Hedgeye - BYD 4Q CONF NOTES

Setting up for Q1 beat but FY2014 guidance better than we thought. Japan?

CONF CALL

Wholly-owned business performed in-line in 2013
Relaunched Penny Lane at 4 LV properties in November
Penny Lane now in place at 12 BYD properties; seeing better response by Penny Lane
Earliest debt maturity is 2018
Open to more acquisitions
Wilton Rancheria: early stage design work under way
Interested in Japan
Online gaming: Borgata has 1/3% of market
Discontinuing quarterly guidance for Borgata
October- mid Nov: strong trends
Casual players visitation declined outside of Nevada
Top-tier players doing well
LV Locals

reduced marketing spend by $2MM. Improved operating margins by 120bps. Non-gaming promising area of growth

$9.3MM one-time property tax adjustment at Blue Chip
Winter weather has been a record
Severe weather reduced EBITDA by $3MM
Delta Downs: notable bright spot, posted double digit EBITDA growth; annual records for EBITDA, rev, and coin-in.

Below expectations
Unusally low hold in December reduced EBITDA by $3.6MM, higher property tax decreased EBITDA by ~$2.1MM in the quarter and $8.4MM for the year, and bad weather impacted EBITDA by $1MM
Borgata/PartyPoker: 43% share of I-gaming, 85% of online players have not had rated play in the last 2 years
Significant uptick in promotional spending, although Borgata have not matched the increase
In Feb, launched online/mobile platforms for 1st 3G/4G devices

December: redeemed $950MM 2015 note
Peninsula has expanded FCF by $100MM
$1.1 bn tax loss carryforward (couple of dollars per share)
Cash: $268MM at Boyd, $27MM Peninsula, $17MM Borgata
Boyd senior leverage: 4.2x (covenant 5.0x)
Boyd total leverage: 6.5x (covenant 8.5x)
Peninsula leverage: 6.3x (coventnat 7.0x)
Borgata's covenant EBITDA was $121.8MM compared to acquired minimum level of $110MM
2014 maintenance capex: $125MM ($15MM Peninsula, $25MM Borgata)
Final Phase of Kansas Star will cost $20MM
2014 guidance

Total D&A: $255-$260MM (Boyd: $130MM, Peninsula $72MM, Borgata $55MM)
Total interest expense: $300MM (Boyd: $155MM, Peninsual $75MM, Borgata $70MM)
Deferred Rent: $4MM
Pre-opening: $5MM
Share-based compensation: $16MM
Shares outstanding: 110MM
Do not expect weather to be an issue going forward. $8MM in quarterly and annual impact
Expect LV Locals rev and EBITDA growth to be similar to that in 2013
Downtown Locals: minimal EBITDA growth
Midwest/South expect growth in 2H 2014
Borgata EBITDA similar to 2013 - does not include I-gaming or lower property taxes
Corporate expense: $55MM

Q & A

LV Locals why flat revenue despite market up? False positive in December #s. No major change in direction or slope of LV market. Have to look at Jan/Dec together.
Hotels have benefited from increased convention business on Strip, particularly in March
Midwest/South Cannibalization: a lot of disruption from weather; lapping Shreveport competitor in June
NJ I-gaming: ramping slowly but nicely
Bad weather will impact EBITDA by $8-10MM in 1Q 2014
Japan: exploring options
Regional acquisitions: fewer opportunities but looking
AC market : closing of Atlantic Club had no impact on Borgata
Selling assets? Open to it
Acquired IP in the low $30MM EBITDA; today, it is #2 in Biloxi and generating above $30MM