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US-Boyd turns to profit in Q2 despite Vegas downturn

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Results in the Midwest and Southern regions helped American operator Boyd Gaming turn a profit in the second quarter despite continual concerns in the struggling locals market in Las Vegas.

Net revenues came in at US$615.2m for the second quarter, marking an increase of 7.1 per cent from US$574.4m during the same quarter in 2011.

Revenues were up to $438.7m, representing an increase of 12.4 per cent from the year-ago period, driven by results in the Midwest and South region, while a weaker performance in Nevada negatively impacted results. Borgata, the company’s 50 per cent joint venture, reported second-quarter 2012 net revenues of $175.4m, down $7.4m from the second quarter of 2011.

Keith Smith, President and Chief Executive Officer of Boyd Gaming, said: “The results for the second quarter clearly were not in line with our expectations or the guidance we provided on our last earnings call. We have seen several consecutive quarters of encouraging trends in the business, both in Nevada and in the Midwest and South. There were no signs that these trends would change in a material way. Starting in May, we began to see some weakness in economic trends, both locally and nationally. Manufacturing, job creation and consumer spending all started to slow. The slowdown in economic activity clearly showed up in our business in May and June and impacted our overall results. During the second half of the quarter, business trends began to weaken, and that clearly contributed to softness in our results. We remain encouraged by results at our Midwest and South properties, where we maintained or grew share in each of our markets.   This bodes well for our acquisition of Peninsula Gaming, which is on track to be completed in the fourth quarter.”

In the Las Vegas Locals segment, second-quarter 2012 net revenues were $149m, down $2.9m from the second quarter of 2011 although the company’s Downtown Las Vegas business stabilised with net revenues of $55.9m for the second quarter 2012, compared to $56.6m in the second quarter 2011.

In the Midwest and South region, net revenues were $233.7m, up 28.6 per cent from the year-ago with Delta Downs, Treasure Chest and the IP produced solid results during the quarter.

Atlantic City continued to struggle with Borgata’s net revenues coming in at $175.4m, down $7.4m from the second quarter 2011.  However, Borgata continued to lead the Atlantic Citymarket by a wide margin, increasing its market share during the quarter, and we expect the property to deliver a strong performance during the summer season.

The operator continues to make progress toward closing the acquisition of Peninsula Gaming, which will add five properties to its portfolio: the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Casino in Worth County, Iowa; Evangeline Downs Racetrack and Casino in Opelousas, Louisiana; and Amelia Belle Casino in Amelia, Louisiana.

Boyd also announced that it has reached separate development agreements for new projects in Broward County, Florida and Sacramento County, California.

In Florida, it has entered into an agreement with Sunrise Sports Entertainment, the operator of the BankAtlantic Center, a major entertainment venue in south Florida and home to the NHL’s Florida Panthers. This agreement provides Boyd the opportunity to take advantage of the potential of expanded gaming in south Florida at the site of the BankAtlantic Center.

The BankAtlantic Center is the largest indoor arena of its kind in Florida, hosting more than 200 events annually.  It is located directly across from Sawgrass Mills, the sixth-largest shopping mall in the country.

Boyd has also reached an agreement with Wilton Rancheria, a federally-recognised tribe located about 30 miles southeast of Sacramento, California, to develop and manage a gaming entertainment complex.  The deal is subject to the receipt of all required local, state and federal approvals, a process we believe will take approximately 24 months.

“While it is early in the process, these two agreements provide exciting long-term growth opportunities for the company,” Mr. Smith said.  “The agreement with Sunrise Sports Entertainment positions us to take advantage of a potential development opportunity in an attractive location. The project would be in an ideal location in Broward County, adjacent to two attractions that already draw substantial visitor volumes, with easy access to several major traffic corridors. We are equally excited by our agreement with Wilton Rancheria in California.  We look forward to working with them to develop an exciting gaming complex southeast of Sacramento.”

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