Boyd Gaming Still Angling for Station Casinos

"We believe we've reached the low point in this economic cycle, and that the precipitous declines that began in the second half of 2008 are behind us [and] we are now at a new base to build from," he said on the quarterly conference call after reporting a 60% drop in its adjusted profit for the second quarter. "However, while the business trends may have stabilized, we are not currently seeing any indications that point to a meaningful recovery in the short term."

Boyd Gaming owns and operates 16 gambling properties including nine in the Las Vegas Valley--six locals' casinos and three Downtown properties. The company did not release second quarter hotel occupancy and room rate information along with its earnings release but is expected to include some detail in its 10-Q, which should be filed with the SEC in the next couple of days.

It Las Vegas Locals' properties--Gold Coast, Orleans, Suncoast, Sam's Town, Eldorado, Jokers Wild—generated net revenues of $166.1 million, a 16% decline from the same year-earlier period. Adjusted EBITDA fell 29.7% to $43.9 million. Boyd said generally that reduced consumer spending and continued pressure on room rates impacted results, citing the region's 12% unemployment and 50% drop in home values.

Its Downtown Las Vegas properties -- California Hotel and Casino, Fremont Hotel and Casino, Main Street Station Casino Brewery and Hotel – generated net revenues of $57.6 million, down 8.6% from the same year-earlier period. Adjusted EBITDA was $11.8 million, a 14.5% increase from the same year-earlier period. The company attributed the increase in adjusted EBITDA to improved property operating margins and lower fuel costs for its Hawaiian charter operations.

With regard to its efforts to acquire more locals' casinos from Station Casinos, Smith told analysts that Station's Ch. 11 bankruptcy filing does not change the fact that the company remains "extremely" interested. Boyd Gaming made a non-binding $950-million offer for several of Station's casino properties in February but Station Casinos shot down the offer.

"The constraints, expenses and distraction associated with this process can take an unfortunate toll on a company, its employees, vendors and its customers; we believe we can play a key role in helping to resolve the situation," Smith told analysts. "To that end, we remain actively engaged with various parties. As the bankruptcy process continues and the creditors consider their options, they know Boyd Gaming remains serious and committed in being an active participant. They also know we have the ability and the financial resources to swiftly execute a transaction, and we have more than 35 years of experience in the Las Vegas market. Both of these factors will allow us to provide a smooth transition for Station's employees and customers. We will keep you updated as the situation develops."

With regard to Echelon, Smith said the company continues to review its options for this site. Part of that review includes investigating alternative design approaches for the project, reiterated Smith. The options being considered include developing the project in phases, alternative capital structures, scope modifications, and additional strategic partnerships.

Work on Echelon officially got underway in June 2007. The company halted construction on Aug. 1, 2008. Its first project on the Strip, the 87-acre, $4.8-billion integrated resort was scheduled to open in late 2010 with 5,000 rooms in five hotels, 750,000 square feet of convention and meeting space, 300,000 square feet of retail, two live entertainment venues, 30 dining and nightlife venues, a 140,000-square-foot casino and parking for 8,000 cars.

"We have tremendous confidence in the future of Las Vegas," Smith told analysts this week, "and while the new projects coming on line in the next year will certainly present challenges for the Las Vegas Strip, we continue to view our site on the Strip as an important, long term strategic asset for the company."