Borgata helps Boyd double profit in second quarter

Thursday, July 29, 2004 | 10:57 a.m.

Second-quarter profit at Boyd Gaming Corp. more than doubled from last year on the opening of the Borgata casino resort in Atlantic City in July 2003 and the May purchase of a Shreveport, Miss., casino from Harrah's Entertainment Inc., executives said Wednesday.

"Borgata is proving to be the Lance Armstrong of the Tour de Atlantic City," Boyd Chief Financial Officer Ellis Landau said.

Officials said they are contemplating adding another hotel tower to the Borgata on top of the previously announced casino expansion that will soon be under way at the property, the result of blockbuster results that have surpassed company and Wall Street expectations. The boards of both Boyd and Borgata joint venture partner MGM MIRAGE would still need to approve the tower, they said.

Boyd's Stardust and Sam's Town casinos in Las Vegas improved from last year, though earnings at the company's downtown casinos fell on higher fuel costs for its Hawaii air charter service, officials said. Results at its Midwest and South casinos were mixed.

The performance of Borgata and the Las Vegas locals market is "helping offset the slower growth riverboat markets that have had to absorb tax increases," Goldman, Sachs & Co. gaming analyst Steven Kent said in a research note today.

Fulcrum Global Partners gaming analyst Joe Greff said he is impressed with Borgata's performance but is "less than enamored with the rest of the existing Boyd portfolio."

The second-quarter boost at Sam's Town and Stardust is more a function of the booming local tourism economy than anything particular to those properties, Greff said.

"It's more of a rising tide lifting all boats," he said. Stardust's performance was relatively poor in the second quarter of last year, making this year's comparison relatively easy, he said.

The company reported profit of $15.5 million or 23 cents per share compared with $4.4 million or 7 cents per share for the same period last year.

The company, which closed its $1.3 billion merger with locals casino operator Coast Casinos Inc. on July 1, reported some Coast financials Wednesday.

Revenue at Coast Casinos rose 12 percent in the second quarter to $163 million compared with a year ago. Cash flow -- a key indicator of casino performance -- rose 15 percent to $46 million from a year earlier. Revenue rose 11 percent and cash flow rose 24 percent over a trailing 12-month period compared with the prior 12 months.

Excluding certain one-time items such as a $1.4 million gain on a land sale and expenses of $5.9 million related to the acquisition of the Shreveport casino, Boyd's second quarter earnings were $18.2 million or 27 cents per share -- in line with analysts' estimates. Boyd sold more than 26 acres of land at the northeast corner of Jeffreys Street and St. Rose Parkway for $10.9 million in June after deciding it didn't want to develop the parcel.

Excluding a $3.5 million retroactive gaming tax in Indiana and $11.9 million in expenses related to the opening of the Borgata resort, the company's second quarter 2003 earnings were $13.7 million or 21 cents per share.

Boyd also revealed details of the Borgata's $200 million expansion Wednesday, saying it would add another 600 slot machines, 36 table games, 56 poker tables, 46 race book seats, two upscale restaurants, one casual dining and one fast food restaurant, two nightclubs, six retail shops and more spa treatment rooms. The resort would have a total of 4,100 slots, 175 table games and 90 poker tables with the expansion.

Construction will occur on land leased from MGM MIRAGE and adjacent to the resort. Work is expected to begin in December with an opening date in the second quarter of 2006, officials said.

"When we developed Borgata, we knew we were building the right product for Atlantic City and the Northeast gaming market, but it is exceeding our expectations both in how fast its revenue and earnings are ramping up and in how quickly we need to expand the property," Boyd Chief Executive Bill Boyd said.

"In many areas, we simply cannot meet the strong demand for our facilities," Borgata Chief Executive Bob Boughner said.

The resort reported the highest slot revenue per unit per day and the highest table revenue per unit per day of any Atlantic City casino. Revenue was $206.5 million, including promotional expenses of $41.6 million. Casino revenue was $150 million and non-gaming revenue was $56.6 million. Profit was $24.5 million. Boyd and MGM MIRAGE each receive half of the proceeds.

Overall revenue at Boyd rose 9 percent to $341.9 million, excluding promotional expenses. Cash flow surged 35 percent to $85.3 million. Excluding the Borgata resort, cash flow rose only 5 percent to $73.9 million in the second quarter.

Revenue at the Stardust rose 16 percent to $38.2 million and cash flow rose 62 percent to $4.6 million. At Sam's Town, revenue increased 12 percent to $36.7 million and cash flow rose 20 percent to $10.2 million.

Boyd's three downtown casinos reported a 2 percent increase in revenue to $59 million. But cash flow fell 12 percent to $8.8 million.