Exec’s steady hand helps Boyd cope in slump

Josh Hirsberg didn't have much of a honeymoon after he became chief financial officer at Boyd Gaming Corp. a year ago.

Eight months after moving into the seat, Boyd Gaming decided to halt development of the $4.8 billion Echelon project, which will be sidelined at least for all of 2009.

Hirsberg, 46, who had served in financial roles and investor relations positions with Harrah's Entertainment and Caesars Entertainment before joining Boyd Gaming in January 2008, said shelving Echelon was widely discussed well before the decision was announced Aug. 1.

"I had a seat at the table, but it was a group decision of our management team," Hirsberg said. "The great thing about our management team is we are willing to talk openly about a variety of subjects, no matter how difficult the topic."

Hirsberg landed at Boyd Gaming after spending a year away from the casino industry. He served as the chief financial officer for EdgeStar, a development company trying to bring a W hotel to Las Vegas.

At Boyd, CFO has not been a revolving door. Ellis Landau held the job for more than decade before his retirement in 2006. He was replaced by Paul Chakmak, who moved into the chief operating officer's role a year later.

Hirsberg said having Chakmak in a nearby office in the executive suite gives him some comfort.

"It's helpful and it makes for a much smoother transition," Hirsberg said.

The ink wasn't even dry on Hirsberg's new business cards when the troubled economy began to affect the casino business and Boyd Gaming. The falling financial markets changed the CFO's role.

"Things you took historically for granted, you could no longer take for granted," Hirsberg said. "When this happened, it made you step back and take a second look. It made the job more complex."

Hirsberg believes the steps Boyd Gaming has taken in the past year as the economy sank into a recession will make the casino operator stronger when the recovery begins.

Question: How has the falling economy affected Boyd Gaming?

Answer: Our industry got into a situation where it really was overleveraged. The industry is just trying to rightsize itself and recapitalize itself. We are all re-evaluating what the right leverage ratios are for the company moving forward. Our grandfathers lived through the Great Depression and it affected them and how they lived their lives. This will affect how we live our lives and how we manage our affairs personally and within the company because it's changing the way we think about these matters.

Question: How did Wall Street and the investment community view the move to halt Echelon?

Answer: When we made the decision, it was already pretty well vetted within the company. Our lenders, ultimately, respected us for the decision. It was almost a sigh of relief. They couldn't see how the project could continue to move forward in the economic environment we were in.

The analysts thought it was both the right decision to make and a difficult decision to make. There is no doubt when we come out on the other side of all this, the Echelon decision will prove to be the right one made for the company.

Question: What's next for Echelon?

Answer: We are going to take 2009 to evaluate the positioning of Echelon. It could be exactly how it was originally contemplated or it could be something totally different. Will Las Vegas have the same customer and revenue streams that we had when we designed Echelon? I don't think anyone has a clear picture. It's our obligation and our responsibility to evaluate Echelon and figure out what makes sense to develop on the site.

Question: Is Boyd Gaming in position to capitalize when the economy finally turns around?

Answer: We removed the one big concern we were trying to deal with in a very difficult environment. The company management realized something was changing in late 2007. The business was changing and we needed to tighten our belts back then. We deserve credit for recognizing something was happening and reacting to it. Now we're continuing to make the business efficient and to make sure we are one of the guys that survive on the other end. Maybe survive is a little bit of a strong word, but it's the reality of the situation.

Question: How will Boyd Gaming fare compared with other casino operators?

Answer: We are in an unique position in comparison to many of our competitors. Our balance sheet is very strong. Our credit facility gives us access to capital in this environment, when access to capital is the key to the success of survival.

The way we look at it, we're making our businesses as efficient as possible. But on the other side, we're optimistic there will be opportunities for our company to take advantage of. We're managing our core business while looking opportunistically to the future.

Question: Are investors looking at Boyd Gaming and the gaming industry differently?

Answer: I think one of the disadvantages for institutional investors is that they are so quarterly focused. Boyd Gaming is being run for the long term. The decisions are being made not for this quarter or this year, but for the next decade. If you have an investment horizon longer than the next quarter, you can see real value in (gaming) stocks. The best time to be investing is when everyone else is headed in the other direction.

Question: When will you be able to tell that the economy is turning for the better?

Answer: Our visibility in the locals market is limited. We need to have a better handle on that business. You don't know from one month to the next what to really expect. Once we're able to forecast the locals market more accurately, we'll be near the end.

Question: Are you optimistic a turnaround is near?

Answer: We feel like it's at or near the bottom, but even if we are there, it's not immediately going to come back up. You people talk about the "V" recovery or the "long U" recovery. I have no idea. At some point, we're going to come and the industry as a whole will be in a better position to come out of it because of everything we're doing now.

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