2004 success buoys Boyd

Friday, May 13, 2005 | 10:42 a.m.

Boyd Gaming Corp. executives said Thursday they were genuinely surprised by a 2004 performance that catapulted the once-overlooked company into the ranks of the year's top stock performers.

"Nothing could have prepared us for the success we experienced in 2004," Chief Executive Bill Boyd said at the company's annual shareholder meeting.

This year -- the first full year owning the Coast Casinos Inc. franchise of locals properties -- already is off to a stronger start, Boyd said.

The company's shares are now valued at roughly 12 times where the stock traded three years ago, he said.

Boyd assured shareholders that the Coast Casinos management team -- responsible for much of the growth the company has experienced over the past several months -- is still intact after last year's deal.

"We have not lost one employee to anybody since the merger," Boyd Gaming board member Michael Gaughan said of his top staffers. Gaughan, who was bought out of privately held Coast, is now chief executive of Boyd's Coast Casinos subsidiary.

Executives also touted the company's half-owned Borgata resort it operates in Atlantic City, which opened in July 2003. The property has posted the highest return on investment of any major casino resort in the past decade, they said.

Borgata -- the city's newest and most luxurious resort -- generated gambling revenue of $638 million last year, only $9 million short of Atlantic City's No. 1 revenue-producer, the much-larger Bally's casino. The resort generated $216 million in operating cash flow in 2004.

The resort is attracting a higher-end customer that might not have frequented Atlantic City in the past, they said.

The property, which has enrolled 1.4 million customers in its "Borgata Rewards" gambler loyalty club, grew its higher-end gambling business by 38 percent last year, Borgata Chief Executive Bob Boughner said.

The Borgata's table game revenue handily beat Atlantic City competitors with a 21 percent market share -- 56 percent higher than the next-closest casino, Boughner said. The property's slot machine market share also was 35 percent higher than the competition.

"Borgata is proving that entertainment is not as seasonal as once thought," he said.

The company is bullish on redeveloping the company's Stardust property and, longer term, the Barbary Coast casino on the Strip, executives said.

"These are two of the most exciting development opportunities that exist in Las Vegas today," Boyd President Keith Smith said.

The company has begun the design work to master plan the redevelopment of the 61-acre Stardust site -- a planning process expected to take up much of the remainder of this year, Smith said.

No timeline has been determined for the redevelopment of the Barbary Coast, which would be a longer-term project, executives said.

The casino sits on nearly five acres at the corner of Flamingo Road and the Strip. That's still enough room to build a high rise without cutting into surrounding buildings, Smith said.

"There's a tremendous amount you can do with vertical development," he said.

Executives reiterated Thursday's announcement of a further expansion of the company's upcoming South Coast resort south of the Strip in addition to other expansion projects under way in the Midwest.

Among the items voted on at the meeting, stockholders approved an executive bonus plan and increased the number of company shares by 5 million that can be used to issue future stock option grants and other executive awards.

In response to a shareholder question, Boyd said it would be highly unlikely that business partner MGM Mirage would sell its 50 percent interest in the lucrative Borgata resort to his company.

"It's a pretty sweet deal for them," Boyd said. MGM Mirage -- which contributed land and some cash for the resort but left development and operations up to Boyd -- is "collecting a profit with minimal effort," he said.