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Isle of Capri Casinos, Inc. (NASDAQ:ISLE)

F1Q09 Earnings Call

September 3, 2008 11:00 am ET

Executives

Virginia McDowell - President, Chief Operating Officer

Dale R. Black - Chief Financial Officer, Senior Vice President

James B. Perry - Executive Vice Chairman, Chief Executive Officer

Robert Griffin - Senior Vice President - Operations

Analysts

Lawrence Klatzkin - Jefferies & Co.

Justin Sebastiano - Morgan Joseph

[James Kahler] - Bank of America

Steven Wieczynski - Stifel Nicolaus & Company, Inc.

Dennis Forst - Keybanc Capital Markets

[Dennis Werst - V Financial Investments]

Ryan Worst - Brean Murray, Carret & Co.

David Troyer - Credit Suisse

Operator

Welcome to the Isle of Capri Casinos’ first quarter conference call. (Operator Instructions)

Before we begin, I will read the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Isle of Capri’s management and are subject to risks and uncertainties which could cause actual results to differ from the forward-looking statements.

These statements may be significantly impacted either positively or negatively by various factors including without limitation licensing or other regulatory approvals, financing sources, development and construction activities, costs and delays, permits, weather, competition and business conditions in the gaming industry. Such risks are more fully discussed in Isle of Capri’s filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks. Isle of Capri does not assume any obligation to update the information contained in this conference call.

Also, this conference call could contain non-GAAP financial measures such as EBITDA. Following the call a reconciliation of non-GAAP financial measures to GAAP financial measures will be posted on the Isle of Capri website.

With that I’d like to turn the call over to Virginia McDowell, President and Chief Operating Officer.

Virginia McDowell

I think that we’ve done a good job in the press release of summarizing the quarter and providing updates on our direction moving forward, so I will be brief this morning. Dale Black is going to address a few financial housekeeping items and then we will open the call for your questions.

First of all, before we get to the quarter I’m certain that most of you are aware that we did have to close three of our properties over the holiday weekend as a result of Hurricane Gustav. First and foremost, we focused on the safety and security of our employees and guests. Frankly we were very fortunate we did not sustain any significant damage to our properties and we are optimistic that Biloxi, Natchez and Lake Charles could all reopen sometime today subject to all necessary regulatory approvals. We closed each of these properties at varying times on Sunday as we were directed or as evacuation orders were issued. At each of these locations our team did a commendable job and we thank them so much for their dedication. The cities and regulatory agencies have also been extremely supportive with those we closed, and as we are in the process of reopening we thank them as well. We will keep you all updated as these issues continue to develop.

Getting back to the first quarter, I’m pleased with our overall performance. Our property level and corporate EBIDTA increased on a year-over-year basis as did our net revenues during this time of continuing economic uncertainty. I believe that this is a direct result of the dedication of our team to executing our strategic plan, strengthen our operations and improve our customer experience. As a result we have made mild gains in our operating margins.

On our last call we discussed our preliminary plans for our Biloxi property and since that time Harrah’s has announced a delay on their Margueritaville project. We still intend to move forward in Biloxi but feel that we now have some additional time to continue to refine the project and to get the best pricing possible. We do though intend to be complete before or in concert with the opening of Margueritaville.

In Colorado the campaign for extended hours and limits was launched with the support of more than 70 organizations and key individuals throughout the state. Polling numbers for the ballot amendment are favorable. And although we continue to feel the effects of the smoking bans, there are indications that the promotional environment in Black Hawk is improving.

In Florida the introduction of table games had only a minor impact in the first quarter but we are seeing that impact become more pronounced in the second. As far as our lawsuit and other legislative matters in Florida, we view the situation as one that will unfold in the long term, not the short term, and we will be in a better position to evaluate our options later in our fiscal year.

Finally, in Coventry we’re pleased with the progress that Don Mitchell and his team have made relative to reducing our expenses and we are continuing to explore all of our options in the United Kingdom.

And with that I’ll turn it over to Dale.

Dale R. Black

Before I get started I will mention that Jim Perry and Bob Griffin are also on the line with Virginia and I.

Just a couple of housekeeping matters before we turn it over to questions to go through some things. As you know we reported loss per share of $0.12 for the quarter compared to $0.23 in the prior year quarter. Impacting EPS this year was a $6 million charge related to our decision to get out of a potential development project in Portland which had the impact of about $0.12 on our earnings per share. So without the impact of that we would have been just barely profitable in the quarter but on an EPS basis would essentially have been break even. In last year’s quarter though we did have about $0.19 of charges related to pre-opening expenses and the impact of our refinancing last year that would have brought last year’s loss to a loss of about $0.04. So still the year-over-year comparison would have been favorable.

At the end of the quarter we have about $1.5 billion in debt, $110 million in cash, the leverage ratio as calculated under the terms of our credit facility is about 6.9 times, interest coverage is 2.15, and we have about $155 million of availability under our credit facility which is limited by the covenants. At the end of the quarter there’s about $125 million outstanding on the revolver, $867 million on the term loan, $500 million of the notes, and about $700 million of other debt to get to the $1.5 billion.

With that we’ll turn it over for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Lawrence Klatzkin - Jefferies & Co.

Lawrence Klatzkin - Jefferies & Co.

Capitalized interest for the quarter?

Dale R. Black

It was really minimal. $400,000.

Lawrence Klatzkin - Jefferies & Co.

And corporate, you managed to save some more costs again. Should we assume that that keeps at this level going forward?

Dale R. Black

We had announced at the end of our last conference call that we expected corporate to be in the neighborhood of $40 million for the year and I think this quarter sort of shows that we’re kind of on that run rate.

Lawrence Klatzkin - Jefferies & Co.

And the option expense went up a little bit. Should it keep at that level too?

Dale R. Black

Yes. That will bounce around marginally but it probably is our current estimate of what existing options will run out.

Lawrence Klatzkin - Jefferies & Co.

Cap ex the rest of the year?

Dale R. Black

We gave some guidance last time on the maintenance capital. We continue to believe that the $40 million in maintenance capital for the year is the right number. This quarter I think about $5 million out of the $8 million that we spent was for maintenance so we’ve got about $35 million to go. And that’s on a cash basis.

Lawrence Klatzkin - Jefferies & Co.

I know Virginia it’s too early to say, but I guess there’s no way to quantify what you might be taking as a hit for shutting for the few days assuming that there’s no real damage?

Virginia McDowell

Yes. It really is too early to tell Larry.

Lawrence Klatzkin - Jefferies & Co.

If Colorado would pass, knock on wood, or Missouri would pass, I guess Missouri’s kind of minimal for you guys, but what kind of upside could we be looking at with the change of rules in Colorado?

Dale R. Black

Larry I think the upside in Colorado is really going to depend upon the timing. We believed that July 1 we would have table games on the floor. With the tax rate that is favorable in Colorado, we think there is an upside clearly but we haven’t quantified it at this point.

Lawrence Klatzkin - Jefferies & Co.

As far as Coventry goes, should we assume that since you improved from this number that there is continued improvement there?

Virginia McDowell

We’re doing everything that we can to continue to trim our costs and look for opportunities to increase efficiency. I don’t know how much room there is for improvement but we’re going to keep trying Larry.

Lawrence Klatzkin - Jefferies & Co.

The lease expense is how much a quarter?

Dale R. Black

$1.3 million.

Lawrence Klatzkin - Jefferies & Co.

So the bulk of the loss is the lease expense? And are you still working on selling maybe?

Dale R. Black

No. Because of the 97/10 accounting, the lease costs really don’t run through the P&L because it’s just handled like a capital lease.

Lawrence Klatzkin - Jefferies & Co.

Assuming the rules don’t change, and hopefully Allan can pull off miracles, but what do you think Pompano can cap out at under the current rules? Do you think it could get over $15 million? Do you think you could make $20 million?

Virginia McDowell

Larry the issue that we have is that table games obviously strengthens the Seminole’s hand. They can now offer very appealing full service gaming facility and it’s going to be very tough to compete with them. As we said we’re seeing a little bit more pressure in the second quarter right now and we’re going to have to see how this unfolds.

Operator

Our next question comes from Justin Sebastiano - Morgan Joseph.

Justin Sebastiano - Morgan Joseph

As far as Florida, are you guys still pursuing the JV project for an entertainment retail center despite the disappointing results there?

Virginia McDowell

I wouldn’t say that we were actively pursuing it but certainly we’re always looking at our options.

James B. Perry

We’ve always talked about this more as an intermediate to longer-term solution down there that we’re working on. So we continue to explore those efforts but I wouldn’t expect to see anything down there or have any announcements in the next several months.

Virginia McDowell

One of the things that we’re working on right now is just going through the necessary approvals process as it relates to the DRI and that is a lengthy time.

Justin Sebastiano - Morgan Joseph

As far as the margins in Pompano, you did 6% in the first quarter. Is that kind of where we should be considering that you’re seeing more pressure in the second quarter or I guess as we get further into possibly the winter season more into the third and fourth quarters? Will that as the snowbirds come back hopefully that we see margin improvement there or should it stay kind of around this level?

Dale R. Black

No, I think that you’re exactly right. In the slow season here we will see some pressure on the margins from the slow season as well as the table games at Hard Rock, and as we get into the third and fourth quarters we will see those margins improve as the snowbirds come back down and revenues go up.

Justin Sebastiano - Morgan Joseph

As far as the corporate expense, I know you guys said it was up $40 million for the year. How much of that though is the cost cutting? Is that based on lower marketing spends? Have you cut payroll? Where is that coming from?

Dale R. Black

The marketing expenses by and large rest with the properties anyway. The $40 million that we spend in the corporate office is payroll, insurance, professional fees, travel out to the property, basically what any other gaming company of this size has. The IT department, things like that.

Justin Sebastiano - Morgan Joseph

You guys talk about possibly opening the three casinos that were shuttered because of the hurricane today but are there people back in town near the markets? Like even if you guys open your casinos, are there people there that can get into the casinos if they are open?

James B. Perry

In Biloxi a lot of the people have come back into town. Natchez they still have some power issues there. We think it’ll be a couple of days to get the guests back into that market. And in Lake Charles most of the guests have returned. We’ve also got all of our team members coming back to the properties today. So everyone is returning from the storms.

Virginia McDowell

It is of course subject to regulatory approvals.

Justin Sebastiano - Morgan Joseph

Sure. Dale you did a good job of breaking down the debt. The term loan, I missed that. Is that $867 million you said?

Dale R. Black

$867 million, yes.

Operator

Our next question comes from [James Kahler] - Bank of America.

[James Kahler] - Bank of America

On Biloxi, the cap ex there, I think you mentioned on the last call that you were very focused on sort of having that project done before Margueritaville was open. I think it’s kind of clear that Harrah’s is delaying that project. Does that change your kind of level of urgency or does it change the schedule at all?

Virginia McDowell

Yes. We’re actually looking at this as an opportunity to, as I mentioned in my comments at the beginning of the call, further refine the project and also take the opportunity to do what we can to get the best pricing possible with the understanding that it is still our goal to be open either prior to or in concert with Margueritaville.

[James Kahler] - Bank of America

Do you guys have any updates just now that more time has gone by on the total anticipated insurance proceeds and when you might receive them?

Dale R. Black

No.

[James Kahler] - Bank of America

Nothing new? But still this fiscal year?

Dale R. Black

Hopefully yes.

[James Kahler] - Bank of America

I don’t think that Larry asked this. You had mentioned on the last call that you had been approached by interested parties on strategic options for Coventry. Has anything advanced there or is that other discussion still going on?

Virginia McDowell

We’re still having discussions with a couple of interested parties but we don’t have any updates.

[James Kahler] - Bank of America

You had also mentioned the idea that sort of the second license in Lake Charles could potentially be monetized at some point in the future. Anything new on that front?

Virginia McDowell

Still looking at our options there as well James.

[James Kahler] - Bank of America

Obviously you guys continue to make very solid progress on the property margin side. Can you maybe give us a sense for where you guys think you are in that process? Are we in the third inning or the seventh inning? How much is left to be done just on the pure execution side?

Virginia McDowell

As we said, we started this process about a year ago and we’ve talked before about low hanging fruit and that we’ve done what we can to basically eliminate that. Every quarter it gets a little bit more difficult but we are going to continue to trim costs and to look for opportunities to increase efficiency at each of the properties and to take advantage of every opportunity that we can find. So certainly not as much opportunity as we had a year ago but we’ll continue to work at it going forward.

James B. Perry

You get to the point where the real opportunities are going to come when sort of the macro environment changes and you’re able to increase revenues. To the extent that we’ve been able to make some operating changes and get our programs in place, once that happens we’re confident that we’ll see some flow through.

[James Kahler] - Bank of America

Bigger picture, if we kind of take out or ignore the impact of the property shutdowns in the hurricane, have you guys seen any positive impact with gas prices coming down in August? Did the sentiment of your customers improve at all noticeably in any of your markets?

Virginia McDowell

I wouldn’t say so. We’ve been tracking gas prices very carefully and up until the recent decline I think gas prices were up like 42% year-over-year. Our customers are still feeling the impact of that quite frankly.

Operator

Our next question comes from Steven Wieczynski - Stifel Nicolaus & Company, Inc.

Steven Wieczynski - Stifel Nicolaus & Company, Inc.

Most of my questions have been answered. Just really two questions. A little bit more color Virginia if you could on the non-rated player. What are you seeing right now, and I think a lot of it goes back to the last question in terms of gas prices, but have you seen that group of players start to stabilize yet?

Virginia McDowell

Not really.

Steven Wieczynski - Stifel Nicolaus & Company, Inc.

And then what are you seeing on the promotional front?

James B. Perry

We’ve actually seen on the promotional front some of our competitors start to pull back in on their marketing expenses, which we’ve seen in Kansas City and Colorado. And we’ve taken the approach through our database segmentation that we were going to hold our costs firm and we think we’ve benefited from that and we expect to benefit further going forward.

Operator

Our next question comes from Dennis Forst - Keybanc Capital Markets.

[Dennis Werst - V Financial Investments]

I had a question Dale on taxes. The [inaudible] tax rate in the quarter was something like 34% that was lower than usual. Did that have to do with the write-downs and will it be more in the 40% range going forward?

Dale R. Black

The issue you have when you have a quarter or a period of time that’s this close to break-even and you talk about your tax rate as a percentage, you can get some different answers quite honestly Dennis because of the impact of permanent items. We’ve applied the tax rate to the first quarter that we think will be in effect for the year.

[Dennis Werst - V Financial Investments]

So we could use that tax rate which would be some 500 basis points below last year’s and it’s okay to use that number for full year, somewhere in that range?

Dale R. Black

Yes. Somewhere in between the two is probably the right answer to be honest with you. As you get into all the requirements of FIN 48 now and the adjustments you have to make from time to time to your reserves and things like that, I hesitate to give you a specific number to use. But somewhere between the two is probably the right place.

[Dennis Werst - V Financial Investments]

Moving to bigger picture items, Lady Luck conversions. Caruthersville’s already done?

Virginia McDowell

Caruthersville name change occurred in conjunction with our agreement with the State of Missouri as it related to our purchasing the property. It was really just a signage change and some advertising. Realistically we haven’t even started painting the outside of the building yet. So in terms of kind of changing the experience for the customers, we’re in the very early innings there.

[Dennis Werst - V Financial Investments]

What about the change of management focus more decentralized, etc?

Virginia McDowell

We always kind of looked at Caruthersville as a great business model for Lady Luck to begin with because they did have a very streamlined team. So at this point it’s basically just looking at our opportunities quite frankly to change the customer experience.

[Dennis Werst - V Financial Investments]

What about rolling out other Lady Lucks? Any time table Virginia?

Virginia McDowell

We are probably going to move forward with Marquette next and from there we’re just going to kind of play it by ear.

[Dennis Werst - V Financial Investments]

Is that a different answer than I would have gotten three months ago?

James B. Perry

Probably not materially. We’ve always kind of just been going through and kind of phasing these in (1) as the properties are ready for it and (2) as we kind of looked at what made sense. Keep in mind we’re also doing this with an eye towards making sure that we have the discipline to work within the capital structure as it exists today rather than go out and try to do them all at once.

[Dennis Werst - V Financial Investments]

I have one question for Bob about Davenport. The revenues were down some $3 million both sequentially and year-over-year which is understandable, but [inaudible] out the bottom line, why the EBITDA was so close. Was that just cost savings? Was there anything else there or did you just do a great job on the margin side?

Robert Griffin

I really believe that the team up there did a great job on the margin side. They jumped in front of our segmentation in the database; they pulled down their marketing spends; they trimmed their labor; and I think we also picked up a little bit because of the smoking ban in Illinois. So we were able to benefit from a few things there.

[Dennis Werst - V Financial Investments]

I guess the pickup from Illinois really wasn’t noticeable. Weren’t you closed for some period of time with flooding?

Robert Griffin

We were. We were closed for 20 days. The market itself actually shrank 3.5% but we grew our combined share in the Quad Cities to 81.9% from 81.6%. We did pick up additional business in Bettendorf because of our new hotel there continuing to ramp up and we benefited from some business further north of us that shifted down due to the flooding in that quarter.

[Dennis Werst - V Financial Investments]

But you still had employees. For the days you were closed you still had labor costs there?

Robert Griffin

Yes.

[Dennis Werst - V Financial Investments]

You paid the labor the whole time that it was closed?

Robert Griffin

Yes.

[Dennis Werst - V Financial Investments]

Especially with that it was an enviable type of number.

Robert Griffin

Along those points Dennis, we should be able to recover some of that from our business interruption policy. We don’t know how much yet and there’s nothing in the numbers this quarter related to any sort of insurance gain.

Operator

Our next question comes from Dennis Werst - V Finance Investments.

Dennis Werst - V Finance Investments

I was looking for some granularity on two issues. One is the $110 million cash balance. If you could break that down possibly between cash used for the gambling operation and general cash if you want to call it that? And the second one is if you could update me please on the status of the Greek Department of Tourism and Recreation or whoever it was that was trying to sue you for $10 million earlier. Is that evolving? How’s that going?

Dale R. Black

There’s really been no change in the lawsuit since we filed our 10K and provided a pretty thorough update in that. As far as the cash, if you want to call me offline I can talk to you a little bit. I don’t have the breakdown between how much is in the bank and how much is actually on the casinos themselves. Generally speaking though it’s somewhere between $50 million and $60 million is usually on the boats.

Dennis Werst - V Finance Investments

Your current liabilities, the Other seemed kind of beefy when I looked at it. I forget what the number was. Maybe it was $43 million or something like that. It’s not a static number; it’s not a fixed number; it’s kind of dynamic. So I’m wondering what the nature of that might be, if there’s one big item or something?

Dale R. Black

I’m sorry. Which line are you asking about?

Dennis Werst - V Finance Investments

The Other Liabilities line was fairly large. Other Accrued Liabilities. $43.9 million.

Dale R. Black

Other Accruals. The one thing that could probably make the fluctuation in that pops to top of my mind of substance would be just the timing of insurance payments. We generally pay our premiums in like four installments.

Dennis Werst - V Finance Investments

It was large number for other and I was just looking for some clarity. Thank you.

Operator

Our next question comes from Ryan Worst - Brean Murray, Carret & Co.

Ryan Worst - Brean Murray, Carret & Co.

Dale, that $40 million for corporate expense, does that include option expense?

Dale R. Black

No. $40 million in cash.

Ryan Worst - Brean Murray, Carret & Co.

Could you guys quantify the impact of the closures at Natchez and Davenport in terms of EBITDA?

Virginia McDowell

We’re not ready to do that at this time Ryan. It’s a little too early.

Ryan Worst - Brean Murray, Carret & Co.

Even for last quarter?

Virginia McDowell

Oh I’m sorry. Q1?

Ryan Worst - Brean Murray, Carret & Co.

Yes.

Dale R. Black

We don’t know for sure. It would be a guess frankly because we’re working through getting the claims filed. We have an idea of what they are and what they would be but to tell you guys or to go through it I think would be a little bit of speculation.

Ryan Worst - Brean Murray, Carret & Co.

Do you guys have a deductible per property or how does that work exactly for those previous claims?

Dale R. Black

It’s a deductible per event. For those claims, they were covered under our flood policy and it’s like $250,000 per occurrence and there’s no time period before it kicks in. Now relating that and kind of anticipating the next question here I guess is it’s different on what claims we may have related to the recent activities because that’s covered under a different portion of the policy, mostly under wind or water damage surge as opposed to flooding.

Ryan Worst - Brean Murray, Carret & Co.

What would your deductible be for those occurrences?

Dale R. Black

It gets to be a complicated process because you have to have somebody from the insurance company come out and experts and determine which area it’s covered by and then the deductibles vary by coverage type. But it’s usually based on a percentage of the value of the property.

Ryan Worst - Brean Murray, Carret & Co.

Could you talk a little bit about the results in Biloxi in the quarter? I guess that would be a question for Bob. Revenue was up sequentially about $1.5 million and EBITDA was up close to $4 million sequentially, so was there any one-time occurrences there or just strong cost savings?

Robert Griffin

You’re looking from the fourth to the first?

Ryan Worst - Brean Murray, Carret & Co.

Yes. Just the sequential improvement.

Robert Griffin

One of the things that we did and we had talked about on the last call is we changed some of our general managers around. We put in a new management team and they have been very focused on what the rest of the company has been on executing our key operating initiatives, trimming our marketing expenses and our labor costs.

James B. Perry

A bit of it’s just seasonality too.

Operator

Our next question comes from David Troyer - Credit Suisse.

David Troyer - Credit Suisse

Corporate expense. You said that the $40 million guidance for fiscal 09 did not include stock comp. So if I take the roughly $16.1 million that was reported, I back out the $6 million for the write down, and I back out $2.1 million it implies something like $8 million for the first quarter. So on a $35 million to $36 million run rate. Am I to expect corporate expense to increase by $1 million or so a quarter to reach that $40 million or am I just not thinking about it the same way?

Dale R. Black

I misspoke. The $40 million does include the stock comp.

David Troyer - Credit Suisse

Then Dale, just a couple of cash flow items for the balance of the year. The $40 million for maintenance cap ex, I have that. I think on the fourth quarter call you got it towards discretionary cap ex of my note says $50 million to $70 million for 09, about $3 million spent in the first quarter. Can you just update us on what you think discretionary cap ex is doing to be?

Dale R. Black

I don’t think it will be any more than what we talked about previously. Most of that would have been weighted towards the back end of the year anyway as we got into potentially the construction of Biloxi. As Virginia mentioned, if anything, things will come a little bit later I think that what we had originally anticipated given some of the recent developments in that market and our kind of really scrubbing our approach to our project down there. I would be comfortable that the range we gave in the first quarter would still be the most we would spend this year.

David Troyer - Credit Suisse

And insurance proceeds, kind of a mountain timing in 2009?

Dale R. Black

We really haven’t talked about the amount. We’re frankly trying to keep those conversations between us and the insurance companies. But as far as timing, we’re hopeful to have it done within the year.

David Troyer - Credit Suisse

Is it just a negotiation or is there still fact-finding?

Dale R. Black

It’s a little bit of both. We are in negotiations with the insurance companies. We’re hopeful that we won’t have to move forward with litigation. I mean we have filed a suit basically to protect our rights should the negotiations become unfruitful but we don’t anticipate that happening at this point in time. It’s just one of those things that’s taken time to work through and chipping away at the edges of where both parties are.

David Troyer - Credit Suisse

I guess a similar question on any tax rebates, timing and magnitude?

Dale R. Black

We had mentioned before that we thought that they might come in the middle part of the year. I still think that’s the thing. We’re working as fast as we can to get our fiscal 08 tax return filed to get that process started.

David Troyer - Credit Suisse

Magnitude? Any comments?

Dale R. Black

About $25 million.

Operator

Our next question comes from Justin Sebastiano - Morgan Joseph.

Justin Sebastiano - Morgan Joseph

You guys talk about at the property levels you’ve done a good job of payroll reduction and streamlining your promotions. Is there a lot of that left to do? Are you kind of hitting the bone at this point or how much more margin improvements do you think you can see over the next quarter?

Dale R. Black

Justin, what we had said earlier is we continue to look for improvement. If you look at some of our properties the next quarter, you’ll see that we continue to improve in some properties a little bit more than we do in others. We’re not at the bone. You’ve heard about our strategic plan which we are very focused on the customer experience and elevating customer experience. And our labor has really come through, attrition and really looking at our senior management teams and getting the organization structured correctly.

Justin Sebastiano - Morgan Joseph

Which properties are you having a better time at?

Dale R. Black

Waterloo continues to ramp up very nicely. Iowa overall we continue to do well. And in Natchez and Lula we continue to have very good margins.

Justin Sebastiano - Morgan Joseph

And Dale you said that if you back out that $6 million charge, you’re basically break even. So I guess 0 is EPS for the quarter. If I back out that $6 million I come up with a pre-tax number of about $540,000. So what kind of tax rate or what diluted shares outstanding is going to get us to that 0?

Dale R. Black

The statutory rate which I would use to apply to this is going to be about 37%. And then the share count shouldn’t change materially. It’s right on that cost where it’s either going to be 0 or $0.01 depending on where you start rounding and things like that.

Operator

Our next question comes from [Dennis Werst - V Financial Investments].

[Dennis Werst - V Financial Investments]

I just wanted to follow up with one or two things. First of all, on the timing of any write downs or non-recurring events, right now do you see anything in the second or third quarter Dale?

Dale R. Black

No, I don’t foresee anything and there’s nothing that we’ve talked about.

[Dennis Werst - V Financial Investments]

If you get a settlement with the insurance company, would that go through that line or would it go through the income statement of the various properties?

Dale R. Black

It’s either going to show up as a reduction in cost or an increase in revenue, depending on how it’s allocated between the various pieces. The accounting rules frankly are a little goofy in that business interruption claims generally run through revenue as opposed to costs. But it will show up in the income statement in one place. It’ll be identifiable. That would be the only thing I foresee based on any information we have now ultimately if and when that comes through, the handling of it.

[Dennis Werst - V Financial Investments]

You mentioned that you’re hoping to get the insurance proceeds this year. Were you talking fiscal or calendar?

Dale R. Black

Yes.

Operator

At this time there are no further questions.

Virginia McDowell

Thank you all very much and we’ll see you next quarter.

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Source: Isle of Capri Casinos, Inc. F1Q09 (Qtr End 07/27/08) Earnings Call Transcript
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