Stardust hit hard by slowdown

David Strow

Tuesday, Oct. 16, 2001 | 9:37 a.m.

Boyd Gaming Corp. gave the first post-Sept. 11 financial snapshot of a Las Vegas Strip property Monday -- and the picture wasn't good.

Boyd's Stardust hotel-casino posted cash flow of $722,000 for the quarter ending Sept. 30, down 76 percent from the year-ago period. Revenues were down a more modest 5 percent to $34.4 million. Though the Stardust probably wouldn't have matched last year's results even in a normal year, the property was hurt by the post-Sept. 11 downturn in tourism, Boyd officials said.

Still, one Wall Street analyst cautioned against extending the Stardust results to the rest of the Strip.

"It doesn't really give you a true snapshot of what Las Vegas looked like in the quarter ... it's not a great indicator," said Larry Klatzkin, gaming analyst with Jeffries & Co. "Aztar (Corp., owner of the Tropicana) and Harrah's (Entertainment Inc., owner of Harrah's Las Vegas and the Rio) will be better indicators."

But while Las Vegas took a dip, Boyd's midwestern properties shone. As a result, Boyd was able to report net income of $4.1 million for the quarter, up 11 percent from the year-ago period. The company earned 7 cents per share, up from 6 cents in the year-ago quarter and in line with analyst expectations. The events of Sept. 11 and their aftermath reduced earnings by about 2.5 cents per share, company officials estimated.

Revenues increased 3.4 percent to $273.4 million, while cash flow rose 10 percent to $58.5 million.

"This shows being a quite diversified company ... was very helpful to us," said Chief Financial Officer Ellis Landau.

Boyd's Blue Chip casino, located east of Chicago in Indiana, reported cash flow of $21 million, up 3 percent from the year-ago period and an all-time record for the property. And Par-A-Dice, located in East Peoria, Ill., reported its second-best quarter ever with $13.3 million in cash flow, up 8 percent.

Sam's Town Tunica, following the completion of a huge renovation project, saw cash flow increase sixfold to $3.9 million. And Treasure Chest, located in metro New Orleans, posted cash flow of $4.7 million, an increase of 38 percent.

These performances helped overcome a weak quarter across Las Vegas.

At Boyd's three downtown properties, cash flow fell 6 percent to $8.9 million, while cash flow from its two Henderson casinos was flat at $1.2 million. Sam's Town Las Vegas was up 87 percent to $5 million in cash flow, but this compared to a year-ago quarter heavily impacted by renovation activity.

Because of weakness at the Stardust and Sam's Town, Boyd laid off about 200 workers at each property. It has recalled some workers at each property as business strengthens, though company officials were unable to say how many.

"We reacted quickly to minimize the affect (of the slowdown) on our business in the areas we can control," said Don Snyder, president of Boyd. Staffing levels, he said, was one of those areas "most important to look at when business has been affected severely."

"Stardust and Sam's Town have been affected the most severely," Snyder said.

Boyd, however, is proceeding with two new gaming projects -- the conversion of Louisiana's Delta Downs racetrack into a casino, and the construction of the $1 billion Borgata hotel-casino in Atlantic City.

Boyd had been projecting Delta Downs, acquired earlier this year, would reopen this month with 1,700 slots. Those plans would make Delta Downs, located 100 miles east of Houston, the closest casino to that market.

Those plans also contemplated that Boyd would receive approval for its plans from Louisiana gaming regulators in August. Now, Boyd said it won't be on the Louisiana Gaming Control Board's agenda until Nov. 20. While confident of approval, Boyd officials said they don't expect to get the property open again until the end of the year.

That disappointed Klatzkin, who expects Delta Downs could produce $31 million a year in cash flow.

"But when you're in the state of Louisiana ... nothing's a given," Klatzkin said.

Moving forward on schedule and on budget is the Borgata, a joint venture with MGM MIRAGE. The property is still set to open in the summer of 2003, Snyder said.

"We couldn't be more pleased with the way things are going there," Snyder said.