Quarterly numbers mixed for Boyd

Thursday, Feb. 5, 2004 | 10:52 a.m.

Profit at Boyd Gaming Corp. more than tripled in the fourth quarter because of an easy comparison to losses incurred in the same quarter a year ago, the company reported Wednesday. Excluding those one-time expenses, profit fell 22 percent as casinos in Illinois, Indiana and Nevada were hit by higher taxes and cash flow fell at most of the company's casinos.

Lower results elsewhere were partly offset by better than expected performance at the company's 50 percent-owned Borgata, which opened in Atlantic City in July 2003 as the city's first new megaresort in 13 years.

"The not-so positive takeaway is that the rest of its portfolio -- with the notable exception of Delta Downs (a Louisiana racino) -- has limited growth potential in the near-term," Fulcrum Global Partners analyst Joe Greff wrote in a research note today.

The Borgata's early success has led Boyd to initiate a plan to expand the property's restaurants, bars, casino floor and convention space by a total of about 500,000 square feet. Executives didn't reveal the project's timeline or cost.

In a conference call Wednesday, officials confirmed the company's aim of developing its aging Stardust hotel-casino at some point after the mid-2005 opening of the Wynn Las Vegas megaresort nearby. The company hasn't yet explored financing for the project or whether it would be a joint venture or wholly-owned.

"Borgata has redefined the type and size of product Boyd Gaming can be expected to deliver at a time when we begin to focus more attention on the Las Vegas Strip and our 60 acres of developable real estate at the Stardust," President Don Snyder said. "We don't anticipate making any specific announcement until after Wynn Las Vegas opens."

The company reported earnings of $12.3 million in the fourth quarter, or 19 cents per share, compared to earnings of $3.9 million, or 6 cents per share, a year earlier.

Earnings in 2002 were driven down by a $3.8 million loss on assets held for sale, $3.6 million in pre-opening expenses for the company's Borgata resort joint venture in Atlantic City and a $11.6 million loss on early debt payoffs.

Excluding the one-time expenses, company profit fell 22.2 percent to $12.3 million, or 19 cents per share -- in line with analysts' expectations.

Fourth quarter revenue was $308 million, up from $306 million a year ago primarily because of Borgata.

Including results from Borgata, cash flow rose 9.8 percent to $79.3 million compared to a year ago. Excluding Borgata, cash flow fell 11.4 percent to $58.1 million.

Higher casino taxes in Illinois reduced cash flow by $3.4 million during the quarter, while cash flow at the company's Blue Chip casino in Indiana fell by $2.3 million because of increased taxes in that state. Nevada's reccent gaming tax hike cost the company $700,000.

Cash flow at the company's three casinos in downtown Las Vegas fell 17.2 percent to $11.7 million because of increased operating costs in the company's Hawaiian air charter operations and record performance in the year-ago period. Cash flow fell 33.6 percent at the Stardust to $2.5 million.

"These properties remain very good producers for us," Chief Financial Officer Ellis Landau said of the downtown casinos. Excluding the air charter results, performance last year came close to previous records, he said.

Sam's Town Las Vegas on Boulder Highway reported an 8.1 percent increase in cash flow to $8.7 million.

Borgata, which is half owned by MGM MIRAGE, reported revenue of $176 million and cash flow of $33.9 million for the quarter. Gambling revenue was $122 million, the second highest in Atlantic City. Table game revenue was $48.6 million in the quarter, the highest in town, and slot win was 5th at $73.7 million.

"We are attracting players who did not visit Atlantic City before the opening of Borgata, achieving one of our goals to expand the Atlantic City market," Borgata Chief Executive Bob Boughner said.

Boyd's other properties encountered difficulties last year including property management changes, glitches with new systems and marketing programs and higher gaming taxes, Lehman Brothers analyst Joyce Minor said.

"But it does appear that most of these issues should be behind the company in 2004 and with potential upside at Borgata anything extra from these properties is a bonus, in our view," Minor wrote in a research note today.