Majestic Research

Reuters

Boyd Profit Falls 79 pct, Selling Las Vegas Casino

By Deena Beasley
Published: July 25, 2006

LOS ANGELES, July 25 (Reuters) - Casino operator Boyd Gaming Corp. said on Tuesday its second-quarter net profit fell 79 percent after it wrote off a retired riverboat casino and pre-opening costs rose.

Net income at Boyd, which also surprised investors with plans to sell its recently-opened South Coast Hotel and Casino located south of the Las Vegas Strip, fell to $10.2 million, or 11 cents a share, from $48.6 million, or 54 cents a share, a year earlier.

Excluding one-time items, Las Vegas-based Boyd said it earned 47 cents a share, including stock options expense, which fell short of the average Wall Street estimate of 58 cents a share, as compiled by Reuters Estimates.

“It’s no secret that business at South Coast has been soft since the opening,” said Chief Financial Officer Paul Chakmak told a conference call.

Business was also soft at the company’s other casinos that cater to Las Vegas residents, said Matthew Jacob, an analyst at Majestic Research.

The company’s shares were down 2.7 percent at $35.50 in extended trading after losing 21 cents to close at $36.49 on the New York Stock Exchange.

Quarterly revenue rose 10.2 percent to $610.9 million, also below the average analyst estimate of $633.51 million.

In addition to increased competition for casinos that cater to Las Vegas residents, operating results were hurt by costs related to the opening of a new riverboat casino in northern Indiana and a three-day shutdown earlier this month in Atlantic City, President and Chief Operating Officer Keith Smith said on the conference call.

Boyd said the Atlantic City shutdown, triggered by a dispute over the state’s budget, led to a loss of $4 million for the Borgata Casino, which Boyd operates in a joint venture with MGM Mirage .

The company’s second-quarter earnings before interest, tax, depreciation and amortization (EBITDA) totaled $167.3 million.

Boyd projected third-quarter quarter adjusted earnings per share of 50 cents to 55 cents a share and EBITDA of $165 million to $170 million.

The company said it has reached an agreement to sell its South Coast casino, which opened south of the Las Vegas Strip last December, to Michael Gaughan, CEO of the company’s Coast Casinos unit, for a price equal to proceeds from the sale of 15.8 million shares of Boyd that are owned by Gaughan.

Boyd acquired its chain of Coast Casinos, which cater to Las Vegas residents, in 2004.

“Investors would be more comfortable with the sale if there was more information about the price and why there was no auction,” Jacob said.

The South Coast deal, which is expected to close by year-end, will immediately add to earnings, Smith said.

Boyd said it expects to begin construction in the second quarter of next year on its planned $4 billion hotel, retail and casino project on the Las Vegas Strip site of its Stardust Hotel and Casino. The development, to be called Echelon Place, is slated to open in early 2010.

Boyd’s stock has fallen about 23 percent year-to-date, compared with a gain of 12 percent in the Dow Jones U.S. gambling Index <.DJUSCA>.