Boyd reports results

LAS VEGAS, Nevada – (PRESS RELEASE) -- Boyd Gaming Corporation (NYSE:BYD) today reported financial results for the third quarter ended September 30, 2006. Due to the pending Barbary Coast exchange and the recently completed South Coast sale, results from these two properties are classified as discontinued operations; therefore, except where noted, all references to operating results in this press release exclude the results of Barbary Coast and South Coast for all periods presented.

    

    Recent Highlights
    *  Company announces branding initiative that will allow it to position
       its properties as part of a larger network, further capitalizing on its
       central customer database, and begins a phased introduction of a
       one-card player program.

    *  Company announces agreement with Harrah's Entertainment to trade the
       Barbary Coast Hotel and Casino in a tax-deferred exchange for
       approximately 24 acres of Las Vegas Strip property contiguous to its
       63-acre Echelon Place development on the Las Vegas Strip.

    *  Company closes the sale of South Coast on October 25; consideration
       received in the transaction included approximately $401 million in cash
       and approximately 3.4 million shares of the Company's common stock.

    *  Company announces $130 million expansion project at its Blue Chip
       facility in Michigan City, Indiana to meet rising demand and strengthen
       the property's competitive edge in the northern Indiana market.

    *  Central Region records double digit increases in the third quarter for
       both net revenues and Adjusted EBITDA(1), increasing 15.4% and 31.7%,
       respectively, over the same quarter in 2005; improvements were due in
       part to the impact from Hurricanes Katrina and Rita.

    *  Downtown Las Vegas properties set a new third quarter record for
       Adjusted EBITDA of $9.5 million, a 2.0% increase over same period in
       2005, largely attributable to greater operating efficiencies.

    (1)  See footnotes at the end of the release for additional information
         relative to non-GAAP financial measures.

    Third Quarter Results

We reported third quarter 2006 income from continuing operations of $28.1 million, or $0.32 per share, compared with $33.9 million, or $0.37 per share, in the same period 2005. When including discontinued operations, we reported a net loss for the third quarter 2006 of $12.9 million, or $0.15 per share, compared to net income of $32.9 million, or $0.36 per share, reported in the same period 2005. The net loss for the 2006 period included a $65.0 million pre-tax impairment charge, included in discontinued operations, to write-down South Coast to its fair value less estimated cost to sell. Additionally, on January 1, 2006, we adopted Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, resulting in $5.0 million of non-cash compensation expense in the current quarter, or $0.04 per share; there was no such expense recorded for the same period last year. Per share earnings discussed throughout this release are reported on a diluted basis.

Adjusted Earnings(1) from continuing operations for the third quarter 2006 were $38.8 million, or $0.44 per share, as compared to $51.1 million, or $0.56 per share, for the same period in 2005. Had we expensed stock options in the third quarter last year, pro forma Adjusted EPS(1) would have been $0.53 in that period. During the third quarter 2006, certain pre-tax adjustments to income from continuing operations totaling $16.6 million ($10.7 million, net of tax, or $0.12 per share) were as follows:

    *  $6.0 million for write-downs and other charges that consist mainly of
       estimated Stardust termination benefits and a charge to write-down land
       we had purchased for our Pennsylvania development that is now held for
       sale.

    *  $4.3 million charge for accelerated depreciation at Stardust, which
       will close on November 1 to make way for our Echelon Place development.

    *  $3.2 million charge for preopening expenses primarily related to our
       Echelon Place development.

    *  $1.8 million charge for the change in fair value for our
       forward-starting interest rate swaps.

    *  $1.3 million in charges for our share of Borgata's loss on asset
       disposals and preopening expenses.

By comparison, the third quarter 2005 included pre-tax adjustments that reduced income from continuing operations by $26.2 million ($17.3 million, net of tax, or $0.19 per share).

Net revenues were $530.7 million for the third quarter 2006, an increase of 1.4% over the same quarter in 2005. Total Adjusted EBITDA was $149.9 million in the third quarter 2006, as compared to $154.0 million for the same period last year.

Bill Boyd, Chairman and Chief Executive Officer of Boyd Gaming, commented, "We continued to refine our operating strategies in the third quarter, adjusting for new capacity in the Las Vegas Locals market, and winding down initial marketing and advertising efforts related to recently completed expansions of our Blue Chip and Borgata operations. We are also strengthening our growth pipeline by trading the Barbary Coast and its four acres for 24 acres of land adjacent to our Echelon development. We will control over a quarter-mile of Las Vegas Strip frontage and have an opportunity to develop future phases related to our Echelon project. Finally, the completion of our South Coast sale provides additional capital for future growth, and in connection with the sale, we were able to repurchase approximately 3.4 million shares."

    (1)  See footnotes at the end of the release for additional information
         relative to non-GAAP financial measures.

    Year-To-Date Results

Income from continuing operations for the nine months ended September 30, 2006 was $105.7 million, or $1.17 per share, as compared to $138.6 million, or $1.53 per share for the nine months ended September 30, 2005. Net income, which includes the results from discontinued operations, was $60.5 million, or $0.67 per share, for the 2006 year-to-date period compared to $121.7 million, or $1.35 per share, for the nine-month period ended September 30, 2005, which included a $16.4 million net of tax charge, or $0.17 per share, for the cumulative effect of a change in accounting principle. The 2006 period net income included a $65.0 million pre-tax impairment charge, included in discontinued operations, to write-down South Coast to its fair value less estimated cost to sell. Pursuant to the adoption of SFAS No. 123R, Share-Based Payment, on January 1, 2006, we have recorded $17.0 million of share-based compensation expense in the 2006 year-to-date period, or $0.12 per share; there was no such expense recorded for the same period last year.

Adjusted Earnings from continuing operations for the nine months ended September 30, 2006 were $155.5 million, or $1.72 per share, as compared to $157.4 million, or $1.74 per share for the nine-month period in 2005. Had we expensed stock options in the prior year, pro forma Adjusted EPS would have been $1.64 per share in that period.

Net revenues were $1.7 billion and $1.6 billion for the nine months ended September 30, 2006 and 2005, respectively. Total Adjusted EBITDA was $506.0 million for the current nine month period and included a $6.7 million charge for a retroactive gaming tax assessment at our Par-A-Dice property in Illinois. By comparison, Total Adjusted EBITDA for the 2005 period was $478.5 million.

Key Operations Review

In our Central Region, Blue Chip net revenues increased 16.8% in the third quarter 2006 over the same period in 2005, and the property improved EBITDA margin by over 330 basis points from the second quarter 2006, as we neared completion of our launch phase for the new expansion during the third quarter. Treasure Chest and Delta Downs recorded third quarter 2006 Adjusted EBITDA increases of 267% and 53.0%, respectively, over the 2005 quarter. While hurricane disruption resulted in temporary closures of the properties in 2005, increased revenue and improved EBITDA margin were key factors in their current quarterly performances. Treasure Chest was closed for 35 days and Delta Downs was closed for nine days during the third quarter 2005.

Our Downtown Las Vegas properties posted record third quarter results with Adjusted EBITDA of $9.5 million, a 2.0% increase over the third quarter 2005, largely attributable to greater operating efficiencies.

In our Las Vegas Locals segment, third quarter net revenues were $199.5 million versus $214.2 million for the third quarter 2005. Third quarter 2006 Adjusted EBITDA was $56.2 million as compared to $71.1 million in the same quarter 2005. New capacity in the market and increased promotional spending were the primary reasons for the declines in net revenues and Adjusted EBITDA.

In Atlantic City, Borgata Hotel Casino and Spa continued its market-leading success in the third quarter 2006. Both gaming and non-gaming revenues increased by more than 13% for the third quarter over the same period in 2005, despite the three-day New Jersey state shutdown. Borgata also posted record monthly and quarterly gross gaming revenue for the Atlantic City market, as reported by the New Jersey Casino Control Commission. Prior to July 2006, no other Atlantic City property had ever exceeded the $70 million mark for a single month, and Borgata surpassed that milestone in each of the three months of the third quarter 2006.

While Borgata posted record revenues, net income declined to $45.1 million for the third quarter 2006 as compared to $55.9 million for the third quarter 2005. Adjusted EBITDA during the quarter also declined by $4.6 million, or 6.0%, from the same period in the prior year. These declines are primarily due to the three-day mandated New Jersey state shutdown and the launch of the new public space expansion. The shutdown resulted in an estimated loss of $7 million in gaming revenue and $4 million in Adjusted EBITDA. Additionally, the property incurred greater marketing costs and certain labor inefficiencies related to the launch of the public space expansion. Higher depreciation and interest charges at Borgata were also related to the opening.

Development Update

Our growth pipeline continues to evolve with both short and long term opportunities that include new developments, as well as expansions to some of our existing properties.

With the pending addition of 24 acres of Las Vegas Strip land adjacent to our Echelon Place development, we will control approximately 87 contiguous acres, centrally located in the area many believe will ultimately become the luxury corridor of the Las Vegas Strip. While we do not anticipate any scope changes to our Echelon project as a result of the additional land, we are reviewing the site plan to maximize opportunities for the remaining acreage. We recently announced that we will close the Stardust on November 1, 2006, setting the stage for its demolition later in the first quarter 2007, followed by the commencement of construction of Echelon Place in the second quarter 2007.

We are also announcing a new expansion project at our Blue Chip facility in Michigan City, Indiana. The $130 million project is expected to begin construction in the first quarter 2007 and will include 300 guest rooms, a spa and fitness center, additional meeting and event space, new dining and nightlife experiences, and a more dramatic entrance and porte cochere. A key element of the expansion will be a dramatic 22-story hotel tower that will be among the most visible structures in the area. The opening of Blue Chip's new casino and pavilion in January has created significant new demand and the Company believes that additional hotel rooms and attractions will continue to broaden the property's appeal. The project is scheduled to open in late 2008.

Keith Smith, Boyd Gaming's President and Chief Operating Officer, commented on the new Blue Chip expansion project, "With the launch of our new Blue Chip brand platform, we have already increased our reach in the market and successfully elevated the brand. Growing customer interest combined with the high room demand, make this an incredible opportunity to build our business with an enhanced room product and offer a more complete trade-up opportunity for our expanding market demographic."

Boyd Gaming Branding Initiative

We also announced a new branding initiative that will position our individual properties as part of a larger network, creating additional synergies and further leveraging Boyd's highly regarded blend of gaming excitement and personal service. A chief benefit of the branding initiative will be to combine our individual property player clubs into a one-card program, enhancing the value of our player clubs, as well as driving cross-property visitation. We plan to begin rolling out the initial phase of the player club upgrades in the Central Region in 2007.

We also will bring together our Las Vegas Locals properties under one operating and marketing structure with the goal of creating a stronger presence in the market, increasing customer loyalty and generating additional economies. The six Central Region properties, which have historically operated individually, will be similarly structured, but in a way that respects their distinct characteristics. An important aspect to our Central Region strategy will be to use our large customer database to drive business to our Las Vegas locations.

Keith Smith commented on the branding initiative, "We believe our new branding initiative will help us to better leverage our geographic diversity and channel that energy to bring additional guests to our Las Vegas properties, enhancing the performance of future developments, such as Echelon Place."

Barbary Coast Exchange

On October 2, we announced an agreement with Harrah's Entertainment, Inc. to trade the Barbary Coast Hotel and Casino (approximately four acres) in a tax-deferred exchange for approximately 24 acres of Las Vegas Strip property that Harrah's acquired from third parties. The land that we are to receive in the exchange is located adjacent to and directly north of our 63-acre Echelon Place development site and will give us approximately 87 contiguous acres.

We expect to recognize a non-cash gain of approximately $280 million in the quarter in which the transaction closes and are now reporting the results of operations from Barbary Coast in discontinued operations on our consolidated statements of operations. The transaction is subject to customary closing conditions, including receipt of regulatory approvals, and is expected to close on January 30, 2007.

South Coast Sale

We closed the sale of the South Coast Hotel and Casino on October 25. In connection with the transaction, we reported a $65 million impairment charge during the third quarter 2006 that is included in discontinued operations. As consideration for the sale of South Coast, we received approximately $401 million in cash and the cancellation of our $112 million note payable for our purchase of approximately 3.4 million shares of our common stock.

Dividend

We also announced that our Board of Directors declared a quarterly dividend of $0.135 per share, payable December 1, 2006 to shareholders of record on November 10, 2006.

Key Financial Statistics

The following is additional information as of and for the three months ended September 30, 2006:

    *  September 30 debt balance: $2.57 billion (excludes the $112 million
       note associated with the share repurchase related to the South Coast
       sale)

    *  September 30 cash: $170.2 million

    *  Dividends paid in the quarter: $11.7 million

    *  Maintenance capital expenditures during the quarter (excluding Delta
       Downs restoration costs covered by insurance): $20.0 million


    *  Expansion capital expenditures during the quarter:
       -  Echelon Place    $   6.4 million
       -  South Coast          6.7 million
       -  Blue Chip            3.5 million
       -  North Las Vegas      2.4 million
       -  Other                6.3 million
                    Total  $  25.3 million


    *  Number of shares outstanding on September 30, 2006:  86.4 million

    *  Capitalized interest during the quarter: $1.6 million

    *  Cash distribution to the Company from Borgata in the quarter:
        $17.4 million

    *  September 30 debt balance at Borgata: $498.9 million