Thursday, February 10, 2005
Copyright © Las Vegas Review-Journal

Boyd deal looks better

Coast properties play big role in earnings jump

When Boyd Gaming Corp. completed its $1.3 billion buyout of Coast Casinos in July, consensus among gaming analysts and industry observers was that the company made a good purchase.

Just how valuable that acquisition was to Boyd's earnings became clear Wednesday.

Fueled by results from the Coast properties and the dominance of the Borgata in the Atlantic City market, Boyd Gaming reported a 75 percent increase in adjusted earnings per share for 2004, which included a 163 percent jump in earnings per share in the fourth quarter that ended Dec. 31.

Boyd's fourth-quarter revenues rose 75.3 percent to $540 million from $308 million.

Revenues for all of 2004 were $1.73 billion, an increase of 38.4 percent over the $1.25 billion reported in 2003.

"We always knew that Coast was a good purchase and a good fit for our company, but we didn't realize how good of a purchase it was," Boyd Gaming Chief Financial Officer Ellis Landau said following a conference call with analysts. "In the fourth quarter, all our segments showed increases, while our Coast properties and our Boulder Strip properties put up huge numbers."

Deutsche Bank gaming analyst Marc Falcone said the acquisition of Coast may have been one of the most important events in Boyd's history because it brought an established portfolio of casino properties underneath the company banner.

"It was a company-transforming event," Falcone said. "The merger gave Boyd some tremendous assets and gave the company a pipeline for growth. I looked at the earnings and there isn't anything I could poke a hole in. Boyd is a tremendous success story."

In the fourth quarter, Boyd reported adjusted earnings of 50 cents per share, well above 19 cents for the fourth quarter of 2003. For the year, the company reported adjusted earnings of $1.47 per share, compared with 84 cents per share in 2003.

The company's overall stock price has reflected shareholder confidence. Since the end of 2003, when it was trading at $16.14, price in Boyd Gaming has climbed more than 165 percent. On Wednesday, before the company's earnings release, shares in Boyd fell 68 cents, or 1.6 percent, to close at $42.23.

Coast properties were only figured into six months of Boyd's total earnings, but the amount was substantial. Coast's revenues in the fourth quarter were $179 million and for the year were $341 million. Boyd properties on the Boulder Strip, which includes Sam's Town and two small casino-only facilities in Henderson, had revenues of $48.9 million in the quarter and $183 million for the year.

The company's downtown casinos reported revenues of $63.6 million in the fourth quarter and $239.4 million for the year.

"The Las Vegas market is on fire," Landau said. "The general economic conditions continue to remain strong, and we think that benefits our company across those properties."

Boyd executives said construction of the $350 million South Coast is expected to be completed in the first quarter of 2006.

"While our very strong earnings growth was widespread in the quarter, the principal drivers of the growth were in two areas where market dynamics, our business models, and our current expansion projects provide excellent prospects for continuing our strong earnings," Boyd Gaming Chairman William Boyd said in a statement. "The Las Vegas locals market is firing on all cylinders with growing demand and limited supply growth, with our company's excellent properties enjoying a significant share in that strong market. And we expect to increase that share with the addition, less than a year from now, of South Coast, which will serve a dynamic growth area of the Las Vegas locals market."

In Atlantic City, the Borgata, which Boyd operates in a joint venture with MGM Mirage, reported a 2004 gaming win of $638 million, the second best in the market. For the fourth quarter, Borgata reported gaming revenue of $165 million and nongaming revenue of $56.8 million.