Boyd Gaming Corporation (BYD) Q4 2010 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2010 Boyd Gaming Earnings Conference Call. My name is Crystal, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. Josh Hirsberg, Senior Vice President and Chief Financial Officer of Boyd Gaming. Please proceed.

Thank you, Crystal. Good morning, everyone. And welcome to our fourth quarter earnings conference call. Joining me on the call this morning are Keith Smith, our President and Chief Executive Officer; and Paul Chakmak, our Executive Vice President and Chief Operating Officer. Our comments today will include statements relating to our future results including, among others, the financial outlook for the company, our expansion and development projects and other market business and property trends that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements whether as a result of new information, future events or otherwise. Actual results may differ materially from those projected in any forward-looking statements as a result of certain risks and uncertainties including, but not limited to, those noted in our earnings release, our periodic reports and our other filings with the SEC. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today, and both of which are available in the Investors section of our website at boydgaming.com. Finally, as a reminder, we are broadcasting this call on our website at boydgaming.com and streetevents.com. I'd now like to turn the call over to Keith Smith, our President and CEO. Keith?

Thanks, Josh. And good morning, everyone. Thank you for joining us for our fourth quarter earnings call. When we spoke in October, we said that we expected our fourth quarter comparisons would be the best of the year. That prediction proved to be correct, as both revenue and EBITDA were essentially flat with last year's levels. We believe these results are further evidence that our core business is improving, and we are on track to begin reported year-over-year growth starting in the second quarter. This optimism is driven not only by our fourth quarter results, but also by encouraging signals in both the national and Las Vegas economies. While we expect to return to year-over-year growth in the second quarter, we also expect that the first quarter of the year may reflect a slight decline versus last year. This is due, in large part, to tough comparisons, not a fundamental shift in our business. Recall that the first quarter of 2010 was one of the strongest quarters in Las Vegas Locals region we have experienced in several years, as the economy appeared to be picking up steam, consumers were spending, and it appeared a full recovery was underway. Unfortunately, the recovery slowed dramatically in the second quarter, most notably due to the flash crash in May of 2010. In addition to tough comparisons to the prior year, the first quarter has been impacted by severe weather in the Midwest and South regions. Nevertheless, we do expect to see strong sequential growth in revenue and EBITDA between the fourth quarter of 2010 and the first quarter of this year. As I said a few minutes ago, the optimism we feel about the future of our business is not solely based on current results and trends, but reflects our confidence in an improving company, both here in Nevada and nationally. Looking first in Las Vegas, 37 million people visited in 2010, which was a 2.7% increase over 2009. Business accounts have grown for 10 consecutive months in 15 of the last 16 months. Conventional meeting business, which began to rebound in the second half of 2010, growing at 5%, appears to be poised to provide for support for additional growth in 2011. We've seen evidence of this over the last several months. The 2011 convention calendar in Las Vegas has gotten off to a very solid start. CES saw an 11% increase in attendance this year, 20,000 more visitors than expected. And last month, the first Air Conditioning, Heating & Refrigeration Expo Las Vegas saw had a record attendance with 55,000 visitors, which were 15,000 more than expected. During the first two quarters of 2011, we've also seen evidence of this at our own properties. We are projecting that our group business at our Las Vegas properties will be up 15% year-over-year. The strengthening in the conventional meeting market has a direct positive impact on our business. For example, during this year's CES, cash, ADRs in the Las Vegas hotels were up more than 20% from last year's show on improved occupancy. We're also encouraged by early signs of a broader recovery in the Las Vegas market. For example, taxable sales were up nearly 3% in Southern Nevada in December. This was a third straight month of improvement, with five of the last six months showing year-over-year growth, signaling that consumers are starting to spend a little bit more. Clearly, the Las Vegas business climate still has a long way to go. But as I noted on our last call, our business will be improving well before the Las Vegas economy has fully healed. I have said previously that we do not need to see employment and housing recover completely before the Las Vegas Locals business begins to improve. We continue to believe that our business will be positively impacted as the economic health and confidence of our customer improves. There are two additional factors that cause us to be optimistic about the future of our business. First, our business is built on a basis of high frequency of visitation and relatively modest spend per visit. We're a Strip operator and may see the customers a few times the year, our Las Vegas Locals properties will see our customers an average of seven times a quarter. Second, it is important to remember that our business has a substantial amount of operating leverage. We certainly experienced the positive effects of this during the boom periods and saw the downside during this recent recession. However, as we have worked diligently to take costs out of the business during the last several years and refined our marketing efforts, I am confident that we will once again see the positive effects of this operating leverage as we move forward in 2011. As a result, even a modest increase in frequency, spend per visit or both will result in substantial gains in revenue and EBITDA. For example, just a $5 increase in spend per visit would result in growth of $20 million to $25 million annually in EBITDA in Las Vegas Locals region alone. Moving briefly to Atlantic City. I'd like to recognize New Jersey lawmakers and Governor Christie for their foresight in the creation of a tourism district. By aggressively investing in the infrastructure, up-keep and safety of the area, New Jersey is helping to strengthen the appeal of this destination resort. We believe state leaders have taken the right steps and deserve recognition for their commitment to New Jersey’s tourism industry. Atlantic City still faces significant challenges, but the leadership shown by elected officials is a positive first step for the market's long-term recovery. Before turning the call over to Paul, I want to briefly summarize the strategies in which we'll remain focused as business continues to improve. First, we will remain committed to strengthening our balance sheet. We realize that a strong balance sheet is essential, as we look to the future and consider growth opportunities. Second, we will continue to consider a variety of growth opportunities, both in existing and new business. We remain interested in acquisitions, and we will continue to evaluate them in a manner that is strategic, deliberate and disciplined. This has historically been our approach, and it will continue to be. As we have said previously, we will only pursue opportunities that are a good fit for our existing business, are priced correctly and will deliver an attractive return for shareholders. Third, our efforts to find ways to operate more efficiently will be ongoing, and we will make sure unnecessary costs do not creep back into the business. As we discussed earlier, efficiencies that we have built into our business model over the last several years allow us to flow a substantial portion of our revenue gains to the bottom line, a dynamic that will be a key driver of our growth for our company. We will also stay committed to a disciplined marketing effort. Finally, we are very pleased that our employees continue to deliver outstanding customer service for our customers each and every day. Our employees are a key reason why customer satisfaction scores continue to improve and our loyal customers continue to frequent our properties, even as we push for greater efficiencies. Thank you, again, for joining us this morning. Now I would like to turn the call over to Paul Chakmak to talk more specifically about the results in each of our regions. Paul?

Thanks, Keith. Hello, everybody. We're quite pleased with our results in the fourth quarter. As noted earlier, both the Las Vegas Locals and Midwest and South regions produced the strongest comparisons of the year. And we continue to gain share in many markets across the country. Let's start by looking at the Las Vegas Locals segment. The EBITDA gap nearly disappeared, as the region produced its most favorable year-over-year comparisons since the fourth quarter of 2007. We kept our operating margins consistent despite slightly lower revenues, and they grew our market share by 30 basis points. The strongest performance, by far, came at The Orleans, which posted solid year-over-year growth in the fourth quarter. The Orleans has been benefiting from a targeted marketing effort focused on its existing customer base. That campaign has been highly effective, generating new incremental business for the property. The Orleans is also seeing a significant pickup in meeting and group business, and this should continue in the coming quarters. This month, The Orleans Arena will host championship tournaments for the West Coast Conference and the Western Athletic Conference, making it the first arena in the nation to host two major basketball championship tournaments in the same year. We're increasingly encouraged by the outlook for the Locals market, although we should note that the promotional environment continues to be highly competitive. In fact, our largest Locals competitor unveiled an unusually aggressive advertising and promotional campaign in February. While they are clearly investing a tremendous amount of money in these efforts, they have not had an effect on our Las Vegas Locals operations. Despite this promotional activity, our coin-in and customer traffic have grown since they launched their campaign. We remain pleased with our position in the Las Vegas Locals market. Our best customers have remained loyal. Our levels of customer service have continued to improve. And even during the worst of the recession, our financial situation remains strong. Looking ahead, we will continue to focus on growing our business over the long term, on retaining the loyalty of our customers and on providing them with an exceptional experience at a great value. We are comfortable that we have the right combination of consistent marketing and promotional tactics in place that will allow us to meet these objectives. Moving to Downtown Las Vegas. We continue to build on our leading market share during the quarter. We finished the fourth quarter with a 35% share, up 120 basis points from the fourth quarter of 2009. Higher expenses at our Hawaiian charter operation impacted regional results in the fourth quarter. Fuel costs have been rising sharply in recent months. So we expect higher charter expenses to remain a factor in upcoming quarters. Despite this, we are encouraged by strength in our business volumes, [ph] play from our Hawaiian Customer segment rose in the fourth quarter, and it was up again in January and February. Hawaii's tourism industry is enjoying a strong winter season, and this recovery is providing a catalyst for future gains in our Downtown business. In the Midwest and South, EBITDA rose nearly 4% on a 1% gain in revenue, making our best quarterly comparison since the third quarter of 2009. Four of our six properties posted year-over-year EBITDA gains, and we grew slot revenue by more than $3 million across the region. The strongest performance came at Treasure Chest, which grew its market share by more than a full percentage point in the fourth quarter. As others have noted, gaming operations throughout much of the country were recently impacted by some of the worst winter weather in decades. These storms made it very difficult for our customers to visit us at times. We project that winter weather has cost the MSR nearly $3 million in EBITDA during the first 60 days of the year. And when weather's not a factor, business levels are meeting our expectations throughout the region. Movie to Borgata. The property continue to outperform the market in total gaming revenue and market share in the fourth quarter, despite lower-than- historical table-game hold, primarily attributable to certain premium players in December. Higher promotional expense, declines in table game volume and increased regional competition also impacted both revenue and EBITDA at the property. Promotional spending was 34.2% of gross gaming revenue in the fourth quarter, up from 30.3% from the fourth quarter of 2009. This increased spending is a result of rising competition in both Atlantic City and Eastern Pennsylvania. However, our promotional spending remains relatively low compared to others in the market. Looking forward however, we see every reason to remain optimistic about Borgata's long-term prospects. Both spot revenue and non-gaming revenues rose more than 3% in the fourth quarter. And despite horrible weather, Borgata maintained slot-win at prior-year levels in January and captured a record 21% share of the Atlantic City slot market. This marked the second straight month we set a new record in slot share. Clearly, we remain the destination of choice in Atlantic City. To wrap up, this was a very encouraging quarter from an operating perspective. As predicted last quarter, we essentially met prior-year results. Assuming the U.S. economic recovery stays on track, we believe we'll begin reporting positive comparisons in the second quarter of this year. We note that the base of our business remains strong. Our most loyal customers have continued to visit throughout the downturn, and we believe we'll see a pickup in their spend per visit in the months ahead as the economic recovery gains momentum. This will ultimately lead to EBITDA growth. A broad economic recovery should also help lift visitation and spend per visit about lower rated and non-rated customers as well. We believe growth in this segment will begin to make a meaningful contribution to both the top and bottom lines. Thanks for your time today. I'd like to turn the call over to Josh for a review of the financials.

Thanks, Paul. I'd like to begin by discussing a few items from the quarter and also provide insight into our expectations for line items below EBITDA. Beginning with debt, excluding Borgata, Boyd's debt balance was approximately $2.4 billion, of which $1.4 billion was outstanding under our $2 billion credit facility. Borgata's debt balance was $861 million at the end of the year, of which $61 million was outstanding under their $115 million credit facility. In terms of covenants, Boyd senior leverage ratio was 4.2x versus a covenant of 4.5x. Our total leverage ratio was 7.06x versus a covenant of 7.75x. So we were in compliance with our covenants at the end of the fourth quarter and expect to remain in compliance going forward. Likewise, Borgata was in compliance with their covenants, and we expect Borgata to remain in compliance going forward. While Borgata does not have a specific leverage covenant test, at the end of the year, their leverage ratio was approximately 5x. We completed several important financings in the fourth quarter, including the issuance of $500 million of 9 1/8% notes due 2018 and the amendment and extension of our revolving credit facility. In conjunction with the issuance of our senior notes, we called the remaining $159 million balance of our 7 3/4% Senior Subordinated Notes due 2012. The refinancing of our credit facility resulted in a non-extending portion of $548 million in commitments that mature in May 2012, and it's priced at LIBOR plus 1 5/8%. And an extending portion that is $1.46 billion of bank capacity that matures in December 2015 and is priced that LIBOR plus 3 1/2%. The extended credit facility has the necessary capacity to retire the outstanding balance under the non-extended portion of the credit facility. As a result of these financings, we effectively have no maturities until 2014. Moving to the income statement. Corporate expense, excluding share-based compensation for the quarter, was $9.5 million, essentially even with the prior year. Corporate expense is projected for 2011 to be approximately $40 million to $42 million. That amount should be spread relatively evenly throughout the year. Depreciation expense in the quarter was $51.4 million. With that amount, Boyd's depreciation expense represented $34.8 million, which compares to $39.4 million in the fourth quarter 2009. The decrease in depreciation expense is due to our reduced capital expenditure program. Borgata's depreciation expense in the fourth quarter was $16.6 million compared to $19.4 million in the fourth quarter of 2009, a decline of approximately $3 million due to the roll-off of seven-year assets. For 2011, we expect consolidated depreciation expense to be approximately $195 million to $200 million, about $130 million to $135 million attributable to Boyd or remaining to Borgata. Share-based compensation expense was $3.2 million in the quarter compared to $4.2 million last year in the fourth quarter. We expect share-based comp to be approximately $12 million for 2011. As a result of the financing activity that I spoke about earlier, as well as the Borgata refinancing that took place during the third quarter of 2010, consolidated interest expense was reported at $55 million. Of that amount, Boyd's wholly-owned interest expense was $33.2 million, essentially even with the fourth quarter 2009. Borgata's interest expense was approximately $22 million in the quarter compared to $5.8 million last year in the fourth quarter. Assuming three-month LIBOR stays in the 50 basis points to 75 basis points range throughout this year, we expect Boyd's interest expense to range from $145 million to $150 million in 2011, and Borgata's interest expense to be approximately $85 million to $87 million. Therefore, consolidated interest expense should be reported between $230 million and $237 million for 2011. Our effective consolidated tax rate for the quarter was 44%. We expect the tax rate to be approximately 35% for 2011. With respect to capital expenditures, at Boyd we expect to spend about $50 million, mostly in the second half of this year. Separately, Borgata is expected to begin a $15 million room remodel in the fourth quarter of this year to be completed in the first quarter of 2012, 1/2 of the spend is expected to occur in 2011 and the other 1/2 in 2012. With normal maintenance at the property of approximately $15 million and the room remodels being forecasted for this year, capital spend at Borgata should approximate $40 million. Finally, for modeling purposes, please note that the noncontrolling interest line item represents 50% of Borgata's net income. So with that, operator, we're now ready for any questions.

[Operator Instructions] Today's first question comes from the line of Felicia Hendrix with Barclays Capital.

So a quick question. This probably goes out to all of you, you're pretty clear to talk about how the first quarter was trending vis-à-vis the comps and the weather, second quarter getting better. But just wondering if you could give us, in a bigger picture look, you talked before the stages of improvement you've been seeing, your admissions kind of stayed stable, then you're seeing frequency increasing. I'm wondering if you're now seeing greater spend per visit or both in the locals market and then in the other regions, or if we're still at this state of just seeing increased frequency?

Felicia, it's Paul. Frequency generally across the board continues to build, so it continues to grow. And that's certainly a very positive trend for us. On the spend per visit perspective, we certainly haven't seen any declines today, but I would tell you that most of the upward trajectory on the revenue line is related to the frequency number as opposed to the spend per visit at this point. David Katz - Jefferies & Company, Inc.: And now I realize that my follow-on's going to be a bit hypothetical. But with oil kind of hovering around $99 today, is there any sense on what this current energy environment could do to your local customers? And have you been thinking about that strategically in the recent environment?

Well, I think relative to gas prices, we've kind of ended this show before a little bit, not the first time we've seen these. And obviously, as I talked about, there are certainly a direct and, frankly, rather immediate impact in the charter operation, because there's a pass-through on fuel costs there. And generally speaking, airline fares tend to lag the actual movement, both upward and downward. So there's a positive story just probably on the other side. That's at least what usually we've seen in the past. Relative to the local business here, I think a real question would be on the Southern California destination business, which is certainly a part of our operation. Obviously, it's going to cost a few more dollars for every trip into Las Vegas. And I think it's maybe more psychological than actually real dollars associated with musing to make a trip or not make a trip. Relative to the actual locals here, if they drive for five or 10 minutes to go to one of our places, it's really not part of the thought process. And obviously, coming to our properties is part of their day-to-day lives. So overall, again, we haven't seen anything in the immediate term that gives us any pause. I think I'm sure you'll start to see promotions around gasoline and other things as part of our marketing campaigns. It's more sensitive. But really, I think people are generally fairly resilient other than the psychological aspects of it.

And that would speak regionally, too? I meant to throw regional in there.

That would speak regionally as well, because for the most part, our properties throughout the Midwest and South, and even at Borgata, I mean, they're obviously drive-to markets, and they're a lot shorter distance from a drive-to standpoint than Los Angeles is to Las Vegas.

And then the follow-up question is just on some new competition that you'll see in Atlantic City, comments on your Borgata vis-à-vis Revel, and then thoughts on the Louisiana license going to Mojito Pointe? There, I would think that could be a benefit, given the geography. But I just wanted to hear your thoughts.

Felicia, this is Keith. With respect to competition at Atlantic City, we certainly enjoy the number one position at Atlantic City today and have the best asset in the market. So I think we certainly like where we start from. We don't take any competition for granted, and we will be planning for the arrival of Revel and anticipate it and make sure that we are on the top of our game, when it does open. And so, we will not take it lightly. Having said that, what Atlantic City needs in the short term is not more capacity, it needs more demand, and we need to find a way to kind of grow that demand in the short term. In the long term, I think projects like Revel and other Borgata-like projects will help to grow the market in the long term and are all positive, as they will continue to attract new visitors to the market. So from a long-term perspective, I think it's a positive. What's good for short-term perspective, we will be prepared for it, and it just adds capacity at a time when we don't need to see that capacity right now.

I think as it relates to Louisiana, specifically, the Lake Charles market, there was a previous project that was originally anticipated for that market. And I spoke pretty directly about the fact that I didn't think Lake Charles needed any additional capacity nor did I believe a new project in Lake Charles would have any sort of economic return to it. And my views haven't changed there. With that said, obviously, our positioning at Delta Downs relative to the Houston market, which is the primary feeder market into Lake Charles, puts everybody on Interstate 10 going directly past us. So any incremental traffic that a new project would build, gives us a shot at those folks, going and coming from home for the most part. So there is, to some extent, a positive aspect to it, beyond just the economic return associated with it.

Our next question comes from the line of David Katz with Jefferies. David Katz - Jefferies & Company, Inc.: I wanted to ask a couple of questions. Firstly, as it relates to CapEx, Josh, would you mind just reviewing what -- I think you broke out Borgata's maintenance as $15 million annually. I missed the number on what Corporate was. And to that end, I wanted to ask about the prospect that you may have, any deferred CapEx that you might be contemplating in the Locals properties that could be under discussion that would come up in the next year or so? And then I have one other quick question, please.

Sure. Just to repeat the numbers, in total, Borgata's maintenance capital run rate is about $15 million. And then they have the $50 million room remodel project, of which about 1/2 of that will be spent in 2011. So for Borgata, the $15 million maintenance plus the approximate $25 million room remodel, to get to about $40 million for Borgata for 2011. And probably a similar amount in 2012. For Boyd, our maintenance capital run rate right now is about $50 million. And I would say that -- and I'll let Paul answer in terms of the status of where our properties are in terms of deferred maintenance.

Yes, I think -- Dave, it's Paul. Relative to deferred maintenance, I guess I would challenge anybody to find any deferred maintenance at any of our properties. I think they're, frankly, in great shape overall. With that said, during the course of the last three years, we have held off on big-ticket items like room renovations. And I think the room product itself has withstood itself quite well. Frankly, some of our competitors, both here and across the country, have actually done the same thing. With that said, within the numbers that Josh provided, there's about 700 rooms or so that are anticipated to be remodeled, some of which are here in Las Vegas, some of which are in the Midwest and South. And then we'll continue to move forward with just kind of our normal room remodel schedule for the years to come.

Just to add to that, we've been fortunate that we've had access to capital and haven't been in some of the financial constraints of some of our competitors. So we kept our product largely up to standard, as we've gone through this, and just deferred whatever really didn't need necessary capital at the time. And I think, generally, our properties are in great shape, relative to both the floor as well as the back of the house and room products. David Katz - Jefferies & Company, Inc.: I wanted to ask about sort of the Locals market. And just listening to Keith's commentary at the beginning, I guess one of the issues that I struggle with is thinking through, and Josh, you talked about this, a few times, thinking through how a recovery evolves in the Las Vegas Locals market. If hypothetically speaking, we get a sense that headcount on the Las Vegas Strip improves and there is some hiring to that, I would think some of the debate lies around how quickly that either trickles or flows into your business, with some employment improvement on the Las Vegas Strip. Can you just give us a little bit more detail as to what you're looking at or what data you're looking that gives you some optimism about how that would flow? And I assume that's where your optimism is coming from.

David, this is Keith. I think you touched on all the important elements. Visitation on the Strip did grow in 2010 at a fairly good clip, and the prediction is for it to continue to grow in 2011 by another million visitors or so. We saw the additional hotel rooms come on line with City Centre last year with Cosmopolitan this year. Our occupancies are growing. ADRs are growing. People are going back to work. They're getting more hours. Actual employment and hospitality, leisure sector is up. And those are many of our customers. And I think as we talk about increased frequency at our Las Vegas Locals properties, that is I think part of reaction to more employment and maybe slightly larger paychecks, as the Strip visitation increases and occupancy and ADRs increase, and people are going back to work or getting more hours and there are more jobs. There is a direct impact. There's a direct correlation. As the Strip improves, the Locals improve. Both of them, from a business perspective, as we get some overflow business but also from -- from a customer perspective, as many of those [ph] Strip employees are our customers, at the end of the day, they feel better about kind of where they are in life, and they feel more confident about their future and, therefore, are willing to spend more money. Some of it is psychological. Some of it is not directly related to what's happening, but it's how they feel and the fact that employment has been stable, and there haven’t been layoffs, and that the business is growing so...

One of the comments that I made, David, in my remarks was that we saw coin-in up in the Locals market, even in the face of heightened promotional activity over the course of the last month or so. That's a key factor. Now we've got a long ways to go to get back to coin-in levels that we saw three years ago, but directionally, to see more volume-type drivers, the volumes drivers improved in the market overall is, certainly, a bullish sign.

Our next question comes from the line of Chris Woronka with Deutsche Bank.

Can you share with us maybe the breakdown of what you saw in tables versus slots for the quarter in terms of drop or win?

In terms of wholly-owned piece of our business?

That's right, the overall.

I don't think we have that in front of us right now, Chris. You've got to keep in mind, Chris, that from a wholly-owned perspective, slots accounts for 85-plus percent of overall gaming revenue on the wholly-owned side. A little bit different mix at Borgata, but it's primarily, certainly a slot-oriented business.

And can you remind us what percentage of your fuel costs are hedged on that line charter?

We did not hedge fuel.

On Borgata, promotional expenses, I know they’re up in the quarter, is that more of a realistic run rate? I know there's a lot of seasonality there. But as we think about it, relative to '10, how do you guys look at it?

The number in the fourth quarter was probably a little elevated, but it's probably close to the current run rate. There was some additional marketing that occurred in the fourth quarter, but not a lot. So probably use that number, or close to it, going forward.

And then just finally on Internet gaming, I think there's kind of quasi-deadline coming up Thursday in New Jersey. How are you guys positioned or are you ready to move with Borgata, if that ultimately goes through?

Yes, Chris, this is Keith. We've certainly been paying attention to it. We would be a beneficiary of that, if it were to go forward. And so, we're prepared to take advantage of it, if it goes forward. I think there's a lot of challenges to it, still, but we'll wait and see what the governor does with the bill, but we have been paying attention and we are prepared.

Our next question comes from the line of Joe Greff with JPMorgan. Joseph Greff - JP Morgan Chase & Co: Keith, Paul, I've missed some of your earlier comments about a resumption of growth starting in the second quarter that the first quarter, not showing your growth. Are you talking about that from a revenue perspective or from an adjusted EBITDA perspective? And then were it not for the $3 million heretofore weather impact in the Midwest, South region, would there have been growth or do you think you would been able to demonstrate growth on an EBITDA basis?

[ph] comment on Q1 was, it was both revenue and EBITDA, but it did focus on weather and focus on the fact that Q1 of last year was an extremely strong quarter, specifically in the Las Vegas Locals region. It's one of the strongest quarters we have seen in a couple of years. So it actually is a very tough comp. The year trailed off after that as the economy slowed down a little bit, as we went through the year. We're still going to see significant growth between Q4 and Q1, as we did last year. We will probably fall short of last year's Q1 for those reasons. Part of it's weather, once again, a part of it is just a strong Q1 last year. Paul, anything to add?

That covers it.

Our next question comes from the line of Steven Ruggiero with CRT Capital.

It's been well cited at this point that you had a weak January, not only you, but your competitors, due to weather. Did you see any signs of pent-up demand in February, rebuilding as weather improved? And do you expect to make up some of that loss that Joe just asked in the latter part of the quarter? Or should we just assume that, that's not going to happen?

We've certainly seen some recovery, especially on the weekends when it's just not a terrible environment for people to get to where they want to go, whether it's our place or anywhere else for that matter. In fact, I think, Steven, in my comments, I made the point that when weather isn't a factor, we see numbers that meet our expectations and our forecast. It's just kind of a lost opportunity associated with a number of weekends that impacted the business, and it really spans all the way from Indiana, Illinois, all the way down to Louisiana.

During Keith's comments, you referred to group business, up 15% year-over-year, in the first quarter with ADR improvements. Had you expect those trends to continue into the second quarter? How much visibility do you have? And importantly, what portion of your business is coming from cash or convention rooms, if you will?

Well, cash rooms in the Las Vegas market, overall, accounts for roughly, let's call it 25% to 30% of our overall business mix. And that would exclude things like wholesalers and other things, more FIT and Convention business, more account-oriented customers. As far as the trending is concerned, the trends are actually continuing to strengthen in the second quarter.

Our next question comes from the line of Carlo Santarelli with Wells Fargo.

If you guys can go into a little bit more detail, and as you see the promotional environment now more recently into Q4 and some of the things that you've seen happening around you, and we were to assume a flattish net revenue environment in Locals in 2011. Is there a potential for margins to improve despite maybe what could turn into some lost market share, given competitor promotions?

I think, I mean speak to -- our breakevens at all of our properties in Nevada are better right now than they were 12 months ago. So I guess, to your question on flat net revenues, you'll have a positive impact on the EBITDA line.

Our next question comes from the line of Mark Strawn with Morgan Stanley.

Hi, one quick follow-up on the commentary on the group business. You mentioned some positive data points there. Can you give us a sense of what that group business contributes in terms of percentage of overall revenues or EBITDA, just a rough number there?

Yes, I don't think we're really prepared to comment on that. It's obviously substantially smaller than some of our competitors that operate where those properties are literally built for that type of business. So [ph] consider it in the context, of who's got 5,000 rooms in Las Vegas compared to other folks that have tens of thousands of rooms in Las Vegas.

Our next question comes from the line of Bill Lerner with Union Gaming.

A question, maybe for Paul. Tivoli Village across from Suncoast opening in the spring or whenever it ultimately does. I know you know that part of the world pretty well. What's your thought on that? I know people won't cross rampart by foot, but what's your sense? I mean is it similar demographic? I'm not exactly sure what retail and so forth will be in there, but I wonder what -- how much overlap and incremental benefit?

We view Tivoli, it's certainly a positive to our business at the Suncoast. I think it's going to be like other kind of regional shopping areas, something that people just naturally will gravitate to. It's certainly beautiful, from an architectural standpoint, I understand that they will be opening up in phases, and we have been working with them and having kind of a joint marketing effort for just the Summerland Tivoli Ranch area, generally speaking. So we're working together to make sure we take advantage of the traffic that it's created in that intersection.

Our next question comes from the line of David Farber with Crédit Suisse.

Just two quick questions on Borgata. It's been somewhat quiet in the sale process. I'm just curious if there's any update there, first. And then with increased competition in Atlantic City, in your mind, does that improve your chances or thoughts around acquiring the asset? Or does it have no impact? Or just any thoughts around that would be very helpful.

This is Keith. With respect to the process, as we've, I think, indicated in the past, it's really MGM's process. We don't have any comment on that. We don't have anything to report. And I think that our last update on this we received an offer earlier in the year and had kind of a right of first refusal, because we didn't think it was at the right valuation for us. And so we'll just have to see how this plays out. We really don't have any other comments at this point, with respect to process or price or kind of our views on it.

That concludes our question-and-answer session for today. I would like to hand the call back to Mr. Josh Hirsberg for closing comments.

Thank you for your interest and participation in the call today. If you have any follow-up questions, please feel free to contact the company directly. Have a good day.

Ladies and gentlemen, that concludes today's conference. Thank you so much for your participation. You may now disconnect and have a wonderful day.