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Boyd Gaming, Harrah’s blame
taxes for declining profits

Feb 10, 2004 6:11 AM

After floundering for months in the middle single digit range, the price of Boyd Gaming Corporation (BYD) has seen renewed life in the past couple of months with a substantial boost coming this past week with the announcement of its fiscal fourth quarter results and the announcement of a merger with Coast Casinos Inc.

Despite a substantial boost by its 50% ownership and management of the $1.1 billion Borgata Hotel/Casino in Atlantic City, the company reported adjusted earnings of $0.19 per share compared to last year’s $0.24 per share. The decline was attributed to "increased gaming taxes in Illinois, Indiana, and Nevada."

But offsetting some of the taxes impact were the earnings contributed by the Borgata, half-owned by MGM MIRAGE Inc. (MGG). The Borgata had operating income of $18.5 million with Boyd Gaming booking $9.294 of that amount. This resulted from Borgata’s net revenue of $141.8 million.

Commenting on the fourth quarter, Bill Boyd, chairman and CEO, said, "Many of the revenue trends experienced during Borgata’s opening quarter continued and even strengthened in the fourth quarter while our operating expenses have decreased as we fine-tune our operations." Table game win during the period for the Borgata was $48.6 million, placing it at the top of the list of Atlantic City casinos.

For the full year, Boyd Gaming reported revenues of $1.25 billion, up from the $1.23 billion in 2002.

The company provided no guidance for fiscal 2004.

Further information on the merger acquisition of Coast Casinos Inc. can be found on Page One of this edition.

Harrah’s Entertainment

Also complaining of higher taxes and their impact on company earnings were the officials of Harrah’s Entertainment Inc. (HET).

Fourth quarter income from operations declined 11% to $134.8 million from last year’s $151.4 million while net income was $35.4 million as compared to the $53.9 million earnings in the fourth quarter of 2002. But revenues for the period reached $1.04 billion, up 3.6% from last year.

Affecting earnings and the company’s property earnings before interest, taxes, depreciation and amortization were "higher gaming taxes and costs associated with developing growth opportunities," the company said. fourth quarter adjusted earnings per share was $0.50 down 7.4% from last year’s $0.54.

Addressing the earnings report, Gary Loveman, company president and CEO, said, "The year 2003 was one of transition for our company, as we focused on enhancing our customer loyalty program and seeking new opportunities to expand our distribution." He said he was optimistic the United Kingdom "will act this year on gaming liberalization, "allowing us to move forward with an aggressive expansion into the UK regional casino market with our joint-venture partner, Gala Group Ltd., as well as the development of destinational resorts for our own account."

Income from operations for the full year reached $726.4 million, down 6.6% from the $777.9 million reported in 2002. Full year diluted earnings per share was $2.65, up from the $2.07 earned last year.

WMS Industries

New unit shipments jumped 90% in the fiscal second quarter that ended on Dec. 31, 2003 but still WMS Industries Inc. (WMS) reported a net loss of $370,00 or $0.01 per diluted share for the period.

The net loss in the comparable quarter was $1.8 million or $0.06 per diluted share. The 2002 period, however, included a pre-tax charge of $2.8 million to write off a license agreement obligation related to a third party’s operating system.

Total revenues for the December 2003 quarter increased 18% or $7.9 million to $51.5 million. This was due primarily to the $11.8 million generated by the high number of gaming machine sales.

The average installed base of participation gaming devices for the period decreased to 4,549 units from the previous 5,605 units.

Expressing optimisms, Brian Gamache, president and CEO, said, "Following receipt of important regulatory approvals, we began shipping our new Bluebird video gaming devices in December 2003. The innovative platform and our new game themes are garnering high marks from our customers and their players. This early market acceptance and our ability to once again execute on our plan, positions WMS to regain its position as a leading supplier of innovative and entertaining games."