Boyd Gaming posts loss for first quarter

A first-quarter net loss of $32.6 million by Boyd Gaming Corp. didn't surprise Wall Street.

Analysts expected a sour quarter as the company faced a slowing national economy.

"Operationally, results were in line with our reduced expectations," Susquehana Financial Group analyst Robert LaFleur told investors shortly after the Las Vegas-based company released its quarterly financial figures Tuesday morning. "The challenges in operating results were widely expected, given the softness in reported state revenue results."

Boyd Gaming said its net loss translated to a loss of 37 cents a share. In the same quarter a year ago, Boyd Gaming reported a net income of $35.1 million, or 40 cents a share.

Analysts surveyed by Thomson Financial expected earnings of 32 cents per share in the most recent quarter.

Quarterly revenues fell 8.9 percent, to $471.1 million from $517 million.

Revenues in all of the company's operating segments fell during the quarter. The Las Vegas locals market, which includes the company's Coast casinos and Sam's Town, reported revenues of $206.5 million, down 5.6 percent; downtown market revenues were $60.9 million, down 4.6 percent; and the company's South and Midwest casinos had revenues of $203.7 million, down 13.1 percent.

The Borgata in Atlantic City, which the company operates and jointly owns with MGM Mirage, had net revenues of $202 million, compared with $203.7 million a year ago.

"The large year-over-year drop in downtown Las Vegas was worse than we expected," LaFleur said. "However, Boyd recovered some earnings per share in the quarter on lower below-the-line items."

The company recorded an $84 million pretax impairment charge on the Dania Jai Alai park in Fort Lauderdale, Fla. Boyd Gaming said it was postponing the development indefinitely because of market conditions and competition from an American Indian casino.

Oppenheimer gaming analyst David Katz was optimistic, even though Boyd could be facing a tough year.

"Several issues in key markets were greater than expected, particularly the Las Vegas locals market." Katz said. "We believe these issues could persist through 2008, although our outlook for 2009 is incrementally more positive."

Boyd Gaming CEO Keith Smith said consumers nationwide are facing higher food and gasoline prices, larger mortgage payments and job uncertainties, which has affected their discretionary spending.

"Our management team responded aggressively to a difficult consumer climate by realigning expense levels to the changing business volumes," Smith said. "We remain confident in our ability to weather these current conditions."

The drop in revenues is running across the board. Smith said, and includes nongaming categories, such as restaurant spending, retail and entertainment.

"There is just a softness in all areas," he said.

Smith said the company is pointing toward its development pipeline as a way to boost the company's prospects. The Water Club, a $400 million, 800-room hotel expansion to the Borgata, opens in June. A $130 million hotel tower expansion to the Blue Chip riverboat casino in Michigan City, Ind., opens in December. Construction also continues on the $4.8 billion Echelon on the Strip.

"Despite near-term consumer challenges in all businesses, we believe our long-term prospects remain as bright as ever," Smith said.

Boyd Chief Operating Officer Paul Chakmak said different initiatives had been undertaken to offset the slowing economy. He pointed to the company's branding initiative through a player-tracking program that is now being rolled out nationwide after being introduced in Las Vegas.

"The creation of a nationwide, multiproperty players card will allow us to better leverage our national portfolio, driving cross-property and cross-market visitation," Chakmak said, adding there has been a 21 percent increase in new player sign-ups.

Boyd Gaming shares rose 29 cents, or 1.53 percent, Tuesday to close at $19.21 on the New York Stock Exchange.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.