Boyd Gaming reports $220.8 million quarterly loss

By Steve Green (contact)

Published Thursday, Feb. 26, 2009 | 8:15 a.m.

Updated Thursday, Feb. 26, 2009 | 1:57 p.m.

Boyd Gaming Corp., the Las Vegas company interested in buying part or all of competitor Station Casinos Inc., today reported a quarterly loss from continuing operations of $220.8 million, or $2.51 per share, compared to a profit of $31 million, or 35 cents per share, in the same period last year.

For the fourth quarter ended Dec. 31, Boyd said the loss was caused by non-cash, pre-tax impairment charges of $290.2 million mainly to write down the value of underperforming operations.

Revenue fell from $478.6 million to $422.6 million. Earnings, adjusted for the write downs, met published analysts' expectations and Boyd stock rose 57 cents to $4.55 in early trading today on the news.

"The primary reason for the impairment charges is the effects of the ongoing recession, which caused us to reduce our estimates for projected cash flows and lowered overall industry valuations,'' Boyd said in a statement.

"Our fourth quarter results reflect the ongoing recessionary environment. With consumer confidence at all-time lows, people continue to scale back on discretionary spending. We will continue to manage our business to ensure we are operating efficiently and competitively during these challenging times. The strength of our geographically diversified portfolio, our balance sheet and our experienced management team, has and will continue to serve us well as we navigate our way through this economic downturn," Chief Executive Keith Smith said in a statement.

The company's Las Vegas locals segment, which includes Sam's Town, the Orleans, the Gold Coast and Suncoast hotel-casinos, generated quarterly revenue of $176.8 million vs. $214.4 million for the fourth quarter 2007. Cash flow declined 39.8 percent to $43.8 million as Boyd faced rising unemployment and decreased consumer spending in the Las Vegas Valley; increased supply and weakness in room rates.

Boyd's downtown Las Vegas properties -- including the California, Fremont and Main Street Station casinos -- generated net revenue of $60.8 million and cash flow of $13.3 million, down from $66.9 million and $14.8 million in the 2007 quarter. Its downtown casinos were hurt by the slow economy as well as reduced air capacity from Hawaii, a big feeder market.

Boyd's partially constructed Echelon destination resort on the Las Vegas Strip at the former Stardust site, a project initially estimated to cost $5 billion, remains at a standstill.

On a conference call this morning, Smith offered no new information on the status of Echelon or Boyd's $950 million cash offer for certain Station assets.

He said the 87-acre Echelon site remains a key long-term asset for Boyd and that the company continues to evaluate its options there, including as they relate to the availability of credit,

Regarding the offer to Station Casinos, Smith said Boyd remains interested in buying some or all of Station's locals casinos and hotels.

"These assets appear to be an ideal fit for our company,'' he said.

"It is simply too early in the process to provide more information at this time,'' he added.

Boyd's $950 million offer is for certain Station assets including Texas and Santa Fe stations, its two Fiestas and its interests in the Aliante and Green Valley Ranch resorts. Not included in that offer are the Red Rock, Boulder Station, Palace Station and Sunset Station properties -- though Boyd has said it's willing to consider buying those, too.

Station has said it's evaluating Boyd's interest, but continues to work on management's debt-refinancing plan that would need to be finalized with a bankruptcy filing.

Overall for the fourth quarter and 2008, Smith said Boyd cut expenses by $125 million last year in response to ``the toughest operating environment our industry has ever faced.''

He said business trends during the first eight weeks of the current quarter are similar to those seen in the fourth quarter, which was marked by reduced consumer spending that translated to reduced activity in the gaming industry's casinos and a marked decline in the room rates fetched by gaming companies' hotels.

In Las Vegas and some other markets, Boyd is focused on marketing to locals and has launched a nationwide ``B Connected'' loyalty card program that includes an online component to keep players informed of gaming and entertainment promotions and special events. Boyd has also worked to improve its restaurant offerings for locals, for instance expanding the presence of T.G.I. Friday's from the Orleans to the Suncoast, Gold Coast and Sam's Town.

In the Midwest and South, revenue of $185.1 million was down from $197.3 million while cash flow fell from $44 million to $36.3 million. The company cited increased competition and construction disruption at its recently expanded Blue Chip property in Indiana, though its Louisiana properties were relatively strong.

Borgata resort in Atlantic City, hurt by the recession and heightened competition, generated an operating profit of $16.5 million vs. $35.4 million for the fourth quarter 2007. Revenue of $183.5 million was down from $202.7 million. Boyd owns 50 percent of that property.

Steve Green can be reached at 990-7714 or steve.green@hbcpub.com.