Boyd Gaming narrows fourth quarter loss

Analysts on Tuesday downplayed questions about Boyd Gaming Corp.'s earnings and instead used a conference call to ask executives about how business trends might shape the company's future.

During the conference call, the Las Vegas-based casino operator reported that it substantially narrowed its fourth quarter net loss from a year ago. The company said its net loss in the period that ended Dec. 31 was $1 million, or 1 cent a share. In the same quarter of 2008, Boyd Gaming had a net loss of $220.8 million, or $2.51 per share.

Analysts surveyed by Thomson Reuters expected the company to break even during the quarter.

Boyd Gaming executives also told analysts and investors they believe business trends in Las Vegas had stabilized during the last three months. However, casino customers are still not spending at levels seen a few years ago. That factor kept several of Boyd's business divisions from turning a profit in the fourth quarter.

"We're still getting people to visit, which is a good thing," Boyd Gaming Chief Executive Officer Keith Smith said.

"Visitation to the city continues to grow, reflecting the popularity of Las Vegas as a destination. As the economic recovery accelerates, consumer spending will increase, providing us the opportunity to capitalize on our more efficient business model."

History, however, wasn't on the minds of Wall Street analysts. They wanted answers on other matters.

Yes, Boyd Gaming is still interested in acquiring all or part of Station Casinos despite reports last week that its bankrupt rival has reached an agreement in principle with key creditors on a comprehensive reorganization plan.

Smith said there will be a clearer picture of that plan when its filed with the U.S. Bankruptcy Court in Reno on March 25. Until then, Boyd Gaming's offer of $2.45 billion in cash and assumed debt for all of Station Casinos remains on the table.

"We're still engaged in the process," Smith said. "It's a good fit for our company. We offer value and we believe it works well for the community."

The deal with creditors, Smith said, covers only four of the 18 properties operated by Station Casinos, leaving the others in play.

Macquarie Securities gaming analyst Joel Simkins disagrees that an acquisition of Station Casinos is a good thing for Boyd Gaming.

"Boyd has spent considerable time and effort trying to gain control of these assets within the Las Vegas locals segment," Simkins told investors. "While it could have been a positive catalyst for Boyd, we believe management must now plan on a strategic direction for the company. In the near term, we expect debt reduction to be a primary focus of free cash flow."

The casino operator is also watching the situation surrounding MGM Mirage, its joint venture partner in Atlantic City's Borgata. MGM Mirage, which has faced questions from New Jersey gaming authorities about its relationship with its Macau business partner, told regulators it wants to divest its holdings in the market. Boyd Gaming could end up purchasing MGM Mirage's 50 percent share in the Borgata.

In the near term, nothing will change in the operation of Borgata.

"It's business as usual," Smith said. "We have right of first refusal so we'll be monitoring this closely."

Borgata's results could also be hurt by growth in the Pennsylvania casino market, including the addition of table games at casinos and racetracks. Also, two casino projects could be on track for nearby Philadelphia, including one operated by Wynn Resorts Ltd.

Boyd Gaming is already taking steps to address the situation, including introducing new customer marketing programs for the Borgata. Company officials believe Pennsylvania and Atlantic City are two different markets.

"It's really a different product," Smith said. "The casinos in Pennsylvania don't have the amenities we provide in Atlantic City. So we have confidence in our ability to compete."

During the fourth quarter, Boyd's net revenues were $384.9 million, a decline of 8.9 percent from $422.6 million for the same quarter in 2008.

In the locals market, Boyd's Coast Casinos brand saw net revenues decline from $176.8 million a year ago to $155 million in the fourth quarter of 2009.

Boyd's three downtown casinos reported net revenues of $58 million, compared with $60.8 million a year earlier. Any operating increases at the properties were offset by lower pricing and higher fuel costs associated with the company's charter service that brings in customers from Hawaii.

Net revenues and cash flow slid at Boyd's Southern and Midwest casinos. Revenues from the two regions were $171.9 million for the fourth quarter 2009, compared with $185.1 million a year earlier.

Revenues from the Borgata were $175.4 million in the quarter, down from $183.5 million a year earlier.

"Recovery or true stabilization should ultimately occur in most of these markets, although we would not classify fourth-quarter results as necessarily stabilized," Oppenheimer gaming analyst David Katz told investors. "The results were solid in some markets where maintaining flat year-over-year results is a positive, namely Atlantic City and downtown Las Vegas."

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.