Boyd Gaming narrows first quarter loss

Boyd Gaming Corp. officials found themselves in the unique position Wednesday to comment on any economic recovery the company is experiencing in multiple gaming markets.

During Boyd’s first-quarter earnings conference call, Chief Executive Officer Keith Smith said several markets have stabilized in a sense that declining gaming revenues have flattened in consecutive quarters. The company has been able to boost cash flows through cost reductions or other means.

“We’re still down year over year,” Smith said. “But the declines are no longer getting worse.”

The casino operator is also looking to expand. Smith said the company, which has a $2 billion revolving line of credit, was still interested in acquiring all or a portion of rival Station Casinos’ Las Vegas holdings. Also, executives would be willing to discuss acquisition possibilities in regional markets and on the Strip, if opportunities presented themselves.

“We’re not rushing out to do anything,” Smith said. “We’re going to be careful and prudent. There are no headlines at this time.”

Boyd Gaming said it lost $13.8 million in the first quarter, due in large part to a charge concerning its Florida jai-alai facility.

The net loss translated into a loss of 16 cents per share in the quarter that ended March 31. A year ago the company lost $32.6 million, or 37 cents a share. Without the adjustments, Boyd would have earned 15 cents a share in the quarter. Analysts surveyed by Thomson Reuters, who exclude one-time items, thought Boyd gaming would earn 8 cents a share.

Companywide net revenues were $434.8 million in the quarter, a decrease of 7.7 percent compared with $471.1 million for the same quarter in 2008.

Smith said the company, which operates casinos in Las Vegas, Atlantic City and several regional markets, has been impacted by the recession. However, the results in the Las Vegas locals market have begun to stabilize, while the company’s casinos in downtown, the Midwest and Southern regions all posted gains. The Borgata has out-performed the challenged Atlantic City market.

“We’re encouraged by some positive trends that developed during the quarter,” Smith said. “These regional performances helped to offset difficult economic climates in Las Vegas and Atlantic City, and demonstrate the value of geographic diversification to our company.”

Boyd said the loss was due to a noncash, pre-tax impairment charge of $28.4 million related to the write-off of goodwill incurred as a result of the finalization of the purchase price for Dania Jai-Alai near Fort Lauderdale.

Smith the said the company operates jai-alai matches out of the facility and is sitting on the 48-acre site for future development.

Goldman Sachs gaming analyst Steven Kent said the quarter showed the strength of having a regional presence.

“Boyd’s results are further confirmation that the regional gaming markets are recovering more quickly and benefiting from lower supply growth than destination gaming markets,” Kent said.

During the conference call, Smith reiterated Boyd’s interest in acquiring several of Station Casinos properties for $950 million. The company made a proposal in February, but the offer was rejected. Station Casinos is seeking bondholder approval to file a bankruptcy restructuring plan. The company has a May 15 deadline.

Smith said Boyd Gaming has been in contact with some of Station Casinos lenders and bondholders.

“We believe the Station Casinos’ assets would fit within the overall strategy of our company,” Smith said.

Station Casinos spokeswoman Lori Nelson said the company’s position on the Boyd offer remains unchanged and the company is not considering it.

“(Boyd) is still kicking the tires and talking with parties in all parts of the capital structure,” JP Morgan gaming analyst Joe Greff said. “We believe this process will be slow moving.”

Smith told investors that Boyd Gaming will continuing to watch for any turnaround signs in the locals market.

Deutsche Bank gaming analyst Andrew Zarnett said unemployment, layoffs, construction stoppage, declines in discretionary consumer spending, and home foreclosures pressure the Las Vegas economy.

“On the flip side, the locals market should somewhat benefit from the opening of CityCenter, which will add approximately 10,000 new jobs,” Zarnett said.

Shares of Boyd Gaming closed at $11.70 on the New York Stock Exchange, up 39 cents or 3.45 percent.

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