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Solid quarter and guidance

“Our business continued to show improvement as we saw double-digit EBITDA growth in our wholly-owned operations for the third straight quarter. Our strategy of building a diversified portfolio and maintaining an exceptional customer experience,
while keeping a tight rein on costs, is delivering strong results.”

- Keith Smith, President and Chief Executive Officer of Boyd Gaming


  • IP acquisition: "We are confident we will be able to drive significant efficiencies and generate additional revenue through cross-marketing opportunities"
  • Las Vegas Local: "Three of the four major properties in the region posted increased EBITDA, led once again the Orleans, as margins for the region improved..."
  • Downtown: "Successful marketing efforts with the Hawaiian customer segment drove strong increases in play and visitation, generating revenue and EBITDA growth for the third consecutive quarter.  Results continued to be impacted by significantly higher fuel costs associated with the Company's Hawaiian charter service."
  • Midwest and South: "Results reflect widespread improvement across the region, particularly in our southern Louisiana and Illinois operations."
  • Borgata: "Borgata's results reflect the mandated closure of the property for three days in late August due to Hurricane Irene; absent this closure, the Company believes Borgata would have reported growth in both revenue and EBITDA during the third quarter. Borgata continued to outperform the Atlantic City market, achieving an all-time record market share of nearly 20% during the third quarter."


  • Positive momentum that they have seen in the 1H11 continued in the 3rd Q
  • Las Vegas locals market - business is moving in the right direction. 
  • IP generated $36MM of LTM EBITDA as of Sept 30th.  $5MM of synergies from IP as well as benefits from cross marketing.  Closing was extended to Nov 28th and will be funded by secured financing
  • Strategy is deleveraging and diversifying their business.  Interested in acquisitions, management contracts, and opportunities from online gaming should it become legal.
  • Las Vegas locals business - margins rose by 320bps due to focus on maximizing returns on marketing dollars. EBITDA rose 28% at the Orleans - making it the 4th Q of growth at the property.  Elevated promotional environment has continued.  Stations remains aggressive and launched its 2nd large marketing campaign, but BYD will remain rational. No impact yet. Customers continue to choose BYD despite elevated promotional environment.
  • Downtown segment EBITDA hurt by $850k increase in fuel expenses.  All 3 properties experienced growth. Hawaii's economy has been strong and their marketing efforts continue to be successful.  Boeing 767 has increased their capacity by 12%.
  • Midwest & South: 4 out of 6 properties grew EBITDA.  Treasure Chest lead gains, followed by Delta Downs
  • AC: Estimate that the impact of Irene cost Borgata $10MM of revenue and $6MM of EBITDA. In September they reported an 11% increase in GGR and had record levels of table drop - with stable hold levels. 
  • Cash ADR's were up across the board and so they remain cautiously optimisitc
  • $2.4BM of debt; Borgata: $806MM ($16MM no R/C).  Consumated IP for $288MM right after the Q.  They borrowed $200MM under the R/C. $415MM O/S on their R/C. $215MM available in facility due 2015.  They expect to raise $300MM between now and the end of the 1Q12'.
  • $31MM of fully consolidated D&A. Decrease in D&A is due to a decrease in capex
  • Expect 4Q D&A to add $4-5MM from IP acquisition
  • Guidance 4Q: 
    • Wholly owned:
      • $73-78MM EBITDA (including IP)
      • EPS: $0.01 to a loss of $0.04 (including IP)
    • Borgata:
      • $34-37MM of EBITDA


  • Trends in 4Q so far: 
    • December is slowest part of the quarter for locals
    • Overall they are seeing overall stable trends in gaming.  In August and September, their customers played very lucky.
  • On the gaming side of the business, they continue to see modest but stable growth in the locals business
  • There are some extenuating circumstances that impacted IP EBITDA.  They are very confident of the upside there.
  • They are not interested in MA
  • Impact of Mojito Point at Delta Downs?
    • They are already at capacity on weekends at the property, mid-week is more of an issue. Thinks that more people visiting the area will benefit them.
  • Write off was related to acquisition costs and flood expenses.  There shouldn't be any material acquisition costs in the 4Q.  The $1MM of other revenue was related to a payment from Dania.  Basically EBITDA from Dania was a $1MM loss.
  • Cost of funds/options for the $300MM financing? 
    • They have a lot of options across the capital structure - it's not just high yield notes.  For the right kind of acquisition they would consider equity but not for IP - it's more of a plug in acquisition not transformative
    • They never counted on Dania closing to fund IP
    • We think they are talking to the banks and negotiations are going well
  • They are not depending on market growth to make the IP acquisition make sense. They think that plugging it into their system will be important and the key driver of growth there. They believe that the there are more synergies than they thought.
  • FCF will be continued to be used to maintain their properties competitive. Maintenance capital is about $70MM or $15MM/Q in 2011 and $80MM in 2012.  Room refurb will be done in 1Q12 at Borgata. Borgata's maintenance is about $20MM/year. 
  • Expect 60%+ flowthrough going forward in 2012
  • Capex in the Q:
    • BYD:  $15MM in maintenance and $70MM or a little less in 2011. Boyd ex IP in 12' $75-80MM. Borgata $8MM of capex, and will spend $20MM on the room refinish.  Next year: $20MM of maintenance and $25-30MM of project capex.
    • IP:  $44MM of maintenance - including $5MM in 4Q
  • How long will it take to recognize synergies at IP?
    • Some will be immediate and some will take longer.  North of $5MM in year 1 - not pro-rata all year - will take a year to get to $5MM.
  • Treasure Chest is truly a local casino - most of their customers come within a 5 mile perimeter. Most of those clients also visit Biloxi as a destination market.
  • Bought back $8.5MM of bonds at Borgata late in the quarter
  • IP  - peak EBITDA? N/A - happened in the year following Katrina as they were first to open. 
  • Impact of Acqueduct opening? 
    • Will likely to have some small impact on AC but not really an impact on Borgata
  • Revel - not sure what exactly will open amenity wise. They do think that Revel will grow the market, but aren't naive to think that there will be no impact. They are doing a room refurbishment. They will be aggressive to maintain their #1 position in the market.  
  • IP is not limited in regards to second lien capacity