Diversity Seen to Boost Boyd

by Jennifer Robinson

LAS VEGAS -- For Boyd Gaming Corp., variety proved a winner in 2005.

From its locals casinos in Las Vegas to its riverboats in the south, "the benefits of broad diversification" helped Boyd turn in a positive fourth quarter and "one hell of a year" in 2005, Chief Financial Officer Ellis Landau said.

Because of a $56 million impairment loss at the soon-to-disappear Stardust, Boyd's net income dropped in the quarter that ended Dec. 31. Net income was $22.9 million, or 25 cents a share, down from $46.9 million, or 53 cents a share in the fourth quarter of 2004.

Adjusted to account for the Stardust charge, as well as preopening costs at the South Coast and tax credits for wage continuation at the Gulf Coast properties shuttered after hurricanes Rita and Katrina, Boyd had quarterly earnings of 76 cents a share, an increase of 49 percent when compared with 51 cents a share in the same quarter a year ago.

Revenue rose 4.6 percent to $565 million from $540 million.

Analysts expected earnings of 61 cents a share on $558.4 million in revenue.

Quarterly cash flow, or earnings before interest, taxes, depreciation and amortization, was a record $182 million, up 22 percent from $149 million in the fourth quarter of 2004.

Net income in 2005 increased to $145 million, or $1.60 a share, up from $111 million, or $1.42 a share in 2004.

Revenue for the full year was $2.22 billion, a 28 percent increase over the $1.73 billion reported in 2004.

Cash flow in 2005 totaled $668 million, compared with $449 million in 2004.

"The results reflect the fact that we have a strong and diverse operating base in some of the strongest markets in the industry," said Boyd President Keith Smith. "Our strategy for diversification has proven very successful."

Brian Gordon, a gaming analyst with the Las Vegas research firm Applied Analysis, said Boyd's financial strides aren't confined to sales boosts.

"Boyd continues to press forward with reasonable gains in revenue, but more importantly, the company continues to increase profitability," Gordon said. "That's driven partly by efficiencies gained in the locals market, where Boyd has leveraged cross promotion and eliminated duplicative positions following its Coast acquisition (in 2004). There are also positive performances across the locals sector, including the Boulder Strip (with Sam's Town) and the Coast Casinos properties."

Brian McGill, a gaming analyst with Susquehanna Financial Group, also praised the results.

"The numbers on a margin basis were significantly higher than what most folks modeled, ourselves included," McGill said.

The biggest surprise, analysts said, was Boyd's central region, which includes the Gulf Coast properties buffeted during hurricanes Katrina and Rita.

Fourth-quarter cash flow in the central region rose 50 percent, from $44.7 million in 2004 to $66.9 million in 2005. The Treasure Chest riverboat accounted for most of that increase; when it reopened in October following repairs of hurricane damage, its competitors had yet to relaunch.

Boyd's Coast Casinos unit, which includes Suncoast, Gold Coast, Barbary Coast, South Coast and The Orleans also flourished. The division posted record revenue of $191 million in the fourth quarter, up 6.8 percent from $179 million a year ago. Company officials credited the boost to a growing Las Vegas economy and the Dec. 22 opening of South Coast.

Coast's cash flow was up 6.1 percent, from $60.5 million in the fourth quarter of 2004 to $64.2 million in the most recent quarter.

For the full year, Coast cash flow was up 24 percent to $254 million, a record for the operating unit.

Quarterly cash flow at the Stardust surged 43 percent, from $4.8 million in the fourth quarter of 2004 to $6.9 million in the most recent fourth quarter, due in part to an ongoing efficiency program. The property's cash flow for the year was $24.7 million, a 37 percent increase over the $18 million recorded in 2004.

Boyd's downtown resorts also had record results in the quarter and the year. The company attributed the improved results to a strong economy in the unit's Hawaiian feeder market.

In the quarter, the downtown properties -- Main Street Station, the California Hotel and the Fremont -- posted a cash flow of $17.2 million, a 40 percent increase over $12.3 million in the same period a year earlier. For the year, the properties posted $52.3 million in cash flow, up 35 percent over $38.7 million in 2004.

Smith noted the three properties have a combined 1,635 rooms, and said the yearly cash flow "is not something many Strip properties of the same size can achieve."

The downtown results also countered general trends in the submarket: In November, downtown casinos as a whole posted a 5.2 decline in gaming win -- the sixth time in seven months that the area's performance dipped.

Boyd shares rose 69 cents to close at $45.39 Thursday on the New York Stock Exchange.