MTR Gaming Group, Inc. Q1 2010 Earnings Call Transcript

May.10.10 | About: Eldorado Resorts, (ERI)

MTR Gaming Group, Inc. (MNTG) Q1 2010 Earnings Call Transcript May 10, 2010 4:30 PM ET

Executives

William Schmitt – IR, ICR

Bob Griffin – President & CEO

Dave Hughes – EVP & CFO

Analysts

Larry Klatzkin – Chapdelaine & Company Inc.

Kevin Coyne – Goldman Sachs Asset Management

Steve Altebrando – Sidoti & Company

Joe Hudak – Wells Fargo Advisors

Zvi Rhine [ph] – Hilco Trading [ph]

James Kayler – Banc of America Securities

Justin Sebastiano – Morgan, Joseph & Company

Operator

Greetings and welcome to the MTR Gaming first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow after the following presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce to your host, William Schmitt of ICR. Thank you, Mr. Schmitt you may begin.

William Schmitt

Thank you, Bob. Good afternoon everyone. Welcome to MTR Gaming Group first quarter 2010 conference call. Before we get stated, I just want remind you that the Company's remarks may include forward-looking statements within the meaning of section 27(a) of the Securities Act of 1933 as amended, and section 21(e) of the Securities Exchange Act of 1934 as amended, concerning the company's prospects. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a variety of factors which are described in the company's periodic reports filed with the Securities and Exchange Commission and in the Company's news releases.

Additionally, the company may discuss EBIDTA or earnings before interest, taxes, depreciation, and amortization, which is a non-GAAP financial measure. Such information and any disclosure required by the SEC regulation G can be found in today's news release, and will be available on the company's website under investor relations.

Finally, under certain circumstances the federal securities laws may require the Company to file a transcript of this call, including your questions, with the SEC. Accordingly, if you ask a question the Company will assume that you have consented to the inclusion of your questions and identity in any such required file.

It is now my pleasure to introduce your host Bob Griffin, President, CEO of MTR Gaming. Bob?

Bob Griffin

Thank you, Bill and good afternoon everyone. Overall, the Company had an average quarter. We got off to strong start in January and then in February we experienced the highest amount of snowfall for the region on record. And then March came around and the properties came back nicely. And Mountaineer Park, we performed very well.

We were only down 3% in EBITDA over prior year and it was not only with the snowstorm but the addition of the rivers and the Meadows permanent facility into the marketplace. Presque down to EBIT declined 12.2%. The property was not only affected by the record snowfall, but they didn't react effectively as Mountaineer Park did.

Our general manager resigned during the quarter. Now we have a general manager starting next Monday. I'd also like to point out that we'd $375,000 in severance and pre-opening cost in that number and $370,000 increase in real estate taxes in the quarter. In April, the Company received our table games license in Pennsylvania. Our construction project is on time and off budget, and we expect to open our tables in July with the approval of the Pennsylvania Game and Control Board.

We believe that this is going to be a very positive step for us based on the lower tax rate in Pennsylvania. The Company continues to work for a positive VoIP legislation in Ohio while we stay focused on our operating businesses, and with that I'll turn it over to Dave Hughes, our Executive Vice President and Chief Financial Officer.

Dave Hughes

Thank you, Bob. A couple of things before you get into the figures. On March 18th, we replaced our amended and restated credit facility with a $20 million senior secured delayed draw term loan credit facility of which we due $10 million of closing with deposit at $10 million in the bank that have a set of size for our licensing fee payment of $16.5 million to table games for Pennsylvania.

The facility will mature on March 18 2013 and a term commitment terminates to the earliest of 18th month anniversary of the closing date with the date of term loan is permanently reduced zero.

The facility has an interest rate of LIBOR plus 7% and contains customer covenants including restrictions on additional debt, payments of dividends, making start of new investment and disposable of certain assets. They must also maintain certain maximum of leverage ratio, some interest coverage ratio and then the EBITDA and the maximum capital expenditures.

In cash Binion [ph] property, we will require to provide some guarantees which expired on March 31st, 2010. During the quarter we paid $200,000 security events of defaults regarding leases that TLC was to pay.

This concludes our charges for discontinued operations owned in small administrative and legal fees that aren't really significant on an ongoing forward base.

We continue to purse offers to starting our Non-Core Land and sold off our old track wagering facility land in Erie for $1.350 million resulting in a gain of $76,000 and certain costs over the West Virginia were sold for $157,000 of which was approximate to our book value.

For the first quarter of 2010, the company's adjusted EBITDA from continuing operations was $16.6 million, down 14% after charges, as Bob mentioned a $300,000 for severance and $75,000 for pre-opening cost related to Presque Isle Downs table games.

That compares to $19.5 million for the prior year. Overall net adjusted EBITDA margin for the first quarter contingent operations were 16.8% compared to 17.7% for the prior quarter.

Net adjusted EBITDA margins for the first quarter for Mountaineer was 20.6% compared to 18.7% for prior year period, net adjusted EBITDA margin for Presque Isle Downs was 19.4% compared to 20.8%.

However, we had a real estate increase in real estate taxes of $370,000 and we mentioned that we had a $300,000 in the severance cost with the company as well $75,000 for pre-opening cost for the differential.

Loss per diluted share from continuing operations for the quarter amounted to $0.11 per share compared to $0.05 per diluted share for the prior period. EPS for discontinued operations amount to a loss of a penny per diluted share compared to $0.02 loss per diluted share in the prior quarter.

Net income amounted to $0.12 per diluted share compared to a gain of $0.03 per diluted share for the prior period. Depreciation expense for the quarter was $7.3 million which is the same as the prior quarter. Interest expense and that includes consent fees, amortization is deferred financing costs for the quarter was $13.5 million compared to $9.9 million for the prior period.

We have no capitalized interest for this period. During the three months ended March 31, we spent $1.9 million in CapEx consisting of a $1 million at Mountaineer Park primarily for slot product of about $600,000, buffet renovations for around $200,000 and our Presque Isle Downs through table games expansion we spent so far $643,000 as of the quarter.

And we also purchased some slot products for $239,000 [ph]. Regarding the majority of price our slot tracks we are able to negotiate favorable terms with our vendors for two years payments with no interest. During the second quarter this year we are expecting federal income tax refunds of approximately $9 million as a result of a 2009 operating loss to prior periods.

I did say that during this period this year we also will receive approximately $1.2 million in prior CapEx reimbursement as well as funding for some capital projects.

Our total gross debt ending March 31, 2010 was $401.1 million including $10 million we drew on the new credit facility. We have cash and cash equivalent funding amount to $46.3 million. Some other housekeeping items, again our total project outlay for implementation of table games at PIDI will be approximately $25 million. That is net of the $3.5 million deposit returned from the Commonwealth of Pennsylvania or $28.5 million if you add that back.

Included in this number is approximately $9.2 million capital expenditures and $16.5 million for the license fee and other expenses including project reopening cost of approximately $1.8 million. Regarding our Pennsylvania facility for table games, the company has done a presentation for the state of Pennsylvania. In that presentation, we did provide our estimates for table game win. Our estimates are based on 48 units and we estimate [ph] F4 approximately $90 million in fact for Presque Isle Downs revenue per tables in 2010, for the full year $38.5 million.

With that I'll turn it over to Bob Griffin.

Bob Griffin

Thanks, David. At this time, we'll open it up for questions and answers.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Larry Klatzkin with Chapdelaine & Company Inc. Please proceed with your question.

Larry Klatzkin – Chapdelaine & Company Inc.

A couple of quick questions. One, could you guys quantify what you feel the effect of the snow was?

Bob Griffin

You know Larry, it's hard to say. I will tell you that we were up considerably in January and February it just really fell off a cliff. I wouldn't want to quantify it because we have bad weather here every year. But this is definitely record snowfalls. And I think more importantly for us was we saw in March, the same trend we saw in January, which was positive year-over-year growth and what we're seeing in April and so far in May is positive growth for us as well and as I've told everybody, when you really look at our company because of the free play issue, the focus is on our bottom line and not so much on the top line revenues.

Larry Klatzkin – Chapdelaine & Company Inc.

All right. But no – I mean, it wasn't like more than $5 million would you say? It's something much smaller than that?

Bob Griffin

Yes. Larry, you know how this is. You get good weather one month, bad weather certainly impacted us. You could take a look a February. If you saw, we came out real strong in January. If you want, you can kind of take a look at March and extrapolate the February number but we're kind of reluctant to do that because it is a regional market and yes, we lost business but also there is some pent up demand.

I do want to play one thing out is, last year, when you look at your comparable, it's just an accounting treatment. Last year we had cash mailers and the accounting treatments required us to report approximately $1.7 million of revenue. This year we're free play. We do not report that. So take out $1.7 million for the quarter, just from an accounting way the way it's treated from an up announcements perspective by merit of free flow. So back that up from your number.

Larry Klatzkin – Chapdelaine & Company Inc.

All right. So how does it look on Ohio now? You guys are going in three ways. You talked about last quarter, what's going in each method?

Bob Griffin

That's a great question Larry. For us Ohio is the ballgame. We are very focused on getting BLT's done. Right now our folks are lobbying with some of the other race tracks to be included in the enabling legislation.

We expect that legislation will be completed by the first week of June. We don't know it will be successful to be included in that or not. We have talked to a number of people that would participate with us on a campaign in November, and fate for any reason the referendum is not on about in November. The governor's executive order stand, so we're fighting on a couple of different fronts, but I really wouldn't want to handicap the outcome at this point.

Larry Klatzkin – Chapdelaine & Company Inc.

I thought that you said there was a possibly a third type of, a third way of going into it too.

Bob Griffin

No. I said there is a number of ways we're looking at it. One is the enabling legislation, two –

Larry Klatzkin – Chapdelaine & Company Inc.

Oh okay, okay.

Bob Griffin

Yes. The reference could be pulled off technically and the governor's executive order would stand, and then the third way of course is the November ballot itself. It's still on how much should we put to a campaign and who else would support us.

Larry Klatzkin – Chapdelaine & Company Inc.

Okay, and then I guess last question would be the win around the Mountaineer and do you think there's so many of that or is that not will you say its excess win, the math around the Mountaineer how would you look at that?

Bob Griffin

We're looking at that Larry. Again we close on a two transaction. We're in a process of engaging a real estate broker. It's a long and lengthy process to get that done because of licensing. We also have some land as well as in Presque Isle Downs that we were looking so. We will be listing more land. We had quite a bit on our list, and quite a bit of transactions to close on. Now that we've completed that, we're looking to move forward with this real estate agent and started listing additional non-core asset land. So, basically it's not involved in the running of the facility, we're looking to dispose of that and get the cash for the Company.

Larry Klatzkin – Chapdelaine & Company Inc.

All right. Thanks guys.

Bob Griffin

Thanks Larry.

Operator

Thank you. Our next question comes from the line of Kevin Coyne with Goldman Sachs Asset Management. Please proceed with your question.

Kevin Coyne – Goldman Sachs Asset Management

Good afternoon guys.

Bob Griffin

Good afternoon.

Kevin Coyne – Goldman Sachs Asset Management

Just wanted to clarify so there was debt at the end of the quarter was 390, but then after the quarter you pulled out the remaining $10 million, is that correct?

Bob Griffin

That's correct. We required to – just to be clear part of the deal with Aladdin, which it did a very good deal with us and give us very, very favorable ratio coverages, much more favorable than the traditional bank. They had asked that we draw down a piece of that. We agree to draw down $10 million of that. It was a part of the negotiation. Again, we just deposited that thing in the bank account and now we go toward the $16.5 million licensing fee so that's on for a one.

Kevin Coyne – Goldman Sachs Asset Management

Okay, and so the – you said you had was it 1.6 in the CapEx reimbursement that you expect to receive?

Bob Griffin

The CapEx no, I think you mixed up another topic. The capital reimbursement themselves we received $1.3 million so far for some prior CapEx reimbursement. We also have some CAFO that we talked about in the past that were booked that was fully funded through capital reimbursement. So that what will happen is you'll see that net out in the CapEx line, so that it's going bring down that CapEx run rate because of these reimbursements.

Kevin Coyne – Goldman Sachs Asset Management

Okay, but the maintenance CapEx for the year is still in that 9.2 to $9.3 million range?

Bob Griffin

I'd say it is somewhere around $8.8 million to $9 million. It is $9 million. That's fine and that's without the table games program in Pennsylvania.

Kevin Coyne – Goldman Sachs Asset Management

Okay, and then was there sorry to interrupt. Go ahead.

Bob Griffin

And as you recall we talked about our CapEx program, our CapEx was initially built on a table did not occur. One table that occurred we looked at that project and incorporate that into our overall CapEx spends. Additionally, we did not have reflected those reimbursable to that time.

Kevin Coyne – Goldman Sachs Asset Management

Okay, and then was there any particular it was luck in the impact during the quarter in terms of whole percentage amount in there?

Bob Griffin

No luck is not a factor I mean our whole percentage is totally pretty predictable, we don't have the volatility of other jurisdictions, it did go higher but I wouldn't classify this luck I will classify it as good management.

Kevin Coyne – Goldman Sachs Asset Management

Okay and then in terms of just on the balance sheet, the prepaid income tax line. It's up about $1.2 million, is it little bit of seasonality or how should we think about modeling that from a working capital perspective?

Dave Hughes

That really reflects the refund at the end of 2009 versus the refund at the end of 2008. The amount that the 331, 2010 reflects the estimated $9 million refund for the current year versus the refund that was there a year ago.

Kevin Coyne – Goldman Sachs Asset Management

Okay, so we will bring that down when you get that payment in the second quarter?

Bob Griffin

Correct.

Dave Hughes

That's correct.

Kevin Coyne – Goldman Sachs Asset Management

Okay and then just as you think about let's say the potential competition in Ohio, are you doing anything in particular in terms of our marketing effort, have you started any initiatives to try to bolster your Ohio customer base or will you not start that until let's say you have more of a 2011 event.

Bob Griffin

No I think that's something that we have already started. What we talked about last year was that table games was still relatively new for Mountaineer Park itself, we have opened play development offices in Cleveland. Clearly the Erie property is closer to Cleveland than it is to the Mountaineer property. We have expanded those efforts, we are putting more of our marketing dollars into the Cleveland market and Presque Isle will be very aggressive into that market long before the standalone casinos come online.

So, we are spending that money today.

Kevin Coyne – Goldman Sachs Asset Management

Great. Thank you.

Bob Griffin

Thank you, Kevin.

Operator

Thank you. Our next question comes from the line of Steve Altebrando with Sidoti & Company. Please proceed with your question.

Steve Altebrando – Sidoti & Company

Hi guys how are you?

Bob Griffin

Hi, Steve.

Steve Altebrando – Sidoti & Company

Given the tax rate in Pennsylvania, you guys are expecting the tables to be accretive some margins in Erie?

Bob Griffin

Absolutely, again we have talked about in prior call at Mountaineer Park our margins were somewhere around approximately 16% full absorbed and that's with a 40% tax rate. If you compare that to Presque Isle Downs tax rate that's pretty new in the 40 percentile margin so that's pretty strong on table game. So, it's a very significant factor, I think it was wise for the State of Pennsylvanian they realize the competitive nature in coming out with lower tax rate.

Steve Altebrando – Sidoti & Company

Okay and just one other to make sure I was heard right. Do you project a $38 million annualized from tables?

Bob Griffin

The table games number annualized the data that I provided you was $38 million that's correct.

Steve Altebrando – Sidoti & Company

Thanks.

Bob Griffin

Thanks Steve.

Operator

Thank you. Our next question comes from the line of Joe Hudak with Wells Fargo Advisors. Please proceed with your question.

Joe Hudak – Wells Fargo Advisors

Couple of questions have been already answered but going back, what's the prospects for the hotel down there at Mountaineer I mean what's average room rate in occupancy?

Bob Griffin

For the ADR, sure will give it you if it's available to me, like I got to find my seat [ph] here. ADR for Mountaineer Park was with comps was $48 compared to $63. Without comps it was $63 compared to $75 roughly and that really comes down to pretty more customers into the hotel versus going down to an empty hotel.

Joe Hudak – Wells Fargo Advisors

Okay great. What would you say were your biggest challenges in the quarter and what were the biggest positives during the past quarter?

Bob Griffin

I think the biggest challenge was quite frankly the web. I've certainly never seen anything like it and no one in Pittsburg has ever seen anything like it. We really started the year just great out of the gate. January, we knocked the cover off the ball and February hurt us. So that was really the challenge and quite frankly, the team at Mountaineer did a very good job in managing those business volumes. As I said in the opening remarks, we thought Presque Isle Downs reacted a little slow and we were able to just correct that quickly and pick some of that back up in March. I thought the best opportunities that we see is that we that our table name licensed in Pennsylvania and the construction project, it's actually – it's not a large dollar amount for a good return. So I think that was probably the best opportunity we had in the quarter.

Dave Hughes

And following up on the table games, keep in mind, I think what a lot of folks found is, it's your capital investment. And one of the things we've talked about as our company is our discipline in capital spending. And when we approach Presque Isle Downs, we didn't go in here and say we're going to spend $150 million to generate X amount of revenue. We went in and said what is the revenue and then how much CapEx should we spend. So again, our whole plan was, we talked about getting our investment back within two, two and a half years on investment and that's what w did in Presque Isle Downs.

Joe Hudak – Wells Fargo Advisors

Okay, great, thanks.

Bob Griffin

Thanks, Joe.

Operator

Thank you. Our next question comes from the line of Zvi Rhine [ph] with Hilco Trading [ph]. Please proceed with your question.

Zvi Rhine – Hilco Trading

Good afternoon, gentlemen. A couple of quick ones, on the corporate expense line, $2.8 million, it's been ticking up over the last several quarters. What do you kind of see as the run rate when table games occurs at Presque?

Dave Hughes

The corporate run rate is not going to change because table games at Presque really for corporate run rate, use $12 million as our run rate.

Zvi Rhine – Hilco Trading

Okay, secondly, I think on the last quarter you mentioned that there wouldn't be a similar type of spend for the ballot in Ohio if it comes to that. Now, you're indicating that the referendum is the only way to get table games – to get casinos in Ohio. You're going to team up with some other party to try and fight for that. Do you have an allocation or a budget for what you may spend this year? They get that approved?

Dave Hughes

Yes, before we get to it, our conversation is whether we would spend to that level or not and we said we would not. We didn't say we wouldn't spend something. We just said we wouldn't spend to that level and I'll turn it over to Bob to answer.

Bob Griffin

Right. Clearly, we're not going to spend the same amount we did last year and we don't expect the opposition to fund it to the level that we were opposed with last year as well. What's interesting is there seems to be more people willing to join the party with us this time and we're going to see what the polls tell us as we come out of the summer months. That's really going to tell us how much money we need to spend.

Dave Hughes

We aren't going to it; we don't want to telegraph what our game plan is. Rest assured Ohio is important to us and we'll continue to be very aggressive and pursing our interest in Ohio.

Zvi Rhine – Hilco Trading

Okay, very good. And then the last question may choose to answer this not, but you indicated that volumes were doing well in April and May. Can you comment on the margin on those volumes? Does that help study?

Bob Griffin

When I actually talk about how we're doing and I keep asking everybody to look at our product line as we look to what we did last year over the last 16-18 months. We took a lot of cost out of the business, and with free play when I met – we don't have that large cash mailer going out every month anymore.

So, we're seeing our bottom line grow. Customer counts are slightly down. Our revenues are slightly down, but our bottom line is what we're focused and that's about we were very pleased what we were seeing there. And to recap the net effect of the netting out from accounting perspective, the expense size was about $1 million of savings. The rest of that at Mountaineer Park was really is attributable to the management team, continue do a really good job on a cost to payment program, and I think you're going to see Presque Isle Downs follows that same trend going forward.

Zvi Rhine – Hilco Trading

Okay, and just to clarify so you maybe comment about growth in April and so far in the early part of May you're referring to a cash flow, EBITDA?

Bob Griffin

That's correct.

Zvi Rhine – Hilco Trading

Okay. All right, very well. That does it for me. Thanks guys.

Operator

Thank you. Our next question comes from the line of James Kayler with Banc of America Securities. Please proceed with your question.

James Kayler – Banc of America Securities

Hey guys. How you doing?

Bob Griffin

Hey, James.

Dave Hughes

Hey, James.

James Kayler – Banc of America Securities

Sorry, just to clarify one thing on the Ohio ballot initiative, have all the signatures been certified. Is it officially on the ballot for the November election?

Dave Hughes

It is. The signatures have been certified and it is officially on the ballot as of now.

James Kayler – Banc of America Securities

Okay. And then, I know that recently there was a ruling or a – yes, ruling in one of the lawsuits relating to kind of who is behind the campaign, could you give any update on what's going on with the whole? I think it's basically the Secretary of State (inaudible) Ohio votes?

Dave Hughes

It is, and the latest round of Secretary of State was – she did win that piece of the suit and they are trying to trace down where the money for the referendum comes from. Quite frankly, I think that's an issue more for the governor and the administration. Our focus is that if the ballot is still on come November and now removed. What we need to do to be successful in November, I think some of the pressure that's coming from the administration on this group, they may be inclined to remove it off the ballot.

James Kayler – Banc of America Securities

Okay, and then from sort of a constitutional or sort of state law perspective. Could that happen at sort of any time or it's set at a certain point?

Dave Hughes

No. it can – at this point it can happen at any time. It actually is three signatures to it under Ohio law; you must have two to three signers sent a letter in asking for to be removed. As of now that has not happen, and there is a lot of politics been played in Ohio right now, and it is an election year. We're looking at November as it were going to happen and how we funded and how we're going to be successful, but there is the possibility that it could be removed before which still doesn't clear all the hurdles for us. That's just one. There's still the constitutionality question whether there are slots or VoIPs, but it would put the governor's executive order back in standing.

James Kayler – Banc of America Securities

Okay, and then I guess on the implantation issue or the implantation bill for the casinos what things is that bill going to define and the tax raising locations obviously in the ballot question. So, what does that defines or how much room is in there and sort of where is that stand right now?

Dave Hughes

It has a fair amount of support on both sides of the isle. It's like any other state. They are putting in rules or regulations on how to set up the Gaming Commission, hours of operation, and how to control liquor sales and hours of operation and how to control liquor sales in hours. Our focus is not on injecting ourselves into how that is setup, but we are more inclined to push for the inclusion of VoIPs at the race tracks into the enabling legislation and we don't know if we will be successful with that or not.

James Kayler – Banc of America Securities

And that could happen, that would not require constitutional amendment obviously, that would be just a regular

Bob Griffin

That would beat down to the legislature.

James Kayler – Banc of America Securities

Okay but wouldn't that be a change for the constitution which would be part of implementing bill.

Bob Griffin

That's correct.

James Kayler – Banc of America Securities

Okay, and sorry if I – hopefully I didn't this but did you quantify and all the impact of the free play in West Virginian on the EBITDA numbers?

Dave Hughes

Yes, we did from revenue we said it was $1.7 million approximately rounded $1.7 million and EBITDA was a $1 million beneficial. That shift in our savings from the conversion, it doesn't reflect increased in EBITDA from obviously having the tools available that West Virginia gave us. We are just giving you the treatment change. Right and what we are seeing with that free play is that we are tracking where our customers have gone; we saw a number of our customers return who were going to the rivers and meadows. And once we were given free play we are seeing those customers come back and we now have competitive offers to put in their hands and we are getting those customers back.

James Kayler – Banc of America Securities

And in terms of sort of your sort of ability to use free play. Where do you guys think you are? I mean do you think there are still improvements to be had; do you think you have had a good run-rate?

Bob Griffin

I think we are going to monitor our market conditions it is one of the best way to put it and we are going to react to market conditions and we will go up and down depending on what necessity. We also have a GM starting, it's got a great marketing background at Presque Isle Downs, so I think they will continue to evaluate that.

The one thing that I would say is that IGT has a trademark that's free play but free play is not free and one of the things that we are disciplined on is what we will spend our marketing dollars and what we expect that reinvestment to be into our customer and our return.

So clearly, as we said, the first few months, we needed to see what was the right mix. We feel pretty comfortable where we are and we are seeing how we can use free play as different drivers during different days of the week. But clearly the marketing in this area has gotten a little bit stronger. I don't want to say it's a marketing war but it's definitely heated up quite a bit and we still feel we have lot of drive power with free play.

James Kayler – Banc of America Securities

All right. Thanks guys.

Operator

Thank you. (Operator Instructions) Our next question comes from Justin Sebastiano with Morgan, Joseph & Company. Please proceed with your question.

Justin Sebastiano – Morgan, Joseph & Company

Thanks. Hey guys.

Bob Griffin

Hey, Justin.

Justin Sebastiano – Morgan, Joseph & Company

Most of my questions have been asked and answered but if you could maybe give us a little bit of background or at least tell us who the new GM is at Presque Isle and they are more of a gaming person. You said marketing is kind of maybe their expertise; could you maybe go a little more bit into the bio there?

Bob Griffin

Yeah, sure. I would be happy to, gentlemen; that is Fred Buro. Fred comes out of Atlantic City where he was the President of one of the Trump Properties, he worked for Penn National, he has a lot of experience, he had his own business for a while consulting. He is really a marketing person and when we looked at the Presque Isle market to what we are trying to do with table games and player development. We felt that Fred was the best fit there. We actually had him parked here at our corporate office for the last couple of months and I will say that just in the last five weeks alone with the change that we have made up there that Presque Isle has actually exceeded Mountaineer Park in slot revenue. So he's very familiar with the market and he is, we think he is going to do an outstanding job for us.

Justin Sebastiano – Morgan, Joseph & Company

Okay, so he was working on his own company or did you take him out of AC?

Bob Griffin

No, he actually – when I came to Mountaineer he had his own consulting company and I hired him in house.

Justin Sebastiano – Morgan, Joseph & Company

Okay.

Bob Griffin

And then – so he actually came into our corporate office a few months ago from the Mountaineer property and we have set him the area. But he has a lot of experience, not only in Atlantic City but in the regional markets.

Dave Hughes

He's going to stay for a lot of years. His background is regional gaming company.

Justin Sebastiano – Morgan, Joseph & Company

Okay. And was he more of a table games guy? Was he more slots? Where was his slant if he had one?

Bob Griffin

I think his slant is really, he's a marketing guy. He had a lot of experience in player development and that's what I would say his strength is.

Justin Sebastiano – Morgan, Joseph & Company

Okay, so is he, is he helping or is he taking charge of kind of the new office you guys opened or a tact of Cleveland to Presque Isle considering that's going to be, you're rolling out to that table games prior and kind of preempting the Ohio games that will come on in say two years or so.

Bob Griffin

Actually we got Fred working on that for us for the last six months. So this is just the natural projection with tables now approved and only a couple of months, actually putting up the property.

Justin Sebastiano – Morgan, Joseph & Company

Okay, thanks guys.

Bob Griffin

Sure thing. Take care, Justin.

Operator

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Dave Hughes

So before we go to closing comments, before I turn it back over to job, I just want to do a couple of housekeeping items, particularly my only purpose is the company doesn't provide. However looking at the different projections that are out there, I jut want to remind everyone in the interest and consent of and the purchase [ph] is approximately $53.4 million, made up of $45.3 million interest and $2.5 million in consent fees and the remaining being deferred financing costs. Again a recap, the corporate run rate is approximately $12 million. Provision for taxes is about 26%. Just thought that was important. And for depreciation you can need around $30 million.

Bob Griffin

Thank you, David. We appreciate everyone's time calling in and your support. We'll talk to you next quarter.

Operator

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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