Boyd Gaming reports Q1 results

LAS VEGAS, Nevada -- (PRESS RELEASE) -- Boyd Gaming Corporation (NYSE: BYD) today reported financial results for the first quarter ended March 31, 2008.

Recent Highlights

-- First quarter 2008 net revenues for the Las Vegas Locals region decline 5.6% and Adjusted EBITDA(1) decreases 10.6% compared to the first quarter 2007, as an increasingly difficult economic climate impacts consumer spending.

-- Midwest and South records 13.1% decline in net revenues and 20.4% decline in Adjusted EBITDA for the first quarter 2008, chiefly due to Blue Chip, which continues to be materially impacted by an increased competitive environment and significant construction disruption.

-- Downtown Las Vegas net revenues decline 4.6% and Adjusted EBITDA declines 26.7%, due to sharply higher fuel costs, as well as a reduction in consumer spending due to tougher economic conditions.

-- Borgata's first quarter 2008 net revenues were essentially flat with prior year results and Adjusted EBITDA declined 8.4% primarily due to lower gaming revenues, partially offset by lower promotional expenses, and slightly higher operating expenses.

-- Initial launch of nationwide players club program leads to 21% increase in new Las Vegas Local member sign-ups for the first quarter 2008 versus the same period last year; the Midwest and South phase begins with successful players club launch at Blue Chip in April, with the remaining properties to follow over the course of the next two months.

First Quarter Results

We reported a first quarter 2008 loss from continuing operations of $32.6 million, or $0.37 per share, compared to income from continuing operations of $35.1 million, or $0.40 per share, in the same period 2007. The loss from continuing operations for the 2008 period included an $84.0 million pre-tax impairment charge, principally related to the write-off of the entire Dania Jai-Alai intangible license right.

During the first quarter 2008, we completed our valuation of the acquisition of Dania Jai-Alai, which was purchased in March 2007 for approximately $80 million, plus an additional amount of contingent consideration. As a result, we assigned a fair value to the total assets acquired of approximately $130 million, the majority of which was assigned to the value of our intangible license right to operate slot machines at the property. However, following our recent decision to indefinitely postpone redevelopment plans for Dania Jai-Alai, we recorded an $84.0 million pre-tax impairment charge for the first quarter 2008. Our decision to postpone the development is based on numerous factors, including the introduction of expanded gaming at a nearby Native American casino, the potential for additional casino gaming venues in Florida, and the existing Broward County pari-mutuel casinos performing below our expectations for the market.

Including discontinued operations, we reported net income for the first quarter 2007 of $218 million, or $2.46 per share. The first quarter 2007 results include a $285 million pre-tax gain, classified as part of discontinued operations, recorded upon the disposition of Barbary Coast. There were no such discontinued operations reported in the first quarter 2008. Per share earnings discussed throughout this release are reported on a diluted basis.

Adjusted Earnings(1) from continuing operations for the first quarter 2008 were $29.6 million, or $0.34 per share, compared to $44.0 million, or $0.50 per share, for the same period in 2007. During the first quarter 2008, certain pre-tax adjustments that reduced income from continuing operations by $95.0 million ($62.2 million, net of tax, or $0.71 per share), were as follows:

-- $90.3 million for write-downs and other charges, primarily consisting of an $84.0 million non-cash impairment charge related to Dania Jai-Alai; and

-- $4.7 million for other items, primarily consisting of preopening expenses associated with our Echelon development.

By comparison, the first quarter 2007 included certain pre-tax adjustments that reduced income from continuing operations by $14.0 million ($8.9 million, net of tax, or $0.10 per share) due to:

-- $9.0 million for write-downs and other charges, mainly consisting of closure costs at Stardust; and

-- $5.0 million for other items, primarily consisting of preopening expenses associated with our Echelon development.

Net revenues were $471.1 million for the first quarter 2008, compared to $517.0 million for the same quarter in 2007, a decrease of 8.9%. Total Adjusted EBITDA was $127.7 million in the first quarter 2008, compared to $155.4 million for the same period 2007. These declines were chiefly due to an increasingly difficult economic climate impacting consumer spending, as well as the addition of a new competitor near our Blue Chip operation.

Keith Smith, President and Chief Executive Officer of Boyd Gaming, commented, "During the quarter, consumers across the country faced an increasing number of hardships, including higher food prices, higher mortgage payments, unprecedented gas prices and the prospects of higher unemployment. As a result, like virtually every other consumer-oriented company, we experienced a challenging quarter, as consumers pulled back on discretionary spending. And, our management team responded aggressively to a difficult consumer climate by realigning expense levels to the changing business volumes. We remain confident in our ability to weather these current conditions, and to emerge in excellent position to capitalize on long-term growth opportunities across the country."

Key Operations Review

In our Las Vegas Locals segment, first quarter 2008 net revenues were $206.5 million versus $218.7 million for the first quarter 2007. First quarter 2008 Adjusted EBITDA was $66.7 million, a 10.6% decrease from the $74.6 million in the same quarter 2007.

Our Downtown Las Vegas properties generated net revenues of $60.9 million and Adjusted EBITDA of $10.2 million for the first quarter 2008, versus $63.8 million and $13.9 million, respectively, for the first quarter 2007.

In our Midwest and South region, we recorded $203.7 million in net revenues for the first quarter 2008, compared to $234.5 million for the same period in 2007. Adjusted EBITDA for the current period was $45.6 million, versus $57.3 million in the first quarter 2007; the decline in net revenues and Adjusted EBITDA were principally due to Blue Chip.

In Atlantic City, Borgata's operating income for the first quarter 2008 was $37.1 million, versus $42.9 million for the first quarter 2007. Net income for Borgata was $27.8 million for the first quarter 2008, compared to $35.3 million in the same period last year, and Adjusted EBITDA was $55.5 million, compared to $60.6 million for the first quarter 2007. Net revenue for Borgata was $202.0 million for the first quarter 2008, essentially flat compared to the $203.7 million recorded in the same quarter in 2007.

Development Update

Development continues to progress on our key growth initiatives:

-- In Atlantic City, The Water Club is in the final stages of construction and recently began taking reservations. Readying for a June 2008 opening, The Water Club is an 800-room boutique hotel directly connected to Borgata and will be the first of its kind in Atlantic City. The $400 million expansion will include five swimming pools, a spa in the sky, additional meeting and retail space and a separate porte cochere and front desk.

-- Our $130 million expansion of Blue Chip in Michigan City, Indiana remains on schedule for a December 2008 opening. This development project will add a dramatic 22-story hotel tower, which we topped-off earlier this month. The hotel will include 300 new upscale guest rooms, a spa and fitness center, additional meeting and event space, new dining and nightlife experiences, and a new porte cochere.

-- Construction on our Echelon development continues to advance as foundation work is complete for our wholly-owned hotels, which include Hotel Echelon, The Enclave, and Shangri-La Las Vegas; we began erecting steel for the lowrise this week, which encompasses much of the common area for three of the five hotels. Excavation for High Street (retail promenade) and The Meeting Center is complete and foundation work is well underway. Echelon remains on-schedule and on-budget.

Keith Smith added, "Despite near-term consumer challenges in all businesses, we believe our long-term prospects remain as bright as ever. As our growth pipeline begins to come on line with the opening of The Water Club in June and Blue Chip's new hotel in December, we will be able to offer more upscale and encompassing entertainment experiences than ever before, boosting our competitive position in crucial markets. As the economy recovers, we will be well-positioned to capitalize on growth opportunities."

Boyd Gaming Branding Initiative

The second phase of our branding initiative is underway, as Blue Chip recently introduced its new players club program to widespread customer acceptance. We successfully launched the first phase of our nationwide, consolidated players club program last quarter, when our Las Vegas Locals properties were united under a new Club Coast card. The current phase involves the rollout of the program across the Midwest and South Region under the "B Connected" brand. When the program launch is completed later this quarter, players will be able to use their cards at Boyd Gaming properties in Nevada, Illinois, Indiana, Louisiana and Mississippi.

Commenting on the launch, Paul Chakmak, Executive Vice President and Chief Operating Officer, said, "The creation of a nationwide, multi-property players card will allow us to better leverage our national portfolio, driving cross-property and cross-market visitation within and between the Midwest and South Region and our Las Vegas properties. We believe the 21% increase in new player sign-ups for our Club Coast program bodes well for customer acceptance, and we're confident that the defining aspects of our One Card program will provide us a key competitive advantage in the coming months and years."

Dividend

Our Board of Directors declared a quarterly dividend of $0.15 per share, payable June 2, 2008 to shareholders of record as of the close of business on May 14, 2008.

Key Financial Statistics

The following is additional information as of and for the three months ended March 31, 2008:

-- March 31 debt balance: $2.4 billion

-- March 31 cash: $152.5 million

-- Dividends paid in the quarter: $13.2 million

-- Maintenance capital expenditures during the quarter: $14.0 million

-- Expansion capital expenditures during the quarter: $169.0 million

-- Capitalized interest during the quarter: $6.7 million

-- Cash distribution to the Company from Borgata in the quarter: $14.7 million

-- March 31 debt balance at Borgata: $751.8 million