Boyd Gaming Corporation (BYD) Q2 2015 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Boyd Gaming Second Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Josh Hirsberg, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, Amy. Good afternoon everyone, and welcome to our second quarter earnings conference call. Joining me on the call this afternoon is Keith Smith, our President and Chief Executive Officer. Our comments today will include statements 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. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties that include but are not limited to those disclosed in our earnings release, our periodic reports and our other filings with the SEC that may impact our results. During our call today we’ll make references 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 Investor Section of website at boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Finally, today’s call is also being webcast live on our website, at boydgaming.com and will be available for replay on the Investor Relations section of our website shortly after the completion of this call. I’d now like to turn the call over to Keith Smith. Keith.

Thanks Josh. Good afternoon everyone. Welcome to our second quarter earnings call. This was an exceptional quarter for our company as the positive trends that we’ve been seeing since the second half of last year continue to strengthen across every segment of our business. Across the country we see consumers growing more confident and showing a greater willingness to spend and thanks to more effective marketing programs upgrades to our non-gaming amenities and outstanding execution by our property management teams, we successfully generated strong revenue growth and even stronger EBITDA growth. Total revenue increased nearly 4% in the second quarter marking our fourth consecutive quarter of top-line growth. This revenue growth was broad based as we grew both gaming and non-gaming revenues and generated solid revenue gains in all five of our business segments. We also continue to improve our cost structure by driving additional efficiencies throughout our business. The combination of revenue growth and cost efficiencies allowed us to produce very strong flow through and increased profitability. Companywide EBITDA increased 17% during the second quarter, our third straight quarter of double-digit EBITDA growth and it was also the fifth straight quarter of margin improvement for our company. Additionally, every business segment achieved EBITDA growth with 19 of our 22 properties growing EBITDA year-over-year and 16 of these properties achieving double digit EBITDA growth. We are making solid progress as a company, and every segment of our business is moving in the right direction. Now, let’s walk through what we saw in each of these segments. Our Las Vegas locals business had a solid quarter growing revenue by more than 3% and EBITDA by more than 15%. All four of our major locals properties achieved year-over-year EBITDA growth during the quarter. Non-gaming revenues grew for the 8th consecutive quarter in our locals business. And importantly, we grew gaming revenues as well with strong gains in table games. These results are particularly impressive when you consider that both some custom sands [indiscernible] were disrupted by major roadwork throughout the quarter. While this negatively impacting gaming revenue of these properties, we still achieved year-over-year EBITDA growth at both. We expect roadwork to be completed at both properties by Labor Day which should contribute to further strengthening in our locals business in the fourth quarter. At the properties not impacted by roadwork The Orleans and Gold Coast results were more reflective of the underlying strength of our locals business. On a combined basis, The Orleans and Gold Coast generated revenue growth of more than 6% and EBITDA growth of more than 20%. This was the best second quarter EBITDA performance for these properties since 2008. The Orleans and Gold Coast are grow throughout the business with increases in gaming revenue, non-gaming revenue and cash ADR. In downtown Las Vegas, solid revenue growth and lower fuel cost in our Hawaiian charter service drove an EBITDA gain of more than 40%. This was the 4th consecutive quarter of EBITDA growth for our downtown business. Both gaming and non-gaming revenues were up as all geographic segments of our downtown customer base saw growth, including continued strength among our core Hawaiian customers. Importantly, we saw increases in both table game and slot volumes in our downtown operations. We’re also benefiting from significant growth in visitation to downtown Las Vegas. 2015 has been a great year for downtown and the Fremont Street as ongoing reinvestments and improvements in the area continue to draw more visitors. Outside of Nevada, we’re seeing growth throughout our operation as well. On a combined basis, the Midwest and South and Peninsula segments achieved revenue growth of more than 3% and EBITDA growth of 15%. Of our 12 regional properties, 11 were up year-over-year on EBITDA line with nine of these properties growing EBITDA at double digit rates. Leading the way was the IT which turned revenue growth of $3 million into an EBITDA gain of more than $4 million, thanks to refinements to our operations, our casino floor and our marketing, the IT team has now delivered three consecutive quarters of double digit EBITDA growth. In New Orleans Treasure Chest have an impressive quarter, posting 11% higher revenues and 24% EBITDA gain. Treasure Chest generated strong gaming revenue growth during the quarter, particularly among casual players. Delta Downs had a strong operating performance as well with 12% EBITDA growth year-over-year. The property successfully grew EBITDA every month during the quarter while improving operating margins by nearly 270 basis points. Delta Downs also continued to perform well in the face of new competition achieving record EBITDA for the month of April. However, the severe rainfall and flooding has hit the Houston area in late May and June impacted the entire market resulting in a slight year-over-year decline in EBITDA for the quarter. Despite this, Delta Downs continues to perform well ahead of our expectations and see opening of the Golden Nugget last December. In Indiana Blue Chip grew revenue and EBITDA for the fourth consecutive quarter, successfully leveraging smarter leading amenities to continue increasing market share. Blue Chip outpaced the market with year-over-year admission growth and was the only Northwest Indiana casino to grow year-over-year slot volume and revenue during the quarter. In Iowa Diamond Jo Dubuque significantly outperformed its competition gaining substantial share of flat market. As a result, the property was able to grow revenue by 4% and EBITDA by 15%. And in Kansas, the Kansas Star achieved record second quarter EBITDA with the year-over-year EBITDA increase of nearly 10%. The Kansas Star team is taking full advantage of expanded non-gaming amenities to drive visitation to the property. Revenues rose 5% during the quarter with increases in both gaming and non-gaming business. And impressively the Kansas Star improved its operating margins by 130 basis points during the second quarter to 46.5%. This represents the highest operating margin achieved by the property since the fourth quarter of 2012 when it moved into its permanent facility. Finally in Atlantic City, Borgata posted its 5th consecutive quarter of EBITDA growth. Revenue increased nearly $10 million year-over-year as every segment of Borgata’s business showed healthy growth. As the region’s leading entertainment resort, Borgata continues to gain an outside share of the market. Borgata expanded its lead in the Atlantic City gaming market by nearly 400 basis points year-over-year to more than 27%. And looking at the quarter, remember that last year’s results included a onetime benefit of approximately $12 million related to last year’s property tax settlement with the city. Excluding that benefit, EBITDA at the Borgata grew by about 45% year-over-year including 1.6 million in EBITDA from our online operations. Gross gaming revenue rose nearly 3% at Borgata and while table hold was down more than 200 basis points year-over-year net slot win rose nearly 10%. We also saw strong revenue increases away from the casino floor, Borgata sold nearly 5,000 additional room nights during the quarter and food and beverage business was up across the board. During the quarter we continued to invest in Borgata’s non-gaming offerings with the opening of Festival Park last month. This 5,000 capacity outdoor venue has an attractive new entertainment offering to Borgata enabling the property to further capitalize on a busy summer season by driving increased visitation, ticket sales and food and beverage revenue. We successfully launched the venue with a sold out performance by The Killers in June and we’ll be hosting concert by Meghan Trainor, Tiesto and Counting Crows in the coming weeks. In all the second quarter reflected an exceptional operating performance by our management teams nationwide. We are growing gaming and non-gaming revenue, achieving strong flow through and further improving our operating margins. We’re clearly making significant progress on our strategic initiatives to refine and strengthen our operations. We are also making continued progress on our initiative to reposition, expand and enhance non-gaming amenities and markets with high growth potential. Our objective here is twofold, to generate additional business from our existing customers and to expand the appeal of our properties to attract new customers. We saw the potential of this initiative during the second quarter as non-gaming revenue grew across the portfolio. Almost all of our company’s strongest performer properties like the Arleen's, Borgata, Blue Chip, IP and Kansas Star offer customers a broad selection of gaming, dining and entertainment offerings. We expect similar results from our planned expansion of Delta Downs which we announced last month. As one of our most popular and successful properties Delta Down simply doesn’t have enough hotel rooms to meet all of the customer demand we’re seeing today especially on weekends and during other peak periods and more demand is coming with billions of dollars of infrastructure activity planned for this region, a significant portion of which is already started South West Louisiana is poised for continued growth. With this project we will be adding 167 hotel rooms and suites to Delta Downs redesigning the property's existing 200 rooms and expanding and enhancing our food and beverage offerings. We’ll be expanding our event center as well allowing Delta Downs to better accommodate meetings, banquets, live entertainment and special events. We will also be adding an expanded outdoor pool and event area. By expanding Delta Downs we’ll be better able to capitalize on the growing demand seeing more customers that we can accommodate today. We will also look to generate additional business to the enhancement of the property's amenities giving customers’ new reasons to visit Delta Downs for the first time. Of course Delta Down isn’t the only project on the drawing board. As noted previously we also have several hotel renovations now underway and we are continuing to work on the 20 new food and beverage concepts we plan to open over the next 12 months. Next week we’ll be celebrating the grand opening of the newest concept in this campaign the Filament Bar at the Freemont. Located just inside the Freemont's third street entrance, the Filament is well positioned to take advantage of the significant pedestrian traffic along the Freemont's great experience. And in September we plan to debut a new casual fine dining brand at Evangeline Downs as we look to expand that property's appeal in a very competitive market. Even while we are making smart investments for the future we continue to make steady progress strengthening our balance sheet. During the quarter we successfully refinanced 500 million in high coupon senior notes that were coming due in 2018 pushing out our maturities at a lower cost. We also continued our focus on paying down debt. In summary I am proud of what our management team's achieved in the second quarter. We delivered strong results for our shareholders with significant revenue and EBITDA growth throughout the portfolio and we are starting to see solid results from the investments we are making to enhance the long-term appeal of our portfolio and drive further growth. As a company we have made considerable progress so far this year and we are well positioned to benefit from improving our economic trends across the country. Through renewed focus and intensity we are optimistic about the remainder of the year and our ability to continue enhance the results for our shareholders. Thank you for your time I’d like to turn the call over to Josh.

Thanks Keith. During the quarter we continued to make progress in strengthening in our balance sheet. In May we successfully issued $750 million of senior notes at an attractive rate of [six and seven eights percent]. We used the proceeds of the new issuance to retire $500 million of [nine and one eights percent] senior notes maturing in 2018 and reduce outstanding borrowings under our revolving credit facility. In addition as Keith mentioned we continue to reduce debt. In the second quarter we paid down approximately $45 million. Our debt reduction in the second quarter would have been similar to first quarter if not for fees related to debt financing. Debt reduction year-to-date totals approximately $125 million. Our quarter end debt and cash balances were provided to you in our earnings release. In terms of capital expenditures during the quarter we invested $39 million including $5 million at Peninsula. Year-to-date we have invested $58 million between Boyd and Peninsula. As Keith mentioned we announced a $45 million expansion project at Delta Downs. We expect to spend about $10 million this year on the project and a remaining portion of the budget in 2016. This project is slated to be completed by year end 2016. Separately Borgata’s capital expenditures were $10 million during the quarter. In terms of EBITDA guidance, we are raising our guidance to incorporate second quarter performance and to reflect the positive trend we are seeing in our business. As noted in our release, we expect to report adjusted EBITDA, including Peninsula and 50% of Borgata’s EBITDA and after corporate expense in the range of $575 million to $595 million for the full year of 2015. This guidance incorporates the following expectations; wholly owned net revenues are expected to grow in the second half of the year consistent with the first half with EBITDA benefiting from 65% to 70% flow through. More specifically in the Las Vegas locals segment, including the impact of road construction through the summer at Sun Coast and Sam’s Town, we expect our Las Vegas locals business to grow EBITDA by about 5% to 5.5% for the full year. For our downtown businesses, we expect full year EBITDA to grow about 14% over 2014 levels. In the Midwest and South and Peninsula segments, we expect to grow full year EBITDA on a combined basis by about 7% to 8%. At Borgata we are increasing our EBITDA expectations to $170 million for the year. Of which, we will record 50% in our results. Our expectations for Borgata include an assumption of increased property taxes for 2015. Borgata has performed impressively in a highly competitive marketplace. Borgata’s leverage at the end of the second quarter was approximately four times. Beyond this capital program excess cash flow will continue to be used to deleverage Borgata’s balance sheet. Last week we announced that Borgata has entered into a new $650 million term loan commitment that will be used to refinance Borgata’s remaining high yield debt when the call premiums steps down in mid-August and further provides incremental capacity to refinance the existing term loan, should Borgata decide to retire that loan within the next 12 months. Retiring Borgata’s [nine and seven eights percent] secured notes will save over $12 million interest expense annually. In conclusion, everything came together to create a great second quarter. Our operations team executed seamlessly across the portfolio, driving both gaming and non-gaming revenue growth while continuing to find ways to reduce operating cost yielding strong flow through and continued margin improvements. And our capital plans are successfully capturing how our customers are spending their money. With that, operator, that concludes our remarks and we’re now ready to take any questions.

Thank you [Operator Instructions]. Our first question comes from Joel Simkins at Credit Suisse.

You’ve obviously seen some pretty strong demand here in Las Vegas and its phenomenal flow through. Could you just talk a little bit about what you’re seeing on the hotel side? Do you feel like you’re capturing some ADR opportunities as strip continues to reoccupy? And to the extent you could talk a little bit about the summer that would be helpful, I am obviously mindful this is kind of a softer period for demand from tourist perhaps in that market.

Couple of comments, so on the ADR side of thing for the last several quarters, we seen nice growth in cash ADR and good occupancies throughout the portfolio here in Las Vegas and so I think we have a demonstrated ability to capture some upside there and its flowing straight to the bottom line. From a kind of summer perspective, I think the trends that we’re seeing not just here in Las Vegas but frankly around the country are very similar to what we saw in Q2. We have three weeks of July kind of behind or under our belt at this point so it’s a limited snapshot but those three weeks are basically consistent with what we’re seeing in Q2.

And Josh in your prepared remarks you mentioned some roadwork as well at Sam’s Town that sounded a little incremental to Sun Coast. Do you guys have any sense of when these projects will wrap up? I know we’re hoping some of them will be done by the end of the second quarter. I know that’s out of your control obviously.

Right Joel, I think these projects are driven by factors and circumstances that are really out of our control and so we go by what we’re told. I think we originally expected Sam’s Town and Sun Coast to be kind of be done and behind us at the end of the second quarter but they seem to be kind of dragging on so we’re now thinking kind of by Labor Day, that’s the best guess we have now. Keith might know a little bit more about.

Joe I mean it is kind of an integral process every time we think it’s going to be done something comes up and the project gets extended. Our best guess is Labor Day. And so we would have thought that would have been done by now but that isn’t the case.

And one final question, obviously GLPI [indiscernible] looks like it’s come to a conclusion here with that in mind just how does that sort of change your mind set in terms of your ability you got two acquisitions and attract multiples. You feel like you’re going to be continuing to compete against GLPI or do you feel like you can find some additional incremental opportunities out here.

We’ve always felt that we have been a company that has grown through acquisition and been able to kind of execute those successfully and we today have not been seen any impairments or any kind of factors that would suggest to us that that’s going to change. I think we continue to have opportunities that we are considering and I would say really what the REIT conversation has down to our industry has kind of opened the eyes to some folks that may not have previously been considering selling to kind of have those conversations. So there was a period of time right after we acquired Peninsula where we said we were going to kind of take a hiatus or vacation from acquisitions for a little bit and we kind of regrouped around that and really focused on integrating Peninsula. And I would say today we have as many constructive conversations around potential opportunities as we’ve had kind of pre-Peninsula. So I think up until now we don’t feel like we have been thwarted from our ability to acquire other assets.

Our next question is from Felicia Hendrix of Barclays.

Hi good afternoon and thanks. You guys beat your guidance quite nicely, Josh I was just wondering if you could walk us through where the biggest surprises came from versus what you thought was going to happen in May when you provided that guidance.

Sure Felicia. Thanks for noticing the beats; it was kind of a nice quarter for us. The revenue growth that we achieved was generally in line with our expectations maybe just slightly better but generally in line with our expectations. I think the real surprise came through on the flow through where it was just a quarter where it all came together for us and we have very strong flow through of those incremental dollars. So that’s kind of where the real positive news came from.

Okay. And then when you think about your guidance then for the second quarter, how would you rate the conservatism around that?

I think we’re providing guidance and we believe is certainly achievable. We are not trying to be aggressive; but we’re not trying to be conservative. We’re trying to provide something that is based on our internal conversations with the operations folks that are close to it every day, closer to it than myself in particular. And so we’re trying to give you our best view but we also were cognizant of the fact that we want to continue to be able to deliver on the results that we put forth for the market place. So we're kind of balancing all those things. I think what we have tried to do was tell you that the consumer is getting stronger. We want to continue to get a little bit more kind of history under our belt from how they’re willing to spend and how they’re willing to kind of interact with us as a provider of their entertainment dollars. But in the context of what we are seeing today we tried to give you the factors that we have used in the framework of providing the guidance around both flow through as well as kind of revenue growth.

And on that point is in terms of the consumer getting stronger, can you just give us a little bit more color what you’re seeing maybe up and down the spectrum.

So I think that as we look through the database, we look at our rated play and our unrated play I mean look at our mid and our upper levels, play remain strong and we’re seeing good growth in both spend and frequency. Customer spend is up across the portfolio in that respect. Unrated plays also show year-over-year growth and was kind of the first business to go away during the tough times and has been the last business to come back but we are beginning to see a comeback not in all properties but frankly in most of our properties we’re seeing growth in the unrated play. In the casual play the lower end of the database we’re also seeing some strengthening there and so again the consumers are getting healthier we are seeing better spend patterns from them. But we have a good quarter under our belt. We’ve seen some good trends. I don’t think we are going to take the second quarter and multiply it by four to annualize it but I think we feel good about the direction of the business.

The next question is from Shaun Kelley, Bank of America Merrill Lynch.

Good afternoon guys. I just wanted to talk a little more maybe about some of the strategic options in front of you. So I was curious to sort of on your current thinking on Borgata you’re putting in a place a decent refi the property tax that has generally worked out, you put some very good results in a fully consolidating market share. But you still have the joint venture relationship. So is there a chance or I mean what would be your appetite in terms of renewed interest and possibly trying to buy in maybe other side of that partnership and where do you kind of think about how Atlantic City or doubling down in that market sits in to your priorities right now.

Shaun, this is Josh I will take the first shot at it and then if Keith wants to add something he can jump in. I think generally we like our position in Atlantic City, we got obviously is the market leader and not only competes well in the marketplace but in the entire region. And competitively we don’t see that changing for quite some time, if at all. And so overall the circumstance of our competitive positioning and our operating position within Atlantic City in the form of Borgata is something that we are pleased with. Would we make additional investments in Atlantic City, only in the sense of Borgata idly I think we’re happy with the partnership that we have with MGM I think MGM and you would have to ask them but I believe they are pleased with it and wanted to continue to have a presence in Atlantic City for their own strategic reasons. And so, while we would certainly be interested in having more of Borgata I am sure they would perhaps say the same thing. So, I think that’s kind of how it lines up.

Sean just to echo what Josh said, first of all, MGM has been a great partner since the JV was created by prior to ’03 and the property does quite well. Would we be interested in buying the other half, certainly I mean we have confidence in Atlantic City, their confidence in that property. If they came to us at the right price we’ll look at it like any other acquisition it’s got to be the right price but we would be interested. But MGM has been a great partner, the property is running well and we’ll continue to try to maximize the profitability out of that asset.

And then the other question I guess is sort of bigger picture, but I mean perhaps along the same lines. So, it was already at the little bit about the whole GLPI pinnacle kind of concept in terms of what does the acquisition landscape. But the other way to think about it is where they sort of kind of came out as a sort of financing source for different operators including yourself. So, I am curious, I mean, could you give us year-over-year your thoughts on your own cost of capital at this point? And would you ever consider -- would you reconsider sale leasebacks given where pricing on that deal ultimately sort of ended up? And how do you think about that construct?

I don’t think we’ll comment specifically on the GLPI pinnacle transaction that was a transaction that made sense for both of those companies and they ultimately agreed to a price in a transaction that made sense for them. And I think even as GLPI mentioned in their comments, each company is different and each transaction will be different for them. From our perspective, I think we strictly make decisions based on what makes economic sense for us. Our cost of capital has some competitive advantages versus a sale leaseback transaction but we have to -- it's hard to answer that question without knowing what the terms or the specifics are. So, I really can’t go much beyond saying that. We’ll evaluate whatever is available for us to consider.

The next question comes from Steve Wieczynski at Stifel.

So with downtown Vegas, can I ask a question about -- you pointed out in the press release about the fuel cost going down. Josh I don’t know if there is any way, could you quantify how much that helped the margin in the quarter?

Steve, I don’t know that we can quantify sitting here today how much it helped the margin. I mean we called it out because it was a factor in the overall increase in the profitability downtown it wasn’t the factor, it wasn’t the majority it was a small piece but taking up first to call out.

And then with Borgata I know that your promotional spend there was down at descent amount you. Can you just talk about environment in terms of what you’re seeing there? And is that more a function of a lot of your competitors essentially not having money to spend, or is it -- that something on year end in terms of making those decisions?

I think that it is a combination I think both of us continuing to dial in our marketing programs and our marketing spend I think it’s a function of -- we’re getting an outsized I think portion of some of the displaced customers from the closures last year looking for a new home, not all of that is rated place, some of that is unrated. So we’re seeing a benefit there in terms of when you look at dollars as a percentage. I think part of it is generally speaking a fairly normal promotional environment on any given month or any given week competitors will do something a little more aggressive. But generally it hasn’t been too promotionally aggressive in Atlantic City. So I think it’s a combination of factors.

Next question is from Thomas Allen, Morgan Stanley.

It’s Mark Savino on for Thomas. Just digging into the Las Vegas locals market a bit further, can you kind of give us your updated thoughts on the margin opportunity there? I mean, obviously, really solid revenue growth in the quarter and it looks like expenses were still down year-over-year. So, just wondering where you’re finding the cost savings and is that something that we should expect to continue? Thank you.

I think the management team both in Las Vegas locals market as well as throughout the country we’ve done a great job taking cost out of this business. And we’ve got a number of quarters in a row of increasing margins. Every time we think we’re kind of at the end of that, we challenge the team and they seem to come up with more. And clearly all the low hanging fruit has been picked and every quarters that goes by it’s a little tougher and tougher to extract more savings, yet the team is able to do it. So, are we at the end of road? No, I don’t think we are. The current levels of margins, are the current margins sustainable? Yes, I think they are. And we’ll continue to push our operating teams to find new and creative ways to take cost out of the business.

Great. That’s helpful. And then just sort of switching gears just on capital allocation, can you guys kind of help us understand how you are thinking about maybe prioritizing your use of capital going forward? Obviously there is a lot of other expansion and repositioning going underway right now but how should we think about those opportunities versus the opportunity to pay down debt. And then I guess just in addition to that for projects like the Delta Downs expansion at a high level how should we think about the type of return that you’re targeting from an investment like that.

I’ll try to answer all of those questions; I am not very good at keeping up with the multiple questions in one.

Sorry, I squeezed a few in there.

All right, I’ll give it a shot and then if I leave anything out, just let me know. I think from a kind of user free cash flow perspective we are using the repositioning capital opportunity to really improve the overall performance of the business and expecting, when we look at that $45 million that we’ve allocated not every project will generate a return, but we think as a bulk when you think about that $45 we have in mind kind of a level of return that we expect from that investment. And so kind of excess return that we expect to get from that capital makes it worth investing and actually positions our properties long-term to be competitive and positions us long-term to kind of attract new customers and even in some cases are demographic that we’re not seeing today in big large amounts and that's at younger demographic as well. So we see that capital in that overall program which is really kind of as we’ve talked about before really multiyear program, really as much reinvesting in ourselves and position ourselves competitively today but also push is our strategic initiative for the longer term. We expect to continue to stay focused on deleveraging and I know that can sound like we’re trying to do two things that are kind of [have opted] in but we expect to continue to pay down debt. And key to that component is the part that you’re seeing now we’re delivering higher levels of EBITDA all at the same time, so while we may not pay down as much debt as we paid down in 2014, we are going to continue to pay down debt and that’s going to be through managing how much we reinvest in these programs, how successful those programs are as we watch them being rolled out and how successful we are in the core business.

In terms of Delta Downs, we think of Delta Downs as more offense than defense. Delta Downs right now is capacity constrained from a hotel product and from amenity standpoint and we think that adding the rooms and adding the amenities allows us to grow that business from where we’re at today. So, it’s offense it’s not defense and we will get a very healthy return on those capital dollars investment.

Our next question is from James [indiscernible] Bank of America Merrill Lynch.

I guess just a few sort of outstanding things; now that you guys are sort of consistently profitable on [indiscernible] can you just remind us of your tax position and NOLs?

We have just under $1 billion of NOLs, 982 I think is the exact number.

Okay, very good. And obviously we talked for the Delta Downs expansion but with trends seeming to get better and EBITDA expectation is going up, would you expect your sort of your maintenance capital to increase some and I guess specifically given the intention of increasing your smart purchases?

No I think maintenance capital will stay pretty much where we've had it budgeted and where it’s been over the last year or two. We have what I think is a fairly healthy amount of maintenance capital to keep our proprieties current and modern and competitive I don’t see that going up at all. So I think it's going to stay as is from a slot product standpoint we’ve had a fairly once again, fairly consistent budget to find new products for [smart] I don’t see that changing very much at all just because EBITDA is going up.

Very good. And then just to circle back Josh on your commentary about potential acquisitions in the environment, can you just tell us sort of big picture how you think about the balance sheet. I know historically you’ve always said that an acquisition would have to sort of make sense strategically and be cash flow accretive but what is kind of your talents on leverage. I mean you’ve guys have done a great job of paying down debt and starting to get leverage moving in the right direction. Are you willing to pick leverage up again at this point or do you still want to get down to a lower number before doing a transaction?

Yes, I think transactions happen are things you can’t really time. So having kind of saying that and then putting it aside, what I would say is, is that kind of philosophically we would be looking to [indiscernible] take to something leverage neutral and hopefully be able to do things it would continue to be deleveraging for the company. I think Peninsula is a great example of a strategic transaction generates a lot of free cash flow and was not leveraging to the company. And for us continues to create opportunities going forward in terms of actually operating more efficiently and generating more free cash flow. So, I think people should look at Peninsula as an example. I think our preference would be to do it under one balance sheet I think doing it under separate balance sheet is kind of complicated things. But it made sense at the time. So, I am just trying to give you kind of how we think about it from a big picture framework perspective. And depending on how strategic it is, how significant of a transaction it is, we’ll try to work within those guide post I think.

The next question comes from Kevin Coyne, Goldman Sachs.

Thanks for taking my questions, most of them have been asked and answered. But Josh as a follow up to what you just mentioned, you have discussed combining the Peninsula restricted group with the Boyd restricted group in the past, and with the 8 and 38 notes having a call price that just kept down. Is it something we should expect in the near term or maybe you can give us some color on that?

Kevin I guess it depends on what you define as near term. But basically I would say that certainly with the call premium stepping down and depending on where the markets are when we are able to go to the market, we’ll just evaluate that in terms of what makes economic sense and kind of way the cost associated with the interest savings. And then ultimately if it doesn’t make sense today, maybe with the step down and markets stay good for a while, may make sense as we approach the next call step down which is when a step down makes all [indiscernible] par. So I think sometime between now and that time period would be a generally reasonable expectation for us to consolidate the two balance sheets. We definitely want to do it; we run the businesses as one today it’s just a matter of trying to simplify our balance sheet and capital structure by being able to take advantage of markets that made sense for us. We don’t feel like we need to kind of do something that doesn’t make sense for us and so we’ll be looking to do that when it does make economic sense.

Just housekeeping question since you gave us the NOL numbers. I was just wondering, do you have an updated restricted payment basket amount?

No, I may or may not, but I am not giving it out.

And just one final one for just related to downtown, can you remind us how many charters you’re running now versus how many were running at the peak?

Today we run four charters a week, we used to run seven. The way to think of it is as peak we move north of 100,000 people into Las Vegas, on the charters today it’s south of 50,000 and that’s because the commercial airlines have picked up the lift and therefore there is no reason for us to have the additional lift, that’s the reason it’s gone down, it has nothing to do with kind of the structure of the business or anything else it’s just that when it was 100,000 because there wasn’t enough commercial lift into the market.

We’ve always kind of managed it based on the availability of capacity.

So would you say your rated play from Hawaii is flat?

No rated play from Hawaii is up and once again they don’t all come on our charters, the people that are on our charters are rated players but there are just as an equal amount of rated players coming out in Hawaiian air or [indiscernible] United or all the other airlines, we really -- we've been in the airline business for a few years now, maybe a decade and if we could ever get out of it, it would be great if there we had enough lift but they don’t, so.

And so the packages we sell are not just for our own charter and therefore they can combine and buy for other domestic carriers as well.

The next question comes from Carlos Santarelli, Deutsche Bank.

As you guys think about the Las Vegas locals business, and you think back to the peak years when it was in $300 plus million EBITDA business. Clearly, a lot has changed since then. But as you think about how the markets evolved albeit with new supply and evolving consumer different competitive -- different types of competitive environment. What do you guys think is kind of been new peak for your portfolio in that market relative to kind of the hay-day of the locals market?

I think what we call is it’s an interesting question and it’s very difficult to answer given it’s really depending on the consumer’s behavior from here on out. I think what we generally kind of thought of is that the number of people in our buildings hasn’t really been the issue it’s been their willingness to spend. And what we’re seeing is that trend starting to pick up and whether it kind of gains momentum or flat toes at some point it’s very difficult. But I think as an intermediate kind of target for ourselves or as a way to kind of think about it is we felt like in 2008, 2009 we were kind of 20% off of the peak in terms of ability to drive our business and so I think we feel like we can try to get to those levels overtime. But it will be very dependent on how the consumer chooses to spend and how they develop and all of that stuff, it's not going to happen overnight, it’s a much longer kind of timeframe that we would be able to get those kind of levels.

Thank you, Josh. I know in the past you’ve provided some CapEx guidance for the year I believe when last we spoke it was 100 million for Boyd and 15 million in Peninsula maintenance and I want to say 45 million in project CapEx, is it fair to just add the 10 million of Delta this year to that 45 and assume the maintenance stays the same?

Yes, that’s exactly right. You got the numbers correct and then you just add the 10 million to it for the Delta Downs project.

Time for one more question, which will be from Chad Beynon at Macquarie.

Hi. Thanks for taking my questions. Keith in your prepared remarks you highlighted some pretty incredible results down at the IP I believe you said 4 million of EBITDA over a 100% flow through and I know that you have owned the property now for three or four years and made some changes and there have been some additional changes just to the market. I was wondering if you could provide some color around, is this a one-time -- was this a one-time opportunity or do you think the team has done some things to really change the positioning of the property and we continue to see some outsized results that really move the needle for that region. Thanks.

Yes, I think it is the latter. I think that the team has in the last couple of quarters done an exceptional job of repositioning it from a marketing standpoint and creating some efficiencies in some of those marketing programs that have been baked into the property for years. They’ve doing a good job kind of managing other cost as well and once we have couple of quarters at this level under our belt and while we never kind of project a 100% plus flow throughs and I wouldn’t carry that into the future I think we do project continued strong flow throughs at that property.

Okay. Switching subjects, one of your competitors are now talking about social [indiscernible] sports, given the size of your database in the geographic reach, could you give us your view on those segments of gaming/entertainment?

On the fantasy sports side it’s an interesting conversation and as you look at the landscape across the U.S. you have states that have made it clear that it is a legal activity within the state, you have states that have made it clear that it’s not legal and other states that just have an aggressive words I refer to as kind of grey states. When you listen to people talk about fantasy sports they use words like betting and making bets. So in our view it is gambling at its core and should be regulated just like other forms of gambling, today it is not. And so that’s kind of our view on that. With respect to social games and social gaming I think it's something that we’ve been paying attention to, we've dipped our toe in the water here and there obviously having a market leading position in online gaming in New Jersey where we’re interested in continuing to expand that and so we’re very interested in the social gaming aspect of it.

Okay. Thank you. And then Josh a housekeeping one, The Appeals Court that upheld your property tax recently in Borgata with 63 million, could you provide some guidance for when that payment comes into your bank?

This is Keith I’ll take that. So it was a great move and obviously strengthened our case but it doesn’t -- we don’t have any more clarity on when we will get paid either that amount or the $88 million that was a settlement amount from last year. So we’re still waiting to have some active dialog with the city or state on these matters and we’ll update on it when we have, but at this point we actually don’t have any clarity on that.

This does conclude our question-and-answer session. I’d like to turn the conference back over to Mr. Hirsberg for closing remarks.

Thank you, Amy and thank each one of you for joining the call today. And should you have any other questions or follow up please feel free to call the company and we’ll make ourselves available to address those questions. Thanks for joining.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.