on whether they have these in. And that's still being played out right now.

Okay.

We are already there and in fact that may result in less machines being there once they legalize them.

Okay.

A good comparable is West Virginia where reputedly or reportedly there were something close to 50,000 gray machines. We were there operating for a number of years, and someone, this gray machine issue came up. And I said what is a gray machine and where is it? Somebody dragged me over to a window of our facility, and pointed to a bar across are the street and said, "Right there". I had no idea.

Okay.

The basement. These things were everywhere. They license them as you know in West Virginia. The impact was zero. Actually zero. Because it was going on anyway. We expect that Illinois should be similar.

Okay. And then, on Kansas, just from the modeling perspective, is there any difference in how we should be thinking about it it given the state ownership structure or will that be non apparent to us from our perspective?

Even with the state ownership structure it should be just viewed as any other property performance. The laws in Kansas are such they own the facility and everything. But everything is our capital. And all the profits and revenues hit our P&L just like they would any other property.

Okay. Thanks.

Ladies and gentlemen, (Operator Instructions). Our next question comes from the line of John Maxwell from Jefferies and Company. Please proceed.

Hi, just another quick follow up on Ohio. Depending on the vote in May, are you required, is it still your choice at which property you want to develop?

Oh no. It is clear, it is very clear that if the new site, the Delphi is approved by voters, we're going to go there. Remember this was a part of an agreement with local folks to consider moving the site if it could be approved. So, we are committed to making the move. But the other way, if we should fail, we do back to the improved site.

This isn't as simple as, the state constitution was amended and it's site specific. So the designated tax parcel are in there currently for the arena district site. All this would do in a very clean and surgical way is amend those tax parcel numbers to be the Delphi site. If this goes down in May, the existing arena site stays in the state constitution and we proceed.

Plus, we are supportive of this relocation. It is a site that is 120 acres in size, has good transportation access, and is a Brown Field Development. So, it has a lot things that I think will be of interest to certainly the voter of Franklin County but we also believe statewide to get this thing passed in May. It would be very hard for voters, it would strike me to object when it is really a request from the folks in Franklin county, to allow us to move it from point A to point B. It is really why should anyone care. We expect that it ought to pass and make everybody happy.

Yes I guess I was just wondering from your perspective if you have done enough work in terms of whether it is site work, reading about whether there's any clean up or just from the cost side, that as you, if the vote goes through but as you get into it all the sudden you determine maybe the cost for billing that site would be more expensive than the arena district.

We are satisfied there's no material between the two sites may even be some opportunity because a little more ground at the new site. So, we are completely neutral on that.

Okay. Then, Peter just broader picture if you look at it given where the environment is today, and obviously, the expectation or the hope is it doesn't continue. But if you look at the investments that you have going forward, do you as a management team kind of step back and say maybe we have to rethink what we are investing, at least initially to make sure that we continue to keep kind of keep the balance sheet the way you've had it versus. I guess maybe I am just looking at Lawrenceburg for example as an example of a project that maybe in hindsight maybe you don't spend as much if given the kind of returns you are getting at that site now?

That's a fair question. Obviously, we are guided by the economic climate that surrounds us. And try to understand, what is the world we're living in today? Clearly our threshold, return, needs to be very carefully thought about as we look at stuff going forward. Now, obviously Ohio will, should be and will be, will be a very adequate return for shareholder investment period. I think we all know that. The Lawrenceburg situation is interesting. This is a project that started before we bought the Company, and significant capital was already committed. The whole (inaudible) were under construction at that time and we were headed down that path. So we did follow on. We did a terrific job of it. A couple of things gist came out of the blue. One was the approval of slots at racetrack, which was not foreseen at the time we bought that Company and they had already started the project. Of course what really came out of the blue, it came in with a very very high cost for the licenses. I assume nobody should be foolish enough to pay that costs. They did anyway and of course they've had an unhappy result. But it did have a result in the market. The other of course is Ohio. We would have preferred of course to have not seen anything occur in Ohio. But, we thought at the very first it was inevitable that something would happen with Ohio. So we made the right choice to be part of it. The net result of shareholders despite or, in view of is still going to be terrific. We will be very excited about that. But look, we are using very great care, in what we look at today. Because it is a different world and we recognize that no market is safe forever. We have looked very skeptically always at the market in Louisiana. We bowed out of Shreveport because again we think Texas will have slots. Virtually all of these states will have slots before the game is finished. And it will have impact on its neighbors. So, that's a long answer to say that we are definitely tightening our view of what is an acceptable risk and reward.

Okay. Appreciate the comments.

Okay. We will take one more question. We are coming out on 11:00 and I think, let's take one more.

Very good. Our question comes from Dennis (indiscernible) with Wells Fargo.

Good morning guys. Bill, two quick ones. What is the current state of the restricted payments basket. And when you think about capital allocation going forward, and share repurchases, projects financing, what are your thought there is?

Well, there's certain payments that still has the number, I think it is $600 million or $700 million remaining room. We don't really have any practical limitations on that front.

Listen, we clearly are evaluating all of the time the opportunities that we have got. And one of those opportunities is to buy back our own shares. And clearly as we said, we believe we would get a better return buying back shares and we would continue to do that, or we would, we did that last year, but we certainly look into doing it again. We are also mindful of the, we have got the preferred equity out there, which is an instrument (inaudible) but we call it on a strike, a minimum price of $45, and we will do $250 just downward of our stock basis. A portion to below $45, and remains a(inaudible) investors have an opportunity to make (inaudible). We are certainly mindful of that as well. And we're looking at other ways to potentially lock in some value on that instrument based on what's happened. Clearly unforeseen at the time that we entered into those instruments, I don't think we in anyway expected that our that the economy would be where it is at, that the value of those shares would be as low as they are. But, we are looking at that as well.

So I think the answer to your question is, we are not opposed to doing some financial engineering around improving the outlook for our Company, on a going forward basis in addition to looking at growth opportunity. And we have a board meeting scheduled next Tuesday, I think it is. And I am sure that will be an item on the agenda. Look, we always aggressively look at all aspects of our capital structure, and that very affirmatively, think very hard about where capital is met always with an eye toward caution. So, look, it will l be interesting. I will sort of conclude our remarks by saying that let see what our competitors have to say about their experiences elsewhere. I'd be a little discouraged of course if they're not seeing the same sort of things that we are or maybe enlightened. But we have got lots to be excited about as we look forward at the future of this company.

Again, my view is as the largest shareholder in business, still always the long view. Doing those things that in the end, will create the greater shareholder value. That's my one and I asure you, only interest. So with that I think we will conclude this call. And if we failed to answer any questions, unfortunately you know where to find Phil, and I am sure we would be happy to fill in any gaps that we may have left. So, with that we look forward to we hope a very positive call next quarter. Perhaps a more positive one. But, look, a lot of great stuff going on here, I think you see that. These are just tough times. So, let's just hope for a better day. Thank you 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. Have a great day everybody.