Boyd Gaming sees second quarter profits plunge

LAS VEGAS, Nevada -- Boyd Gaming Corp. executives weren't taking the bait.

With the Las Vegas-based casino operator dropping out of Friday's planned bankruptcy court auction of several Station Casinos' properties, Wall Street speculated on the next potential acquisition target for the Las Vegas-based casino operator.

But company leaders didn't go along.

Boyd Gaming had just explained Tuesday how the recession left consumers skittish, causing the company's second-quarter profits to fall 73 percent, when the questions started.

Union Gaming Group Principal Bill Lerner asked point blank if Boyd Gaming had participated in a rumored privately held bank-back auction of M Resort. Company Chief Financial Officer Josh Hirsberg was noncommittal.

"We don't comment on speculation," Hirsberg said. "We do believe the best opportunities for us are in the locals market. Buying an existing property is a much better opportunity than building something from the ground up."

Which means Echelon, the company's mothballed $4.8 billion Strip development, which halted construction two years ago, will sit well into the next decade until the market turns.

Until then, Boyd executives will keep their interests focused on buying opportunities around the country.

"We have confidence in the locals market. We believe it will recover," said Boyd Gaming CEO Keith Smith. "We believe there will be opportunities that will present themselves and will be a strategic fit for our company."

Boyd earned $3.4 million during the three-month period that ended June 30, or 4 cents a share. A year ago, Boyd Gaming reported net income of $12.8 million, or 15 cents a share. Analysts polled by FactSet Research expected a profit of 10 cents a share.

Net revenues during the quarter declined 5.9 percent to $578.4 million compared with $614.5 million collected a year ago.

"The lingering effects of the recession have left consumers unusually sensitive to shifts in the economy, and they now react more quickly to economic data and other developments, such as fluctuations in the stock market," Smith said. "Although conditions remain uncertain, we believe long-term stabilizing trends are still in place, and that year-over-year growth is achievable by the end of 2010."

Wall Street analysts said they were somewhat disappointed by the company's results but were more interested in hearing about future plans following Friday's announcement it was no longer interested in pursuing a purchase of assets from bankrupt Station Casinos.

Boyd didn't provide much information about buying MGM Resorts International's up-for-sale 50 percent share of the Borgata in Atlantic City, which the company operates.

Net revenues fell from $191.5 million to $186.9 million at Borgata. Adjusted cash flow was off 9.9 percent. Boyd said Borgata's performance was hurt by higher promotional activity from competitors in Pennsylvania, higher utility costs due to unseasonably hot weather and reduced day-trip visitation to Atlantic City during June.

"It's MGM's process to run with and we'll see how that unfolds," Smith said. "Once MGM has a third-party offer, they will bring it to us and we have a chance to match it."

During the quarter, Boyd Gaming's revenues and cash flows were down in every operating segment.

"Property results were lower than our estimates in most markets," Jefferies and Co. gaming analyst David Katz said.

In the Las Vegas locals market, net revenues were $153.1 million, down from $166.1 million, while adjusted cash flows declined 16.2 percent. The company's downtown casinos generated net revenues of $55.2 million, compared to $57.6 million a year ago, while adjusted cash flow was off 21.2 percent.

The results weren't better in the Midwest and South, where Boyd Gaming recorded $181.7 million in net revenues, compared with $197.3 million in the same quarter of 2009. Adjusted cash flows were off 20.9 percent.