Construction continues to hurt Boyd earnings

David Strow

Thursday, Oct. 26, 2000 | 10:25 a.m.

Boyd Gaming Corp. of Las Vegas on Wednesday reported a significant decline in earnings for the quarter ending Sept. 30, as construction at its Sam's Town properties in Las Vegas and Tunica, Miss., continued to drag down the company's performance.

Boyd reported net income of $3.7 million, or 6 cents per share, down dramatically from net income of $10.3 million, or 17 cents per share, earned in the year-ago quarter. Excluding pre-opening expenses, Boyd earned 7 cents per share.

Even without including pre-opening expenses, Boyd badly missed analyst expectations of 13 cents per share for the quarter. Boyd stock fell 31 cents to $4.13, a 7 percent drop, with most selling occurring after Boyd announced earnings in the mid-afternoon.

Ellis Landau, chief financial officer of Boyd, warned analysts and investors that it was unlikely the company would meet the 13 cents-per-share expectation on Wall Street for the fourth quarter.

"We think we can do a little better than the 7 cents per share we did in the third quarter, but not by too much," Landau said.

At the top line, the company performed well, recording revenues of $271 million, up 13 percent over the year-ago quarter. The Stardust's performance improved drastically, with cash flow rising from $106,000 last year to $3.02 million in the most recent quarter. And Blue Chip, the Michigan City, Ind., casino acquired last November, produced $20.4 million in cash flow, more than any other property in Boyd's portfolio.

But those strong performances weren't enough to overcome severe declines in performance in Nevada, Mississippi and Louisiana. At Sam's Town Las Vegas, cash flow fell 47 percent to $2.7 million, a decline the company blamed on a continuing expansion project. That $86 million project, which will add a 18-screen movie theater, 500 slots and an 1,100-seat events center to Sam's Town, should open in mid-November.

A more severe decline occurred at Sam's Town Tunica, where a casino renovation and increases in marketing expenses caused cash flow to plunge to $631,000 for the quarter, down from $6.6 million. That expansion, which removed 28 percent of the casino's slot inventory, should be finished by year's end.

Increased competition for the Treasure Chest, located near New Orleans, caused cash flow to fall 59 percent to $3.4 million. At the Eldorado and Joker's Wild properties in Henderson, cash flow fell off 30 percent to $1.2 million, which the company blamed on increased competition in the Henderson market.

Meanwhile, Boyd's three downtown Las Vegas properties -- the California, the Fremont and Main Street Station -- posted $9.4 million in cash flow, remaining relatively flat compared to last year. Cash flow was also flat at Par-A-Dice in East Peoria, Ill., which recorded $12.3 million in cash flow.

"It's always tough to deliver current results that aren't satisfactory, though we do feel good about the outlook for 2001," said Don Snyder, president of Boyd. "While the year 2000 has become a more challenging transition year than we expected, we feel very good about what's been done ... and we are confident about our ability to get back on track in 2001."

Also reporting earnings Wednesday was Anchor Gaming of Las Vegas, which posted net income of $18.5 million for the quarter ending Sept. 30, up 17 percent from the year-ago quarter.

Anchor earned $1.56 per diluted share before one-time charges, a 20 percent increase and a record for the company. One-time charges reduced actual earnings by 7 cents per share, to $1.49.

Analysts had expected $1.50 per share in earnings.

Revenues increased 9 percent, to $138.8 million, while cash flow before one-time charges shot up 22 percent to $52.9 million. One-time charges reduced actual cash flow by $1.3 million.

The company also announced a 2-for-1 stock split, effective Oct. 31. The split will increase Anchor's outstanding shares to 14.2 million.

On Oct. 17, Anchor completed the buyback of 4.6 million shares from Chairman Stanley Fulton, who is retiring from the company, and members of his family. Fulton and his family received $306 million in cash and promissory notes. To finance the transaction, the company sold $250 million in 8-year notes yielding 10 percent, and increased its credit facility from $300 million to $325 million.