Boyd Gaming's CEO Discusses Q4 2013 Results - Earnings Call Transcript

| About: Boyd Gaming (BYD)

Boyd Gaming Corporation (NYSE:BYD)

Q4 2013 Results Earnings Conference Call

March 05, 2014 05:00 PM ET

Executives

Josh Hirsberg - SVP and Chief Financial Officer

Keith Smith - President and CEO

Paul Chakmak - EVP and Chief Operating Officer

Analysts

Felicia Hendrix - Barclays

Thomas Allen - Morgan Stanley

Carlo Santarelli - Deutsche Bank

Justin Sebastiano - Brean Capital

Operator

Good afternoon, and welcome to the Boyd Gaming Fourth Quarter 2013 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Josh Hirsberg, Senior Vice President and Chief Financial Officer.

Josh Hirsberg

Thank you, Amy, good afternoon everyone and welcome to our fourth quarter earnings conference call. Joining me on the call this afternoon are Keith Smith, our President and Chief Executive Officer; and Paul Chakmak, our Executive Vice President and Chief Operating Officer.

Our comments today will include statements relating to our estimated future results and other market, business and property trends that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date and we undertake no obligation to update or revise the forward-looking statements.

Actual results may differ materially from those projected in any forward-looking statement as a result of certain risks and uncertainties, including, but not limited to, those noted in our earnings release, our periodic reports and our other filings with the SEC.

During our call today, we will make reference to non-GAAP financial measures. For complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-K furnished to the SEC today and both of which are available in the Investors section of our website at boydgaming.com.

We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses.

Finally, as a reminder, today's conference call is also being webcast live on our website at boydgaming.com and will be available for replay on the Investor Relations section of our website shortly after the completion of this call.

I'd now like to turn the call over to Keith Smith, our President and CEO. Keith.

Keith Smith

Thanks Josh and good afternoon everyone. Thanks for joining us here today. For the fourth quarter of 2013, our wholly owned business performed in line with our expectations. Despite some external challenges in December. But before reviewing our results for the quarter, I would like to begin by summarizing where Boyd Gaming stands today; progress we have made as a company over the last year and where we're going in the year ahead.

During 2013, we made great strides excluding on our strategic plan, putting our company in a much stronger operational and financial position from when the year began. From an operational perspective, we diligently focused on refining and adjusting our product our marketing and our amenities, keeping cost under control, while delivering a consolidated and competitive entertainment product to our customers.

A good example of this is our Penny Lane initiative. In early November we relaunched Penny Lane at our 4 Las Vegas Locals properties adding significantly more bonus opportunities for players under the tagline more bonuses more often. We then introduced Penny Lane for the first time in our downtown Las Vegas and our Midwest and South operations. Penny Lane is now in place at 12 Boyd Gaming properties across the country and then it’s having a positive impact on play across our business. The adjustments and refinements we’ve made to our business have helped us to return to consistent and sustainable EBITDA growth in Las Vegas.

And while the landscape has been more challenging elsewhere, we’re confident that we have right strategy and amenities in place to successfully compete across the country. We’re making good progress in the financial front as well. During 2013, we eliminated more than $0.5 billion in debt and we reduced interest expense by more than $60 million annually. And our earliest debt maturity is now 2018. In the Peninsula we’re now generating nearly $100 million a year in free cash flow.

As a result of all of these efforts we’ve improved our flexibility allowing us to consider the number of potential growth opportunities that we believe will create significant value for our business and our investors in the years to come. Boyd Gaming has always been focused on innovation, growth and increasing long-term shareholder value that commitment will continue. Acquisitions are good example of that for ours to be in action. And while the landscape of potential acquisitions is more limited now than in the past, we always keep our eyes open. As we demonstrated with the Peninsula Gaming and the IP, we know how to identify assets that are good strategic fit to acquire them at an attractive price and successfully integrate them into our nationwide operations to create shareholder value.

And acquisitions are just one of many ways to pursue future growth. New developments are another and we currently have two compelling opportunities in our long-term pipeline. First, in Northern California our partnership with the Wilton Rancheria Tribe represents a significant potential growth opportunity, a project at an outstanding location with great access. Early stage design work is well underway and the environmental impact statements scoping report was filed in early February. We continue to work with various federal, state, and local government agencies to move this project forward.

In South Florida our partnership with Sunrise Sports Entertainment puts us in a prime position to develop a gaming entertainment complex at one of the state’s most visited locations. Florida law makers are now actively considering the expansion of casino gaming in key markets across the state and we expect to have more clarity on this opportunity in the coming months.

When it comes to growth opportunities we are not limiting ourselves to domestic markets. One interesting possibility is Japan where law makers are now considering legislation that would bring resort casinos to their country. Much in the attention so far has been focused on Tokyo and Osaka with the opportunity in Japan could be much broader including regional resorts and markets across the country. We started looking closely as a possibility of competing for one or more of those regional licenses. And recently I had the opportunity to travel to Japan to meet with various business and community leaders and introduce them to our company and our capabilities. We have begun examining the landscape to establish certain new relationships and gaining a sense to whether Japan would be a good fit for our company and our growth strategy.

But expanding in the new markets through new developments or acquisitions is just facet of our growth strategy. With organic standpoint there are still other opportunities to innovate, evolve and expand our business, example is on our gaming product, amenities like restaurants, night life entertainment and hotel rooms have been areas of significant growth for our industry in recent years. It provide an opportunity to speak to an expanded demographic and the strengthen relationships with our existing customer base.

Accordingly, we are increasing our focus on enhancing and reinvigorating our non-gaming amenities across the country. We’re also continuing to refine and expand our player royalty program, starting this month, we will begin the roll out of the B Connected program at the Peninsula properties. Once in place B Connected will create a new opportunities to further cross market our nationwide portfolio properties to our customer base. In addition we plan to introduce Penny Lane at these new properties in the coming months. As we have demonstrated elsewhere Penny Lane will give these properties, yet another competitive [leverage] of bonus centric high quality smart product that resonates well with players.

Another compelling opportunity is online gaming, and we took an important step forward in this regard in the fourth quarter. On November 26th, we launched a real money online gaming operation in the state of New Jersey, our first such operation in the United States. And while it is early, we are extremely pleased with the progress we have made so far.

Through January Borgata business has established itself as a clear market leader with nearly one-third of the total market; this new testament to both the quality of our online product and the power of the Borgata brand. It is important to note that the vast majority of our online customer to-date have not been active Borgata customers, which is clear evidence that online gaming is a complimentary not competitive to our land based business.

I deliver no product through a more familiar and convenient channel, we are reaching entirely new customers and growing our overall business. New Jersey is a good pushed up, but would not be the last a number of states across the country are considering online gaming as well. And as new opportunities emerge, we will carefully consider each to determine which ones make strategic and economic sense for our company.

So, as you can see, we made great strides in 2013 executing on our strategy to strengthen our company and our balance sheet and have a compelling portfolio of growth opportunities that we believe will payout for our shareholders.

Our future as a company is bright and I remain optimistic about our directions and our ability to create long-term shareholder value.

Before handing off the call to Paul, I would like to take a brief moment to review some changes we are making to our guidance practices.

Josh will be providing more detail on our guidance in a few minutes, but wanted to first give you some color on the changes we are making and why we are making them. First, we are discontinuing individual guidance for Borgata; we will instead provide guidance for total adjusted EBITDA after corporate expense which will include our wholly owned properties and Borgata.

We have grown significantly as a company over the large several years and while Borgata remains a significant and important portion of our business, it now accounts for smaller portion of our overall results than in years past. As a result, it no longer makes sense to callout this property individually in our guidance. Our preference is to focus on overall operations nationwide rather than the quarterly performance of an individual property.

Next, we are moving annual guidance. While we are furnishing first quarter guidance today to ensure smooth transition, we believe that annual guidance is a benefit for how we view our business from a long term perspective.

Thank you for your time today. I will now turn the call over to Paul. Paul?

Paul Chakmak

Thanks Keith. Hello everybody. As noted on our last call, October was a strong month across our operations. This positive trend continued about half way into November before weakening. As we saw in previous quarters, spending and visitation declined among casual players. This trend was exacerbated by severe winter weather in December, which further reduced visitation in many markets outside of Nevada.

But there were bright spots as well. Across the country, business among our top tier players is as strong as ever, and the recovery of our Las Vegas business continued.

Let’s begin our review with the Las Vegas Locals business. Our 6% EBITDA gain marked the fourth straight quarter of growth in this segment, thanks largely to the operating efficiencies we have built into our business. We reduced marketing spend by nearly $2 million during the quarter and improved operating margins by more than 120 basis points. And we saw benefits throughout the quarter from the launch of an enhanced Penny Lane. Players have responded well to Penny Lane’s mini-bonus features with meaningful gains in both frequency and play among participating customers.

Non-gaining business also grew during the quarter, driven largely by strength in our hotel business. As Keith noted, non-gaming has been a promising area of growth throughout our business. And we’re finding these amenities with a strategic priority, both in Las Vegas and across the country.

2013 was an encouraging year of consistent growth for our locals business. EBITDA increased by nearly $9 million for the full year, an increase of almost 7% for 2012. And we expect growth to continue in 2014.

The fourth quarter was quite positive for our Downtown business as well, as revenue and EBITDA growth resumed, which is largely the result of successful refinements throughout our business. The changes we made last year to our Hawaiian marketing programs are continuing to have a positive impact on business volumes. And our Hawaiian charter service is now running much more efficiently with improved yields.

Like our Las Vegas Locals business, Downtown has shown encouraging strength so far in the first quarter. And we remain optimistic about the direction of our Downtown business in 2014.

As you’ve heard from others in recent weeks, the fourth quarter was challenging for casino operators throughout the Midwest and South, we were certainly no exception to that trend. EBITDA did increase year-over-year but this was entirely the result of a one-time favorable property tax adjustment at (inaudible). Consumers remained cautious throughout the region. While play from our top tier customers was solid, we continued to experience declines in casual play at many of our Midwest and South properties. Winter weather has not helped the situation. As many of you know from personal experience, this has been one of the worst winners in decades and we have contended with polar vortexes and near record snowfalls. We’ve even seen ice storms on the Gulf Coast. This had a significant impact on our business throughout the region. In December, we estimate that severe weather reduced EBITDA by about $3 million from what we would have expected to see during that typical winter. Despite these challenges, we remain vigilant in controlling costs and successfully mitigated a good portion of the revenue shortfalls impact to EBITDA during the quarter.

And once again, our Delta Downs property in South Western Louisiana was a notable bright spot in our operations. Delta Downs posted double-digit EBITDA growth in the fourth quarter and set all time annual records for EBITDA, gaming revenue and [point in]. Delta is clearly benefiting from an excellent location that driving Houston market and it is outperforming the competition which is attributed to the Boyd Gaming brand proposition, a high quality product at an attractive price, effective marketing, great service and a comfortable environment for our guests.

In Atlantic City, consistent with our revised guidance, results were well below our original expectations. A number of factors were at work; the most significant was an unusual low hold percentage in December which reduced EBITDA by $3.6 million. We estimate that winter weather cost Borgata another $1 million in December. And we continue to feel the impact of higher property taxes with reduced EBITDA by $2.1 million during the fourth quarter and $8.4 million for the full year.

While we did receive favorable property tax ruling in October, that ruling in now being appealed by the city and we must continue to pay taxes at a higher amount until that process is complete. However, we expect to reach a resolution by the end of the year.

While online gaming did not make a meaningful contribution to EBITDA in the fourth quarter, we are encouraged by the early performance of Borgata’s real money online gaming product.

Through the end of January, the Borgata and PartyPoker platform had a total market share of 43%. Borgata accounted for a 30% share by itself which actually exceeded our LAN based market share by more than 8 percentage points. Notably, much of this business is coming from entirely new customers. To-date, 85% of our online players have not had rated play at Borgata in the last two years. We are growing the Borgata database creating an opportunity to market the property to customer we have not reached before.

Looking at the first quarter, weather continues to have a negative impact on Borgata’s LAN based business. We have also seen a significant uptick in the promotional activity throughout the Atlantic City market although Borgata has not needed to match this increased spending.

Moving to the online business, we continue to make excellent progress expanding and refining our product during the first quarter. Our geolocation technology has been significantly improved, making it much easier for our New Jersey players access the site. In February, we launched our first 3G, 4G mobile product for customers using android devices. We expect to expand this technology to Apple devices as well in the near future, pending regulatory approval, which will mark the final step in our roll out of online and mobile platforms.

The addition of mobile products that can access other networks is a significant milestone for our online business. It means the customers can access Borgata online gaming from every corner of the state regardless of whether they have access to a Wi-Fi network. So while it’s still early, we’re making considerable progress and to the potential for significant growth in our online business throughout the year.

To recap, our operations continue moving in the right direction despite some external challenges. The refinements and innovations we are making to our core business are resonating the customers. Play among top tier players remains strong. We are successfully controlling cost without compromising the quality of our product. As a result, our Las Vegas segments have returned to consistent growth and we are confident, our Midwest and South business will improve as well in the months ahead.

Thanks for your time today. And now over to Josh.

Josh Hirsberg

Thanks Paul. During the fourth quarter, we continued to take advantage of favorable market conditions to reduce interest expense and extend maturities. In December, we redeemed Borgata’s 9.5% secured notes through 2015 with a $380 million term loan. The term loan matures in 2018 and is priced with a LIBOR spread of 5.75%. At current rate, this refinancing reduces Borgata’s interest expense by over $8 million annually. And given the amount of free cash flow this property is expected to generate, increases the amount of pre-payable debt and the capital structure.

This past year was very busy for us in terms of both paying down and refinancing debt.

In 2013, we repaid $525 million in debt and refinance existing debt at Peninsula and Borgata. The net cash interest benefits from this activity represented over $60 million in annual interest savings.

In addition, 2013 was the first full year of contribution from our Peninsula acquisition. Peninsula has expanded our free cash flow generation by approximately $100 million. Further contributing to our free cash flow is the sizable $1.1 billion [Maxwell’s] carry forward which is valuable to our company for a lead to next decade and our present value bases represents at least a couple of dollars per share. The elimination of our federal tax burn on a cash basis is expected to contribute materially and directly to our free cash flow for years to come.

Our year-end debt and cash balances are disclosed in our earnings release. We had incremental availability at year-end under our credit facilities of $268 million at [Boyd], $27 million at Peninsula and $17 million at Borgata. From a financial covenant perspective, Boyd secured leverage was approximately 4.2 times compared to a covenant of 5 times and total leverage was approximately 6.5 times versus a covenant of 8.5 times. At Peninsula, total leverage was approximately 6.3 times compared to a covenant of 7 times and Borgata’s covenant EBITDA was up $121.8 million compared to a required minimum level of $110 million.

Our capital expenditures in the quarter were $37 million including $2 million at Peninsula and $6 million at Borgata. For 2014 we are budgeting maintenance capital expenditures to be approximately $125 million on a consolidated basis. This amount includes approximately $15 million at Peninsula and $25 million at Borgata. In addition to our budget for maintenance capital, we expect the final phase of the Kansas Star expansion to cost approximately $20 million and be completed in early 2015.

Total annual depreciation expense is expected to range from $255 million to $260 million, with Boyd's level of depreciation approximating $130 million, Peninsula's depreciation around $72 million and Borgata's depreciation around $55 million.

In terms of total annual interest expense we expect on a consolidated basis approximately $300 million. This interest expense assumes the modest increase in LIBOR rates in 2014. Of this amount, we expect Boyd’s interest expense to be about $155 million, Peninsula’s to be around $75 million and Borgata's to be around $70 million.

Other items that might be of interest for 2014 modeling purposes includes deferred rent which should approximate 2013 levels of about $4 million for the year. Preopening expense which is estimated to be about $5 million for the year and share-based compensation expense is expected to be about $16 million. Shares outstanding should approximate 110 million shares.

In terms of overall guidance, as noted in our release, we expect wholly-owned EBITDA after the deduction for corporate expense and including the operating results from Peninsula and Borgata to be in a range of $600 million to $630 million for the full year of 2014 and $140 million to $145 million for the first quarter.

This guidance incorporates the following assumptions. First, we do not expect weather to continue to be an issue beyond the impacts we have felt to-date in first quarter. We have included a negative impact of about $8 million to $10 million for the weather in our quarterly and annual guidance. We expect Las Vegas Locals to continue to show year-over-year growth in revenue and EBITDA similar to the levels we experienced in 2013. In our downtown segment, we expect minimal EBITDA growth in 2014. In Boyd’s Midwest and South and Peninsula operations, we expect to show year-over-year growth on a quarterly basis beginning in the second half of this year.

When thinking about this segment of our business you should also consider the benefit from the Blue Chip $9.3 million property tax adjustment that we received in the fourth quarter of 2013 that will not reoccur in 2014.

At Borgata for 2014 we expect the land-based business to generate EBITDA similar to 2013 levels excluding a negative $5 million impact of cold weather we experienced in December. Our Borgata guidance does not assume any benefits from a reduced property tax bill or any material contribution from Borgata’s online gaming business.

Finally in terms of corporate expense which is included in our EBITDA guidance, we expect about $55 million. This number is higher than 2013 levels because of several corporate initiatives we’re undertaking. We do not expect this level of corporate expense to continue beyond 2014.

In conclusion, we make great strides toward executing on our strategic plan and we’re in stronger operational and financial position as we now head into the remainder of 2014.

Operator, that concludes our remarks and we’re now ready to take any questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from Felicia Hendrix at Barclays.

Felicia Hendrix - Barclays

Hi, good afternoon. And Josh thanks for all the color. The question for you on the just the Las Vegas Locals in the quarter, you posted flat revenue growth there, the market was up I am wondering is the driver of your actual revenue performance was due to the changes in your marketing program. In other words since your revenues declined mainly due to perhaps the decline in the less profitable players or is it something else?

Josh Hirsberg

No I think as it relates to the market being up I think Felicia you have taken that from the Gaming Control Board abstracts that have come out, is that your source?

Felicia Hendrix - Barclays

Yes. I notice there was not a correlation, so I understand that.

Josh Hirsberg

And I think that’s really probably the key driver because the January numbers as you know just came out very recently and it sort of showed that correction, it was probably a bit of a false positive we believe in the December number which was up given where New Year’s eve fell, what was reported by certain companies in maybe December versus January that probably led to that.

I am not sure there is a material change in sort of the direction or the slope of the curve for the Las Vegas Locals market. You probably have to look at kind of January and December sort of together to get a better feel for that.

Felicia Hendrix - Barclays

Okay, helpful. Thank you. And have you guys seen any benefit -- the first quarter on the [strip] has been good because of increased convention activity. Have you seen any benefit trickle through to the Locals market?

Josh Hirsberg

Well, we see it in particular -- my comments and Keith alluded to as well on a non-gaming side, our hotel business we benefit from 5,000 rooms in Las Vegas just like any of the other major players on the strip and that’s certainly a positive. It will further be benefited in March as (inaudible) March a very good convention calendar that's been written about. And so we expect that sort of trend to continue for the entire quarter.

Felicia Hendrix - Barclays

Great thanks. Final housekeeping, in your EBITDA guidance are you including online gaming in there?

Josh Hirsberg

No, we are not, Felicia. We are assuming basically no contribution positive or negative from online gaming for the full year.

Felicia Hendrix - Barclays

Okay. I’m sorry you have said that already, I understand. Thank you.

Josh Hirsberg

It’s okay.

Operator

The next question comes from Thomas Allen at Morgan Stanley.

Thomas Allen - Morgan Stanley

Hi guys. Thanks for providing the full year guidance and the color around it. Just digging a little further, as you think about kind of your regional Midwest, Peninsula and properties, what are you factoring in terms of same-store sales if you kind of take out properties that are getting cannibalized? Thanks.

Keith Smith

Well, I think as far as cannibalization is concerned, Thomas we will be lapping the opening of new competitor in the [Shreveport] market in the June timeframe. Beyond that there really won’t be any other cannibalization as a result of new property openings until we get really very deep into the year in the Lake Charles market.

So really what our comments are as far as the Midwest and South are concerned tied to what has been a lot of disruption for weather and Josh gave you a sense of what that process in the first quarter as he went through the guidance numbers. And then just very sort of marginal improvement over what was relatively tough year in 2013.

Thomas Allen - Morgan Stanley

Okay, thanks. And then just in terms of New Jersey and online gaming, you’ve been operating for three months now, what really surprise you the most since moving on? Thanks.

Keith Smith

Yes, Tom. We are not sure there’s been that many surprises, the new business is performing right now in line with our expectations. It’s ramping up slowly but it continues to ramp up nicely. The technology continues to improve. So from our perspective, we are kind of right on track and it is performing as we would have expecting to three months into the process.

Thomas Allen - Morgan Stanley

It seems and kind of the progress normally the (inaudible) has fallen a bit in February, and maybe picked up a little bit in March, are you, I mean is there anything that drove that?

Keith Smith

No we will provide some commentary next week when the numbers for February come out, but until then we won’t be providing any commentary on those numbers.

Thomas Allen - Morgan Stanley

Okay, thank you.

Operator

Our next question comes from Carlo Santarelli, Deutsche Bank.

Carlo Santarelli - Deutsche Bank

Hey, thanks guys. Josh, if we could just, you went through the guidance on a segment level that was helpful. I just wanted to clarify a few things. Did you say in the 2014, 600 to 630 weather was an $8 million to $10 million EBITDA impact?

Josh Hirsberg

Yes, that’s what we felt to-date so far in the first quarter and to clarify Carlo, it’s really not just weather, it’s weather impact over normal weather that we would have seen last year. So it’s not -- it’s all weather it’s the excessive kind of bad weather increment if you will.

Carlo Santarelli - Deutsche Bank

Understood, so first quarter there will be basically $8 million to $10 million spread between Borgata, Peninsula and Midwest in South, I would assume?

Josh Hirsberg

That’s right.

Carlo Santarelli - Deutsche Bank

Okay. And then, sorry go ahead.

Keith Smith

Just in the first quarter. Yes.

Carlo Santarelli - Deutsche Bank

Okay. And then if we look at the rest and you kind of extrapolate your comments on the Locals market it looks like 6% to 7% EBITDA growth. At downtown you mentioned being flat. And then when you look at kind of the Midwest and South the first half down and then we're obviously looking at that $9 million non-recurring in the fourth quarter. But on an apples-to-apples basis of the kind of the one, I guess 70 number. Do you guys think for the full year you can get close to that?

Josh Hirsberg

Yes. I think I'm not sure what you're doing with the $9 million. But if you take the $9 million out, I think we have the opportunity to be close to that.

Paul Chakmak

The $9 million was 180 less than 9, that's where I get the 171 from.

Carlo Santarelli - Deutsche Bank

Okay, alright. That makes sense. Thank you very much.

Keith Smith

You're welcome.

Operator

(Operator Instructions). Our next question comes from Shree Vijay at UBS.

Unidentified Analyst

Hey guys, how are you? That's Shree Hari from UBS. Josh I was kind of curious you gave us comment about looking at the Japan. Maybe you can elaborate a little more on what you guys are looking to do there. And how you plan to finance that?

Josh Hirsberg

Sure. I think I should let Japan expert, Keith answer those questions. And then we'll go from there. And I think it's a little early try to figure out how we would finance it, just given where we're on the process. But Keith can give you kind of a bigger picture view of how we're thinking about Japan industry.

Keith Smith

Sure. If we continue to look for ways to grow the business and clearly that growth during the states is somewhat limited and growth in the Asian markets has been quite dramatic. And as Japan is talking about it, they are in the early stages, basically what I have learned here to multi-step process, now I am looking to it to pass, maybe the first part of that middle of this year. And so we’re investigating the opportunities trying to understand, is it a good fit for us trying to meet people and beside whether that is an opportunity that we should take a serious look at. So as Josh says very early of a process, we’re in the exploratory phase introducing our company to Japanese companies and learning more about the process, but as we’re probably pretty far way from worrying about how to finance it and what the structure or deal may look like and where that deal maybe whether it would be Tokyo or Osaka or one of the regional markets, if they get approved and when they get approved. It’s pretty far up into the future but we started the process of looking in any case.

Unidentified Analyst

Fair enough. And you noted there are limited opportunities in regional basis, their couple of assets out there, anything interesting from an acquisition perspective?

Paul Chakmak

Yes. I would say that, we continue to have opportunities for acquisition. I think they are fewer and harder to kind of understand strategically how they make sense for us. But we’re always looking and I think that they are all opportunity to just have kind of gotten to the point where they make sense for us just yet.

But we’ll look for ways to grow the company and improve the shareholder value whether that’s acquiring assets, potentially selling some assets as well to the extent that it makes sense for our company.

Keith Smith

(Inaudible) we have been a fairly aggressive acquirer of assets over the last several years. It has to fit into a very specific strategic plan and it’s got to be right markets at the right price and we have got to do it for a reason. So we pay close attention to what’s out there and what’s available, if the right opportunity comes along you will see us execute on it. But it’s got to fit into the plan.

Unidentified Analyst

Fair enough. And one last one on Atlantic City with one of the competitors shutting down and possibly another casino being bought out, your thoughts on that market and where you see that stabilize in 2014?

Keith Smith

Well the closing of the Atlanta Club really had no impact on the Borgata, those are not our customers those were kind of never customers of the Borgata. I think it probably helps some of the other properties to square those customers there. So really has no impact there and therefore doesn’t impact the overall market, the market has gotten somewhat competitive as Paul alluded to in the first quarter as I think people are competing for those Atlantic Club customers. And I certainly hope that the market is kind of stabilizing in terms of where it’s at, maybe we see a little bit of growth in the year ahead and that we have kind of seen the worst of the decline.

Unidentified Analyst

And assuming Philadelphia second license doesn’t come up at some point. Thanks for taking my questions.

Keith Smith

Sure.

Operator

Our next question comes from Thomas Allen at Morgan Stanley.

Thomas Allen - Morgan Stanley

Hey guys, just one follow-up. So you talked just now and earlier about the potential of doing further acquisitions. But do you have any interest in selling properties and obviously while your peers convert into an [opco propco] structure. Any appetite for you to selling real estate to them or even potentially topping them during (inaudible)? Thanks.

Keith Smith

Yes. I think in terms of selling assets, it just depends on the specifics of a transaction and so it’s hard to kind of comment generally, but we’re certainly open to that as it makes strategic sense for us. I think in terms of your question around would we copy 10, that’s more of a strategic initiative that we’re not going to comment on specifically, but I can just say generically that we’re always, as I mentioned actually earlier that we’re always interested in growing the company and looking for an initiatives to create shareholder value.

And so it’s not appropriate really for us to comment on specific strategic initiatives that we may or may not take. But just broadly, we’re interested in acquiring assets, we’ve done that historically very successfully in a strategic fashion and created value with those acquisitions. And to the extent somebody comes along and offers just a multiple that we think exceeds what our trading values are for that asset and I think we have to consider for the best interest of our shareholders.

Operator

The next question comes from Justin Sebastiano with Brean Capital.

Justin Sebastiano - Brean Capital

Thanks guys. Hey Josh, you mentioned there is, you think there is fewer opportunities that make sense on the M&A front; is that due to a multiple of that, perhaps as sellers are looking for or is it a market situation that maybe the markets that you guys are more particularly looking at just there is nothing really coming to bear there, could you may be give us some thoughts on that?

Keith Smith

May be let me provide a little color on that and will see if Josh has comments. But part of it, I think as we’ve grown in size as a company and we have expanded into additional markets that we’re in now, it makes it -- the opportunities for us are somewhat more limited. Size and scale is important also because it’s just as difficult to run a small property as it is a large property. So, we look at the size of properties, performance of properties, we like to buy assets that are more market leading assets, not assets that are kind of in the bottom tier of the market, and (inaudible) got to fit into overall strategic plan that we have in place in terms of the quality of the asset, the market and the price.

So we add all those things together, it just I think limits the pool. We’ve proven we’re very prudent acquirer of assets. When we do acquire an asset, we are able to do good things with it. But we have our eyes open and we will continue to look for things, but they do have to fit a profile. So Josh, you may want to…

Josh Hirsberg

No, I think you covered it Keith.

Justin Sebastiano - Brean Capital

Okay. So since acquiring Peninsula Gaming, would the IP, would that have been something that you probably would have maybe past on today given your comments about size and scope of potential M&A activity?

Keith Smith

I think we are looking at the IP, we acquired the IP, was in the low $30 million EBITDA range, and we’ve driven it up significantly higher. That is an asset that we will look at today, something that produces $30 plus million EBITDA is clearly an asset that is clearly number two in Block C market. If by some standards not tied for number one, so it clearly is something we would look at today, and we would look at in the future.

Justin Sebastiano - Brean Capital

Okay. So is $30 million kind of that threshold or is that just kind of where the IP should go?

Keith Smith

I wouldn’t take that as a threshold that just is a specific comment with respect to the IP.

Justin Sebastiano - Brean Capital

Okay. All right, thanks.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Josh Hirsberg for any closing remarks.

Josh Hirsberg

Thanks, Amy. And we appreciate you guys joining the call today. And if you have any follow up questions, please feel free to reach out to the company, and we will try to help you out. Thanks.

Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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