Trump Entertainment Resorts Inc. Q4 2007 Earnings Call Transcript

Mar. 5.08 | About: Trump Entertainment (TRMP)

Trump Entertainment Resorts Inc. (TRMP) Q4 2007 Earnings Call March 5, 2008 11:00 AM ET

Executives

Mark Juliano – Chief Executive Officer and Chief Operating Officer

John Burke – Interim Chief Financial Officer, Executive Vice President, Corp. Treasurer,

Robert Pickus – Chief Administration Officer, Executive Vice President, Secretary, General Counsel

Eric Hausler - Senior Vice President of Development

Chris [Lateal] - Director of Operational Analysis

Analysts

Carlo Santarelli – Bear, Stearns & Company

Ryan Worst – Brean Murray, Carret & Company

Larry Klatzkin – Jefferies

[Jean Padraia – Lehman Brothers]

James Taylor – Bank of America Securities

[Steven Carte – A & M Investment Partner ]

Chris Bailey for Ralph Elliott – J.P. Morgan

Operator

Good morning everyone and welcome to the Trump Entertainment Resorts 2007 fourth quarter conference call. Today’s call is being recorded and a replay of the call will be available on the Investor Relations page of the Company website www.trumpcasino.com or by phone from 4 pm today until midnight on March 12. The replay is toll free at 888-286-8010 or for callers outside the United States and Canada 617-801-6888 and the pass code is 29322862 again that is 2932862.

Now the Company would like listeners to know that certain information discussed by management during today’s call regarding the Company operations, financial results, plan, expectations, estimates and beliefs as well as other statements including such words as anticipate, believe, plan, estimate, expect, intend, will, could and other similar expressions constituent forward looking statements under the Private Securities Ligations Reform Act which provides the Safe Harbor for such statements so long as they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in such forward looking statements. In connection with any such statement, there are various factors that could cause results to materially differ from those contained in such forward looking statements and are subject to significant business, economic, competitive, regulatory and other uncertainties and contingencies all of which are difficult or impossible to predict or control accordingly there can be no assurance that such forward looking statements will be realized.

Listeners are also advised that developments subsequent to today’s call are like to cause these statements to become outdated with the passage of time or other factors, which are unforeseeable, or beyond the Company control. The Company does not intend to update the guidance provided in today’s call prior to its next press release or conference call unless otherwise required to do so. Listeners should consider these facts in evaluating the information provided during today’s call and should not place undue reliance on any forward looking statements made during today’s call. Additional information concerning the potential risk factors that could affect the Company future performance are described form time to time in the Company periodic report filed with the SEC and which may be viewed free of charge on either the SEC’s website or through the Company website.

At this time we could like to commence today’s conference call by introducing the Company’s Chief Executive Officer Mr. Mark Juliano and the Company’s Interim Chief Financial Officer Mr. John Burke. Please go ahead gentlemen.

Mark Juliano

Good morning and thank you for joining us today. Joining John and I for our call this morning are Robert Pickus, Chief Administrative Officer, Eric Hausler, Senior Vice President of Development, Raniq Bonderry, Senior Vice President of Revenue Manager and Chris Lateal, Director of Operational Analysis.

In our press release, you can clearly see there are a variety of factors that complicated our financial results for the quarter and year. Principally certain non-cash write downs in accordance with generally accepted accounting principals. We will go through these factors in just a few minutes but first I wanted to review our operating results.

Two thousand and seven has become widely accepted as the most challenging year in the history of the Atlantic City Gaming Market. Overall gaming revenues in Atlantic City decreased by almost 9% during the quarter and almost 6% for the year the first ever year over year decrease in its history.

While 2007 was certainly a difficult years during which we faced unprecedented challenges, I am happy to report that we out performed the revenue trends in the market place. As a Company, we performed reasonably well in a difficult market place and we believe that the trends indicate that we are well on our way to accomplishing our goal of improved financial performance.

For almost three years, we have been talking about the initiatives we were pursuing to build a new business technology infrastructure streamline and improve our operation, refurbish our hotels, drive additional cash revenue and overall implement a new business plan based on increasing customer quality and extending length of stay.

Today I am also happy to report to you that we have successfully implemented the majority of these changes and believe that the opening of Trump Taj Mahal tower marks a significant milestone in our effort to reposition our Company to succeed in a changing market place.

Despite the market revenue challenges, our operating margins remain relatively stable on a year over year basis at both the Trump Taj Mahal and Trump Plaza. Again, this quarter and for the full year, our primary challenge was slot revenue. While we out performed the market in terms of revenue, Pennsylvania still had a very significant impact on our business and represented nearly dollar for dollar, our loss in rate of slot play.

Table revenue presented a challenge in the fourth quarter in particular. Despite an increase in volume, our whole percentage was down 200 bases points at the Trump Taj Mahal and nearly 160 bases points across the Company. Normalized for last year’s whole percentage, this represented a loss of nearly 7.7 million in revenue.

One of the highlights of the second half of 2007 was the early success of our Trump One Program. During those six months, our cross property play increased more than 40% and we believe that this is an area where we have additional opportunity to capture a percentage of gaming budgets.

The retain component of our program both in our stores and through our catalogue has found tremendous customer acceptance and we play to launch across property shuttle in the coming weeks to make it easier for customers to enjoy two or more of our properties.

Our revenue management and hotel yield management initiatives were another highlight of the year. As of the end of 2007, our hotel occupancy and revenue for available room are up. We took in nearly $8 million in high margin cash hotel business, more than we had in 2006.

Cost saving initiatives also produced strong favorable results and at the property levels, our annual payroll and benefit savings were $15 million.

Additionally, our facility renovations and expansion continue through the quarter. The 782-room Trump Taj Mahal Hotel Tower remains on schedule to begin opening Labor Day with the entire tower open by the end of 2008.

Also during the quarter, we announced our partnership with Il Mulino New York, the new Italian restaurant that we expect to open in August of this year and complete at the high gaming salon at the Taj, which opened just before New Year’s Eve.

The closure of our high limit table game area for a significant portion of the fourth quarter did have an impact on our table revenue and produced some construction disruption on the casino floor. Now open though, it is already proving to be a successful investment.

We are optimistic about the competitive landscape for the coming year. Our new 800-room tower at the Trump Taj Mahal will also be accompanied by the opening of 1600 other new rooms in town. We view these expansion projects as a net positive for our Company and the entire marketplace and continue to believe that expanding the citywide room inventory will bode well for all the Atlantic City operators as the city evolves.

In Pennsylvania, we do not expect a significant amount of new product to come on line this year or through the first half of 2009 as the Philadelphia casino projects are continuing to meet delays.

Another significant accomplishment of the year was the refinancing of our debt facility with Field Bank. We have adequate capital to implement our strategic plan and believe that the maturity period interest rate and improved flexibility of the loan are very favorable in the difficult credit environment companies are facing today. The settlement of our property tax appeal during the fourth quarter was also significant as we took in almost $29 million in income, net of legal fees, 12 million of which was cash and ended this costly ligation, which had gone on for a decade.

As you know from the press release, we also recorded non-cash write-downs to certain of our intangible and other assets that were principally responsible for our quarterly net loss. We did this in accordance with GAAP measures but also believe that the adjustment represents the current value of our assets reflecting a competitive environment and general economic pressures we have been facing. Considering the fact the book value of our assets was set in 2005 at a time when the credit markets were strong and Atlantic City was producing historic revenues.

Overall we believe we have done a great deal to execute our plan to attract new cash business, target our marketing span, control our cost and improve the overall experience at our property.

We have the people, the technology and the plan in place to attract new business and continue to migrate toward more profitable customers, who enjoy our gaming and other entertainment experiences during an extended stay.

The opening of the Taj Tower later this year will, we believe, be the most substantial step to date in our effort to reinvigorate our properties and realign our business model.

While the introduction of slots in Pennsylvania and other competitive and economic pressures have certainly posed challenges, we are also confident we have the right plan in place for future growth. Thank you and with that I would like to open up the discussion for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, thank you and if you wish to ask a question, touch star one on your touch tone phone. (Operator Instructions)

Your first question comes from the line of Larry Klatzkin of Jefferies please proceed.

Larry Klatzkin – Jefferies

Hey, Mark. You know what doesn’t kill us makes us strong, right?

Mark Juliano

I like that.

Larry Klatzkin – Jefferies

A couple of questions, one is there is a proposal on the table to ban smoking in lots of the parts of Fox with Mohican Sun, what kind of effect do you think that could have in Atlantic City, if any?

Mark Juliano

Well, it would be a positive effect. It would be one less jurisdiction that allows smoking. Right now, the two Pennsylvania casinos in Chester and Bucks County, Philadelphia Park, allow smoking although the Philadelphia casinos will not be permitted to have smoking. We think the less jurisdiction, Delaware being one of them, that does not allow smoking, helps us get on a even competitive playing field.

Larry Klatzkin – Jefferies

All right, good, Bater Field, what is your feeling about what is going on there? It seems the legislature is trying to take it away from Atlantic City control. If that would happen, how do you think you guys would fare and would you actually make a bid like everyone else on Bater Field?

Mark Juliano

Right now, we would not make a bid on Bater Field. We have three facilities that we are operating now and we’re really focused on trying to get them to perform as well as we can. We would not be interested in Bater Field.

Larry Klatzkin – Jefferies

If they went ahead with it, do you think it would be a disaster for you guys or is it really too hard to say at this point?

Mark Juliano

It would not be a disaster for us, of course, and we are firm believers that whatever happens to make the marketplace a better and stronger place will ultimately benefit us. However, having said that, we are still of the mind that even if that progressed in the most expeditious manner possible, it is a 2015 event and that’s too far out for us to be concerned about right now.

Larry Klatzkin – Jefferies

That’s fair, then you have great plans for the Taj, and the Tower sounds great. Marina and the Plaza, what do you see in the future for those properties?

Mark Juliano

We are going to continue to refine them as we have over the past couple of years. All of them have new competitive room product. The Plaza has done a great job in reconfiguring their casino floor and adding new slot inventory as have the Marina and right now we are going to focus on really getting the Trump One card to work to the best of our advantage. We are going to be adding a shuttle service to take people from all three of our properties. Other than just really paying attention to basic fundamentals and continuing to focus on costs there and improving the customer experience through Trump One that’s about what we have planned for now.

Larry Klatzkin – Jefferies

All right, thanks Mark, I appreciate it.

Mark Juliano

Thanks, Larry.

Operator

Your next question comes from the line of Jean Padraia from Lehman Brothers please proceed.

Jean Padraia - Lehman Brothers

I just had a couple of questions. I feel like table drop had been positive for most of the year and then it fell in December and I believe it fell in January and in your view, is that weather or is that the economy? Are you seeing any uptick cure in February or March?

Mark Juliano

One comment I would make about the fourth quarter, particularly at the Taj Mahal, we had 22 less table games during the reconstruction of our Bacharach Pit so typically, that had some impact but I don’t believe general table game trends in volume from drop were down. In fact, they were up. We did have a whole percentage problem at the Taj and at the Plaza that had a $7.8 or 7.7 million negative impact that is really kind of the table game story there. We have seen a great acceptance of the Bacharach Pit and the new suite at the Taj, which is really fueling the growth that we have seen in table game volume. We expect that to continue if not increase.

I will say that January we continued to out performs the marketplace generally and the February revenue numbers, which will be out in the next five days, will show that we have had positive revenue increases at all three of our properties and that’s the first time that that has happened in a while. I think that the impact of Pennsylvania is starting to dissipate. People who are experiencing the Racino are being to realize that the only thing to do there is to play slots, which of course, many of them are interested in but for that, full experience, Atlantic City is still the best bet around. We are encouraged by February and what we have seen so far in March.

Jean Padraia - Lehman Brothers

I am sorry; I should have clarified, I was speaking to the market as a whole where it dropped for the whole market was down, not your particular properties.

Mark Juliano

We continue to out perform the marketplace so thanks very much for that Jean.

Jean Padraia - Lehman Brothers

Excellent and in terms of the whole being volatile, is this just nature of the beast, do you direct more of your focus on tables, is this going to be the way of the future where we are going to see some up months, some down months?

Mark Juliano

Table game hold particularly in the Atlantic City marketplace is never really quite as volatile as in some markets but occasionally you do run into periods of time when it is below normal; we do expect it to normalize. We do not expect there to be significant spikes moving forward in the whole particularly at the Taj because our volume continues to grow there and that’s what helps even out whole percentage over the long term.

I will say that having the 22 less games during the quarter puts some pressure on it because it concentrates that high end table game play on less of a table game spread so that when the whole doesn’t go in your direction it is more concentrated and that obviously is not the case moving forward. We are at a full spread now and that will help smooth out some of the volatility.

Jean Padraia - Lehman Brothers

Okay and then just turning onto Meadowlands, just curious if the slot proposal at the Meadowlands is that totally off the table now that they have this new agreement to subsidize the racing industry? I haven’t heard much about that.

Mark Juliano

We have an agreement in principal as the legislation is continuing to be refined, I could comment on that portion of it much further than that except that both the horse racing industry, the casino industry and the Governor’s Office have agreed in principal that this would preclude BLTs for the next three years at the Meadowlands. We have always had conversations with the Governor to support that and we think BLTs at the Meadowlands is off the table for at least the next three years.

Jean Padraia - Lehman Brothers

Excellent and just one last question or two more, in terms of capital budgeting for ’08, can you comment on expenditures beyond the Taj Tower, how much you would expect to spend.

Mark Juliano

We have maintenance capital at both the Taj and the Plaza, 20 at the Taj and 10 each at the Plaza and the Marina; however, we are going to monitor that and prioritize the projects that we have. What we have actually underway right now would be the completion of the casino floor at the Taj which would just really be the back half of the casino and then in July, August of this year, the opening and completion of Delmonico. There are the big projects for the Taj and normal refurbishment and replacement of slot inventory will continue but obviously we will keep an eye on the results and monitor the capital spend as appropriate.

Jean Padraia - Lehman Brothers

Okay and then just one last question, I will give somebody else a chance. I know you have done a good job at reaming expenses out, is there more that can be done there or do you feel like you have taken out most of the corporate costs that you can?

Mark Juliano

I would say from a labor perspective, at the corporate level, we are lean and we don’t expect a lot more savings in that regard. We will continue to refine labor costs and labor savings at the property level as we introduce new technology and as we continue to refine our business model. I would say you really need to go back to the beginning of 2006, the middle of 2005 and look at the enormous progress that we have made there to realize that there won’t be an enormous amount moving forward except that continual refinement that we always do. You will have a slight increase with the opening of the Tower, of course, in the end of the third and beginning of the fourth quarter of this year. However, that will not be significant because it really will be primarily guest room attendants since the Tower does not contain a lot of public space or food and beverage outlet.

Jean Padraia - Lehman Brothers

Got you, well thank you very much.

Mark Juliano

Thanks, Jean.

Operator

Your next question comes from the line of Carlo Santarelli of Bear, Stearn please proceed.

Carlo Santarelli – Bear, Stearn & Company

Thank you, hey guys, where do you stand as of right now in terms of the capital you have already put in to the Tower of that 255?

Mark Juliano

Right now through the first quarter of this year, we are year to date so far, 88 million and we have another 103 million…

Carlo Santarelli – Bear, Stearn & Company

Basically, just the numbers here, we had spent 88 million on the Tower last year, in ’07, about 12 million in ’04 and we spent basically 103 million year to date to the end of the year and we have roughly the remaining 155 through the end of ’08 probably into the beginning of the first quarter of ’09.

Mark Juliano

Yes, there will be some bleed into the first quarter of ’09.

Carlo Santarelli – Bear, Stearn & Company

It was hard not to notice in the earnings release the year over year spike in promotional allowances. I know you guys have tried to stay away from that for awhile. Do you guys feel at this point it has become too competitive to allow the revenue to continue to get hurt from some of your competitors being extremely aggressive?

Mark Juliano

No, I think that the thing that you are noticing in the fourth quarter is that it is the introduction of the retail component of Trump One, which we had not included in the program before. Obviously, when you introduce the product there is certain start up costs that are associated with a winning customer acceptance and that is where most all of the increase in the promotional spend came. Obviously, that is something that we are continuing to refine and we have launched it successfully, customers like it and now we are able to really refine what items they are reacting to, pare our inventory down a bit and makes tweaks to the program so that it becomes more reasonable. We are seeing those trends become more positive and back to what we normally use to in the first quarter of this year. We also have seen kind of a continuation of what we saw in the third and fourth quarter where the general overall promotional expense is stabilized. I wouldn’t say it is drastically reduced but the City itself has not experienced some of the run away costs that we had in the past.

Carlo Santarelli – Bear, Stearn & Company

Would you call that a couple million bucks in terms of the retail stuff?

Mark Juliano

Probably about three and a half.

Carlo Santarelli – Bear, Stearn & Company

Fair enough, perfect, thanks so much, Mark.

Operator

Your next question comes from the line of Ryan Worst of Brean Murray please proceed.

Ryan Worst – Brean Murray

Thanks, hi Mark.

Mark Juliano

Good morning Ryan.

Ryan Worst – Brean Murray

It sounds like going forward, you would expect promotional allowances to be in line with prior year numbers?

Mark Juliano

Yes, I think with the obviously we can’t go into great detail about the changes that we are making to the program because they are proprietary to our marketing plan for this year. It will be a refinement where we will really identify the better customers and continue to offer access to the better aspects of the retail component of it and kind of weed out the ones that really are not profitable. We had no choice but to offer it to them until we got the program established.

Ryan Worst – Brean Murray

Okay and then what kind of effect, Mark, these things the current proposals on promotional packs as credits will have on you guys relative to the Pennsylvania competition?

Mark Juliano

The legislation they are talking about now relates directly to the horseracing subsidy. Is that of what you are speaking?

Mark Juliano

Isn’t there something where you are going to be allowed to have promotional credits that would be tax deductible in terms of the gaming tax?

Mark Juliano

We are and that is the legislation that’s being proposed right now and it is really too early to comment on what the final format of that legislation would be. It is similar to what they are doing in Pennsylvania where the promotional credits that we extend the customer, do not go into the gross gaming revenue and therefore are not subjected to the tax. However, we do not know what the final form that will take and the bulk of that money we might realize will be to fund the subsidy for the horse racing industry of the purses.

It is really, what it has been in the past, which is a bargain with the State and with the Horse Racing Association to keep the BLTs out of the Meadow Land.

Ryan Worst – Brean Murray

Okay, and then I guess you talked a little bit about February trends and that’s why you are more optimistic. Could you take a little bit more about the drivers to those trends? Are you seeing actually customers that you haven’t seen for a while because they were playing in Pennsylvania or is it just a reflection of the easier comps?

Mark Juliano

It’s obviously a reflection of the easier comps, there is no doubt about that. The impact of Pennsylvania is now somewhat fully loaded. It is also the result of a lot of these initiatives that we have been taking the past couple of years and a lot of the improvements that we have made to the property are complete and are generally close to complete and customers are reacting positively to that. I think one of the more significant things that we have seem out of Trump One, for example, is that we have a real increase in cross property play. Customers that generally could have been making their second or third trip to another property or another company are choosing one of our properties because there is an incentive for them to do so.

We are seeing general confidence in the way the marketplace is performing but more importantly, we continue to perform better than the marketplace has and we are expecting that to continue as customers continue to react positively to the changes that we have made.

Ryan Worst – Brean Murray

Okay, great and then one housekeeping item. What was stock comp in the fourth quarter, John?

John Burke

It was 400 thousand.

Ryan Worst – Brean Murray

Four hundred thousand, okay, great.

Operator

Your next question comes from the line of James Taylor, Bank of America Securities please proceed.

James Taylor – Bank of America Securities

Hey guys, how are you doing?

Mark Juliano

Good morning.

James Taylor – Bank of America Securities

Just one more follow up on the comment about February, is there any way you can give us a little more granularity? Is the improvement in February, are you actually seeing improvement in slots or have anything to do with improve hold?

Mark Juliano

The hold is normalized; the bulk of the improvement has been obviously in revenue but in slots.

James Taylor – Bank of America Securities

Okay, you’re seeing an improvement in both areas, that is good to hear. Part of the driver was the promotion but this past year even with the revenue declines, you guys have been doing a very good job controlling margins. Is the decline in margin in the quarter is that just because the fourth quarter is one of the lowest revenue quarters and it gets more challenging?

Mark Juliano

There are three basic reasons. Number one, it always is our low quarter but you have to compare it to the fourth quarter of last year and what impact it to the fourth quarter of last year was you know $16 million decrease in revenue. An increase in some of the promotional expenses directly related to the retail component of Trump One and a whole percentage problem which was a $7.8 million impact for both the Taj and the Plaza.

Getting back to February for a minute though, the real significant driver, which was very encouraging to us is slots, particularly at the Taj. You are going to see very shortly that we‘ve had really nice healthy growth and unfortunately table whole percentage was still a bit of a problem in February there but volumes are way up in table gain in volume and very significantly in slot handle and win.

James Taylor – Bank of America Securities

That is good; that is very encouraging.

Mark Juliano

In table hold, there’s never anything that we really worry or focus about. You need to worry about it when your volume is not there because the volume is what really diminishes the volatility. It always normalizes itself.

James Taylor – Bank of America Securities

Do you ever just to sort of to try to back into kind of more normalize, do you guys ever talk about what the expected hold would be overall?

Mark Juliano

Generally overall, we expect hold tri property at the end of the year to fall somewhere between 15.5 and 16%. Historically we never have been too far off the mark. We have been off the mark of course in months and in quarters but in the end of the year, certainly that’s where it falls out.

James Taylor – Bank of America Securities

That is helpful and can you just walk us through this liquidity position, just build bridges from where you are today through getting the Tower open and maybe just comment on how the new bank facility works and the remaining liquidity?

John Burke

You will see at the end of the year, we had probably a hundred million dollars of excess cash as a result of having cash set aside, restricted cash from the initial draw down on the old loan plus the draw down on the real bank facility. The real bank facility provides us with a hundred million dollar delayed draw, which has to be drawn between now, and the end of the year. It is roughly 200 million of liquidity right there, which effectively covers our Tower completion and our required and/or maintenance scheduled capital expenditures. Basically, the operations given where we are now and where we foresee we will be without giving any specific guidance is more than enough to make interest payments and then any other capital requirements. We don’t see liquidity as being an issue for all of ’08.

James Taylor – Bank of America Securities

Very good and then just finally, Mark, it seems like with the Taj and the Plaza, you have a well articulated and for the strategic plans that you are executing on, it seems like the Marina is a little less, the plan has been a little less specific. Can you just comment about sort of what your view on the Marina is and what the plan may be going forward?

Mark Juliano

I think the Marina has been challenging because number one it is located in the same district where you have the two biggest and some might consider the two most profitable hotels operating. You also have the two companies that at one point throughout ’07 were the most aggressive in their promotional span and you had the Marina trying to compete against that. We have seen, obviously, the sharpest drop off in both revenue and EBITDA there but we think that as we have new management in place, Mark Sachais is now the General Manager there. He was the VP of Marketing of both at the Plaza and then the Taj Mahal and as they as really focusing on refining their marketing calendar around special events that specifically drive customers and volume and they will be also a pretty good beneficiary of the new shuttle which we are starting with Trump One. We think that January had a slight improvement in trend. You are going to see February some significant and holding up well in March. Again, as you had articulated, the Taj and the Plaza have been chugging along fairly well and the Marina had struggled but we do think we have a handle on it. We are optimistically looking forward to the rest of this year.

James Taylor – Bank of America Securities

Finally, a follow up, the bank facility has no maintenance covenants now, is it?

Mark Juliano

No, there are no restrictions at all. It pushes the maturity out about three years.

John Burke

Yes, it fully matures in 12.

James Taylor – Bank of America Securities

Very good, thanks guys.

Operator

Ladies and gentle as a reminder star one to ask a question.

Your next question comes from the line of Steven Carte who’s A & M Investors Partner please proceed.

Steven Carte – A & M Investors Partner

Most of my stuff was already answered but I have a couple of things. The first one, I want to congratulate Mark being named to the Board and that nice pay raise, I guess, that went with it. Spend it well.

Mark Juliano

Well, thank you.

Steven Carte – A & M Investors Partner

Just generally speaking, it is obviously encouraging all the slots on February is everybody’s pretty much for the last six or seven months doing nothing but staring at slot lines versus you versus PA. A turning of the tide would be great news for you guys if it is sustainable.

Economy potential recession jitters in Pennsylvania, do you think you are feeling anything? Do you expect to feel anything, most of your competitors in the space you know some why or other were starting to see signs of volumes dropping and starting to weaken a little bit. That’s possible that Atlantic City due to Pennsylvania is already feeling that you’ve taken the appropriate measure from expense stand point, et cetera but I was just curious what you guys think on those lines.

Mark Juliano

The economy always as you know and our business is not an exception, is a result of confidence; how confident people feel that they have the ability to spend what is really discretionary income. What we have seen in a very positive note is that the cash revenue and the room rates and the occupancy has been holding strong and actually increasing significantly as we open inventory and discovery or really make available new channels for people to book reservations into the hotel, they are reacting to it. I think that is a good indication that regionally we still have a confident consumer. I think that you pointed out something that is significant, we really have been focusing on the impact of Pennsylvania, which as we have mentioned earlier is directly related to the decrease in slot play at the very lower end of our database. That customer that is being impacted in the discretionary spending has already been absorbed by the Pennsylvania impact so I think that’s takes a little bit of pressure about the economy off of us. We’ve already absorbed that Pennsylvania impact so to speak for the lower income customer.

We find that the more discretionary affluent the casual traveler has not been affected yet. We keep our eye on it, of course, and we’re never glib enough to think that we are going to be insulated from it and consequently we keep an eye on expenses. Our marketing programs never go too far out so that we can’t pull them back when we need to. We are doing whatever we can to prepare for it but right now I would have to feel confident that we are in good shape.

Steven Carte – A & M Investors Partner

Okay, great and thanks a lot.

Operator

Your final question comes from the line of Ralph Elliott of J.P. Morgan please proceed.

Chris Bailey for Ralph Elliott – J.P. Morgan

Hi there, it’s Chris Bailey stepping in for Ralph with just a quick question.

Is there an amount of cash you are required to set aside as cage cash, that’s my first question.

John Burke

On the balance sheet? There is not a set amount that you have to keep aside. You are basically required obviously by CCC regulations to have enough in your cage system to meet what would be the normal flow and generally as asset will go up and down depending upon the time of day and the week, the holiday season you will have more money on the floor. Generally it runs to the tune of about $40 to 50 million. Actually, that’s a number that’s going down over time as we continue to get more toward the ticket in and ticket out because there is less cash that physically has to be around on the floor.

Mark Juliano

As John said, it is directly related to volume and there is no specific requirement but we adjust it each week and actually each day. All of the advance of particularly with e-promo and restricted credits and everything being non-cash, it becomes less and less of a requirement.

Chris Bailey for Ralph Elliott – J.P. Morgan

Okay, thank you and then the last question on the Tower. I don’t know if you are allowed to give this, you break out rev-par fro the Company care. Are you allowed to give rev-par what that is per se?

Mark Juliano

We know that we are starting to book the Tower and we know that we are getting a premium that is running anywhere from 25 to $40 a night on each of those rooms. It is going to be hard to predict what rev-par will be for the year because they are coming on board in different stages, 326 of them right at Labor day and the about 100 per month afterwards. What we can tell you is that we are getting a premium promising people that room.

Chris Bailey for Ralph Elliott – J.P. Morgan

Okay, now it’s my last question, do you expect 325 to come online Labor Day?

Mark Juliano

Yes, Labor Day right in the very beginning of September and then 100 rooms a month until completely open around 15 December.

Chris Bailey for Ralph Elliott – J.P. Morgan

Okay, thank you.

Mark Juliano

Thank you.

Operator

There are no further questions in the Q at this time. I would like to turn the call back over to Mr. Juliano for closing remarks.

Mark Juliano

Thank you for joining us today. As you can see, 2007 was a challenging year but fortunately, as we have said throughout the call, out performed the marketplace and all of the investment that we made in our technology and in our facility have given us the ability to get through this tough time. We are very optimistic about 2008 and we are very optimistic about the city of Atlantic City. It still is the second best tax rate in the entire country and we don’t see that changing anytime soon. We think that the potential for the city to evolve into a strong regional destination where people will come and spend two or three days is the upside for that is optimistic for us. We are very happy that our focus this year is on additional rooms at the Taj because that is an integral part of executing this business plan.

Stay tuned and thanks for joining us.

Operator

Thank you Mr. Juliano, this concludes today’s conference call. We thank everyone for calling in today and participating in the Company’s earning conference call. Thank you and have a great day.

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