Beleaguered Boyd Reports Lackluster 3Q

According to financial documents obtained by onlinecasinocrawler.com, Boyd reported income during the third quarter 2006 income from continuing operations of $28.1 million, or $0.32 per share, compared with $33.9 million, or $0.37 per share, in the same period 2005. When including discontinued operations (the recently shed Barbary Coast South Coast casinos), Boyd reported a net loss for the third quarter 2006 of $12.9 million, or $0.15 per share, compared to net income of $32.9 million, or $0.36 per share, reported in the same period 2005.

Adjusted Earnings from continuing operations for the third quarter 2006 were $38.8 million, or $0.44 per share, as compared to $51.1 million, or $0.56 per share, for the same period in 2005. The net loss for the 2006 period included a $65.0 million pre-tax impairment charge, included in discontinued operations, to write-down South Coast to its fair value less estimated cost to sell.

Borgata results were also below expectations, according to Joseph Greff, an analyst with Bear Sterns in an investor’s note. The property generated $25.7 million in operating income for before amortization. However, Greff’s team estimated earnings would be $30.4 million during that period.  He did note however, “Benefits from the property’s recent expansion were more than offset by the 3-day government shutdown(estimated loss of $7mm in revs and $4mm in EBITDA), increased marketing, depreciation, labor, and interest charges.”

While Borgata posted record revenues, net income declined to $45.1 million for the third quarter 2006 as compared to $55.9 million for the third quarter 2005. Adjusted EBITDA during the quarter also declined by $4.6 million, or 6.0%, from the same period in the prior year. According to Boyd, declines are primarily due to the three-day mandated New Jersey state shutdown and the launch of the new public space expansion. The shutdown resulted in an estimated loss of $7 million in gaming revenue and $4 million in Adjusted EBITDA. Additionally, the property incurred greater marketing costs and certain labor inefficiencies related to the launch of the public space expansion. Higher depreciation and interest charges at Borgata were also related to the opening.

Other significant charges include $6.0 million for write-downs and other charges that consist mainly of estimated Stardust termination benefits and a charge to write-down land we had purchased for our Pennsylvania development that is now held for sale, $4.3 million charge for accelerated depreciation at Stardust, which will closes November 1 to make way for our Echelon Place development, $3.2 million charge for pre-opening expenses primarily related to Echelon Place development, $1.8 million charge for the change in fair value for forward-starting interest rate swaps and $1.3 million in charges for our share of Borgata's loss on asset disposals and pre-opening expenses.




In the Central Region, Blue Chip net revenues increased 16.8% in the third quarter 2006 over the same period in 2005, and the property improved EBITDA margin by over 330 basis points from the second quarter 2006, as we neared completion of our launch phase for the new expansion during the third quarter. Treasure Chest and Delta Downs recorded third quarter 2006 Adjusted EBITDA increases of 267% and 53.0%, respectively, over the 2005 quarter. While hurricane disruption resulted in temporary closures of the properties in 2005, increased revenue and improved EBITDA margin were key factors in their current quarterly performances. Treasure Chest was closed for 35 days and Delta Downs was closed for nine days during the third quarter 2005.

In Downtown Las Vegas, Boyd properties posted record third quarter results with Adjusted EBITDA of $9.5 million, a 2.0% increase over the third quarter 2005, largely attributable to greater operating efficiencies.

When catering to the Las Vegas Locals segment, third quarter net revenues were $199.5 million versus $214.2 million for the third quarter 2005. Third quarter 2006 Adjusted EBITDA was $56.2 million as compared to $71.1 million in the same quarter 2005. New capacity in the market and increased promotional spending were the primary reasons for the declines in net revenues and Adjusted EBITDA.

The company’s expansion pipeline includes Echelon Place, which will break ground next spring and a $130 million  expansion of the Blue Chip casino in Michigan City, Indiana. Set to start early next year, Boyd will add 300 guest rooms in  a 22-story tower, a spa and fitness center, additional meeting and event space, new dining and nightlife experiences, and a more dramatic entrance and porte cochere.


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