Boyd earnings surge on continued growth streak

By Liz Benston (contact)

Wednesday, July 27, 2005 | 10:58 a.m.

Profit at Boyd Gaming Corp. more than tripled in the second quarter, boosted by last year's acquisition of Coast Casinos and continuing a yearlong growth streak that is likely to slow somewhat as the company passes the July anniversary of its takeover of the popular chain of locals casinos.

Executives said the entire company, including its downtown Las Vegas and Stardust casinos, performed well and pointed to further profit drivers in next year's debut of the 1,350-room South Coast in Las Vegas, an expansion at the Borgata resort in Atlantic City and a new riverboat casino in Northern Indiana.

"We may never see another Tiger Woods, we may never see another Lance Armstrong, we may never see another Secretariat," Chief Financial Officer Ellis Landau said. "We may never see another year of the explosive growth rates from July 2004 to June 2005 of Boyd Gaming, but it was really something and it shows what we can do."

The company earned $48.6 million or 55 cents per share for the three months ended June 30 compared with $15.5 million or 23 cents per share a year ago.

Excluding certain costs unrelated to performance, the company earned 56 cents per share -- one cent above Wall Street estimates. In the third quarter, Boyd Gaming expects to generate earnings per share of between 53 and 56 cents, higher than the current average estimate of 52 cents.

The second quarter marked the fourth in a row that the company more than doubled its earnings per share from a year ago and also the fourth straight quarter in which all of the company's geographic regions posted higher operating cash flow than the prior year.

Revenue rose 62 percent to $554.6 million, including promotional expenses. Excluding the addition of Coast properties and others not operated in both 2005 and 2004 quarters, revenue rose 5 percent.

Earnings before interest, taxes, depreciation and amortization -- defined as operating cash flow and a key indicator of casino profit -- were up 87 percent from a year ago to $159.2 million. Excluding properties operated less than two years, that figure was up 14 percent.

That measure of earnings rose 32 percent, respectively, across the Coast properties as well as the company's Boulder Strip casinos, which include Sam's Town, Eldorado and Joker's Wild.

Over the last 12 months ended June 30, the Coast properties generated 31 percent more in operating cash flow under Boyd Gaming than they did as a separate company, Landau said. The Coast chain is managed by a separate operating unit still led by company chief Michael Gaughan.

"With little supply growth and strong demand, the Las Vegas locals business model is in great shape," Landau said.

Over the past year ended June 30, the Boulder Strip casinos generated 28 percent more in operating cash flow than the prior year, the Stardust gained by 72 percent and the company's three downtown casinos gained by 20 percent.

Besides the strong economy, cost-cutting contributed to some of the profit growth, Landau said.

Executives still haven't set an opening date for the upcoming South Coast resort, which will open soon after the first of the year with 660 rooms and will open another 700 or so rooms after about four months.

Another, bigger question mark is the redevelopment of the Stardust. The company is working on conceptual plans for a new resort at the 63-acre site but won't be ready to announce any details until close to the end of the year, executives said.

Analysts have speculated that the company will devise a resort much like the Borgata. The resort is half owned by MGM Mirage and has been a runaway success in Atlantic City, attracting East Coast urbanites and young hipsters who don't normally go to the seaside casino town.

Among the decisions to be made is whether the company will have a joint venture partner at the Stardust and what the project will look like.

"We're still in the data-gathering process," Boyd President Keith Smith said. "We haven't ruled anything out and we haven't ruled anything in."