Boyd Gaming Reports Third Quarter Results
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BOYD GAMING REPORTS THIRD QUARTER RESULTS - Company Launches Branding Initiative, Includes Phased Plan for One-Card System - - Central Region and Downtown Las Vegas Post Strong Results - - Company Declares Quarterly Dividend - LAS VEGAS, NV – OCTOBER 26, 2006 – 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. • Our 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: 2 • $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. 3 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 4 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.