Oct 21, 2010
Executives
Joe Jaffoni - IR Peter Carlino - Chairman & CEO Tim Wilmott - President & COO Bill Clifford - CFO Eric Schippers - VP of Public Affairs Steve Snyder - SVP, Corporate Development Jordan Savitch - SVP and General Counsel
Analysts
Joe Greff - JPMorgan Felicia Hendrix - Barclays Capital Larry Klatzkin - Chapdelaine David Katz - Jefferies & company Steve Wieczynski - Stifel Nicolaus Ryan Anchor - Affiliated Research Joel Simkins - Credit Suisse Steven Ruggiero - CRT Capital Carlo Santarelli - Wells Fargo Bill Lerner - Union Gaming Mark Strawn - Morgan Stanley Neil Portis - Goldman Sachs Harry Curits - Nomura Securities Adam Steinberg - Maryman Capital
Operator
Ladies and gentlemen thank you for standing by, and welcome to the Penn National Gaming third quarter earnings call. During the presentation all participants will be in a listen-only mode.
Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded, Thursday, October 21, 2010.
It is now my pleasure to introduce Mr. Joe Jaffoni, Investor Relations.
You may proceed, sir.
Joe Jaffoni
Thank you, Francis, and good morning everyone, and thank you for joining Penn National Gaming's 2010 third quarter conference call. We'll get to management's presentation and comments momentarily as well as your questions and answers, but first I'll review the Safe Harbor disclosure.
In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance.
As such, actual results can vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q.
Penn National Gaming assumes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast may also include non-GAAP financial measures within the meaning of SEC Regulation G.
When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's news announcement as well as on the company's website. With that, I will turn the call over to Peter Carlino, the company's Chairman and CEO.
Peter?
Peter Carlino
Thank you, Joe. Well good morning, everyone and welcome.
Here with me today as usual is most of our management team and you will be hearing from probably most of them through the course of our presentation. You know it's been interesting and event full quarter for us.
You know we open table games at Charles town. We opened table games at Penn National.
We opened a brand new facility in Perryville, Maryland. We announced the establishment of a joint venture with the Sam Houston Race Park in Houston.
We broke ground in Toledo. We have made significant progress with our construction Kansas City.
We have made great progress in our site preparation in Columbus which started with raising a 1.2 million square foot building that had a lot of environmental issues, and that's moving along very, very well. We purchased the outstanding debt at M.
So there are a whole lot of things to talk about today. And as usual why don't we move quickly to your questions and go where you'd like us to go.
So operator would you open the call to questions?
Operator
Thank you. (Operator Instructions).
Our first question is from the line of Joe Greff from JPMorgan. You may proceed.
Joe Greff - JPMorgan
Good morning, everybody. Peter, in the quarter that one thing that nicely surprised us to the upside at Pennsylvania, West Virginia wasn't as much on the revenue but really on the margins.
Can you talk about that? I know obviously there's a difference of gaming tax rate on the table side.
Can you just discuss that margin improvement and then typically I would think we would expect to see maybe with time, margin improve from here. Do you think margins can improve from Pennsylvania and West Virginia from what we saw in the third quarter?
That's my first question. The second question is can you talk about M a little bit and the timeline and the gaming issues in order for you to close?
Maybe you can talk a little bit if you can about sort of the operating structure there, what can you take out? And then, if there is a rebranding effort there, how much dollars that would cost?
And maybe just generally just talk about what you can do different or better at that property?
Peter Carlino
If I answer all that there would be nothing left for anybody else.
Joe Greff - JPMorgan
I will e-mail you the questions
Peter Carlino
Well let me give you a partial answer on number two just so we save some room for others. But on the margin question I'll have Tim address this more specifically.
Look you understand that we are always focused on the bottom line. Its always less critical if we love top-line volume, but in the end its how much you drop to the bottom line.
And there are certainly a lot of instances in our industry where we see, some pretty fancy properties doing nice numbers but not making any money; that is not our model. So I'll get that commercial in because that is what drives us here day in and day out.
Tim, why don't you get to the specifics?
Tim Wilmott
There is a couple of things Joe working in the favor of these margins, one of which we had already started early part of 2010 at Penn National and Charles town to continue to be smarter marketers and continue to look at opportunities to reduce our promotional spending. That continued in the third quarter but obviously the introduction of table games created a whole new level of energy and excitement.
And as you know at West Virginia table games is taxed to 35% versus slotted in the high 50s. At Penn National table games is taxed at 16%.
So we did expect especially Pennsylvania that there would be margin improvement on that business, and we did see as well a lot of movement especially in Penn National away from the electronic table games product which was taxed at 58% moving to live table games, the Black Jack and Poker options there. So, that all contributed to the improved margins.
Plus given the newness of table games in both of these properties, we saw a lot of new business trial, unrated business which has always delivered very strong margins in our operations. So there is a multitude of things that are contributing to the margin expansion of these two properties.
I'd be hesitant Joe to say that there is going to be further improvement going forward from what you saw in the third quarter given all the noise of the introduction of the new offering of these two businesses.
Joe Greff - JPMorgan
And then Peter, on M?
Peter Carlino
M is a very interesting situation for us. Let me make clear, we own debts; that's all we own today.
Obviously we have an objective in mind. What I can tell you is a couple of things, first, PN does not, in case there is any doubt about that lead our strategic objectives.
In Las Vegas, it does not. It's just a terrific property dealt with great love and care by the Marnell that has been affected by a very tough market and we just have kind of happily ended up with an opportunity that we believe in a long term.
So I don't need to advertise just what a terrific job they did there. It gives us a chance to work with our, pretty much newly organized database that has now been integrated company-wide.
It gets through once I play with but begin the process of working with offers, there is a percentage of our customer base that will be thrilled to go there because its just such a terrific property. So we get to sort of work with that.
We see a significant upside there. We do.
But it's a one-off purchase of a terrific property. We do this kind of every day, this one just happens to be in Nevada.
So Bill do you want to give some highlights cause I know we are going to get the question.
Bill Clifford
I think again we are the lenders and not the operators, but I will give you just a little bit of a couple of pieces of data points. One is their year to date revenue through August was roughly $106.5 million, their EBITDA through August was roughly $9.7 million, there are some onetime costs in there, but candidly I don't have enough detail and enough backup to support what could probably be supportable at a slightly higher number.
And then lastly I would indicate that cash on hand at 8/31/2010 was $21.4 million. As a lender obviously that cash as they continue, assuming and there is no reason there won't continue to be positive EBITDA through whatever period it takes to finalize the transaction that cash balance should grow.
The source of funds that we used to buy it was withdrew them and revolver for $145 million, and we paid the rest with cash sitting at the corporate level in October to fund the transaction. And to figure back on what Peter said, I do this and it was in transaction as purely really a financial opportunity.
We think that we can overtime and in the foreseeable future get this property to a point where its a very nice return, and handsome return for our investment. There is no other motivation other than that when we looked it in relative to the strategic stuff, and whether we would buy something else in Las Vegas.
The answer is if its a compelling opportunity, the answer is yes. If its not, we will continue to be disciplined and pass some opportunities that come by us.
Peter Carlino
I'm going to ask Tim to add some color. One thought came to my mind that I kind of liked and it was this: the property sits in Henderson, so it's 10 miles south of the strip.
And Anthony Marnell had described to me, forgive me it was not he, but one of the folks at the property that early on had some, it looks very close, the distances are defective. They had some guest that decided rather than take a cab that they would walk to the strip.
And I was fooled myself, it looks like a 3 mile hike, but he said an hour and half later you had some very red faces to drive at booking people coming back. Not much worse aware for having tried that.
So again, we're not confused about the location of the property, it is just a terrific one off opportunity. Tim you want to add some color to that.
Tim Wilmott
Yes, the only thing I'd like to add on what Peter and Bill said is, the current management team there has continued to improve operations over the quarter-to-quarter and year-over-year results. So we're very encouraged that business is getting towards stabilization, and as we said before we do know that we do have a percentage of our database that I think would very much enjoy the experience that the M offers.
Quality hotel rooms, quality restaurants, great casino floor and we're going to work with that property to take advantage of their property and our database. So that's something as we get greater understanding of that business and spend more time with management there is that we're encouraged, as Bill said that we're going to get a good return for our shareholders on this investment.
Peter Carlino
And just another observation about quality, look I would easily rank this in the top five of all properties in that market. This is a first rate property that's built with great love and care by the Marnell's.
So we are anxious to sort of take the next step. Next question or does that answer your question?
Operator
Our next question is from Felicia Hendrix from Barclays Capital. You may proceed.
Felicia Hendrix - Barclays Capital
Bill you just touched on this, but I am going to see if you could be a little more specific. When you were doing your analysis on M, you gave us kind of the current numbers through August, which is really helpful.
But just wondering what kind of EBITDA did you use in your analysis?
Bill Clifford
I don't think we are going to go there. Most due to reasons, listen its premature for us to do that in the first place.
We certainly have numbers. I feel very comfortable that we are going to be able to increase results to a point where it will be better than the company multiple.
But I can't promise that its going to happen next year, but I do see that that happens within the perceivable future. We don't think its going to take enormous, heroic in the Las Vegas return market for us to get there.
And if Las Vegas returns, which we have always said on our calls or at least I've always been consistent. We do believe in the long term health of Las Vegas.
And on a long term basis we think we can get really outstanding results for this property.
Felicia Hendrix - Barclays Capital
And it seems like you might try with your database to make it a little more destination oriented than it was originally intended?
Bill Clifford
Well there's 390 rooms there, very high quality rooms. And clearly the property just like the rest of Las Vegas struggles to sell rooms.
Given the size of our database what we expect is that we will be able to use our database as a additional price to help fill that side of the business. And clearly the property, it's a great property.
I mean its got some outstanding restaurants, food quality is amazing. And I think our guest would find it incredibly a great experience.
If we can help, its nothing else but we can just help fill the shoulder period with customers or enhance the quality of the customer from, maybe the lowest and type customers of what they have to use today that try to fill the hotel, and we can replace those with customers with a relatively high propensity to gamble. We should be able to enhance results.
Its not going to be astronomic, because there's only 400 rooms. So even if we were able to completely fill the hotel with just our guest, it's not like there's hundreds of millions of EBITDA here.
And we all know too that the majority of customers coming now say is do you want to stay on center strip. The thing that we're encouraged by the quality of this facility will certainly attract some business but the majority of our database will still want to experience what goes on in the center of town.
So, that's going to dampen the effect of our database a bit, but as Bill said its only 390 rooms.
Felicia Hendrix - Barclays Capital
Right. Switching gears over to Maryland, the Maryland state lottery released numbers yesterday which looked great just for the last four days of September, I get that it was early days in the initial.
But the win per unit per day was obviously a lot higher than we were looking for, it was slightly under 350. Just wondering if you could talk a little bit about how we should think about that property on a run rate basis?
Tim Wilmott
Felicia, it's still very early. We are three weeks into the business and its stabilizing.
Certainly the first four days are driven by the newness of the facility in a grand opening and all the energy around that was Governor O'Malley being there on September 30 to do the ribbon cutting. So, it has started to stabilize in October.
Its still very early to give an indication where this win per unit is going to level out. Its meeting our expectations.
You know there is a lot of business coming there unintended right now. We are watching what are competitors do to the North in Delaware.
So I would just say its performing to our expectations and we'll have more information for you, be comfortable to provide better and more confident information once we had little bit more time under our belt.
Felicia Hendrix - Barclays Capital
That's fair. Thanks.
Then just my final question is on Louisiana and your application for this license there. I am wondering with the three other applications vying for Lake Charles, does that give you an advantage?
Peter Carlino
Steve, do you want take that.
Steve Snyder
Well, Felicia I think we certainly have advantages related to the presentation we will be making in front of the Louisiana Gaming Control Board in December in terms of the financing and the certainty of an outcome. So I think if all other things are equal, I think the preference down there will clearly be, to certain that whoever is selected will build the facility and I think we're better positioned than anyone else to evidence that proves.
Felicia Hendrix - Barclays Capital
Thanks. And then I'm just wondering, are you guys, are you planning to build a new boat there, or could you move your old Lawrenceburg out there.
I was wondering if you could, I mean just not a lot of information I was wondering if you could just give us some more?
Steve Snyder
Yes, and we are not prepared at this point in time to announce any capital plans with respect to the project. We will be as I said presenting in December.
But despite to say we have looked at a boat that is sitting in Indiana that will fit in that location and it probably makes quite a bit of sense given the fact that the existing incumbent operator there who's made very little capital investment in their project over recent years.
Operator
Our next question is from the line of Larry Klatzkin from Chapdelaine. You may proceed.
Larry Klatzkin - Chapdelaine
One quick housekeeping capitalized interest?
Bill Clifford
Capitalized interest in the quarter was a $1.6 million.
Larry Klatzkin - Chapdelaine
Depreciation at Perryville what number should we be using?
Bill Clifford
I'm not really prepared to give detailed line by line projections. That will be a lot, $93 million.
It's not really a material number but you can call Mario later on.
Larry Klatzkin - Chapdelaine
For M casino, that costs what $1 billion to build?
Bill Clifford
We're kind of trying to trend away from giving exact details relative to the former owners. Again we're the bank at this point so there is certain confidentiality provisions within the credit agreements that we probably at this point wouldn't care to share.
Larry Klatzkin - Chapdelaine
No concerns about somebody buying Green Valley and fixing it up and making it more competitive?
Peter Carlino
Could well happen. First of all I don't think Green Valley that I can't imagine that anybody could buy and justify the capital expenditure required to get it up to a level that would be anything close.
Quite clearly the quality of finish of what M has, I mean, Green Valley is a fine property.
Tim Wilmott
It's very competitive today as it stands Larry.
Larry Klatzkin - Chapdelaine
I know, I know.
Tim Wilmott
Because they are going to fix the reserve or whatever they call that. That would be a different animal.
But Green Valley Ranches, there is nothing wrong with Green Valley Ranches. Well look, we are not confused this is still a very, very, very competitive market, the local market.
So I went to dog fights, and we understand it so go in with our eyes wide open.
Larry Klatzkin - Chapdelaine
Changing direction, the Ohio slots on your two tracks and timing I know with the governmental election things kind of get put aside until you have a new governor. Any feel for what's going on there?
Eric Schippers
The gaming commission is actually going to have its first meeting on Monday, and that's to swear in the new members of the board. And so they're continuing to try to move forward.
The following meeting from there is probably going to wait until after the election. Its showing that its going to be a tight race there with Kasich in Strickland.
I want to see what happens after that. There were some rumblings yesterday in the press that depending on who wins there maybe another look as of the competition of the gaming commission.
A lot of that is just politicking right now. So watch to see what happens after November 2.
Larry Klatzkin - Chapdelaine
What about Eric the status of VLTs at the tracks?
Eric Schippers
Besides VLTs there also is, we think largely dependant on the outcome of November 2nd, Kasich had said publicly not to put words in his mouth. He had said that he would be open to exploring any new sources of revenue that could create jobs and opportunity.
And so he is not precluded the possibility. We know where Strickland stands on the issue.
He has talked about seeking a declaratory judgment on the question, at this point it has not been filed. We don't know when that will occur.
Obviously, that's going to be after the election item as well. So we'll have to see how it plays out.
In the mean time, the lottery commission is continuing to put together rule of regulations, get up to speed on how the VLT industry will be run in Ohio. So even though everyone has an eye on the election, things are moving on a parallel track, both in terms of the gaming commission and at the Lottery commission.
Peter Carlino
Yes let me be clear, we support slots at the race track, and we always do wherever that opportunity exists. We'll just have to see how it plays out as Eric has clearly said.
On the other hand if it doesn't happen, that's okay too. But we do support it, and we have a strategy that we think will be successful.
Operator
Our next question is from the line of David Katz from Jefferies & Company. You may proceed.
David Katz - Jefferies & Company
I wanted to just see if we can go back to M resort for a second. Obviously those of us that are projecting out for next year and the year after are going to be required to make somewhat of a leap as to when that property is going to come online.
If you can share any detail about how that process is going to work, or what news item or what benchmarks we can be looking at that might help us make that leap? And then I have a couple of detailed follow-ups.
Bill Clifford
I am going to have Jordan Savitch go through the legal aspects of that question. We're getting a lot of questions on them.
This is a relatively small deal, I mean from my point of view. And I know its interesting and its kind of fascinating that we are actually there, but understand this is still a small transaction relatively speaking.
It is as we've mentioned kind of a one off opportunity, and it will unfold over a period of time. So we can spend a lot of time with it, but I think frankly there's a lot more important than this thing that we are doing today.
Jordan you want to address the particulars.
Jordan Savitch
Sure, you know given how we came into this transaction we are still sorting through the details. We stepped into the bank's shoes so we're sorting through the details of what they were thinking, what's best for us and going to hopefully finalize this shortly.
But whatever we do its going to require approval from the Nevada gaming control board, the Nevada gaming commission. We are expecting that, hoping that that happens some time in the first quarter.
So that's probably the best time direction I can give you.
David Katz - Jefferies & Company
And then just a couple of other details. I noticed that obviously your earnings from joint venture line becomes a little bit more prominent in the model these days, and I assume that's a result of including Maryland in there, but we are also going to be reflecting Sam Houston in there as well.
And if you could shed a little bit of light on that. And then also for Bill if you could just talk about the CapEx ramp we should be thinking about particularly as it relates to Ohio and those two projects, and I apologize if I missed it in the release but I was looking for your revolver balance in your debt balances?
Peter Carlino
Look we understand what we have undertaken in both Maryland and in Texas. We are alert, obviously to any large opportunity that could have positively effect us.
These are money losing operations, be clear. And we have a sober look at what the opportunity is and a timeframe around which we are willing to sustain negative numbers.
This company is not in the business of losing money, not here not anywhere. So we're going to take a hard look at it.
If we don't succeed in Maryland, you're going to see a major change in the way we operate there. We have the commitment of our partners, we have a very realistic sense of the opportunity, we are making the case today that slots belong at Laurel racetrack because that's what's best for Maryland.
That's the most certain thing, and by the way it is the most profitable thing for the state if we succeed in that effort. In Texas again, maybe the stars are aligning with a lot of support.
Much beyond us, in that state four slots, probably not just as the racetrack holders, that's fine with us. Maybe a broader bill all of Pennsylvania.
Hopefully its not lost for the smarter legislatures that Pennsylvania has rocketed from no place to being the number one revenue producing state in the United States from gaming revenues. That is an amazing accomplishment in the span of just three years.
It's amazing. Pennsylvania has set a model that will work.
It balanced both racetracks and free standing facilities. It's been terrific.
You all see the results. We would hope that Texas will look at that as an example, as a perfect model.
So that's sort of gives you our strategy, but make no mistake we are not on the money loosing business forever. Bill do you want to…
Bill Clifford
Yes I mean, relative to the timing I mean, Texas is obviously in front of the regulatory racing commission for approval and we're not exactly sure what that timing is for next year at this point. So, something that's probably second quarter as well.
Relative to some missing data that we normally get out, our cash at the end of September 30 was $237.3 million, bank debt $1.518 billion, capital leases 4.2 million, the overall obligation $3.7 million then we had two bond offerings for $2.50 million and $3.25 for a total of $2.1 billion. CapEx in the third quarter broken out with a total of $74.1 million with roughly $51.8 million in new projects, maintenance CapEx was roughly $22.3 million.
That was broken down with spends roughly $12.9 million in total. Cecil County was $14.6 million.
Columbus was roughly $4.4 million, Toledo was $3.4 million, Penn National $3.5 million, Lawrenceburg finishing up the restaurants there with $3.2 million. Charles Town was roughly $7.6 million.
Looking into the fourth quarter, we are looking at total CapEx for $89.7 million which we broke down to new projects of roughly $69.3 million and maintenance CapEx of roughly $20.4 million. As far as next year at this point we're not really prepared to give guidance on 2011, that we'll be doing that on the fourth quarter earnings call
David Katz - Jefferies & Company
Okay. If I may, just one last one.
Your earnings guidance are you reflecting $0.46 for this quarter or $0.37?
Bill Clifford
We are reflecting the $0.46.
Operator
Our next question is from the line of Steve Wieczynski from Stifel Nicolaus. You may proceed.
Steve Wieczynski - Stifel Nicolaus
Good morning, guys. Two questions I think they're probably both for Tim.
Just first Tim, you talked about the past in terms of Charles Town, the high end play and that has been pretty strong, the database of players down there. Can you just address what you've seen over the past couple months, couple of weeks, in terms of that market and how big you think that market can grow to?
Then just address Lawrenceburg, the property seems to be a little bit under pressure, margin deteriorated a little bit year, just a little color on that would be great. Thanks.
Tim Wilmott
Sure. First in Charles Town, we certainly are with our 85 table games in 27-28 poker tables.
You know we are seeing very, very strong play in a weekend. Our table limits are extremely strong during these periods, and we've also benefited from marketing we did prior to the opening into the Asian community in the Washington DC, Northern Virginia markets.
And knock on wood its been fairly strong and stable over the three months in the third quarter. We've seen no erosion as we've turned the page on the third quarter into the fourth its been very solid.
I can't give you a sense for how much bigger it can get. I wouldn't want to say its already exceeded our expectations and it continues to be strong and will continue to price our offering based on the demand there which continues to be very, very encouraging.
So we are off to a good start there and we know it's a deep market as we have been over the years with the slot business we've enjoyed there. It's a deep market that right now is being exposed table game for the first time and we expect it to sustain itself.
In Lawrenceburg going over to Southern Indiana we, in the third quarter had the anniversary of our grand opening last year in 2009 of the Hollywood Casino refurbishment. So we knew there was going to be some decline year-over-year in especially July to August.
But what surprised me and concerned me its the softest we saw is September in the market it was down. We have a competitor there who's up for sale.
Actually a transaction is in place to sell the assets, clearly spending a lot of promotional dollars to prop up the revenues. We believe with the expense of EBITDA, it sort of updated in our margins at our lower ADC levels.
Its something we are looking at. We are certainly not going chase as we see this competitor continuing to be very, very aggressive there.
And we're going to continue to be very smart about how we spend our promotional dollars, and continue to wait for that market to recover. And I didn't want to cover it, we're generally across the businesses with the exception of introduction of table games in Pennsylvania and West Virginia, we are still seeing a bumping along at the bottom across the regional market.
Its not getting any worse, its not getting any better, we are still managing volume levels that are pretty consistent with what we saw in early part of 2010. I think in most of our businesses we are doing a better job of managing our expenses and that's where you are seeing the margin improvement across the enterprise.
Operator
Our next question is from the line of Ryan Anchor from Affiliated Research. You may proceed.
Ryan Anchor - Affiliated Research
Just wondering if you had any update regarding the zoning ballot initiative in Anne Arundel County in Maryland? What these this findings are showing regarding the initiative in that market?
Eric Schippers
As many of you have probably seen the public polls that have come out have shown that it's going to be a tight race, and it's a dog fight there. We believe the voters in Anne Arundel County, originally intended for slots to be at the racetrack when they decided this issue back in 2008 as to whether Maryland should have gaming.
And while the economy is certainly on everyone's mind there, we have been continuing to point out that the mall is just a bad location and Laurel racetrack is a better location where we can create jobs and revenue faster, and we have really spectacular plans for a facility there. And so its really been an education effort on our part.
We think the natural inclination and people sort of get the fact that the mall with the traffic problem, with the growth and development that's occurred around there with residential neighborhoods it's just as an inappropriate location. And so the more we talk to people about this and point out what we're hoping to do at Laurel, the more support we're continuing to get.
But it's going to be close, and we're just keeping our nose to the grindstone.
Peter Carlino
Yes, one of the problems for us has been the Baltimore Sun, which is completely in the back that they reported. Their behavior through this process has been virtually scandalous.
I don't think ever in our experience around the United States in any of these efforts have we ever seen the most outrageous behavior by a newspaper. To say it flatly, it's been amazing, and it sort of shocked us everyday.
So that's been sort of a difficult process, the free press can't stop the fight. But nonetheless the truth is on our side.
We can actually move faster than this guy to get slots open. We actually have a site that is completely entitled and ready to go, which he doesn't.
And so there's a lot of facts in our favor. What's the voters emotion will be like on the election day, of course is something that we can't completely predict for the reasons that we all know.
And some of these races go up and down, even to my surprise here in Pennsylvania I see that that too many maybe slipping back. So you watch these things and recognize this is a highly volatile year.
So it could go one way or the other. I guess that's our answer.
Ryan Anchor - Affiliated Research
If I could just ask maybe one follow-up regarding, you commented very extensively on the promotional environment in Lawrenceburg. If you could say anything about the current promotional environment in other markets such as Chicago market, Missouri?
Tim Wilmott
Well, generally as the quarter evolved it got better. We started to see some pullback in the promotional activities in the Kansas city market, which in the beginning part of the third quarter Brian we were very intent.
That's gotten a bit better. Chicago lands, it has been fairly stable over the quarter.
Southern Mississippi and Tunica continue to be very aggressive markets for promotional spending. Its something that hasn't changed really now for a couple of years.
And then in the other markets, generally the level of promotional spending has been fairly reasonable. And some of the competitors have actually started to pull back, noticeably Pinnacle which we have seen in the markets we compete head to head with them.
They have actually pulled back as well which is encouraging to see.
Operator
Our next question is from the line of Joel Simkins from Credit Suisse. You may proceed.
Joel Simkins - Credit Suisse
A couple of quick questions here. Clearly everyone here continues to be focused on M, but your appetite historically has been for regional acquisitions.
The last time I checked Ameristar is for sale, there's a couple of assets that could fit in nicely there. What's your view generally on the regional M&A at this point?
Bill Clifford
We're always interested in quality properties at a fair price. So that's all I can say.
They had some very nice properties. The question is can they be had at a price that we can survive?
That's the quick answer. Tim do you want to add anything?
Tim Wilmott
No I have nothing more to say Bill.
Bill Clifford
No, I think we're always looking forward an opportunity to growth free tax roll per share. And quite candidly Ameris will be an enormous collection of assets, however quite candidly in our view anyway the market and relative value what you pay for is very tight.
And candidly Ameristar has indicated they are available for sale, and I am sure they are going through a process. The question is that what price will they actually part with the assets.
Joel Simkins - Credit Suisse
Sure. Two quick follow up here.
One on Zia Park, obviously a smaller property but it looks pretty good this quarter. Is that driven by energy prices and then secondly just real quickly back to Texas any sense of what you're prepared to spend on lobbying there the next six to 12 months?
Tim Wilmott
Let me cover the Zia question, I'll let someone else in the room cover the other question about lobbying spending in Texas. Joe we have seen oil be above $75 a barrel and that really does drive the feeder markets that going to Zia Park Midland, Odessa and Lubbock.
And that's why we are seeing good year-over-year growth in that business and we are able to continue to grow the business because people that work in the energy industries now are employed at higher levels, and that's certainly the primary reason why we are seeing year-over-year growth in Zia.
Peter Carlino
Well with respect to lobbing, obviously we can't probably say what our thoughts about our financial commitment there. It doesn't serve any of our purposes to do that.
So if I should say, we're going to spend as little as possible, but we'll spend what we must. We're part of a coalition there, which is not a one-off effort on the part of our company.
There were a lot of people with an interest in the same thing. We think its good for the state, its good throughout the state.
I think it stands better than reasonable chances this cycle than it has in the past for the reasons that we all know, its called economics and tough budget. So we'll do what we must but again, this is not a one-off effort, we're part of a group.
Eric Schippers
I do want to say Joe, from our polling research in the state of Texas, if it does go to the voters of that state, the polling is very favorable among the residents of Texas for gaming. So that's obviously what we think is going to happen in terms of how its going to be structured through a legislative process.
You know you look at that state, its surrounded by gaming to the east, north and to the west, and it's a huge feeder market for Las Vegas. So there is already a very favorable feeders' position towards casino gaming among Texas.
Operator
Our next question is from the line of Steven Wilgayro from CRK Capital. You may proceed.
Steven Ruggiero - CRT Capital
Good morning. One last question I have there are a few casinos including Aurora, Alton and Bay St.
Louis where you controlled your expenses, your top line was off but managed to improve margins notably. Is this expected to continue not only in the fourth quarter but into 2011 at those properties?
Bill Clifford
I certainly believe we're going to see year-over-year margin improvement in the fourth quarter Steven as we continue to do that and fine tune it. I would be hesitant to go into 2011 that far out until we have more data points until the fourth quarter to talk about how the P&Ls are looking in these businesses.
But certainly I am confident that you're going to continue to see margin improvement in the fourth quarter.
Steven Ruggiero - CRT Capital
One last question on consolidated affiliates, a bump up in the latest quarter, what did we see from that giving your Texas acquisitions perspectively? Can you give us a sense of guidance if you will?
Bill Clifford
We're not really touching 2011 guidance today.
Steven Ruggiero - CRT Capital
How about just for the fourth quarter similar type of number.
Bill Clifford
Well, it's not included because we don't yet. We haven't closed on the transaction.
There is nothing in Texas in the fourth quarter.
Steven Ruggiero - CRT Capital
Okay. What is driving that then, the higher number?
Bill Clifford
That would be basically Maryland Jockey Club which includes preference, which excludes our political efforts in Maryland.
Peter Carlino
You know one observation I think that Tim made is, then I think it is obviously broadly to all of you. And that is that, while Penn had some very good things happening and those are evident.
We're not seeing a lot of wonderful things happening out in the market. I mean any thoughts that somehow this is turned around beautifully and we're off to a new day.
It certainly hasn't settled here in this conference room upon us. The market is still tight in most of the places where we do business, consumers have considerably cut their spend, and while we remain optimistic with our eyes on the horizon, we're managing the business as it is today and trying to be forward-looking about new stuff, different stuff, there's one way or the other.
Growing revenue on the bottom-line is our goal. So it's still soft.
Operator
Our next question is from the line of Carlo Santarelli from Wells Fargo. You may proceed.
Carlo Santarelli - Wells Fargo
Hey guys. I just happened to notice in Illinois it looks like you have done a lot of the same there where we've seen revenues declining at two of the properties and you being able to grow margins, was there an aberration in the quarter or should we expect you guys to continue to operate under the same structure there?
Thanks.
Bill Clifford
Carlo in Illinois, Alton and Aurora were fairly clean quarters. There is really no one-time things driving those results.
Joliet was a bit of elaboration. We had there as well like Lawrenceburg anniversary that reopening of that facility from the fire that closed it in the second quarter 2009.
And we had a very good, especially July and August of 2009 we saw it decline there coupled with unusually, unlucky from a house standpoint will hold on table. And that certainly impacted the results as well.
But we did continue to cut our promotional spending at Joliet during the quarter reflective of what we are seeing with the consumer. But Joliet is going to have a transformation in the fourth quarter with the completion and the rebuilding from the fire of the new facility and the re-branding to Hollywood casino Joliet which should happen by the end of this year.
So that's really the big news going on in this quarter in Illinois that the change is going to occur there with the completion of that work.
Operator
Our next question is from the line of Bill Lerner from Union Gaming. You may proceed.
Bill Lerner - Union Gaming
Couple of questions. One just on Maryland if Anne Arundel County is rebid are you out of bid on the second license, or anybody can bid?
But you know what I mean, can you have a second license or what body would give you approval in the event you need a carve out there? And then the follow-up is as it relates to MID, interest in Gulf Stream, Golden Gate, Santa Anita in anyway, I understand not all of those are slot oriented, if ever, but want to get a sense for your level interest.
Eric Schippers
First and foremost there's nothing that would preclude us or MJC rather from applying for a license at Laurel Park, literally on November 3, or whenever the lottery commission tells us they are ready for that application. Nothing in the law that says we can't apply for it.
We then have options that we will have to explore, that include restructuring from an ownership perspective management or potentially a divestiture of our other asset there. And clearly those are options that have been put on the table and we've not shied away from that publicly.
We think the county, the state, the lottery commission and the location commission are going to want to move as quickly as possible to start generating the revenues and jobs that we are hoping to create at Laurel Park. And so we are cautiously optimistic.
We know on our end we'll be ready, and our their end we're cautiously optimistic they will move very, very swiftly to get this process underway.
Peter Carlino
Yes, the governor has made it very clear that he believes that slots belong as long. So that we are pretty confident that following a defeat of the effort to put the slots where they don't belong that state will move very swiftly to start a new process as they can have an RFP out in 30 days and we expect it to move very, very quickly thereafter.
And we are ready with design, and an approved site and an existing facility where we can open it temporary. They've talked about concealing us as a circus tent in the parking lot.
I can't believe they have actually published that, but that's what they say they want to do. We actually have a real building where gaming is going on, where we can put these machines pretty quickly.
So, we've got the better story we will just have to see how it plays out.
Eric Schippers
And we also are reminding the folks in Maryland if you look at our record in Perryville, once we got the okay to proceed, we with our development folks designed a construction and operating team got that facility open in record time. And we are prepared to do the same in Anne Arundel.
Bill Lerner - Union Gaming
And then just a follow-up with you on Gulf Stream, Golden Gate and Santa Anita as it relates to your MID relationship.
Peter Carlino
Look we have a great relationship with those folks and we've talked about other opportunities. I would never say no to anything, but again we are not prepared to make any other comment about that today.
Operator
Our next question from the line Mark Strawn with Morgan Stanley. You may proceed
Mark Strawn - Morgan Stanley
One quick question on Columbus. Just wondering if there's any concerns if that project could be delayed beyond 2012 given that you haven't broke ground yet or is that still tracking towards the end of the year?
Peter Carlino
I mean we are on still on schedule Mark to continue to remediation of the Del Piero plant site that's expected to finish up in the early part of February, and we are still targeting an end of first quarter ground breaking there in Columbus. We are making very good progress on our designs for the facility.
And that is moving along very, very nicely and we are still targeting an end of 2012 opening there. As Eric said before, the state is also now established the gaming commission there so that's a good sign as well.
The progress is being made on the state side.
Tim Wilmott
And we've completely settled designs; it's a terrific facility, not what it looks like. Its going to be a very exciting project.
Operator
Our next question is from the line of Neal Portis from Goldman Sachs. You may proceed
Neil Portis - Goldman Sachs
Could you provide some detail on specific programs or ways that you have been able to reduce marketing spend? Are there types of customers that you are targeting less or types of incentives?
Bill Clifford
No it's really Neil, all looking at the profitability of our relationship with customers and the profitability of our marketing programs. We put in filters to determine certain thresholds that we want to manage margins to on a customer basis and a program basis and then over time as you evolve these programs continue to make them more profitable by redefining the rules of engagement and modifying the details of the execution of where you have expenses being applied to your marketing program.
Then it's an ongoing process and a discipline that is inherent in all our businesses. There is no one specific magic wand that is being waved that's producing these results.
Neal Portis - Goldman Sachs
Is that across the portfolio or certain markets?
Bill Clifford
Across all the businesses. We started to see in late 2009 that trying some changed customer behavior during this recessionary period was not producing any meaningful results.
So we decided to reflect the changing spending patterns of our customers across all of our businesses. So that's something that we put in place early part of this year and it's in all of our businesses and it will continue.
Neal Portis - Goldman Sachs
Okay. And for M resort, is there a time frame you are envisioning to achieve your target return on investments?
Peter Carlino
Well, listen, I mean I think that's a bit of a fluid process and it's quite candidly not completely within our control. Listen, those targets are probably I guess, I would say by 12 if we're not getting the numbers that we're very happy with, we'll be disappointed.
Operator
Our next question is from the line of Harry Curits from the Nomura Securities. You may proceed.
Harry Curits - Nomura Securities
Good morning. Peter a quick question on the regulatory landscape as we look into 2011 given the increasing state budget deficits.
Do you see any markets where there are rumblings where you could see easing in either the regulatory environment or taxes or are there markets where there's risk of or talk of taxes going higher?
Peter Carlino
I will let Eric handle that. Fortunately we haven't heard a lot about higher pack, whether that popular item about a decade ago.
I think most states have wised up to the fact that notably Illinois that they don't learn fast. That you tax it more and you get les.
We've seen that effort and I think it's not lost on most legislators that Steven said a point that nobody has heard. Eric you want to talk more broadly about that?
Eric Schippers
The only jurisdiction we've seen that it started to sense some rumblings in the legislature about the tax rate would be Maryland because they have the second highest tax rate in eth country at 67% and obviously there is an ongoing arms rate in the Mid-Atlantic region with favorable games coming on in the neighboring states. So there's been some talk about that, there's been some talk even about when the state would go back and possibly look at adding table games in Maryland.
In terms of higher taxes though, we're really not seeing that out there. What we are seeing though given the state of the economy, our expansion proposals.
That could be very devastating to it namely in Illinois. What we lovingly call as the "perennial kitchen sink" bill.
That is where we head again that we will have to play whack-a-mole every year to flat that down and show them it would expanding it beyond where it is today beyond the footprint of gaming in Illinois today would be very damaging. Though the current bill there would require a three fifth majority the way it was written, so we are working along with our industry brethrens who try to knock it down for what's and probably its emptier that this has come up?
Tim Wilmott
No, probably close to 20 had come up.
Peter Carlino
This is the least stable state in America. Its just a terrible place to do business, unfortunately.
And we are happy to thinking of having three properties there. It's a shame, it should be a great gaming state, but it remains very, very, very unstable.
So, we look at it as best we can and we'll just have to see.
Tim Wilmott
One of the thing Harry to your question, the industry has demonstrated to these states over the past especially five to seven years that higher taxes kills jobs, and that's the last thing anybody wants to do right now given the high unemployment rates we are seeing across all of our markets right now.
Operator
(Operator Instructions). We do have a follow-up question from the line of Larry Klatzkin from Chapdelaine.
You may proceed.
Larry Klatzkin - Chapdelaine
Hey Peter. A quick question with the M casino, let's say you negotiate that and get possession or whatever, does that end your appetite for a strip property or do you guys still that's something attractive at the right price?
Peter Carlino
Larry, you must have missed the opening statements where I think I made pretty clear that this is not a property that we are strategic goals in Las Vegas. This is a one-off transaction, a terrific pool of transaction, but it doesn't get us where we would like to be.
So we remain as focused as ever on the right opportunity on the strip at the right time. So, I forget whether that's yes to your question or a no, but either way you get the message.
Larry Klatzkin - Chapdelaine
I get the message.
Bill Clifford
Yes, and I think at the end of the day we're still not going to rush out and pay a ridiculous price for a strip asset. That's you know regardless of what happens at the end and if something…
Peter Carlino
Absolutely right. That's regardless of what happens with the M and if something become available on the trip that we thought was a good opportunity, yes we would pursue it.
But I don't think the likelihood of that coming forward in the near future is very high. So I guess the answer to your is question, no it hasn't wetted your appetite for a great property on this strip for a good price.
But it doesn't mean its increased the likelihood that we are actually going to get there.
Operator
Okay, thank you from the Adam Steinberg from Maryman Capital.
Adam Steinberg - Maryman Capital
Real quick, Bill, you mentioned that your growth CapEx for next quarter is to be $59 million. So I am going to assume that doesn't assume the two $50 million payments for the licensing fee in Ohio.
When do you expect to pay those out?
Bill Clifford
You know I am not the right person to answer that question that would be…
Peter Carlino
Yes, the $50 million would we do is the time when we got our license. So as Tim pointed out and I pointed out earlier the gaming commission is just beginning to process.
We have to keep eye on the November 2 election, and take guidance from the gaming commission going forward, and watch how the process unfolds. But its upon licenser when that check… It should be sometime next year.
Adam Steinberg - Maryman Capital
And then also in the guidance you say does not include any benefit or any earnings impact from M. Is that operational or are you including into that kind of the higher interest on the revolver from buying the debt?
Bill Clifford
We do include the interest expense on the revolver. We are not including it in the operating results from M.
Peter Carlino
With that we are going wind up the call. You all know where to find us.
We're working hard here and look forward to seeing you all next quarter. Thanks very much for participating.
Bye-bye.
Operator
Thank you ladies and gentlemen. That does conclude the conference call for today.
We thank you for your participation and kindly ask that you please disconnect your lines. Have a great day everyone.