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Negative investor sentiment could turn positive. Regionals might be at a positive inflection point with ASCA and PNK the standouts. The bottom might be in on LVS.


Jacobs allegations & SEC/DOJ investigation

  • The Jacobs suit will either settle quickly or will sit for a while before it goes to trial, which would take a while. The judge ordered settlement discussions to take place. 
  • What happened with Jacobs?
    • If you get fired but not for cause, LVS vests all of your restricted stock and options, pays you your bonus and severance.  Jacobs wants his contract honored – which entails all of the above.  The company wanted to fire him because he was acting erratically and many people actually thought that he was looking to get fired.  After the company already made the decision to let him go but before telling him, Jacobs sold 250k of his restricted shares without asking the company, which is one of the reasons he got canned. When Leven told him that that were letting him go, Jacobs was offered his salary and bonus but not his remaining options.  In response, Jacobs threatened to spread information on Sheldon's behavior including bribing a public official which he was “collecting for months”.
  • Leven believes that Jacob’s allegations are baseless against Sheldon.
  • Think that there is nothing in the 5 issues that the DOJ is investigating and that a small settlement will be the most likely outcome. Caveated that with while Sheldon is innocent they can’t vouch for every person in their organization.
  • International investors don't fully understand the investigation and the implications, and are just staying away from the stock
  • Think that the investigation will wrap up in 6 months and that they will settle with Jacobs. Sheldon doesn't want to take this to jury trial.
  • Jacobs has a record of suing at least one former employer – Starwood

Approach to Junkets

  • Four Seasons is in the process of signing 2 very large junkets (who currently have rooms at Wynn, including David) to Four Seasons
  • Still talking to Neptune about expanding their relationship. Neptune wants additional incentives if they can bring roll from 9BN to 15BN/ month, but they are unlikely to sign such a deal
  • Strategy is to hold at the 1.25% commission level (little higher at Sands). They would like to follow Wynn's model more closely.  They are trying to add more junkets. Jacobs built a lot of the direct business that they have.
  • Want to change the dynamic of junkets—just hitting their minimums and that's all at their properties. They recently hired a new junket relations person who will hopefully improve relations over the next few months.

 Strategy with Galaxy World opening

  • Doesn't think that they will get more aggressive on marketing
  • They are more concerned with labor issues for 5 & 6


  • Thinks that they will be capacity constrained in that market which will limit growth.
  • Property can hit $1.3BN of EBITDA this year and maybe $1.6BN next; from there, growth will slow to maybe 10% a year
  • This month they are rolling ok but win rate is low. Last month win rate was good
  • Plan on a mall sale in 2013, some sort of rent securitization, which they believe can yield $4bn of proceeds
  • Plan on refinancing the debt at MBS so they can take more cash out of the property
  • Later this year, they are planning on building a new VIP area near the roof
  • Still skeptical of whether junkets will get approved, but are taking the wait and see approach
  • They are beating Genting on the mass side, but Genting will beat them on the roll

Cannibalization from 5 & 6

  • There is likely to be cannibalization but their bet is 2014 and beyond
  • The Venetian is an $800mm property EBITDA with maybe 10% growth this year and flatting out from there
  • Hope to open a casino in January then another in May with the final one in 2013


  • Slot business is grungy
  • They reduced their comps. Initially, they were comping too much, then not enough, now going back to center. Palazzo was filled with slot comps which got as low as 40/day - they raised the floor to $300/day players   

Other Stuff

  • Thinks that the EGTs will eventually catch on in Macau but off to a slow start. 


  • Things have been really busy. Their FIT calendar is really strong but think that that business will be event driven.
  • Cosmo - is doing well from a restaurant/nightlife standpoint. Don't know how the gaming business is going. Seen a big pickup in foot traffic at Crystals and Aria since Cosmo opened. From a gaming standpoint, they haven't been impacted.  Cosmo’s room rates are higher than Aria’s.
  • Feb and March feel a lot better this year than last year.  Feel good about convention business in the year for the year.
    • 1% increase in occupancy/$5 dollar increase in ADR equals $50mm of EBITDA
  • Luxury is clearly leading the way in their recovery.  Lower end properties draft off of the higher priced properties in peak periods.  Environment is less promotional today than it has been over the last few years. Doesn't think it'll be all smooth sailing though.
  • Airlines are picking their spot to add some capacity.  Over the next 90 days, there is a 3-5% seat increase coming into the market.
  • Macau:
    • Thinks that 25% of customers are coming from in-house marketing
    • Still working to clear the HK exchange on the IPO process. There is a debate of having more good quarters vs timing of IPO.
    • Talking to a few new junket operators to join MGM. Converting some of their Villas to VIP rooms. Converting some of the spa space too. Still have 70k of incremental space that can be built out. 
    • Cotai? They are a lot further along than people think. They know the site and as soon as the government will be ready to commit, they are ready to go. They will be in the same wave as Wynn and SJM. Their site is 2x they size of their Peninsula site.
    • Would be surprised if they aren't gazetted at the same time as WYNN and SJM.
  • Don't need to be in the capital markets until sometime next year. So they will just be opportunistic - more so on the debt side in pushing out the maturity profile.
  • Have almost $190mm sitting in trust in NJ. They have a 30 month time frame to sell the property. Over the first 18 months, they have oversight of the process - which expires this September 24th. 
  • 2 hospitality openings later this year.
    • MGM Grand Sanya - 600 rooms
    • Beijing 100 units (unbranded)- Diaoyutai Art Hotel. This will grow their database for direct players in Macau. Have 17 contracts signed/ LOI's for additional hotel openings which they will manage.



  • IL: thinks it will be tough for the state to find alternative funding for their bonds.
  • Italy: will have 4,600 machines in Italy.  Will have a variable daily fee rate.  The 7,000 machines out there now earning 2x what AWPs were earnings (80-100 euros/day)
  • Problem with 2011 is that they are spending R&D on Italy and Canada w/ no revenues till '12
  • Thinks that lots of companies are spending to their fixed charge coverage ratio – they see weak spending from operators in the first two months of the quarter with catch up in the 3rd.
  • Their oldest reel machines are 10-12 years old.  The video slots older than 8 years old have trouble sourcing parts.
  • IGT’s multi-hand poker patent expires in 3-5 years for IGT
  • Downward revision with systems was primarily due to slower rollout of iVIEW DM.  They thought they would be further along in their DM release at this point. It took them longer to rollout the DMs across the difference manufacturers.  They're in the first rollout of the iView applications.
  • Given the momentum in technology changes accelerating,- it’s taking regulators longer to approve things.
  • Pricing on slots? 3-4% annual increases are realistic.  They are realizing 5-7% price increases on the new platform.  Not seeing price pressure, however as pro series ramps as a % of sales their margins will be under pressure until they reach a critical mass.  Usually takes 12 months after a new intro of a product to start getting leverage margin-wise. 
  • Software for iVIEW will be subscription based and the premium stuff will be additional. Thinks that iVIEW DM can have a similar life cycle of penetration as iVIEW did, but it depends on content.
  • The overall cost of ownership of a windows system is a lot cheaper than a SDS system.  The IT department needed to operate their non-windows based system is a lot larger.  The Windows-based system only need a few people.  Licensing for a Windows based system is also cheaper. 
    • Other competitors for smaller systems deals include ALL & Komani.
    • Windows-based system is really helping them internationally, where many of the casinos are very small


  • Thinks that the Strip needs to recover first before their locals market recovers. In Oct, when strip was good, their business was good. Don't think that they need to fix the housing or unemployment issues. Just need to have their customers spend more per visit. Thinks that 35-40% of their locals customers are retirees.
  • Seen more aggressive marketing from STN's since February. However, it’s not hurting BYD’s properties. When they gave guidance on the last call, they already saw the impact from STNs promotions. STNs slot product is pretty old and they are starting replacing more slots.
  • M Resorts impact - saw a small impact when they first opened but it’s just too far away for their customers.  40 minutes from their properties.
  • 2011 won't be much different then 2010 unless convention business picks up materially.
  • Looking for some ideas on how to create value on the Echelon site. Are considering all options including: JV partnerships and asset sale opportunities for the site.  Rating agencies have Echelon land valued at $5mm/acre—thinks it’s worth more like $10-15mm/acre.  BYD’s cost basis on the land is around $1mm per acre
  • Always viewed as having a strip property as strategically important
  • Regional markets are doing pretty well. LA has recovered faster than they expected
  • Doesn't think that MGM wants the property to go to the trustee. Believes that the LTM EBITDA ($170MM) at Borgata is the low.
  • Thinks that the LTM EBITDA at most of their property represents trough levels
  • When does capex go back to historical levels?  Not anytime soon. Historical maintenance was $100-$120mm vs. the current 50mm. Skimping on room product. 
  • They're good on the financing side through 2014. 
  • Thinks that BYI and WMS has some new good content.
  • Definitely want to grow the company and are looking at opportunities to do so.


  • After the first week of February, business has been good for them and March is strong.
  • Q1 looks good, somewhat due to East Chicago because there was so much money spent there last year.  ASCA changed their slot marketing program mid-year in 2010 that will also help comparisons in 1H2011. Last year, they also had 2 quarters of weak table hold at East Chicago and one quarter of bad hold at Vicksburg. March – May 2010 were also bad months.
  • Visitation has been improving for them.
  • Not seeing an impact from gas prices, but higher commodity prices are helping them in the Midwest economies which are commodity dependant.
  • Not much left to do on the cost side
  • Unemployment rate is so high in most jurisdictions that they aren't likely to see wage inflation.  If they do, it means that the economy is good.
  • Should get at least 50% flow through at most properties (basically only variable costs for now-taxes and marketing).
  • Blackhawk is doing fine - even if they are just flat YoY. Think that that market can be more impacted by fuel increases.
  • Harrah's:
    • Took several hundred machines off the floor in Council Bluffs and Kansas City. Sounds like they are mostly focused on Vegas with regards to any capex spend. ASCA's market share improvement partly has to do with HET’s lack of maintenance of their assets. Their properties don't look good and are starting to look really worn down.  They’re only spending exactly what they have to to meet health and safety levels.
  • Not interested in a cross marketing agreement with MGM. They already compete effectively against HET which has cross marketing with Vegas and have the highest industry property level margins – so if it’s not broken, why fix it?
  • Will use their cash flow to delever.  They won't be paying taxes this year courtesy of bonus tax depreciation and should have at least $10mm per month to retire debt.  Should get them to sub 6.0x leverage by YE and sub 5.5x by 2012. 
  • They don’t see any attractive acquisitions right now. HET and MGM can't afford to sell any assets because it would be leveraging up for them.
  • Should close the financing in 1-2 weeks
  • If not for ASCA buying back some of Ray’s stock, he would have had the tax issue next August - but the real issue was 2013. Justified premium paid for Ray’s stock:
    • Still very accretive ~ 20%.
    • Still cheap on a multiple basis
    • Will allow them to use stock as currency in the future for acquisitions or projects which really wasn’t an option before
    • Eliminated an overhang
  • No update on East Chicago bridge really
  • Thinks that IL will eventually get VLTs but no idea when


  • Business is outstanding, can't complain. First and second shifts at their manufacturing facility are tapped out.
  • Not expecting a huge jump in replacements in 2011 - just a few thousand units over 2010
  • HET’s product is getting so stale that sooner or later they will lose patrons to their competition
  • Canada remains strong for them as are the regional and tribal markets. They are seeing a recovery in the South West. STN is starting to buy more, BYD is starting to talk about buying more. Herbst is buying more. MGM and HET aren't buying slots yet.
  • Their participation install base is 5,500-5,600.  They don't have WAPs and don’t intend to develop WAP games.
    • 40% of their install base is on 80/20 arrangements
    • 60% is fixed daily fee which pays between $55/day and up to $65-75/day for games with the Rock on Top feature
    • Their install base grew 2,500-2,700 units YoY
  • Expect that their March for sale shipments will be up YoY materially from last year in North America and overall.  Europe is kicking in for them. Their French distributor ordered more games over the last 4 months than all of last year (this distributor isn’t exclusive to Konami so there is read-through to other US manufacturers). South America is up materially - Argentina, Uraguay, Chile – these are newish markets for them.
  • Think they will continue to take share from IGT, BYI, and ALL this year. Targeting BYI right now.  Think that they can get to 16% share in 2011.
  • This year they have 75-80 new titles.
  • Implemented a price increase on Jan 1st.  Claim that IGT has been heavily discounting. WMS and themselves are the only players who have been maintaining price.  Their ASP is over $14k. Contrary to competitors' allegations of deep discounting of their products,  they have never sold a game for $10k unless it’s used.  They do have the lowest cost basis in the industry and the highest margins on game sales.
    • They only have 350 employees.
    • Lowest break even in terms of how many units they need to sell.
  • Konami’s gaming business contributes about 25% of the operating profit ( 8-9% of revenues) of the Company and will become a larger part of the company. Thinks that their sports club business will get cut down a lot because of the disaster in Japan. Not sure that they would ever float this business.
  • Their biggest challenge is growing their systems business. Grand Falls Iowa and Des Plaines Casinos will have their Oracle based system. They were invited to compete for the systems business at Revel, Resorts, and Cordish. Thinks that BYI’s Windows is notoriously unreliable. Oracle is much more reliable, which is why all the banks use it.
  • Thinks casino legislation has moved to the very bottom of Japan’s priority list, post disaster.  Regarding supply chain concerns - they don't have a factory in Japan. Their manufacturing facilities are in Vegas and Australia.
  • They are licensing their content to other manufacturers for the Italian market

Nevada Gaming Commission (Mark Lipperilli – Head of the Commission)

  • His goal is to deregulate somewhat and having the agency serve in more of a consultative function than just as a regulatory body
  • Couple of bills in legislative phases to ease things.
    • Increasing the ownership threshold that requires an owner to be licensed from 0% now to 5%. Will make it easier for investors to take small stakes in casinos
    • Legalizing internet poker: Poker Stars and Full tilt have pushed the agenda. You can argue that a poker bet isn't a violation of the wire act. Although even if that is the case, you still need a license to take wagers. All the US guys will partner with an existing operator if and when online poker gets legalized. Thinks that any US technology is 5 years away from where Poker Stars and Fulltilt are today.
  • Thoughts on what goes on in Macau?
    • They aren't blind to it and it’s a controversial issue at the agency.  Part of the issue is whether the alleged laundering occurs on the mainland or in Macau.  It’s believed that it's mostly on the mainland.
  • They are doing their own investigation on LVS

IGT (Pat Cavanaugh)

  • Slot sales are still tough but game ops are getting a little better. Some of that is due to better game content.
  • Thinks that Japan is now more likely to happen post disaster.
  • Acqueduct: IGT will have 36% market share.
  • Launching their Reel Edge (Skill based games) shortly which, if successful, can become a new niche category of games for IGT
  • Thinks that the online space is going to be a nice source of growth for them. Today, they are just a content provider in the UK.  Figuring out how do they become a B to B provider though if online gaming gets legalized in the US.  Their online business is currently included in game ops, and generates about $40mm. Will go into Italy this year. Wager Works is really just an online casino- they need to address the sports betting and the poker/table gaming side – for which they will need a partner or license content.
  • Video poker machines last 12-15 years.  
  • They just introduced the universal slant cabinet which can be used as video poker/ video slot/ and even a mechanical reel.
  • Montana just legalized video slots. Until now, they just had video poker and keno, so this could and should stimulate replacement cycle there.
  • Feel like they are under penetrated internationally
  • Italy: Very fragmented from a systems standpoint, there is a lack of consistency from each vendor which is part of the reason why rollouts are taking so long. Right now, they are only selling/leasing Barcrest content in Italy since developing a new platform was not considered a good ROI investment for them… but that may change given that many new markets (like Greece) will also have similar platform requirements. They have signed 2 deals to place  3,000 units in Italy (SNAI & CIRSA).  Starting shipping to SNAI in Dec, will take a little while to get all those machines shipped.  The SNAI units are roughly ½ of the 3,000 units and are for sale. Cirsa units will be participation but haven't started shipping those yet.
  • IL:  Supposedly the Supreme Court is scheduled to rule on the Appelate ruling in May/June and usually rules with the government- so hopefully, there will be more visibility on VLT timing post ruling.
  • Will continue to push away from hardware dependency and more towards content
  • Over the last downturn, they have also learned to understand saturation on the game operators side and will be more thoughtful on restricting the number of any title they release.
  • Getting more thoughtful about repurposing content from successful Class 3 titles to VLT to internet titles
  • Gaming Operations: They are standardizing the hardware and platforms so that they can recycle the hardware and eventually increase the life of the games. Hope that they can move to 3 years on depreciable life from 2 currently.  Business still has returns of north of the 200% returns but used to be 300%.   Longer D&A cycle will boost margins.


  • Honing in on CFO in the next week or so; hope to make an announcement by month end. It's between Lewis and Carlos – but thinks it will be Carlos.
  • Pleasantly surprised with results that they’ve been seeing lately - despite the crazy weather.
  • L'Auberge saw revenue increases despite a drop in admissions
  • Baton Rouge: As long as water levels say at current levels, they will be able to get the last pole in very shortly
  • My Choice relaunching on April 4th
  • The marketing costs shouldn't increase with the Wynn announcement. The marketing deal is really just for their top 3 tiers of players which are roughly ~2,000 patrons. Will use the marketing agreement as an aspirational tool to help them encourage patrons to consolidate play at their properties to get into those top 3 tiers.  People that go to both their casinos in St Louis play 2x as much as people that just go to one. HET’s Vegas properties help them increase regional play.  Wynn will give them a certain amount of free play and free rooms. 
  • MGM wasn't willing to offer an exclusive on their co-market deal, so they passed on it.
  • Seeing admissions decrease but revenues are still up in LA. Customers at least feel more stable in their jobs. Pretty optimistic on LA. St Louis is more sluggish economy wise. Had too many competing marketing offers at their 2 properties a year ago. Now their offers are non-conflicting. Think that their market share in St Louis in 4Q will get better. My Choice will help them garner more share. That market has the most potential to consolidate play.
  • In the 6th of 9 innings re: cost cuts. Looking at cash services contracts now, consolidating some corporate and property level jobs. They’re still in the early innings on improving their marketing efforts. Overall margin improvement will slow though, unless there is topline growth. He's less cautious than just outright optimistic.
  • Wasn't surprised by Dan Lee winning the LA contract.  PENN wasn't even close in winning that contract. Dan still needs to win the local election and raise financing.  ISLE of Capri and other employees might vote against it. PNK won't spend money against Dan Lee. They do think that Dan will grow the market – just not sure if he will grow it enough not to cannabilize their property
  • Capp - he's not going anywhere - has a 3 year non-compete. Thinks that he was disappointed that he didn't get the CEO spot.