Boyd Gaming CEO Discusses Q3 2010 Results - Earnings Call Transcript

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 |  About: Boyd Gaming Corporation (BYD)
by: SA Transcripts

Boyd Gaming (NYSE:BYD)

Q3 2010 Earnings Call

October 25, 2010 1:00 pm ET

Executives

Keith Smith - Chief Executive Officer, President and Director

Josh Hirsberg - Chief Financial Officer, Senior Vice President and Treasurer

Paul Chakmak - Chief Operating Officer and Executive Vice President

Analysts

Carlo Santarelli - Wells Fargo Securities, LLC

David Bain - Sterne Agee & Leach Inc.

David Katz - Jefferies & Company, Inc.

John Maxwell - Jefferies

Kevin Coyne - Goldman Sachs

Lawrence Klatzkin - Jeffries & Co.

Chris Woronka - Deutsche Bank AG

Adam Steinberg - Merriman Curhan Ford & Co.

Joseph Greff - JP Morgan Chase & Co

Mark Strawn - Morgan Stanley

Neil Portus

Steven Ruggiero - CRT Capital Group LLC

David Farber

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2010 Boyd Gaming Earnings Conference Call. My name is Kerris, and I will be your coordinator for today. [Operator Instructions] And I would now like to turn the call over to your host for today, Mr. Josh Hirsberg, Chief Financial Officer. Please proceed, sir.

Josh Hirsberg

Thank you, Kerris. Good morning, everyone, and welcome to our third quarter earnings conference call. Joining me on the call this morning 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 future results including, among others, the financial outlook for the company, our expansion and development projects 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 whether as a result of some new information, future events or otherwise. 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 a 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 Investor section of our website at boydgaming.com.

Finally, as a reminder, we are broadcasting this call on our website at boydgaming.com and streetevents.com. I'd now like to turn the call over to Keith Smith, our President and CEO. Keith?

Keith Smith

Thanks, Josh. Good morning, everyone, or good afternoon, depending on where you're at. Thank you for joining us for our third quarter earnings call. Overall, our results for the third quarter were in line with our expectations. Most notably, we produced our best revenue and EBITDA comparison for the year during the quarter, largely as a result of the continued stabilization and improvement of our core business volumes. And we're pleased to report that the positive trends we've experienced in the third quarter are continuing into October.

Given these trends, we expect our fourth quarter comparisons will be the best of the year. While we are encouraged by our recent results, we continue to watch the broader national economy for additional positive signs, signs of a continuing recovery. And I believe that they are there. The Dow and S&P both rose more than 10% during the third quarter alone. Business travel is rising as our overall occupancies and ADRs in the lodging sector nationwide. The manufacturing sector continues to expand, and business investment is slowly growing. And GDP continues to expand on a quarter-by-quarter basis, albeit at a much slower rate than any of us would like.

These data points show that the national recovery that began last year is continuing, although it is clear that this recovery will be a slow process. As I've said previously, a recovery in the nation's economy is an important predicate for recovery in our business.

So beyond the broader economic recovery, it appears as though Las Vegas is finally beginning its own recovery. There are several effects that support this. First and most importantly, customers continue to show up in increasing numbers every month. September marked the 12th consecutive month of either flat or increased visitor counts to Las Vegas. I believe that constitutes a trend.

Second, taxable sales in July showed the largest increase in nearly two years. Consumer-oriented segments spurred the growth with clothing retailers and furniture stores showing meaningful year-over-year growth. That's not a trend yet, but it's certainly a positive sign, especially when compared to the double-digit declines in taxable sales we saw throughout 2009, and the fact that it was consumer-oriented segments that spurred the growth.

Also, as has been widely reported previously, gaming win in the Las Vegas Strip rose 21% in August. But more importantly, slot win grew 13.2%. And all three Las Vegas Locals sectors, including Boulder Strip in North Las Vegas, reported year-over-year growth in gaming revenue during the month.

As important as all of the above is, equally important is that convention attendance continues to grow, which is not only a positive for Las Vegas but also, I believe, a window into the broader national recovery. Companies devote resources to conventions based on expectations they will secure new business. Rising convention attendance and increased convention square footage reflects rising confidence in the business community at large. As a matter of fact, many of the major conventions in the last 12 months have seen both an increase in attendance and an increase in square footage used by exhibitors, and the calendar for 2011 appears to be very strong.

Switching to the Las Vegas Locals market, I believe that there is a misperception that a recovery in this market will only occur when there's a recovery in the local housing market and a significant change in our employment statistics. We do not fully subscribe to this theory. Improvements in our Las Vegas Locals business is more about increased spend per visit than it is about increased visitation. And increases in spend per visit, or consumer spending, is more about consumer confidence than it is about job growth or housing statistics. Job growth will return when businesses need to meet increased demand for their products or services. Job growth is more a result of consumer confidence or consumer spending than it is a cause of it. We firmly believe that increases in consumer confidence can and will have an impact in our business long before the metrics in the housing and employment show significant improvement. You only have to think about the impact of the flash crash and the impact it had on our business to understand the importance of consumer confidence.

So while lower unemployment rates and rebounds in housing are necessary components of a robust long-term recovery, we are more focused on data points that will lead to increased consumer confidence, such as stable employment, price stability and real growth in wages, all of which I believe we are beginning to see. In Las Vegas, total employment has been relatively stable in recent months despite increases in the unemployment rate. While we have seen continuing declines in the construction sector, those losses are being offset by a modest growth in the leisure and hospitality sector and the trade transportation utility sector. In September, the Las Vegas economy actually added 3,000 jobs over the prior month. This stability in the labor market suggests people who have jobs can be more confident that they will keep them. And increases in ADRs and improvement in occupancy over the last several months is leading to increase hours and wages for workers in our industry.

The other frequent misperception is that in order to see a recovery, we need our customers to significantly increase their levels of spend. This is simply not true. Because of the high frequency of visitation we enjoy in the Las Vegas Locals market, and the efficiencies we have created in our business during the last several years, even a very modest increase in spend per visit will have a meaningful impact on our overall cash flow out of this market.

Beyond Las Vegas, we are also seeing encouraging signs. Visitation to our Midwest and South properties continues to increase, and we have grown market share during the quarter. And in Atlantic City, the governor's focus on reinvigorating the Atlantic City market is beginning to take shape. Last week's announcement of the Atlantic City Alliance is an important first step in revitalizing the Atlantic City market. We are fully supportive of the direction the governor has outlined for Atlantic City. Paul will speak in more detail about each of these markets during his comments.

As more robust growth returns to our business, we will continue to pursue several long-term strategies. First and foremost, we will dedicate free cash flow to paying down debt and deleveraging our balance sheet. Deleveraging is our highest priority as a strong balance sheet will give us flexibility to pursue new growth opportunities created by an improving economy. Second, we are actively examining opportunities to refinance our debt and extend our maturities. Third, we will continue to evaluate a variety of growth opportunities across the country. While we're interested in acquisitions, we will continue to be thoughtful, strategic and disciplined, as we have done historically, and we will only pursue transactions or acquisitions that makes strategic sense and are priced correctly. We will only pursue deals that deliver an attractive return for our shareholders and do not stretch our balance sheet.

With that in mind, we announced today that we have decided not to exercise our right to match the offer MGM received for their interest in the Borgata. Given other opportunities, and our current focus on deleveraging our balance sheet, the current offer would not provide a sufficient return on investment for our shareholders. Despite this decision, we remain very confident in the future of Borgata. The property represents a major investment by Boyd Gaming, and it has delivered substantial value for our shareholders. We remain comfortable with our current position as managing member and 50% owner of Borgata, the region's premier destination resort.

Finally, we will continue to focus on ways to improve and operate more efficiently. We have made significant strides in taking costs out of the business during the last several years, creating a more efficient operating model. These efficiencies will pay off as our business recovers, as even modest increases in revenue will result in substantial gains in EBITDA.

Thank you, again, for joining us this morning. Now I'd like to turn the call over to Paul Chakmak, to talk more specifically about the results in each of our regions. Paul?

Paul Chakmak

Thanks, Keith. Hello, everybody. Overall, our business levels continue stabilize during the third quarter. As Keith has noted, each of our regions performed in line with our expectations and in all cases, we gained market share.

Let's start by looking at the Las Vegas Locals segment. The EBITDA GAAP was almost identical to what we saw in the second quarter. And this was expected as consumers remain cautious with their discretionary spending. However, we see reasons to be optimistic moving forward.

Our third quarter results were in line with the expectations we outlined on our last call. The GAAP and year-over-year result is well below the 20% to 40% declines we reported from the third quarter of 2008 to the fourth quarter of 2009. And on a dollar basis, EBITDA matched the smallest decline in the last two years.

These trends are improving, and we have started the fourth quarter on a strong note by posting positive comparisons so far in the month of October. The base of our Locals business remains strong. Our best customers have shown resilience to the downturn, and that continued in the third quarter. Run rated in lower-tier players, we believe improved consumer confidence will lead to increased per visit spending. This will be an important driver for growth in future quarters.

Visitation in the Las Vegas Locals market, as in the region more broadly, continued to grow during the quarter. In addition, we calculate that we increased our market share in the locals region by a full percentage point in the three-month period ending August. We are building a very solid foundation for additional growth and profitability in this business, especially when spend per visit increases.

Moving to Downtown Las Vegas. We reported lower revenue and EBITDA due to decreased spend per visit as well as higher fuel costs and lower ticket prices at our Hawaiian charter service. However, there are encouraging signals in this region as well. In fact, while spending per visit declined in Q3, the decrease was the lowest in the last seven quarters. We continue to gain market share Downtown, posting an impressive 310 basis point increase in the three months ending in August, and we saw a modest increase in visitation by rated players as well. In addition, there are indications the Hawaiian economy is strengthening as tourist visitation and spending in Hawaii have both risen in recent months. We anticipate improvements in the Hawaiian economy will eventually lead to improved revenues for our properties in the downtown market.

In the Midwest and South, we are particularly pleased with our results. Our EBITDA decline was under 10% compared to gaps of more than 20% in each of the last three quarters. Revenue trends showed similar improvement as well. Business is clearly stabilizing across the region as visitation grew. As was the case in our other regions, we gained on our competition, as all six properties in the region either maintained or increased their market share. Non-gaming revenue in the MSR was up, as was occupancy across the region. Our Louisiana properties have been comparing against strong results in 2009, but they have made considerable progress toward closing that GAAP.

Finally, I'd like to touch on Borgata. The most significant factor impacting Borgata's results was lower table game revenue, which was largely a function of unusually lucky play by our customers. However, there were a number of positive factors during the quarter as well. Slot win was nearly flat for Q3, even as it declined about 9% in the overall Atlantic City market. This was an encouraging performance, especially considering new competition from casinos in Eastern Pennsylvania.

In addition, occupancy in Borgata and Water Club was more than 96% for the quarter, up nearly a full percentage point from 2009.

With respect to our Table Game business, had we experienced historical table game hold, we estimate revenue would have been of $9 million higher during the quarter. There are other factors impacting Table Game business as well, including reduced consumer discretionary spending and increasingly competitive environment in Atlantic City and the introduction of table games in Pennsylvania.

As Steve noted earlier, Borgata offers a resort entertainment experience unlike anything else in the region. That gives our customers a reason to bypass casinos closer to home and make the trip to Atlantic City. While it's too early to determine the long-term impact of increased competition in the region, we are more than holding our own and are pleased with our position with the leading asset in the market.

To summarize, our business continues to stabilize, and we are on track to report the best year-over-year comparisons of the year in the fourth quarter. Visitation has remained strong across our business. Even though spend per visit is down, we maintained or gained market share at all of our properties. Our relatively strong position is largely a reflection of our customer loyalty, and that in turn is a tribute to the efforts of our property management and employees. We continue to see improving customer satisfaction scores throughout the business, and exceptional service keeps customers loyal to the Boyd Gaming brand.

Thanks for your time today. I'd now like to turn the call over to Josh for a review of our financials.

Josh Hirsberg

Thanks, Paul. I'd like to begin by discussing a few items from the quarter. Excluding Borgata, our debt balance was approximately $2.4 billion, a reduction of approximately $165 million from the end of the second quarter, largely due to the distribution we received from Borgata as a result of refinancing their credit agreement. I'll discuss that later in my remarks.

Of our total debt balance, the amount outstanding on our credit facility was $1.73 billion at the end of the third quarter. Our leverage ratio, calculated in accordance with our loan documents, was 6.89x versus a covenant of 7.25x. Our leverage covenant remains at 7.25x for the fourth quarter, and we expect to remain in compliance with our covenants going forward.

Corporate expense was $9.1 million, even with the third quarter last year. Preopening expense, which primarily related to Echelon and other new business development opportunities was $2.7 million for the quarter.

Interest expense was approximately $46 million, $7 million higher than last year in the third quarter. The increase in interest expense is a result of the new financing at Borgata, where year-over-year interest expense during the quarter increased by $11 million due to higher debt balances and rates, as well as a onetime noncash write-off of $2 million in debt amortization fees related to the prior credit facility. We expect the fourth quarter interest expense for Borgata, including debt amortization fees associated with the new financing, to be approximately $22 million.

Boyd's interest expense decreased about $4 million, primarily due to lower debt balances. Our effective tax rate for the quarter was 30%. This rate is lower than last year due to the consolidation of Borgata into our results. We expect the tax rate to be approximately the same for the fourth quarter of this year.

As I mentioned above, we completed the refinancing of Borgata's credit facility during the third quarter. We replaced their existing $740 million credit facility with $950 million in new financing, comprised of two $400 million secured notes and a $150 million revolving credit facility. As a result of the financing, Borgata made a $240 million distribution to its partners. Including a $10 million consent fee paid to Boyd by MGM and a priority distribution of $31 million to reimburse Boyd for prior excess capital contributions, we received total distributions and fees of $145 million. The distributions and fees reduced debt at Boyd. A $2.5 million gain resulting from the reimbursement of Boyd's prior excess capital contributions and the $10 million consent fee were recorded as income in the quarter.

Finally, Borgata's total debt balance at the end of the quarter was $847 million, including $800 million of notes at par and $47 million outstanding under the revolver. The property reduced debt by $28 million since the 1st of August when the new financing was complete.

So with that, operator, we are now ready for any questions from the audience.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Mark Strawn with Morgan Stanley.

Mark Strawn - Morgan Stanley

On the Las Vegas Locals market, you mentioned that October is trending quite well and actually trending positively. Is that on the revenue line or EBITDA line or both?

Paul Chakmak

Well, it's really a function of both.

Mark Strawn - Morgan Stanley

And is what driving that just higher spend per visit out of the customer base at this point?

Paul Chakmak

Well, I mean, again, we're comparing it to October of 2009, so obviously, higher revenue will be generated by higher spend per visit. I don't know that we're creating a lot of new customers today, but we certainly have seen customers come back that have been sitting on the sidelines given their own personal economic conditions. So there's certainly a benefit from the lower-tier and unrateds as well.

Operator

And your next question comes from the line Carlo Santarelli with Wells Fargo.

Carlo Santarelli - Wells Fargo Securities, LLC

Would you guys mind putting the framework around how you're thinking about a Borgata decision, or how you thought about your decisions past on Borgata?

Keith Smith

Well, I think the decision actually was outlined fairly well in the release. We just have other opportunities. We're focused on deleveraging our balance sheet. Those are things that are truly important to us. And we didn't think that, as we looked at that acquisition, that it would provide a sufficient return to our shareholders. It doesn't go beyond that actually.

Carlo Santarelli

So should I take from that, that there aren't many levels that would be attractive to you guys as it relates to Borgata?

Keith Smith

I think that what you should probably take away from that is that the offer that was made was something that we chose not to exercise a first right of refusal on and probably not go beyond that.

Operator

And your next question comes from the line of Larry Klatzkin with Chapdelaine.

Lawrence Klatzkin - Jeffries & Co.

Just from housekeeping, Josh, cap expense and capitalized interest for the Borgata?

Josh Hirsberg

Only Borgata?

Lawrence Klatzkin - Jeffries & Co.

Yes.

Josh Hirsberg

I don't know that off the top of my head. I'll get it for you perhaps during the call here.

Lawrence Klatzkin - Jeffries & Co.

Borgata, as far as the EBITDA effect of the bad table luck, does that come in between $4 million and $5 million you think? Or do you guys -- could you quantify that $9 million of revenue effect for the bottom line?

Josh Hirsberg

Really, hold would largely float to the bottom line, absent taxes. So we think 90% to 92% of it would come to the bottom line.

Lawrence Klatzkin - Jeffries & Co.

So $8 million. Okay, good.

Josh Hirsberg

It has been a significant impact. Table games has been much less of an impact on our business than we would've expected prior to the introduction.

Lawrence Klatzkin - Jeffries & Co.

Would you guys still look in Las Vegas Locals? I mean, would you make a pitch toward Green Valley management or even owning?

Keith Smith

Larry, as I think that -- and we've said this before, as we looked at the Station's Casino acquisition that we are very bullish on the Las Vegas Locals market long-term and are interested in acquisitions at the right price. And so if those opportunities came our way, at the right price, yes, we would look at them.

Josh Hirsberg

Larry, as soon as I get the number I'll either -- for Borgata CapEx, I'll either repeat it on the call or -- we'll let you know. I would say that all they’ve been spending is maintenance capital and that's running $15 million to $20 million a year. So I can imagine it's more than $4 million or $5 million for the quarter.

Operator

And your next question comes from the line of David Katz with Jefferies.

David Katz - Jefferies & Company, Inc.

Josh, can you help me think through -- I admit to not knowing fully the conventions around how long we should keep Borgata as a consolidated portion, right, of your business. Does that stay in there until such time as whatever offer is out there closes? Or at the time that you've announced your decision this morning and then, I was hoping, and I apologize if I missed it, I was hoping to have CapEx numbers for the quarter and what those allocations were for?

Josh Hirsberg

Sure. David, the process around Borgata will really not affect the consolidation. The consolidation would potentially be affected if there were some new joint venture agreement or any changes to the joint venture agreement, which wouldn't anticipate occurring. So I think we're going to be living with consolidation for quite some time, in respect to Borgata and Boyd's financial statements.

David Katz - Jefferies & Company, Inc.

So in other words, whoever the bidder is, will have to go through gaming commission approval, et cetera and whatever, sort of other due process goes on until ownership formally changes hands, and that's the point at which we would unconsolidate it?

Josh Hirsberg

No. Maybe I wasn't as clear as I was trying to be. Basically, they can go through -- assuming that a deal is consummated, and there are no changes to that deal because recall if there's any changes to that deal, then we get another 30-day look. So that first right of refusal isn't a one-time shot. But once a deal is reached between a potential buyer and MGM, then they would go through the process of the required regulatory approval process. But once again, assuming they consummate their transaction, unless there were some kind of change in the joint venture agreement, our consolidation would not be impacted by that. So what I'm trying to say is, is we will consolidate Borgata, assuming no change to the joint venture agreement, which we're not going to be likely to entertain. And so whatever happens with the other 50% is not going to affect the consolidation. Does that make sense to you?

David Katz - Jefferies & Company, Inc.

Yes, mostly. And if you could just talk through the CapEx please for the quarter? And again I apologize if I missed it.

Carlo Santarelli

Well, David, first on Borgata. Just assume it stays consolidated, I think, is what Josh is trying to say.

Josh Hirsberg

Yes. Whatever happens in this process does not change consolidation.

David Katz - Jefferies & Company, Inc.

It's staying in the model as though you own 100% of it for the indefinite future, until further notice?

Josh Hirsberg

Yes. Cap expenditures for Boyd? Is that what you're asking.

David Katz - Jefferies & Company, Inc.

Yes, please.

Josh Hirsberg

Only maintenance capital, about $7 million.

David Katz - Jefferies & Company, Inc.

And have you given any sort of forward commentary about what you expect to spend and on what fourth quarter, next year or anything like that?

Josh Hirsberg

Given the current environment -- I'll let Paul add some color if he'd like. But just given where things are, I would say that the numbers that we have for 2010 are probably good ones to use for 2011. We're going through our process right now, for budgeting for 2011, and we'll look at that and update guidance when have a more formal budget to complete that process. I would say right now, we expect stabilization to continue and then slowly start to see a recovery. And as that comes to fruition, then we may take a different approach to maintenance capital. But right now, I think we're doing kind of what we need to do to ensure that the customer interfaces and our competitiveness of our properties are there. We really don't feel a need, given the current environment, to spend more than kind of what we're allocating and what our run rate is.

David Katz - Jefferies & Company, Inc.

In Atlantic City and the competitive landscape, I know there are periodic rumblings about Revel moving down the road. And I guess I'd like your perspective on whether it would be better or worse for you to have a brand new competitor in that market and how you sort of see that, what is a very fluid landscape of evolving in the next year or two?

Keith Smith

Look, in the Atlantic City marketplace right now, there is plenty of capacity and so that any additional capacity will just create additional competition that I think is not needed. So we certainly like to see the competitive landscape kind of stay as is and not see additional capacity added to the marketplace.

Operator

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

Joseph Greff - JP Morgan Chase & Co

You mentioned in the press release that you're comfortable with your current position and ownership stake in Borgata. Are you currently thinking about potentially selling your stake? Or has there been any discussions or overtures with the interested party that has talked with MGM?

Keith Smith

I think that the release probably speaks for itself. The only decision point we have right now at this moment is whether or not we are interested in matching the offer. And as we indicated, we're not, for the reasons that were spelled out. And there haven't been, frankly, any conversations beyond the actual offer in right of first refusal so...

Operator

And your next question comes from the line of Steven Ruggiero with CRT Capital.

Steven Ruggiero - CRT Capital Group LLC

A couple of questions related to the Borgata also. You had indicated earlier that the Pennsylvania table games had less impact on Borgata than you expected. Can we take away from that the table play in the third quarter, the mix of that and the comping of that was pretty constant on a year-over-year basis and/or sequentially? And if not, I guess you could comment further on that?

Josh Hirsberg

Are you saying table play for Borgata?

Steven Ruggiero - CRT Capital Group LLC

Yes, the mix of the play. So I'm just looking at the whole percentage and trying to perhaps, derive something more from that.

Josh Hirsberg

I would say the whole percentage is really largely -- it's largely in blackjack, but there's no material change that has occurred that would suggest that the hold should be different than what we've experienced historically. We haven't changed our credit policies. We've been always very disciplined around that. We haven't changed anything, really, in terms of how -- other than kind of our own normal business practices in terms of promoting, I think the market itself in Atlantic City has gotten more promotional around some of the credit policies and some of the play, but Borgata has largely not participated in that. So to get to your core question, anything we're doing around credit or promotional activity couldn't really be attributable to impacting the whole percentage. We're looking diligently into other reasons potentially. We're looking at length of play and not found that to be material. We're looking at customers who have been a little bit less risk averse; meaning when they win, they tend to walk, but again, that hasn't been a material impact either.

Steven Ruggiero - CRT Capital Group LLC

Now that there's an announced potential sale of the MGM 50% interest in Borgata, will that likely accelerate the room remodel that you folks have talked about in prior meetings?

Keith Smith

No, they're really unrelated issues. We continue to manage and operate the Borgata in the same fashion that we always have, any change in MGM's ownership interest really has no bearing on the ongoing operations of the property. It continues to kind of be operated as it always has.

Steven Ruggiero - CRT Capital Group LLC

So can we take away that -- you're still looking at the end of 2011 perhaps as starting that room remodel?

Keith Smith

Yes. It will probably will occur sometime during calendar '11.

Operator

And your next question comes from the line of David Farber with Credit Suisse.

David Farber

Just any more color you can provide on potential refinancing, and what are the necessary steps remaining in that process for you guys?

Josh Hirsberg

Yes, David, I'd say basically that we have in our own mind the components of what we want to execute on. We really had that plan formulated since 2008, and we just -- as market's have changed and become more viable and different markets more appealing than others, we modified that. But we will just be prudent and take our time in terms of executing our refinancing. And I would say that we will do it sometime between now and middle of next year when the credit facility goes current. That's just kind of put in perspective.

David Farber

And have you guys started having conversations with banks yet, with respect to maybe how you want to go after refinancing?

Josh Hirsberg

Consistent with my earlier remarks, we've been really speaking with them since 2008. So I wouldn't say that they've necessarily changed in terms of the subject matter or anything else. It's just that we're very much involved in conversations from our bank to consider all of our different alternatives that are available to us.

David Farber

And then actually the bigger picture question, sort of just given Station spending, reemergence and resort and some other maybe one-off assets that might see a new owner at some point, how do you see the locals environment in the next six to nine months? Have things changed as assets changed ownership and as they become more promotional, just any help around that would be great.

Keith Smith

Well, I mean, that's a little bit of prognostication there. I guess I would say, relative to Stations, who's clearly our biggest and most formidable competitor, they have definitely ramped things up relative to reinvestment in the customer base and positioning in the market since the process kind of concluded. And I think that's had some impact and you've seen that impact on margins a bit in the third quarter. Really hard to make comparisons relative to M or other things at this point in time. I mean frankly, we just don't compete with M on any sort of direct basis, given its geography and the geography of our properties in this town.

Operator

And your next question comes from the line of Kevin Coyne with Goldman Sachs.

Kevin Coyne - Goldman Sachs

Did you repurchase any bonds during the third quarter or subsequent to the quarter?

Josh Hirsberg

No, we did not. Larry Klatzkin had a question on capitalized interest and capital expenditures for Borgata. We had no capitalized interest in the quarter, and we spent $4.5 million on capital expenditures, all maintenance-related.

Operator

And your next question comes from the line of David Bain with Sterne Agee.

David Bain - Sterne Agee & Leach Inc.

I just have two questions. One was on just going back to the changes and perhaps the aggressiveness in marketing spend in the Local's market. How do you see that rolling on the fourth quarter? And what's the response going forward, if any? I know you noted the geographical diversification or difference in Station, where at the same time, looking at margins, maybe there was some changes in your own marketing spend?

Josh Hirsberg

Well, I'd first say that, I mean, the third quarter in Nevada is typically the low watermark relative to volumes given it's the summer. And that is when in good times and in bad, you see the lowest revenue numbers. When you combine low volumes obviously with, to some extent, a fixed cost base in the business, you naturally have margin compression. When we get into the fourth quarter and then the first quarter, the first being the highest volume quarter of a calendar year, I think you'll see improvements. As far as direction on marketing, I would say that we're obviously not going to sit back and ignore what's going on in the town. I think we want to pay strong attention to and continue to establish customer loyalty that we have, and you'll see us be as aggressive as we need to be to compete in a very competitive market.

David Bain - Sterne Agee & Leach Inc.

And then just a broad-based one. In the State of Nevada, are there any issues at the local level that we need to be aware of with regard to the upcoming elections? Or do you consider that a completely neutral event?

Josh Hirsberg

No. I don't see the outcome of any of the elections within the state really impacting our business, regardless of who wins the races, I don't see an impact in our business based on who wins.

David Bain - Sterne Agee & Leach Inc.

No other issues with any upcoming votes?

Paul Chakmak

No.

Operator

And your next question comes from the line of Adam Steinberg with Merriman Capital.

Adam Steinberg - Merriman Curhan Ford & Co.

Can you actually give the CapEx for the parent company for the quarter?

Josh Hirsberg

That was $7 million, approximately.

Adam Steinberg - Merriman Curhan Ford & Co.

And that's inclusive or exclusive of the Borgata $4.5 million?

Josh Hirsberg

Exclusive. Borgata was $4.5 million additional.

Adam Steinberg - Merriman Curhan Ford & Co.

With regards to Borgata, I mean the hold's been slow all year long. For the entire year it's been under 14%. What other factors are you looking into there? Do you think there's some sort of collusion or some sort of cheating going on? Or is it just a change in consumer behavior?

Paul Chakmak

Look, as you can imagine, when the hole drops in any one of our properties, kind of beyond historical levels, that we spent a great deal of time and we have a great deal of resource, a great number of resources that we can look at to ensure that there is nothing wrong with the game. And we can assure that everything is fine, and we've done all of our diligence and looked at it. I think it is a function of luck. It happens in our business where you can run for a number of months with low hold. It is possible that there is some altered consumer behavior, but I think that's the smaller part if it is. It really is about luck, and we fully expect it to come back to a more historical level at some point in the future. Nothing we can do about it.

Adam Steinberg - Merriman Curhan Ford & Co.

Are you seeing low hold in any of your other properties as well that leads to believe it's a change in consumer behavior or not?

Paul Chakmak

No, we really have not. I mean, you'll naturally have some ups and downs relative to normative levels, which are frankly different in every market based on game mix, but nothing to the level we've seen at Borgata.

Josh Hirsberg

I was going to say the hold is not limited to one area of the casino. It's kind of throughout the table game area. So again, that suggests that -- and it's not throughout the market either, so there's something unique at Borgata at this point.

Adam Steinberg - Merriman Curhan Ford & Co.

Josh, you previously mentioned that including Borgata consolidating it resulted in the lower tax rate. If I kind of want to normalize with last year's tax rate, I mean that helps you guys by about $0.03. And even about $0.01 off a 35% tax rate, was that something we'll see going forward? What was the dynamic there that resulted in the lower tax rate?

Josh Hirsberg

I mean, I'm pretty simplistic about it. I just see Boyd's tax rate as -- say, corporate tax is 35% and Borgata's only pay state taxes of 9%. So you kind of put those together and average them out. That's kind of the impact is. It's just a lower effective tax rate as a result of that.

Keith Smith

Said another way, Adam, I mean keep in mind that Boyd and MGM for that matter paid federal tax on Borgata income prior to the consolidation. So that was always in our income tax provision, the federal portion, which is by far the largest portion historically.

Adam Steinberg - Merriman Curhan Ford & Co.

Did this change the cash tax portion? Or just the amount that you kind of are estimating there?

Keith Smith

It didn't affect the cash tax portion.

Adam Steinberg - Merriman Curhan Ford & Co.

And then last question's with regards to Downtown Las Vegas. I mean, I know it's the smallest part of your business. But an 11% margin rate, is there something you can do there with costs? Or is that all related to higher fuel prices?

Keith Smith

Most of it relates to Vacations Hawaii. So it's, as I said, really a combination of fuel and frankly, what we're able to charge for charter seats and charter packages on our flights. That was a significant portion of the overall decline. We run the business Downtown very, very efficiently. I think it does get back to typical declines in margins during the summer, which for Downtown is also a lower volume period. And we would expect as we see some uptick on the revenue side for the reasons we noted in our comments that you will see margins expand again in Downtown Las Vegas.

Adam Steinberg - Merriman Curhan Ford & Co.

You usually break out the revenues from Vacations Hawaii. You didn't do it, or at least I didn't see it in the press release. Could you give out that figure?

Josh Hirsberg

You'd have to look back in the tables. There was no intention to change anything.

Operator

And your next question comes from the line of Steven Kent with Goldman Sachs.

Neil Portus

It's Neil Portus for Steve. Could you comment on what you've done in the Midwest and South region to gain market share?

Keith Smith

Well, I think it's been our continued focus from a marketing perspective on who our customers is. I mean, we've done quite a bit through both direct mail and electronic media, to continue to focus on our local customer, which is different relative to geography to what you think of as a local customer in Las Vegas. But nonetheless, we operate six properties that have a significant local flare to them. And I think it's also a statement on recovery in a more advanced stage in both the Midwest and the South relative to what you're seeing in the West, and particularly in Las Vegas.

Operator

And your next question comes from the line of John Maxwell. [Jefferies & Company]

John Maxwell - Jefferies

Actually, Paul, just a little bit more in Louisiana, you've been seeing -- is that gains at all the properties you were seeing improvements at?

Paul Chakmak

I think, as we said, it's pretty transparent obviously in Louisiana, because you see the actual monthly revenue numbers as reported. And that's the same numbers that we used to gauge market share. If you look at our performance kind of over the quarter relative to the same quarter last year, all the properties, all six of the properties, Louisiana, Mississippi, Indiana and Illinois are all up in market share relative to the competitive set we use. That isn't always the same set in each state obviously, because an example would be in Peoria, Illinois, we compete against operations that are to the south of us and to the north of us and they aren't all in the state of Illinois. Some are obviously in the State of Iowa as well. So that's really the direction on the market share comment and where it's going.

John Maxwell - Jefferies

Could you maybe, I guess, a little bit on Treasure Chest, when Pinnacle opens up their site in Baton Rouge, do you have any sense how many customers are coming from that region that you think would be competing against Pinnacle with?

Keith Smith

Next to none.

John Maxwell - Jefferies

And then just lastly with, I guess, multiple things change around a little bit. Any update on the company's plans with Florida and the site there?

Josh Hirsberg

No, there is currently no update on our Dania Jai Alai facility down there and what we may do with it or the timing of that maybe. We're still kind of in the mix or in the queue.

Operator

And your next question comes from the line of Chris Woronka with Deutsche Bank.

Chris Woronka - Deutsche Bank AG

Just on the property expense side. If I understood your comments correctly earlier, you're assuming that going forward, you might see more in the way of spend per visit increase, as opposed to total visitation increase. I mean, does that imply that you're kind of from a staffing standpoint and most of the other property expenses that you would not expect any material increase there going forward?

Keith Smith

I think relative to labor, you're absolutely correct. I mean, obviously, it will impact nominally marketing expense because as people play more they earn more as our programs go. But we are very focused on flow-through to the EBITDA line as we see spend per visit move up.

Operator

And at this time, there are no further questions in queue, and I would now like to turn the call back over to Mr. Hirsberg for closing remarks.

Josh Hirsberg

Thank you, Kerris. A lot of good questions today, and we appreciate you participating. If you have any follow-up questions or would like to reach out to the company, please just call my office, and we'll try to get back to you as soon as possible. Thank you very much. Have a good day.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.

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