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Boyd Gaming reports results

LAS VEGAS, Nevada –- (PRESS RELEASE) -- Boyd Gaming Corporation (NYSE: BYD) today reported financial results for the second quarter ended June 30, 2008.

Key Highlights

-- We have decided to delay construction of our Echelon project on the Las Vegas Strip due to the difficult environment surrounding today's capital markets and the challenging economic conditions that currently exist. We expect to resume construction when credit market conditions and the overall outlook for the economy improve.

-- Our Board of Directors has authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. The Board also suspended our quarterly dividend program, which they believed was not adequately valued in our share price at recent trading levels.

Key Operating Highlights

-- Las Vegas Locals segment records second quarter 2008 net revenues and Adjusted EBITDA(1) declines of 6.3% and 6.6%, respectively, as economic conditions continue to impact consumer spending; despite these declines, Adjusted EBITDA margins were consistent with the year ago quarter.

-- Midwest and South records 15.0% decline in net revenues and 17.4% decline in Adjusted EBITDA for the second quarter 2008; as in previous quarters, the decline was principally attributable to Blue Chip, as an increased competitive environment, weak economic conditions, and significant construction disruption continue to impact the property.

-- Borgata's second quarter 2008 net revenues were essentially the same as prior year results, while Adjusted EBITDA declined 17.1%, primarily due to higher overall operating costs, and higher-than-anticipated operating expenses from the recently opened Water Club.

Echelon Update

Due to the difficult environment in today's capital markets, as well as weak economic conditions, we have decided to delay our Echelon project on the Las Vegas Strip. Our present expectation is to resume construction in three to four quarters, assuming credit market conditions and the economic outlook improves.

We are in discussions with Morgans Hotel Group and General Growth Properties (GGP) to modify our existing agreements, as both joint venture parties remain interested in Echelon. The delay will allow our joint ventures with Morgans and GGP the opportunity to secure financing under more favorable conditions at a later date. It also provides additional time for our joint venture with GGP, the High Street retail promenade, to take advantage of an improved leasing environment, once economic conditions moderate.

From the beginning, we strategically designed Echelon to be developed in a single phase, and this schedule adjustment allows us to preserve the holistic integrity of the project. By delaying, we will be able to better manage the timing of the construction of the wholly-owned aspects of Echelon and ensure that they do not outpace the construction of the joint venture components. This delay will also give us time to focus on restoring momentum in our core business, and for consumers in general, to regain their footing and confidence.

Keith Smith, President and Chief Executive Officer of Boyd Gaming, commenting on the decision to delay Echelon: "The current economic climate is unprecedented in recent years. While we remain enthusiastic about the long-term prospects for the Las Vegas market and Echelon, this is the right decision for our Company at this time. This decision is not a reflection of the merits of the project, nor the accomplishments of our professional development team, but rather the challenges we, and many other businesses, face in today's uncertain business climate.

"We remain fully committed to Echelon, and convinced that it will produce long-term, sustainable growth for our Company in the years to come. We look forward to resuming construction as soon as we are able to do so."

As of the June 30, 2008, we have incurred approximately $500 million of capitalized costs related to the overall project.

Stock Repurchase and Dividend

Our Board of Directors has authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million, allowing us to focus on maximizing shareholder value through the repurchase program. Accordingly, repurchases may be made from time to time in the open market or in privately negotiated transactions, depending on market conditions.

In a related decision, the Board also suspended the quarterly dividend for the time being, as they believe the market assigned little value to our dividend program.

Second Quarter Results

We reported second quarter 2008 income from continuing operations of $21.7 million, or $0.25 per share, compared to income from continuing operations of $22.9 million, or $0.26 per share, in the same period 2007.

Including discontinued operations, we reported net income for the second quarter 2007 of $22.1 million, or $0.25 per share. There were no such discontinued operations reported in the second quarter 2008. Per share earnings discussed throughout this release are reported on a diluted basis.

Adjusted Earnings(1) from continuing operations for the second quarter 2008 were $26.4 million, or $0.30 per share, compared to $39.9 million, or $0.45 per share, for the same period in 2007. During the second quarter 2008, certain pre-tax adjustments consisting principally of preopening expenses, largely associated with Echelon and The Water Club, reduced income from continuing operations by $7.6 million ($4.8 million, net of tax, or $0.05 per share).

By comparison, the second quarter 2007 included certain pre-tax adjustments that had a net effect of reducing income from continuing operations by $26.3 million ($17.0 million, net of tax, or $0.19 per share).

Net revenues were $460.8 million for the second quarter 2008, compared to $511.4 million for the same quarter in 2007, a decrease of 9.9%. Total Adjusted EBITDA was $119.6 million in the second quarter 2008, compared to $143.7 million for the same period 2007. These declines were chiefly due to a continuing difficult economic climate impacting consumer spending, as well as the addition of a new competitor near our Blue Chip operation.

Keith Smith commented on the results, "During the second quarter, we continued to see the same economic factors at work that were present in the first quarter. Consumers across the nation are faced with rising food and fuel costs, and the housing slump continues to impact consumer confidence. Despite these economic headwinds, our business is still producing significant operating cash flows, and our results are generally in line with our expectations for the quarter. We remain confident in our ability to manage through these difficult economic times and believe we will be prepared to capitalize on growth opportunities when conditions normalize."

Year-To-Date Results

We reported a loss from continuing operations for the six months ended June 30, 2008 of $10.9 million, or $0.12 per share, which includes an $84.0 million pre-tax impairment charge, principally related to the write-off of the Dania Jai-Alai intangible license right. By comparison, we reported income from continuing operations of $58.0 million, or $0.66 per share for the six months ended June 30, 2007. Including discontinued operations, we reported net income for the six months ended June 30, 2007 of $240.0 million, or $2.71 per share. Net income for the 2007 period includes a $285 million gain on the disposition of the Barbary Coast. There were no such discontinued operations reported during the 2008 period.

Adjusted Earnings from continuing operations for the six months ended June 30, 2008 were $63.4 million, or $0.72 per share, as compared to $83.9 million, or $0.95 per share for the six-month period in 2007.

Net revenues were $931.9 million and $1.0 billion for the six months ended June 30, 2008 and 2007, respectively. Total Adjusted EBITDA was $247.3 million for the current six-month period. By comparison, total Adjusted EBITDA for the 2007 period was $299.1 million (or $302.3 million, excluding a $3.2 million estimated retroactive property tax charge for an unanticipated increase in assessed property value at Blue Chip).

Key Operations Review

In our Las Vegas Locals segment, second quarter 2008 net revenues were $197.9 million versus $211.2 million for the second quarter 2007. Second quarter 2008 Adjusted EBITDA was $62.4 million, a 6.6% decrease from the $66.8 million in the same quarter 2007. The decreases reflect the varied economic factors weighing on consumers in the Las Vegas Valley during this difficult period, including continued declines in the local housing market and rising unemployment.

Our Downtown Las Vegas properties generated net revenues of $63.0 million and Adjusted EBITDA of $10.3 million for the second quarter 2008, versus $65.0 million and $13.2 million, respectively, for the second quarter 2007. The $2.8 million decrease in Adjusted EBITDA was attributable to higher fuel costs, which adversely affected leisure travel from our Hawaiian feeder markets.

In our Midwest and South region, we recorded $199.9 million in net revenues for the second quarter 2008, compared to $235.2 million for the same period in 2007. Adjusted EBITDA for the current period was $45.3 million, versus $54.9 million in the second quarter 2007; the decline in net revenues and Adjusted EBITDA were principally attributable to Blue Chip, which was impacted by increased competition, weak economic conditions and construction disruption.

Borgata's operating income for the second quarter 2008 was $22.3 million, versus $36.1 million for the second quarter 2007. Net revenues for Borgata were $205.1 million for the second quarter 2008, essentially flat compared to the $202.1 million recorded in the same quarter in 2007. Adjusted EBITDA was $45.2 million, compared to $54.5 million for the second quarter 2007. The decline was primarily due to higher operating expense for Borgata and higher-than-anticipated operating expense from The Water Club, which we expect to continue through the opening phase. Additionally, the overall Atlantic City market was impacted by increased competition from slot operations in Pennsylvania and slowing economic conditions.

Paul Chakmak, Executive Vice President and Chief Operating Officer, said, "Our veteran management team has been through difficult times before and is drawing on that experience to guide us through this challenging period. We continue to aggressively refine our operations, exploring new and innovative ways to run our businesses and control costs without compromising the integrity of our entertainment offering."

The rollout of our nationwide, consolidated players club program continued to progress during the quarter, as we successfully launched our "B Connected" program throughout the Midwest and South region. The six properties in this region are now linked to our Las Vegas Locals properties through this players program. We plan to complete the rollout later in the third quarter 2008, when we link our three Downtown Las Vegas properties into the system. Once complete, players will be able to use their cards at Boyd Gaming properties throughout Nevada, Illinois, Indiana, Louisiana and Mississippi.

Key Financial Statistics

The following is additional information as of and for the three months ended June 30, 2008:

-- June 30 debt balance: $2.5 billion

-- June 30 cash: $148.7 million

-- Dividends paid in the quarter: $13.2 million

-- Maintenance capital expenditures during the quarter: $22.9 million

-- Expansion capital expenditures during the quarter: $222.5 million

-- Capitalized interest during the quarter: $7.9 million

-- Cash distribution to the Company from Borgata in the quarter: $4.9 million

-- June 30 debt balance at Borgata: $746.4 million

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