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Boyd Gaming won’t buy rest of Atlantic City’s Borgata

Updated Monday, Oct. 25, 2010 | 12:46 p.m.

Boyd Gaming Financial Information

  3Q 2010 3Q 2009 % Change 2Q 2010
Revenue $595.4 million $620.8 million -4.1% $578.5 million
Net income $5.6 million $6.3 million - 11 percent $3.4 million
Net income per share 6 cents 7 cents - 14 percent 4 cents

Boyd Gaming Corp. of Las Vegas today reported continued declines in revenue in the Las Vegas area, hard hit by the recession, and also said it's turning down an offer to buy the 50 percent of the Borgata resort in Atlantic City it does not already own.

"Given other opportunities and our current focus on deleveraging our balance sheet, the current offer would not provide a sufficient return on investment for our shareholders. Despite this decision, we are confident in the future of Borgata. The property represents a major investment by Boyd Gaming, and it has delivered substantial value for our shareholders. We remain comfortable with our current position as managing member and 50 percent owner of Borgata, the region's premier destination resort," Boyd said of the Borgata decision.

MGM Resorts International of Las Vegas has received an offer for its share of Borgata and Boyd had the right of first refusal. Bloomberg has reported the offer yielding $250 million for MGM Resorts came from buyout firm Leonard Green & Partners.

For its part, MGM Resorts said in a statement today it now intends to pursue negotiations with the original bidder.

Also, for the third quarter, Boyd reported net income of $5.6 million, or 6 cents per share, compared to net income of $6.3 million, or 7 cents per share, in the same period last year.

Net revenue companywide of $595.4 million fell 4.1 percent.

Investors seemed encouraged by the developments, including year-to-year comparisons improving in the third quarter and projections that results in the fourth quarter would show the best year-to-year comparisons of 2010.

Boyd stock traded at $8.42 in midday trading, up 43 cents or 5.38 percent.

In the Las Vegas locals market, third quarter 2010 net revenue of $145.6 million was down from $150.7 million. Adjusted EBITDA was $26.1 million, versus $31.4 million in the same quarter of 2009 for the locals casinos including Sam's Town, the Orleans, Gold Coast, Suncoast, El Dorado and Joker's Wild, which combined have some 10,390 slot machines. EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.

"Although spend-per-visit was lower, visitation to our Las Vegas locals properties remained strong," Boyd said in today's report.

Unemployment has been running at 15 percent in the Las Vegas area.

Downtown Las Vegas properties, with a big base of Hawaiian visitors, generated net revenue of $51.9 million for the third quarter, compared to $54.9 million in the third quarter of 2009. Boyd said it increased market share downtown by better than 3 percentage points, but adjusted EBITDA there was $5.7 million, down from $8.7 million in the third quarter of 2009.

"Results reflect lower spend-per-visit, combined with lower ticket prices and increased fuel costs associated with our Hawaiian charter business. There is evidence of a strengthening recovery in Hawaii's tourism economy, which bodes well for our Hawaiian visitation," Boyd said.

Despite the locals market difficulties in Las Vegas, Boyd said it increased its Las Vegas locals' market share by a percentage point in the three months ending in August.

CEO Keith Smith said during a conference call with analysts that it's a misperception that the housing and employment situations must significantly improve before the Las Vegas locals market shows meaningful improvement.

Rather, a boost in consumer confidence would lead to increases in spending at Boyd's casinos and just an incremental increase in spending would boost profits as Boyd keeps costs in check, executives said.

In addition, despite high employment locally, there are signs of improvement in Las Vegas including improvements in gaming win and convention attendance, Smith said.

These signs have Boyd bullish on Las Vegas in the long run and the company -- which gave up on efforts to acquire competitor Station Casinos Inc. out of bankruptcy -- would be interested in a Las Vegas acquisition should the right deal come along, Smith said.

While noting "it's clear this recovery will be a slow process," Smith said: "It appears Las Vegas is beginning its own recovery."

Elsewhere around the country for Boyd, its Midwest and southern casinos posted $188.7 million in net revenue for the third quarter of 2010, down from $190.9 million for the same period in 2009.

Borgata's net revenue for the third quarter was $207.7 million, versus $222.6 million in the third quarter of 2009, as the casino played unlucky during the most recent third quarter when table games players won about $9 million more than usual.

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