Boyd Gaming Corporation (BYD) Q2 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Boyd Gaming Earnings Conference Call. My name is Alicia and I'll be your operator for today. [Operator Instructions] This conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Josh Hirsberg, Senior Vice President, Chief Financial Officer. Please proceed, sir.

Thank you, Alicia, and good morning, everyone, and welcome to our second 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 estimated future results, including among others, guidance for the third quarter, the financial outlook for our 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 statement 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 second quarter earnings call. Results for the second quarter reflect the continuation of the positive momentum we discussed on our first quarter call. During the current quarter, we saw our wholly-owned EBITDA grow more than 13% and our margins improved 240 basis points. Most encouraging is that all 3 of our wholly-owned operating regions reported year-over-year growth. These impressive results were led by our properties in the Midwest and South, where we grew EBITDA by 19% and improved margins by 370 basis points. In addition, the Las Vegas Locals region returned to year-over-year growth, which is an encouraging milestone. Positive results generated by our wholly-owned operations during both the first quarter and second quarter clearly demonstrate that we have finally turned a corner in our business. We expect that our wholly-owned business will continue to show improvements throughout the rest of this year. In Atlantic City, we face more difficult comparisons as the market continues to experience intense competition from surrounding markets. While Borgata was clearly impacted by this competition, it continues to outperform the market, growing its market share by 80 basis points, supporting [ph] growth in non-gaming revenues. From an economic standpoint, the recovery of the Las Vegas tourism industry is continuing and all major metrics are showing improvement. Visitation has now increased by 15 straight months. Citywide occupancy is up more than 4 percentage points so far this year. ADRs have risen by nearly 10% and airline traffic through McCarran has increased 3.5%. Additionally, so far this year, the leisure and hospitality sector has added nearly 8,000 jobs in Southern Nevada. We have long held the belief that strength in business trends on the Las Vegas Strip will lead to improved results in our Las Vegas Locals business. We believe we're finally beginning to see these results reflected in the playing patterns of our customers. Paul will touch on this more in his remarks. Midwest and South Region, where the economic recovery is taking firmer hold, 5 of our 6 properties posted positive comparisons to the second quarter of 2010. The exception was Sam's Town Tunica, which was closed for nearly the entire month of May due to flooding on the Mississippi River. Factor out this closure, and we would have seen even healthier growth in both revenue and EBITDA during the quarter. Giving the growing predictability and consistency in our business over the last several quarters, we have made a decision to resume quarterly guidance. Josh will review guidance for the third quarter during his comments. Switching topics to the company spending transactions, we have 2 significant transactions we are working on. First, is our sale of Dania Jai Alai and the second is our acquisition of the IP. I want to take a moment to provide you with a quick update on each of them. With respect to the sale of Dania Jai Alai, the process continues to move forward. The transaction is scheduled to close in late September, however, the buyers do have the option of extending closing by 2 months, under certain circumstances, for an additional $2 million payment. With respect to the IP, the acquisition remains on track and we expect to have due diligence wrapped up by August 4. Barring any complications, we will make a $10 million nonrefundable deposit payment to the sellers at that time. We currently expect to close the acquisition early in the fourth quarter. As we work our way through the diligence process, we continue to learn more about the IP operation. We are more confident than ever that this acquisition will be a great addition to our company. The IP in the Mississippi Gulf Coast offers attractive destination experience for millions of Beacon Equity members nationwide, which will allow us to generate additional revenue on the property, and we believe there are substantial opportunities through cross-property marketing. Beyond the wonderful physical assets and amenities that are part of the property, the IP team members have created an outstanding service offering [ph]. As a result, they have given the IP brand a tremendous reputation in the market. Based on this, we have determined that upon closing of the transaction, we'll be keeping the IP name and brand. This is a testament to the efforts of all the IP team members and their hard work. In addition, as we have learned more about the property, we remain confident about our ability to improve the bottom line through our purchase of goods and services at more competitive prices than the IP can as a stand-alone property. The IP generated approximately $41 million in EBITDA over the last year, but we believe its potential as part of Boyd Gaming is significantly higher. Last month, we said we could generate a minimum of $5 million in immediate annual cost savings, and we remain very comfortable with that projection. We look forward [ph] to welcoming the IP to our company, and anticipate it will be a significant contributor to our future results. Now I'd like to offer a few comments on our strategy moving forward. As we have come to appreciate over the recent past, we cannot control the national economy, seasonal recovery or the spending habits of the consumer. What we can control is our focus. Our focus on ensuring our existing operations are managed as efficiently as possible [indiscernible] growth, our focus on our capital structure in strengthening our balance sheet not just by paying down debt, but also by strengthening our operations and diversifying our asset base and our focus on our growth strategy, both on finding those assets that are a good strategic fit and provide an appropriate return to our shareholders. The IP is one example, but we do not believe it will be the last. Finally, once again, we need to recognize our wonderful team of employees and commend them for the outstanding job they're doing over [ph] a consistently great customer experience in each and every day. The great service people have come to expect from Boy Gaming remains a differentiator for our company and for our brands. Thank you for joining us this morning. Now I'd like to turn the call over to Paul to talk more specifically about the results in each of our regions. Paul?

Thanks, Keith. Hello, everybody. Our operating performance continued to strengthen in the second quarter. As anticipated, our wholly-owned business showed EBITDA growth. We are particularly pleased with the continued strong performance of our Midwest and South region which produced an EBITDA gain of 19% and its third consecutive quarter of growth. During the second quarter, before corporate expense, our wholly-owned properties posted an EBITDA margin of 23.1%. This is our best quarterly margin in 2 years and represents a 220-basis point improvement over the second quarter of 2010. The fact that we were able to generate a double-digit increase in EBITDA on flat revenue is a powerful example of the growth potential created by efficiencies in our business. As revenue growth accelerates, we believe there is potential for substantial improvements in EBITDA. Results were driven by improvements in visitation and play in our 2 premium tiers across all 3 regions. We have also begun to see initial signs of growth from unrated play in our stronger performing Midwest and South properties. Now let me discuss our regional operating results in a little bit more detail. First, let's look at our Las Vegas Locals business, which returned to year-over-year growth in the quarter. On past calls, we've discussed strong operating performance at The Orleans. That continued in the second quarter as the property posted 7% EBITDA growth on higher revenue. This marked the third consecutive quarter of growth at The Orleans. But the growth story was about more than The Orleans as multiple properties reported year-over-year gains in the second quarter. Our management teams continue to excel at operating efficiently, while maintaining a high level of customer service. In the second quarter, our Locals business posted an EBITDA margin of 25.4%. This is a 140-basis point increase over the second quarter of 2010. Growth in our Convention and Meeting business continues to be a bright spot in the region. As we predicted on our last call, Convention and Meeting business revenue increased more than 20% during the second quarter, in line with the growth we saw in the first quarter. We expect that run rate to continue. The promotional environment in the Locals region remains elevated. We believe, however, that we have the right mix of promotional activities in place and remain disciplined in our marketing efforts. The soundness of our strategy helped us produce EBITDA growth. We're extremely pleased that the Las Vegas Locals region has returned to positive year-over-year comparisons. This is a significant step for our company and we expect growth to continue for the rest of the year. The Downtown Las Vegas region also reported a strong performance. Revenue grew 2.5% year-over-year. EBITDA rose only slightly, but it's important to note that this was entirely a function of much higher fuel costs at our Hawaiian charter service. We estimate that higher fuel expense cost us nearly $1 million during the quarter. If you back out that expense, EBITDA would have grown more than 8% during the quarter, which is a much more accurate reflection of how well the properties performed. Growth on the top line is primarily a function of continued growth in our geographical line customer segment, similar to what we saw in the first quarter. This customer base is essential to our Downtown operations and we continue to invest in them. For example, starting in October, we will convert to a Boeing 767 on our Hawaiian charter route. This will allow us to offer our Hawaiian customers a flying experience as competitive as anything currently offered in the Las Vegas to Hawaii route. That's [ph] important, this new aircraft to be more efficient on a per seat basis while providing us with a 12% increase in available seats, allowing us to transport 6,200 more customers annually based on our current 5-flight-per-week rotation. In the Midwest and South, the growth story continues to brighten as the region posted its third straight quarter of year-over-year EBITDA gains. Margin improvements played a key role as the region recorded its strongest margins since the first quarter of 2009. As in other regions, this was not a case of isolated growth at a single property. Excluding Sam's Town Tunica, all properties in the Midwest and South region reported EBITDA growth, while 3 properties showed double-digit gain. Sam's Town Tunica was able to reopen on May 25 and is back to full operations. Visitations to the market were slow to pick up, but returned to pre-flood levels in July. However, booking windows remain much shorter than normal. Elsewhere in the region, our strongest growth came once again at Treasure Chest, which reported 60% EBITDA growth during the quarter, driven by effective marketing programs and growing demand. Looking ahead, we believe our MSR properties will benefit from the IP acquisition. The IP will be an attractive destination for Beacon Equity members throughout the region and should create substantial cross-marketing opportunities in the future, particularly with our Louisiana properties. Our most difficult comparison in the quarter were at Borgata, which posted a 2% decline in net revenue and a 10% decrease in EBITDA. As we've noted previously, competition has elevated in the region and we responded by increasing customer reinvestment. This increased spending made for a difficult EBITDA comparison to the prior year. Our quarterly table game hold percentage was 13%, which is in line with our long-term expectations. However, this rate was 80% -- 80 basis points below prior year levels, further impacting EBITDA. Despite these challenges, the remainder of Borgata's business performed well during the quarter. Slot win rose slightly and table game volume was flat year-over-year. This allowed us to increase our share to 19% of the Atlantic City market, an increase of 80 basis points over the prior year. Other areas of the business posted growth. A majority of these gains came on the hotel side, as cash ADR rose 14%, $174. Occupancy for the quarter was 87%, 2.5 percentage points above the year-ago quarter. Despite challenges in Atlantic City, Borgata continues to outperform the market, offering a guest experience unmatched in the region. To recap, there are many highlights in the quarter from an operating perspective. The efficiencies we've built into the business over the last several years are paying off. We believe this is a preview of what to expect in the quarters ahead. As customer spending and visitation continue to recover, revenue growth should accelerate and drive additional bottom line gains in the quarters and years ahead. Thanks for your time today. I'd now like to turn it over to Josh.

Thanks, Paul. I'd like to start with a few comments on items from the quarter. Starting with the balance sheet, excluding Borgata, Boyd's debt balance at the end of the second quarter was approximately $2.4 billion, of which $1.4 billion was outstanding under our $2 billion credit facility. Borgata's debt balance was $820 million, of which $20 million was outstanding under their $150 million credit facility. On the income statement, corporate expense excluding share-based compensation expense for the quarter was $10.5 million, an improvement over last year by $700,000. Share-based compensation expense was $2.1 million, also $700,000 below prior year. Depreciation expense in the quarter was $48.5 million, a decrease of approximately $7 million from the prior year. Boyd's depreciation expense represented approximately $32 million which compares to $37 million in the second quarter of last year. The decrease in depreciation expense is due to our reduced capital expenditure program. Borgata's depreciation expense of $16.2 million was $2 million below second quarter of last year. Excluding the impacts of consolidating Las Vegas energy, consolidated interest expense for the quarter was $61.4 million. Interest expense at Boyd was $40 million for the quarter, an increase of approximately $11 million over the prior year, reflecting the impact of our financing activity in the second half of last year. Interest expense for Borgata was $21.3 million for the quarter, an increase of $15.7 million over prior year, again due to the financing activities that occurred in the latter part of 2010. Sequentially from the second quarter, we expect interest expense for the third quarter to decline approximately $5 million due to the expiration of swaps at the end of June. The income tax line item in this quarter may seem a little odd to those of us who aren't tax accountants. We've recorded income tax expense on a pretax loss. Typically, we would expect a tax benefit from the loss. This outcome reflects the impact of permanent adjustments and state income tax expense, which exceeded our federal income tax benefit. Changing gears a bit to guidance. Given the consistency and greater visibility we now have in our business, we are reinstating quarterly guidance. We will provide quarterly EBITDA and EPS guidance. Because we consolidate Borgata's financial results, we will provide separate EBITDA guidance for Borgata and we will provide guidance for adjusted EPS for the consolidated business, which includes both Borgata and our wholly-owned segments of Boyd. We expect wholly-owned EBITDA, which includes corporate expense, to be in the range of $65 million to $70 million versus the $61 million reported in the third quarter last year. We expect Borgata to generate EBITDA of $52 million to $55 million. With that range of EBITDA, adjusted EPS for the third quarter is expected to range from breakeven to $0.03 per share. This guidance assumes no contribution from IP during the third quarter. With that, operator, that includes -- concludes our remarks, and we're now ready for any questions from participants on the call.

Alicia?

[Operator Instructions] Your first question comes from the line of Felicia Hendrix.

A few questions, Keith. In your prepared remarks, when you were -- and actually also Paul when you guys are talking about Las Vegas Locals, you mentioned The Orleans is generating higher year-over-year revenues, but overall revenues were down year-over-year. So I'm just wondering was it -- was Orleans the only property that generated higher year-over-year revenues? And in light of that, how are you thinking about the Las Vegas Locals market revenues as comps get tougher in the second half?

I think as -- Orleans obviously has been a standout now for 3 quarters in a row. And on the revenue line item, naturally, we've seen pretty significant declines over the last 3 years. The rate of decline has obviously continued to shrink on a year-over-year basis, so at or slightly down as a group overall, but approaching really flat at a couple of the other properties as well. So year-over-year types of improvements. As we look out to the rest of the year and kind of the reference to kind of the tougher comps, if you will, in the LVL region in particular, we still feel very comfortable about our statements around seeing year-over-year growth in the third and fourth quarter based on the historical comparable numbers. We, in fact, last summer saw a pretty significant downdraft in the Las Vegas Locals market and actually in July. And the comparables started to recover at the back half of the year. But again based on business volumes, booking trends, et cetera, et cetera, we feel good about the direction that region is going.

That's very helpful because that gets to my next question. Just on the margin side, you've obviously done well. Just wondering how much room you have to go there. I mean, obviously, increasing revenues will help margins, but absent that.

Well, I think, obviously, we've worked hard to refine the expense side of the business and there is really nothing else in our bag of tricks as it relates to the expense side of the business at this point, some 3-plus years into this whole thing. But as you can see, as revenues improve and in some cases, you don't actually have revenue growth at specific properties, but the rate of decline lessens. The relative improvement, we're able to continue to flow through on a pretty substantial pace. The EBITDA line, which has kind of an exponential impact on increasing margins.

Okay, helpful. And then just moving to Midwest and South. Based on the monthly revenues that the states put out, your Lake Charles and New Orleans properties really surprised us on the upside. I was just wondering what was going on there? In particular, is it coming from higher-priced oil or what is driving that?

Well, I think, in the case of Treasure Chest, we have continued to expand hours of operations. Really to go all the way back to Hurricane Katrina, Treasure Chest is not operated on a 24-hour basis, 7 days a week. As we've seen improvements in the economy, we have continued to modify that schedule to a point now where we're open 24 hours on weekends and have just a longer business day, weekdays based on demand, and that's certainly helped us from a revenue perspective. I also would say that the New Orleans market, overall, never probably hit the lows that a lot of parts of the overall economy hit over the last few years. And as a result, it has improved quicker than in other areas as well. As it relates to Delta Downs, I would say that the Lake Charles market is very, very competitive. There's no question about it. Obviously, our geographic positioning relative to the Lake Charles operations and the Texas markets is obviously beneficial to us. That's been part of our strategy ever since we bought Delta Downs. And again, it's not marketing for just marketing's sake. It's marketing in a very smart way. And I made a comment that at our stronger properties, we've started to see unrated play pick up and that kind of ties back to a couple of those properties. And with unrated play picking up, you're probably [ph] going to start to see some very positive momentum.

Great. And then just, Josh, final question regarding the balance sheet. Just following the IP acquisition, we've calculated that you have a funding shortfall in 2012. I was just wondering can you update us on how you're thinking about that?

Sure. I think -- we think about that question in really kind of 2 perspectives. One is where the uses of capital and that is -- and we have 2 of those. One is the $330 million nonextending portion of our credit facility, which matures in May of 2012, and then we have the IP acquisition itself, which is $288 million when you include the $10 million contribution to the trust. So kind of from the sources side of things, we have $350 million of availability under our 5-year extended credit facility. So kind of a backup kind of situation, that $350 million can really take care of the nonextending portion of the credit facility. In addition, we have about $80 million on our balance sheet right now in terms of cash, that's the cash that's not in the cage. So that's available to us. And then to the extent Dania closes, that's $80 million as well. We have about $160 million of the $288 million associated with funding the IP acquisition. So that leaves us, as we mentioned on our call when we made the announcement, with approximately like $250 million to $300 million of financing that we would like to do. And I expect that we would do that some time before first quarter of next year. And that's kind of how -- what we're comfortable with at this point.

Your next question comes from the line of Shaun Kelley from Bank of America.

Josh, maybe I just wanted to start with one quick clarification on the actual printed numbers. But there is a little bit of, I guess, some expense that you guys took for the Tunica flooding. And I just wanted to clarify, is that something that actually dragged down your numbers more in the quarter and we should be kind of adding that back? I think it's like $1.1 million or so, if I looked at the schedule correctly.

That is related to expenses that our company is responsible for related to the claim because of the closing in Tunica. So that's the deductible plus some incremental expenses. And in our calculation of the adjusted EPS number, we have added that back or moved the impact of that.

But what about for adjusted EBITDA?

It's not in adjusted EBITDA. It's not included there because it's below the line.

Okay, got it. That's helpful. And then just kind of to think about the operations, I think you hit on the Midwest and South, but I did want to ask about Atlantic City. You mentioned the elevated promotional environment there, Paul, I think in your comments. Just, could you give us some thoughts about the summer, where some of that increasing promo activity may be coming from? And is there any kind of, I guess, like any line of sight to an environment where Atlantic City could actually bottom and start to improve? Or is it still just trying to do as best as you can in what's obviously a very challenging environment?

Sean, this is Keith. Clearly, Atlantic City is facing a lot of increased competition. And I think what we're seeing over the summer is the same thing that we've seen for the last couple of quarters in terms of an elevated promotional environment, as Paul indicated in his remarks. We've responded in time [ph] to make sure that we retain the customer base. As we move forward, obviously, we'll start to cycle through the Pennsylvania table games in the current quarter, so those started to open in late July of last year and so we'll start to have some better or maybe easier comps as we move forward. And I think Atlantic City is just going to continue to slug it out over the next couple of quarters. Clearly as a market leader, we like our position there. I think we're doing a great job running the business. We continue to see good improvements on the nongaming side. And we're able to basically maintain on the casino side. The gaming revenue, as we've talked about it, the slot win [ph] and the table games volume being flat. So some pretty positive results given the level of competition. And we're focused on margins there also, trying to operate as efficiently as possible. But I think it will continue to be a battle as we look forward over the next couple of quarters.

Okay, Keith. And then I guess last question for me was on Dania. Could you just give us a little bit more color on the deal there? Since you -- and I know, I'm sure, it being in contract, but specifically what I'm thinking of is, do you guys have a hard deposit today? And just, I guess, how committed is the potential purchaser at this point? Just trying to get a sense because it does factor into the funding equation that kind of Josh referred to in his last answer.

We did see the $5 million nonrefundable deposit when we signed the contract or when the contract was signed. They had spent or I should just say they are currently spending significant sums preparing for the ultimate closing of that transaction on architects and designers and meetings with the City Council and moving it forward. They've had meetings with the people who live in the area and the surrounding community to let them know what their plans are. So they are actively and aggressively kind of moving forward with respect to the projects. But again, we have a $5 million deposit, we expect this to close late September. They do have the ability to extend for 60 days under certain circumstances. We, at this point, would expect it to close. We don't have any information otherwise.

And Sean, just as a clarification on my remarks, to the extent the $250 million to $300 million of incremental financing that we would expect to do takes into consideration whether Dania closes or not. So that number wouldn't go up if Dania didn't close by chance.

Your next question comes from the line of Joe Greff. Joseph Greff - JP Morgan Chase & Co: Paul, just want to clarify, I think your comments or answers to the first question. With respect to your 3Q guidance and how you're thinking about the fourth quarter. Is it your expectation that you would actually see revenue growth in the Las Vegas Locals market?

Well, I think, I mean I didn't talk about revenue growth specifically in the fourth quarter. So I don't think you really missed anything there. But my point, I think to Felicia's earlier question, relative to comparables and how those comparables roll out is, we are very optimistic that we will continue to grow the business. Obviously, as we continue to move forward, those types of -- that type of growth in EBITDA would naturally come with revenue growth. And I think I even got specific into kind of property-by-property. We're certainly not up year-over-year in every single case today. But directionally, we're going the right place. Joseph Greff - JP Morgan Chase & Co: Okay. Then my follow-up question on that is, in the locals market, if we do see some level of net revenue growth, say in the plus 1% to plus 5% range, how much of that incremental revenue drops down to the EBITDA line? What's the flow-through on that? You obviously have done a great job in controlling expenses, controlling margins. How do you think about that flow-through?

Well, the flow-through will continue to run on a pretty substantial base. Obviously, marketing, expense and labor are 2 kind of key components to the overall impact. But generally, the kind of rule of thumb you can use is a 1% increase in revenue, is a 2% increase in EBITDA. Joseph Greff - JP Morgan Chase & Co: Okay. And then on the IP, can you give us a sense of EBITDA seasonality on a, I guess, quarterly basis over the last 4 quarters or if you want to look at it full year of 2010?

I think the, and not surprisingly, the summer is the peak season along the Gulf Coast relative to certainly things like hotel occupancy and visitation. I mean, it's a summer destination. But with that said, there is quite a bit of snowbird travel in the winter and then the Biloxi market overall is very much a destination for the likes of golfers and sport fishers in the spring and fall as well. So there isn't -- there is a bit of seasonality skewed to the summer, but it is probably similar to what you see in other markets that have that same kind of makeup. Joseph Greff - JP Morgan Chase & Co: Great. And then, Josh, I don't know if you gave capital expenditures for the second quarter, if you can give us a sense of 3Q and 4Q CapEx?

Yes. In the second quarter, we spent about $12.5 million on CapEx and that includes Borgata as well as Boyd. So Boyd was about $6 million of that and Borgata was about, obviously the remaining portion, about $7 million. I think at Boyd we have consistently kind of underspent our CapEx budgets. And I think generally, we had talked about spending somewhere between kind of $60 million and $70 million this year. I think we're probably on a run rate to spend kind of $15 million in each of the next 2 quarters.

Your next question comes from the line of David Katz from Jefferies. David Katz - Jefferies & Company, Inc.: I wanted to ask about the Las Vegas Locals market, if I may and what the promotional environment is like. We'd certainly heard some things and then we see your results, which are pretty good. If you could just talk about what that landscape has been like.

David, this is Paul. I think, I mean obviously, promotions take many different forms, from very broad-based promotions to direct mail, which is we've talked about in the past. Direct mail is very much a tool we use quite considerably in focusing on kind of our key customer base. And things ebb and flow between those, between companies. Right now, you don't see in this town any significant broad-based public promotions, but I think we factually know, as our competitors know, that there's quite a bit in the mailbox and through the various electronic forms of communication with customers. So as we would consider reinvestment in the customer base, continues to be at high levels. Now we, as a company, have stayed away from some of the large ticket, broad-based promotions because in all honesty we just haven't seen the types of returns on those that really made them make sense for us. They can drive revenue, there's no question about it. And I'm sure they have driven revenue considerably for some of our competitors. But it's always a challenge in making that flow to the EBITDA line. And again, we're just focused on where we can get the right types of returns on investment. David Katz - Jefferies & Company, Inc.: Okay. And one last one, if I may, and this may be an odd question. It just hasn't come up for a while. But you do have a Las Vegas Strip site that is there and circled on a map as an opportunity one day. Has there been any discussion or any thought given to doing something there?

David, this is Keith. We continue to monitor the progress of the recovery in the Las Vegas Strip and the Las Vegas market generally. There are no active conversations today. We obviously have a kind of, as part of our longer range future plan, to get reengaged in that site when the time is right. But there's no current conversation about starting to redraw or anything of that nature on that site. But it still is important to us as we look at the future of the company and still, ultimately, look to have a presence on the Las Vegas Strip as we look a few years down the road.

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

A few questions here following up. In the Las Vegas Locals markets, a market you've improved margins notably. And I wanted to get a better sense of if this was specific costs or if there's any easing in the Locals market vis-à-vis promotions, especially coming off the Station Casino exit from bankruptcy.

Well, Steve, I think you know as I said, I mean, on the marketing side and the promotion side, we have not seen any easing up of spending. We, again, are just trying to focus on spending the right dollars in the right places. And that is translated into really the numbers you see. There's no real magic about them.

Okay. And then this is not only for the Las Vegas Locals market, but also for your other segments, and that's your full-time equivalents. When do you see a potential need, especially with some of these properties generating some nice top line growth for your FTEs to start increasing again? Or is that something you can hold and check for the remainder of this year and even into the beginning of next year?

Well, I mean, our Las Vegas Locals properties are very busy. We've talked about in the past spend per visit, which is really where the focus is. Obviously, through the decline in the economy, folks have spent less. That, as we've said at the top ends of our database, has started to recover. And our property is relative to occupancy and just people in the building are running as full as they frankly ever have. Our customer service scores and we use really a third-party group to touch base with our customers and give us an assessment on how we're doing are as good as they ever have been. And so it's really a tribute to the group of employees we have. As Keith talked about, and obviously a first step is continuing to expand hours that people receive via scheduling. But it's really about spend per person as opposed to more people in the building.

So you feel that you still have flexibility there to maintain your number of employees at this point? Is that the answer?

Yes. We absolutely do.

Okay. And then one last quick question with regards to Downtown. You'd stated that year-over-year, there's about $1 million of incremental fuel cost related to your charter service in the second quarter that dragged that EBITDA down. What do you see as the year-over-year fuel cost comparison for the third quarter?

Well, the third quarter is on, from a charter-only standpoint, going to probably run in that same zip code of $1 million higher.

Your next question comes from the line of Amir Markowitz with Morgan Stanley.

Just, I guess, a follow-up question on what you're talking about before, about spend per visit levels. Can you just, I guess, give a little more color about spend per visit trends in the Las Vegas Locals market over the past few quarters and kind of how this past quarter compared to those levels? Are you seeing any sort of improvement?

As I said before in my comments about the database overall, we have seen improvements in the top 2 tiers of the database amongst all 3 of the regions. So that's Locals, Downtown and the Midwest and South. So that directly translates into spend per visit.

Okay. And just one more follow-up. I guess, looking at the Las Vegas Locals market, it looked like overall at least through May, it was kind of up low-single digits, let's say. So is it fair to assume that the apparent, I guess, share losses in the market reflect your competitor's increased promotional activity? Or was there something else going on?

Well, I mean, I think obviously, the numbers that you see reported by any state, including Nevada, relate to revenues. And we've talked quite a bit on this call about marketing spend and inefficiency and reinvestment in the customer base. There's certainly -- if we were totally focused on revenue we could do an awful lot to drive the revenue number, but I don't think anybody would be very happy with the ultimate bottom line performance. And some of our competitors have taken different approaches to that relative to how they have looked at continued reinvestment in their customers. So revenue numbers are kind of what they are, and I would suggest that they aren't necessarily the end-all and be-all as it relates to ultimate profitability.

Your next question comes from the line of Bill Learner from Union Gaming.

My question is really one of strategy or more strategic, I guess, in nature related to the IP. And I don't think -- I know you talked about the transaction, but I don't think you touched on this, guys. What's the strategy there? I mean, it sounds like it's going to be an accretive deal. It rounds out the regional story further for you. In the not too distant past, you wanted to bulk up in Las Vegas Locals and that didn't play out as you may have hoped. But I'm just wondering, is this isolated in that, it's accretive and it's a trade for the network or is this where you'd likely direct capital in regionals going forward?

This is Keith. We've talked about strategically in the past looking for acquisitions that we think are a good fit to help us to diversify our asset base. That tend to be more market leaders and that will provide a good return. In this case. I think that IP fits the bill and it clearly is in the top 2 assets in the market. It clearly, as you said, is accretive to the company, it provides a great return. It helps -- it drives -- continue to geographically diversify the company. In terms of specific markets, we're somewhat agnostic as to what market it is, whether it is the Midwest or the South or Las Vegas. If it provides a good return and it helps to further diversify the asset base and they are market-leading properties, we are interested in the acquisition. So we look at a lot of things. We'll continue to look at a lot of things, but it has got to be a good fit and it's got to fit those. I hope that answered your question.

Your next question comes from the line of Joel Simkins from Crédit Suisse. Joel Simkins - Crédit Suisse AG: A couple of quick questions. First, you may eventually have another competitor in Lake Charles if Dan Lee gets financing and similarly if this license moves from that market into Shreveport. Just curious how you're positioning both your assets in those markets longer-term?

With respect to the Lake Charles market, I think we've said for a long time that the more people you put on I-10 heading into Lake Charles, given our position in the market and being first into the market, we certainly like our position. We've got a great asset there. So that property, obviously, is a number of years off from being developed and we'll continue to [indiscernible] our property to reap the benefits of more people being on I-10 crossing from Houston into the Lake Charles area. We're positive about there being additional traffic. I'll let Paul talk about the Shreveport asset.

Well, I think, look, the Shreveport market is, we've touched on and everyone has seen, has been challenged by more and more competition in neighboring states that have focused on the Dallas market in particular and that's come from the State of Oklahoma and Native American tribes that have built very substantial operations up in that market. I think as it relates to the proposed project in Boger City that's been discussed, again, we haven't seen a lot of depth in that market overall. And I think it's certainly a challenging market to consider additional capacity coming in. Joel Simkins - Crédit Suisse AG: And one final follow-up here on the Borgata. I think you're embarking or you may have embarked already on this rooms renovating. Can you just give us a sense of the scope of that project, the timing of completion, potential disruption and sort of maybe what specifically you're do to each room, et cetera?

The project will include all the rooms in the original Borgata Hotel. It will be completed between generally the fourth quarter, the fall of this year and late spring of next year. We would expect all those rooms to be completely remodeled before [indiscernible] opens. And it is a pretty complete renovation. We'll be touching all of the parts of the room, from the furniture to carpet and wallpaper and the like. So it's a comprehensive overhaul of the rooms, and we'll be done by the time [indiscernible] reopens.

And I think relative to the question about disruption, you can go through this process, and obviously you have a couple of floors out of service at a time. But managing it through certain seasons of the year, you clearly have rooms available gone. It is not frankly very disruptive to the overall business at all.

At this time, you have no further questions in the queue. I will now turn the call back over to Josh Hirsberg for closing remarks. Please proceed, sir.

Thanks, Alicia. We had a very good quarter and we really don't see those trends changing for our wholly-owned business going forward. We appreciate you participating in the call. And to the extent you have follow-up questions, feel free to reach out to the company and we'll be available to answer those questions. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.