Boyd Gaming Reports Third Quarter Results

28 October 2009

LAS VEGAS, Oct. 27/PRNewswire-FirstCall/ --Boyd Gaming Corporation (NYSE: BYD) today reported financial results for the third quarter ended September 30, 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20030219/BOYDLOGO)

For the quarter, we reported net income of $6.3 million, or $0.07 per share, compared to net income of $8.7 million, or $0.10 per share, in the same period last year. Adjusted Earnings(1) for the third quarter 2009 were $8.0 million, or $0.09 per share, compared to $14.0 million, or $0.16 per share, for the same period in 2008.

Certain pre-tax items resulted in a net increase in Adjusted Earnings of $1.3 million ($1.7 million, net of tax, or $0.02 per share) during the third quarter 2009, including a $13.5 million noncash, pre-tax impairment charge related to our joint venture with Morgans Hotel Group at Echelon, offset by a $14.4 million gain related to our share of an insurance settlement associated with the fire at The Water Club construction site in 2007. By comparison, the third quarter 2008 included certain pre-tax items that had a net effect of increasing Adjusted Earnings by $9.0 million ($5.3 million, net of tax, or $0.06 per share), primarily related to preopening expenses and write-downs and other charges. Pre-tax items in the third quarter 2009 and 2008 are listed in a table included in this press release.

Net revenues were $398.2 million for the third quarter 2009, compared to $426.5 million for the same quarter in 2008, a decrease of 6.6%. Total Adjusted EBITDA was $96.6 million for the quarter, a decrease of 4.5% from $101.2 million in the prior year.

Keith Smith, President and Chief Executive Officer of Boyd Gaming, commented on the quarter, "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 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. I am extremely proud of our management team's ability to produce strengthened operating results and improved margins in the face of declining revenues."

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

Year-To-Date Results

We reported net income for the nine months ended September 30, 2009 of $5.3 million, or $0.06 per share. By comparison, we reported a net loss of $2.2 million, or $0.03 loss per share, for the nine months ended September 30, 2008. Our nine-month results in the period ended September 30, 2009 were primarily impacted by noncash, pre-tax impairment charges of $28.4 million related to Dania Jai-Alai, and $13.5 million related to our joint venture with Morgans Hotel Group at Echelon, offset by a $14.4 million gain related to the fire at The Water Club. Nine-month results in the period ended September 30, 2008 reflect a noncash, pre-tax impairment charge of $84.0 million related to Dania Jai-Alai.

Adjusted Earnings for the nine months ended September 30, 2009 were $31.4 million, or $0.36 per share, compared to $70.0 million, or $0.80 per share, for the nine-month period in 2008.

Net revenues were $1.26 billion and $1.36 billion for the nine months ended September 30, 2009 and 2008, respectively. Total Adjusted EBITDA was $311.8 million for the current nine-month period. By comparison, total Adjusted EBITDA for the 2008 period was $348.5 million.

Echelon Update

Development of the Echelon master plan - including the resort, casino and retail project that is owned by Echelon Resorts, a subsidiary of the Company - remains suspended. Based on our current outlook, we do not anticipate that Echelon will resume construction for three to five years.

Smith said, "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. 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."

As a consequence of the uncertainty surrounding Echelon, we recorded an impairment charge of $13.5 million in the third quarter related to the joint venture at Echelon with Morgans Hotel Group. In addition, Echelon and Shangri-La Hotels and Resorts mutually agreed to terminate Shangri-La's management and technical services agreements.

Station Casinos Update

Commenting on Boyd Gaming's previously disclosed proposal to acquire some or all of the assets of Station Casinos, Smith said, "We remain very serious about acquiring Station's assets when permitted by the bankruptcy court. 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."

Key Operations Review

Las Vegas Locals

In our Las Vegas Locals segment, third quarter 2009 net revenues were $150.7 million versus $181.8 million for the third quarter 2008. Third quarter 2009 Adjusted EBITDA was $31.4 million, a 31.3% decrease from the $45.7 million in the same quarter 2008. 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.

Downtown

Our Downtown Las Vegas properties generated net revenues of $54.9 million versus $55.6 million in the third quarter 2008. Adjusted EBITDA for the third quarter was $8.7 million, a 26.1% increase from the $6.9 million reported in the third quarter 2008. Continued strength in our Hawaiian customer segment driven by refinements in our targeted marketing efforts, as well as cost-control measures, contributed to gains in this region.

Midwest and South

In our Midwest and South region, we recorded $192.6 million in net revenues for the third quarter 2009, compared to $189.1 million for the same period in 2008. Adjusted EBITDA for the current period was $41.5 million, an increase of 6.2% from the $39.1 million reported in the third quarter of 2008. Regional results were boosted by a strong performance at our recently expanded Blue Chip property, as well as continued growth at Delta Downs.

Borgata

Net revenues for Borgata were $222.6 million for the third quarter 2009, compared to $239.9 million recorded in the same quarter in 2008. Operating income for the third quarter 2009 increased to $77.0 million, versus $39.5 million for the third quarter 2008, in part due to a $28.7 million gain on an insurance settlement related to the fire at The Water Club. Adjusted EBITDA increased to $67.6 million, up from $59.8 million for the third quarter 2008. Borgata continued to expand its leading market share during the third quarter, while improved efficiencies and cost-containment initiatives helped the property grow both operating income and Adjusted EBITDA.

Key Financial Statistics

The following is additional information as of and for the three months ended September 30, 2009:

    --  Debt balance: $2.65 billion    --  Cash: $89.1 million    --  Maintenance capital expenditures: $11.3 million    --  Echelon expansion capital expenditures: $4.7 million    --  Debt balance at Borgata: $595.1 million

Conference Call Information

We will host our third quarter 2009 conference call today, October 27, at 12:00 p.m. Eastern. The conference call number is 888.680.0860 and the passcode is 28870548. 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=2478840

Following the call's completion, a replay will be available by dialing 888.286.8010 today, October 27, beginning two hours after the completion of the call and continuing through Tuesday, November 3. The passcode for the replay will be 19326935. The replay will also be available on the Internet at www.boydgaming.com .

    BOYD GAMING CORPORATION AND SUBSIDIARIES    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                 Three Months Ended      Nine Months Ended                                    September 30,          September 30,                                 ------------------      -----------------                                   2009      2008        2009        2008                                   ----      ----        ----        ----        Revenues          Gaming                 $332,054  $351,788  $1,051,714  $1,125,812          Food and beverage        55,695    59,767     173,424     191,577          Room                     30,062    33,065      93,251     107,936          Other                    24,722    28,021      76,143      89,077                                   ------    ------      ------      ------        Gross revenues            442,533   472,641   1,394,532   1,514,402        Less promotional         allowances                44,290    46,186     138,494     156,065                                   ------    ------     -------     -------                Net revenues      398,243   426,455   1,256,038   1,358,337                                  -------   -------   ---------   ---------        Costs and expenses          Gaming                  161,690   169,045     502,029     518,427          Food and beverage        31,026    35,152      94,524     111,008          Room                     10,186    10,991      30,212      33,594          Other                    19,863    22,426      58,730      69,001          Selling, general and           administrative          70,901    73,395     217,492     227,351          Maintenance and           utilities               24,752    25,819      70,111      72,731          Depreciation and           amortization            40,579    41,573     125,324     127,318          Corporate expense        11,356    12,540      35,077      42,323          Preopening expenses       4,880     5,978      14,773      16,764          Write-downs and           other charges, net      14,287     3,215      41,415      94,702                                   ------     -----      ------      ------              Total costs and               expenses           389,520   400,134   1,189,687   1,313,219                                  -------   -------   ---------   ---------        Operating income         from Borgata              38,189    19,429      63,921      48,441                                   ------    ------      ------      ------        Operating income           46,912    45,750     130,272      93,559                                   ------    ------     -------      ------        Other expense (income)          Interest income              (1)   (1,056)         (5)     (1,069)          Interest expense,           net of amounts           capitalized             32,300    27,400     113,806      84,823          Increase in value           of derivative           instruments                  -         -           -        (425)          Gain on early           retirements of debt     (3,604)     (616)    (12,061)     (2,429)          Other non-operating           expenses                    30         -          30           -          Other non-operating           expenses from           Borgata, net             7,204     5,154      16,230      12,889                                    -----     -----      ------      ------                Total other                 expense, net      35,929    30,882     118,000      93,789                                   ------    ------     -------      ------        Income (loss) before         income taxes              10,983    14,868      12,272        (230)        Provision for income         taxes                     (4,668)   (6,170)     (7,007)     (2,001)                                   ------    ------      ------      ------        Net income (loss)          $6,315    $8,698      $5,265     $(2,231)                                   ======    ======      ======     =======        Basic net income         (loss) per common         share                      $0.07     $0.10       $0.06      $(0.03)                                    =====     =====       =====      ======        Weighted average         basic shares         outstanding               86,264    87,872      86,481      87,845                                   ======    ======      ======      ======        Diluted net income         (loss) per common         share                      $0.07     $0.10       $0.06      $(0.03)                                    =====     =====       =====      ======        Weighted average         diluted shares         outstanding               86,436    87,923      86,550      87,845                                   ======    ======      ======      ======        Dividends declared         per common share              $-        $-          $-       $0.30                                      ===       ===         ===       =====    The following table reconciles the net income (loss) based upon United    States generally accepted accounting principles to adjusted earnings and    adjusted earnings per share.                                     Three Months Ended  Nine Months Ended                                        September 30,      September 30,                                     ------------------  -----------------                                        2009     2008     2009     2008                                        ----     ----     ----     ----                                                (In thousands)        Net income (loss)              $6,315   $8,698   $5,265  $(2,231)          Adjustments:            Preopening expenses         4,880    5,978   14,773   16,764            Our share of Borgata's             preopening expenses            -      417      349    2,926            Our share of Borgata's             other items and write-             downs, net               (14,339)      (3) (14,308)      76            Write-downs and             other charges, net        14,287    3,215   41,415   94,702            Increase in value of             derivative instruments         -        -        -     (425)            Gain on early             retirements of debt       (3,604)    (616) (12,061)  (2,429)            Other non-operating             expenses                      30        -       30        -            Prior period interest             expense related to the             finalization of             our purchase price             for Dania Jai-Alai             -        -    8,883        -            Income tax effect for             above adjustments            424   (3,731) (12,922) (39,365)                                          ---   ------  -------  -------        Adjusted earnings              $7,993  $13,958  $31,424  $70,018                                       ======  =======  =======  =======        Adjusted earnings per         diluted share (Adjusted         EPS)                           $0.09    $0.16    $0.36    $0.80                                        =====    =====    =====    =====        Weighted average diluted         shares outstanding            86,436   87,923   86,550   87,845                                       ======   ======   ======   ======    The following table illustrates the impact of the above adjustments on    earnings per share.                                              Three Months   Nine Months                                                  Ended         Ended                                              September 30,  September 30,                                              -------------  -------------                                               2009   2008   2009    2008                                               ----   ----   ----    ----        Diluted net income         (loss) per common share              $0.07  $0.10  $0.06  $(0.03)          Adjustments:            Preopening expenses                0.06   0.07   0.17    0.19            Our share of Borgata's             preopening expenses                  -   0.00   0.00    0.04            Our share of Borgata's other             items and write-downs, net       (0.17) (0.00) (0.16)   0.00            Write-downs and             other charges, net                0.17   0.04   0.48    1.08            Increase in value of             derivative instruments               -      -      -   (0.00)            Gain on early             retirements of debt              (0.04) (0.01) (0.14)  (0.03)            Other non-operating expenses       0.00      -   0.00       -            Prior period interest expense             related to the finalization of             our purchase price             for Dania Jai-Alai                   -      -   0.10       -            Income tax effect for             above adjustments                 0.00  (0.04) (0.15)  (0.45)                                               ----  -----  -----   -----        Adjusted earnings per diluted         share (Adjusted EPS)                 $0.09  $0.16  $0.36   $0.80                                              =====  =====  =====   =====    The following table presents Net Revenues and Adjusted EBITDA by operating    segment and reconciles Adjusted EBITDA to net income (loss) for the three    and nine months ended September 30, 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     Nine Months Ended                                    September 30,         September 30,                                 ------------------     -----------------                                   2009      2008        2009        2008                                   ----      ----        ----        ----                                               (In thousands)        Net Revenues          Las Vegas Locals       $150,749  $181,793    $486,975    $586,183          Downtown Las           Vegas (a)               54,857    55,578     171,100     179,477          Midwest and South       192,637   189,084     597,963     592,677                                  -------   -------     -------     -------                  Net Revenues   $398,243  $426,455  $1,256,038  $1,358,337                                 ========  ========  ==========  ==========        Adjusted EBITDA          Las Vegas Locals        $31,363   $45,681    $120,600    $174,763          Downtown Las Vegas        8,701     6,900      33,855      27,393          Midwest and South        41,537    39,103     133,811     130,039                                   ------    ------     -------     -------              Wholly-owned               property               Adjusted               EBITDA              81,601    91,684     288,266     332,195              Corporate               expense (c)         (9,157)  (10,672)    (27,353)    (36,103)                                   ------   -------     -------     -------                  Wholly-owned                   Adjusted                   EBITDA          72,444    81,012     260,913     296,092          Our share of           Borgata's           operating           income before           net amortization,           preopening and           other items (d)         24,174    20,167      50,935      52,416                                   ------    ------      ------      ------                Adjusted                 EBITDA (e)        96,618   101,179     311,848     348,508                                   ------   -------     -------     -------        Other operating         costs and expenses          Deferred rent             1,089     1,115       3,266       3,345          Depreciation           and amortization (f)    40,903    41,897     126,297     128,291          Preopening           expenses                 4,880     5,978      14,773      16,764          Our share of           Borgata's           preopening           expenses                     -       417         349       2,926          Our share of           Borgata's           other items           and write-           downs, net             (14,339)       (3)    (14,308)         76          Share-based           compensation           expense                  2,886     2,810       9,784       8,845          Write-downs           and other           charges, net            14,287     3,215      41,415      94,702                                   ------     -----      ------      ------              Total other               operating               costs and               expenses            49,706    55,429     181,576     254,949                                   ------    ------     -------     -------        Operating         income                    46,912    45,750     130,272      93,559                                   ------    ------     -------      ------        Other non-         operating         items          Interest           expense, net (b)        32,299    26,344     113,801      83,754          Increase in           value of           derivative           instruments                  -         -           -        (425)          Gain on early           retirements           of debt                 (3,604)     (616)    (12,061)     (2,429)          Other non-           operating           expenses                    30         -          30           -          Our share of           Borgata's           other non-           operating           expenses, net            7,204     5,154      16,230      12,889                                    -----     -----      ------      ------              Total other               non-operating               costs and               expenses            35,929    30,882     118,000      93,789                                   ------    ------     -------      ------        Income (loss)         before income         taxes                     10,983    14,868      12,272        (230)        Provision for         income taxes              (4,668)   (6,170)     (7,007)     (2,001)                                   ------    ------      ------      ------        Net income         (loss)                    $6,315    $8,698      $5,265     $(2,231)                                   ======    ======      ======     =======    (a) Includes revenues related to Vacations Hawaii and other travel agency        related entities of $7.8 million and $24.1 million for the three and        nine months ended September 30, 2009, respectively, and $9.9 million        and $32.3 million for the three and six months ended September 30,        2008, respectively.    (b) Net of interest income and amounts capitalized. Interest expense for        the nine months ended September 30, 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  Nine Months Ended                                         September 30,      September 30,                                      ------------------  -----------------                                         2009     2008      2009     2008                                         ----     ----      ----     ----                                                  (In thousands)        Corporate expense as         reported on our condensed         consolidated statements of         operations                     $11,356  $12,540  $35,077  $42,323        Corporate share-based         compensation expense            (2,199)  (1,868)  (7,724)  (6,220)                                         ------   ------   ------   ------        Corporate expense as reported         on the accompanying table       $9,157  $10,672  $27,353  $36,103                                         ======  =======  =======  =======    (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      Nine Months                                            Ended            Ended                                        September 30,     September 30,                                        -------------     -------------                                        2009     2008     2009     2008                                        ----     ----     ----     ----                                                 (In thousands)        Operating income from         Borgata as reported         on our condensed consolidated         statements of operations      $38,189  $19,429  $63,921  $48,441        Add back:          Net amortization expense           related to our investment           in Borgata                      324      324      973      973          Our share of Borgata's           preopening expenses               -      417      349    2,926          Our share of Borgata's           other items and write-           downs, net                  (14,339)      (3) (14,308)      76                                       -------       --  -------       --        Our share of Borgata's         operating income         before net amortization,         preopening and other         items as reported on the         accompanying table            $24,174  $20,167  $50,935  $52,416                                       =======  =======  =======  =======    (e) The following table reconciles Adjusted EBITDA to EBITDA and net        income (loss).                                    Three Months Ended   Nine Months Ended                                       September 30,       September 30,                                    ------------------   -----------------                                       2009      2008      2009      2008                                       ----      ----      ----      ----                                                (In thousands)        Adjusted EBITDA             $96,618  $101,179  $311,848  $348,508          Deferred rent               1,089     1,115     3,266     3,345          Preopening expenses         4,880     5,978    14,773    16,764          Our share of Borgata's           preopening expenses            -       417       349     2,926          Our share of Borgata's           other items and write-           downs, net               (14,339)       (3)  (14,308)       76          Share-based           compensation expense       2,886     2,810     9,784     8,845          Write-downs and other           charges, net              14,287     3,215    41,415    94,702          Increase in value of           derivative instruments         -         -         -      (425)          Gain on early           retirements of debt       (3,604)     (616)  (12,061)   (2,429)          Other non-operating           expenses                      30         -        30         -          Our share of Borgata's           other non-operating           expenses, net              7,204     5,154    16,230    12,889                                      -----     -----    ------    ------        EBITDA                       84,185    83,109   252,370   211,815                                     ------    ------   -------   -------          Depreciation and           amortization              40,903    41,897   126,297   128,291          Interest expense, net      32,299    26,344   113,801    83,754          Provision for income           taxes                      4,668     6,170     7,007     2,001                                      -----     -----     -----     -----        Net income (loss)            $6,315    $8,698    $5,265   $(2,231)                                     ======    ======    ======   =======    (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  Nine Months Ended                                            September 30,      September 30,                                         ------------------  -----------------                                            2009    2008      2009     2008                                            ----    ----      ----     ----                                                      (In thousands)        Depreciation and amortization as         reported on our condensed         consolidated statements of         operations                         $40,579 $41,573 $125,324 $127,318        Net amortization expense related         to our investment in Borgata           324     324      973      973                                                ---     ---      ---      ---        Depreciation and amortization         as reported on the accompanying         table                              $40,903 $41,897 $126,297 $128,291                                            ======= ======= ======== ========    The following table reports Borgata's financial results.                                  Three Months Ended   Nine Months Ended                                     September 30,       September 30,                                  ------------------   -----------------                                     2009      2008      2009      2008                                     ----      ----      ----      ----                                              (In thousands)        Gaming revenue            $195,355  $207,352  $538,041  $564,510        Non-gaming revenue          89,411    95,043   230,665   237,435                                    ------    ------   -------   -------        Gross revenues             284,766   302,395   768,706   801,945        Less promotional         allowances                 62,169    62,474   166,706   154,939                                    ------    ------   -------   -------            Net revenues           222,597   239,921   602,000   647,006                                   -------   -------   -------   -------        Expenses                   155,038   180,139   440,789   486,588        Depreciation and         amortization               19,208    19,445    59,339    55,585        Preopening expenses              -       835       699     5,852        Other items and write-         downs, net                (28,677)       (4)  (28,616)      153                                   -------        --   -------       ---        Operating income            77,028    39,506   129,789    98,828