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Boyd Gaming sees profit fall as locals market takes hit

Updated Tuesday, Oct. 27, 2009 | 11:19 a.m.

Boyd Gaming Financial Information

  4Q 2009 4Q 2008 % Change 3Q 2009
Revenue $384.9 million $422.6 million -9% $398.2 million
Net income ($1 million) ($220.8 million) N/A $6.3 million
Net income per share (1 cent) ($2.51) N/A 7 cents

Boyd Gaming Corp. of Las Vegas today said it remained profitable in the third quarter, despite a decline in revenue for its biggest hotel-casinos in Las Vegas, where unemployment is running at an unprecedented 13.9 percent.

The company earned $6.3 million or 7 cents per share in the quarter, down from $8.7 million or 10 cents in the year-ago quarter. Net revenue fell 6.6 percent to $398.2 million.

The operating measure of adjusted EBITDA -- earnings before interest, taxes, depreciation and amortization -- fell 4.5 percent to $96.6 million.

"We are encouraged that we were able to produce both increased EBITDA and operating margins in three of our four regions during the quarter. Improved results in our Downtown Las Vegas, Borgata (Atlantic City) and Midwest and South regions helped offset softness in the Las Vegas Locals market. While visitation levels remained fairly constant, spend per visitor continues to be down significantly year-over-year, as consumers are still being cautious with their spending," Chief Executive Officer Keith Smith said in a statement.

Boyd's big Las Vegas properties outside of downtown, catering to both visitors and locals, include Sam's Town, the Orleans, Gold Coast and Suncoast. They posted net revenue of $150.7 million, down from $181.8 million in the year-ago quarter. Adjusted EBITDA for this group fell 31.3 percent to $31.4 million.

"Results in the region continue to be impacted by lower consumer spending and room rate pressures throughout the entire market, as Las Vegas remains one of the hardest-hit metropolitan areas," Boyd said in a statement.

Boyd reiterated its interest in acquiring some or all of the assets of bankrupt Station Casinos Inc. and said it anticipates that work on its Echelon project on the Las Vegas Strip will remain suspended for three to five years.

Smith, during a conference call, signaled Boyd remains intensely interested in Station and asserted Boyd will offer more value to creditors than any reorganization plan Station may propose.

"We stand ready to discuss our proposal and begin due diligence as soon as the bankruptcy court allows us," he said.

"We cannot be more serious. We are very serious about acquiring some of all of the Station assets," he said.

Saying Boyd's national player loyalty marketing program would fit in with a Station acquisition, he said "We believe an acquisition would deliver immediate value to our shareholders, and represents a very attractive and timely solution for Station, its creditors, employees and customers."

Station, however, said in a court filing last month that: "Due consideration was given to Boyd and will be given to any other bona fide offers."

Station said in the court papers that Boyd's interest in an acquisition, first revealed in February, was rejected after evaluations that included discussions with legal and financial advisors as well as certain creditors.

Station said in the court papers its "OpCo" operating company "continues to believe that a comprehensive debt-restructuring plan is in the best interest of the debtors' estate, rather than pursuit of a distressed-sale transaction under the present circumstances with a primary competitor such as Boyd."

On Echelon, the company suspended construction of the megaresort in August 2008 and at that time said it expected the suspension to last three to four quarters. Since then, the economy has deteriorated and Boyd executives today said financing is not available for such a project as the Las Vegas market still needs to absorb 10,000 rooms coming online at CityCenter and other hotel-casino projects.

"Neither us nor anyone else anticipated the recession would be as deep as it has been," Smith said on the conference call.

"We continue to believe in the long-term viability of the Las Vegas market. But given the ongoing weak economic conditions, the significant new supply coming online and a difficult capital market environment for projects of this nature, resuming construction in the near term is not an option," Smith said in a company statement. "We remain committed to having a significant presence on the Las Vegas Strip as part of our long-term growth strategy and we continue to view this site as a major strategic asset. We will use the time this ongoing suspension creates to ensure that the project that is ultimately built is appropriately positioned and competitive in the marketplace."

Executives on the call also said that after an extremely soft August, business picked up in Las Vegas in September.

The company's downtown Las Vegas properties, benefiting from an established visitor base in Hawaii, generated net revenue of $54.9 million in the third quarter, down slightly from $55.6 million in the third quarter of 2008. Adjusted EBITDA for the third quarter at those properties was $8.7 million, a 26.1% increase from the $6.9 million reported in the third quarter 2008.

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