Possible Station buy overshadows Boyd net loss

LAS VEGAS, Nevada -- Boyd Gaming Corp. executives repeatedly told analysts during Thursday's fourth-quarter earnings conference call they would not answer questions about the company's interest in spending $950 million to buy a large portion of rival Station Casinos.

The matter, which was announced Monday, overshadowed the company's reported net loss of $220.8 million for the period that ended Dec. 31. The decline, which translated into a loss of $2.51 per share, was due in large part to noncash, pretax impairment charges of $290.2 million related to several businesses Boyd Gaming acquired in recent years.

A year ago in the same quarter, the company earned $31 million, or 35 cents a share. Analysts polled by FactSet Research expected the company to earn 14 cents a share in the quarter.

Boyd Gaming's fourth-quarter revenues fell 11.7 percent to $422.6 million from $478.6 million.

Still, officials said results from its three Louisiana casinos were strong, trends in the Las Vegas locals market stabilized in the first eight weeks of 2009 and the company reduced operating expenses by $125 million.

"Although we believe that investors are more focused on Boyd Gaming's prospective acquisition of Station Casinos' assets, there are some key points worth noting in (the) results," Oppenheimer gaming analyst David Katz said in a research note.

The stock market seemed to agree. Boyd Gaming closed trading Thursday at $4.54 on the New York Stock Exchange, up 56 cents, or 14.07 percent. Shares of Boyd were trading at $26.25 a year ago before falling to $2.81 during last November's stock market crash.

Boyd Gaming Chief Executive Officer Keith Smith, in prepared remarks at the outset of the conference call, repeated Monday's announcement that Boyd Gaming was looking at buying the bulk of Station Casinos' Southern Nevada operations, including Santa Fe Station, Texas Station, the Fiesta properties in North Las Vegas and Henderson, Station Casinos' 50 percent interest in Green Valley Ranch Resort and Aliante Station, as well as several smaller casinos in the Las Vegas Valley.

Boyd would finance the cash transaction using the $2 billion it has available under its revolving line of credit.

Smith did offer some new details on the proposed offer. During the call, he said it was Boyd Gaming's understanding that Station Casinos' management contract to operate the Thunder Valley Indian casino near Sacramento, Calif., was part of the deal. Following the call, Smith said Boyd Gaming is interested in purchasing the 50 percent ownership stakes in Green Valley Ranch and Aliante Station that are controlled by the Greenspun Corp.

In response to a question about Boyd Gaming's overall growth philosophy, Smith said the company was interested in expanding its presence in the Las Vegas locals market while re-establishing a presence on the Strip.

"If you look over our history, we've grown prudently and carefully," Smith said. "We keep our eyes open for opportunities to make a good investment."

Smith said the company was spending all of this year evaluating its 87-acre Echelon site on the Strip, on which the Stardust once stood. Boyd Gaming halted construction on the $4.8 billion Echelon in August because of the credit market crunch and because the company's partners were having financing issues.

He couldn't answer how Echelon's future could be affected by the potential purchase of Station Casinos' assets.

"There are many other things in determining the future of Echelon that haven't been figured out yet and will be in the course of this year," Smith said.

Boyd's quarterly loss didn't faze analysts, especially with the results from Louisiana. Company officials said the Delta Downs racetrack in western Louisiana recorded a record year for earnings. In January, Delta Downs' gaming revenues were up 29 percent from a year ago while its Shreveport casino saw revenues jump 16 percent.

"We think Boyd reported a generally solid quarter in a challenging operating environment, and it provides another example that regional gaming results could be stabilizing," Goldman Sachs gaming analyst Seven Kent told investors.

JP Morgan gaming analyst Joe Greff said Boyd's quarter didn't shock investors.

"Overall, we think results were no worse than expected, perhaps even slightly ahead," Greff said.

In Las Vegas, Boyd Gaming said its revenues in the quarter were $176.8 million in the locals market, a decline of 17.5 percent, while downtown revenues dropped 9 percent to $60.8 million.

"We experienced our largest declines for the year the fourth quarter," Smith said.