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Executives

Virginia E. Shanks - Chief Administrative Officer and Executive Vice President

Anthony M. Sanfilippo - Chief Executive Officer and Director

Carlos A. Ruisanchez - President and Chief Financial Officer

Analysts

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Joseph Greff - JP Morgan Chase & Co, Research Division

Carlo Santarelli - Deutsche Bank AG, Research Division

Felicia R. Hendrix - Barclays Capital, Research Division

Justin T. Sebastiano - Brean Capital LLC, Research Division

Chad Beynon - Macquarie Research

Pinnacle Entertainment (PNK) Q3 2013 Earnings Call November 6, 2013 10:00 AM ET

Virginia E. Shanks

[Audio Gap]

We've had great success opening the Legacy Pinnacle Hotel assets with the same system and look forward to seeing similar results across in their subproperties. We're also combining the databases to quickly leverage cost of property opportunities. We recently sent L'Auberge Baton Rouge offers to Ameristar Vicksburg guests. We're hosting a variety of cross-property VIP events in the fourth quarter and have begun to leverage our established national casino marketing infrastructure, an example of that being our branch office in Chicago now working directly with Ameristar in Chicago to bring new guests to that property.

Discovery is underway on a combined loyalty program to launch next year. We are using guest's feedback to provide the benefit inclusions, and we look forward to unveiling a new program that reflects the best of both mychoice and Star Awards in the spring of next year.

Tied to the combined loyalty program is the ability to have a universal card throughout our portfolio. We will start rollout of this universal card in quarter 2 of next year, and expect to conclude by mid-2015.

Lastly, we will also use scale to our advantage in terms of how we approach media buying, direct mail print production, loyalty program benefits, to name just a few.

I will now wrap up with some comments about notable [indiscernible] performance in the quarter. We experienced a very strong quarter at our L'Auberge Lake Charles property, where all-time records were set in table drop, table revenue and retail revenue. We completed the renovation of our standard hotel rooms and have received very favorable guest feedback.

In the quarter, we experienced both growth in occupancy and RevPAR, demonstrating the strength of our improved hotel assets. In St. Louis, the market continues to be soft, down 7.3% in the quarter, but River City is significantly outperforming the market. Our new hotel opened on August 28, completing an $82 million project that included an events center and 1,600-space parking garage.

Early results have been encouraging, with guests who have stayed in the hotel showing a 37% increase in Morris[ph] when compared to play scene[ph] prior to the hotel opening.

Similar to other regional gaming markets, the same-store Southern Indiana market was south -- was soft in the third quarter, down 20% year-over-year. This is due primarily to increased competition in the Cincinnati market. We have focused our efforts on growing markets such as Louisville and Lexington, while adjusting our marketing spend to reflect current business level.

We are looking forward to the opening of our newest property, Belterra Park, in May of next year. This will be a beautiful facility with the best location and will be highly synergistic with Belterra, allowing us to profitably grow the Cincinnati market.

Lastly, L'Auberge Baton Rouge continues to be a very good story, growing the market while achieving the highest market share since opening at 53.4% in the third quarter. We are seeing the momentum of strong trial continue, with over 17,000 new mychoice members visiting the property for the first time in the third quarter.

Hotel demand remains high, with the property now producing the second-highest RevPAR in the combined company. EBITDA margins also are improving as we cycled our first year anniversary in September.

In closing, we had a very productive third quarter and look forward to continuing our integration efforts that will lead to additional synergies and benefits for our guests. I'm now going to turn the call back over to Anthony.

Anthony M. Sanfilippo

Ginny, thank you, and terrific comments. We have been told that there were some technical difficulties and that the call didn't actually get started until a few minutes after the hour. We believed, here in this room, that it had started on the hour. So I am going to provide a few comments, and then we're going to hear from Carlos Ruisanchez, our President and CFO.

Good morning, everyone. We very much appreciate you being on the call this morning and welcome you to our third quarter earnings discussion. We're extremely pleased with how the integration has progressed since we closed the Ameristar transaction on August 13.

Pinnacle Entertainment today is a stronger company. We have a portfolio of properties that are in terrific locations. Our properties have been very well maintained. Most importantly though, we have over 15,000 team members who are very much engaged and focused on our mission statement, which is to be the best casino entertainment company in the world.

We have a powerful combination of enhanced scale, great operating assets, a diverse portfolio and a dedicated team focused on serving our guests and creating value for our shareholders. Many of our team members are also shareholders of Pinnacle Entertainment.

We had a very active year with a number of notable events. Our third quarter had a lot of activity, which we detailed in today's earnings release. We are moving thoughtfully and rapidly to create one highly-integrated and seamless organization. We've stayed true to selecting leaders who are best suited to manage a larger organization. We're focused on identifying and implementing best practices, and in some situations, new practices.

We focus on the long-term health of our company and strongly believe we have a great platform to continue to build a relevant and valuable company. You've heard Ginny's remarks. Ginny, thank you. And now I'm going to turn it over to Carlos. Carlos?

Carlos A. Ruisanchez

Thank you, Anthony, and good morning to all on the call. We've had a very eventful quarter, marked by the closing of the Ameristar transaction. While the operating environment has been challenging, there have been a number of very positive events throughout the quarter.

We had a successful financing that not only provided the company with the capital we needed to complete the Ameristar transaction, but lower our cost of capital and provided the type of capital structure that will allow the company to delever while maintaining the financial flexibility to support our business.

Since the close of the transaction, we paid down $74 million of term loans in the quarter. We entered into agreements to divest Lumiere and Ameristar Lake Charles, in accordance with the consent decree with the FTC. We opened our new hotel in River City with great -- to great reviews from our guests, completing the $82 million project on-time and on budget; completed the sale of our Atlantic City property; and finally, made tremendous progress on our integration. And we'll spend a few moments talking about our synergy update.

Over the course of the first 49 days of the integration, we have implemented synergies that will provide savings throughout our company in excess of $20 million per year. These implemented synergies fall into 3 categories: public company costs, labor and scale efficiencies.

Under public company costs, synergies include the board and audit costs and other public company expenses. In labor[ph] , we have been moving aggressively, as Anthony mentioned, to select leadership teams in all areas to combine our 2 companies. And finally, we have implemented some scale efficiencies already, with meaningful identified opportunities on to come[ph] .

Among the items that have been identified and largely not implemented are: marketing opportunities, as Ginny mentioned; and best practices that medium[ph] construction and time to implement, such as healthcare efficiencies.

We have meaningful readily-identified opportunities in every one of these categories that have yet to be implemented. Everyday, we continue to make progress and feel very confident on our ability to execute, to meaningfully exceed our public target of $40 million in synergies to be implemented by the end of next year.

On Belterra Park, formerly known as River Downs, a great new facility is coming together, and we're excited about bringing this facility into our portfolio in May of next year. We are confident about the budget and the return prospects for that project. As Ginny mentioned, this facility will target the broader Cincinnati market with a great location and leveraging its sister resort property an hour away.

Turning back to operations. Our team has responded well to lower business levels with a focus on cost containment and operating efficiencies. While October was better relative to September, we have the ability to look at the long-term prospects of our business and implement synergies to offset the top line challenges that the sector, as a whole, has been facing.

We're very excited about the terrific team that our company has and our long-term prospects, a team who is implementing and advancing best practices into a larger, more diverse platform that will produce increasing cash flow and stronger operations throughout.

We continue to be focused on maximizing the opportunity right in front of us with Ameristar, through the integration and realization of synergies, and using our strong diversified cash flow base to delever. I will turn the call back to Anthony.

Anthony M. Sanfilippo

Carlos, thank you. And operator, we are going to open up for any questions that any of our participants may have.

Question-and-Answer Session

Operator

[Operator Instructions] You have a question from the line of Shaun Kelley with Bank of America.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

So maybe to lead off here, Carlos or Anthony, could you...

[Technical Difficulty]

So maybe we could lead off by talking a little bit about corporate expenses, as we're trying to kind of measure out the impact of the synergies here. Carlos, could you try and give us a sense on like -- or maybe on an apples-to-apples basis, how much you think corporate expenses declined on a year-on-year basis, just given that, obviously, you changed the segment reporting and your historical Pinnacle reporting?

Carlos A. Ruisanchez

Sure. We had accounted for corporate expenses for the quarter in the same way that each company did last year. Our corporate expenses would have been down approximately about $4 million in the quarter. So Shaun, we made the change because we believe it more accurately reflects the contribution that each property is making to the company. It also allows us to manage the business in a more effective basis by allowing the properties to focus on the direct expense structure that they control. Hopefully, that's helpful and answers the question.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Yes, that's helpful. And then I guess to follow up on that, Carlos, obviously, the synergy target that you guys provided, the $20 million, seems like that's kind of a run rate exiting the third quarter. Would it be kind of realistic to think that you guys can actually exceed, I guess -- that's kind of $5 million on a quarterly basis, actually exceed that as you're continuing to get any additional synergies in the fourth quarter?

Carlos A. Ruisanchez

Certainly, we're ahead of that pace today relative to where we were. And the $20-plus million that we noted in the release and on the comments was the level that we were at, at the end of the third quarter. Certainly, we do expect that number to grow. And as we mentioned, we think that we'll meaningfully exceed the $40 million, certainly, implemented by the end of next year.

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Great. And then maybe my last one and I'll yield the floor. Just looking at the commentary around what you're seeing in the current business trends, it seemed like you were probably in the midst of trying to make some adjustments on operating and marketing expense levels as it related to the business environment in the third quarter. Is there more room to maybe move those down? Particularly, I think we saw some pretty weak top line numbers at some of the legacy Ameristar properties. Could you just talk a little bit about, maybe, the opportunity to tweak down promo at some of those to just kind of adjust the ship for the current operating environment?

Anthony M. Sanfilippo

Yes. Let me address that, Shaun. First and foremost, I'll tell you, we very much focus, on an ongoing basis, on running businesses that we think are sustainable for the long term. So let me even be clearer, and I know your question's on marketing, but let me even be clearer about that. We won't denigrate our businesses for short-term gain or profit, we just won't do that. We have -- we're proud of the fact that we have businesses that are very well maintained, and that we have integrated with a company that did the same thing over the last number of years. So when we look at the health of our businesses, they're in fairly great shape, which we're very proud of. And we focus on taking great care of our guests as they come in. Now we absolutely adjust expenses to the business volumes that we have throughout our organization, and we are always closely -- look, it's probably a little bit inaccurate on our part to say that when we started adjustments when we saw it, a little bit of softness, in both August and September. We continue to look at what we believe business volumes are going to be and appropriately adjust, whether it's marketing or other spend, as we move forward. And we continue to look at, are we reinvesting in our most profitable customers. And we have told you that for many years now, that we're not focused on market share, we're focused on investing in profitable customers. We don't spend a lot of time, internally or externally, talking about our market share. We spend a lot of time internally talking about profitable revenue. Ginny, you want to add to that?

Virginia E. Shanks

I would just add that we, of course, have looked at fourth quarter marketing reinvestment and have made adjustments that we think are right for the business levels, but also looking at the reinvestment as it relates to certain guests that [indiscernible]. So we want to keep our eye on our most loyal guests, of course, and continuing to provide them with a great experience and appropriate level of reinvestment. I was just going to add one more thing. There will be synergies that we'll begin to realize in the fourth quarter as it relates to marketing and different programs that we're doing, how we think about media buying and the like. So not only are we adjusting reinvestment, we're also looking at how we can consolidate some of our marketing efforts to be more profitable.

Anthony M. Sanfilippo

And as Ginny talked about in her comments, we're very focused on the rollout of our combined loyalty program, which will happen the beginning of the second quarter of '14.

Operator

Your next question comes from the line of Joe Greff with JPMorgan.

Joseph Greff - JP Morgan Chase & Co, Research Division

A question also on the synergies. To us, we interpret your comments this morning and what's in the press release as incrementally more positive than prior public comments. My question is on the remaining $20 million-plus of synergies. How much of that is related to revenues? In other words, if we're still in this tough year-over-year declining regional-revenue environment, how much risk is there to the balance of the target?

Carlos A. Ruisanchez

Based on where we sit today, we will be able to achieve that without any revenue. And we will exceed it without any revenue.

Joseph Greff - JP Morgan Chase & Co, Research Division

Great. And am I interpreting your comments as incrementally more positive about how you feel about achieving those synergies versus a quarter ago?

Anthony M. Sanfilippo

You're interpreting that correctly. We are -- we're positive. We do believe -- you heard Carlos say, you've heard me say that we think we can exceed, in a meaningful way, the $40 million target.

Joseph Greff - JP Morgan Chase & Co, Research Division

$20 million over 49 days suggests more than $40 million over 365 days. That's a joke.

Anthony M. Sanfilippo

I'm not good at complicated math problems, Joe. So do you have another question?

Joseph Greff - JP Morgan Chase & Co, Research Division

Yes. Ginny, you mentioned that Baton Rouge margins were up sequentially in the 3Q. What were the absolute EBITDA margin levels for that property?

Virginia E. Shanks

Get that, Carlos?

Carlos A. Ruisanchez

Yes. They're now approaching about 20%.

Joseph Greff - JP Morgan Chase & Co, Research Division

Got it. And my last question. Your commentary about October being better relative to September, is that just another way of saying that maybe October was less bad than September in general? Or how would you amplify those comments if your interpretation or [indiscernible]

Anthony M. Sanfilippo

Here's what we're seeing, we talk about this a lot. It hasn't -- each month hasn't been highly predictable. There has been ebbs and flows every month. And I'll go back to the statement, we're very true to focusing on our profitable segments and providing great experiences. September was an extremely soft month, and we have seen a bounce back in October. Is it as good as July? Possibly. It is, it is, but it's not predictable is probably the best way to say it. And we wish we had -- here's 3 key things that are causing the ebb and flow, we don't. And we're staying very focused on making sure that we take great care of our guests, and that we're focused on continuing to build profitable guest segments.

Operator

Your next question comes from the line of Carlo Santarelli with Deutsche Bank.

Carlo Santarelli - Deutsche Bank AG, Research Division

Just really quickly on kind of some of the regional results. Obviously, in September, Louisiana was certainly a sequentially different tone relative to July and August. Is there anything specific you guys would call out that kind of took place in the market during the month? And could you maybe try and categorize a little bit how October specifically is in that market?

Anthony M. Sanfilippo

Yes. So let me take a shot at that, Carlo. A couple of things. Clearly, and this is the smallest operating property that we have in Louisiana, but Bossier City in the Shreveport/Bossier market, Northwest Louisiana, has been impacted by a new competitor coming in, coupled with -- in Oklahoma, they continue to expand. Oklahoma, which is the closest market to Texas, has -- it's closer than our Northwest Louisiana market. They continue to add amenities, add games to those facilities. And having an additional competitor come into Northwest Louisiana didn't grow the market, it just cut the market up. So that brought that segment down in Northwest Louisiana. We feel very good about what's happening in New Orleans. We're continuing to build a hotel there. We think those additional guest rooms are going to be helpful to us, and that property had better performance from an EBITDA standpoint year-over-year. We feel very good about the management team that's in place in New Orleans and that we're making progress there and that there's upside there. Baton Rouge, Carlos talked about. Baton Rouge continues to ramp up. It's a wonderful property, we have great team there. Guests that are guests of that property rave about it, and we continue to market to those segments that we built that property for. And we're very bullish on the Lake Charles market. We continue to believe that Houston/Beaumont is underpenetrated and that we have a terrific property there, a wonderful resort property with an excellent management team, and we see very good results. Ginny talked about we had some record numbers coming out of Lake Charles. So when you look at what drives Houston and Beaumont, very oil-centric. It's a very healthy economy. That is, by far, the largest EBITDA property that we have in our portfolio. We're very confident it will continue to do well.

Carlo Santarelli - Deutsche Bank AG, Research Division

Great. And then if I could just follow up. With respect to -- and this is kind of, I guess, a piggyback of an earlier question. But if I were to think about your business on a same-store, forgetting the acquisition, forgetting the synergies, and paint a picture of 2014 regional GGR being down mid-single-digits, all things considered, with cannibalization and everything else, do you guys believe on a same-store portfolio basis that you will be able to mitigate that, as we've seen in some of the prior releases from some of the other guys? It seems like absorbing the revenue dips are becoming more difficult right now with cost cutting. Do you guys think that there's still some -- are there still some kind of levers you could pull to mitigate what could continue to be a little bit of a challenging top line environment?

Carlos A. Ruisanchez

Sure, Carlo. Certainly, we believe that while there is undoubtedly some headwinds regionally, our story is somewhat different. One, by virtue of our positions in the markets that we're in, where we think that we can -- we have the assets, both in terms of team members, as well as the physical assets, to fare well in all those markets. And secondly, there are going to be a number of synergies that we have identified, are planning for, are in the process of implementing that will certainly be an offset against any challenges that will go out there. Certainly, we're -- cost cutting, we appreciate that you can't save your way to freedom entirely. But it's got to be -- you got to be smarter about how dollars get spent. The synergy effort that we have undertaken for -- through this acquisition and continues to be a big focus in this management team, is how are you smarter about every dollar that gets spent. And more so than in prior years, where we've had some softness on the revenue side. We not only have the team to get that done, but we have real tangible efforts by virtue of the integration that are somewhat unique to us, or certainly not commonplace across our competitive set.

Operator

Your next question comes from the line of Felicia Hendrix.

Felicia R. Hendrix - Barclays Capital, Research Division

I started to circle back for a moment to the revenue synergies, because that seems to be an area which hasn't been quantified yet but is an opportunity that you have talked about in the past. Just wondering if you could discuss the areas where you think you could benefit from on the revenue side, and if there's any way to quantify where you think you could go with that?

Virginia E. Shanks

Yes, Felicia. I'll speak to the areas where we believe there is revenue opportunities for the combined company. I mentioned a few, but I'll just elaborate on them. One, being the hotel yield automated system. Currently, Ameristar does not have a sophisticated hotel yield system. We put that in, in the Pinnacle property, so like 2[ph] Pinnacle properties about 3 years ago. We reaped the rewards of that with 16 straight quarters of RevPAR, improved then the costs at[ph] our portfolio. We expect similar results in the Ameristar properties. They have terrific assets, so the ability to yield those assets to higher-worth guests is obviously a revenue opportunity. The second opportunity will be the combining and the unveiling of the new loyalty program in the spring of next year. You may recall when we launched, we launched mychoice in the spring of 2011. We had significant revenue gain outperforming pretty much every market in which we operated in with the new mychoice. We're talking to guests at both Ameristar, legacy Ameristar and legacy Pinnacle properties to understand what they value most in their current programs. And when it'll start[ph] , fully put together a combined program that we think will be on even better than what we have today with the 2 separate programs. And then one other item that I would add to the revenue mix is legacy Pinnacle has an established national casino marketing infrastructure that includes branch offices in key cities like Chicago, Dallas, Houston and others, as well as a pretty expansive network of independent reps. We're now going to take that same infrastructure and leverage it across the Ameristar portfolio. Let me give you 3 very tangible examples of how we plan to grow revenue. And the ones that are real, national casino marketing, we're already seeing some of the benefits of that. Hotel yield starts in December of this year in St. Charles, our largest hotel property, with Ameristar. And then the loyalty program, as I mentioned, in the spring of next year. So all within our grasp.

Felicia R. Hendrix - Barclays Capital, Research Division

I think we all went live right when you were talking about the loyalty programs. So anything you said before was just for you guys in the room. If we could just move on to Ohio for a second. Can you all update us about the Ohio promotional environment? Are you seeing any change there lately? We had the shuttering of Internet cafés. Maybe that wasn't really affecting you guys as much, but do you -- have you seen that environment abating or is it still status quo?

Anthony M. Sanfilippo

Yes, let me talk about Ohio a bit. I do think the Internet cafés not operating are a positive for our industry, and really went negative for our industry in multiple ways by operating. So we were very pleased that they stopped operating. Let me talk a little bit about what is now Belterra Park, which is the name that we have chosen for what was formerly River Downs. That property is going to be terrific. It has a wonderful location that has easy access, and it will be an integrated both thoroughbred racing and video lottery terminal facility. And we've taken the time to actually bring it all the way to the ground and rebuild it, so that it will be highly integrated and will provide great experiences for our guests. We're going to open up with 1,600 VLTs. We have built the facility so that we could rapidly expand. We put a shell on the end of the facility that will allow us to put another 300 to 400 VLTs in quickly, if demand warrants it. We're going to have a number of terrific food outlets that are going to be there, which we think helps bring people to that facility. And we very much focus on those things we can control, and that is our ability to market and attract guests that are profitable guests. And I continue to repeat that, but that's very important to us on the long term. We think Belterra resort has held up very, very well and has been operated in a manner that has really mitigated the competition in Cincinnati. We have been much more focused on Kentucky and those areas in Kentucky that we've marketed to. We're the only resort destination in the area. We think that both Belterra resort and Belterra Park will be a powerful combination. It's 60 minutes door-to-door. And we believe people, from a convenience standpoint, who live in the Cincinnati area will play at Belterra Park. And when they want to have a getaway, they'll go to Belterra resort. So we're very bullish on the property that we're developing right now. And we think that it will be the best racing-integrated video lottery terminal facility in the state of Ohio.

Felicia R. Hendrix - Barclays Capital, Research Division

And Carlos, just one last one for you. Just on the balance sheet. I was just wondering if you could walk us through the path of future delevering? Obviously, you started chipping away at the term loan. But can you just help us -- help frame for us what the debt-to-EBITDA could look like over the next several years?

Carlos A. Ruisanchez

We certainly have been consistent about our goal to get in the 3.5x to 4x leverage over the, call it, medium term. Certainly, we have started chipping away at that with cash flows from our existing operations. There will be, obviously, a meaningful paydown when the 2 divestitures close. The one in Louisiana, we expect to close by the end of the year. And the one in St. Louis will be sometime late first quarter, early second, somewhere in the -- certainly, in first half of next year. The cash flow dynamics of the company should continue to grow, both by virtue of synergies as well as the fact that we don't have material taxes that we're going to be paying in the near term, certainly on a federal basis. So that portion will continue to pay down debt as we go through. And I think that you will see meaningful improvements in our leverage profile next year, and certainly the year after that.

Operator

Your next question comes from the line of Justin Sebastiano from Brean Capital.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Can you just try to quantify the impact of the Colorado floods in September had on Ameristar's EBITDA in the quarter, or at least the ballpark?

Anthony M. Sanfilippo

Justin, I'm going to let you go to question 2. That -- we're happy offline to have a discussion about that. It's not meaningful to the total results.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Okay. And Felicia had mentioned it, about the retiring debt. I mean, that's still the plan going forward, is to use the free cash flow and asset sales from proceeds to stay on point with that, as opposed to, perhaps, going after a new project or a new gaming license?

Anthony M. Sanfilippo

Well, I wouldn't say that one overrides the other. I will tell you that we are very disciplined and very focused on how we spend our time. And today, all of us are spending our time on making this the best it could be, as our 2 companies come together. We're being very careful not to get distracted. And if there was something that was so compelling that we would -- we should or would spend time on it, we would do that. But there is an internal check before we take our sights off of our 16 properties and the process we're going through right now before we would spend any meaningful time outside of that.

Carlos A. Ruisanchez

I will add to that, Justin. Certainly, we view our leverage as elevated. We went into it comfortable, knowing the cash flow dynamics of our portfolio. And the focus is to bring that down in the near term.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Okay. And lastly, Lumiere Place divestiture, you're saying first half '14. What are the sequence of events that need to occur? Is it purely just Tropicana getting licensed? Is it -- or was there something beyond that for the [indiscernible]

Anthony M. Sanfilippo

No, it's the licensing of Tropicana in Missouri, and they're going through what would be a normal licensing process. There is -- because it was a situation with the Federal Trade Commission, there is a manager, independent manager at that property that we communicate with. We communicate with -- I communicate with the general manager that's there. We are being as competitive as we can be in that market. We're very much focused on running our Lumiere property the best we can run it until the last moment that we own that property. And I'll add, I'm very proud of the team that's there. It wasn't something we wanted to do, it was something that we were required to do. And until the last moment we own that property, we will treat it as part of the Pinnacle family.

Justin T. Sebastiano - Brean Capital LLC, Research Division

Okay. And so just to be clear, it isn't purely just Missouri Gaming Commission getting a license to Tropicana? [indiscernible]

Anthony M. Sanfilippo

That's what it is. Just Missouri Gaming getting licensed in Lake Charles, it's Landry's getting licensed. And we expect Landry's to get licensed by the end of this year, and that we would transfer -- we would close that deal and transfer the assets to Landry's.

Operator

Your question comes from the line of Chad Beynon with Macquarie.

Chad Beynon - Macquarie Research

Anthony, on the back of your response that you gave 1 minute or 2 ago, this morning, we learned that the city of New York approved 4 new resort-type properties, more in the upstate regions. Understanding that you have a very full plate right now, could you provide some of your comments around these regions, given the fairly reasonable tax rate that the state has issued?

Anthony M. Sanfilippo

Well, this is a great example. I'm glad you're bringing it up. This would be a good example of we will spend some time understanding what the situation is and spend some time looking at what the possibilities could be, and then making a decision if we wanted to allocate resources to being engaged with it. That's the best way for me to tell you. So when a state like New York passes a vote like they did yesterday, we would take a look. We don't have our head buried, but we are very focused on this integration. We're very focused on delevering our company. We believe we have a terrific platform today that will lead us to a much better company over time, and we're making sure we don't get sidetracked. So will we take a look at it? Sure. But we're very prudent and we're very disciplined is the best way to say it.

Chad Beynon - Macquarie Research

Okay. And then a follow-up for Carlos. Could you help us better understand your deleveraging plans by providing a caged cash number going forward on a quarterly basis? And then if you can provide any color around 4Q depreciation or interest expense, kind of how that would have looked or how that will look based off of the new model here?

Carlos A. Ruisanchez

Sure. As it relates to the caged cash, we're utilizing somewhere in the, call it, $100 million to $110 million or so in the everyday business. Certainly, the balances were a bit higher at the end of the quarter, in part, because of interest payments that were due right on the first, right after the quarter ended. But we will be managing towards that number, call it $100 million to $110 million on an ongoing basis. As it relates to the depreciation, roughly speaking, if you looked at the pro formas that we filed a few days ago, the annualized pro forma number of depreciation was put out there at $202 million. That is not exactly a straight line, but it's pretty close, what you should expect on a quarterly basis, give or take, $50 million of depreciation. As it relates to the interest, that, you can certainly go through what our cap structure is, based on the information that's out there and the instruments that were put out there. The capitalized piece of it is actually relatively small. Until we sell Lake Charles, we consider it capitalized, that piece. There is minimal capitalization associated with Belterra Park, and we stopped capitalizing on River City. So you're talking about, call it, a couple of million dollars or so a month of capitalized interest for purposes of your models.

Anthony M. Sanfilippo

And to everybody on the call, I know we have a wide range of people who listen in. To those that follow the company, thank you for doing that and to be thorough in your work. Those who were investors, thank you for believing in the company. And really, for the team members that are listening, we have a bright future in front of us. I very much appreciate all you're doing to really create the best casino entertainment company in the world. Thank you, all.

Operator

Thank you. This concludes today's conference. You may now disconnect.

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