Coast Casinos acquisition boosts Boyd’s earnings

By Liz Benston (contact)

Wednesday, Oct. 27, 2004 | 11:16 a.m.

Third-quarter profit surged at Boyd Gaming Corp., driven largely by the July 1 acquisition of Coast Casinos Inc. as well as increased earnings at Borgata, the Atlantic City megaresort Boyd owns with MGM Mirage.

The company reported profit of $35.5 million or 40 cents per share compared with profit of $7.7 million or 12 cents per share in the third quarter of last year.

During a conference call Tuesday, Boyd Gaming executives said the company has begun to craft a master plan for its Stardust casino on the Strip and that officials will decide next summer -- after Wynn Las Vegas opens across Las Vegas Boulevard -- when and how Boyd will redevelop the aging property. The company may decide to develop it alone or with a partner, Boyd Gaming President Don Snyder said.

"We have the luxury to take the time to do this project right," Snyder said.

Work is under way to complete the foundation of the $500 million Southcoast hotel and casino south of the Strip, he said. The project, which would mark Coast's fifth locals casino, is still on track to open at the end of 2005.

Also Tuesday, Boyd announced plans to build a second hotel tower at the Borgata resort it owns with MGM Mirage in Atlantic City. The project would include 500 hotel rooms, 100 suites and 200 resort condominiums in addition to two swimming pools, meeting rooms and a spa. The 800-room tower would have a separate entrance and identity from the Borgata, though it would connect to the Borgata casino, Borgata Chief Executive Bob Boughner said. Construction would begin in summer 2005 for an expected opening in mid-2007.

Boughner said the cost of the project, which has yet to be approved by the boards of Boyd Gaming and MGM Mirage and state authorities, hasn't been formalized.

Preliminary plans approved by the Casino Reinvestment Development Authority, a state agency in New Jersey, on Thursday approved preliminary plans for a hotel tower worth roughly $350 million.

Excluding one-time events such as an $8.3 million land sale gain and a $4.3 million penalty to retire debt early, Boyd reported profit of $33.3 million or 38 cents per share -- one cent higher than analysts' estimates -- compared with $9.8 million or 15 cents per share a year earlier.

Revenue rose 68 percent to $522.5 million. Revenue at properties open at least a year rose 4 percent. Cash flow rose 109 percent to $133.4 million.

The Coast Casinos properties -- including Barbary Coast, Gold Coast, Suncoast and Orleans -- reported a 9 percent increase in third quarter revenue to $162 million and a 21 percent increase in cash flow to $45 million.

Revenue at the company's Boulder Strip casinos grew 9 percent to $42.9 million. The Stardust reported an 11 percent increase in revenue to $35.8 million and the company's three casinos in downtown Las Vegas reported a 3 percent increase to $57.2 million.

The locals gambling market is booming, while the Stardust has benefited from new marketing programs implemented last year, Chief Financial Officer Ellis Landau said. Cash flow gains downtown were "mostly wiped out" by increased fuel charges involving the company's air charter service between Hawaii and the downtown casinos, Landau said.

The Borgata's performance continues to exceed expectations, executives said. The property, which opened in July 2003, reported $35.9 million in third-quarter profit compared with only $5.1 million a year ago.

Hotel occupancy was virtually 100 percent for the quarter and average daily rates were $131.

The Borgata reported the highest table game revenue of any Atlantic City casino. Each table yielded $4,198 per day, 47 percent higher than the city average. The property's slot revenue is gaining on competitors and revenue per slot per day was the highest in town at $349, 36 percent above the city average.

The new hotel tower, which would begin as a previously-announced casino expansion is wrapping up, is aimed at meeting existing demand and further establishing the Borgata as a resort destination.

The property often turns down as many weekend hotel customers as it has in rooms, Boughner said.

Boughner also said an ongoing strike involving about 10,000 union workers at seven other casinos in Atlantic City could be benefiting Borgata but has probably been "revenue neutral" so far.