Friday, April 19, 2002 | 10:56 a.m.
Boyd Gaming Corp. on Thursday posted a 210 percent increase in earnings per share for the quarter ending March 31, topping its own estimates for the quarter.
Las Vegas-based Boyd reported net income before one-time charges and pre-opening expenses of 31 cents per share, up from 10 cents per share a year ago. On March 22, Boyd had told investors to expect earnings of 27 cents to 30 cents per share; at that time, the analyst consensus stood at 18 cents per share.
Boyd kept the gaming industry flawless so far in this quarter's earnings season. Five gaming companies have reported their results so far for the March quarter -- Alliance Gaming Corp., Station Casinos Inc., Harrah's Entertainment Inc., MGM MIRAGE and Boyd. All five have exceeded analyst estimates.
One of the biggest factors in Boyd's big quarter was greater efficiency. Boyd's cash flow margin rose from 19.7 percent of revenues a year ago to 24.2 percent during the March 2002 quarter.
Cash flow came in at $77.6 million, up 25 percent over the year-ago quarter, and $7.6 million ahead of the company's highest estimate. Revenues were up 8 percent to $303 million.
Cash flow, revenues and earnings per share were all records for the company, Boyd said.
"This quarter really moved us to a new level," said Ellis Landau, chief financial officer of Boyd.
Boyd's stock rose 39 cents, or 2.5 percent, to $16.49 Thursday. This was its highest close since 1996.
"This is a unique point in time for Boyd," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown. "This is a company running on all cylinders. With the improving economy, going forward into the summer, they should be able to sustain these kind of results on a go-forward basis."
Boyd did take several substantial one-time charges. One was an $8.2 million non-cash charge at the Stardust, reflecting the fact that Boyd can no longer amortize goodwill on the property. The fact that Boyd is writing off goodwill in a single charge will save the company 2 cents per share per quarter going forward.
The company also absorbed $6.3 million in preopening expenses at the $1 billion Borgata in Atlantic City -- a joint venture with MGM MIRAGE set to open next year -- and Delta Downs, a slot casino and racetrack that opened in February.
After these charges, Boyd posted net income of $7.8 million, or 12 cents per share. This was up 28 percent from the year-ago quarter on a net income basis, and 20 percent on a per-share basis.
The Stardust continued to lag during the quarter, as cash flow fell 10 percent to $4.5 million. But Boyd's other Las Vegas properties shone.
The brightest spot was Sam's Town on the Boulder Strip, which saw cash flow leap 56 percent to $8.1 million, even while revenue fell 13 percent. The company attributed these gains to "significant reductions in marketing and payroll costs" -- Don Snyder, president of Boyd, said 250 jobs were eliminated at the property since the year-ago quarter.
Sam's Town Tunica, located in northern Mississippi, posted a 280 percent increase in cash flow, to $3.8 million. Payroll and marketing costs were also cut at this property, the company said.
In downtown Las Vegas, the Fremont, California and Main Street Station posted combined cash flow of $11.8 million, a 16 percent increase. This was the second-best quarter ever for the downtown properties. Strong business from Hawaii was a big factor.
"Our charters (from Hawaii) were essentially full every day, and that unit keeps getting more efficient," Landau said.
At the Eldorado and Jokers Wild in Henderson, cash flow rose 5 percent to $2 million.
Boyd's three Midwestern casinos also fared well during the quarter, boosted by mild weather. Blue Chip in Michigan City, Ind., reported $22.5 million in cash flow, up 16 percent; Par-A-Dice in East Peoria, Ill., reported cash flow of $14.2 million, up 8 percent; and Treasure Chest, near New Orleans, reported cash flow of $6.4 million, up 5 percent.
In its first months of operation, Delta Downs, located on the Louisiana-Texas border, appears on track to become one of Boyd's most profitable operations. Over its first one and a half month of operations, it reported cash flow of $4.4 million, though Landau cautioned the property would not be able to maintain the slot win per day per machine numbers it saw in its early days.
"We won't keep running at that level, but we are expecting to stay ahead of expectations for slot win," Landau said.
Boyd's next new casino will be the Borgata in Atlantic City. But company officials said on Thursday's conference call that another project could follow that -- a new Strip casino, on the site where the Stardust now sits. The Stardust parcel covers 61 acres.
A number of factors are prompting Boyd to examine the possibility of redevelopment more closely, including Steve Wynn's proposed $1.65 billion Le Reve resort, the expansion of Fashion Show Mall, the expansion of the Las Vegas Convention Center and the opening of Turnberry Place, the high-rise condominium development near the site of the old El Rancho. Snyder, however, provided no timeframe for when Boyd might build a new resort there.
"(The Stardust site) is a long-term strategic asset, and we continue to feel, over time, that the long-term aspects of that are coming closer," Snyder said. "We're encouraged by what Steve Wynn is planning, and we'd like to see that come out of the ground, and get the Borgata finished first.
"There's a lot of activity in the next few years that will give us an opportunity. It's certainly on our radar screen."