PENN Entertainment, Inc. (PENN) Q2 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Penn National Gaming Second Quarter Results. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session [Operator Instructions] I would now like to turn the conference over to Joe Jaffoni. Please go ahead.

Thanks, Benjamin. Good morning everyone and thank you for joining Penn National Gaming's 2016 second quarter conference call. We'll get to Management's presentations and comments momentarily, as well as your questions-and-answers, but first I'll review the Safe Harbor disclosure. In addition to historical facts or statements of current condition, today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involves risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as expects, believes, estimates, projects, intends, plans, seeks, may, will, hold, should, anticipates, or the negative or other variations of these or similar words, or by discussion of future events, strategies, or risks and uncertainties, including future plans, strategies, performance, development, acquisitions, capital expenditures and operating results. Such forward-looking statements reflect the Company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectation. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the Company's filings with the Securities and Exchange Commission, including the Company's reports on Form 10-K and 10-Q. Penn National Gaming assumes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast will also include non-GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release, as well as on the Company's website. I will now turn the call over to the Company's CEO, Tim Wilmott. Tim?

Thank you, Joe, and good morning to everyone to our second quarter 2016 earnings conference call for Penn National Gaming. I'd like to introduce the team that's with me today in Wyomissing, Pennsylvania. I'm joined by BJ Fair, our Chief Development Officer; our Head of Government Relations, Eric Schippers; our General Counsel, Carl Sottosanti; our Chief Financial Officer Saul Reibstein; and our Chief Operating Officer, Jay Snowden. It's been eight quarters in a row where we met or exceeded guidance and we take that very seriously. Unfortunately, the second quarter is a miss in our guidance that makes none of us happy. We want to meet the expectations we set forth as we try to provide an outlook to how we think we're going to perform. And our miss on guidance in the second quarter was primarily driven by softer volumes in the latter two-thirds of the quarter, May and June. And as we reflect back on the first six months of 2016, compared to what we saw in 2015, clearly our first quarter beat had much to do with the better weather we had in the first quarter of 2016 compared to the first quarter of 2015. And we certainly believe there hasn't been the pent-up demand we saw in the second quarter of 2015 that we didn't see in the second quarter of 2016, in part why we believe we saw some softer volumes this year. I do want to highlight, in the second quarter, we had a positive impact by the developments and acquisitions that we concluded and finalized in 2015 that of Plainridge Park in Massachusetts, the acquisition of Trop, Las Vegas and the acquisition of VGT slot route operator Prairie State Gaming in Illinois, all were great positive stories for us in the second quarter of 2016. I'm also pleased to report that despite the softer top line volumes, the operations did a good job maintaining margins that were fairly consistent with what we did in prior periods. And looking forward into the third quarter of this year, I am pleased to report that we're confident that we're going to open our Hollywood Casino Jamul-San Diego property in the month of August. All we're waiting for now is National Indian Gaming Commission's final approval to open that facility. And we're also confident that we are going to be able to secure third-party financing for a large portion of our current project financing of that Jamul development. I will come back after Jay and Saul give you some additional insight. Jay, specifically on what's going on in the business as to what we're seeing with our consumer and Saul with what we thought through in terms of providing you guidance for the balance of 2016 and some general financials statistics. I'll come back with some final comments before we open it up for questions. So with that, I'll turn it over to Jay.

Thanks Tim, good morning everyone. I just want to underscore Tim's comments on the slight miss here in the second quarter. We don't take it lightly. We've got a track record of exceeding guidance that we're very proud of. I do want to point out that in the second quarter, it wasn't all bad. We had some bright spots, record EBITDA margins at three of our four Ohio properties took place in the second quarter. Record EBITDA margins since the property opened, quarterly margins at our property in Massachusetts, Plainridge Parks. We saw strength at both of our Las Vegas properties which I'll detail in a moment. And we continue to gain profitable market share on both sides of the State in Missouri. That was however offset by rated-player losses at our Zia Park property due to the depressed oil-dependent feeder markets in Eastern New Mexico and Western Texas as well as in Illinois and the Gulf Coast and Mississippi, due to additional supply in those markets. Perhaps the most impactful and unanticipated dynamic in the second quarter was the unrated softness that hit us in the months of May and June in several of our key markets. For the second quarter as a whole, we saw a 2% decline in our unrated business versus the first quarter, a 4% gain. So pretty significant shift from Q1 to Q2 that obviously affected our second quarter results. The million-dollar question of course is why? I think Tim articulated well some of the pull forwards into Q1 this year versus last year due to the softer or more mild weather and the lack of pent-up demand in the second quarter that took place in 2016 versus 2015. So there is some that's explainable and some that's less explainable, the macroeconomic indicators continue to be healthy, we're seeing job and income growth, gas prices are still down 10%-plus year-on-year and there is improving home values across most key markets. However, the results of economic and political uncertainty that seems to be weighing on discretionary spend in the second quarter. Regional gaming is not alone, you're seeing this in QSR and casual dining results in the second quarter as well. So I think the key question, what's to expect going forward? We took our best data forecasting the answer to that question for the remainder of the year in our second half guidance that Saul will walk you through in a moment. We were able to maintain our margins in the second quarter, despite some of these unrated surprises in the consumer behavior and we will be prepared, as we move forward, for any situation that we're presented were. We'll remain disciplined and prudent in our approach to managing this business as we always have. I want to talk specifically about some highlights in the second quarter with regards to Las Vegas because I think those results, though positive, were largely masked in the South and West segment by softness in New Mexico and Mississippi. So specific to Tropicana Las Vegas, April wasn't a great month for us. We had a tremendous amount casino floor disruption as we worked on the final implementation from our Key Rewards. We had hundreds of slot machines down each week for most of that month, but we were very encouraged by what we saw in the month of May and June, over 10,000 database room nights. In the hotel, we saw a slot volume increases of over 30% year-on-year, RevPAR record growth for Tropicana in the second quarter of 6.5%. And we talked a lot about this hotel block dynamic of wanting to shift away from leisure, OTA, wholesale to casino block and we're happy to report that's a nice work in progress. A year ago Q2, Tropicana had a casino block less than 10%. In the Q2 this year, it was over 20% and the wholesale OTA block last year in Q2 was 52% of the room nights, and this year 36%. So we're moving in the right direction. Obviously, revenue and EBITDA trends are tracking along with the hotel dynamics that I described. With regards to M Resort, we had record EBITDA and EBITDA margins in both Q1 and Q2 at that property, so tremendous momentum in the Las Vegas locals market as, I think, has been well-articulated by many and we're happy with how the businesses are both tracking in July as well. More globally, the promotional environment remained stable across our key markets. We're obviously keeping a close eye on the Washington DC, Northern Virginia, Western Maryland markets in anticipation of MGM National Harbor opening in December. And lastly, I'll finish with some comments on July. We're certainly feeling a little bit better than we were in May and June. We're seeing some improvements sequentially from May-June into July with regards to both rated and unrated aspects of our database as well as visitation. And I think, as I alluded to earlier, and certainly was reflected in our margin performance in the second quarter, we'll be prepared for whatever comes our way as we move forward for the rest of the year. We move fast, we act fast and we take a lot of pride in that. So with that, I'll turn it over to Saul to walk you through guidance.

Thanks, Jay. As you've read in our release and heard from both Tim and Jay, there are many positive trends in our business today. Further, we have sound near-term opportunities with the completion of Jamul and the pending financing. So far in 2016, we have repaid $35 million of our bank debt while spending slightly over $100 million on the Jamul project. We expect to see continued strong levels of free cash flow generation for the rest of the year. As our usual detailed property-by-property analysis, we've lowered 2016 adjusted EBITDA guidance by $6.4 million, which is inclusive of the actual results for Q2. This adjustment is driven primarily by the delay in the expected opening from July to August at Jamul, the continued softening of the New Mexico market and the overall challenging consumer spending environment. For the quarter ending September 30, we have set guidance for net revenue at $767 million and adjusted EBITDA at $212 million. As a reminder, adjusted EBITDA excludes payments under our master lease as it is now accounted for as a financing obligation and we have considered a December 2016 opening at MGM National Harbor. Page 6 of our press release provides current estimates for corporate overhead, depreciation and amortization, interest expense and non-cash stock compensation. It also includes the amount of actual cash payments under the master lease for the quarter and the year. In addition, some other key data points are; cash on hand at June 30, 2016 of $221.4 million; all of our debt covenant ratios have been comfortable met; project CapEx, inclusive of Jamul for 2016, is estimated at $285 million with $110 million in the third quarter; maintenance CapEx for 2016 is estimated at $83 million, with $32 million in the third quarter; our cash basis effective tax rate for the second half of 2016 is estimated at 23%; and finally, free cash flow before project CapEx and principal repayments of $256 million for the year. And with that, Tim, back to you.

Thanks, Saul. Thank you, Jay. I did want to conclude my comments by updating you on where we are with the long-term master plan on Tropicana, Las Vegas as we've outlined when we did that. We did that acquisition back in the third quarter of last year. We're making very good progress on how we're going to continue to transform the property and add more non-gaming, restaurant, retail and entertainment amenities that will be executed over the period of 2017 to 2019. And I can assure everyone out there in the audience that we're going to make sure our capital allocation process around that will be very disciplined to ensure that we get the returns on the capital that gets deployed at Tropicana, Las Vegas. And with that, as Saul referred to it, going forward, past the Jamul opening, we have a very compelling free cash flow story. As we look at the years beyond 2016 into 2017, 2018 and 2019 that I think will be very encouraging for investors to look at. With that, operator, we're now be able to take any questions that are out there.

[Operator Instructions] Our first question comes from the line of Felicia Hendrix with Barclays. Please proceed with your question.

Hi, this is [indiscernible] for Felicia. You mentioned the weakening consumer environment and we were just wondering if you could talk a little bit more about the regional gaming environment and if you think that your guidance will accurately reflect the continuing weakness or if you see any difference?

I think certainly we put guidance out that we just finalized yesterday. So, it's our best estimate as to what's going to happen for the remainder of the year. Some of the softness, we have I think a better handle on because it's happening in our rated database. Our rated database is two-thirds of our business and it's been largely stable. So, that's the part of the business that we feel most comfortable with guiding and forecasting as we move forward. The more difficult exercises is the one-third of our business that's unrated and where we saw real softness in the month of May and June. As I mentioned earlier, trends are improving in July. I don't think we're out the woods here yet, but I think we're seeing better signs as an indication of some stabilization of unrated plays in July versus the previous two months. So we took all those factors and that's what went into our guidance for the rest of the year.

And then, you also mentioned the uncertainty in the political environment. Can you speak a little bit more about whether or not you think that's going to affect in a negative manner or what are your thoughts there?

That's another tough one. I don't know, I think depends on who you ask, who you're speaking to. There is uncertainty, that's the way I would answer it. And is there going to be more uncertainty as we approach November, less uncertainty? Your guess is as good as mine, but there is certainly some uncertainty out there right now that I think is not just political but economic and having some impact on discretionary spend.

Yes, this is pure speculation which we don't want to comment on and we all are watching what's going on and we probably have never seen Presidential campaign like we're seeing it in 2016. But we're not experts in this area to speculate it's overarching effect on the economy here in United States.

Yes. I think that's definitely true. And then, just another question about the environment. You pointed to the overall challenges and oil patch, but can you get a little bit more granular as to where you're seeing the greatest underperformance where you weren't before? And I guess, are some of the region surprising you on the positive side? You mentioned that Las Vegas was masked a little bit in May and June, but can you just speak a little bit more about the regions and get a little more granular?

Sure. Listen, I think the Northeast and the Midwest, they're largely reflected in the monthly gaming revenue results. South and West is a little bit more difficult because Mississippi doesn't report by property and Nevada doesn't report by property and New Mexico is more difficult to get out. So, I'll spend some time on the South and West segment. The second quarter was a real challenge, as has been the last three quarters before that at Zia Parks. That's a business that is very reliant on oil business. Our feeder markets are obviously in our backyard in Eastern New Mexico and then importantly Midland, Odessa and Lubbock in Western Texas and those local economy have been decimated. Our unrated business at that property in the second quarter was down 24%. So that's tough to overcome, the rated business is actually quite fine, the customers we know, the higher end segment, they're performing well, but that's free business that was just coming into the market to work in the oil field is not there currently. It doesn't mean it won't come back. Mississippi where we're deal with, still we have not annualized Scarlet Pearl's opening nor the additional hotel rooms in the market with a couple of key competitors there, Island View being one of those. So, I think the trends for Mississippi should continue to get better as we annualize those impacts or approach the time frame to annualize those impacts. And New Mexico is tough to put your finger on right now, so we certainly incorporated some continued softness at least for the next two quarters in our full-year guidance.

And our next question comes from the line of Steven Wieczynski with Stifel. Please proceed with your question.

So, I guess, when you talked about July, you said you guys felt a little bit better around what you've seen so far in July. Can you dig a little bit more into that? Is that more on the trips side? Is that more on the unrated side? Is it spend? And to follow-up on that, I know one of the things you guys have been trying to do is increase the trip frequency. Can you give us an update on how that's been going and what you're doing to try to increase the trips?

Sure, Steve. I'll take that one. Really what we're seeing in July, and again, it's early, we're looking at first 21 days year-over-year, so the month is not concluded. But we're seeing improvement as compared to May and June across all the key metrics. So unrated is a little bit better, visitation is better, and the spend per visit is stable versus what we saw in the latter half of Q2. With regards to driving incremental visitation, one of our missions is to increase our rated play percentage. We're still at only two-thirds of our database. It's a lot better than where we were two, three years ago at 60%, but we want to get that up to 70%, 75%. It's a lot easier and I think you have more control over driving visitation increases, when you know the customer and so that's really been our mission, and then, I think being a lot more creative and incentivizing customers to visit us more often once we get to know them.

And then second question, just maybe an update on Plainridge. I know you guys have still been trying to get that win per day metric more with a four starting in front of it and the goal has always been to get it up to about $15 million a month. Can you just give us an update on how that's been going and what you're doing to try to drive those numbers higher?

Sure. I mean, we're continuing -- we just hit our one-year anniversary and we know a lot more about that market today than we did six months ago or nine months ago. June was a very disappointing month across the portfolio and Plainridge Park is certainly part of the story there. We're off to a much better start at that property in the month of July. We continue to refine our Casino floor offering and importantly, continue to make adjustments to our marketing strategy there. It's a very competitive market. I think more competitive than we had early on anticipated. Twin River is 12 miles to 13 miles down the road and they offer live table games, more restaurants, almost 5000 slot machines. So they're a formidable competitor and our goal certainly is to get that slot win per unit to start with a four handle and we're making good progress. Again June, I think, was more of a blip in the start of a new trend and I think we'll see where July ends.

Our next question comes the line of David Katz with Telsey Advisory Group. Please proceed with your question.

I wanted to just follow up on some of the commentary around Tropicana Las Vegas. As we all know, what the purchase price was and some incremental spend on and so forth, how should we think about that property ramping to some minimum hurdle rate and how we are thinking about that in the context of the second phase of it? It sounds like things are going well, but is there kind of a minimum comfort level in terms of return or EBITDA generated that would, again, get you to a place where pursuing Phase 2 is comfortable, is appropriate?

David, this is Tim. We fully intent, as we've communicated previously, over the period of the next three years, ‘17, ‘18 and ‘19 to spend around $200 million to improve that facility and make it more competitive in a very attractive location on the strip in Las Vegas. And when we get to that point, our expectation and we've said this previously, our expectation is to get this acquisition multiple and all the incremental investment that we put in under a 10 and that continues to be our expectation. Jay outlined our early results in the second quarter ’16, which are encouraging given the receptivity of our Marquee Rewards database to the room offers and that continues to be the plan and we'll continue to provide updates on a quarterly basis on our progress against that, but nothing really has changed regarding that expectation.

Okay. I know that this is an important issue and I'm not suggesting one way or the other, but just for the sake of discussion, what would happen if you didn't pursue the second phase and for the time being spent the next several years just focusing on improving the property as it is now. Is there a plan B and what does that look like?

I think, David, that would lead us to a non-competitive product and missing revenue and EBITDA opportunities that are present at that facility with this expansion plan. And we fully intend, given what we know of the early customer feedback, we just don't have enough of non-gaming amenity specifically to create and experience for our customers that is an expectation our customers have when they visit Las Vegas and stay on the strip. So it would be a large missed opportunity for us if we did not move forward with this plan.

Got it. I appreciate. Thanks

Our next question comes from the line of Shaun Kelley, Bank of America. Please proceed with your question.

Hi guys, this is Barry Jonas. Just had a question about Jamul. Any reason you think that the project isn't proceeding in the original timeline that you thought and then once Jamul does open, when do you think you'll get the refinancing done?

We've always said summer of 2016, Barry, regarding the opening of this and August is really still in line with our expectation. Now we did think it had the possibility of opening in July. We've had some delays in getting the roadway improvements in place and the final regulatory approvals and that probably cost us five or six weeks, but it's not that far off of what our original expectations were. And we believe and we said it in our release that we're confident that we're going to get a large portion of our refinancing in place, either shortly before or shortly after the property opens. And that is moving along as well with the approval of the management agreement that we need from the NIGC to open the facility.

Got it. And then just a question on Ohio, another quarter where relatively stronger results. Just curious, what inning you think you're in, in terms of the ramp there?

Barry, this is Jay. I think it really depends on the property and the market. I think we're in the early innings in Columbus. There is one competitor. It's a two property market and that's a market that was largely insulated from offerings in other states because of its geographic location in the middle of Ohio. So, I think we're in the very early innings in Columbus. Toledo continues to ramp well. We're seeing really nice growth out of Mahoning Valley, and I think the self-reflecting Dayton has been a bit of a disappointment certainly, recently. So we've got some work to do in Dayton to be more competitive in that Greater Cincinnati market. But, I think all four are in the earlier innings. Columbus in particular in an early inning. But we still have some work to do. We can certainly improve our results and our EBITDA margins and EBITDA performance at all four businesses.

Great. Thanks very much, guys.

Our next question comes from the line of Carlo Santarelli with Deutsche Bank. Please proceed with your question.

Hey, thanks guys. Jay, you mentioned July being a little bit better sequentially. Would you be able to comment kind of year-over-year, I know there were some properties where comps were easy; some where they were difficult. But year-over-year, are things tracking a little bit better as well.

I would just say Carlo without getting into the percentages year-over-year, the trends are better so far in July than what we are experiencing in May-June really across both rated and unrated segments.

I think other -- about July, Carlo and I know you know this, is the calendar is very favorable this year with five Fridays, five Saturdays, and five Sundays compared to the July of 2015. So there is going to be some natural lift from the calendar as well

And all true and what I'm referencing in July looking a little bit better is the first 21 days versus first 21 days. So it's apples to apples versus last year, it's just sequentially a bit better than what we saw in May and June.

Great. Okay. Thank you. And then so a couple of things on the balance sheet and the cash flows, what was maintenance CapEx in the quarter and then, would you be able to talk a little bit about how we should think about cash taxes for the balance of this year and possibly next year?

Sure, glad to. Maintenance cap for the quarter was $32 million. Specifically with respect to cash tax you might have observed in the release that the -- below the EBITDA line in the other section to get to net income, there was a fairly significant shift in our -- a favorable shift in our tax expense were really driven by a couple of items namely the -- we had some pent-up demand of exercise of employee stock options after our lengthy blackout date that generated a tax benefit for us as well as the -- we're able to utilize, a little bit faster than expected, the NOL that we acquired with it from the Tropicana acquisition. And finally there is, as the differences in the timing of rent payments versus amortization of interest and depreciation, we got a little bit of a reversal of our deferred tax assets that generated a benefit and so, if you take our actual tax expense rate for the first six months and add to it the 23% that I referenced in the opening remarks that would give you a good lead into how to look at the whole year.

Okay, great. And that $32 million, was that your 3Q guide or was that your 2Q maintenance spend?

That was our 3Q maintenance spend, you want actual --

Sorry, I was looking for -- yes, actual 2Q.

Actual Q2 was $18 million.

Our next question comes from the line of Joseph Greff with JP Morgan. Please proceed with your question.

Good morning, guys. Just with respect to your comment about July being a bit better than what you saw in May and June. You're looking at the rate of change year-over-year in July and saying that's better than the rate of change that you could have experienced in May and June? Am I correct in interpreting those comments, Jay?

Joe, that's exactly right. I'm looking at year-over-year result in May-June versus year-over-year in July and we're seeing sequential improvement in those results.

And the rate of change, is it more improved within the higher end of the database? Is it within the unrated segment?

We're seeing some improvement sequentially in both rated and unrated.

Okay. And then with respect to Massachusetts, I know the margins are embedded in the reportable segment, just directionally, are you seeing EBITDA margin improve in 2Q relative to the 1Q or would you characterize it as more stabilized?

No, we're continuing to see margin improvement, Joe, I mentioned in my comments at the beginning that we experienced record EBITDA margins at Plainridge Park Casino as well as three out of our four Ohio properties in the second quarter. So meaning since the date we opened, that's including our comparing Plainridge Park Casino to the third quarter of last year when we had higher revenue levels. Our margins in second quarter this year were the highest margins we've delivered since that property opened.

And then, great, sort of a similar question with respect to the Tropicana, Las Vegas. As you mentioned, what went on at the property in April and then much better trends in May and June. How do you think about where you are in terms of the margins where you finished, month three in the Q2 relative to where you think you can get to those margin levels in the second half? What's contemplated in your aggregate guidance for the Tropicana from a margin perspective?

We got a lot of work to do at Tropicana. I don't want to mislead anyone, we're not happy with where the margins are by any stretch, but we are seeing continued improvement in the business as we have more of the hotel rooms filled by our database customers who are spending money at the property, non-gaming obviously on the gaming floor as well. It's going to take us several quarters to continue to ramp these margins both on the cost structure and of course as we're driving incremental revenues to flow down to EBITDA. But we delivered sequential improvement in EBITDA since the day we closed. We closed in August of last year and fourth quarter results were beat by first quarter and second quarter was an improvement over first quarter and we expect that trend to continue as we move forward and continue to make adjustments to the business there.

Our next question comes from the line of Cameron Mcknight with Wells Fargo. Please proceed with your question.

Good morning. Thanks very much. So first of all, on the operational expense side of things, we estimate that OpEx, excluding gaming taxes was up about $10 million or about 3% quarter-on-quarter. Is that a normal seasonal move, number one? Number two, if we are heading into a tougher revenue environment either in the second half or in ‘17, is there more overhead that you can trim from the business?

That's more of a seasonal adjustment from Q2 to Q3 and there is nothing in particular that really stands out incrementally, Cameron, in terms of spend and yes, there is still more work to be done. There always will be, by the way, but we still have a number of areas, the two primary areas of course are labor and marketing but we've got opportunities in other aspects of the business that we continue to work on. We've got a number of tests going on throughout the company and we share those best practices immediately and make adjustments across the portfolio. So we'll be ready, we're always ready, we're nimble, we move fast and we got great operators to responses to the consumer behavior trends that we're seeing in the business. So we'll continue to do that.

And then, moving on to Charlestown, as we get closer to the opening of the National Harbor in December, tables are what? 20% to 25% of your business at Charlestown. Do you think that that will help insulate it from competition from National Harbor given that the property at National Harbor will be very table games focused and heavy?

It's a good question. I think that the property -- I mean we look at where our business comes from today Cameron and most of our -- all of our business comes from Northern Virginia and Western Maryland and we think that we're set up very well to hold on to the lion's share of our business in Western Maryland and there is parts of Northern Virginia, when you get into Fairfax County. That's going to be more of a fight zone for us. We've got plans in place for that fight. And as you move further West to Loudoun County, we think we've got little more proximate to many parts of Loudoun County. So specifically to your point about table game business, our table game business comes from the same geographies as the slot business does. We know our players there very well and we anticipate being able to hold on to the lion's share of our slot and table game players.

Karen, this is Tim. I'll add, at least our experience absorbing the other two openings in Maryland, we generally and this is just a broad statement, we generally have done a little bit better holding our slot players than we did our table customers with the opening of Horseshoe Baltimore, and Maryland Live. And I think, more so slot players tend to be a little bit more loyal and a little bit more habitual in what they like and what they don't like. That's just a general statement, but I wouldn't be surprised if that's our experience when National Harbor opened as well.

Okay, great. Thanks, it's very helpful. One final question if I can. Just on Prairie State, any thoughts on the gaming legislation that's been kicking around in Pennsylvania and the prospect of route gaming in PA.

I'll let Eric Schippers handle that question Cameron.

Hey Cameron, as we know in Pennsylvania, the legislature threw a ton of stuffs against the wall in the waning hours trying to help close the budget gap, and none of it stuck. One of the elements was that BGTs in the bars and taverns, they looked at iGaming, they looked at slots at OTBs and ancillary facilities. All of that they were unable to get to agreement between the House and Senate and so they did a short-term solution of raising a tax on table games. But they're going to be coming back in the fall and we're hearing that everything is back on the table for a discussion. So, more to come as we engage in the political process in the months after Labor Day.

Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.

Hey, Jay, can you hear me okay? Okay, thanks. Good afternoon and thanks for taking my questions. Wanted to ask you, firstly, I know you obviously have a lot of operational things on your plate, but if the potential slowness in gaming as we saw in the second quarter and that's again what you're seeing in July. If that does continue and you see a reduction in just overall revenue and EBITDA for the industry, how do you think about balancing as you talked about, Tim, the master plan Tropicana and the returns that you could get on that versus maybe going after some assets that would come at a lower EBITDA and hopefully a lower valuation. If you could buy something there? Thanks.

I think, as we talked about in this release, Chad that we are looking at with good probability, the refinancing of the Jamul loan giving us additional liquidity to do that. And the capital that we're going to deploy over ‘17, ‘18 and ‘19 in Tropicana, Las Vegas would not preclude us from looking at attractive acquisitions that could be immediately accretive to our share price and our leverage story. So I think obviously it's out there. You never know what opportunities present themselves, but we have very good knowledge of almost all the gaming assets that are available here in the United States and the markets and how we perform vis-a-vis our competitors. And we think if something is out there that represents an opportunity that we can improve on, we'll be prepared to look at that very quickly.

Okay. Thanks, Tim. And then my follow-up, can we get an update on the Taunton facility, what happened there, maybe an expected date, and when you see the property of things are actually moving in that area?

Hi, this is Eric. It's really a legal question for the courts now as per the status of the land and trust for the Taunton trial and their federal recognition. But we should note that we haven't seen any signs that the development has slowed or stopped in terms of construction. So, it's, I think something that is going to play out in the courts, but we think the timeline that they have publicly stated appears to be still in play.

I would not speculate on how the court are going to rule on this, I concur with where you're at Eric.

We're reading and following what everyone else in the media is reporting. I think before the end of the year is out, we'll know one way or the other, where the courts will decide on whether they are appropriately recognized trial by our Federal Government or not. And then we'll have better indication over the next couple quarters of what the opening schedule will be in Taunton either short-term or more long-term.

Okay. Thanks, Tim. Thanks, Eric. Appreciate it.

Our next question comes from the line of Brian Egger with Bloomberg Intelligence. Please proceed with your question.

Hi, good morning. To the degree that there has been some small changes in the way you categorize your results by region, geographic segment. Could you just speak to that, maybe provide a little context. I know you've done this from time to time, are there any underlying reasons other than obvious proximity to certain locations?

Right, as you might recall last quarter, we added a new Regional Vice President to assist in the management and the operations and that indeed in and of itself is what created the slight change of moving the Lawrenceburg property. Other than that there really is no other reason or thing to think about.

Brian, the one thing I would say, in the last year, we've added Massachusetts, we've added Prairie State Gaming, we've added Tropicana Las Vegas. So as the company continues to grow, I know it's sometimes frustrating for people following our company as we continue to move around the segments, but we're trying to respond to the best management coverage we can provide for these businesses as we grow the company, and that's really what's driving the slight movement of properties within the segments.

Okay. That makes sense. Thanks very much.

Mr. Wilmott, we have no further questions from the phone lines at this time. I would now like to turn the call back –

Great. Thank you, operator. And again, thanks to everyone to attend during this call and we'll look forward to be back together at sometime late October after we conclude the third quarter of 2016. Take care.

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