Boyd Gaming's ( BYD) bet on the Borgata Hotel Casino and Spa in Atlantic City reaped big rewards in the second quarter, with the company's earnings nearly tripling from last year, prompting it to announce a $200 million expansion of the casino. Boyd, which recently completed its merger with Coast Casinos, announced second-quarter net income of $15.5 million, or 23 cents a share, more than three times the $4.4 million, or 7 cents a share, it had a year ago. On an adjusted basis, which eliminates a number of charges and is how Wall Street views the company, Boyd earned 27 cents a share, up from 21 cents a year ago and matching the Wall Street estimate. The company said EBITDA rose to $85.3 million from $63.1 million last year. On Wednesday, before Boyd released earnings, shares rose 74 cents, or 2.9%, to $24.53. Revenue came in at $341.9 million, much better than the $327.9 million expected by analysts and up 9.4% from last year, fueled by the company's acquisition of Sam's Town Shreveport. All in all, revenue from casinos open a year ago rose 3.7%. Results from the Borgata, a joint-venture between the company and MGM Mirage ( MGG), fueled Boyd's earnings growth. The company said the casino took in record net revenue of $165 million in the quarter, fueled by an average daily table win of $4,184, which topped the Atlantic City average by nearly 60%. The property's record EBITDA of $52.3 million on margins of 31.7% was the highest of any of its peers in Atlantic City. Occupancy was at 94% for the quarter, with an average daily room rate of $119. "Borgata has now operated for four quarters, and every quarter since its opening has been better than the quarter before in both EBITDA and EBITDA margin," said William Boyd, chairman and CEO of Boyd. "
The Borgata is exceeding our expectations both in how fast its revenues and earnings are ramping up and in how quickly we need to expand the property."
With the Borgata performing so well -- and with partner MGM owning acres of buildable land in the market -- Boyd announced specifics of its previously-announced plan to expand the casino. Construction on the $200 million expansion will start in December and will conclude in the second quarter of 2006, adding 600 slot machines, 36 gaming tables and more than doubling the size of its poker room. Furthermore, the casino will add four restaurants, two nightclubs, nine spa treatment rooms and six new retail shops. Boyd will lease the land from MGM and will renegotiate its existing bank facility to fund construction. "In many areas, we simply cannot meet the strong demand for our facilities," said Bob Boughner, CEO of Borgata. "We are capacity constrained in nearly every major product offering and our customer research clearly signals that demand for our products is strong and growing." Boyd said that its acquisition of Coast Casinos will show up in third-quarter earnings, boosting revenue and earnings while adding expenses and increasing the number of shares outstanding. In the second quarter, Boyd said Coast's revenue came in at $163 million up from $145 million in the prior year, while EBITDA rose 15%.