Boyd beats expectations, has ‘huge’ fourth quarter

David Strow

Friday, Feb. 8, 2002 | 11:08 a.m.

Strong performances in downtown Las Vegas and the Boulder Strip helped carry Boyd Gaming Corp. to a fourth quarter well ahead of analyst expectations.

The Las Vegas-based casino operator on Thursday posted net income of $6.4 million, or 10 cents per share. In the year-ago period, Boyd lost $4.7 million, or 7 cents per share.

Prior to one-time charges, Boyd reported net income of 15 cents per share, compared to a loss of 6 cents per share a year ago. Analysts had only been expecting Boyd to earn 4 cents per share.

"Frankly, it's above what we expected as we entered the fourth quarter," Ellis Landau, Boyd's chief financial officer, said. "We didn't expect the first full quarter after the Sept. 11 attacks would be the best quarter of the year for us."

CIBC World Markets gaming analyst William Schmitt called the quarter "huge."

"They really performed, right across the board," Schmitt said. "We're two to three quarters into what I consider a good, solid fundamental turnaround. The numbers we see here are very encouraging."

Boyd stock closed Thursday at $8.51, up 42 cents, a gain of more than 5 percent, after the earnings were announced.

While revenues were up just 5 percent to $267.2 million, cash flow rose 48 percent to $63 million. That was the second-highest quarterly cash flow in Boyd's history, the company said.

That was partially the result of "aggressive" cost-cutting measures that began in the first quarter and intensified after Sept. 11, said Boyd President Don Snyder. Boyd also benefitted from lower interest rates on its $1.15 billion debt load.

But these cost-cutting measures primarily involved merging various corporate functions for Boyd's casinos, rather than layoffs, said Boyd spokesman Rob Stillwell. Boyd's only post-Sept. 11 layoffs were 200 at the Stardust and 200 at Sam's Town Las Vegas, he said.

Of Boyd's eight properties, seven showed growth during the quarter. The sole exception was the Stardust on the Las Vegas Strip, where cash flow fell 23 percent to $3.5 million.

"It's been tough on the Las Vegas Strip, and the Stardust ... was not excepted from that difficult environment," Landau said. "The Stardust still hung in there pretty well, given the tough times on the Strip."

Elsewhere in the Las Vegas Valley, though, Boyd's casinos performed far better than expected.

Sam's Town Las Vegas, which had been a laggard for Boyd in previous years, posted cash flow of $7.2 million in the quarter, a 321 percent increase. Boyd's Henderson casinos, the Eldorado and Joker's Wild, reported $1.9 million in cash flow, up 33 percent. And the company's three downtown casinos -- the California, Fremont and Main Street Station -- reported cash flow of $12.5 million, up 10 percent, a new quarterly record.

"Really, the upside (to Boyd's earnings) came from the Nevada properties, and substantially," Schmitt said.

"(The Las Vegas locals market) is showing a bit more resilience than we would have expected, given the events of Sept. 11 and the layoffs (in Las Vegas)," Snyder said.

Neither Green Valley Ranch Station Casino nor the Palms, both opened during the quarter, seemed to have much effect on Boyd's local properties, Snyder said.

"Green Valley Ranch ... is an attractive place, and it's had some impact on the market place, but our volumes at Sam's Town have not been impacted as much as we would have anticipated," Snyder said. "The Palms has been a bit softer than people expected ... it doesn't seem to have a major impact on our business either."

The downtown properties, by contrast, rely heavily on fly-in traffic, particularly from Hawaii. Fly-in traffic has been the weak spot for Las Vegas' gaming industry since Sept. 11, but it did not prove a problem for Boyd.

One of the biggest reasons, Schmitt said, is that Boyd's Hawaiian customers usually come on chartered fights.

"Those people pretty much know each other, and they've been doing this for years," Schmitt said. "It's not like getting on a commercial flight, it's like getting on a plane with your buddies. Given the (environment), you have to say, 'People aren't going to get on planes.' But they did."

Boyd's Midwestern casinos also showed strength, in keeping with the experiences of other riverboat operators. Blue Chip, located east of Chicago in Michigan City, Ind., reported cash flow of $19 million, up 27 percent. Par-a-Dice in East Peoria, Ill., posted cash flow of $13.1 million, up 26 percent. Treasure Chest near New Orleans reported $5 million in cash flow, an increase of 85 percent. And Sam's Town in Tunica, Miss., reported $1.6 million in cash flow, compared to negative cash flow of $4.6 million in the year-ago period.

The Delta Downs racetrack, located on the Louisiana-Texas border east of Houston, had negative cash flow of $778,000. Delta Downs began horse racing during the middle of the quarter, but company officials expect the property's performance to improve substantially when the property's 1,500 slot machines come on-line next week.

Boyd executives didn't provide estimates for future quarters, beyond saying that they expected each of the next four quarters to be more profitable than the fourth quarter of 2001.

"We move into 2002 with confidence and optimism," Snyder said. "We feel very good about where we are, and where we're going."