Boyd Gaming upbeat despite earnings miss

By Liz Benston

Friday, Feb. 14, 2003 | 11:20 a.m.

Boyd Gaming Corp. missed fourth-quarter Wall Street earnings expectations by a hair but still touted record earnings and revenue and cash flow for 2002 as well as its highest annual cash flow in six years at its three casinos in downtown Las Vegas.

"Every unit recorded increased (cash flow) in tough economic and competitive environments," Boyd Gaming Chairman and Chief Executive Officer William Boyd said in announcing the results Thursday. "I am particularly pleased that our Nevada operations, where business conditions were generally difficult in 2002, reported its highest annual (cash flow) in six years."

The company defines cash flow -- a key indicator of casino performance -- as earnings before interest, taxes, depreciation, amortization, pre-opening expenses and non-recurring items.

Executives also said the budget for the company's biggest upcoming project, the luxury Borgata resort in Atlantic City, could increase slightly, from $1.035 billion to $1.0625 billion. Any additional costs over the top estimate would be funded by Boyd Gaming, the company said.

The company hasn't announced an opening date for the Borgata, which is being built in the Marina District of Atlantic City away from the traditional cluster of casinos on the famed Boardwalk. Executives said they hope for an opening in early summer and expect to open a customer center in June that will accept bookings from tourists. The company already has begun to book group business.

The Borgata, the newest major resort in the city in more than a decade, will attract mid- to upper-level visitors, Boyd President Don Snyder said.

"Every level of the market wants to trade up," Snyder said. "We positioned Borgata as a trade up."

Just short of 40,000 people have so far applied to work at the Borgata, which will open with about 5,000 employees, executives said.

Executives also said they don't anticipate New Jersey Gov. James McGreevey's proposal to increase casino taxes to pass muster with state legislators.

Casinos there have denounced the proposed tax hike from 8 percent to 10 percent of gambling revenues, saying it will destroy economic development and job growth.

The company reported fourth-quarter net income of $3.9 million, or 6 cents per share, compared to $6.4 million, or 10 cents per share, during the same period last year.

Excluding certain non-recurring items, earnings were $15.9 million, or 24 cents per share, compared to $9.4 million, or 15 cents per share, for the same quarter last year. Analysts had expected the company to earn 25 cents per share.

Non-recurring items include $3.6 million in pre-opening expenses related to Borgata, a $11.6 million loss on the early retirement of debt and a loss of $3.8 million on the sale of certain assets, including a corporate aircraft.

Consolidated net revenue increased by 14.5 percent, to $306.1 million. Excluding Delta Downs, a racetrack the company purchased and added slots to in early 2002, net revenue at properties open at least a year was up 4.2 percent in the quarter compared to the same quarter a year ago. Most of the gains were due to the ability to permanently dock the company's highest revenue-producer, its Blue Chip riverboat casino in Indiana, in August, the company said.

Cash flow rose by 14.9 percent, to $65.6 million.

Revenues at the company's three downtown casinos totaled $61.1 million in the fourth quarter compared to $57.4 million for the same quarter a year ago. The Stardust reported $34.2 million compared to $33.6 million a year earlier.

Sam's Town, Boyd's casino on the Boulder Strip, reported revenue of $33.1 million compared to $34.2 million. The Eldorado in Henderson and Joker's Wild on the Boulder Strip yielded $9 million compared to $9.3 million.

On a cash flow basis, downtown properties reported $14.1 million compared to $12.5 million. The Stardust reported $3.8 million in cash flow compared to $3.5 million. Sam's Town reported $8.1 million compared to $7.2 million. Eldorado and Joker's Wild reported $1.6 million compared to $1.9 million.

Some analysts today said downtown performed better than they expected, offsetting weaker results in the Midwest.

Deutsche Bank analyst Marc Falcone called the performance "a remarkable accomplishment considering the challenges that many casinos are facing in the downtown Las Vegas market."

"We expect the downtown properties as well as Sam's Town Las Vegas to remain solid performers in 2003, as both operations have solid market niches."

The company's Blue Chip casino in Indiana was the highest revenue producer at the company, totaling $53.8 million in the fourth quarter compared to $46 million and $23.3 million in cash flow compared to $19 million a year ago. The Par-A-Dice casino in Illinois reported $34.6 million in revenue compared to $34.9 million and $11.3 million in cash flow compared to $13.1 million.