Q2 Earnings Mixed for Casinos: 2 Down, 1 Up

The stock market was on a wild ride the last two weeks of July, and the writing was on the wall for a few casino companies. But at least one beat the odds and doubled its profits.

Just days after the founder and CEO of Boyd Gaming, William S. Boyd, said he would step down as CEO Jan. 1 and be replaced by senior executive Keith E. Smith, the company released its second-quarter earnings.

Boyd Gaming's income rose to $22.9 million from $12.4 million in the second quarter of last year, but adjusted earnings were $39.9 million, compared with $44.5 million in the same period of 2006.

The company cited pre-opening expenses associated with the Echelon development and decreased performance in Atlantic City business as reasons for the decline in profits.

William Boyd, who will still serve as executive chairman, said: "Our development projects will transform our company, providing us with substantial growth opportunities well into the future. With Echelon, our company will once again become a major player on the Las Vegas Strip, as we redefine the Las Vegas luxury resort experience."

The company has a number of developments in the pipeline:

• In Atlantic City, Borgata will add The Water Club, an 800-room, connected boutique hotel.
• Construction is underway in Michigan City, Ind., on a $30 million expansion of The Blue Chip that will add 300 new guest rooms and open in late 2008.
• In South Florida, a casino will be added to the Danai Jai-Alai property.
• Construction started in June on Echelon and is expected to be completed by the third quarter of 2010.

Las Vegas Sands, owned by billionaire Sheldon Adelson, also saw a dip in the second quarter with higher-than-expected costs from property development.

Sands' revenue increased 18.6 percent in the second quarter to $612.9 million, compared with $517 million in the same period of 2006, but net income fell 69 percent from a year ago to $34 million, and adjusted earnings were $81.9 million compared with $121.3 million in the same period.

Even with the losses, the company's president and COO, William P. Weidner, remained upbeat. The Venetian Macao is set to open Aug. 28, undoubtedly giving the Sands a boost.

"With the opening of The Venetian Macao, the anchor of the Cotai Strip and Macao's first integrated destination resort, with the complete set of assets and service offerings needed to generate multi-night visitation from both the region and the world, Macao will begin in earnest to realize her true potential as a world-class business and leisure destination," Weidner said.

Another casino empire, MGM Mirage, was celebrating its second quarter with profits that more than doubled to $360.2 million, compared with $146.4 million in 2006.

A number of factors drove the gains:

• Occupancy at the company's Las Vegas Strip resorts was 98.7 percent, the highest level since 2000.
• Property EBITDA (earnings before interest, taxes, depreciation and amortization) of $686 million was a record for the second quarter, and represented a 9-percent increase compared with the prior year.
• MGM Grand Las Vegas had EBITDA of $108 million, a 43-percent increase compared with last year's second quarter.
• The Mirage's EBITDA for the second quarter was $59 million, a 41-percent increase compared with the prior year.
• The company made a $63 million profit closing condo units of Tower 3 at The Signature at MGM Grand.