Boyd Gaming Reports First Quarter Results

07 May 2009

LAS VEGAS, May 6 /PRNewswire-FirstCall/ -- Boyd Gaming Corporation (NYSE: BYD) today reported financial results for the first quarter ended March 31, 2009.

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For the quarter, we reported a net loss of $13.8 million, or $0.16 per share, compared to a loss of $32.6 million, or $0.37 per share, in the same period last year. The loss was due in part to a non-cash, pre-tax impairment charge of $28.4 million related to the write-off of goodwill incurred as a result of the finalization of our purchase price for Dania Jai-Alai in January 2009.

Adjusted Earnings(1) for the first quarter 2009 were $13.0 million, or $0.15 per share, compared to $29.6 million, or $0.34 per share, for the same period in 2008. During the first quarter 2009, certain pre-tax adjustments resulted in a net reduction of income by $41.5 million ($26.8 million, net of tax, or $0.31 per share). By comparison, the first quarter 2008 included certain pre-tax adjustments that had a net effect of reducing income by $95.0 million ($62.2 million, net of tax, or $0.71 per share). Pre-tax adjustments in the first quarter 2009 and 2008 are listed in a table at the end of this press release.

Net revenues were $434.8 million for the first quarter 2009, compared to $471.1 million for the same quarter in 2008, a decrease of 7.7%. Total Adjusted EBITDA was $109.6 million for the quarter, compared to $127.7 million in the prior year.

Keith Smith, President and Chief Executive Officer of Boyd Gaming, commented on the quarter, "The recession continues to impact our business, but we're encouraged by some positive trends that developed during the quarter. In our Las Vegas Locals region, we began to see signs of stabilization, while Borgata continued to outperform a severely challenged Atlantic City market. Results were especially encouraging in our Midwest and South and Downtown Las Vegas regions, both of which posted gains for the quarter. These regional performances helped to offset difficult economic climates in Las Vegas and Atlantic City, and demonstrate the value of geographic diversification to our Company."

(1) See footnotes at the end of the release for additional information relative to non-GAAP financial measures.

Key Operations Review

Las Vegas Locals

In our Las Vegas Locals segment, first quarter 2009 net revenues were $170.1 million versus $206.5 million for the first quarter 2008. First quarter 2009 Adjusted EBITDA was $45.3 million, a 32.0% decrease from the $66.7 million in the same quarter 2008. We continue to be impacted by overall weakness in consumer spending, as well as significant declines in room rates.

Downtown

Our Downtown Las Vegas properties generated net revenues of $58.7 million and Adjusted EBITDA of $13.4 million for the first quarter 2009, versus $60.9 million and $10.2 million, respectively, for the first quarter 2008. Favorable fuel pricing led to improved margins from our Hawaii charter operations, while increased efficiencies in our Downtown operations also strengthened results.

Midwest and South

In our Midwest and South region, we recorded $206.1 million in net revenues for the first quarter 2009, compared to $203.7 million for the same period in 2008. Adjusted EBITDA for the current period was $48.0 million, an increase of 5.3% from the $45.6 million reported in the first quarter of 2008. Continued strength at our Louisiana properties helped boost results from this region, highlighted by all-time record revenue and Adjusted EBITDA at Delta Downs.

Borgata

Borgata's operating income for the first quarter 2009 was $25.5 million versus $37.1 million for the first quarter 2008. Net revenues for Borgata were $187.9 million for the first quarter 2009, down compared to the $202.0 million recorded in the same quarter in 2008. Adjusted EBITDA was $45.9 million, compared to $55.5 million for the first quarter 2008. Borgata's results were adversely impacted by both the recession and an increasingly competitive regional environment.

Paul Chakmak, Executive Vice President and Chief Operating Officer, said, "We responded aggressively to this downturn by streamlining our operations and removing costs from across our business. These efforts helped lessen the recession's impact on our results, particularly in our Las Vegas regions. Elsewhere, results were brighter. Our Louisiana properties have proven resilient, and our Blue Chip expansion is being favorably received as we transition from our opening phase."

Key Financial Statistics

The following is additional information as of and for the three months ended March 31, 2009:

    --  March 31 debt balance: $2.70 billion    --  March 31 cash: $98.2 million    --  Maintenance capital expenditures during the quarter: $7.5 million    --  Expansion capital expenditures during the quarter: $19.5 million        --  Echelon: $10.9 million        --  Blue Chip: $8.6 million    --  Capitalized interest during the quarter: $0.4 million    --  March 31 debt balance at Borgata: $699.9 million

Conference Call Information

We will host our first quarter 2009 conference call today Wednesday, May 6 at 12:00 p.m. Eastern. The conference call number is 888.680.0865 and the passcode is 63949973. Please call up to 15 minutes in advance to ensure you are connected prior to the start of the call.

The conference call will also be available live on the Internet at www.boydgaming.com or http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=95703&eventID=2170613

Following the call's completion, a replay will be available by dialing 888.286.8010 on Wednesday, May 6, beginning two hours after the completion of the call and continuing through Wednesday, May 13. The passcode for the replay will be 29662484. The replay will also be available on the Internet at www.boydgaming.com.

The following table presents Net Revenues and Adjusted EBITDA by operating segment and reconciles Adjusted EBITDA to net loss for the three months ended March 31, 2009 and 2008. Note that in the Company's periodic reports filed with the Securities and Exchange Commission, the results from Dania Jai-Alai and corporate expense are classified as part of total other operating costs and expenses and are not included in Reportable Segment Adjusted EBITDA.

                                           Three Months Ended                                                March 31,                                             --------------                                             2009      2008                                             ----      ----    Net Revenues                             (In thousands)        Las Vegas Locals                   $170,099  $206,494        Downtown Las Vegas (a)               58,665    60,929        Midwest and South                   206,081   203,695                                            -------   -------                Net revenues               $434,845  $471,118                                           ========  ========    Adjusted EBITDA        Las Vegas Locals                    $45,320   $66,655        Downtown Las Vegas                   13,354    10,169        Midwest and South                    48,021    45,599                                             ------    ------            Wholly-owned property Adjusted             EBITDA                         106,695   122,423            Corporate expense (c)            (9,980)  (13,746)                                             ------   -------                Wholly-owned Adjusted                 EBITDA                      96,715   108,677            Our share of Borgata's              operating income before net              amortization, preopening              and other items (d)            12,917    19,005                                             ------    ------                Adjusted EBITDA (e)         109,632   127,682                                            -------   -------    Other operating costs and expenses        Deferred rent                         1,089     1,134        Depreciation and amortization (f)    42,976    43,494        Preopening expenses                   5,839     5,579        Our share of Borgata's preopening         expenses                               176       408        Our share of Borgata's write-downs         and other charges, net                  (5)       70        Share-based compensation expense      3,392     2,969        Write-downs and other charges        28,963    90,313                                             ------    ------                Total other operating                 costs and expenses          82,430   143,967                                             ------   -------    Operating income (loss)                  27,202   (16,285)                                             ------   -------    Other non-operating items        Interest expense, net (b)            45,267    30,253        Increase in value of derivative         instruments                              -      (442)        Gain on early retirements of debt    (2,400)     (950)        Our share of Borgata's non-         operating expenses, net              4,522     4,605                                              -----     -----                Total other non-                 operating costs and                 expenses, net               47,389    33,466                                             ------    ------    Loss before income taxes                (20,187)  (49,751)    Benefit from income taxes                 6,359    17,164                                              -----    ------    Net loss                               $(13,828) $(32,587)                                           ========  ========    (a) Includes revenues related to Vacations Hawaii and other travel agency        related entities of $8.7 million and $10.0 million for the three        months ended March 31, 2009 and March 31, 2008, respectively.    (b) Net of interest income and amounts capitalized. Interest expense for        the three months ended March 31, 2009 includes $8.9 million of prior        period interest expense (from the March 1, 2007 date of acquisition to        December 31, 2008) related to the January 2009 amendment to the        purchase agreement resulting in the finalization of our purchase price        for Dania Jai-Alai.    (c) The following table reconciles the presentation of corporate expense        on our condensed consolidated statements of operations to the        presentation on the accompanying table.                                           Three Months Ended                                                March 31,                                              --------------                                              2009      2008                                              ----      ----                                             (In thousands)    Corporate expense as reported on our     condensed consolidated statements of     operations                             $12,685   $15,773    Corporate share-based compensation     expense                                 (2,705)   (2,027)                                             ------    ------    Corporate expense as reported on the     accompanying table                      $9,980   $13,746                                             ======   =======    (d) The following table reconciles the presentation of our share of        Borgata's operating income on our condensed consolidated statements of        operations to the presentation of our share of Borgata's results on        the accompanying table.                                            Three Months Ended                                                 March 31,                                              --------------                                              2009      2008                                              ----      ----                                             (In thousands)    Operating income from Borgata, as     reported on our condensed     consolidated statements of     operations                             $12,422   $18,203    Add back:        Net amortization expense related         to our investment in Borgata           324       324        Our share of preopening expenses        176       408        Our share of write-downs and other         charges, net                            (5)       70                                                 --        --    Our share of Borgata's operating income     before net amortization, preopening     and other items                        $12,917   $19,005                                            =======   =======    (e) The following table reconciles Adjusted EBITDA to EBITDA and net loss                                           Three Months Ended                                                March 31,                                             --------------                                             2009      2008                                             ----      ----                                             (In thousands)    Adjusted EBITDA                        $109,632  $127,682        Deferred rent                         1,089     1,134        Preopening expenses                   5,839     5,579        Our share of Borgata's preopening         expenses                               176       408        Our share of Borgata's write-downs         and other charges, net                  (5)       70        Share-based compensation expense      3,392     2,969        Write-downs and other charges        28,963    90,313        Increase in value of derivative         instruments                              -      (442)        Gain on early retirements of debt    (2,400)     (950)        Our share of Borgata's non-         operating expenses, net              4,522     4,605                                              -----     -----    EBITDA                                   68,056    23,996                                             ------    ------        Depreciation and amortization        42,976    43,494        Interest expense, net                45,267    30,253        Benefit from income taxes            (6,359)  (17,164)                                             ------   -------    Net loss                               $(13,828) $(32,587)                                           ========  ========    (f) The following table reconciles the presentation of depreciation and        amortization on our condensed consolidated statements of operations to        the presentation on the accompanying table.                                            Three Months Ended                                                 March 31,                                              --------------                                              2009      2008                                              ----      ----                                              (In thousands)    Depreciation and amortization as     reported on our condensed     consolidated statements of     operations                             $42,652   $43,170    Net amortization expense related to     our investment in Borgata                  324       324                                                ---       ---    Depreciation and amortization as     reported on the accompanying table     $42,976   $43,494                                            =======   =======    BOYD GAMING CORPORATION AND SUBSIDIARIES    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS    (Unaudited)                            Three Months Ended                                                 March 31,                                              --------------                                              2009      2008                                              ----      ----                                   (In thousands, except per share data)    Revenues        Gaming                             $366,063  $392,966        Food and beverage                    59,041    66,926        Room                                 30,641    38,355        Other                                26,935    29,664                                             ------    ------    Gross revenues                          482,680   527,911    Less promotional allowances              47,835    56,793                                             ------    ------            Net revenues                    434,845   471,118                                            -------   -------    Costs and expenses        Gaming                              172,912   177,035        Food and beverage                    31,384    39,278        Room                                  9,957    11,424        Other                                19,314    22,090        Selling, general and         administrative                      73,973    77,907        Maintenance and utilities            22,386    23,037        Depreciation and amortization        42,652    43,170        Corporate expense                    12,685    15,773        Preopening expenses                   5,839     5,579        Write-downs and other charges        28,963    90,313                                             ------    ------            Total costs and expenses        420,065   505,606                                            -------   -------    Operating income from Borgata            12,422    18,203                                             ------    ------    Operating income (loss)                  27,202   (16,285)                                             ------   -------    Other expense (income)        Interest income                          (4)       (8)        Interest expense, net of amounts         capitalized                         45,271    30,261        Increase in value of derivative         instruments                              -      (442)        Gain on early retirements of debt    (2,400)     (950)        Other non-operating expenses from         Borgata, net                         4,522     4,605                                              -----     -----            Total other expense, net         47,389    33,466                                             ------    ------    Loss before income taxes                (20,187)  (49,751)    Benefit from income taxes                 6,359    17,164                                              -----    ------    Net loss                               $(13,828) $(32,587)                                           ========  ========    Basic and diluted net loss per common     share                                   $(0.16)   $(0.37)                                             ======    ======    Weighted average basic and diluted     shares outstanding                      86,931    87,809                                             ======    ======    The following table reconciles the net loss based upon United States    generally accepted accounting principles to adjusted earnings and adjusted    earnings per share.                                            Three Months Ended                                                March 31,                                              --------------                                              2009      2008                                              ----      ----                                   (In thousands, except per share data)    Net loss                               $(13,828) $(32,587)       Adjustments:          Preopening expenses                 5,839     5,579          Our share of Borgata's           preopening expenses                  176       408          Our share of Borgata's write-           downs and other charges, net          (5)       70          Increase in value of derivative           instruments                            -      (442)          Gain on early retirements of           debt                              (2,400)     (950)          Write-downs and other charges      28,963    90,313          Prior period interest expense           related to the finalization of           our purchase price for Dania           Jai-Alai                           8,883         -          Income tax effect for above           adjustments                      (14,626)  (32,767)                                            -------   -------             Adjusted earnings              $13,002   $29,624                                            =======   =======          Adjusted earnings per diluted           share (Adjusted EPS)               $0.15     $0.34                                              =====     =====          Weighted average diluted shares           outstanding                       86,931    87,809                                             ======    ======    The following table reports Borgata's financial results.                                            Three Months Ended                                                 March 31,                                              --------------                                              2009      2008                                              ----      ----                                             (In thousands)    Gaming revenue                         $168,849  $178,636    Non-gaming revenue                       69,339    68,106                                             ------    ------        Gross revenues                      238,188   246,742        Less promotional allowances          50,298    44,718                                             ------    ------    Net revenues                            187,890   202,024    Expenses                                141,964   146,558    Depreciation and amortization            20,091    17,455    Preopening expenses                         353       816    Write-downs and other charges, net          (10)      140                                                ---       ---        Operating income                     25,492    37,055                                             ------    ------    Interest expense, net                    (8,011)   (6,457)    Provision for state income taxes         (1,032)   (2,754)                                             ------    ------        Total non-operating expenses         (9,043)   (9,211)                                             ------    ------    Net income                              $16,449   $27,844                                            =======   =======    The following table reconciles our share of Borgata's financial results to    the amounts reported on our condensed consolidated statements of    operations.                                            Three Months Ended                                                 March 31,                                              --------------                                              2009      2008                                              ----      ----                                              (In thousands)    Our share of Borgata's operating     income                                 $12,746   $18,527    Net amortization expense related to     our investment in Borgata                 (324)     (324)                                               ----      ----    Operating income from Borgata, as     reported on our condensed     consolidated statements of     operations                             $12,422   $18,203                                            =======   =======    Other non-operating net expenses     from Borgata, as reported on our     condensed consolidated     statements of operations                $4,522    $4,605                                             ======    ======    The following table reconciles operating income to Adjusted EBITDA for    Borgata.                                            Three Months Ended                                                 March 31,                                              --------------                                              2009      2008                                              ----      ----                                              (In thousands)    Operating income                        $25,492   $37,055        Depreciation and amortization        20,091    17,455        Preopening expenses                     353       816        Write-downs and other charges, net      (10)      140                                                ---       ---    Adjusted EBITDA                         $45,926   $55,466                                            =======   =======    The following table reconciles Adjusted EBITDA to EBITDA and net income    for Borgata.                                           Three Months Ended                                                March 31,                                              --------------                                              2009      2008                                              ----      ----                                              (In thousands)    Adjusted EBITDA                         $45,926   $55,466        Preopening expenses                     353       816        Write-downs and other charges, net      (10)      140                                                ---       ---    EBITDA                                   45,583    54,510                                             ------    ------        Depreciation and amortization        20,091    17,455        Interest expense, net                 8,011     6,457        Provision for income taxes            1,032     2,754                                              -----     -----    Net income                              $16,449   $27,844                                            =======   =======

Footnotes and Safe Harbor Statements

Non-GAAP Financial Measures

Regulation G, "Conditions for Use of Non-GAAP Financial Measures," prescribes the conditions for use of non-GAAP financial information in public disclosures. We believe that our presentations of the following non-GAAP financial measures are important supplemental measures of operating performance to investors: earnings before interest, taxes, depreciation and amortization (EBITDA), Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings Per Share (Adjusted EPS). The following discussion defines these terms and why we believe they are useful measures of our performance.

Note that while the Company will continue to include the results of Dania Jai-Alai and corporate expense in Adjusted EBITDA for purposes of its earnings releases, in filings of the Company's periodic reports with the Securities and Exchange Commission, the results of Dania Jai-Alai and corporate expense are not included in the Company's Reportable Segment Adjusted EBITDA. Effective April 1, 2008, the Company reclassified the reporting of its Midwest and South segment to exclude the results of Dania Jai-Alai, since it does not share similar economic characteristics with our other Midwest and South operations. In the Company's periodic reports, Dania Jai-Alai's results are included as part of total other operating costs and expenses. In addition, as of the same date, we reclassified the reporting of corporate expense to exclude it from our subtotal for Reportable Segment Adjusted EBITDA and include it as part of total other operating costs and expenses. Furthermore, in the Company's periodic reports, corporate expense is presented to include its portion of share-based compensation expense.

EBITDA and Adjusted EBITDA

EBITDA is a commonly used measure of performance in our industry which we believe, when considered with measures calculated in accordance with United States Generally Accepted Accounting Principles (GAAP), gives investors a more complete understanding of operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Management has historically adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide the most accurate measure of our core operating results and as a means to evaluate period-to-period results. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core on-going operations. We do not reflect such items when calculating EBITDA; however, we adjust for these items and refer to this measure as Adjusted EBITDA. We have historically reported this measure to our investors and believe that the continued inclusion of Adjusted EBITDA provides consistency in our financial reporting. We use Adjusted EBITDA in this press release because we believe it is useful to investors in allowing greater transparency related to a significant measure used by management in its financial and operational decision-making. Adjusted EBITDA is among the more significant factors in management's internal evaluation of total company and individual property performance and in the evaluation of incentive compensation related to property management. Management also uses Adjusted EBITDA as a measure in determining the value of acquisitions and dispositions. Adjusted EBITDA is also widely used by management in the annual budget process. Externally, we believe these measures continue to be used by investors in their assessment of our operating performance and the valuation of our company. Adjusted EBITDA reflects EBITDA adjusted for deferred rent, preopening expenses, share-based compensation expense, write-downs and other charges, change in value of derivative instruments, gain/loss on early retirements of debt, and our share of Borgata's non-operating expenses, preopening expenses and write-downs and other charges, net. In addition, Adjusted EBITDA includes the results of Dania Jai-Alai and corporate expense. A reconciliation of Adjusted EBITDA to EBITDA and net loss, based upon GAAP, is included in the financial schedules accompanying this release.

Adjusted Earnings and Adjusted EPS

Adjusted Earnings is net loss before preopening expenses, change in value of derivative instruments, write-downs and other charges, gain/loss on early retirements of debt, prior period interest expense related to the finalization of our purchase price for Dania Jai-Alai, and our share of Borgata's preopening expenses and write-downs and other charges, net. Adjusted Earnings and Adjusted EPS are presented solely as supplemental disclosures because management believes that they are widely used measures of performance in the gaming industry. A reconciliation of net loss based upon GAAP to Adjusted Earnings and Adjusted EPS are included in the financial schedules accompanying this release.

Limitations on the Use of Non-GAAP Measures

The use of EBITDA, Adjusted EBITDA, Adjusted Earnings and Adjusted EPS has certain limitations. Our presentation of EBITDA,