Pinnacle Entertainment Inc. Q3 2008 Earnings Call Transcript

Nov. 7.08 | About: Pinnacle Entertainment, (PNK)

Pinnacle Entertainment Inc. (NYSE:PNK)

Q3 2008 Earnings Call

November 6, 2008 11:00 am ET


Chris Plant – Vice President and Treasurer

Dan Lee – Chairman and Chief Executive Officer

Alain Uboldi – Chief Operating Officer

Steve Capp – Chief Financial Officer


Joe Greff – JPMorgan

[Neil Polit] – Barclays Capital

Celeste Brown – Morgan Stanley

David Katz – Oppenheimer

[Dave Alerento] – [Shadow Net Income]

Dennis Forst – Keybanc


At this time I would like to welcome everyone to the Pinnacle third quarter earnings call. (Operator Instructions). Mr. Plant you may begin your conference.

Chris Plant

Good morning everyone and thank, welcome to our third quarter 2008 earnings conference call. Earlier this morning we released our third quarter and year-to-date 2008 financial results. If you do not have a copy of the announcement and would like one sent to you please contact us at 702-784-7777 or

In a few moments you will hear from and have an opportunity to ask questions of our chairman and CEO Dan Lee, CFO Steve Capp, and Chief Operating Officer Alain Uboldi. Now let me remind you that during the course of this conference call management may state beliefs and make projections or other forward-looking statements regarding the future events and future financial performance of the company.

We wish to caution you that such statements are just projections and expectations and that actual events and results may differ materially. I refer to you the safe harbor statement that’s included in today’s press release and to our annual report on foreign 10-K, quarterly reports on foreign 10-Q and to other press releases and documents filed with the SEC.

With that said I will turn the call over to our Chief Operating Officer, Alain Uboldi.

Alain Uboldi – Pinnacle Entertainment Inc.

Ladies and gentlemen good morning. The third quarter 2008 total revenue of $268 million, with consolidated, adjusted EBITDA $39.9 million compared with revenue of 238 million and an EBITDA $47 million in 2007.

The third quarter started very strongly. July was an excellent month as was August until the very end of the month when Hurricane Gustav forced us to close our properties in New Orleans and Lake Charles during the important Labor Day weekend.

Hurricane Ike came two weeks later forcing us to close L'Auberge for several days and also disrupting operation in New Orleans. Ike moved up the Mississippi and caused flooding in San Louis and power-related outage at Belterra.

The loss of revenue due to the weather events and the repairs incurred at the properties afterwards reduced EBITDA for the quarter by approximately 7.3 million. The result of the company was otherwise very encouraging given the other things happening in the U.S. economy.

At L'Auberge du Lac adjusted EBITDA was$ 21.8 million and the revenue was $81.9 million. We estimated a loss of revenue for the properties from the hurricanes was approximately $10 million. That equates to about an EBITDA of $5 million, which includes some repairs due to the damage of the hurricanes.

If it was not for the two hurricanes we believe L'Auberge income would have been at ninety in the quarter as it was in the second quarter. Results to date in October suggest that the properties are returning to the expected level of business prior to the two hurricanes.

Boomtown New Orleans, the revenue for the property was, an EBITDA of $11.2 million compared to $13.5 million in 2007. Again, we believe results would have been up except for the hurricanes.

Based on the preliminary October results our property has been performing extremely well considering the circumstances. In fact the slow business has returned to the same level as the level prior to the hurricanes and, the table game business is recovering as expected. The [Altera], as an increase in competition with introduction of slot machines at two racetracks in Indianapolis, which start in June 2008.

The Harris Horseshoe property in Louisville also was marketed heavily as refurbished and re-branded facility in recent periods. Our objective has been to preserve market share, which we did and we increased our marketing for it accordingly.

During the quarter the EBITDA was slightly affected by the passage of Hurricane Ike with very high wind as well as some problem for another weekend when we had a problem with the supply of water to the property. That decline was about $300,000. In Bossier the Shrimp Boat Bossier Casino competes with several large Native American casinos at the border with Texas and Oklahoma. One of them has opened a portion of the expansion already and the full opening for 6,000 machines will be complete by the end of 2008.

We have been able to maintain our revenue very close to 2007 and our EBITDA was slightly up at $4.5 million compared to $4.4 million in 2007. At Lumiere Place in Saint Louis we are making great progress even before passage of Proposition A on Tuesday.

The total revenue for Lumiere Place was $5.9 million in the quarter, which includes Lumiere Place Casino, Four Seasons Saint Louis Hotel, Hotel Lumiere and the Admiral Riverboat Casino.

The Lumiere Place Casino, Hotel Lumiere and Four Seasons showed significant improvement of revenue and bottom line during the third quarter. Hotel Lumiere, which had 89% occupancy for the quarter.

The Four Season had the large increased occupancy to 64% in September when July was only 49%. Lumiere Place stabilizes marketing costs and payroll after the usual push for both types of expenses common to any opening.

This improvement however, was somewhat offset by increasing loss of the President, which had to close for 22 days in the quarter due to flooding. I’ll let Dan address the President problem in greater detail in a minute.

Boomtown Reno, the increased competition for the Native American Casino in California and the California economy has impacted Reno market in general. Our property returned to profitability in somewhat EBITDA in the seasonally better quarter, although such profit was less than a year ago. On the international market the Casino at Emerald Bay in The Bahamas is now classified as discontinued operation for all periods and therefore is excluded from our international segment. It is scheduled to close just after New Year’s weekend.

In Argentina, the third quarter revenue was $11.4 million compared to $10.7 in 2007, while the EBITDA was 3.7 in 2008 compared to 4.4 in 2007. We have been hampered by a smoking ban since November 15, 2007 that did not apply to our principal competitor in the neighboring province.

Effective November 3, 2008 the adjoining province, Rio Negro would impose the same smoking ban as our province on Neuquen and therefore will ultimately help us compete with our nearby competitors. On that I would like Dan to take over.

Dan Lee

I will just reiterate a couple of things. I mean we operate a number of casinos in the gulf regions so Hurricanes are a bit of a fact of life for us. It seems like on average you get one a year or one every other year, nonetheless this year we had two which is unusual and the two both fell on weekends.

I mean one fell on Labor Day weekend and the second one fell on an Asian Holiday Weekend later in September and so I think the quarter had kind of unusually bad weather if you just kind of assumed we always get one Hurricane and there is a two-seventh's chance that it’s going to be on a weekend you can kind of see how all of a sudden you get two and they are both on weekends and that’s kind of a tough quarter.

A part from the Hurricanes it was actually a very good quarter and I think even with the Hurricanes relative to what we see elsewhere in the casino business we seem to be doing pretty well. Proposition A passed in Missouri. We always felt like the general population thought that the loss limits were a little bit silly.

The industry had tried for years to go through the legislature, could not quite get there. Usually part of the problem as I stated on earlier calls is the senate of Missouri has a tradition of not stopping filibusters and so all it really took was one senator to block a bill.

So we took the more expensive route of going directly to the people with a proposition and it passed quite handily. And now we’re working wit the gaming commission to implement it as quickly as possible.

Obviously it takes a new set of regulations. They’ve already published kind of a draft of it. My guess is it will be 30 to 60 days. We’re trying to deal with it before New Year’s Eve because it would be nice to pick up a New Year’s weekend. But we’ll see, but I think it’s somewhere in that timeframe.

There’s another aspect of it as well, part of our early polling in trying to draft Proposition A we discovered that they’re large parts of Missouri that are quite conservative and they really don’t want casinos in their neighborhoods and so we knew we would pick up some votes for Proposition A by putting a cap on the number of licenses.

We actually weren’t concerned about the competition we’ve got; we have lots of competition. We have no problem competing with the casinos we compete with. But we knew that having a cap in the number of licenses would help get some votes.

That in effect creates some value at the President Casino which we bought a couple of years ago. And the President has been loosing money kind of steadily all year and the losses actually have been increasing almost exponentially.

It’s had to close twice this year for flooding and each time it closed when it re-opened didn’t get back to the levels of business it had before. And, so, we’ve basically kept the casino open just because we didn’t want to loose the license especially with an initiative coming down the road that would cap the number of licenses.

So now the license has some value. We had previously assured the Mayor, Mayor Slay of Saint Louis that we would not seek to move that license out of the city and in fact the Proposition A legally restricts it.

The licenses have to stay within the city or county in which they are in. Now we have an option on a piece of land just to the north of the Chain of Rocks at the extreme north end of the city of Saint Louis and on the west bank of the Mississippi.

And, we intend to work with the city and ask the gaming commission for permission to move the President River boat up to that location. Now the President River boat is a very old boat. The hull was actually over a hundred years old now.

And it has a limited life, there is a point where you would have to re-hull the boat and that wouldn’t be economical to do so but we think there is a few more years left on that hull and we would like to move it up to the Chain of Rocks and see what sort of business we could generate.

The population density up there isn’t all that high but that is the major east west corridor of Interstate 70 and there is something in the neighborhood of 30,000 cars a day crossing the Chain of Rocks Bridge that are not commuters, that are just traveling.

The actual vehicle count is quite a bit higher than that. But if you take out people that might just be commuting across the river there seems to be about 30,000 cars a day that are traveling across the country or they’re driving from Indianapolis to Kansas City or something and that traffic today misses all the casinos in St. Louis.

It’s routed onto 279, I think the highway is called 370, and it goes north of the stuff at Maryland Heights and St. Charles and it’s well north of Lumiere Place and so we would like to move the President up there and see what’s sort of business there is and if there is decent business which there might be then we would contemplate building a more permanent structure to replace the President when the hull is no longer viable.

But what that facility would be, would depend on how much business we generate. So that’s kind of the game plan for the President and frankly just moving it would improve the results of the downtown complex because it’s loosing money and it looses half as much money as everything else earns.

So it, just moving it out of there would help the results pretty significantly. The rest of the property project in Lumiere Place is doing very well. The Four Seasons made money in September; the hotel Lumiere has made money steadily. The casinos had increase in profits virtually every month and of course we think Proposition A will only help even more.

We’re actually positioned to become the higher roller venue in the Midwest. There’s great air service into St. Louis. It’s centrally located. We’ve got a wonderful, two wonderful hotels, one is a Four Seasons the other is the hotel Lumiere. We’ve got beautiful casinos, great restaurants, and then in our neighborhood are great restaurants and museums.

And sporting events, there’s a sporting event almost one of two nights in downtown St. Louis whether it’s a baseball game, football game, or hockey game and so if a team is down from Chicago we’ve got the perfect excuse to invite somebody to come down and see a ball game and stay at the Four Seasons Hotel and you couldn't do that with a $500 lost limit, you had no hope of recouping what you had spent on somebody from Chicago when they hit the $500 loss limit.

In fact, it's pretty funny, on Monday night, I was walking through the casino with [Andrew Zarnet] and we were in the high roller part of the slot machines, and a customer comes up to me and says, "Do you work here?" and I said, "Yes, kind of," He said, "My slot machine stopped working, what do I do, I'm not from here, it just stopped."

And I looked at my watch and it was 9:58 and I said, "Believe it or not, if you wait two minutes, it'll start working again." He said, "What?", and I said, "Yes, you just have to wait two minutes, and I know it's really silly and stupid, and that's why I've got this button on, but let us get you a drink and we'll just stand here and it'll start working in two minutes, I promise." And that's what we've been dealing with for a year, and it's going to be great to get rid of it, so.

In River City, south of there, I just realized I jumped ahead of Steve, but we'll go back to Steve in a minute. In River City, steel work, is going up, you can see it on our website. The road is nearing completion. The contractor under the guaranteed maximum price contract tested to deliver back to us, I think in January 10, if I remember the date, no later than. It'll take us a little while to train the employees to get open, so it's probably at first quarter, 2010 opening. It's really starting to take shape now.

Now, we have an informal policy, of trying not to start serious construction on something unless we're reasonably certain of having the money to finish it. Seems like a pretty good policy when I look out my window and see Echelon with $500 million sitting over there baking in the sun. So, just to take you through some of the numbers, that's a $375 million project, about $25 million of that project budget is capitalized interest, or there's some screwy accounting dealing with the lease. We have a 99 year lease, and the rent doesn't begin until we open.

The accountants, for some reason, add up the 99 years without any discount factor, divided by 103, and we have to take the charge during construction, related to a 1% of the sum of all the future rent payments, so we are taking a charge now, even though we are not paying anything. And then when we actually open, we will have a smaller charge than what we actually pay. I happen to think it is totally absurd accounting.

But it's a little bit of that $375 that is a non cash item, so if you take out the non cash stuff, or capitalized interest, obviously, we're actually paying interest, but you either account for it as a project cost, or you account for it as a reduction in pre cash flow from operations. I've seen some analysts make the mistake of deducting it both places, and you shouldn't do that. But if you take off capitalized interest, and the lease stuff, there's about $350 of cash costs, we're in at about $100, so there's about $250 to go.

Our credit facility is $625. With Lehman gone, it shrinks to about $590. You know, Lehman was a small piece with credit facility, a piece, they were about $45 million, and about $10 of that was drawn, so we lost about $35 million. So it's $590, all of which is pretty irrelevant because we have a bond covenant that limits us to borrowing $350, so we could actually have about half our banks go bankrupt before it starts to really affect our liquidity, and so what we can borrow is $350, about $125 is drawn, there's about $125 million of letters of credit.

So we have about $200 million of availability today under the credit facility. Now, obviously we have to stay within the covenants and meet all, the other borrowing requirements, to be able to do that, and we plan and expect to do that. One of the things, and it was mentioned in the press release, is the credit facility had anticipated River City being opened by now, so some of the ratios start coming down, or have been coming down, and it gets a little closer than we'd like in the middle of next year. So we may seek to go change some of those covenants.

And we've talked with our banks, and don't see a problem in doing that. They will want to improve the pricing, because we pay LIBOR plus two, which is today what, 4.35 % or less than that, so, you know, frankly in this environment I'm astounded that we can borrow money at 4% so, I think we end up modifying the pricing a little bit but I do think we get that done. It's not completely clear that we need to, but I think that it would be prudent to do so, because we're all wondering what the hell the economy is going to do. Clearly, we're in a recession, but so far, or properties seem to doing ok, but I don't want to bank on that, so I think there's a pretty good chance we'll seek to modify some of those covenants, and the cost of the bank loan will jump to something like 6 or 7, or 8% instead of 4.

So that leaves $50 million, we've got some pretty good surplus cash today, and then we have some pretty good cash flow from our operations. The last construction bills wouldn't be paid until about 18 months from today. So we're in pretty good shape, building River City if you kind of factor all that through.

So, Sugarcane Bay, we're working on putting together the funding. It is a difficult market, but in our case, we have very little senior debt, in fact, at the opening of River City, I would expect about $300 million, maybe $325 to be drawn under the bank facility. That is our only senior indebtedness, and so it'd be roughly one and half times cash flow or something like that. Generally you can go to three or three and a half times cash flow in senior indebtedness, and that's really the key to financing Sugarcane Bay, and figuring out how to do that.

And the average term of our debt if somewhere around four and a half years. We have the bank line maturing December of 2010, and then our bonds are 2012, 2013, and 2015. The bonds maturing in 2012 and 2013 are both (callable) today if we chose to, although high yield market today would be ridiculously expensive to go refinance those, so we probably won't do that until we have to.

And the biggest bond deal matures in 2015, which is quite a ways out. And then Baton Rouge, we're continuing to design it, and it's a ways behind Sugarcane Bay. We still have to work out zoning approvals, and a development agreement with the city. We intentionally waited a little bit to get past the election because we figured if we started negotiating with the prior city council we'd just end up negotiating with the new one anyway. The mayor, who is very popular in Baton Rouge, won reelection handily, and he's a big fan of our project, and we think we'll get all that resolved, but Baton Rouge is a ways off.

Atlantic City, I think even if we could get the money today, we would put it on hold just watching what's going on in the environmental. And in the environment, in Maryland, legalizing slots, frankly the step in Philadelphia had a bigger impact on Atlantic City than we thought. There's two more casinos coming in, in Philadelphia, then you've got Bat Works in eastern Pennsylvania coming, a pretty big place. Now there's going to be slots at Aqueduct in New York State, and then Atlantic City puts out a request for proposals at Bader Field and I think over a year ago, we indicated that if they did that it would be problem for us. They did it. It's a problem for us.

So, we are just going to sit in Atlantic City. We own a great wonderful piece of land that Caesar sat on for 30 years, so we've sat on it two years, so I guess we're just starting. So, we'll just sit, and there'll be some ongoing costs, principally for real estate taxes, which are about $5 million a year, and there's one leased piece that has four years to go at $2 million a year.

But you'll see the Atlantic City spend rate came down in this quarter and will come down pretty dramatically in the next couple of quarters, as we kind of moth ball the project until we see what happens. And it might be that somebody buys Bader Field and builds a casino, and we'll wait and see, and when it gets open, we'll see if the casinos on the Boardwalk are still in business, and reevaluate, and so we may be sitting there for a very long period of time.

Let me turn it over to Steve to kind of address capitalization, to the extent I didn't already. Sorry, Steve. And then we'll take questions and answers.

Steve Capp

All well said, and in addition to that, I'll just maybe point out a couple of obvious things on the income statement. It's obviously it's reflective as was Q2 of this year, of substantial increase in revenues, while we a wait the significant turn to profitability at Lumiere Place. Obviously it has now turned that corner of profitability and we're very appreciative of that.

Depreciation is up about $10 million in the quarter, obviously attributed the vast majority to Lumiere Place and to a lesser extent, the [Lavarious Tower] which is in service for the first year. Pre opening and development is dominated as outlined in the table by $6 million for Prop A in Missouri which we now look back and think was money very well spent, and $4 million for AC as Dan just outlined a bit.

Did have some [discop] activity, as we shut down, or intend to resume operations in the near term and our tax rate is as normal – a little bit disjointed, but it's about 53% attributable – there are a lot of moving parts in that from some of the typical items that we site from quarter to quarter, namely non-deductibility for income tax return purposes of certain expenses including lobbying costs, of which we have had some in recent periods because of the activities down at Sugarcane Bay for the referendum and to move the license, the lobbying for Proposition A, and as well at Baton Rouge in prior quarters.

So that continues to be in the numbers. We also have in the State of Indiana, once again the non-deductibility of gaming revenue taxes for state income tax purposes, which becomes their permanent item for income tax return purposes and hurts us. And then some Argentina tax payments as well that we're currently working to get a foreign tax credit for.

Actually the largest item is actually a FIN 48 valuation adjustment, which sent our effective tax rate to 53% for the quarter. Call me back if you want more exciting details on the tax provision later. And in interest, total interest spent for the quarter, about $19.6 million versus – about $20 million in the quarter versus about $18 million in the prior. And then CapEx – CapEx at the River City, which is probably the biggest question anybody had was about $13, a little north of $13 million for the quarter.

And Dan kind of went through what's left in the budget there versus liquidity and we're in pretty good shape there. That CapEx as it lays forward is about – we expect about $20 million in Q4 at River City and the balance through Q1 of 2010 as we would anticipate opening that facility at about that time, perhaps earlier if possible.

The total of CapEx in the quarter was 64 and want much more detail in the queue on that. Then from a balance sheet perspective, I think Dan covered it. We got $125 million of cash. We do use about $60 or $65 of that in operations. The balance of that is really off to the side, rainy day money if you will and we choose to endure the carry cost of that in this very unpredictable credit environment and make sure that we have liquidity for the business at all times, even though that's a little bit expensive at the moment.

We have $125 drawn under the bank deal, about $22 million fees. If you round those numbers you get to about a buck fifty of total utilization. That leaves us 200 of the 350 we were able to draw and so at the end of the day, liquidity, present liquidity, is pretty good. We're pretty pleased to be in the shape that we're in.

That's all I have.

Dan Lee

I've got just a few other wrap-ups and then get to questions. We didn't mention much on Argentina. We recognize our casinos in Argentina are in the Province of Neuquen, which is more or less the New Mexico of Argentina. It's quite remote, it has a lot of energy, a lot of energy-driven business – oil companies, oil company workers, and so on – they're not tourists.

And so our results there are really quite stable in pesos and so what you'll see in dollars will depend on the exchange rate and that economy down there can be pretty volatile sometimes, but the exchange rate has actually been remarkably stable even today. So it's actually been pretty stable.

But I mention that. It's a very nice place if anybody gets to Neuquen. Argentina. It's an 11-hour drive from Buenos Aires. At FIN 48, which Steve mentioned, our tax provision jumps all over the place. If anybody cares, you can try to figure it out. I certainly don't waste my time trying to figure it out.

We don't actually pay any taxes. We may actually get a little tax refund this year. We get big depreciation charges from building the new places. We didn't acquire any company in the recent past that would give us low tax basis relative to what we paid for it. And in particular, the expansion at L'Auberge was a non-gaming expansion of the hotel towers, swimming pools, and retail shops and that qualified for the accelerated depreciation under the go tax credits.

So we were allowed to take 50% of that $60 million project cost from the year it was put into service. So, we're pretty careful to try to shelter our taxes, drive the accountant's nuts trying to figure out how to account for it under FIN 48, but the real bottom line is we don't pay any taxes and haven't paid it in quite some time and don't anticipate paying it as far as we can see.

I don't really care what they do with the tax rate. If you can avoid paying any taxes, the tax rate can do what it wants. At Belterra, the other thing that I'd put out is everybody knows we have this big development pipeline, but it's all in bite size pieces, which is kind of nice because we can move things around as we need to.

And I'll just reference a number of things because we're going ahead with River City and we're trying to line up Sugarcane Bay and Baton Rouge, but at one point we we're going to build a third tower at Belterra, and when we saw the slot machines coming in Indianapolis, we said, hmm, maybe we shouldn't do that and we stopped it. It was all designed and ready to go and we stopped.

And with hindsight, those slot machines when into those race tracks in Indianapolis. I don't think either one of them make as much money as they'd hoped to make, but they've certainly impacted the other casinos in southern Indiana. With hindsight, it was the right thing to do. We had plans at one time to build a non-casino hotel in New Orleans. We still have those architectural drawings around somewhere, but in the current credit markets, that doesn't rise to the expected return that you'd need, given the cost of capital these days.

In Kansas City, I think we were – I'm a little biased on this, but I think we were likely to win that contest. I think we had the best proposal and the best design. We had an option on the best land. We had the best experience and like three days before they made this selection, we looked around and said, holy cow, we don't want to be committed to build a $625 million place if the financial markets are this turbulent.

And frankly, we pulled out and then the financial markets got even more turbulent. So we looked very prescient, but we were concerned about it and I think we did the right thing by pulling back. Similarly with Atlantic City, we recognize that this isn't an environment to go dream big for something in Atlantic City, and there doesn't seem to be anything there encouraging us to do so and so we'll sit on the land.

Obviously if somebody made us a decent offer for the land, we would consider it. We also own a piece of land we bought some time ago in Central City, Colorado. We have no current plans to build on it, but it was literally the best undeveloped casino site in the State of Colorado and we happened to get there the day after somebody had put up a for sale sign on it and we spun around and bought it for not all that much money.

So the changes that were approved by voters just two days ago in Colorado are a plus for us, even though we have no current plans to develop that land. And in fact, there's an adjoining piece of land that we have the rights to buy, but it's been tied up in litigation for literally, decades. But as long as that litigation is out there, we can sit quietly and just see how it gets resolved.

So, on that, I'm happy to take any questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Joe Greff – J.P. Morgan.

Joe Greff – J.P. Morgan

Can you just comment Dan, on your expectations for the ramp up at Lumiere Place, maybe before how you saw things were going before Proposition A passed and maybe you can help quantify what you think the benefit is of that passing from kind of a revenue and EBITDA perspective.

Dan Lee

Well, to give you some background, I remind everybody that at L'Auberge, we didn't make any money in the first seven months. Now, there was a big hurricane kind of in the middle of that, but it's just a belief from my experience at Mirage Resorts and elsewhere that when you open a property, the employees don't know the jobs all that well yet and everybody comes to see the new property and you want them to have a good experience and so you overstaff intentionally to make sure people have a good experience.

You also spend heavily on the marketing as you build up a reputation in the market and attract people. And then gradually over time, the employees get more efficient at their jobs and through attrition, the size of the payroll comes down. And then the marketing you keep up until you're pretty sure you've kind of locked into the market and then you start backing away from media like newspapers and television where you're paying for a lot of eyeballs of people who may not gamble. You just start going more and more towards direct mail to the mailing list you've developed. So, your profitability comes to light.

That has been basically what's been going on at Lumiere Place since opening masked somewhat by, as we've said the increases and losses of the presidents. If the president is moved to the Chain of Rocks Bridge and let's assume the referendum had not passed I think we still would have been making first quarter something like $5, $6, $7 million of EBITDA and growing from there in the second and third quarters and ending up the year something in the 30's.

Now with the lost limits gone we will be hiring player development people and stepping up the marketing effort. I think we'll see our revenues pop but we're also going to have increased expense. Again, it's almost like a new opening because we have to market to people in Memphis and Chicago and so on. I think there's a pretty good chance we'll end up with kind of the same bottom line in the first quarter and then better bottom lines in subsequent quarters where the additional spending that we'll do in the first quarter will offset the additional revenues.

So, that's a rough guess. Now in the present itself while we seek approval to move it up to the Chain of Rocks we are focused on diminishing the loss as much as possible. So, we're looking at reducing the hours, reducing the marketing, reducing the foodservice options and so on because frankly we make more money if the person is in Lumiere Place.

We may keep the heat on but we’re going to have this thing operate in a slow mode while we seek the approval to move it because the loss has been more than $500,000 a month and we want to get that significantly down.

We have done something similar in the Bahamas, a different order of magnitude, but in the Bahamas the gaming commission wanted us to stay open through December so right now we operate down there with no tables, just slots. I think there's a security guard and maybe a bartender and we've never lost so little money in the Bahamas. Does that answer your question, Joe?

Joe Greff – JP Morgan

Yes, then Steve, I know you talked about it a little bit, but overall project CapEx for the Q4 and then how do you think things ramp up through our 2009? I know River City's going to be the majority of that but if you can walk through some of those items as we're trying to model those through.

Steve Capp

I'm not sure I have those here, Joe. Total Q4 CapEx is going to be, just look at our Q3 experience here, probably the 64 I mentioned for Q3 had about 19 in it for Atlantic City. That's going to be down dramatically. We had 11 at St. Louis and about 9 of that was downtown. I think that's going to be down quite a bit. Cliff, would you agree?


That said St. Louis River City is going to be up about 7 so you're probably looking at an all in number of something closer to 40 for the quarter, Joe, versus the 64 we had for Q3.

Dan Lee

None of us have the numbers in front of us, but Cliff is here, my recollection is the spending on River City next year is like $30 million, $40 million, $60 million and then [inaudible]. The biggest quarter I remember was the third quarter and –

Unidentified Participant

Q's 3 and 4, Dan, we're planning at 60 each for River City next year

Steve Capp

So, it's ramping up and the big spend is in the second half of next year and then it'll go into the second quarter of 2010 and our construction expenditures are paid in arrears and in fact I think we are just now paying the final expenditures on Lumiere Place.


Your next question comes from Celeste Brown – Morgan Stanley

Celeste Brown – Morgan Stanley

Can you walk us through how to think about corporate expense given to the lower level this quarter and all of the changes you're making in terms of some of your plans?

Dan Lee

Well we're in this environment and it's pretty clear the country's in a recession like everybody else we're trying to stay attuned to [inaudible] and so we're going through it pretty carefully. One of the things that we had started some time ago was to centralize certain functions, things like payroll, a call center, marketing.

This past year or so we've been kind of caught betwixt and between because we have a call center here in Las Vegas and we have not yet closed all the call centers at the properties and so you end up with some expenses in both places. So, we have a big effort to make sure that when we centralize stuff here that we actually reduce the headcounts at the properties.

Now like all casino and hotel companies there is a kind of gross corporate amount and then you allocate back to the properties for those services you've provided to the properties and you end up with the net corporate amount. Our gross amount is up a little over last year. The net amount is down because of the allocation figure because we are doing more services for the properties here because it's much more efficient to do it.

We had one outside consultant pointed out to us that one of the properties has a call center and the average time it takes them to answer the phone is like 1.5 seconds. That only happens if somebody's sitting there waiting for the phone to ring, whereas our call center in Las Vegas has very good statistics that show that we have the right level of customer service and yet we're not over spending on it.

The roundabout answer we're not going to announce massive layoffs like other companies do because I think it's kind of the wrong thing to do. It disrupts your employee moral more than any benefit you're going to get in the stock price, but are we being attentive. Are we making sure that if somebody leaves we might not replace them and so on? Absolutely, and in fact we're moving a lot of our offices out of the building we're in because there's a lot of surplus office space in Las Vegas and we've got cheaper office space elsewhere. So, Steve and I are going to stay here but a lot of the rest of the company is going to be in cheaper office space. So, there's a lot of tings we're doing.

Celeste Brown – Morgan Stanley

Is the $9 million in the quarter sustainable or will that go back up?

Dan Lee

Between 9 and 10, but it was running as high as 11 for a while there. Look, we'd like to get it as low as we can but we're not going to do miracles here. In fact, let me step back. It's an interesting environment we're in, in a lot of ways, especially in the casino business. A lot of our competitors are in pretty rough shape and we hear the same stories you have that their not buying a single slot machine this year, or their cutting their maintenance CapEx to the bone.

We saw with Columbia Sussex what happens when you do that. The properties start to get dirty and the good employees start leaving and eventually the customers aren't there. I'm looking at this and saying, wow what an opportunity. I mean let's make sure we maintain our properties well. We're going through with a fine tooth comb and saying okay if the carpet's tattered let's fix it because we can afford to fix it. Some of our competitors can't and their going to end up with tattered carpets.

There are unhappy employees at a lot of our competitors and some of those are great employees and we're trying to sort through them and find the best and get them over here because we've got a balance sheet that allows us to step this up and get a market advantage in a number of markets over some of our key competitors and that can be very, very important. If that means that we have to put off the Atlantic City property for years and years and years in order to make sure that what we have is bulletproof and strong and dominates the markets we're in so be it. It's the right thing to do for our shareholders.

So, we are being attentive to corporate costs but we're also looking at the opportunity to take advantage of the competitive situation that we're in.

Celeste Brown – Morgan Stanley

Just a follow-up on Joe's earlier question, speaking about Lumiere and hiring new people, are you saying you don't expect to earn much more EBITDA than what we just saw in this third quarter or will we expect to see a ramp up but not as big as you would expect with the additional revenue until the marketing efforts ramp?

Dan Lee

I actually threw out two numbers, one was that the first quarter EBITDA would be somewhere in the neighborhood of 6 and I think that would have been true if we didn't have lost limits passed Proposition A and I think it's true with Proposition A. The difference is revenues will be higher now that Proposition A has passed and our marketing expenses are going to be higher because we're going to be reaching out to try to tell people in Memphis and Nashville, all the great cities in the Midwest.

We aim to try to be the preeminent high roller place in the Midwest. We are centrally located, great location and we're going to have a great facility. There are some costs involved in doing that, but I think either way we're going to end up in the ballpark of $6 million of EBITDA on the first quarter, to guess.

We don't normally provide such detailed guidance and that would be better than where we are today. Then I also threw out that I think for the year we end up with something in the 30's and ramping up from there. So, that's our best guess.

Celeste Brown – Morgan Stanley

Dan, to play devil's advocate given the economy and the stresses on higher end and lower end customers around the country, would you consider delaying hiring all these marketing people if things get a little bit worse and see how the property does on a standalone basis and then ramp up later on the marketing?

Dan Lee

That would be singularly foolish because there are marketing people out there right now looking for jobs and looking to go to a place that is trying to build its business. If you don’t have the revenues you can't bring it to the bottom line. Look at what happened when Tropicana laid off all their player and development people in Atlantic City, their EBITDA went from like $120 million to $60 million and now their trying to hire them back.

I'm sorry, I didn't mean singularly foolish is a little strong, but it - -

Celeste Brown – Morgan Stanley

It's a great compliment, thank you.

Dan Lee

Well, to put it into your case –

Celeste Brown – Morgan Stanley

I wasn't suggesting you lay anybody off just hold off on hiring new people.

Dan Lee

You mentioned an investment bank and I'm sure one or two of us probably made this mistake and says Oh, God times are tough let's layoff all our institutional sales people and then you find out you have no revenues. I mean, if you're trying to save money that's not where you save money.

It's a complicated metaphor but I think it's apropos. A lot of times I think of running a company like this like being in a white water raft race down to the Grand Canyon, and you come around the corner and there's a standing wave there and its like Oh God don't hit the standing wave. I mean that would be like the referendum in Ohio that failed. That was a big ass standing wave, thank God Penn got on top of it and spent a lot of money and killed it, right. It would have affected them much more than us, but that was a big standing wave.

Bader Field's a standing wave. Let's make sure we don't tip over on that one, but then occasionally you find a little slipstream in the current where you pick up some speed and you go over to the side and Proposition A is that little slipstream and we gained a little bit. Then you get to the end of the day and your standing on the side of the beach and somebody says you know I think they might have cut the outflows from the Lake Powell Dam. The water doesn't seem to have quite as many cubic feet per minute.

Well, that's a recession, right. Yes, we're in a recession. Its way more important for us whether the carpet at Harrah's is tattered than it is whether we're in a recession, and not to cite Harrah's. So, I think we're in a recession. We clearly are, I guess, by the numbers. Not our numbers in particular but by the statistics. Well, I'll take a recession over a hurricane any day.


Your next question comes from Eric Green – Penn Capital.

Eric Green – Penn Capital

A couple of things, one, is Vegas as bad as people are making it out to be and are we going to see a lot of bankruptcies there? Also, with the kick up in your line the cost of money there whatever you mentioned from 4 to probably 8, is the impact on that going to be cost violations of any other parts of the credit facility?

Dan Lee

I'm not a research analyst any more but I think it's fairly obvious that there are some companies in this industry with some real challenges. I was looking the other day I think Harrah's alone has more debt than the entire industry did four or five years ago. I don't know all the intricacies of exactly where those companies are.

There've already been a few bankruptcies. I suspect there will be more. I think people got a little ahead of themselves and put a lot of leverage on properties and now your going into recession and they've got a lot of stuff under construction and it's going to have some bankruptcies. We were pretty careful. We made sure we had long debt maturities.

When we bought the land in Atlantic City we spun around and issued equity in about the same amount, and so therefore we paid for the line out of Atlantic City I think on the books is $360 million but that was the net proceeds of the equity offering that we did at exactly the same time, so I don't know if we bought it for $360 million or $350 million. We've talked with our banks and, to a bank, they're like, "You guys are golden."

Our EBITDA is well in excess of our interest expense, our maturities are way out, our debt is sub debt not senior debt, which leaves us room on the senior debt level. Some of the other companies have a lot of debt maturing in the near term and their debt is all senior debt, hard to go to the sub market these days, and they got projects that are half built and they don't have the money to finish, and we try to be pretty careful now.

I think eventually the debt markets and the equity markets will be [balanced] between those who have liquidity problems and those who don't. There's a few of us. I'll site Steve Wynn. I was looking at Encore the other day. He's got a golden balance sheet. He's got one great building and another great building to come. Is there any question that Steve Wynn is going to dominate the high end in Las Vegas for the next five years? I don't think there's any question. Okay, I think he's perfectly positioned to do that and I think we're well positioned to do the same thing in the markets we're in.

Now does that create challenges with the banks? Sure, you run into some banks where their credit committee is so stung with casino credits that they're not likely to be in our credit, but most of the banks out there in this industry are relatively sophisticated. They're not going to do highly leveraged deals, they are going to want covenants, and so on. And they will trend towards a credit like us. It'll be much more difficult to get on a project financed or a leveraged buyout in the future than it was in the past, but I do think that we will have access to capital.

Eric Green – Penn Capital

And, Dan, what's your –

Dan Lee

By the way, it won't be LIBOR plus two; it will be LIBOR plus five or something.

Eric Green – Penn Capital

From Vegas's perspective, is the capacity way out of line to the supply? You see the airlines cutting back 10 to 20% coming into the city. I mean it's obviously gas prices have come down so that gives a little help but you've got all of those big casinos. It looks like Vegas, the dynamics, there's a paradigm shift going on there.

Dan Lee

Vegas probably wouldn't be in quite as much trouble if they hadn't levered it up so much. Almost across the board, there's few exceptions, Wynn being one of them. If you have that much leverage and then your results fall a little bit shy, you've got a problem. The occupancy here is up four or five points, room rates are up some, gaming revenues are up some. You add it all up.

I mean in our case our EBDIT would have to fall 50% before we couldn't cover our interest expense, roughly, more than 50%. But, some of these other companies a 10% decline in EBDIT and they can't cover the interest expense. Or, actually worst case and I have one in mind, they had anticipated that a renovation of their facility would double their EBDIT, and so they borrowed enough money that they actually needed EBDIT to cover the double, in order to cover their interest expense. So there were some big dreamers in that bank line and now the renovation is done and the EBDIT if flat, and I think they're headed for the wall. So there's going to be a few of those.

Now, will there be opportunities in that for us? I think the opportunities are a long ways away, mostly because of the amount of leverage that's out there. I mean somebody who paid 9 or 10 times cash flow for an asset, doesn't really want to spin around and sell it at four times cash flow. And, if they borrowed most of the money, then what happens is they eventually go bankrupt and the lender then has the asset they don't want to sell at four times cash flow. A lot of times you have to go through two or three reorganizations before anybody gets realistic about what it's worth.

And so we look at everything. So far, we haven't seen anything that really gets close to what would be an opportunity. So there we are. This is a turbulent time. There will be companies here that go bust. That's an opportunity for us and for a handful of other companies.

If you look at the debt in the industry, one-third of it is Harrah's and they certainly have their challenges, and their debt's trading at like a 30% yield. Another third of the debt is other companies similarly challenged trading at similar deals. Only a third of the industry is reasonably healthy, and we're solidly in that third. But for that third, this is a great opportunity. Did you have any other questions?


The next question will be from [Neil Polit] – Barclays Capital.

[Neil Polit] – Barclays Capital

What was the Admiral's EBITDA loss in the quarter?

Dan Lee

$1.5 million, $1.4 million, the loss at the Admiral? We're all looking at each other.

Alain Uboldi

$1.6 million.

Dan Lee

$1.6 million, approximately $1.5 million. We don't have any exact numbers here, but to the best of our collective recollections about $1.5 million.

[Neil Polit] – Barclays Capital

And, in St. Louis, what percent of hotel customers are comped?

Dan Lee

At the Four Seasons, relatively small because with those room rates it's hard to get it back with the $500 loss limit. That may change now. At the Hotel Lumiere it's a little less than half.

Alain Uboldi

No. It's less than 30%.

Dan Lee

Less than 30%.

Alain Uboldi

Because during the week we get a lot of others.

Dan Lee

Less than 30%. Most of our properties it's just about half. One of the biggest complaints I get is we can't buy a room at Lumiere's because we comp all the rooms on weekends because there's enough qualified customers.


Your next question comes from David Katz – Oppenheimer.

David Katz – Oppenheimer

Dan, two questions. One, your comments earlier about the ramp up in Lumiere, what does that assume, does that assume that you sort of get to a breakeven level with respect to the President and then secondarily, I got knocked off a little bit earlier during your comment and I just wanted to go back over some of your sort of goings on with your bank deal, and I believe there was some discussion about amendments and so forth, how is that progressing?

Dan Lee

Okay, I think we can get the President losses down to a very small number, and at bare minimum you can go to reduced operating hours, you don't necessarily have to operate tables every day of the week, you can close the buffet and tell people to go up the street to Lumiere Place to eat. There's a lot of stuff you can do and scale it back. And so I think we can get it to a meaningful number and meanwhile we'll seek to move it.

Now one of the unknowns is obviously you're not going to move it with slot machines operating. You have to close for some period of time to move it up, and so we have to work out with the Gaming Commission, if we were to actually just close it and move it up there, we might try to do things like change the carpets and so on and you move it up there to reopen it. How long a period of time will they give us between the day you close it and the day you reopen it before they would say, oh, that license is gone.

There's a lot of discussion to have with the Gaming Commission on moving it, but I think by the time we get to the first quarter we can have the losses at the Admiral down to a pretty bare bones number.

And then, your second question was on the bank agreement. It's not completely clear, we need to change the covenants, but I think in this environment where when we look forward when we look at our results so far they don't show a. We're fairly optimistic on what we're going to earn on our properties next year, but I'm not sure I want to rely on those projections given what seems to be going on in the rest of the economy, and so you start saying well if we give a haircut to the projections that we're getting from the operating properties, if they're off by 10 or 20 or 25%, then we run very close to the covenants as the covenants get tighter.

And so, it makes sense to go change them. It's only because the covenants are ramping up. The principal covenant is the total indebtedness covenant. We have three [inaudible] not a problem. We have very little senior indebtedness. Interest coverage ratio doesn’t seem to be a problem. We are ample there. There is a total indebtedness convent that we get a little close to. And if the operating results fell short you could run a follow up.

Now you could-- but the other trade off on that is exactly what is the timing of the construction spend in River City. If our construction guys fell a quarter behind for example, it would go quite a way towards solving the issue.

But rather than wait for an issue to become a problem we generally like to go fix the issue so that it never does become a problem. So we’ve talked with our banks and they’ve basically said not a problem. We’ll just change it so it doesn’t come down.

Or doesn’t come down as fast as it is. It used to be what was it, eight, seven and a half? We were allowed to have a total indebtedness at seven and a half times trailing EBDIT. And it’s trending down gradually to five and a half. Now Wynn got approval to be eight and a half. I think MGM is around eight and a half.

Quite a few-- I think Harrah' is ten. So we’re already well below the total indebtedness ratio that a lot of casino companies have. And so talking to our banks they said not a problem. On the other hand they’re not real happy with us paying LIBOR plus two, so they're like we’re going to want that libber plus two to change. Well we never expected LIBOR to be 2.3%. So there is a trade off there. We only have two years to go on the bank loan anyway.

And so we will probably you know, look at it and say okay we’ll adjust what the spread is over LIBOR and we’ll adjust the covenant. You know, I point out if you take our debt and subtract the construction in progress pure debt is extremely low. And then beyond that we have about $700 million. I don’t know what it’s worth today.

But there is about $700 million of non-earning assets. You know the biggest piece of the land in Atlantic City. But there is also the land in Colorado; we have surplus land in Baton Rouge. We have license that we bought.

We have construction in progress. We have 500 acres of land in Reno. I don’t know what any of that is worth. But if it’s worth $.50 on the dollar from what we thought it was worth six months ago it still would equate to half our debt.

So we’re actually very strong financially. And we I think will go to the banks and work that deal with them in the next quarter where we trade off-- part of what we’ve been debating is whether we do that now. Or do we just wait and redo the bank deal in its entirety.

And but I think we’re probably-- talk with our banks which one to do because the bank deal is maturing in two years anyway. So it’s probably time to start thinking about redoing it. But this is a pretty tough market to think about redoing the bank deals. So maybe you just change the covenant and wait for a better market. And so that’s kind of what we’re debating.


You’re next question comes from [Dave Alerento] – [Shadow Net Income].

[Dave Alerento] – [Shadow Net Income]

Just given the decline that we’ve seen in material I was just wondering if there was kind of an opportunity to come in under budget on River City?

Steve Capp

Well you got to remember in the construction cost. I mean labor is a big component and you can try to persuade a union electrician to take less than minimum wage, but generally that’s not successful. And then on the construction material side a very big component of that is the transportation cost. And you three or four months ago we were actually worried the other way. With the price of oil was so high that the cost, like a cinder block doesn’t cost very much to make but it cost a heck of a lot to transport to the site. So with the back off the price of oil I think it takes away some cost escalation pressure that we were a little worried about.

On the-- we are seeing contractors,-sub contractors being hungrier. But their fees are typically only 3% so how much can you really save if they bid more aggressively. And so I wouldn’t bank on it being substantially under budget. Does it help us be on budget? Which we are very intent do doing. Sure of course it does. But I wouldn’t bank on it being under. But I’m pretty sure it won’t be over.

[Dave Alerento] – [Shadow Net Income]

Okay. And then lastly what ability do you have in terms of pushing back the project in Louisiana? Because if I believe correctly there’s the gaming commission has some restrictions on timing.

Steve Capp

Yeah. The gaming commission has a -- we have developing agreement with the gaming commission that has certain objective timelines to get to. So far they have been very willing to work with us provided that we are making a good faith progress towards getting these casinos open. Their recourse, now it’s a little different than the River City project. There is some actual cash penalties. They’re not huge but there are some cash penalties if we’re not open by a certain date and those are detailed in our 10 K for example. I don’t remember off the top of my head what they are. They’re not huge but they’re enough to pay attention to.

In Louisiana their recourse is to take the license back and then if they do so and of course it’s in the states best interest to make sure these casinos get open because of the jobs and tax revenues they generate. And so if they take the license back they would then have to have a request for proposals to put the license back out again. Whoever they then choose pursuant to that process would then have to win a local referendum on the specific casino site which is something we’ve already done for both Sugarcane Bay and Baton Rouge. That takes several months.

Then you have to do development agreements and so on. And so generally we are – I’m quite sure we are there fastest route to getting these casino open. We also build high quality properties. They’re very aware of that in Louisiana and we work with them all the time and we’re frankly moving as quickly as we can. But it doesn’t do anybody any good to get Sugarcane Bay half built and then run out of money. And so we are moving some dirt down there now putting in the foundation because that doesn’t take a lot of money.

But it does take some time. And we envision that by the time we’re done doing the foundation work, which is probably four to five months that we will have been able to come back and using our senior debt capacity pull together the money to continue right from the foundation to finish. And so that’s our game plan and I think that we’ve explained that to the regulators and so far they’ve worked with us on it.


You’re final question is coming from Dennis Forst – Keybanc.

Dennis Forst - Keybanc

Steve I have a simple question about depreciation notice. It was down about a million and a half sequentially from the second quarter. Was there some five year deprecation that came off or why the decline?

Steve Capp

Why the decline? I don’t’ think I know that Dennis. We didn't have much drop out of the depreciation base other than [Exuma], but that was pretty small.

Dennis Forst – Keybanc

Depreciation went from 31.2 to 29.6

Dan Lee

It might have been some three year property L'Auberge, but you know what Denis we’ll check in and get back to you separately.

Dennis Forst – Keybanc

The other question I had Dan was the approval process for moving the President. Is it only with the gaming commission? You don’t have to deal with the city as long as you stay within the city limits?

Dan Lee

Well I think the city –e have a lease for dock space with the city and we’ll certainly have a discussion with the city. Does it need their approval? It probably does need their approval, but I don’t think that will be difficult. I mean, this is very much in the city's best interest.

And if you get a map you’ll see this little ton of the city that sneaks up the west side of Mississippi principally because the city’s water plant is up there. And so it’s kind of like we’ve put a casino up there to draw traffic off the main east west artery and the city gets tax revenues from it. So what’s not to like about that from their perspective? But there’s a raft of approvals. We’re going to need core engineer approval to deal with the docking issues and so on.

We’re going to need ABS approval on actually moving the boat because it is such an old boat that you have to be very careful how you move it. So there’s a raft of approval. This will take a while and there is no certainty that we’ll get them.

Dennis Forst – Keybanc

So for modeling purposes maybe think sometime in 2010 and maybe it’s closed for 30 days when it gets moved. I assume you’re committed if possible to move it.

Dan Lee

Yes. I think it will – because there is no reason to operate two casinos next to each other. Where one is brand new and beautiful and the other is not. And you know that doesn’t make any sense. The President by the way is an interesting gaming license.

When Harrah's, when they were changing the law to the 1,000 foot rule, where you had to be 1,000 feet from the river I guess at the last minute Harrah's wasn’t sure whether their Maryland Heights casino was within a thousand feet of the Missouri river.

And so the law says unless you are a casino company that was in business prior to such and such date. At which point the law is 2,000 feet. And I think Harrah’s subsequently figured out that they are actually with 1,000 feet of the river as defined or the center of the river I guess. But when we purchase the President we were careful to purchase the company not the asset. Because the way that law is written it goes with the company not with the asset.

So we believe and it’s not 100% clear because a couple of guys at the Gaming Commission said they’re not sure they share our opinion. But we believe it’s a 2,000 foot rule for the President and so we would have to move it to someplace within 2,000 feet of the Mississippi or Missouri rivers.

And we’ve considered quite a few possibilities. I mean you could actually put the casino next to the Cardinal's ball park for example. That’s probably within 2,000 feet of the Mississippi river. But alternately we decided that it was kind of best for us and best for the city and best for the state to go up to the Chain of Rocks Bridge. Now that’s not nearly as big a market as Lemay on the south side of St. Louis. Population density on the south side of St. Louis is much bigger than it us up around the Chain of Rocks Bridge.

But the Chain of Rocks Bridge has this very amount of cross country traffic that the other sites we have don’t have. So it almost is – you can almost envision a place where truckers could park their trucks and maybe – there is already a small truck stop being built kind of next to us.

So I don’t think that we have to actually build the truck stop, but the people might be parking at that truck stop and coming over to us. And then so it’s really about building a place that pulls people off the freeway which obviously is sound revenue for the state and the city. You’ll also notice the way the freeways work there is not-- the freeway that passes in front Lumiere Place it’s 10 miles right along the river to the Chain of Rocks Bridge, but if you actually try to drive it the freeways don’t accommodate you very well. So I think the Chain of Rocks would have minimal impact on Lumiere Place.

And [Louis] is saying to quick update on the insurance with our SUI and there isn’t much to update. We are continuing to have some discussion with them. We have a lawsuit we are continuing to purse. We just filed for a summary judgment on a technical issue.

This is the insurance company who had the [Carey Passe] position with the Arch Insurance Company and Arch settled with us six months ago for $36.5 million and our SUI in addition to that has a $150 million layer at the back.

And so we think they owe us a bunch of money. They sent us $2 million and told us they thought that was all they owed us. And so we are continuing to pursue our revenues on that.

Okay. Thank you very much everybody.


And this concludes today’s teleconference. You may now disconnect.

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