Josh Hirsberg – SVP & CFO Keith Smith – President & CEO.

Felicia Hendricks – Barclays Shaun Kelley – Bank of America Merrill Lynch Carlo Santarelli – Deutsche Bank Thomas Allen – Morgan Stanley Stephen Kent – Goldman Sachs Kevin Coyne – Goldman Sachs John Maxwell – Jeffries Joel Simkins – Credit Suisse.

Welcome to the Boyd Gaming Third Quarter 2014 earnings conference call. (Operator Instructions). At this time I'd like to turn the conference call over to Mr. Josh Hirsberg, Senior Vice President, Chief Financial Officer. Sir, please go ahead..

Thank you, Jamie. Good afternoon, everyone and welcome to our third quarter earnings conference call. Joining me on the call this afternoon is Keith Smith, our President and Chief Financial 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 statement as a result of certain risks and uncertainties including but not limited to those noted in our earnings release, our periodic reports and our 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 investor section of our web site 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 web site shortly after the completion of the call. I'd now like the turn the call over to Keith..

Thanks, Josh. Good afternoon, everyone. Thank you for joining us today for our third quarter earnings call. The third quarter was a solid quarter for our company. On an overall basis, we reported EBITDA growth of more than 5% during the quarter as operating margins improved in all five of our business segments.

This performance was the direct result of actions we have been taking to remove cost from the business and improve our operating efficiency and it clearly shows our ability to generate EBITDA growth, even in a relatively flat revenue environment.

Our Las Vegas Locals region delivered a 6.5% EBITDA gain on slightly higher revenues as operating margins improved more than 100 basis points. This marks the sixth quarter out of the last seven that we’ve achieved positive EBITDA comparisons in our Locals business.

While we’ve yet to see consistent gaming revenue growth in the Locals market, the fundamentals of the Southern Nevada economy continue to strengthen and we’re clearly seeing increased demand for our non-gaming amenities.

Our recently upgraded hotel products at Gold Coast and The Orleans performed particularly well during the quarter driving revenue and EBITDA growth at these properties. We recognize that consumers are spending their discretionary dollars differently today and that demand for non-gaming amenities is increasing.

As we've noted previously, we are now targeting some of our capital spending to take advantage of that trend. I will outline our first steps in that initiative in a few moments. Moving to our Downtown Las Vegas business, we generated 14% EBITDA growth on modestly higher revenues.

Operating efficiencies are allowing us to make the most of our revenue growth, as margins improved more than 130 basis points. As Downtown's largest multi-property operator, we’re seeing clear benefits from the ongoing revitalization of Fremont Street and Downtown.

Strong pedestrian traffic along the Fremont Street Experience and the new Zip Line attraction are generating additional visitation and more excitement for the entire Downtown Las Vegas market. We also benefited from increased visitation for Hawaiian customer base during the quarter.

This was another solid quarter for our Downtown segment and we remain optimistic about the prospect for this business.

Moving to our regional operations, we continue to focus on improving efficiencies as we increased our overall operating margins by more than 60 basis points in the combined Midwest and South and Peninsula segments during the third quarter.

These operating improvements were broad based as margins were up at nine out of 12 of our regional properties and while revenues remain down at many of these properties the year-over-year gap is narrowing and we are seeing the initial signs of stabilization in most markets. Let's walk through a few of these markets in a bit more detail.

First Delta Downs continued to fire on all cylinders producing record third quarter EBITDA in beating its previous third quarter EBITDA record by more than 10% and it grew market share. The property set third quarter records for coin-in and net gain revenue as well. A new competitor will be entering the Lake Charles market toward the end of this year.

However, Delta Downs is a differentiated product, serving a distinctly different customer. Additionally, this is a healthy gaming market and we believe the new property should significantly grow the market. So while there will be an impact from this new competitor we remain confident about the long term outlook for Delta Downs.

In Biloxi, the IP showed improved results generating year-over-year EBITDA growth of nearly 6%. The IP team is doing an excellent job keeping costs under control and improving operating margins by 170 basis points; and Blue Chip had a solid quarter, highlighted by market share growth in each month.

In fact, Blue Chip was the only northwest Indiana casino to report year-over-year visitation growth with admissions up more than 5%. Summer is the peak tourist season and our prior investments in expanding Blue Chip's hotel capacity and non-gaming amenities helped drive solid visitation growth in the third quarter.

Further south conditions do remain challenging at Par-a-Dice. There are now 18,000 video slots in bars, taverns, restaurants and other businesses in throughout the state of Illinois, accounting for $60 million a month in gaming revenue. Our Diamond Jo Dubuque property in Iowa is also being impacted by this expansion.

In the Peninsula segment, about half the revenue in EBITDA shortfall came in Kansas Star, where EBITDA was down 5% on lower revenues. Despite the revenue decline, the property kept costs under control, improving operating margins by more than 60 basis points to 43%.

(Indiscernible) is up slightly but we saw declines in frequency in the local market, particularly among casual players. While we’ve not been pleased with the results of this property to date, Kansas Star is a first-in-class asset with a great team.

Our refined marketing strategies, aimed at growing visitation, are beginning to have a positive effect as a result at Kansas Star have shown improvements in the last several months.

Finally let's review Atlantic City, where Borgata turned in yet another strong performance with both revenue growth and improved EBITDA margins, excluding property tax-related benefits, EBITDA rose $2.2 million, up more than 4% year-over-year. The recent property tax settlement with Atlantic City added an additional $8.1 million to EBITDA.

Borgata's results for the quarter reflect gains throughout the business. On the casino floor, we grew slot win and we increased our overall gaming market share by 260 basis points to 24% Our hotel business was also strong driven by higher occupancy and cash rates.

These trends actually started in July and August well before the recent round of closures, and while it appears that many customers of the recently closed properties have left the Atlantic City market, Borgata has successfully added many new customers to its database over the last couple of months.

We’ve also seen some additional lift in our meeting and convention business, our cash hotel bookings, room rates and occupancy since early September. Moving to the online operation operations, Borgata's online gaming business was profitable throughout the third quarter.

We expect to see further improvement in the fourth quarter as online business should pick up during the colder winter months. Looking nationwide, our third quarter operating performance shows that we are making continued progress, executing on our strategies to reduce our cost structure, improve flow-through and deliver profitable growth.

In addition to our operating activities, we’re also focused on three key areas. First, continued aggressive reduction of our debt. Next, targeted deployment of capital to increase the appeal and productivity of our portfolio and lastly, thoughtfully ensuring that our business is best positioned to maximize long term shareholder value.

Let me provide some additional detail in each of these areas. First our balance sheet, I am pleased to report we have paid down an additional $70 million in debt during the quarter, bringing total debt reduction to more than $165 million so far this year. We remain solidly on track to repay approximately $200 million in debt in 2014.

This highlights our ability to generate levels of free cash flow and represent a free cash flow yield to stockholders of approximately 18%. Strengthening our balance sheet is an important part of our strategy and we will continue to apply the same focus and discipline to this effort in the quarters ahead.

Second, we are pursuing opportunities to deploy a portion of our capital expenditure budget toward enhancing our product offerings to be more compelling and attractive to a broader range of customers. Consumer spending patterns have shifted over the last several years and it is imperative that we remain competitive by adjusting our products.

So they're well positioned to grow. To take advantage of this opportunity, we’re investing in projects aimed at enhancing and repositioning certain amenities at our properties across the country. Some examples of these projects include a new sports bar and grill we opened this week at the Suncoast.

This new amenity provides guests with a unique sports viewing experience with nearly 30 LED screens throughout the facility. And this will not be the only project at the Suncoast as we plan to further revamp their food and beverage product in the coming months.

And in December, we will commence work on an upgraded nearly 400 hotel rooms at the property. Next year at the Orleans, we will begin the repositioning of its food and beverage offerings and we will complete the final phase of the successful hotel room remodel that began earlier this year.

We are planning enhancements to our offerings in Downtown Las Vegas as well. Starting with a new Asian restaurant will open at the California in December. Outside of Nevada, at Evangeline Downs, we see an opportunity to generate incremental growth by revamping our food and beverage offerings.

Design work on these projects is now underway and we have planned to commence construction in the first quarter of next year. At the IP, work has begun on the final stage of an upgraded enhancement of our hotel product. We will complete the remodel of more than 300 hotels in January of 2015 followed by more than 50 suites in the second quarter.

At the Kansas Star we will complete the expansion of the property by the end of the year adding meeting space and equestrian support facilities, that should help driving additional visitation in 2015.

The initiative to enhance and reposition our amenities will not be a one-year project, but part of a multi-year effort to ensure our properties are well positioned to compete into the future.

Nationwide we will pursue these projects in a thoughtful, targeted and efficient manner and we will only invest where we believe we can generate a positive return on our investments. We'll invest in growth, but we will not lose our focus on deleveraging the balance sheet.

Finally, we are always working to ensure that our portfolio and business structure are best fit to position our company for the future. Over the last several years, we’ve significantly expanded our operations.

We now operate 22 properties in eight states, serving 15 distinct markets, and competitive conditions in some of those markets have changed considerably over the years. We’re carefully reviewing our current portfolio to ensure that each asset fits into our current growth strategy.

We will consider making adjustments to our portfolio if we feel it will improve our overall profile going forward. We remain open to expanding our portfolio through development opportunities and acquisitions of businesses we believe will create value to our company and our shareholders.

As we look to refine and enhance our portfolio, we're also taking a careful look at our existing structure.

As part of this process, we together with our Board, have been working with our financial and legal advisers, Greenhill & Company and Morrison and Foerster to make sure we are best positioned to increase shareholder value over the long term including potentially through the formation of a REIT.

We have been undertaking a thorough evaluation of the possibility of forming a REIT with our real estate assets, taking into consideration the associated financial, accounting, tax and legal implications. So far this year we have invested more than $3 million in this process.

While we still have extensive analysis to conduct, initial indications would suggest the forming a REIT is achievable and attractive under certain circumstances. However, there are various aspects of our capital structure that make potential value creation through a REIT challenging at this time.

These include our leverage levels today, breakage costs and finding the right way to maximize the value of our preexisting NOLs. The evaluation of whether to form a REIT takes a considerable amount of time and thoughtful consideration, so this will not be a quick process.

In the meantime, we'll continue to execute the strategic plans I outlined earlier. We cannot stress enough the complex nature of the REIT formation and the many structural, operational and financial challenges that REIT formation presents especially for a company with our capital structure.

As a result, there is no assurance that we will ultimately decide to form a REIT. We do not expect to provide updates on this process or our ongoing evaluation unless or until our Board has approved a specific transaction or otherwise deems that additional disclosures are appropriate or necessary.

Accordingly, we will not be in a position to provide further information or comments about the REIT on this call. So to recap, this is an active time for our company as we pursue a number of strategic initiatives. We’re finding ways to further improve our operational performance and our flow-through potential.

We continue to aggressively pay down debt and strengthen our balance sheets. We're enhancing our properties across the country with a particular focus on strengthening non-gaming amenities.

We're reviewing our portfolio of assets and will make adjustments as necessary and parallel with these initiatives, we’re evaluating the best way to increase shareholder value including the possibility of forming a REIT. Thank you for your time today. I'll turn the call over to Josh.

Josh?.

Thanks, Keith. During the third quarter, we continued to make progress in strengthening our balance sheet. Total debt reduction year-to-date has been over $165 million and since the beginning of 2013, we’ve reduced debt by nearly $700 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 $41 million including $9 million at Peninsula and $3 million at Borgata. Year-to-date capital expenditures have been $95 million. For the year we expect to spend approximately $110 million at Boyd and Peninsula and $25 million at Borgata.

As many of you may know, MGM was recently relicensed in New Jersey. The trust holding MGM's 50% interest in Borgata was dissolved on September 30th resulting in our accounting treatment for Borgata changing as of that date. We'll now account for Borgata as an equity investment.

The deconsolidation impacts our balance sheet as of the end of the third quarter and moving forward beginning with the fourth quarter on our income statement. We will account for our interest in Borgata using the equity method of accounting.

This change has no economic impact on our operating results, though it obviously affects the presentation of those results. We’ve provided an additional exhibit to the Form 8-K furnished earlier today with this quarter's earnings release that presents on both a GAAP and non-GAAP basis.

Our quarterly results for this year and last year on a pro forma basis with Borgata accounted for under the equity method. The GAAP presentation is consistent with our accounting for Borgata prior to the first quarter 2010, when MGM's interest was placed in the divestiture trust and we began consolidating Borgata in our financial results.

The non-GAAP presentation includes our 50% share of Borgata's EBITDA and two additional reporting line items below EBITDA, to capture items such as depreciation, free opening, taxes and interest expense.

In terms of guidance, I'll bridge the gap between our previously provided full year guidance to the results we expect on a full year basis taking into consideration this accounting change for Borgata.

In terms of guidance, assuming there had been no accounting change for Borgata, we are narrowing our full year EBITDA guidance to the high end of the previously provided range. On this basis, EBITDA is expected to range from $590 million to $600 million for full year 2014.

After consideration of the Borgata change in accounting for the fourth quarter, consistent with how we will report EBITDA from a full year basis, that is including all of Borgata's EBITDA for the first three quarters and 50% of Borgata's EBITDA for the fourth quarter, we expect full year EBITDA to range from $576 million to $586 million.

This guidance considers current trends in our business, certain nonrecurring items that occurred in the fourth quarter last year and the expected introduction of a new competitor in Lake Charles later this year.

We’ve also assumed more normal weather than what the entire country experienced last year in the fourth quarter, and a normal whole percentage of Borgata that negatively impacted that property's fourth quarter performance last year.

Specifically, in our Downtown segment, in the fourth quarter last year, there were non-recurring favorable tax items totaling approximately $2 million that will not benefit the downtown segment in the fourth quarter this year.

For the Midwest and South segments, remember to consider the $9.3 million property tax adjustment that benefited Blue Chip in the fourth quarter of 2013 that will not recur in 2014. In addition as was mentioned, we expect a new competitor to open in the Lake Charles market in December.

We previously had not included in 2014 any impact as a result of this supply increase. As you know the Lake Charles market is a healthy gaming market and we expect the new supply to grow the market. However, as Keith mentioned, we do expect an impact to our Delta Downs property.

For the Peninsula segment, we expect the year-over-year EBITDA trends of the third quarter to continue in the fourth quarter, and at Borgata the fourth quarter will benefit from approximately $7 million of property tax reductions as a result of the settlement reached earlier this year with the city of Atlantic City.

That was not reflected in the fourth quarter last year. Finally, a couple of items related to Borgata that are not included in our guidance. Borgata has two remaining actions yet to be finalized related to its property tax appeals.

First, we expect Borgata to receive a onetime cash benefit of approximately $88 million related to the 2011 through 2013 property tax settlement. This payment is dependent on the city of Atlantic City issuing bonds. Upon receipt, this payment will be used to reduce debt at Borgata.

Additionally, Borgata's 2009 and 2010 property tax appeal is moving through the legal process. Recall in October 2013, the tax court ruled in Borgata's favor and that ruling is currently being appealed by the city of Atlantic City. In conclusion, we had a solid quarter.

In the Las Vegas Locals and Downtown markets we saw modest revenue growth lead to solid EBITDA growth and margin improvements.

While we continue to experience revenue declines in the regional markets, there are initial signs of stabilization in most of our markets and we were able to operate more efficiently and improve margins in nearly all of the segment, and at Borgata we benefited from a fundamentally strong business as well as lower property taxes.

With that, Jamie, that concludes our remarks and we are now ready to take any questions..

(Operator Instructions). Our first question comes from Felicia Hendricks from Barclays. Please go ahead with your question..

Keith, you've made in the – I believe it was in your release, in your prepared remarks that you're starting to see signs of stabilization. We’ve also heard that from some of the other regional operators. I was just wondering from your perspective if you could flush that out a bit.

And is that more about the anniversary of tough comps or are you seeing a change in customer trends?.

Well the thing I noted in my comments, it's a little bit of, you know, less bad. The gap is narrowing so the revenues are still down at many of the properties. But it is, you know, less of a decline. But I think it's combination of we’re seeing some better customer trends. But we also had tough comps last year.

I think at this point Felicia; it's still a little bit more of the same, just continuing to get maybe just less bad with the passage of time. Not sure if that helps. That's kind of how we feel about the business right now..

And is that across all of your markets or are there some markets that are looking less bad or time than others?.

No. I think (indiscernible) the regional markets are not all created equal. Delta Downs, as I said, had a great performance with records. The Blue Chip market was very strong. Par-a-Dice is being impacted by competition. The Shreveport market is a tougher market than the Dubuque, Iowa, market. So they are all somewhat different.

It's really tough to paint it with a broad brush..

My next question, on the Las Vegas Locals market, you said you saw growth, mostly to non-gaming.

Can you discuss the year-over-year performance of gaming in the quarter? Should we just assume that all of the growth was due to non-gaming and perhaps gaming was down year-over-year?.

You should assume all the growth came through the non-gaming areas. That's where we're seeing the pick-up in the business, you know, game revenue is flattish..

Okay. And we've talked before about this, you know, just related to the additional construction work that's starting to get underway on the strip that's planned.

Are you seeing any early signs of pick up there as you look forward?.

We haven't yet. But I think a lot of the larger projects haven't really begun to staff up, if you will. And so you have the Resorts World project by (indiscernible) on the strip should add a tremendous number of workers, that hasn't really started yet.

A number of the other projects haven't really kicked off yet construction workers in town generally are up off of the kind of the bottom where we were at or up off of the trial. But we haven't seen that translate into increased business just yet for us..

And to add to that a little bit, I think there is definitely not a enough construction workers for the amount of construction that is on the kind of board to be built or to start.

So I think we're just starting to see the traction of some of that, and I think really it goes to a belief that kind of the reduction in employment that we've seen over time, really has been more from either folks not looking for jobs any longer or people finding, you know, working at multiple jobs through part-time employment.

And what we at least – or envision through the construction that is kind of only on the upswing here is that those will be creating kind of full-time jobs either through the construction employment themselves or through the buildings that they're building and other businesses that are being created.

So I think we're a little bit more optimistic about what that could mean for our market over time. But again to kind of ground it is we're not seeing that as yet..

Okay, and just finally to ask a clarification. I think you said that Atlantic – maybe I misunderstood you, but Atlantic City margins were up year-over-year.

But if we adjust for that tax benefit we see them flat year-over-year?.

I don't – I haven't done it that way. We can do it real quick and see if you've done it that could be true. I would be a little bit surprised at that, but let us do the math and get back to you on that..

It's just 56.9 minus 8.1, right?.

Minus 9.3..

Oh, 9.3. Okay, that will make it even worse. Okay, yes. We could talk about that offline. That would be great. Thank you..

Oh, wait, wait..

Wait, no. It's 8.1. It says right here in the release..

8.1, that's right. 9.3 is at Blue Chip, so, yes..

Yes, because if you back out the 8.1 then, you know, the margins were lower than what we would have expected. I'm just wondering, did you have some sort of pick-up on marketing in the online side.

What would have been driving that?.

I don't know that. I'll have to look into that and get back to you. I know that there has been a little bit of promotional increase toward the end of the quarter as we ran marketing to try to drive play from some of the closures.

But I don't think that that would have been that significant to affect it, and then also the online business last year wasn't there versus this year. So that was about $6 million – I think you’ve to factor in or think how the online business affected that as well. But I'll look into it and we can handle that offline. .

Our next question comes from Shaun Kelley from Bank of America Merrill Lynch. Please go ahead with your question..

So I just wanted to ask I guess briefly, maybe to follow-up on Atlantic City.

Obviously, plenty of headlines about all of the closures there, so just give us maybe a little bit more of a characterization of what you saw in the quarter were you able to pick off some business and is there some competitive strategy to actually maybe gain further share in the future?.

Well, once again we – early in the quarter we began to see pick-ups in room bookings and meeting convention business. Some of our night life business was picking up and I think in September we started maybe a more active approach to try to attract some of those customers who are in database, we have had some success.

Borgata has been in the market for a long time and so the customers know our product. They know it's there, and I think it's a balance between how much we pay to get those customers in the door and so we have gained some traction. We’ve gained some customers, but we're not going to overspend to do it.

And once again we’ve seen good increases in hotel bookings and rates and meeting and convention business as a result of the closures..

And my other question and I appreciate you guys certainly don't want to get into the details on the REIT, but since all of the disclosure on that was new and incremental, I guess a lot of people are probably wondering. Obviously if you guys decide to do something, we will hear.

But if you guys kind of evaluate and decide to step to the sidelines, is that something you would update us on at the time that it's appropriate or at the time that you've concluded your analysis? Or is that unlikely?.

I think the best way to think about that, Shaun, is you would see us probably moving in a different direction and by the fall you would know at that point.

So I don't think specifically we would say yes or no at any point in time, unless it became so obvious that we weren't going to do it, but I don't think we can provide much more color at that point than at this point..

Our next question comes from Carlo Santarelli from Deutsche Bank. Please go ahead with your question..

Just on Atlantic City, obviously we've seen a couple closures. Taj Mahal, clearly one that's rumored right now to be going through some struggles and potentially closing.

Of the stuff that's closed so far, I know acknowledging a lot of them aren't necessarily the Borgata customer, but do you think from some of the more recent closings and some of the more potential future closings, you could start to see a little bit more of that flow in your property?.

Well we certainly hope so. Once again it has to come to us at the right price. We don't want to pay too much for it. Look, we would rather see these properties stay open and have a more robust operating environment. If they close and those customers aren't available, we'll certainly try and attract them to the Borgata.

I don't know that I have anything else to add to that..

Then just on the REIT comments, and I'm sensitive to the fact that you guys don't want to divulge much, but If I could ask a two part question. One, you mentioned the NOLs being part of the complication.

I'm wondering if through your due diligence so far, you've found any concrete determination as to whether or not those NOLs would be transferable to the outgo business and the second part of that question would be Josh, you mentioned going in a different direction. And it would be obvious.

I guess what are some of the other alternatives out there that maybe we are not thinking and is that something along the lines of acquisitions, etcetera?.

Look, I appreciate the question, but as I did say in it my comments earlier we are really not in a position to provide any further information on the REIT topic. We said what we were going to say in our comments and we'll leave it at that..

Our next question comes from Thomas Allen from Morgan Stanley. Please go ahead with your question..

Congrats on the quarter, and excited to hear more about the REIT, potential REIT. So just on your guidance, just want to understand how did – because you are not giving quarterly guidance any more.

I mean, how did 3Q compare to your internal models?.

Well I would say that our guidance typically reflects kind of how middle of the road – how we think the business is going to perform and we're using kind of our best kind of information. We’ve from our existing operations folks and kind of saying that's kind of the middle of the fairway.

So the fact that we performed kind of in the middle of the range that would be generally where we would expect our business to be. If it we're above that then obviously it's to the upside and if we missed that, then it's down on the lower end of that range. So I think we purely take what the best information we’ve and set the guidance around that.

There is not much more science to it than that, and there is not any kind of games that we try to play. It's really just based upon what we're seeing in the business and what our own internal models are showing us. I don't know if that helps. But that's how we do it..

So we can imply because you raised your guidance to the high end of the range, the third quarter came in at the high end of your range and you extrapolated that into the fourth quarter, and so that's my first question.

And then second part of this question is, you guys previously talked about – you called out weakness in September and December last year as being easy comps.

Now that we've gone through September, how did that perform, based on this easy comp and then how are you thinking about December now?.

Yes, what I would say is September in my own view is that September wasn't as strong as we would have expected it to be relative to how weak it was in the prior year. And to me that's kind of what the basis of less bad and less bad kind of continues.

I think December was very weak last year and so given what we've seen for September in that – it wasn't as strong relative to the weak September that we had last year. I would say that we're expecting an easy comp, but not to do as well year-over-year as maybe we would have expected maybe in the first half of the year.

So it's just more of the same, not so much easy comps that are driving our performance in relation to prior year. We are not kind of taking it to the bank that that's going to be an easy kind of level of performance basically..

And then two questions on AC and then I'm done. So Rebel closed, and I guess I read that it was re-bought. What do you think your chances are that property opens again? And if it did how would it affect you and the market? And then any thoughts around Poker Star potentially entering the online space? Thanks..

I think with respect to Rebel reopening, you probably have as much information as we have. If it reopens, it just brings more customers I think into the market. I think what we have seen recently is some of these other properties have closed that the customers have left the market.

So they're having more rooms in the market and more people in the market is a positive and we'll do fine. With respect to Poker Stars, once again we don't have any insight or any knowledge. As we built the model to operate online gaming in New Jersey, we just assumed they would be involved at some point in time.

So that's the ultimate decision by the New Jersey regulators, then that's it. We'll be prepared to deal with it..

Our next question comes from Stephen Kent from Goldman Sachs. Please go ahead with your question..

Just two questions, Felicia asked earlier about trends and whether you were seeing a broad improvement. I just was wondering whether the – or somewhat of an improvement, I'm sorry.

Can you tell us whether it's visitation spend per visit? What kind of characteristics are you seeing there? And then second I was intrigued by some of your comments about some of the modest CapEx programs to enhance the existing casinos and you said you were looking for a positive return.

When you evaluate those projects, are you looking at per – let's say the restaurant's return in and of itself or what it's going to do to the overall property or any other amenity that you plan on having?.

Well with respect to your second question in the capital investments, I think it's like any project. You look for the overall return. Now if it we are upgrading a restaurant, we'll look for both the impact that we think that new restaurant will have, whether it's increasing covers, increasing average check, increasing profitability.

We are drawing new people, new customers, customers who aren't there today into the building and potentially having some benefit in the casino. It's kind of an all-in or a total view of the worth of that customer who will come into the building.

With respect to kind of the trends that we're seeing, I think my last comment to Felicia, which is these regional markets aren't all created equal, you see different trends in each of the markets. It's a little hard to take a brush and say it's frequency, its visitation, it's spend.

It's a little bit different given the dynamics in each of the markets whether it's Illinois or Indiana or Delta Downs where what's in the business is very robust or Dubuque or Worth, Iowa, where it's kind of flatter. So it's really hard to provide a singular explanation to visitations up, visitations down.

It is somewhat different in each of those individual areas and I don't have all the details for every property in front of me. So I'm not in a position to actually go through it..

Okay, and just because you have to ask a REIT question.

Are will you have incremental expense associated with looking at this REIT idea over the next year or two?.

Well I guess I would challenge you on whether or not you have to ask a REIT question. I don't think you have to ask a REIT question..

I just want to be one of the gang..

The thing is, I'm going to have to provide you my standard answer which is that we're not in a position to provide you any additional information other than what we gave in our prepared comments. But thanks for the asking..

Our next question comes from Kevin Coyne from Goldman Sachs..

I was just wondering in term its of operations, with the lower gas prices, mostly subsequent to the quarter.

Have you seen an additional – let's day a benefit on ops?.

Historically in our business, we would see fairly quick reactions to both increases and decreases in gas prices and sometimes other commodity prices. But more recently and in more recent years it seems to be much more transitory and people don't react either way.

When they go up, they don't seem to react too much, and when it goes down, they don't seem so react. Obviously it makes the consumer a little healthier. We’ve not seen any sort of short term pickup recently because of the decline in gas prices..

For my next question I will not use the word REIT.

I will say as you evaluate strategic alternatives, would you say that that evaluation would prevent you from potentially looking at your callable [ph] debt and refinancing that?.

I don't think so. I think we would – one is a little bit kind of – we're going to try to take advantage of opportunities as they present themselves. So as we kind of develop a view of one strategic alternative versus another in the context of opportunities in the capital markets. I think we will try to take advantage of those.

So if it makes sense economically for us and a strategic alternative is a little uncertain or we don't know the timing of it or the details of it, we are going to try to execute on that financing..

Okay. I guess related to that.

Has Atlantic City said when they're going to issue the bond to fund your tax refund?.

I would say that we expect it to occur by year-end and that's about all we know at this point. Obviously it's dependent on them to being able to access the markets that they want. But everything we understand indirectly is that it should all be done by year-end..

And just one final one, which I will reference a REIT.

As you let's say look at your Gantt chart in the evaluation, is it measured in weeks or months?.

Keith has to answer that question. At the risk of repeating myself, we are really not providing any additional information..

Okay..

Our next question comes from John Maxwell from Jeffries. Please go ahead with your question..

Just a couple of quick ones, Keith, you've talked a little bit about the energy. But I'm just wondering at Delta Downs you mentioned the new competitor.

But is there any concern that lower energy prices in that region affects the local economy or is that too early to tell?.

I would say it's too early to tell. It is very, very robust area. Down there weather is – the oil drilling that was occurring offshore all the facilities on shore, the repair shops, whether it's the, LNG product in Lake Charles and all of the production facilities.

I mean there are tens of billions of dollars' worth of projects going on in Lake Charles there from construction standpoint to deal with the energy infrastructure. So I think short term decreases in oil prices or gas prices really are transitory and it's not going to have a long term effect on that economy down there.

We certainly are paying attention to it, but it's probably just more short term related..

Okay, and then just curious on the IP. It sounds like there was a couple of properties in that market that completed big renovations. But it sound like the IP held up pretty well.

Is the market overall in Biloxi getting a little bit better? Is that part of it?.

No, I don't think so. I think we're finding ways to compete better. I think the market is flat, up maybe just a little bit depending on what month you're looking at it. It really continues to be a tough market; Golden Nugget has opened a new property down there. I think we have been able to effectively compete against that.

We really look to compete mainly with the Beau Rivage in terms of that product. They have the two best products in the market and I think the team down there is just continuing to find ways to operate the facility better. Not always about driving higher revenues, but driving profitable revenues..

Okay, and then just finally, Josh it sounds like you're going to wait for the Atlantic City tax refund, that comes in, pays down debt. Is refinancing the 9 and 7/8ths [ph], is that a decision you and MGM have to make now that they're back in? I assume that that's totally independent of anything you do at the corporate consolidated entity..

That's correct, John. It would be a decision that as managing partner, we would recommend. And discuss with MGM and assuming they approved it, we would execute the transaction.

And it largely depends on, as you mentioned, receiving the funds from settlements, and so that really changes the capital structure profile and credit profile of Borgata pretty significantly.

Not only obviously paying down debt is the obvious benefit and then the benefit that we've spoken about more recently in terms of just reduced property taxes overall.

So those two things combined together really kind of set Borgata up very nicely in terms of being able to generate even more free cash flow and just deleverage itself on an accelerated basis. So that's really kind of the event that we are waiting for and then we'll kind of evaluate where markets are and go from there..

And our final question today comes from Joel Simkins from Credit Suisse..

I promise no REIT questions, but I'll have to figure a way to work it out into my title. I guess a couple quick questions. I guess one, Keith, Josh, you get to talk about the Las Vegas Locals market, the overall competitive tone and if you are seeing any sort of divergence across the town, east side, the west side, vice versa.

Would love to get your commentary on what's going on in the market..

No, not really. We all operate in different parts of the valley. Each of the markets is somewhat different whether on the northwest side where Suncoast property is or the southeast side, out where the Sam's Town property is on Boulder Highway.

The demographics are different in each of those markets, but they're generally seeing kind of flattish gaming revenue and seeing more growth in non-gaming revenue whether it's in the east side or the west side and in the northwest or southeast..

I would emphasize Joel, it's as much as those properties that are close to the strip getting the overflow and having their own convention related business. Even Sam's Town has a significant number of hotel rooms and the ability to drive non-gaming revenues there.

So it's fairly broad based on a non-gaming side of things and that's really where we talked about in the prepared remarks, positioning – trying to position the properties going forward to capture more of that cash revenue that folks are willing to spend..

And one other quick question. It's been a while since we have heard anything on the tribal agreement you had signed in 2013.

Is there anything new to report there?.

No it actually just continues to – you've got to work down the path. These tribal or native gaming opportunities just take a long time to get across the finish line. We are in the EIS process right now and it's still probably a few years into the future before we look at opening a facility. But it is on track, just long, slow process..

And ladies and gentlemen that does conclude today's question and answer session. I would like to turn the conference call back over for any closing remarks..

Thanks, Jamie. And thanks for everyone dialing in today. We are obviously available to answer any non-REIT related questions that you may have as follow-ups to the call. So feel free to reach out to us. Thanks..

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines..