Boyd Gaming Corporation (BYD) Q1 2013 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Boyd Gaming First Quarter 2013 Earnings Conference Call. [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 morning, everyone, and welcome to our First 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 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. Actual results may differ materially from those projected in any forward-looking statements as a result of certain risks and uncertainties including, but not limited to, those noted in our earnings release, our periodic reports and our other filings with the SEC. During our call today, we'll 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. 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, as a reminder, today's conference 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, our President and CEO. Keith?

Thanks, Josh, and good morning, everyone. Thank you for joining us this morning for our first quarter call. Our results for the first quarter exceeded our expectations, despite a host of external challenges during the quarter. These challenges included the impact of a more typical winter in the Midwest, a payroll tax increase in January and delays in the processing of income tax refunds, all of which served to have an impact on our business in the quarter. However, a strong performance in the month of March helped offset the impact of these challenges. Throughout our company, we are taking the right steps to grow revenue, improve margins and maximize EBITDA growth, whether it is through innovative marketing programs, improved product offerings or improvements to our operating margins. This was clearly evident in our first quarter results. More importantly, we expect to see greater benefits from these initiatives as external challenges abate. In our Las Vegas Locals business, we were able to produce year-over-year growth and EBITDA for the first time in more than a year. This was the result of a combination of new slot and marketing initiatives and a strong focus on operating margins. This performance was a significant accomplishment for our entire team and we feel good about the overall direction of our Las Vegas Locals business. In our Midwest and South region, year-over-year comparisons were more difficult, largely due to a more typical weather pattern this year as compared to the mild winter weather we saw last year. While we did experience lower revenues in this region, our focus on improving operating margins helped us mitigate the impact of EBITDA during the quarter. At Atlantic City, the Borgata team is making great progress recovering from the effects of Superstorm Sandy and ongoing competitive pressures throughout the Northeast. Borgata remains the clear market leader and outperformed the competition in Atlantic City in every metric in the first quarter. While the first quarter results exceeded our expectations, the last several years have taught us to be cautious about reading too far into the future. Previous recoveries have become uneven or lost steam due to unforeseen events. But at this moment, we are cautiously optimistic about the economic trends that started to form late in the quarter and the overall direction of our business. Customers have started to adapt to higher taxes and the uncertainty from Washington. Tax refunds began arriving in bank accounts and investment portfolios have grown as the stock market reaches all-time highs. In Southern Nevada, the unemployment rate has dipped below 10% and the pace of job growth has been accelerating, running almost twice the national average in January and February. The housing market in Southern Nevada continues to recover as well. Prices for existing homes in Las Vegas are up more than 30% year-over-year and new home sales are rising as well. That is helping rebuild the balance sheets and the confidence of local residents. And there is more than $6 billion in new development either underway or on the drawing board on or near the Las Vegas Strip. This is the highest level of construction activity we have seen since the Great Recession began and should provide further stimulus for the local economy for years to come. Across the central part of the country, economic conditions remain stable. These markets recovered more quickly than Las Vegas and their unemployment rates are generally below the national average. We are optimistic that conditions should remain relatively healthy in our Midwest and South markets in the months ahead. And at Atlantic City's, the recovery from Sandy appears to be strengthening as the market enters its historically busy summer season. As we look back at the first quarter and what we accomplished, it is clear that we are making significant progress toward our strategic goals of strengthening our balance sheet and improving our financial position. In March, we monetized the Echelon site and are on track to complete the sale of Dania Jai Alai in May. Our focus on strengthening our core business through new and innovative marketing programs and improved operating margins is working. And we are making good progress on the integration of the Peninsula properties into the Boyd Gaming portfolio, and we are starting to realize the full benefits of this transformative transaction. Looking ahead, we are well-positioned to take advantage of several significant long-term growth opportunities, including our agreements with the Wilton Rancheria Tribe in northern California and Sunrise Sports Entertainment in south Florida. Both of these partnerships could provide significant growth opportunities to our company in the next several years. We're also quite optimistic about the potential of the emerging domestic online gaming market. We intend to be among the first that offer online gaming in the state of New Jersey and are confident that the Borgata brand will allow us to capture substantial share of this lucrative market. We are evaluating the opportunity to offer online poker in Nevada as well and are determining the best way to enter what is shaping up to be a robust, yet crowded market. But New Jersey and Nevada are only the beginning. Legislation to legalize online gaming has been introduced in several states, including Illinois, California, Pennsylvania, Massachusetts and New York and lawmakers in other states are considering it as well. While it is still early, we will be part of the process across the country. If additional states move forward with the legalization and regulation of online gaming, Boyd Gaming will look for ways to participate. Online gaming is clearly a compelling opportunity to significantly grow and diversify our business. We intend to seize that opportunity to the fullest. Boyd Gaming is clearly heading in the right direction and I'm confident about our future. Thank you for your time today and I would now like to turn the call over to Paul who will provide a little more detail on our operating results. Paul?

Thanks, Keith, hello, everybody. The trends we saw in the first quarter were consistent across our operations as weakness in January and February was offset by improvements in March. This was the result of strengthening economic conditions in many of our markets, as well as a focus on improving operating margins across our business. We were especially encouraged by our Las Vegas Locals segment, which posted year-over-year EBITDA growth for the first time in 5 quarters. Several factors were at work. First, our themed slot initiatives and related marketing programs that we discussed on prior calls have been quite successful. Our focus on improving operating margins paid off as well, driving EBITDA growth in the segment. We also benefited from the successful execution of several major events during the quarter. At the Orleans Arena, the top ranked team in the country played in the West Coast Conference basketball championship, driving growth in business volumes associated with this tournament. And we were quite successful in leveraging our sponsorship of the Las Vegas NASCAR race in March, generating considerable visitation to our properties. Looking ahead, we are optimistic about our prospects in the second quarter, which got off to a good start at The Orleans with a festival celebrating the American Country Music Awards. This 3-day event drove tremendous customer traffic to The Orleans and garnered extensive national exposure for the property. Now let's review Downtown Las Vegas. While we saw nice improvement in March, it was not enough to offset weakness in business levels. We are diligently focused on improving our operating margins in this segment as well, and we're successful in mitigating the impact of lower revenues on the EBITDA line. The overall direction of our Downtown Las Vegas business remains encouraging. We continue to enjoy a great relationship with our Hawaiian customers, providing this business a solid foundation. And we believe there is upside created by the redevelopment of Downtown Las Vegas. As this transformation continues to accelerate, it will further expand the pool of potential customers for our 3 Downtown properties. And with 1/3 of the total market, we stand to be one of the biggest beneficiaries of Downtown's continued revitalization. Now let's move to our properties in the central part of the country. As you may recall, the Midwest enjoyed an unusually mild winter in 2012. This year's winter was more typical, creating difficult comparison throughout the region, including at our new properties in Iowa and Kansas. To the south, our properties in the Gulf Coast were also comparing to particularly strong results in the year-ago quarter. Despite this, Delta Downs still managed to post an all-time record for monthly EBITDA in March. And the Kansas Star generated solid revenue growth following the successful opening of a permanent casino and 5 new food and beverage outlets in December. And while the properties operating margins are still the highest in our company, they were impacted in the first quarter by higher expenses associated with these new amenities, as well as increased marketing expense. Marketing spend was unusually low during Kansas Star's introductory period in early 2012. And this quarter's results reflect more realistic customer reinvestment levels. We expect these trends to continue and visitation should grow further with the opening of our Arena, capable of seating of over 6,000 guests. As we've seen at The Orleans an arena this size can generate significant customer traffic, and we look forward to opening its doors in late June. This property continues to perform in line with our expectations and remains on track to generate about $100 million in EBITDA on an annual basis. Finally, I'll conclude with the Borgata. As you know, the entire Atlantic City market continues to be impacted by numerous factors, including the ongoing recovery from Superstorm Sandy, additional capacity from the opening of a new property last spring and competitive pressure from throughout the region. While Borgata is not immune to these trends, we continue to outperform the market at every category in the first quarter. Borgata finished the first quarter with a 22% market share in net slot win, up nearly 2 percentage points year-over-year. We posted a 26% share in table drop, an increase of more than 1.5 percentage points and we captured 51% of Atlantic City's poker revenue, up more than 3 percentage points. To put it in perspective, our net slot win in the first quarter was 50% higher than our closest competitor and table drop was 70% greater than the #2 property. Borgata is clearly maintaining its leading position in the market and we made good progress in the first quarter, more than doubling property EBITDA from the fourth quarter of 2012. So to recap, we're pleased that the current direction of our business. Across our operations, we remain focused on improving margins and refining our product to meet customer expectations. And we started to see the benefits late in the quarter. Thank you for your time today, and now I'll turn it back over to Josh.

Thanks, Paul, let's start with the balance sheet and then I will discuss items from the income statement and provide guidance. Our total debt balance at the end of the quarter was approximately $4.1 billion, which includes $1.2 billion related to Peninsula. Our debt balances inclusive of Peninsula, declined approximately $50 million from year end. Given the balance outstanding under Boyd's credit facility, we had approximately $280 million of incremental availability. The cash balance at the end of the quarter was $322 million, of which $30 million was related to Peninsula. This balance includes the net proceeds from the Echelon sale. After the end of the quarter, a portion of this cash balance was used to redeem $150 million of the outstanding balance of our 6 3/4% sub notes due 2014. From a financial covenant perspective, secured leverage was 3.89x compared to a covenant of 4.5x and total leverage was 7x versus a covenant of 7.75x. Borgata's debt balance was $805 million at quarter's end, of which $14 million was outstanding under their $60 million credit facility. Their cash balance at the end of the quarter was $36 million. Moving to the income statement, corporate expense, excluding share-based compensation expense, was $11.6 million in the quarter compared to $10.1 million last year. The current year's corporate expense includes about $1.1 million for Peninsula. Depreciation expense in the quarter was $70 million, an increase of about $20 million over last year due to the inclusion of Peninsula. Peninsula's depreciation expense in the quarter was approximately $22 million and Borgata's depreciation expense was about $16 million. Excluding the impact of Las Vegas Energy, our interest expense was approximately $93 million, which includes $22 million for Peninsula and about $21 million for Borgata. Interest expense should decline by about $2.5 million in the second quarter as a result of the April 6 redemption of $150 million of 6 3/4% sub notes that I mentioned earlier. Our capital expenditures in the quarter were approximately $22 million, including $6 million at Peninsula and $3 million at Borgata. Now, in terms of guidance, we will provide EBITDA guidance for Boyd and Borgata, with Boyd's guidance including Peninsula. We will provide adjusted EPS guidance for the consolidated business, which includes Borgata. We expect wholly-owned EBITDA, after the deduction for corporate expense, to be in the range of $132 million to $137 million. We expect Borgata to generate EBITDA of $27 million to $29 million in the second quarter. Assuming a tax rate of 35% and with this range of EBITDA guidance, adjusted EPS for the second quarter is expected to range from a loss of $0.02 per share to income of $0.03 per share. Amy, that concludes our remarks, and we're now ready for any questions for participants.

[Operator Instructions] Our first question comes from Felicia Hendrix of Barclays.

A few questions for you, just on the Las Vegas Locals and on the revenue side. The revenues were down year-over-year, but the comps get easier throughout. Keith, you gave us some good details about what was going on, on the macro side? So it sounds like -- and I just want to make sure that you're comfortable with this. It sounds like you might expect this. I mean, obviously, with the easier comps, you could see revenue growth for the remainder of the year just based on the math of the comps. But it also sounds like you're feeling more encouraged by what you're seeing from just the economic aspects of how the economy is affecting your customer base. So I was just wondering if you could expand on that a bit more?

Felicia, it's Paul. No, I think your comments are fair in both rights. I mean, the magnitude of year-over-year quarterly decline on the net revenue side has continued to ease from a couple of quarters ago, being down almost 5% to obviously -- to the results that we posted this quarter on the revenue line. And I think a couple of things are at work. To your point, the comparables are getting easier. Now to Keith's points as well, there is the beginnings, we think of some good, broad-based recovery going on in Las Vegas as well. Now we've seen this before and we have seen and actually posted in the first quarter of 2012 net revenue growth in this segment. And so we're just a little bit hesitant to call it a trend after just a quarter.

Okay. So you said you're cautiously optimistic just thinking about it and you probably would appreciate it if we're all cautiously optimistic I would assume. On the margin side, seems like some of the EBITDA margins improvement in the Las Vegas Locals market was -- some of the improvement was due to initiatives, some of the initiatives that in terms of increasing your flow-through, but also to some of the events that you held in the quarter. The second quarter sounds like you have some more events to talk about. But what would you say the biggest driver to the EBITDA improvement was? Is it the benefit of your initiatives? Or is it just the benefit of having those events? Just trying to think about how to think of how to think about our margin forecast for the rest of the year.

Well, I think when you look at it, there are really 2 categories. On the marketing side, in the initiatives on the marketing side, we just found good solid traction in those areas. And obviously, marketing expense is a big chunk of total operating expense in this business. So to the extent we can work through programs that are just simply more effective and more valued by the consumer, that's obviously, very important to driving margin growth. And the other piece of it overall, in honesty, is the other largest operating expense line and that's labor. And how we staff, how we still meet the expectations of our customers but be efficient and frugal, and to be able to offer a stellar product, at the same time to manage labor costs overall.

And that's obviously -- and you foresee that to be managed well for the rest of the year?

I think we've continued to focus. It's something that you never stop working on. But I believe that we have the framework for those types of savings for the balance of the year.

Okay. Great. And then just final question on Atlantic City. Just wondering if any of you are willing to take a stab at what you think fair market size of online gaming is -- in Atlantic City will be in and how you're thinking about your share there?

Felicia, this is Keith. We haven't gone out with our own estimate of what that is. As you've read, people are estimating it anywhere between $200 million and $1.2 billion in terms of market size. We obviously, think it's probably somewhere in between that but we haven't come out with an estimate of our own. But are we looking forward to launching the business when all the rules are put together.

Our next question comes from Harry Curtis at Nomura.

Just a follow-up on the online. In your press release, you said that you're excited about your online strategy. What can you share with us about your strategy?

Well, as I said in my comments, we're -- we look forward to being one of the first to launch in New Jersey. We think New Jersey, with 8.8 million people within the state, has great opportunities to have a very profitable business there. So we're looking forward to that. Nevada, once again, has legalized it and it's in process. It will be a crowded market but we think a robust market. We're trying to just make sure how we're going to enter that market. And when you look around the country and you see a number of other states talking about legalizing it, I think this is something that will be exciting and will be a real addition to our overall business plan as we look forward. We haven't put out estimates. We haven't put out profit estimates on it. We're obviously -- have some, we're just not sharing them publicly at this point, but we think it's going to be a great addition to our land-based platform.

Broadly speaking, do you have any sense of what impact it might have on the land-based business?

Sure. We firmly believe that there really is no or minimal impact to the land-based business. It largely speaks to a different customer. And we think at the end of the day, it probably grows the pie. It doesn't shrink the pie. There are 2 examples that we currently have. One is the growth of online poker a few years ago that reinvigorated land-based poker, and you saw that take place. I think the other thing that's happened here in Nevada where there's been some mobile sports betting that has come online in the last year and it has no detrimental effect to kind of the land-based or people coming into the building and sports betting. And so the limited examples we have showed no impact to bricks and mortar casinos. And that's really our belief, that once again, we'll grow the pie, we won't shrink pie.

And I guess last question is, you mentioned it was going to be a crowded market. Do you expect it'll be limited to the bricks and mortar kind of company? Is there any way that some of the other existing sites that are established in other countries will have an opportunity to gain entrance into the market?

Well, in Nevada, you do not have to be an existing bricks and mortar casino. You just have to have a license. You have to be licensed by the state of Nevada through the regulatory authorities here. And so that's why I say, it will likely be a crowded market because you will have others who will look to enter the market in Nevada, besides the traditional casino operators that are here in the state.

And how about New Jersey?

New Jersey, the license runs to the existing casino operators. So it is the existing -- people operating in Atlantic City, existing operators who are in Atlantic City who have the benefit of running or opening up a business.

Our next question comes from Thomas Allen at Morgan Stanley.

Two questions on Borgata. The first, the Maryland properties started introducing table games a few weeks ago. Have you felt any impact there? And then secondly, any update on how we should think about the market over the summer and the residual impact of Sandy? How much of your play comes from people with either permanent or second residences nearby that you think may have been destroyed? And could you see any benefit from rebuilding checks like we saw with Katrina?

Sure. With respect to the table games in Maryland, it's too early to really have any sort of a sense or bearing on how that may be impacting the markets. And so it's, once again, just a little too early to say. With respect to the summer season, it clearly is always the busiest season in Atlantic City. There is plenty of business in the summer season. We don't know the overall impact of last year's storm and how it will impact residence of people who don't have homes there. As you indicated, we certainly have seen in Louisiana and in southern Mississippi when a hurricane comes through and then insurance checks come through, there's additional money in the market. We are hopeful that, that is the case. We haven't seen that start to show up in the casinos yet. But we're expecting in a busy summer and we're expecting good results out of the Borgata over that busy summer season.

And then just to clarify some things on the Locals market. First, last quarter you talked about spend per visitor was still down, has that changed at all? And then can you give us any sense of kind of what your exit rate was for revenue growth of the markets or kind of what your March revenue growth was?

I think on a spend per visitor basis, Thomas, we're running about flat. So sort of an improvement over the declines we have seen prior and that sort of ties into sort of the revenue numbers that we reported today. As it relates to March revenues, in particular, for the market, your comment about exit rate, I wasn't quite clear with that.

Just what March revenue growth was. I mean, we see market revenue growth for January and February. And obviously we don't know what it was for March. So any color on what March year-over-year growth was?

I think, certainly, it was obviously, as we talk about improved to some extent dramatically over January and February. And from the numbers that we have seen, relatively flat year-over-year.

The next question comes from Shaun Kelley at Bank of America.

I was hoping you guys could talk a little bit more about the online gaming side. Any idea what the capital commitments will be there, what will be required in advance and just the timing of those investments?

Sure, this is Keith. Given our relationship with bwin, we'll be providing most of the software, if you will. I think capital commitments really are more along the marketing side and the launch of the business itself. And so we're in the process of kind of putting that together. We're not at a point where we're going to discuss those at this point. But they really -- think of it as launching or marketing costs and not hard cost from -- you typically think of capital.

I'd say, largely, those costs actually come out of the cash flows being generated by the online opportunity. So there's very little kind of upfront spending in advance. It's largely, as Keith was mentioning, kind of recurring as the revenues are coming in.

Perfect. I appreciate that. Sorry, I was having trouble with my headset. It's actually Matt in for Shaun. Just a follow-up, I was hoping you'd talk a little bit about the promotional environment in Atlantic City and what change you saw during the quarter with the Revel's filing and then your expectations for kind of the competitive environment moving forward?

There really wasn't, I would say, a significant change in the competitive environment in Atlantic City in the quarter. If you look at some of the numbers that Atlantic City releases, you probably saw some pull back on promotional credits. We don't expect to see much change in the market with Revel coming out of bankruptcy, and Revel has been in the market for a year and the impact of that property is largely baked into the market. Borgata had a very successful year after Revel came into the market. We continue to kind of expand our market-leading position there and put distance between ourselves and the #2 competitor. So I don't expect a lot to change in the marketplace as it relates to Borgata.

The next question comes from Joe Greff, JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: Question for you on the Las Vegas Locals market, you talked about the first quarter EBITDA performance certainly being enhanced by the slot initiatives and better marketing. Can you just talk about the promotional environment there and whether that was a big factor and if that could help us understand that in terms of how much were promotional allowances and marketing dollars down year-over-year?

I think, overall, the trends, Joe, that we reported in last quarter's call about the Las Vegas Locals market as it relates to promotion, generally, was that they had, to some extent, I would call it, normalized. All the majors were focused, obviously, on the best kind of cost-benefit relationship they had and we had not seen an acceleration of promotions generally in the market. And I would say that trend simply continued in the first quarter. And it frankly has continued into April as well. Certainly, promotional activity but nothing really out of the ordinary overall. Joseph Greff - JP Morgan Chase & Co, Research Division: Excellent, great. And then another question, maybe difficult to answer, in the past, you've been sort of against looking at raising equity as a means to reduce your leverage. With the stock up meaningfully here more recently, are you as steadfast in not issuing equity as a means to reduce your leverage? Or has your thought process changed in that regard?

So if we look at the -- we look at equity as one tool that we have at our disposal. We're kind of quite confident with the current business plan that we have and how we're executing against that plan. Monetizing some non-core assets as we've done recently and focus on improving our core operations. We frankly think the most efficient way to continue to de-lever and strengthen our financial position is through improved operations and so that's our #1 focus right now. And we know equity is available to us if we determine it's the right thing to do. But right now, we will focus in other areas.

The next question comes from Carlo Santarelli at Deutsche Bank.

Quickly on the Locals business, when you think about an environment where you could start seeing some top line growth consistently for the first time in a while, how are you guys thinking about obviously OpEx and the ability to flow that through to the bottom line? I guess, asked another way, do you feel comfortable with the current OpEx structure and do you believe a lot of that, the costs that you've extracted out of the business over the last few years are permanent?

Well, I think the operating expense structure we've put into place has come with a lot of hard work from a lot of different people. And it is poised to show significant bottom line performance with revenue growth. Our challenge has been, obviously, seeing that revenue growth in the various markets, not just for the Las Vegas Locals business, and all of our competitors been faced with the same struggle. But we are in a very good spot for a broader base recovery. And in the meantime, we'll take things into our own hands and focus obviously, on key marketing programs and look at share as well.

Great, that's helpful. I may have missed this at some point here, but with respect to the AC or Borgata specifically, some of the tax rebates that I know some of your peers got throughout last year, where does that stand for you guys right now as it pertains to Borgata?

Sure, I think you're referring to the property tax issue?

Correct.

So our property tax appeal is currently in court. We are currently having a trial and we'll await the outcome of that. We certainly feel confident in our position and confident that we will receive a credit or a rebate on our property taxes. But it's a trial, we'll just have to see how it plays out.

Great. And Keith, is there -- do you have guys parameters around the number? I believe it trumps [ph] somewhere north of $50 million. Have you guys outlined anything within a range?

No, we actually have not provided any specific range of outcomes for what that might be. Once again, it's -- because it is a trial, we're being quite silent on it.

The next question comes from Barry Jonas at Wells Fargo.

Just a quick question. Do you have anything to comment about the potential sale leasebacks or asset sales to the Pen REIT once the conversion happens early next year?

Probably no real comments at this point. I mean, if, I suppose if the Pen REIT came forward and wanted to pay us REIT multiples 12x or better, we'd probably take a look at it. But that hasn't happened and we'll just wait and see.

Great. And then just one point of clarification, I think you said that bwin would be a technology provider in New Jersey. But can you maybe just explain the role of the JV with bwin and MGM in New Jersey?

Sure. The license in New Jersey will run to, the license to operate an Internet gaming operation will run to the gaming licensee. In this case, it's an entity called MDDC [ph], which owns a license in New Jersey, which is owned by the partnership, Boyd Gaming and MGM, or the trustee at this point. And so that is the MC that owns the license and will launch the business. What brands that get launched underneath that are -- we're kind of reviewing that right now in terms of what that will look like, with the public facing part of that website will look like. But that's the licensee, so that's the structure.

Great. And then just lastly, we've heard a range of estimates in terms of when online gaming would commence in New Jersey. Do you have a sense when that might be?

We really don't. We've heard the same thing you've probably heard. We're paying attention and we just expect to be among the first to open once it's legal.

The next question comes from Justin Sebastiano at Brean Capital.

So as far as, Paul, in your earlier comments, you mentioned that you have more streamlined labor levels. Can you talk a little bit about that? Is that more reduction-enforced? Did you just take, take away some shifts? Did you put, maybe, some food and beverage outlets start [ph] at certain times of the week? Can you be a little bit more specific around that?

Well, I think, I guess it comes in various, different, very different areas and how you staff generally. And keep in mind, we have over 20,000 team members. Obviously, a good chunk of those, 7,000 or so, 8,000 are in Nevada. And it's really just managing the workflow as we talk about in sort of our key values, working smart and continuing, obviously, to provide a level of customer service that we believe helps differentiate us from, obviously, a very crowded field of competitors. So look, it’s not unusual during certain parts of the year to change hours of restaurants and things like that in this town. And certainly, we use all of those tools. And it's something that, as I said, really never stops in order to manage overall labor cost in each of the properties.

Okay. So just so I'm clear, sounds like you're talking about, you -- based on volume, you may -- you put some, maybe, offering a start [ph] or shut down some shifts as opposed to actually having a reduction in force for hundreds of employees. Is that fair?

That is correct. It's management rather than some overall, broad-based change in direction in Las Vegas.

Our next question comes from David Bain at Sterne Agee. David Bain - Sterne Agee & Leach Inc., Research Division: [indiscernible] First is a first follow up on the timing for online. I mean, looking at Nevada, the framework that has been in place since late '11, with [indiscernible]. The regulators in New Jersey are pretty, pretty stringent as far as we understand. Just wondering, in your conversations with them or folks that are involved, do you think that they're New Jersey timeline can a sort of outpace what Nevada is having? So is something different there that makes it more likely to happen sooner rather than later?

Yes, I probably don't have a comment on how quickly Nevada will get through the process. Nevada has issued licenses to the various operators. What Nevada hasn't done yet is license the software providers and that's what kind of the process is next in Nevada. And how quickly they get through that, how quickly they're able to move through that and how quickly they are ready to open an online business is up to them. I guess I don't feel it's my place to comment on that. David Bain - Sterne Agee & Leach Inc., Research Division: Okay. And kind of a follow up also on I think what Harry was asking. The Borgata brand, do you think that resonates out of New Jersey to either Nevada or other jurisdictions if they're legalized online? And just trying to handicap, look at brands and databases like some of the big destination locations versus some of the more regional ones. How do you look at taking share versus other potential providers?

Well, right now, we're focused on New Jersey and we're focused on the Borgata brand in New Jersey. It has, obviously, great penetration in New Jersey. As Paul indicated that we captured more than 50% of the poker market share in Atlantic City. And so kind of the penetration of the Borgata brand is significant in New Jersey as the market-leading brand. We really haven't looked at it outside of New Jersey. So...

The next question comes from John Maxwell at Jefferies. John Maxwell - Jefferies & Company, Inc. Fixed Income Research: Most have been asked but just, Paul, maybe with the new permanent property, Kansas Star, have you widened the reach of where customers are coming from there? Or does the permanent property just give people more amenities to -- with your existing customers you've already attracted?

Well, I mean, Kansas Star is obviously very much a local market casino. If you just think of the geography of Wichita and other major cities, obviously, you have very strong population concentration in the Wichita metropolitan area. And then, certainly fades out as you go beyond that until really you hit other competitive markets, whether it's Kansas City in one direction, Oklahoma City, Tulsa, all of which have casino products in those markets. Also fair to say that Kansas Star today has 150 hotel rooms. In total, we'll be increasing that to 300 in the next 18 months or so per our agreement with the state and our hotel operator. But it is, you should think of it, very much as a local market casino, just like our local market casinos around the country, really.

And with regard to what Paul said, well, I don't think it's expanded its reach geographically. Within Wichita, we now have amenities that will attract players that maybe weren't attracted to the temporary facility because you didn't have food facilities, you didn't have other things going on. And so the expanding facilities offer a wider array of products that I think will attract a broader group of customers. John Maxwell - Jefferies & Company, Inc. Fixed Income Research: Okay. And Josh, did you put forth a budget for 2013 CapEx at this point?

We did in the last call, we basically said that for -- and I'm doing this from memory so it's always [indiscernible] years. But basically, I recall that Boyd's CapEx would be about $100 million, plus or minus a little bit, depending on how the business ultimately played out. Borgata's was around $20 million and then Peninsula would have had kind of $15 million of recurring maintenance capital and I think something for the Arena conversion on the order of $8 million or $9 million or so, like that. I just don't remember that number off the top of my head.

[Operator Instructions] And the last question will be from Kevin Coyne at Goldman Sachs.

I know you don't break out property level detail. But I was just wondering, with the IP performance during the quarter, could you give us any subjective thoughts in terms of how that's performing versus your expectations? And is it safe to assume it's outperforming the segment results of 6% decline?

Well, I think with the IP and the market overall, obviously, we had reported individual property results for the 4 quarters following the acquisition. As you saw, we made a number of adjustments there, including -- that had a very positive and meaningful effect on EBITDA. We -- per kind of how we show numbers, we won't be breaking out IP in the future. I would tell you that the Biloxi market is certainly, as we knew going in, a very, very, very competitive market. State of Mississippi issues numbers by sort of region within the state and you have those handy. And the IP for us has been much more of an efficiency story than a revenue growth story. And we think as a result of that, it is -- had a meaningful contribution to stock price and equity valuation because we bought it at the right price and very much improved margins and EBITDA contribution at that property and expect that to continue.

Thank you, that's helpful. Maybe just turning to the Locals market, you detailed a lot of the big projects going on or that are going to come over the next few years. I was just wondering, do you sense -- like, when we look at -- if we try to, let's say, time the inflection point or the acceleration out of the trough of the Las Vegas Locals market, do you get the sense that people will wait until they're actually, let's say, on-site working and getting cash flow and a paycheck to ultimately spend at the casino? Or if they know they're going to be working in 6 months, do you think that sentiment will cause them to come to the spend more at the casino earlier? I was wondering if you have any color in that?

I don't think we really do. We're in a brave new world here in terms of how the consumer reacts to changes in the economic environment or their personal economic circumstances. Certainly, if you look back to pre-recession days, the consumer acted one way and the knowledge of a job or the knowledge of a paycheck or the confidence in having a future job had them spending a certain way, and I think at today's world, that we live in, it's different. I think our expectation generally would be when people are employed, they feel confident and they go out and spend money.

I think at the end of the day, we can feel it for good or for bad well before numbers are actually reported because the numbers reported are obviously, sort of a historical look back. I think I'd add to Keith's comment that because of everything folks have gone through over the last few years, they are certainly highly sensitive, good and bad, to changes in just the feel and their confidence.

And then just one final one. So with the Peninsula acquisition behind you, I was just wondering, does this kind of put you guys on the sidelines for a little while regarding M&A? And related to that, with the sale of the Echelon project, would you still ultimately want to own a Las Vegas Strip asset someday?

With respect to the Las Vegas Strip, I think we were clear when we talked about this previously that we're very interested in returning to the Strip. We have great confidence in Las Vegas and the future of Las Vegas, in the future of the Las Vegas Strip. We're one of the largest employers here in town, and run a very large business in Downtown and second largest business in the Locals market. And so we do look to return to the Strip someday at the right time with the right asset. With respect to future M&A, our company has a history of being somewhat opportunistic and looking at good deals and making good acquisitions the right price and the right markets, being very strategic and very opportunistic. I think we will continue to do that. So I wouldn't say, that we're on the sidelines I think, we'll continue to be opportunistic, which has been the history of the company.

This concludes our question-and-answer session. I would like to turn the conference back over to Josh Hirsberg for any closing remarks.

Thank you, and thank you for participating in today's call. If you have any follow-up questions, feel free to reach out for the company and we'll be responsive to those questions. Thanks for joining us today.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.