BYD 4Q09 CONF CALL: "NOTES"

BYD 4Q09 CONF CALL: "NOTES"

"The stabilizing trends we've noted previously continued during the fourth quarter, and we were especially encouraged by our Las Vegas Locals business, which showed sequential improvement from the third quarter. Visitation to the city continues to grow, reflecting the popularity of Las Vegas as a destination. As the economic recovery accelerates, consumer spending will increase, providing us the opportunity to capitalize on our more efficient business model."

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

HIGHLIGHTS FROM THE RELEASE

  • "We saw stable visitation at our properties in the Las Vegas Valley, but continued to be impacted by depressed consumer discretionary spending."
  • "Stronger operating results at our three downtown properties were offset by lower pricing and higher fuel costs associated with our Hawaiian charter service."
  • "In Indiana, Blue Chip reported solid year-over-year growth, which was offset by previously anticipated weakness at our southern Louisiana properties."
  • "Borgata was able to maintain Adjusted EBITDA at prior-year levels despite the impact of severe winter weather in December."

CONF CALL

  • Seeing early signs that the recovery is underway in Las Vegas, and the recovery of the Strip is vital to their locals market economy
  • Had the first sequential quarterly improvement in the locals business, for the first time in 18 months and are seeing those trends continue into the 1Q2010
  • Continue to look for attractive long term growth opportunities - primarily STN casinos
    • Even if STN's agreement with lenders comes to fruition, there will still be a number of their assets up for sale and they would be interested buyers
  • Will monitor MGM's divestiture process closely; BYD has the right of first refusal
  • Las Vegas locals region:
    • Business trends are finally improving on the strip - (really? I thought they were just getting less bad)
    • Saw a moderation of promotional spending in the 4th quarter and that trend has continued into the first quarter
  • Downtown region:
    • As many customer packages are purchased months in advance, they didn't reflect the rising fuel prices, and that negatively impacted them
    • Their share of the downtown market rose to 1/3
  • Midwest & South
    • Decline was due to declines in Louisiana. Lake Charles market was benefiting from hurricane money - which has finally run out.  Louisiana and Texas job markets have also softened (Delta Downs & Treasure chest)
    • Blue Chip did well, drawing more business from the Chicago market
    • Expecting similar y-o-y comparison in the 1Q2010
  • Borgata
    • If not for weather issues, they would have had $5MM more of EBITDA and revenue growth
    • Bad weather has continued into the 1st quarter - and the impact will be over $5MM of EBITDA as three weekends have been negatively affected by weather
  • Expect y-o-y declines in their results to continue to narrow in 2010
  • Leverage was 6.2x vs a 6.5x covenant
  • Their $1BN R/C availability is enough to complete any of the M&A pursuits (ie. STN's acquisition)
  • $1.8MM one time charge was recorded as interest expense in relation to the early reduction of the R/C capacity which resulted from their credit expansion
  • Pre-opening expense was entirely related to Echelon, no capitalized interest
  • Once the NJ commission allows MGM to move forward with the sale of their share of Borgata, BYD will have to consolidate their results

Q&A

  • Echelon will have on-going minimal costs included in pre-opening expenses.  Will wind down to just security and site maintenance post 1H2010
  • Any other properties have weather hits? No - Midwest has had normal weather
  • Recap of Borgata?
    • They are looking at it - especially since the existing credit facility expires in 2011
  • Las Vegas locals trends are across the board with the Coast properties & Boulder Strip
  • Tax benefit in the quarter?
    • 4Q is always an anomaly because that's when they true up. Expect run rate tax rate to be 38% in 2010
  • Do they have any more room to cut costs at the property level? Just more rational marketing from their competition
    • A number of their competitors were spending a lot in Southwest Louisiana and the easing of that in the 1Q2010 will benefit them
  • Capex and Corporate for 2010?
    • Corporate shouldn't be much different than 2009 levels. For Capex they have a little left on wrapping up Echelon that has already been spent but needs to be paid ($25-30MM) plus another $50-55MM of maintenance
  • Don't need to contemplate issuing equity
  • VLT's at the Meadowlands?
    • Do not want to see that happen and are fighting it
    • It is a legislative issue that needs to pass a bill to get approved
  • Have been planning for the impact of table games in PA for a while.  Will likely step up market. Think that they are more of a destination market than the PA assets. They have much better amenities than PA, even with table games
    • We think they will obviously get hit - despite the better amenities
  • Because the debtor has a period of exclusivity (STN), they haven't been spending a lot of money on this effort