Aug 1, 2007
TRANSCRIPT SPONSOR
Executives
Keith E. Smith - President and COO William S.
Boyd - Chairman and CEO Paul J. Chakmak - EVP, CFO and Treasurer
Analysts
Lawrence Klatzkin - Jefferies & Co. Felicia Hendricks - Lehman Brothers Joseph Greff - Bear Stearns James Hardiman - FTN Midwest Securities Dennis Forst - Keybanc Harry Curtis - J.P.
Morgan Securities David Katz - CIBC World Markets William Lerner - Deutsche Bank Securities Celeste Mellet Brown - Morgan Stanley Adam Steinberg - Morgan Joseph
Operator
Good day ladies and gentlemen and welcome to the Second Quarter 2007 Boyd Gaming Earnings Conference Call. My name is Leon and I will be your coordinator for today.
At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference.
[Operator Instructions]. As a reminder, this call is being recorded for replay purposes.
I'd now like to turn the presentation over to your host for today's call, Mr. Keith Smith, President and Chief Operating Officer.
Keith E. Smith - President and Chief Operating Officer
Thank you, operator. Good morning everyone and welcome to our second quarter conference call.
Joining me on the call is Paul Chakmak, our Executive Vice President, Chief Financial Officer and Treasurer. Also joining me today is Bill Boyd, our Chairman and Chief Executive Officer.
Before we begin, I need to remind you that our comments today will include statements relating to our future results, including the financial outlook and expectations for our third quarter 2007, our expansion and development projects and other market business and property trends that are forward-looking statements within the Private Securities Litigation Reform Act. The company undertakes no obligation to update or revise the forward-looking statements, whether as a result of 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. I would also like to remind everyone that during our call today, we will make references 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, both of which are available in the Investor section of our website at www.boydgaming.com. We do not provide a reconciliation of forward-looking measures due to our inability to project special charges and certain expenses including pre-opening expenses.
Finally, as a reminder we are broadcasting this call on our website at boydgaming.com and at streetevents.com. Given the nature of our announcement last week, we thought we'd start our call off a little different this quarter.
As I mentioned in the opening, Paul and I are joined this morning by Bill Boyd, our Chairman and Chief Executive Officer and effective with the end of this year, our new Executive Chairman. So it is with great honor that I turn the call over to Bill Boyd.
William S. Boyd - Chairman and Chief Executive Officer
Thank you, Keith. Good morning everybody.
Thank you for joining us this morning. On the heel of our announcement last week regarding Keith's well deserved promotion, my new role in the company, I wanted to take just a few moments to provide some background on my decision to transition from Chief Executive Officer to Executive Chairman.
Some of you maybe familiar with the term Executive Chairman, it is far more than the leader of the Board of Directors. He is an active senior executive and leader who remain deeply involved in the operations, vision and strategy of the company.
Sometimes this type of transition is seen as the prelude to retirement. I want to make an absolute declare that this is not my intention.
I intend to remain actively involved in this company. However, I recognize the need to make sure our company has an established path of leadership succession.
That's why on January 1st, 2008 I will transition to the Executive Chairman post, a position that will allow me in opportunity top focus more on our customers and our employees. Our company culture and success have been built on the close bond we have developed with both of our customers and employees and in my new role I will have more time to spend interacting with both.
I will remain a member of our management committee and obviously, will continue to lead our Board of Directors. After 32 years as President or CEO, my decision to turn over the CEO's role was the better sweet moment for me.
But I cannot be happier or more excited to turn over this job to Keith Smith. As many of you know, Keith has been with our company for 17 years and has been involved with the growth and direction of the company over that period of time.
From going public in 1993 to last year's announcement of our Echelon project, Keith has played a key role in our success. Over that time, he has demonstrated considerable skill and vision as the senior executive and leader.
Just as importantly, Keith understands and supports the special culture that has defined and differentiated Boyd Gaming over the last 30 plus years, making this company such a special place to work and play. For these reasons, I have every confidence that he is the right person to take our company to the next level.
I am also pleased that Paul Chakmak will be succeeding Keith as Chief Operating Officer. Since joining our company in 2004, Paul has quickly established himself as a valuable member of our senior management team.
The familiarity with our company and our industry make him an ideal candidate to follow Keith as our Chief Operating Officer. We've been fortunate to have an extremely talented and stable senior management team that has been with us for many years guiding our company.
As we move forward with an exciting new chapter in our company's history, I have the utmost confidence that under the direction of this management team, Boyd Gaming will be in good hands for many years to come. Thank you for your time this morning and now I would like to hand the call back over to Keith.
Keith E. Smith - President and Chief Operating Officer
Thanks Bill. Now let's get into the second quarter.
Earlier this morning, we released our second quarter results, which was in the boundaries of our guidance for the quarter. We are encouraged to report that the Las Vegas Locals market has begun to fully absorbed the significant capacity increase that came online last year, and we are beginning to see real growth in revenues and EBITDA from our Las Vegas local's properties.
In our Midwest and south region, our properties performed in line with our expectations. And in the Atlantic City, we got to continue as to be the market leader in revenue and profitability.
The recently opened Philadelphia slot parlors has expanded gaming supply and created more competitive and challenging environment in the Atlantic City market. However, we continue to have tremendous confidence in the Borgata brand in the Atlantic City marketplace.
We look forward to the opening of the Water Club to further expand Borgata's reach as a destination. Now I would like to spend a few minutes talking about the progress we are making on each one of our current growth initiatives.
In Atlantic City, the Water Club will introduce a unique brand of hospitality in the market and will elevate the Borgata experience. We recently topped off the hotel and are well into the final phase of construction.
The project remains on budget and we anticipate opening early next year. The Water Club will be a boutique hotel featuring 800 finely appointed guest rooms and suites, a spectacular spa in the sky, 18,000 square feet of meeting space, 5 indoor and outdoor pools and 6 retail shops.
We are excited to open this outstanding new facility, which will complement our recent public space expansion. The Water Club will continue Borgata's effort in redefining the Atlantic City as a travel destination by introducing a new and unique hotel experience to the market.
At Blue Chip, construction is way underway on our $130 million expansion project that will add 300 new guest rooms, a spa and fitness center, additional meeting and event space, new dining and nightlife experiences, and a new porte cochere. Once our hotel project is complete late next year, we will be able to deliver on our vision of providing a more upscale offering to continue to attract customers from more distant markets.
New competition will be coming online in the next few days, but we remain confident to expand Blue Chip will offer the kind of amenities and provide the level of service we need to maintain and grow our business. In South Florida, we continue to work on our plans for the addition of a casino and other amenities at our Dania operation.
Given the early results of the recently opened facilities, we are taking additional time to understand the dynamics of the marketplace and to find what elements are required to deliver the best overall experience for attracting our target customer. We are committed to design a property that can effectively compete with the successful operation in the market today.
Once we have finalized our design plans, we will announce a more definitive scope and timeline. Although this process is taking more time than we originally expected, I want to emphasize that we remain optimistic about the South Florida market.
As for our Echelon development on the Las Vegas Strip, many of you know that we recently broke ground on this exciting project. During the quarter, we also announced design and development plans for the Mondrian and Delano hotels at Echelon.
We see Echelon as a tremendous long-term growth opportunity for our company, a project that we will be well positioned to benefit from the continued growth and upscale leisure and business travel to Las Vegas. Moving on to our branding initiative, we continue to make progress in this area and we look forward to beginning the roll out of this program in the fourth quarter.
As we have previously discussed, our branding initiative will position our individual properties as part of a larger network creating additional synergies and further leveraging our highly regarded blend of gaming, excitement and personal service. Our goal is to reward and build customer loyalty, drive cross property visitation and offer the ability to seamlessly earn and redeem rewards at any Boyd property.
As I mentioned on our last earnings call, our focus is on improving our operating performance, rolling out our new branding initiative, executing at our existing growth initiatives and continuing to offer attractive growth opportunities to expand the company. Our focus hasn't changed and I believe we have made significant progress in each of these areas.
We've shown improvement in our operating results in the highly competitive Las Vegas Locals market and in the Midwest and south region. In Atlantic City, we continue to achieve market leading results and to refine our operations in preparation for the opening of the Water Club.
We continue to execute on our existing growth initiatives and make good progress on our major projects. We remain focused on completing them on time and on budget.
We have made considerable progress in our new branding initiative, and I look forward to sharing more details with you when we begin the phase rollout in the fourth quarter. And most important, I believe the successful execution of these strategies will allow us to continue to expand the company's already strong operating foundation, enable us to drive greater shareholder value.
Now I would like to turn the call over Paul Chakmak, our Chief Financial Officer. Paul?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Thanks Keith. Hello everybody.
As we reflect on the second quarter, we are pleased to see results. They were not only in line with our expectations, but also were achieved in a manner where virtually every property pulled its on way.
For the first time since the recent capacity increase in the Las Vegas Locals market, all four of our major Las Vegas Locals property is performing above the prior year levels. Given the magnitude of development in the Las Vegas Metropolitan area over the next five years, we believe these properties will continue to show outstanding growth and return.
Our Downtown Las Vegas properties have once again exceeded expectations, as they delivered results that matched 2006 levels. In addition, we've also continued to gain market share year-over-year.
Though our Midwest and South region was down from last year, it is mainly attributable to the normalization of Treasure Chest. As expected, Treasure Chest performed at a level well below the 2006 results, with EBITDA falling off by nearly 45%.
But to keep this in perspective, the property is still performing over 60% better than it did in the second quarter of 2005, before the effects of hurricane Katrina. As we've now seen three consecutive quarters of stable EBITDA from Treasure Chest, we believe that the near to mid term EBITDA will continue to run at its current levels.
As side from Treasure Chest decline, we did see positive results in several of our other Midwest and South properties. In particular, our Tunica and Shreveport operations have shown significant improvement over their respective Q2 2006 results.
On a combined basis, these two properties outperformed their prior year EBITDA by over 40%. These improvements directly resulted from our ability both to identify opportunities and to execute strategies that allow us to capitalize on the current marketplace.
Finally, in the Midwest, business remains stable when compared to the prior year. The second quarter saw Borgata continue its dominance of the Atlantic City market.
On a year-over-year basis, Borgata have seen a 3% gain in gaming revenue, and 11.5% gain in non-gaming revenue and 1.3 percentage point gain in overall market share. Unfortunately, the combination of increased regional competition and fixed expenses related to the public space expansion are muting the performance of the property.
Our share of second quarter operating income for Borgata was 12% less than it was a year ago. Although, we are paying considerable amount of attention to the near-term results there, we remain long-term focused.
It's our view that we must continue to operate the property at the highest service levels and maintain competitive promotions for our top tier customers. We are confident that this near-term strategy will yield the highest long-term results as the promotional environment turns to normal levels and the opening of the Water Club allows us to capitalize on the public space expansion.
On May 24th, we closed on our new $4 billion revolving credit facility. This new financing will not only fund the majority of our growth pipeline, but it will also do so at extremely attractive rates.
Current pricing under the new facility is set at LIBOR plus 100 basis points for the balance of the year. Before we move into the guidance part of the call, let me briefly address three key assumptions within our forecast.
First, as the Four Winds Casino is coming online this quarter, we have assumed a reduction in EBITDA from Blue Chip. It has been our experience that the EBITDA impact is greatest during the trial phase of a new competitive entrant into the market.
As such, we are conservatively forecasting a reduction of $0.04 to $0.05 per share in the third quarter compared to current levels. Second, although we have made substantial refinements to Borgata's operations over the last year, we do not anticipate that those improvements will be enough to offset the current competitive environment in the region.
We are therefore forecasting that third quarter results from Borgata will mere those from the third quarter 2006. Finally, as you all are aware the hold harmless tax provision in Illinois effectively sunset on June 30th of this past year.
In the absence of further directions from the Illinois legislature, we are projecting third quarter EBITDA as if the sunset remains in place. With those factors in mind for the third quarter 2007, we are estimating adjusted earnings per share from continuing operations to range between $0.40 and $0.45 and the comparable adjusted EBITDA to be between $140 million and $150 million.
Operator, at this time we would be happy to take some questions. Question And Answer
Operator
[Operator Instructions]. And your first question comes from the line of Larry Klatzkin with Jeffries.
Lawrence Klatzkin - Jefferies & Co.
Hey guys, congratulations Keith and Paul couldn't happen two nights ago.
Keith E. Smith - President and Chief Operating Officer
Thank you, Larry.
Lawrence Klatzkin - Jefferies & Co.
Couple of questions; one, can you just give us a little direction on just depreciation and corporate expense going forward and may be CapEx for the rest of this you and next year?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
On the corporate expense side, you saw that we were down a bit in the second quarter over the first quarter Larry, but still about $1 million ahead of last year. If you just kind of look at the seasonality in that particular line item, the second quarter historically is our lowest number that we post.
I think a couple of quarters ago, we gave some views on where we saw corporate expense for the full year and that number I believe was closer to the $50 million mark. At the time I would say for the third and fourth quarter, you should expect it around about $2 million ahead of last year's level.
Lawrence Klatzkin - Jefferies & Co.
Okay great. And then depreciation?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
You know depreciation in what you are seeing is going to be basically fairly constant for the balance of the year. So I think what you are seeing currently is a good approximation for the rest of the year quarterly.
Lawrence Klatzkin - Jefferies & Co.
Perfect. Then the last thing is CapEx for the rest of this year.
I know it's approximate number, but what we might think about for next year with actually placed here in that?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
I think we are not ready to come out with the '08 numbers yet as we are still refining kind of where we see the spend '08, '09 and 10 on Echelon. Previous direction on CapEx for Blue Chip in '07 was $50 million, that's still a good number for the full year.
Previous guidance on Echelon was $180 million for the full year, that's still a good number. And maintenance CapEx was I believe $115 million and that's still a good number.
Lawrence Klatzkin - Jefferies & Co.
Okay, perfect. As far as I...
the Echelon brand originally with the Harrah's land in the back you are going to stop pile and you kind of reconfigured the land. Have you talked about that and what kind of opportunity it might present to you with some free land on the strip?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Yes, once we acquire that land, you are right. We did reposition the buildings associated with Echelon on the overall site.
That left us with 22 acres of land that we are not developing in the initial phase of Echelon. There is a 16 acre parcel on the strip just to the north of the development and obviously continuous to the overall Echelon and there is another 6 acres on the back of the site that will be held for the future as well.
We hadn't made any determination at this point in time exactly what we'll do with either of those parcels, the 6 acres lends itself very readily to further expansion of the complex. The 16 acres is certainly of enough size to accommodate another hotel casino.
Lawrence Klatzkin - Jefferies & Co.
That would be fair to say, you have all your profits in Barbary Coast in the 16 acres. Is that correct?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
I'm sorry, say that again Larry.
Lawrence Klatzkin - Jefferies & Co.
Profits in the Barbary Coast is all embedded in the 16 acres?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well, the Barbary Coast deferred gain if you will, is really embedded in the entire 24 acres that we acquired, of which the 16 represents certainly a potion of that.
Lawrence Klatzkin - Jefferies & Co.
So, you probably wouldn't look to sell that out right. But would you be adverse to having another gaming company developed for you or even swap that for someone else's casino elsewhere in the country?
Keith E. Smith - President and Chief Operating Officer
Well Larry, this is Keith. As Paul said, we haven't really developed a strategy for that 16 acres.
We look at it as another great development site on the strip and something that we look forward to dealing with in the future. Right now, we are simply focused on building out Echelon and completing that project.
So, we haven't given it any further thought.
Lawrence Klatzkin - Jefferies & Co.
Alright. Well, thank you guys.
I think that is an opportunity for you.
Keith E. Smith - President and Chief Operating Officer
Thanks.
Operator
Your next question comes from the line of Felicia Hendricks with Lehman Brothers.
Felicia Hendricks - Lehman Brothers
Hi. Good morning guys.
Few questions; you've mentioned and we've seen in the numbers that Las Vegas Locals market is beginning to absorb some of the supply. I'm just wondering, do you think and if so, maybe you can give us some timing of when you might be able to get EBITDA margins back to the levels they were prior to the new supply that came into the market.
And then moving, well, lets answer that and then I'll ask the next question after.
Keith E. Smith - President and Chief Operating Officer
Sure. We're focused on increasing EBITDA to either match or exceed last year's levels or the prior year levels and we're making good progress on that.
We are frankly less focused on the actual margin and more focused on the absolute dollars amounts in terms of increasing our profitability of those properties. The marketing in the Las Vegas Locals market is little more enhanced, little more aggressive than it was.
And so that's going to continue to impact margins a little bit, but we are seeing... beginning to see good growth in profitability and in EBITDA.
Felicia Hendricks - Lehman Brothers
Okay great. And then in Atlantic City, you know you've all talked in the past about being able to take advantage of the property's balance sheet and perhaps you know levering up on that again.
Is what's happening in this environment at all changing your strategy there?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
No, not necessarily Felicia. I mean obviously, the debt markets have changed pretty materially over the course of the last month or so.
Our assumptions on any sort of recapitalization at Borgata had never assumed the types of leverage levels that some of the buy out activity has been done at and certainly there is some as I said disruption in the market, but things don't last forever either for good or for bad. And we have plenty of flexibility today and we will just look to take advantage of those things as the opportunities open up.
We've always said that we were very focused on completing the Water Club and having it open and being able to fully maximize the cash flow of the property in its fully expanded phase.
Felicia Hendricks - Lehman Brothers
Okay and actually as a segregate on from that question, as I just look at your overall corporate balance sheet and the borrowings that you have over the... for the second half of the year, which we are not estimating to be that significant, but more into next year.
How is the current environment affecting your thoughts there in terms of future financing?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well, we have always been very opportunistic. Having a $4 billion revolving credit facility allows us to be very opportunistic even further and at pricing it is as aggressive certainly as any of our competitors in this market.
As we look out from a CapEx standpoint, CapEx will continue to build the Echelon '08 greater in '09, greatest in '10 and it gives us a significant amount of capacity really to come to the market, when we feel the market is most receptive for us. We have $900 million of subordinated debt as well that all have interest rates below 8% and that again position us quite well for the future.
Felicia Hendricks - Lehman Brothers
Alright, thanks so much.
Operator
Your next question comes from the line of Joe Greff with Bear Stearns.
Joseph Greff - Bear Stearns
Hi gentle management. Paul, you had given us sort of an state of the impact, some of the...
Blue Chip. What does that translate into year-over-year EBITDA decline for the third quarter?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well Joe, as you know we haven't... we don't have numbers out quarterly for Blue Chip, but I think from the stand point of earnings per share, per penny as I said in the past, every penny is about $1.4 million of EBITDA.
Joseph Greff - Bear Stearns
That's helpful, thank you.
Operator
Your next question comes from the line of James Hardiman with FTN Midwest Securities.
James Hardiman - FTN Midwest Securities
Hi good after noon. Couple of brief questions here,First in terms of Echelon place, obviously its pretty early, I am assuming that you haven't seen anything in terms of labor or raw material costs that would make you revise any of your overall project cost or timing estimate.
But what you are seeing, how are those line items trending at this point versus sort of the last year and last two months, where are those numbers trending?
Keith E. Smith - President and Chief Operating Officer
I think you're right it is too early to comment on that. We're actually quite comfortable with the construction market here and where the labor supply is and where our budgets are in relation to all of those items.
So it's a little premature if we're making any further comment on that, we're comfortable with our budget at this point.
James Hardiman - FTN Midwest Securities
Okay fair enough. Talk a little bit about the promotional environment in Atlantic City.
Obviously, it's a difficult market, obviously there are number of other properties coming in line in Pennsylvania. Is there any light at the end of the tunnel in terms of promotions going on in Atlantic City?
And I guess if it sort of relates to that from an EBITDA perspective, obviously Water Club is going to drive the top line to some degree. Talk a little bit about what you think what the Water Club is going to do to your profitability or your margins as that opens up?
Keith E. Smith - President and Chief Operating Officer
Maybe just to start at the end, we are not in a position to give estimates or forecasts on how the Water Club is going to impact. But going back to the top of your question, the promotion environment in Atlantic City is aggressive.
It is driven a lot by the slot parlors that are opened in Philadelphia that are now generating some $60 million a month in gaming revenue. Those facilities are actually increasing their promotions.
They report those on a weekly basis and promotional allowances in that market have been increasing recently as the competitors there are doing more that does impact Atlantic City. And you see many of the competitors in Atlantic City ramping up their promotional efforts.
We've tried to stay out of that fight and I think our marketing expenses year-to-year are generally flat for the quarter. We've tried not to get in the middle of that and frankly there is some good news in the Borgata results when you cut through all the numbers.
You will see that our table game has dropped for the quarter, is up significantly some 9% and you will see that table games win is also up while the market is down. We did not hold well this quarter and I think on a hold to adjusted basis, there is some $3 million that would flow to the bottom line that would frankly make up the difference between this year's EBITDA and last year's EBITDA.
Additionally, we are fighting the fixed cost from the recent office space expansion and property taxes and property insurance and utilities alone were some $6 million in fixed cost on a quarterly basis. So you have to take all that into account when you are looking at Atlantic City's results.
James Hardiman - FTN Midwest Securities
Great. And then one final question, similar question I guess in the Las Vegas Locals market, you touched on the idea that promotions are little bit more, little more half than they have been.
Talk about how you see your role in that market promotionally? Are you leading the pack, are you trying to match what others are out there maybe leading the pack doing or do you just need to be essentially within shouting business of what some of your competitors are doing?
Keith E. Smith - President and Chief Operating Officer
Well I wouldn't say that we are leading the pack. I think we are running the properties the way we see best to run them and market them.
Properties are different than some of our competitors' properties, we have different strengths and weaknesses, different things to offer, so our promotions are slightly different. We are not leading the market.
Are we reacting to the market? Well, we are paying attention to the market and adjusting accordingly.
We are focused on running a profitable business so we are not going to run promotions that don't bring profit to the bottom line, but we are managing the business daily and paying attention to what's going on in the marketplace.
James Hardiman - FTN Midwest Securities
Okay. Great thanks guys.
Operator
Your next question comes from the line of Dennis Forst from Keybanc.
Dennis Forst - Keybanc
Yes, good morning and congratulations to you guys. I had a couple of questions; first about the Locals market.
I saw that the unemployment rate in Las Vegas in June had ratcheted up to the highest level I have seen in a year or two was about 4.7%. Can you maybe comment on that first of all?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well I think part of unemployment and what factors in those numbers is some level of seasonality as businesses do adjust across the board as it relates to the season. I think you've also seen obviously a pretty significant pull back in the home building sector in Las Vegas and certain of the other major cities in the west as a result of current market conditions and I would estimate that that would have certainly a meaningful impact to that overall number.
Dennis Forst - Keybanc
But so far really you haven't seen it in your major properties in Vegas, Paul?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
No, not at all Dennis. And I think finding high quality employees continues to be something that we are focused on everyday and certainly the availability of jobs whether they are in the service business or in the construction industry, which is obviously primarily on the Strip these days here in Las Vegas are important factors to running successful businesses.
I think the flip side of this is it has certainly helped ease any sort of fear that anybody would have on the labor crunch and the construction.
Dennis Forst - Keybanc
Okay. And then also on the Locals side, you said you picked up a little market share in the second quarter in the Locals market?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
I don't think I have any... I didn't make any comment about market share in the Locals market.
The comment on upside in share was both Downtown and in Atlantic City.
Dennis Forst - Keybanc
Okay, okay, good. And then secondly, on Borgata, the margins have certainly been compressed with the competition and even the fixed costs related to the non-gaming that opened up last year.
Are we going to continue to see EBITDA margins around the high, mid... actually mid to high 20s or can they get back into the 30s once you open Water Tower?
Keith E. Smith - President and Chief Operating Officer
Well, I think as Paul indicated on his guidance, we were looking for from the Borgata over the next several quarters our results similar to last year's levels. As we get into the Water Club, the dynamics of that addition in 800 room hotel will significantly change the margin structure of that property and once again, we haven't got into the point of giving guidance on where those numbers are.
But you're opening 800 rooms without any other food and beverage facilities or any other high cost or low margin businesses, so --.
Dennis Forst - Keybanc
Okay.
Keith E. Smith - President and Chief Operating Officer
So quite naturally you would expect that to probably drive them up a little bit from where they are today.
Dennis Forst - Keybanc
Okay. And then I wanted to ask what the company's posture is on share repurchases.
Do you have an authorization, what's the philosophy on doing that, given what's going on in the market today?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well we have an authorization Dennis that we've had in place for some time. It's...
there's about 1 million shares left under that authorization, certainly that could be adjusted with the direction of the Board. We obviously took advantage of the ability to rebuy a significant block this time last year, when there was a secondary offering by major shareholders and we'll continue to look at those types of opportunities based on where we see value.
The flipside is we have an aggressive growth profile ahead of us and we need balance out, obviously our spending and whatever form it takes.
Dennis Forst - Keybanc
Okay. Good.
And then lastly, you had mentioned when you talked about the new $4 billion facility, that it's LIBOR plus 100 through the balance of this year. What happens next year?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well, as is typical with revolving credit facilities with banks, it's based off of leverage. The document itself will be filed with our 10-Q, so you'll be able to see it.
The highest pricing is LIBOR plus 1 and five-eights.
Dennis Forst - Keybanc
Okay. That's the worst they could be.
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Yes.
Dennis Forst - Keybanc
Great. Thanks a lot.
Keith E. Smith - President and Chief Operating Officer
Welcome.
Operator
Your next question comes from the line of Harry Curtis with J.P. Morgan.
Harry Curtis - J.P. Morgan Securities
Hi guys.
Keith E. Smith - President and Chief Operating Officer
Good morning
Harry Curtis - J.P. Morgan Securities
In addition to recognizing awesome talent, if you could discuss the motives and objectives behind the management changes.
Keith E. Smith - President and Chief Operating Officer
This is Keith. I think Bill was...
articulated in his opening comments is... I don't want to speak for Bill; he is here on the call.
But he's been on the job for 32 years and sees it as a time to turn over the reigns. So, Bill you want to comment on that?
William S. Boyd - Chairman and Chief Executive Officer
Sure. We've been...
since 2000 we've been looking at succession planning in our company and it's just the natural point that we've got into with my wanting to after 32 years to start to do something different on a day-to-day basis and still staying involved with the company. But Keith and I have worked closely together in the last 7 or 8 years, very closely and he's ready to step up to the CEO role and I'm ready to do something a little different on a day-to-day basis.
Harry Curtis - J.P. Morgan Securities
Very good. Thank you.
Operator
Your next question comes from the line of David Katz with CIBC World Markets.
David Katz - CIBC World Markets
Hi Hood morning.
Keith E. Smith - President and Chief Operating Officer
Hi David.
David Katz - CIBC World Markets
Could we spend a couple of minutes on Florida? Just looking at the landscape there I think it's fair to say most are surprised by what the outcome has been to-date.
But when we all sit in and sort of look at the Seminole facilities and what they are and what there tax basis is relative to what you have to work with, is there really a way to solve this and is there a point at which the project I mean you might sort of decide to go in another direction with the project all together?
Keith E. Smith - President and Chief Operating Officer
Well, certainly the South Florida gaming market has turned out to be a little more complex than most of us or all of us anticipated. You are right; there are examples of some very successful operations down there.
In terms of Seminole operations they do have a tremendous advantage from the tax perspective which allows them more money in terms of marketing and also the ability may be to build larger facilities and the early results coming out of the pari-mutuel facilities I think are less than what everybody expected. And it's one of the reasons we are taking additional time to make sure that we design and then build in the right thing.
We still have confidence in the market, we think yes, there is a way to solve the problem that there is a business model that works, that there is a project that you can create in the current tax environment that will produce a return on the investment. And we think we can attract the right gambler to that, it's a little more challenging once again and that's why we are taking additional time.
The good news is that we are able to study the market at this point. We have the other three competitors who are open and we have the Seminole tribe that we can look at to see at what's going on down there.
So, we have the luxury of time right now in terms of studying all this, but we are still confident that we can develop a project that will work and make sense for us.
David Katz - CIBC World Markets
Right and just sort of carrying some of the thoughts up to Indiana. Like what are the buttons you can push, I mean you know clearly you might be facing some similar issues, although perhaps not as extreme.
But perhaps they are, I mean what are buttons that you can push to sort of compete on a what looks to be a unlevel playing field?
Keith E. Smith - President and Chief Operating Officer
Well, certainly when you add a new competitor to that market and you add a couple of thousand slot machines in that market, there will be an impact to Blue Chip I don't think we are going to deny that. Paul's guidance or our guidance at the end of the call indicates that we expect there to be in the short-term a hit in any case.
We like the fact that its proximity is close to us, we like the fact that gamblers tend to be superstitious and if there are playing unlucky they want to move to another location and so we like the fact that its close. We like the fact, we have been in the market for quite a long time and we have been able to develop a very loyal following, very loyal customer base.
We have an established service standards, we provide very good levels of service and our customers like our facility. We have customers who drive pass many, many other facilities right now to get to Blue Chip, which gives us the confidence that while many of our customers want to visit the new facility, but we expect the majority to comeback.
We know that some will stay and it happens with every opening, it happened here in the Las Vegas Locals market over the last years as some of competitors open and you know they will visit, they will stay but we expect a large portion to return to us. So, you are right, they have a competitive advantage in the form of the tax advantage, they can spend a few more dollars on marketing, but we can...
we feel like we have a lot of experience in the business operating competitive facilities across the country and this is nothing different.
David Katz - CIBC World Markets
Okay, Congratulation guys
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Thank you.
Operator
Your next question comes from the line of Bill Lerner from Deutsche Bank.
William Lerner - Deutsche Bank Securities
Thanks guys. Just on the Locals market, obviously here population migration is...
be got to be a huge driver behind the absorption of that recent supply. But can you just talk a little bit about your same store or sure enough, same store, but same customer, what's going on there.
I mean as it were not for population migration, how would those numbers look and I had a question about New Orleans and Goldcoast versus I guess Suncoast?
Keith E. Smith - President and Chief Operating Officer
Well, as the market absorbs the capacity, we are seeing both growth in new customers and return of loyal customers. Once again, we've lost certain customers, specifically at Suncoast who wanted to trade up to a different experience and we got many customers returning from the Suncoast property after they went and experienced the new competition and then came back in 1 and 2 quarter come home to the place they were comfortable.
We always said the good news was the two facilities were quite dramatically different in their approach to the customer and the amenities that they offered and so frankly we're seeing once again growth in both areas, both customers returning to us, customers coming back and new customers.
William Lerner - Deutsche Bank Securities
Okay that's fine, thanks guys
Operator
Your next question comes from the line of Celeste Brown with Morgan Stanley
Celeste Mellet Brown - Morgan Stanley
Hi guys good afternoon.
Keith E. Smith - President and Chief Operating Officer
Good afternoon.
Celeste Mellet Brown - Morgan Stanley
Quick question first Keith in Borgata, you mentioned that you thought that the third quarter and the fourth quarter will be similar to last year, last year's number was pretty hard for hold in the fourth quarter, so we're talking I guess last year not just for hotels, 53 million is that we talking about against for the fourth quarter of this year, would it be a higher number I think as closer to 65.
Keith E. Smith - President and Chief Operating Officer
Well, we would expect it to normalize hold. We understand last year's third quarter got hit quite significantly by hold.
So, we expect business volumes generally to run inline with last year business volumes.
Celeste Mellet Brown - Morgan Stanley
Okay, thank you. And then as you look at interest rate rising, how do you think about them in terms of your own decisions in developing properties and then how do you think about them in terms of competition in Las Vegas.
I know a lot of things are being built with pretty narrow returns and do you think some of it gets squeezed out as interest rates continue to go up?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well, I mean based on where the debt markets are today, obviously, projects that aren't fully financed at this point in time, probably will have a challenge in getting financing. So again I don't expect that rates and markets will continue in their current posture forever, and I think they just take some time for the issues that have kind of been created effectively by the by side to resolve themselves and in fact the supply demand to balance back out.
Let's keep in mind, over the last couple of years, we had an imbalance going the opposite direction and we have seen very tight credit spreads and we have seen transactions in all sorts of industries be done with structures, including leverage levels and covenant packages as aggressive as we've ever seen ever. And so there is some practicality to kind of what is happening overall.
When we look at returns on our projects, we look at them from really a weighted average cost of capital basis, obviously we are very focused on our marginal cost to capital being as low as possible and its in my comments you can tell Celeste it is very low today at in the low 6s and so with that and with a very strong balance sheet, I think we are positioned quite well to take advantage of opportunities that come up.
Celeste Mellet Brown - Morgan Stanley
Great. And then just one final question I just want to make sure I am understanding clearly on Illinois and how you are thinking about the Sunset provision.
So you are essentially... well refer to the numbers as similar to what we've see in the last I think for two years in terms of the way you are accounting for taxes?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
No, at Paradise we were subject to the hold harmless level that was set as revenues actually have come down over the last couple of years at Paradise given competition in both Iowa and Missouri. And with the Sunset of that provision, we will just fall to the tier tax structure that's in place as opposed to the minimum amount.
So there was actually bit of savings for us from a tax standpoint at Paradise without that hold harmless provision.
Celeste Mellet Brown - Morgan Stanley
So is that potentially offset some of the higher taxes you are seeing now in Indiana on the property level?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Well sure I mean it's all fundable obviously, we are just trying to identify particular that particular item given that Illinois has been willing to change its mind in the past and we are just letting people know that we are not accruing for at this point of time because the provision doesn't exist.
Celeste Mellet Brown - Morgan Stanley
Okay. I just wanted to be clear.
Thank you so much.
Operator
Your next question comes from the line of Adam Steinberg with Morgan Joseph.
Adam Steinberg - Morgan Joseph
Yes, hi guys. Just a couple of quick questions; Paul, can you breakout the $42 million in the growth CapEx between the various projects?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
The $42 million in the current quarter?
Adam Steinberg - Morgan Joseph
Yes.
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
I would say, most of it is related to Echelon, lets say well over half. Blue Chip also accounts for a very meaningful portion of it as we're fully underway with construction there.
And then the balance of it comes back to honestly, a number of different projects, we have a pretty substantial upgrade project going on at Sam's Town, Las Vegas right now as well as just some other I will call them, odds than ends if you will throughout the company that will be the expansion as opposed to maintenance.
Adam Steinberg - Morgan Joseph
Okay, that's kind of what I was looking at in terms of directionally. Have you guys made a decision on the North Las Vegas side?
Keith E. Smith - President and Chief Operating Officer
No its still... we obviously still on our land out there, we're continuing to monitor that.
I think as we said on our last call we see that as a great way to expand or continue to expand our Las Vegas Locals franchise. We don't think the market is quite ready for that project.
We're waiting for the housing to continue to fill in around that site, so its obviously still in our radar screen, we think its just a few years off.
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Adam, I mean I think from the standpoint of North Las Vegas we will not get out ahead of the market and out ahead of the population. With that said, it's a high growth area, but giving housing development in this city, obviously the timing of building a new property in that area has to be monitored constantly and addressed at appropriate time.
Adam Steinberg - Morgan Joseph
Okay. And then are you tracking in Date county, polls on how the voters feel about putting spot machines at those pari-mutuels?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
We're tracking this like you do.
Adam Steinberg - Morgan Joseph
Is that factored into your eventual decisions on that property?
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
No I think given our location, which is quite central to Fort Lauderdale itself and really the most central of any of the four, our direction in poll was never really focused on markets dramatically further to the south.
Adam Steinberg - Morgan Joseph
Okay. But you are...
that is also the furthest south of the four in Delaware county.
Paul J. Chakmak - Executive Vice President, Chief Financial Officer and Treasurer
Ours is not. Ours actually...
Golfstream and Martin Drive are further south of us.
Adam Steinberg - Morgan Joseph
Okay. And then are there certain time lines as far as the sales gains are there certain time lines or date that will need to be met with regards to any potential development there?
Keith E. Smith - President and Chief Operating Officer
I am sorry with respect to Dania?
Adam Steinberg - Morgan Joseph
Yes.
Keith E. Smith - President and Chief Operating Officer
No, there is no time constraint.
Adam Steinberg - Morgan Joseph
Okay. And then the last question and I will let you go is, are you hearing anything on South Point and the third tower there?
Keith E. Smith - President and Chief Operating Officer
No, we don't any information that we can share on that.
Adam Steinberg - Morgan Joseph
Okay. Thank you.
Operator
And the last question is a follow-up from the line of Larry Klatzkin from Jefferies.
Lawrence Klatzkin - Jefferies & Co.
Hey guys. Just a follow up on Florida, so I was expecting the new beginning [ph] before the fourth quarter '08 when you may hope to open Florida.
Should we be moving that backward?
Keith E. Smith - President and Chief Operating Officer
Yes clearly, the fact that we're still kind of in studying the market making sure that what it is that we want to build, I think that we would not get in construction until sometime in the first half of next year and if you look at 12 to 18 months construction time line for any sort of a project, you're into '09, well into '09.
Lawrence Klatzkin - Jefferies & Co.
Alright. We're talking probably to say the latter part of '09, really.
Keith E. Smith - President and Chief Operating Officer
Probably.
Lawrence Klatzkin - Jefferies & Co.
Alright. Thank you very much.
That was the only question.
Operator
And this concludes our Q&A session. I'll now turn the call back to Mr.
Smith for closing remarks.
Keith E. Smith - President and Chief Operating Officer
Well, thank you for joining us this morning and we would look forward to speaking to you again next quarter. Have a good day.
Operator
This concludes the presentation. You may now disconnect and have a great day.