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Executives

Joe Jaffoni - IR

Peter Carlino - Chairman and CEO

Tim Wilmott - President and COO

Steve Snyder - SVP, Corporate Development

Bill Clifford - CFO

Eric Schippers - VP, Public Affairs.

Analysts

Felicia Hendrix - Barclays Capital

Larry Klatzkin - Chapdelaine

Joe Greff - J.P. Morgan Asset Management

Steve Wieczynski - Stifel Nicolaus

David Katz - Oppenheimer & Co.

Chuck Agri - AgriCapital Management

John Maxwell - Jeffries and Co.

Dennis Forst - KeyBanc

Bill Lerner - Union Gaming

Steve Altebrando - Sidoti & Company

Penn National Gaming Inc. (PENN) Q3 2009 Earnings Call October 21, 2009 10:00 AM ET

Operator

Welcome to the Penn National Gaming's Third Quarter Earnings Call. During the presentation, all participants will be on a listen-only mode after which we will conduct a question-and-session. (Operator Instructions). As a reminder, this conference is being recorded Wednesday, October 21, 2009.

It is now my pleasure to introduce Mr. Joe Jaffoni, Investor Relations. Please go ahead, sir.

Joe Jaffoni

Thank you, operator and good morning everyone and thank you for joining Penn National Gaming's 2009 third quarter conference call. We'll get to management's comments and presentation shortly as well as your questions and answers, but first I'll review the Safe Harbor disclosure.

In addition to historical facts or statements of current conditions today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. As such, actual results may vary materially from expectations.

The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and 10-Q and 8-K.

Penn National assumes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast may also include non-GAAP or will also include non-GAAP financial measures within the meaning of SEC Regulation G, and when required a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP will be found in today's news announcement as well as on the company's website.

With that I'll turn the call over to Peter Carlino, the company's Chairman and CEO. Peter?

Peter Carlino

Thanks, Joe and good morning everyone. Well, it was another fun quarter, not the best time in this world to be in the consumer business, but I suppose on balance that we've done pretty well this quarter.

I want to highlight that despite the current softness, if you will, in the industry overall, but for Penn, at least this has probably been the busiest period in our history, and there has never been a time where we've had so many initiatives, opportunities and things on our plate that we are actively and aggressive pursuing initiatives in our projects in Maryland, and Kansas, Ohio, Pennsylvania, West Virginia, Massachusetts, New York and Texas.

That's plus some of the ongoing projects we have in places like Joliet and some expansion thoughts in West Virginia and in Pennsylvania, so lots happening and some reason for optimism about many of these things.

As usual, we will get pretty much directly to your questions regarding the whole. We will cover everything that we could even think about discussing, but I thought I would ask first, we have by the way our full complement of senior executives here in the room. Too many, in fact to introduce, but let me start with Tim Wilmott, and ask Tim just to give you his view of just a broad economic environment in which we find ourselves.

Tim Wilmott

Thanks, Peter. Well, we obviously continue to feel challenged with the softening of the consumer on a macro basis. As you see economic data coming out regarding the de-leveraging of the consumer and increased savings levels from them, it's certainly is reflective in what we are seeing in our demand and our businesses.

Visitation continues to be flat, in some cases actually like Lawrenceburg showing growth, but clearly spend-per-visit and time-on-device is expecting many of our businesses, even though we showed slight revenue growth year-over-year.

There is no question we are seeing the migration down in terms of customer where they are still coming, but they are playing at lower periodical levels than they had in prior year, any even in prior quarter, so that’s obviously is affecting the top line of business, we continue to be appropriately aggressive in adjusting our cost structures, our labor levels , our marketing spend.

With the mindset though that we want to continue to monitor and enhance the customer satisfaction levels, so when this thing does turn, we'll be able to accelerate the growth with the cost structure that I think is well positioned now and will continue to adjust. And hopefully, when it does turn, we'll benefit greatly from it, but if it does continue to slide we’ll continue to make the modifications that we need to do to maximize EBITDA performance of our businesses. But it’s more of the same as we saw in the second quarter and as we highlighted in our results the month of August is really the softest we saw in the third quarter. And its most reflected in spend-per-visit declines we’re seeing across all of our businesses.

Peter Carlino

Thanks Tim, obviously there are some extraordinary expenses which are outlined here the largest of course is our effort in Ohio. I suspect, though I am not going to start with an outline of what we are doing there, there may be some questions about that. I suppose we can address later.

With that in mind I think we going to get straight to the Q&A as always and operator would you please open the floor.

Question-and-Answer-Session

Operator

Thank you ladies and gentleman (Operator Instructions) Our first question from the line of Felicia Hendrix from Barclays Capital. Please go ahead ma’am.

Felicia Hendrix - Barclays Capital

Hi, Good morning guys. Tim thanks for that explanation about what's going on in the regions I am wondering if just focusing on Lawrenceburg for a second. Are you guys satisfied with how the property's performance has been thus far and if that answer is no. Just wondering what you are doing to drive growth there I know you highlighted some new amenities at the pavilion and may be that some of it but if you could add to that?

Peter Carlino

Sure, it’s Peter, no Tim go ahead. I mean the answer is of course no you have already got that part of it Felicia but I would now let Tim doing them.

Tim Wilmott

Yeah, I think Felicia the gaming revenues grew 12% year-over-year we are not satisfied with that at all. We saw our turntables accounts grow over 20%. So we are getting a lot of visitation. We’ve done a lot of market research in the third quarter, what the consumer feels about the experience and overwhelmingly the casino area and the amenities within the casino space have been very well received. We are not getting growth in our VIP segments that we had hoped for and we recognized that we are working right now and improving the non-gaming amenities in Lawrenceburg. We are going have a new meeting space complete late this year, early next year. So that we can conduct more VIP special events in a high quality environment on the casino floor. And we are improving the tiered restaurants that are on that third level in that space, which will be finished in the late second quarter, early third quarter of next year.

So, clearly the opportunities are there to grow in the VIP segment. We’re seeing good volumes as I said before and we are working and hopefully within 9-10 months from today. We’ll have those non-gaming amenities present in the facility, so that we can take advantage of everything we’ve done on the casino floor throughout the entire facility.

Felicia Hendrix - Barclays Capital

Great. And is it that?

Peter Carlino

Go ahead. I would add that if you recall how that gaming floor is accessed. The parking garage is on both sides enter on that floor. And certainly our goal is to make sure that the customer has one seamless, seamlessly positive experience from the moment you will set foot on that level. The planning the fact that we’ve already settled on the architecture, these programs are very exciting as we’ve already approved them are being drawn and priced right now. I can tell you that virtually all of that floor is going to be done within the original budget set by, that we publicly released to you and approved by our board. Because we actually achieved some savings within that project, so we are going to be able do that without a lot of paying. Then we’ll move down to the lower floor in the following year with some modest improvements there and I think we pretty well done it at that point at Lawrenceburg. So Tim gave you the explanation of our plan going forward but we are pretty excited about what we’ve done there. We just need to hang in there long enough to see better performance from our customers.

Felicia Hendrix - Barclays Capital

That’s really helpful. Do you guys think October, or is October trending much of this basically the same as you’ve been seeing so far is there any change in October?

Tim Wilmott

I think we haven’t seen any change in any of the trends in October that we’ve seen in the third quarter.

Felicia Hendrix - Barclays Capital

Okay. And then just moving to Fontainebleau and thank you for this, someone had to bring it up. You guys brought it up in your release and actually it was a very good write up in your release. I appreciate that. Just wondering, with the reports of a $1.5 billion cost of completion. You know you guys made a pretty clear that you would be partnering with someone and you said many times in the past that you’re not going to do anything to jeopardize your balance sheet strength. But I’m just wondering can you kind of give us an idea of how you were thinking about the CapEx there and maybe discuss the limitations of what you would spend there?

Peter Carlino

I suspect Felecia several of us will take a crack at that question. And there are something we’ll say and something we will not say. I mean, the first thing I’ll tell you generally is that we have not launched offenses. We remain interested as we have over the last couple of years and I’ll remind everybody that’s followed us for a long time, there were days when the words Las Vegas or Nevada would never have past our list in the public forum. Just wasn't even on our agenda. It wasn't appropriate and time wasn't right. Couple of years ago we said that under the right circumstances at the right price and with the right vehicle we would consider entering that market, so we cross that threshold. Pricing of course was broadly out of control, we know that, we've seen the aftermath of that and as we look at the debris that remains we have sort of picked through the rubble if you will and try to figure out what we can salvage from that if anything.

Now, Fontainebleau is a very large project that is among the troubled properties in Las Vegas. It’s a very complicated bankruptcy I can tell you, we have spend a very considerable amount of time examining that situation and it is true that we're thinking about it. We have goods on the ground that have for now months very carefully evaluating cost, status of the building, what it's going to take to secure it, what it's going to finish it and even with all that in hand its ultimate phase will be decided by the courts and by a judge who will have to decide how it is best disposed out. And that we think now by given away any secret, this is my view that its probably going to come to some result fairly quickly only because of the judge himself has said this problem isn’t going to get better with age, its not maturing like fine line.

So the building needs to be secured, right now some of the lenders funds are being used for security for power and light, keep the air conditioning on since about 30 floors of that building are fully finished and they are rightly objecting to the use of their funds for that purpose. It is true that we have offered to participate in providing some financing to close that gap which may or may not under the right terms be appealing to the court and that we could consider a debtor-in-possession financing.

Now, I think Bill Clifford has publicly said and I want to repeat that our view is despite the impressive scale that built in and I don’t mind saying this publicly its value is almost it's little to nothing, because the cost to complete is at the edge of its value in our judgment and around that we have a very, very, very disciplined sense of what we will accept and what we will not. And it kind of goes our way or it doesn’t go. It’s as simple as that. We chase nothing, we'll stretch for nothing and this process will play out or it won't. If we were to secure the building with debtor-in-possession financing and do those things necessary because remember right now the roof of the building is completely open, not completely, but significantly open. There is risk of course that if and the building is fully, all those finished floors are fully air conditioned. If you aren't willing to pay for that, you have to drain all the pipes and now the asset begins to rapidly deteriorate. So, there is some very specific need there.

But again we have a very disciplined thought about value and believe me there is little for no value as it presently sits. Now, that having been said I'm not prepared to talk about what about what we see as a budget, the kind of number show out it’s the outer edge of probably acceptableness and even at that we would only approach this project with a strategic partner who could bring something beyond money to the table. It’s as simple as that and I'll say more about that. We wouldn’t have put that out there if we didn’t think that was the likely outcome and just stay tuned. So, we think that we can bring a lot to our Fontainebleau project with a properly executed development there in enormous amount that nobody else in the United States could break, period. So it remains interesting. There are events beyond our control obviously in the court. So, I think I've said about as much as I can and I am going to add Bill or Tim if you want to add into that.

Tim Wilmott

The only thing I would add Peter is that the reality is the capital markets are certainly getting better on a month-by-month basis, but they’ve not gotten to the point where they're are wide open to greenfield projects in Las Vegas. Reality is we recognize we're going to need a tremendous amount of equity in order to finish this project, that’s why we are looking for a partner. I think the debt load preliminary indications about how much you might be able to finance on this project is somewhere in the $500 million to $600 million range. The rest of the half will have to be equity. It would certainly be our intention to do the investments for this if we're successful and there is a long way to go before we're even close to being successful. Assuming we get ownership of the property we will put it in unrestricted sub, we would use the cash sitting there to fund that project and basically keep it separated from the parent company.

Peter Carlino

Now, let me say one say one final thing. Look you have to have a view in approaching a project like this that is positive about the future of Las Vegas and I think we here believe in the future of Las Vegas that there is so much critical mass in that city, it is indeed the entertainment capital of the world. The current economic prices will not last forever, but in the short run and short run could be a period of couple of years, or several years this could still be great deal of pain, and we are approaching it with that in mind. Recessions comes, recessions go, I read in history books and I read about the recession of 1896, and a whole series of recessions that have come and gone over the years that most people have forgotten about, and there was always to be future, there was always a break time and they will be following this.

Trick of course is to stay alive as you get to that point, but our view is that Las Vegas well in time be fine as we are very concerned about the absorption of all the units that will come to that city, we've done very significant research and have some thinking about how with the right partners this would worked out for us. This is very considered, but carefully approached investment. Ideally, I can say more about that, we probably won't say more, so that's it. That's my answer on that question for everybody, so yes please, sir? Anything else?

Felicia Hendrix - Barclays Capital

Just before I overstay my welcome, just one last housekeeping. Just if you could let us know ballpark what fourth quarter lobbying spend might be in Ohio?

Peter Carlino

Well, we know but we can't tell you. I mean obviously for strategic reasons, we have opponents in Ohio. Anti-gaming, so called anti-gaming opponents, who fact and the person is Jeff Jacobs is try to protect the facility that he owns in West Virginia.

This is the battle for the hearts and minds Ohio voters and the opponents are largely casino people who just don't want to see it happened. That's the reality of it, so I think in a couple of weeks, 13 days.

Tim Wilmott

There's 13 days to for the issue, we'll let you know on November 4.

Peter Carlino

Exactly.

Felicia Hendrix - Barclays Capital

Great, I really appreciate that. Thanks. Have a good morning.

Peter Carlino

I will say this on the subject of Ohio and there are other crisis, but I will volunteer one thing. Polling clearly indicates that our large majority of Ohio citizens support, not just this casino gambling in the state, but support this bill. The trick is really about turn out, getting them in and off-year elections to come out to the polls and vote for you, so it was actually as simple as that.

Steve Snyder

Yeah, I think with unemployment as high as 15% in some of these major cities, Ohio understand that this is about job creation. This is about opportunity. There are 34,000 jobs that will be created with passage of Issue 3, which is eminent worth supporting.

There's $1 billion dollar and the economic development that will coming to Ohio, if we are successful, and more than anything, I think having seen this on the balance of last four times, I mean, Ohio understands that issues on both sides of the isle, and kind of get the joke, that $1 billion dollars annually is leaving Ohio to neighboring states that has gaming, and this is about repatriating and keeping those gaming dollars home.

We think there is tremendous amount of support out there. It's all going to come down to who gets onto both and what is an off-year election and we have a very robust ground campaign that is going to be encouraging people, our yet voters to get out to the poll and we are optimistic. Tim, anything I missed on that?

Tim Wilmott

That was a very good update advertisement. No, that's right.

Peter Carlino

So if you are Ohio resident, vote yes. I remember that.

Felicia Hendrix - Barclays Capital

Yes, that was Eric Schippers, our head of government affairs. Thanks Eric very much. Okay, anything else Felicia? Your are doing a service for everyone else on the call.

Operator

Thank you. Our next question is from the line of Larry Klatzkin from Chapdelaine. Please go ahead, sir.

Larry Klatzkin - Chapdelaine

Hey, guys. I don’t know if there's questions left.

Peter Carlino

I think it is you, Larry.

Larry Klatzkin - Chapdelaine

One, is cash position at the end of the quarter, and that maybe is the leverage?

Bill Clifford

Cash position at the end of the quarter was $764.4 million, representing roughly $600 million in the unrestricted subsidiary. Generally speaking at corporate level class in the operations. We'll, we now have two tranches of revolver.

The tranche A piece was for $63.6 million and tranche B portion was $114 million, the B loan is roughly $1.518 billion, we have total bank debt of $1.695 billion, capital lease is roughly $5 million, and then we have bonds outstanding $250 million of this six and three quarters, $325 million with eight and three quarters, and there's still remaining $105.5 million of the six and seven, eight that are doing 11, which give us total debt of roughly $2.382 billion.

Larry Klatzkin - Chapdelaine

All right, perfect. The question if it somehow doesn't pass, you guys obviously have a few tracks in Ohio. What do you think the chances are of getting tranche of the tracks? Do you think that that has the chance of still happening, or just given what's going first you just don't want to talk about that?

Peter Carlino

Well, as you maybe aware, the Governor had a plan to authorize VLT to the state's seven existing race tracks. The Supreme Court came out with the decision that said that that plan is subject to voter referendum, so it's kind of fluid situation right now. We don’t know whether in fact it will get on the balance. If it gets on the balance, what the chances might be at this point?

Tim Wilmott

The opposition who won this case has to get somewhere in the neighborhood of 200,000 signatures within 90 days of the court ruling first to be on the ballot in November 2010 Larry. So we don’t obviously know where we stand with that and how that’s going to be proceed at this time. We should mentioned that with the Governor’s proposal we did submit we are one of the two of the seven tracks that did submit our $13 million application fee before that court ruling came down.

Peter Carlino

And we support it fully by the way we did, to be clear. During the late practices we completely support that legislation.

Larry Klatzkin - Chapdelaine

Do you get your 13 back now that its been delayed?

Tim Wilmott

We did.

Larry Klatzkin - Chapdelaine

Good, okay, because there were questions to that, Indy Downs, gets table games, do you see any affect at Lawrenceburg, do you think it’s far enough in part, and they already have electronic tables, it’s a minimal effect?

Tim Wilmott

There would be some affect, but Indiana Downs got table games, but we don’t understand why the State of Indiana would give table games to a racino operation knowing what that deal was. And we are not obviously we don’t think that’s a fair concession give Indiana Downs it would have an impact in Lawrenceburg they signed up for that deal knowing what the terms were with $250 million license fee and the tax rate in 2000 slot machines. So it’s something that we are watching very closely.

Larry Klatzkin - Chapdelaine

Okay and there is nothing besides at the beginning of next year anyway. As far as the [acquitted sales] goes what do you, I mean you are one of the candidates what kind of upset you see with that what do you think that it could be going on the timing?

Peter Carlino

Well who wants to take that, look we love to be in New York and again by way of a brief commercial I mean we are certainly the most qualified leading casino racetrack operator in United States. We know more about this business and have done it more successfully then anybody else. So we are logical bidder at the moment I think with highest bidder. Steve, do you want to take that?

Steve Snyder

No, Larry, to your question, I mean, we were told that the decision will be made by Labor Day, I think our mistake was not asking which Labor Day. As Peter pointed out we have put it along the table that we think is the most aggressive in terms of the upfront money for the state in their current budget crisis and you spend a lot of time in the community there. We think our proposal is the one that we would be open earliest among others and therefore, not only do we get to save more upfront money. We get the state money sooner through the operations of BLDs, now within the hands of the folks and all decision makers.

Larry Klatzkin - Chapdelaine

All right and given how well all of it works together that could be a long time from now. As far as another casino named, is there anything going on with that?

Peter Carlino

I don’t think nothing that we are concerned about.

Steve Snyder

There is a group, Larry that’s going to circulate stations, to get a question on ballot for facility in the Western part of mainland on the natural border.

Larry Klatzkin - Chapdelaine

There is really no such thing yet?

Peter Carlino

No. We are not affected.

Larry Klatzkin - Chapdelaine

All right, last one, [PennNaGa] just got an approval with Louisiana on Baton Rouge, any feeling from the effect on that?

Peter Carlino

John, will you take that?

John Finamore

What did they get, Larry?

Larry Klatzkin - Chapdelaine

Apparently, the gaming commission yesterday gave [PennNaGa] some approval on Baton Rouge, for their funding.

John Finamore

Yes, there have been a long series of delays, as you know, the [PennNaGa] plans in Baton Rouge and the gaming board has continually have brought them and say, hey, what are you plans, when do you going to get started so?

Larry Klatzkin - Chapdelaine

Did we know anything about it yesterday?

John Finamore

I did not see anything that came across the wire Larry so I don’t think we can comment until we see what was

Larry Klatzkin - Chapdelaine

All right, came at yesterday. All right, and then, well great guys, you guys have definitely put foot moving forward and good luck with Ohio.

Tim Wilmott

Thank you.

Operator

Our next question from the line of Joe Greff with J.P. Morgan Asset Management, please proceed.

Joe Greff - J.P. Morgan Asset Management

I have a follow up Fontainebleau question. Peter, can you talk about how you think with the hurdle rate, return rate would be for Las Vegas? And when you talk about strategic partner you are talking about 50% strategic partner or 75% strategic partner is that preferred way to go with Fontainebleau is really casino management contract that has very minimal equity stake and has partners and others contribute the equity?

Peter Carlino

No, look we wouldn't go there Joe. We didn't think putting our cash there made sense. I mean and as we bring in the partner, probably going be a 50-50 partner, his cash or their cash, our cash, we won't go there. We don't think that half investment makes sense. Won't talk about hurdle rates on investment except to say it will be consistent with any other investments that we make with a very realistic assessment of where that property can go over the next couple of years.

First of let me be clear there is much work to be done. The project was never fully designed to the last detail. They are still drawing plans to that because that stopped. We estimate, I estimate if we got control of the property that we would take six to nine months to get the architecture in line with what we believe will make a highly successful project. And have in hand firm, I mean firm prices consistent with everything else you have seen us do over the years. Firm contract, guaranteed maximum prices that would get us to a budget that we believe in, so there is no rush, there is no hurry, there is no nothing. It's simply, if it evolves that we would do this, we would do it with a partner, a check writing partner who also brought some strategic advantage to us that’s all I am going to say. And we would take our good old time in assessing what needs to be done. We're obviously not going to spend those significant dollars now until we know we have this project under control with a desired [figure]. But then in a reason and careful way we would start the process of designing for the future. So, it's about all we can say.

Joe Greff - J.P. Morgan Asset Management

And then Bill do you look at what's implied in your fourth quarter property level EBITDA guidance relative to what was implied in your prior guidance, what's the delta there?

Bill Clifford

Well, the delta is two things; primarily obviously we're reflecting trend rates and run rates from what we've seen in the third quarter particularly what we've seen in September and October and then obviously we've also included the Ohio referendum cost simply to give people a [tenor] for where we expect those to go. Now, obviously we're not going to give you this exact number for the Ohio's cost and then of course that makes your job a little bit more difficult, but the reality is that it's a target number and even that number within the Ohio spending is subject to day-to- day decisions as the campaign unwinds or comes to a conclusion over the next few days.

Joe Greff - J.P. Morgan Asset Management

And then, Bill, I don't if you discussed this or I missed it but third quarter if you can break out maintenance CapEx, project CapEx, what you got plans for the fourth quarter and if you could touch on what you have in half of next year?

Bill Clifford

We're not going to test with the next year, we'll come out with that on the next guidance. Relative to the total CapEx in the third quarter was roughly 88.5 million, broken out roughly $25 million in maintenance CapEx, $62.5 million in project. The lion's share of the project CapEx in the third quarter was wrap up around Lawrenceburg as well as Joliet that represents almost 58 million of the 63. Looking into the fourth quarter, we’ve got maintenance CapEx of roughly 36, project CapEx of 49 and that includes Maryland, Joliet and again some expenses in Lawrenceburg to come up with this whole.

Operator

Our next question is from the line of Steve Wieczynski from Stifel Nicolaus. Please proceed.

Steve Wieczynski - Stifel Nicolaus

Just one more question on going back to Vegas. I mean at this point is, you know you guys solely just looking at Fontainebleau or are you still looking at other assets?

Peter Carlino

I am sorry. I didn’t understand.

Tim Wilmott

Looking at other assets in Las Vegas.

Peter Carlino

The answer is yes. I mean this process is in over to its over and absolutely, absolutely.

Steve Wieczynski - Stifel Nicolaus

And then, the thought process behind Maryland, I was a little surprised in terms of you guys taking your bit from 500 slots out of the 1500 slots in that tax environment, just kind of what you guys were thinking there?

Peter Carlino

We are having trouble hearing.

Tim Wilmott

Thought process around 1500 slots, we as a whole, we've anticipated 1500 slots in our Maryland application. We were just uncomfortable and needed to wait to see how the process unfolded, but given the $25 million for 500 being capital expenditure requirement, it was never economically from the scale standpoint to only build a 500 unit facility given the land cost and the infrastructure cost and everything else.

Steve Wieczynski - Stifel Nicolaus

And the last question just in terms of Texas and your bit for Lone Star, the thought process behind that, I mean do you guys see Texas kind of passing gaming within the foreseeable future?

Tim Wilmott

Well, as you know, Texas has been a hot discussion point in terms of expansion in gaming over the recent years both with (inaudible) casinos as well as support for the racing industry with slots or video lottery terminals at the race track. We think Texas expansion of gaining will occur at some point in the future. Is it in the next legislative section, is in two years after that, it’s unknowable at this point in time.

But given the way Texans do vote now by going to three-fourth by going to Lake Charles, we do expect that at some point in time whether it’s this Governor or a new Governor given he contested primary at existing state of Texas something is likely happen. So, we look at Lone Star being really right in the center of the triangle at the Dallas/Fort Worth Metroplex, it’s a very interesting opportunity and it’s in our sweet spot as [rated].

Texas will get gaming as many of these states will, you can write that down, it will happen and then of course then you can write-off Lake Charles. But when do you see how that one that occurs and we think putting down even a large step in Texas is worth every penny up to the amount that we are prepared to spend.

So, Lone Star is an important opportunity, again we will be crazy but we are willing to bid up to get there because we think and believe in the future of Texas.

Operator

Our next question from the line of David Katz from Oppenheimer. Please proceed.

David Katz - Oppenheimer & Co.

So, I think with most of the detail questions addressed at this point. I am starting to just look down the list of opportunities that you’re working on, or after at various stages. And if we think about, let’s assume for the moment that you’re successful at, almost all of these between Aqueduct, Massachusetts, Ohio Fontainebleau and anything else that may come along.

How do you think about sort of maintaining a balance between growth capital and maintaining your balance sheet where it is? Obviously, you are starting from a pretty low level, but if we would add all of these up, it turns into some real money. I'm not looking for you to tell me which ones you'll toss overboard, but rather that you would consider tossing some overboard, but there are in fact limits.

Peter Carlino

I know that there are always limits and obviously you got to have enough falls of years, so that we are couple of fall out of the sky, you got a few more to catch, so we can't kind of tell you what that would be until we see what they are, but let's be honest.

In some of these places and again I don't want to be too specific. I mean these just absolute winners' period. and you'll be thrilled with of course a disciplined capital spend to open a facility in some of these places and again for obvious reasons I don't want to get into the profitability of some of the stuff, but this is all good stuff.

There is virtually nothing we are looking at today that is a risk to capital. With the possible exception, and fairly so of Las Vegas you could say let put that aside. That's the off balance sheet separate strategic objectives that we have that we think could enhance the future of this company in a major way.

Let’s put that on the side. Everything else we have here is kind of just level of goods. There is no downside. The competitive opportunity, it's just the open facility will do fine.

Tim Wilmott

To also be able to follow up on that question, I mean that's why you are seeing things like our partnership in Kansas. They are our great partner at ISC, that's a great location, it was a competitive situation, but primarily with that partner at that location with their balance sheet we do start to solve in incremental ways some of the issues that you point out in terms of where the capital is going to come from to complete this pipeline?

Steve Snyder

Yeah, It’s a great problem to have right since you got to sit there and if you should be so fortunate to land all of these. I think we are going to remain disciplined. We are very focused on what our cost of capital is going to be. While this project obviously becomes much less attractive if you get into too higher cost of capital to finance some, I suppose at some level, some of these opportunities that is quite timely are so good that if you had to issue equity if that and every thing else is going to come down to your pipe and then you still had some of these opportunities you would actually consider issuing equity and that’s what it came to.

I think we are a long way away from being in that environment. We do have a lot of things, but the reality is and Peter has put this many times before. He had to kiss a lot of frogs, and I would seriously doubt that very we are talking about is going to come to fruition. I don't know which one is going to work and which one isn't, but I almost guarantee you, we are not going to let them clean sweep.

Peter Carlino

I do and it’s going to be under corporate rule in Ohio, because it’s one of the bizarre arguments we’ve received that maybe we are not committed to building it if we should be successful on November 3rd. Let me make this very clear that if you are going to find a point on this and if we are successful on November 3, we are building these new projects here.

David Katz - Oppenheimer & Co.

That's right.

Peter Carlino

Which of you wouldn’t line up in the moment to build a free-standing casino in Columbus or in Toledo as an illustration, I mean this is what we are in business to do. This is not a problem, and by the way we have not talked about Pennsylvania and West Virginia.

We remain hopeful that West Virginia will finally pass table-game legislation this year, and to that end we are prepared with some very exciting changes in that facility, new capital spend and so forth to make that a full casino operation. Very, very exciting possibility and what many don't recognize this is one of the largest casinos in the United States. This will be a big time facility should that occur and a very, very exciting place to be.

Pennsylvania has already passed, at least through both houses, the house in the senate, a table games bill. We are hopeful that it will be reconciled to an amount much closer to where the senate bill than house bill. Frankly at the half level, we may not do it. In fact probably won’t do it, but we believe that there will be a rational bill given the cost of running tables in Pennsylvania, and that’s terrific.

That will take our already growing and wonderful facility in Harrisburg and take it to another level, so there is a lot of good stuff going on right now. Maryland will open. We are very optimistic. The Kansas will open and as Eric said, we have got a great partner with ISC. These are terrific people, they have capital, plus it is great to deal with, so just can't say enough about, just the embedded stuff that we've got going along, should nothing else happen.

David Katz - Oppenheimer & Co.

Thank you for that. If I can just follow it up with one quick one. As we sit down and look for these opportunities, from our chair, we are often asked if we believe does this or that make sense. If we put Fontainebleau on the side for a moment, should we always be thinking about whether or not things are cash flow positive, pretty much right out of the box and improving going forward, is that still a standard bill that you adhere too?

Peter Carlino

Yes, absolutely.

David Katz - Oppenheimer & Co.

Okay, good enough. Thanks.

Operator

Our next questions from the line of from Chuck Agri from AgriCapital Management, please proceeds.

Chuck Agri - AgriCapital Management

Good morning gentlemen just two or three quick questions, over the years you have talked about return requirements, you said while ago you wouldn't address them now I am probably just forgetting something any particular reason you are not addressing them now?

Steve Snyder

Well we always talked about that in connection with Fontainebleau and the issues surrounding that are so…

Chuck Agri - AgriCapital Management

All right let’s leave that aside and talk about all the other developments.

Steve Snyder

We put that aside I mean otherwise we are looking with very high double digit kind of returns.

Chuck Agri - AgriCapital Management

Right.

Steve Snyder

Well free cash flow we are still using the free cash flow stop process which is looking at project and expecting 5% settling out fully loaded with capital obviously borrowing costs means CapEx and income taxes taking away.

Chuck Agri - AgriCapital Management

Right and high double digit returns in the first 12 months something like that.

Peter Carlino

Right I think that translates certainly mid-teen levels on to high teen. Yeah, look one of the problems on this call and I think you recognize it Chuck and every other on the call. I mean this is a public forum and I don’t want to say too much about areas where we have initiatives of just how wonderful it might be suffice it to say that if we are pursuing it because we believe it its real opportunity but we just can't.

Chuck Agri - AgriCapital Management

Right well I guess the other way to ask the question is there is no important change in your thinking about return requirements?

Peter Carlino

I missed that.

Chuck Agri - AgriCapital Management

I see the other way to ask it is there is no important change in your thinking about return requirement?

Peter Carlino

Oh, absolutely not Chuck you’ve heard this answer before and its Bill’s free cash flow issue. As a guy who comes out of the real estate business in modest way for many years. You know obviously having to mortgage it paying things off. In fact, every building that I owned as a real estate developer is on a 15 year amortization. I mean, so big about paying down debt.

Chuck Agri - AgriCapital Management

Well, we get that about you and appreciated. Thank you.

Peter Carlino

And I am. So, and it was sort of shock to me when I got into the public world, and I said to folks who we come up with some of these deals. When you pay this stuff off and one of my friendly bankers from you pick your bank, said well you just roll it over and I guess it’s sort of, we never pay this stuff off.

Chuck Agri - AgriCapital Management

Well, that was his model, not your model, right.

Peter Carlino

Absolutely I mean, look, so you do the math, even if 5%, it’s still a 20 year end. I mean, by my rather naïve way of thinking about things. And we like paying down debt. So, let me just, I think that suggests as best as I am capable of describing.

Chuck Agri - AgriCapital Management

Just quickly, remind me what’s your, how you are thinking about the cost of capital and the use of equity in the project?

Peter Carlino

Use of equity you know listen we are obviously looking for 20% on the equities that we can get it. That hasn’t really changed in terms if we have to use equities.

Chuck Agri - AgriCapital Management

Well, obviously if you were to go forward with your off-balance sheet project in Las Vegas. You’d be using a lot of equity?

Peter Carlino

Well, cash for certain. On one level yes, on another level no I mean, obviously the cash is a product of 4% of your transaction which we were able to get more apparent by the year but year, but with 0% financing for 7 years. So…

Chuck Agri - AgriCapital Management

Right.

Peter Carlino

After using that as our capital, but I said I think there is something on the other side. We are not speaking frivolously about that money. It’s not free money its project.

Chuck Agri - AgriCapital Management

No, I get that; because there is this thing called fully diluted shares, right.

Peter Carlino

Absolutely.

Chuck Agri - AgriCapital Management

Somehow relates to that, and then one last question, given your lack of the Ohio lobbying in your prior guidance. Are there any items that you’ve considered and left out of your guidance for the fourth quarter that are just worth talking about?

Peter Carlino

The answer to that is no.

Tim Wilmott

Anything with Fontainebleau anywhere else, I want to ask you the question for you not now.

Peter Carlino

You know there certainly could be if the project you know we certainly have accumulated some costs around Fontainebleau. That if we are unsuccessful could very well show up in the fourth quarter. Bu…

Chuck Agri - AgriCapital Management

All right.

Peter Carlino

I don’t think there is anything that.

Chuck Agri - AgriCapital Management

What’s the magnitude of those bills?

Peter Carlino

Pardon.

Chuck Agri - AgriCapital Management

I said what’s the magnitude of those?

Bill Clifford

We’re probably, I don’t know what you mean about Fontainebleau at this point. I’m not sure if we really want $3 million may be.

Chuck Agri - AgriCapital Management

I guess.

Bill Clifford

$2 million to $3 million.

Chuck Agri - AgriCapital Management

All right. Thank you very much.

Peter Carlino

The price is doing very careful intelligent job.

Chuck Agri - AgriCapital Management

Right.

Peter Carlino

Thank you. And in other way, let me answer that again. If we don’t get the right combination of circumstances with the right partners at the right who brings the right tools even beyond money to the tables, we’re not doing it. It’s as simple as that. Okay, next.

Operator

Our next question from John Maxwell with Jeffries and Co.. Please proceed.

John Maxwell - Jeffries and Co.

Hi, good morning, just a couple of clarification points. In Ohio for the VLT, the timing of the signatures I guess we were hearing and that it was a possibility of a special session to do it earlier, or is it your sense that early as it could be would be November 2010?

Tim Wilmott

No. There has been some discussion and it’s early, very preliminary discussion among some legislators. That maybe they could move the question themselves legislatively to a May ballot, that has been the thought of maybe a small handful of legislators isn’t really real at this point. The only thing real out there is the prospect for citizens, things are gathering in order to put it on the November 2010.

Peter Carlino

And in any case I think in a couple of weeks we are going to know what happens with the casino bill that will have a lot of effect on what then might happen, win or lose, with the (inaudible). So, the two are interactive, there is no doubt about that. We just have to wait and see what happens

Tim Wilmott

And just to remind you, there are still two other pieces of litigation challenging that BLC legislation that have not been decided upon as of yet that's still out there regarding the constitutionality. So, that's still a question mark out there in the court as well, regarding the BLC problem.

John Maxwell - Jeffries and Co.

Okay and that obviously would have to get resolved before it would probably proceed anyway.

Peter Carlino

Well if the legislature can correct the minor constitutional questions raised in the legal channel, if they have an appetite to do so. The legislature and the Governor wants the slots, in fact there are legislative ways that they can make it happen that are not subject to constitutional criticism.

Tim Wilmott

It depends on how the legislature wants to crack that clearly and just to be clear the legislature does have the power to put this on the ballot themselves and not go through a signature gathering process, they can put a question on ballot and that could again occur as early as May or in November but there is no clear indication that that’s the way they are headed. So, its very fluid on both front.

John Maxwell - Jeffries and Co.

Okay, if you're successful in November could you remind us again when you would expect the properties to open?

Peter Carlino

Well there is a Gaming Commission that needs to formed which would be appointed by the Governor with the advice and consent of the Senate. I believe the timeline we have set up although there is probably leakage when you (inaudible) with regulations [being dragged] to approval somewhere in the six to nine months timeframe to receive a license. We each of the four would pay a $50 million license fee which goes into a pot of $200 million for job training in Ohio and construction would begin soon after the license was issued. Tim?

Tim Wilmott

I think given the uncertainty and usually the elongation of this process, the earliest we could expect to see something open at the optimum level of speed would be late 2012. It is more likely later than that.

Bill Clifford

I think Pennsylvania which I hope isn’t the model, did relatively well but it still took a couple of years to get it all together, to get their act together. It's all happened and it's all been wonderful but it took a little while. We think it will move a bit faster in Ohio because of the way this has been set up and also I might point out we’ve done nothing with architecture design and so forth, the site we've identified, we know the sites, but obviously we’re not going to spend a vast amount of [money] until we know we have this secured. Look this a great deal for us. It’s a great deal for Ohio, so we keep fingers crossed.

Tim Wilmott

And as we’ve told the leaders of these four cities, we want to work with the local communities to get them involved in the design process, so we have something that fits within their urban architecture. So one of the other reasons we haven't moved forward with advancing the design process here and being presumptuous.

John Maxwell - Jeffries and Co.

Any comments on Kentucky and your thoughts on that state proceeding with gaming?

Bill Clifford

Yes, let’s talk about (inaudible). You have a proposal I think Tim mentioned that was just put forward by the President that would actually put the question, a constitutional amendment on the ballot and the tax rate would be pretty large. I think they are talking in the neighborhood of 75%, 25% would be retained by the entity operating the notably though there would be a competitive bid process, so it wouldn't necessarily be guaranteed to the track. There would be that statewide election and then local county option election. So many, many hurdles that the plans I said that's been put forth by Senate President. Clearly, there are those supporters in the House and Senate who are going to try to move a bill without having to go to the ballot. We just don't know whether the votes are there or not as you know. There is a tremendous amount of support in the House, the Senate and though it's been blocked by smaller number of individuals including that Senate President we'll see what happens.

John Maxwell - Jeffries and Co.

And Bill just one minor point. I am sure you can go back and check but the September '08 your corporate expense of 27.4 that also included lobbying efforts in last year's period. Correct?

Bill Clifford

Yes, it did.

Operator

Our next question from the line of Dennis Forst from KeyBanc

Dennis Forst - KeyBanc

Most of the questions have been answered. I just had a couple of items. In Texas, does it make sense to acquire Lone Star as a racetrack? Does it have positive cash flow?

Peter Carlino

It does but you can’t justify the purchase on that basis.

Tim Wilmott

We must be honest. It’s a somewhat speculative effort. There is almost no place in the country today where racing alone is profitable. It is not an industry frankly that makes economic sense anymore. Not in Texas, not in any place unfortunately. And a small commercial for this, we are sometimes criticized or critics will say, you get slots at a racetrack but you don't enhance the number of customers coming now and the answer is no, we don't. But the racing industry does have a profound and a powerfully positive effect, and I will favor the state straight face upon state budget, and desirable for a lot of reasons.

In Pennsylvania for example, our racetracks are regulated by the Department of Agriculture for obvious reason. These farms and that raise these horses, grow grains, draw all the things that you that you see around a race track are terrific, so the impact on the economy is enormous, so I can argue in a pretty straight face, that obviously there's a very grooved supporting the activity, so the economics combines slots with these race track for gambling has been going on for many, many years, makes all the sense in the world. It's a win-win for everybody and we think that is the future of many states, and certainly is going to be part of the mix in Texas, but would we buy a racetrack in Dallas or anywhere else? Just on race track, I haven't seen that one in a while, so being very honest about that.

Dennis Forst - KeyBanc

Then secondly, there's obviously some lobbying cost going on in West Virginia, but those were not enumerated, wasn't even mentioned. Are they so insignificant as to not count?

Tim Wilmott

They are fairly minimal. I mean at the end of the day, the entire election happens (inaudible) potential voters, I should Eric?

Eric Schippers

It was only a county election.

Dennis Forst - KeyBanc

Then probably less than half of those are going to actually vote.

Tim Wilmott

Maybe hard to spend $20 million.

Bill Clifford

It generally accounted again. Eric, any comment?

Eric Schippers

No, other than it really is a local campaign and it's being supported by many local residents and business owners and it's a largely a word-of-mouth campaign. It's not at all in Toledo and Ohio.

Tim Wilmott

Now principally we are a well appreciated citizen of Jackson County for the county and very much appreciated, I think by the major of folks there and this is just strictly a turnout issue, and in our case is really odd, because we have a one-off date for the special elections.

Peter Carlino

December 5th and the reason we are doing it in December, because there's another issue that's going to be on the balance in November, we think there maybe some confusion with the few issues, but we feel good about our chances in Jefferson County, we have been running a very strong campaign there.

It's not one and there is a tremendous amount of solid equity that our friends and supporters and local business owners have been putting into this one. They understand we were unsuccessful last time, nobody is taking anything for granted, we're doing common home meetings and knocking on doors and meeting with just about everybody who will meet with us to talk about the benefits of table game, so we see our return, we are feeling like we are running the best possible campaign.

Dennis Forst - KeyBanc

Okay, and you said it was December 5?

Peter Carlino

Saturday campaign.

Dennis Forst - KeyBanc

Okay, are the lobbying costs that you've whatever the modest amount were spent in third quarter and the fourth quarter to those go through Charlestown or those go through corporate the way Ohio did?

Bill Clifford

That's incorporate.

Dennis Forst - KeyBanc

And then the last question kind of just, off-the-wall question. You have a highly insignificant property in Black Hawk, the rules changed pretty dramatically in Colorado. Is there anything you can do with Bullwhackers to make it more significant and make it a meaningful property for yourselves?

Tim Wilmott

Dennis, this is Tim, and it's such a small property so insignificant you know, we are modestly trying to improve the performance of the business the Ameristar's hotel is going to open up soon.

Dennis Forst - KeyBanc

Did open up.

Tim Wilmott

It did open. We're trying to become a second or third stop, but it's so insignificant to the overall performance of our enterprise that it's not going to be material.

Peter Carlino

We had some very nice things, we did the obviously necessary things at that facilitate to bringing it up to.

Dennis Forst - KeyBanc

Do you have some excess land there that you could do something with?

Peter Carlino

We do, the answer is yes, we can do a we can do a parking garage we can do a number of things even on an expanded facility, but I am not sure that’s a highly, highly competitive market. Certain companies have just spent foolish amounts of money, they will never see it return, and if somebody is going to commit capital suicide, I don’t know whether we want to join in.

That's probably a market frankly, where the investment just isn't worth it. Hey, look. We like the property, we like the people there. It's a great training ground too or place that we could bring folks to our system it's a nice little property, but there's just no solution Black Hawk.

Dennis Forst - KeyBanc

Got you, okay. Thanks a lot.

Operator

Our next question is from the line of Bill Lerner from Union Gaming.

Bill Lerner - Union Gaming

Just on current ops for a second, as I think about recovery margins, how much of your cost saves do you think are sustainable on through recovery. I know there is no precise to answer for, but just directionally or magnitude would be helpful.

Peter Carlino

Bill, could you just repeat that question again, please?

Bill Lerner - Union Gaming

Yeah, it’s just a question on recovery margins in your recent cost saves. How much of those are sustainable just generally trying to get that magnitude.

Bill Clifford

Cost is going to get reinstated.

Peter Carlino

I think when you look at what’s been done if volumes come back and we start showing growth, yeah there will be some of that, but I would think two-thirds of it is sustainable.

Bill Lerner - Union Gaming

What kinds of just categorically, what kinds of saves are sustainable? Is most of that labor, or is it marketing and some other stuff?

Bill Clifford

Most of it's labor, most of it is labor in terms of salaried labor structure, where it’s not volume-dependent and as we've made continued to make cuts in the organizational structures of these businesses. We think that's sustainable, some fixed cost in some other areas but most of it is labor savings.

Peter Carlino

You know one thing I'll add and Tim can elaborate if he wishes. Some of our competitors you would doubt have insured their properties have dramatically cut service and quality has fallen properties are not as well maintained, the place is dirty. I mean we've made a judgment to not touch the customer experience and to keep that still at a very, very high level and Tim he works very hard with that. So hopefully our customers will not see any impact on their experience.

Tim Wilmott

And in fact as we look at customer satisfaction levels we see them slightly enhanced over the past couple of quarters.

Bill Lerner - Union Gaming

Great, thank you and then the follow up with just on Las Vegas local market your thoughts on or interest in this market here?

Peter Carlino

That I'd like to talk about it, I’ll let Bill do that.

Bill Clifford

You let me answer that.

Peter Carlino

Who loves Las Vegas

Bill Clifford

I think our thought process is close enough to the economy in Las Vegas is going through an incredibly tough adjustment and it’s probably going to continue to be pretty tough because. One of the biggest segments in town is construction job which is grinding to a halt, certainly City Center has done as well as when our problems get finished and then theoretically you got Fontainebleau which may provide some relief everything work out in the future. You are going to have very tough unemployment numbers in Las Vegas housing prices are I assume relatively stable. So we see the outlook in Las Vegas, local market and quite frankly they got too much capacity as a bunch of new facilities growing our line. Now in a longer term environment so that kind of how we, where we see it for the next couple of years. On a longer term environment I think as Las Vegas and as the national economy rebounds and as the strip properties eventually start to deal the better that will obviously translate in to the local economy and you can certainly forecast this things could get a lot better.

There may be some opportunities for us in the local market around some properties but you know its nothing that appears eminent again it’s the same old story write that you got properties that are struggling and banks that owe a lot of money but the banks are not really pushing forward or looking to wrestle away control from the existing operators. And they are continuing to not to give the debt to certainly fore bear their obligations which means that the opportunities there are I think fairly limited.

But we are keeping an eye open. If something came along that made sense for us, we would absolutely go into that market. But we don’t really look at it as a strategic thought process. It’s really just another local market that we don’t have a presence in that we certainly would be open to be participating in, but we have to make sense financially.

Tim Wilmott

I couldn’t say a better. We viewed Las Vegas focus as another regional gaming opportunity. The macro economic situation there is not good 13% unemployment. If the right opportunity came at the right price, sure we’ll take a look at it. But if nothings eminent and we don’t think that the condition there over the next couple of years is going to get any better.

Bill Lerner - Union Gaming

Great, thanks guys.

Operator

Our next question from the line of [Michael Schunat] from Polar Securities, please proceed.

Unidentified Analyst

Yes, I’m sorry I wasn’t sure if I had heard you guys correctly at the beginning of the call with regards to the metrics that you track with regards to your customers in terms of spend-per-visit and time-on-device. Are all these metrics that you track still declining or you seeing any improvement in anything?

Peter Carlino

We saw in the third quarter that the trends continued to decline as we look at year-over-year numbers. So we are not seeing any recovery yet from the consumer in terms of those metrics that I outlined.

Unidentified Analyst

Okay, are there any?

Peter Carlino

As we say, our business are not declining as much as our spend-per-visit. And I don’t think that is kind of at least it’s not a situation where the customers don’t like our products they just don’t have the money that they used to have to spend on. So the reality is that would you believe it when the economy improves that our spend-per-visit will improve with that.

Unidentified Analyst

Okay. I will just listing some queries of the economy of the consumer improving but you are just not seeing it yet.

Peter Carlino

Here, we really not.

Tim Wilmott

Not with the consumer and not with their piece or their discretionary spend that we are focused on.

Unidentified Analyst

Okay. Great thanks very much for your help.

Operator

Our next question from the mind of Steve Altebrando from Sidoti & Company. Please proceed.

Steve Altebrando - Sidoti & Company

Hi guys. Can you just talk quickly about capital spend, should tables go through in West Virginia and PA?

Peter Carlino

I mean we came pretty clear with the local stand. This is going to be something that can be accommodated within the existing facility without major expansion required.

Tim Wilmott

Well remember in West Virginia the space is already built. Sure built because it could go for several years. So it’s just a matter of ferocity with the interior as well. And (inaudible) much involvement rather we haven’t yet got the budget together. I have approved all the architecture for that. It’s very cool video boards and some of the newest stuff that we are doing in our newest properties, right when you walk in the front door Charles down its pretty dramatic, but we haven't developed a budget for the interior fit yet, that will come soon, it will be extraordinary, but it will be exciting.

Steve Altebrando - Sidoti & Company

I have Pennsylvania

Peter Carlino

Really the same thing, I just yesterday looked at a plan, Tim can bring you up-to-date more specifically that shows us putting, we can [accommodate] a significant number of games within the existing footprint. We are going to want to expand beyond that and we'll do so in our own time. Tim why don't you describe what we've laid out?

Tim Wilmott

And again as we said previously its all going to be dependent upon what comes out of Harrisburg and makes economic sense for us to do, but we can put in approximately 30, 35 games already in the existing facility but if the economics are favorable to us there is an opportunity to expand that footprint obviously working with the local countship to get the necessary approval and permits to move that forward still has a lot of work to do on that front as well, but we're hopeful we're going to get favorable legislation out of Harrisburg and then be able to quickly work on that and probably have something to communicate to everybody in the later part of this year or early part of next year.

Peter Carlino

Well the issue won't be surprising to any of you, it might be to many politicians that is to say the lower the tax, the higher our investment will be, higher the tax, you'd have to lower investment. At the highest level we get no investment from us, at the lowest level we get the maximum.

Tim Wilmott

And the lower the tax rate the more jobs we create too.

Peter Carlino

Exactly

Steve Altebrando - Sidoti & Company

So assuming the tax rate is low it would require an expansion?

Peter Carlino

Not initially but yes we would do a modest expansion again no budget was set for that. Pennsylvania fortunately gets it. Pennsylvania has been very smart I think in balancing the [wire] for high taxes with a realistic sense that if you tax something more you're going to get less and we've actually heard that from some of the highest level politicians in Pennsylvania which is frankly shocking as most politicians don't get that. So, they do here.

Operator

Mr. Carlino, we have no further question at this time. You may resume with your closing remarks.

Peter Carlino

Well, that's terrific. My remarks are few. Thanks very much for being here this morning and stay tuned a lot of action over the next month and totally we have a lot of good things to report at the end of the next quarter. Thank you.

Operator

Thank you ladies and gentlemen. This does concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day everyone.

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Source: Penn National Gaming Inc. Q3 2009 Earnings Call Transcript
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