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BOYD GAMING CORP - Quarter Report: 2022 June (Form 10-Q)

bgc20220630_10q.htm
 

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________

FORM 10-Q

 ____________________________________________________

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to              

Commission file number: 1-12882

___________________________________________________

 

logo1.jpg

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

 ____________________________________________________

 

Nevada

88-0242733

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

6465 South Rainbow Boulevard, Las Vegas, NV 89118

(Address of principal executive offices) (Zip Code)

(702) 792-7200

(Registrant's telephone number, including area code)

 ____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

 

 

Common stock, $0.01 par value

 

BYD

 

New York Stock Exchange

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

☐ 

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

The number of shares outstanding of the registrant’s common stock as of August 1, 2022 was 106,842,266.

 

 

 

 

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2022

TABLE OF CONTENTS

 

 

 

Page

No.

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021

5

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the six months ended June 30, 2022 and 2021

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23
     

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

 

 

 

Item 4.

Controls and Procedures

35

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

36

 

 

 

Item 1A.

Risk Factors

36

     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36

 

 

 

Item 6.

Exhibits

37

 

 

 

Signature Page

38

 

 

 

 

PART I. Financial Information

 

Item 1.        Financial Statements (Unaudited)

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 

  

June 30,

  

December 31,

 

(In thousands, except share data)

 

2022

  

2021

 

ASSETS

        

Current assets

        

Cash and cash equivalents

 $250,195  $344,557 

Restricted cash

  13,824   12,571 

Accounts receivable, net

  86,759   89,483 

Inventories

  21,091   20,090 

Prepaid expenses and other current assets

  40,967   41,102 

Income taxes receivable

  4,976    

Total current assets

  417,812   507,803 

Property and equipment, net

  2,354,455   2,394,184 

Operating lease right-of-use assets

  847,858   884,241 

Other assets, net

  93,769   98,234 

Intangible assets, net

  1,364,972   1,368,420 

Goodwill, net

  971,287   971,287 

Total assets

 $6,050,153  $6,224,169 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current liabilities

        

Accounts payable

 $87,443  $102,031 

Current maturities of long-term debt

  44,275   41,673 

Accrued liabilities

  402,882   412,945 

Income tax payable

     393 

Total current liabilities

  534,600   557,042 

Long-term debt, net of current maturities and debt issuance costs

  2,864,589   2,989,921 

Operating lease liabilities, net of current portion

  780,635   815,974 

Deferred income taxes

  283,710   264,912 

Other liabilities

  57,464   57,574 

Commitments and contingencies (Notes 5 and 6)

          

Stockholders' equity

        

Preferred stock, $0.01 par value, 5,000,000 shares authorized

      

Common stock, $0.01 par value, 200,000,000 shares authorized; 106,841,360 and 111,303,140 shares outstanding

  1,068   1,113 

Additional paid-in capital

  541,797   827,725 

Retained earnings

  987,273   710,088 

Accumulated other comprehensive loss

  (983)  (180)

Total stockholders' equity

  1,529,155   1,538,746 

Total liabilities and stockholders' equity

 $6,050,153  $6,224,169 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands, except per share data)

 

2022

   

2021

   

2022

   

2021

 

Revenues

                               

Gaming

  $ 684,925     $ 727,462     $ 1,352,879     $ 1,345,388  

Food & beverage

    70,299       57,428       134,042       101,540  

Room

    49,904       39,077       92,313       65,067  

Other

    89,322       69,635       175,959       134,914  

Total revenues

    894,450       893,602       1,755,193       1,646,909  

Operating costs and expenses

                               

Gaming

    254,500       259,378       504,542       491,491  

Food & beverage

    57,456       46,819       111,390       85,732  

Room

    17,285       14,207       33,275       26,339  

Other

    60,577       44,487       117,502       86,394  

Selling, general and administrative

    95,662       90,473       187,709       180,480  

Master lease rent expense

    26,654       26,175       52,960       52,090  

Maintenance and utilities

    34,517       31,157       67,407       59,388  

Depreciation and amortization

    66,757       67,279       129,235       131,746  

Corporate expense

    34,872       34,716       63,876       58,031  

Project development, preopening and writedowns

    912       1,454       (9,117 )     2,869  

Other operating items, net

    188       11,115       286       12,272  

Total operating costs and expenses

    649,380       627,260       1,259,065       1,186,832  

Operating income

    245,070       266,342       496,128       460,077  

Other expense (income)

                               

Interest income

    (483 )     (455 )     (903 )     (964 )

Interest expense, net of amounts capitalized

    36,466       55,131       74,124       113,021  

Loss on early extinguishments and modifications of debt

    16,509       65,475       19,809       65,475  

Other, net

    3,750       237       3,497       2,169  

Total other expense, net

    56,242       120,388       96,527       179,701  

Income before income taxes

    188,828       145,954       399,601       280,376  

Income tax provision

    (42,065 )     (32,225 )     (89,910 )     (64,486 )

Net income

  $ 146,763     $ 113,729     $ 309,691     $ 215,890  
                                 
                                 

Basic net income per common share

  $ 1.33     $ 1.00     $ 2.79     $ 1.90  

Weighted average basic shares outstanding

    110,118       113,779       111,151       113,703  
                                 
                                 

Diluted net income per common share

  $ 1.33     $ 1.00     $ 2.78     $ 1.89  

Weighted average diluted shares outstanding

    110,259       114,040       111,303       114,005  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands)

 

2022

   

2021

   

2022

   

2021

 

Net income

  $ 146,763     $ 113,729     $ 309,691     $ 215,890  

Other comprehensive loss, net of tax:

                               

Fair value adjustments to available-for-sale securities

    (619 )     (43 )     (803 )     (364 )

Comprehensive income

  $ 146,144     $ 113,686     $ 308,888     $ 215,526  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

 

                  

Accumulated Other

     
  

Common Stock

  

Additional

  

Retained

  

Comprehensive

     

(In thousands, except share data)

 

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Loss

  

Total

 

Balances, January 1, 2022

  111,303,140  $1,113  $827,725  $710,088  $(180) $1,538,746 

Net income

           162,928      162,928 

Comprehensive loss, net of tax

              (184)  (184)

Release of restricted stock units, net of tax

  115,686   1   (2,720)        (2,719)

Release of performance stock units, net of tax

  294,344   3   (8,113)        (8,110)

Shares repurchased and retired

  (2,096,660)  (21)  (131,768)        (131,789)

Dividends declared ($0.15 per share)

           (16,480)     (16,480)

Share-based compensation costs

        8,734         8,734 

Balances, March 31, 2022

  109,616,510   1,096   693,858   856,536   (364)  1,551,126 

Net income

           146,763      146,763 

Comprehensive loss, net of tax

              (619)  (619)

Stock options exercised

  101,675   1   1,804         1,805 

Release of restricted stock units, net of tax

  140,899   1   (2)        (1)

Release of performance stock units, net of tax

  307      (8)        (8)

Shares repurchased and retired

  (3,018,031)  (30)  (167,954)        (167,984)

Dividends declared ($0.15 per share)

           (16,026)     (16,026)

Share-based compensation costs

        14,099         14,099 

Balances, June 30, 2022

  106,841,360  $1,068  $541,797  $987,273  $(983) $1,529,155 

 

 

                  

Accumulated Other

     
  

Common Stock

  

Additional

  

Retained

  

Comprehensive

     

(In thousands, except share data)

 

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Income (Loss)

  

Total

 

Balances, January 1, 2021

  111,830,857  $1,118  $876,433  $246,242  $150  $1,123,943 

Net income

           102,161      102,161 

Comprehensive loss, net of tax

              (321)  (321)

Stock options exercised

  158,568   2   1,743         1,745 

Release of restricted stock units, net of tax

  29,808      (609)        (609)

Release of performance stock units, net of tax

  61,654   1   (1,901)        (1,900)

Share-based compensation costs

        5,701         5,701 

Balances, March 31, 2021

  112,080,887   1,121   881,367   348,403   (171)  1,230,720 

Net income

           113,729      113,729 

Comprehensive loss, net of tax

              (43)  (43)

Stock options exercised

  100,068      1,037         1,037 

Release of restricted stock units, net of tax

  43,036   1            1 

Share-based compensation costs

        12,823         12,823 

Balances, June 30, 2021

  112,223,991  $1,122  $895,227  $462,132  $(214) $1,358,267 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

   

Six Months Ended

 
   

June 30,

 

(In thousands)

 

2022

   

2021

 

Cash Flows from Operating Activities

               

Net income

  $ 309,691     $ 215,890  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    129,235       131,746  

Amortization of debt financing costs and discounts on debt

    4,258       5,931  

Non-cash operating lease expense

    28,736       30,329  

Share-based compensation expense

    22,833       18,524  

Deferred income taxes

    18,798       60,864  

Gain on sale of assets

    (12,800 )      

Loss on early extinguishments and modifications of debt

    19,809       65,475  

Other operating activities

    (99 )     8,510  

Changes in operating assets and liabilities:

               

Accounts receivable, net

    2,724       (4,058 )

Inventories

    (1,001 )     2,618  

Prepaid expenses and other current assets

    496       (647 )

Income taxes (receivable) payable, net

    (5,369 )     200  

Other assets, net

    3,649       (2,715 )

Accounts payable and accrued liabilities

    (40,098 )     (8,315 )

Operating lease liabilities

    (28,736 )     (30,329 )

Other liabilities

    4,086       5,319  

Net cash provided by operating activities

    456,212       499,342  

Cash Flows from Investing Activities

               

Capital expenditures

    (98,699 )     (96,339 )

Insurance proceeds received from hurricane losses

          40,240  

Proceeds received from disposition of assets

    21,350        

Other investing activities

          6,672  

Net cash used in investing activities

    (77,349 )     (49,427 )

Cash Flows from Financing Activities

               

Borrowings under credit facilities

    1,207,000        

Payments under credit facilities

    (1,025,897 )     (11,536 )

Proceeds from issuance of senior notes

          900,000  

Retirements of senior notes

    (300,000 )     (1,450,000 )

Premium fees

    (12,939 )     (51,863 )

Debt financing costs

    (13,680 )     (14,596 )

Share-based compensation activities

    (9,033 )     274  

Shares repurchased and retired

    (299,773 )      

Dividends paid

    (16,480 )      

Other financing activities

    (1,170 )     (1,344 )

Net cash used in financing activities

    (471,972 )     (629,065 )

Change in cash, cash equivalents and restricted cash

    (93,109 )     (179,150 )

Cash, cash equivalents and restricted cash, beginning of period

    357,128       534,999  

Cash, cash equivalents and restricted cash, end of period

  $ 264,019     $ 355,849  

Supplemental Disclosure of Cash Flow Information

               

Cash paid for interest, net of amounts capitalized

  $ 70,697     $ 131,778  

Cash paid for income taxes

    76,128       3,298  

Supplemental Schedule of Non-cash Investing and Financing Activities

               

Payables incurred for capital expenditures

  $ 3,987     $ 3,072  

Dividends declared not yet paid

    16,026        

Operating lease right-of-use asset and liability remeasurements

    (11,224 )      

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

as of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

 

NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Boyd Gaming Corporation (and together with its subsidiaries, the "Company", "Boyd", "Boyd Gaming", "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD".

 

We are a geographically diversified operator of 28 wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania.

 

Impact of the COVID-19 Pandemic

In mid- March 2020, all of our gaming facilities were closed in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus. As of June 30, 2022, 27 of our 28 gaming facilities are open and operating. One of our properties in Las Vegas remains closed due to the current levels of demand in the market. We cannot predict whether we will be required to temporarily close some or all of our open casinos in the future. Further, we cannot currently predict the ongoing impact of the pandemic on consumer demand and any potential negative effects on our workforce, suppliers, contractors and other partners.

 

The closures of our properties in 2020 had a material impact on our business, and the COVID-19 pandemic, the associated impacts on customer behavior and the requirements of health and safety protocols may further impact our business in the future. The severity and duration of such potential business impacts cannot currently be estimated, and the ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, potential resurgences or new variants of the virus, the logistics of distribution, level of participation and overall efficacy of vaccine programs and treatments, change in consumer behavior and demand and the related impact on economic activity, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in additional business disruptions, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time.

 

We currently anticipate funding our operations over the next 12 months with the cash being generated by our operations, supplemented, if necessary, by the cash we currently have available and the borrowing capacity available under our Revolving Credit Facility. We assessed the recoverability of our assets as of the end of the first quarter and second quarter, and no impairment charges were warranted. If our expectations regarding projected revenues and cash flows related to our assets are not achieved, we may be subject to impairment charges in the future, which could have a material adverse impact on our consolidated financial statements. 

 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 28, 2022.

 

The results for the periods indicated are unaudited but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods.

 

The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in unconsolidated affiliates, which are 50% or less owned and do not meet the controlling financial interest consolidation criteria of the authoritative accounting guidance for voting interest or variable interest entities, are accounted for under the equity method. All intercompany accounts and transactions have been eliminated in consolidation.

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, which include cash on hand and in banks, interest-bearing deposits and money market funds with maturities of three months or less at their date of purchase. The instruments are not restricted as to withdrawal or use and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.

 

Restricted Cash

Restricted cash consists primarily of advance payments related to: (i) amounts restricted by regulation for gaming and racing purposes; and (ii) future bookings with our Hawaiian travel agency. These restricted cash balances are invested in highly liquid instruments with a maturity of 90 days or less. These restricted cash balances are held by high credit quality financial institutions. The carrying value of these instruments approximates their fair value due to their short maturities.

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash balances reported within the condensed consolidated balance sheets to the total balance shown in the condensed consolidated statements of cash flows.

 

  

June 30,

  

December 31,

  

June 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

  

2021

  

2020

 

Cash and cash equivalents

 $250,195  $344,557  $334,537  $519,182 

Restricted cash

  13,824   12,571   21,312   15,817 

Total cash, cash equivalents and restricted cash

 $264,019  $357,128  $355,849  $534,999 

 

Leases

Management determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. For our operating leases for which the rate implicit in the lease is not readily determinable, we generally use an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating right-of-use ("ROU") assets and finance lease assets are recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease and non-lease components are accounted for separately.

 

Revenue Recognition

The Company’s revenue contracts with customers consist of gaming wagers, hotel room sales, food & beverage offerings and other amenity transactions. The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gaming revenues. The transaction price for hotel, food & beverage and other contracts is the net amount collected from the customer for such goods and services. Hotel, food & beverage and other services have been determined to be separate, stand-alone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over their stay at the hotel, when the delivery is made for the food & beverage or when the service is provided for other amenity transactions.

 

Gaming wager contracts involve two performance obligations for those customers earning points under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for a hotel room stay, food & beverage or other amenities. Sales and usage-based taxes are excluded from revenues. An amount is allocated to the gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers, excluding race and sports wagers, is recognized when the wagers occur as all such wagers settle immediately. The allocated revenue for race and sports wagers is recognized when the specific event or game occurs. The loyalty point contract liability amount is deferred and recognized as revenue when the customer redeems the points for a hotel room stay, food & beverage or other amenities and such goods or services are delivered to the customer. See Note 4, Accrued Liabilities, for the balance outstanding related to player loyalty programs.

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

The Company collects advanced deposits from hotel customers for future hotel reservations and other future events such as banquets and ticketed events. These advance deposits represent obligations of the Company until the hotel room stay is provided to the customer or the banquet or ticketed event occurs. See Note 4, Accrued Liabilities, for the balance outstanding related to advance deposits.

 

The Company's outstanding chip liability represents the amounts owed in exchange for gaming chips held by a customer. Outstanding chips are expected to be recognized as revenue or redeemed for cash within one year of being purchased. See Note 4, Accrued Liabilities, for the balance outstanding related to the chip liability.

 

The retail value of hotel accommodations, food & beverage, and other services furnished to guests without charge is recorded as departmental revenues. Gaming revenues are net of incentives earned in our player loyalty programs such as cash and the estimated retail value of goods and services (such as complimentary rooms and food & beverage). We reward customers through the use of player loyalty programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food & beverage, hotel rooms and to a lesser extent for other goods or services, depending on the property.

 

The estimated retail values related to goods and services provided to customers without charge or upon redemption of points under our player loyalty programs included in departmental revenues, and therefore reducing our gaming revenues, are as follows:

 

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

Food & beverage

 $29,330  $26,202  $56,908  $48,904 

Room

  16,706   15,310   31,789   28,249 

Other

  2,334   1,489   4,347   2,565 

 

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the condensed consolidated statements of operations. In addition, we are responsible for the payment of gaming taxes owed for the online gaming activities conducted by third party operators under certain collaborative arrangements. We are reimbursed for these taxes by the third-party operators. We report these gaming taxes paid as other expense and the reimbursements we receive as other revenues. Gaming taxes totaled approximately $180.7 million and $177.5 million for the three months ended June 30, 2022 and 2021, respectively, including taxes deposited pursuant to the online collaborative agreements of $45.5 million and $34.4 million for the three months ended June 30, 2022 and 2021, respectively. Gaming taxes totaled approximately $352.2 million and $336.3 million for the six months ended June 30, 2022 and 2021, respectively, including taxes deposited pursuant to the online collaborative agreements of $85.3 million and $69.0 million for the six months ended June 30, 2022 and 2021, respectively.

 

Income Taxes

Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

 

Other Long-Term Tax Liabilities

The Company's income tax returns are subject to examination by the Internal Revenue Service and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

 

Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. Recognition occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement is only addressed if the position is deemed to be more likely than not to be sustained. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.

 

Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the "more likely than not" standard. If it is subsequently determined that a previously recognized tax position no longer meets the "more likely than not" standard, it is required that the tax position is derecognized. Accounting standards for uncertain tax positions specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. 

 

Collaborative Arrangements

We hold a five percent equity ownership in and have a strategic partnership with FanDuel Group ("FanDuel"), one of the nation's leaders in online sports-betting, to pursue sports-betting opportunities, both at our properties and online, across the country. Subject to state law and regulatory approvals, we have established a presence in the sports wagering industry, both retail and online, by leveraging FanDuel's technology and related services. We have also entered into agreements with other companies for the operation of online sports wagering under market-access agreements. We operate retail sports wagering in Illinois, Indiana, Iowa, Louisiana, Mississippi and Pennsylvania under the FanDuel brand. We offer online sports wagering in Illinois, Indiana, Iowa, Louisiana and Pennsylvania under either the FanDuel brand or one of our other market access partners' brands. In addition, we offer real money online gaming in Pennsylvania and New Jersey under the Stardust brand through our partnership with FanDuel. The activities related to these collaborative arrangements are recorded in other revenue and other expense on the condensed consolidated statements of operations.

 

10

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

Recently Adopted Accounting Pronouncements

ASU 2021-05, Leases, Topic 842 ("Update 2021-05")

In July 2021, the Financial Accounting Standards Board ("FASB") issued Update 2021-05 to clarify guidance for lessors with lease contracts that have variable lease payments that do not depend on a reference index or rate and would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. Update 2021-05 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company adopted Update 2021-05 during first quarter 2022, and the impact of the adoption to its condensed consolidated financial statements was not material.

 

Recently Issued Accounting Pronouncements

A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

 

 

NOTE 2.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

 

Land

 $335,384  $343,963 

Buildings and improvements

  3,138,539   3,146,697 

Furniture and equipment

  1,702,412   1,653,451 

Riverboats and barges

  241,584   241,447 

Construction in progress

  44,899   912 

Total property and equipment

  5,462,818   5,386,470 

Less accumulated depreciation

  (3,108,363)  (2,992,286)

Property and equipment, net

 $2,354,455  $2,394,184 

 

Depreciation expense is as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

Depreciation expense

 $64,953  $64,122  $125,628  $125,432 

 

11

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

 

NOTE 3.    GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

 

  

June 30, 2022

 
  

Weighted

  

Gross

      

Accumulated

     
  

Useful Life

  

Carrying

  

Accumulated

  

Impairment

  

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                   

Customer relationships

 1.0  $68,100  $(65,459) $  $2,641 

Host agreements

 10.9   58,000   (15,789)     42,211 

Development agreement

    21,373         21,373 
      147,473   (81,248)     66,225 
                    

Indefinite lived intangible assets

                   

Trademarks

 Indefinite   204,000      (27,200)  176,800 

Gaming license rights

 Indefinite   1,378,081   (33,960)  (222,174)  1,121,947 
      1,582,081   (33,960)  (249,374)  1,298,747 

Balances, June 30, 2022

    $1,729,554  $(115,208) $(249,374) $1,364,972 

 

  

December 31, 2021

 
  

Weighted

  

Gross

      

Accumulated

     
  

Useful Life

  

Carrying

  

Accumulated

  

Impairment

  

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                   

Customer relationships

 1.5  $68,100  $(63,798) $  $4,302 

Host agreements

 11.4   58,000   (13,856)     44,144 

Development agreement

    21,373         21,373 
      147,473   (77,654)     69,819 
                    

Indefinite lived intangible assets

                   

Trademarks

 

Indefinite

   204,000      (27,200)  176,800 

Gaming license rights

 

Indefinite

   1,377,935   (33,960)  (222,174)  1,121,801 
      1,581,935   (33,960)  (249,374)  1,298,601 

Balances, December 31, 2021

    $1,729,408  $(111,614) $(249,374) $1,368,420 

 

The following table presents the future amortization expense for our amortizing intangible assets as of  June 30, 2022:

 

(In thousands)

 

Customer Relationships

  

Host Agreements

  

Total

 

For the year ending December 31,

            

2022 (excluding six months ended June 30, 2022)

 $1,661  $1,934  $3,595 

2023

  940   3,867   4,807 

2024

  40   3,867   3,907 

2025

     3,867   3,867 

2026

     3,867   3,867 

Thereafter

     24,809   24,809 

Total future amortization

 $2,641  $42,211  $44,852 

 

Goodwill consists of the following:

 

  

Gross

      

Accumulated

     
  

Carrying

  

Accumulated

  

Impairment

  

Goodwill,

 

(In thousands)

 

Value

  

Amortization

  

Losses

  

Net

 

Goodwill, net by Reportable Segment

                

Las Vegas Locals

 $593,567  $  $(188,079) $405,488 

Downtown Las Vegas

  6,997   (6,134)     863 

Midwest & South

  666,798      (101,862)  564,936 

Balances, June 30, 2022

 $1,267,362  $(6,134) $(289,941) $971,287 

 

There have been no changes in goodwill, net, during the six months ended June 30, 2022.

 

 

12

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

 

NOTE 4.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

 

   

June 30,

   

December 31,

 

(In thousands)

 

2022

   

2021

 

Payroll and related

  $ 73,344     $ 99,880  

Interest

    18,408       19,210  

Gaming

    76,671       78,552  

Player loyalty program

    28,447       28,430  

Advance deposits

    13,882       15,320  

Outstanding chips

    7,074       7,407  

Dividends payable

    16,026        

Operating leases

    84,741       84,884  

Other

    84,289       79,262  

Total accrued liabilities

  $ 402,882     $ 412,945  

 

 

NOTE 5.    LONG-TERM DEBT

Long-term debt, net of current maturities and debt issuance costs, consists of the following:

 

  

June 30, 2022

 
  

Interest

          

Unamortized

     
  

Rates at

          

Origination

     
  

June 30,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2022

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Credit Facility

  3.040% $1,049,000  $  $(18,034) $1,030,966 

4.750% senior notes due 2027

  4.750%  1,000,000      (10,714)  989,286 

4.750% senior notes due 2031

  4.750%  900,000      (12,133)  887,867 

Other

  5.208%  745         745 

Total long-term debt

      2,949,745      (40,881)  2,908,864 

Less current maturities

      44,275         44,275 

Long-term debt, net

     $2,905,470  $  $(40,881) $2,864,589 

 

  

December 31, 2021

 
  

Interest

          

Unamortized

     
  Rates at          Origination     
  

December 31,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2021

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Prior Credit Facility

 2.286% $867,897  $(293) $(8,498) $859,106 

4.750% senior notes due 2027

 4.750%  1,000,000      (11,688)  988,312 

8.625% senior notes due 2025

 8.625%  300,000      (4,066)  295,934 

4.750% senior notes due 2031

 4.750%  900,000      (13,254)  886,746 

Other

 5.932%  1,496         1,496 

Total long-term debt

     3,069,393   (293)  (37,506)  3,031,594 

Less current maturities

     41,673         41,673 

Long-term debt, net

    $3,027,720  $(293) $(37,506) $2,989,921 

 

Credit Facility

Credit Agreement

On March 2, 2022 (the "Closing Date"), the Company entered into a credit agreement (the "Credit Agreement") among the Company, certain direct and indirect subsidiaries of the Company as guarantors (the "Guarantors"), Bank of America, N.A., as administrative agent, collateral agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders. The Credit Agreement replaced the Third Amended and Restated Credit Agreement, dated as of August 14, 2013 (the "Prior Credit Facility"), among the Company, certain direct and indirect subsidiaries of the Company as guarantors, Bank of America, N.A., as administrative agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders.

 

13

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

The Credit Agreement provides for (i) a $1,450.0 million senior secured revolving credit facility (the "Revolving Credit Facility") and (ii) an $880.0 million senior secured term A loan (the "Term A Loan," collectively with the Revolving Credit Facility, the "Credit Facility"). The Revolving Credit Facility and the Term A Loan mature on the fifth anniversary of the Closing Date (or earlier upon the occurrence or non-occurrence of certain events). The Term A Loan was fully funded on the Closing Date. Proceeds from the Credit Agreement were used to refinance all outstanding obligations under the Prior Credit Facility, including a senior secured term loan A facility (the "Prior Term A Loan") and senior secured term loan B facility (the "Prior Refinancing Term B Loan"), to fund transaction costs in connection with the Credit Agreement, and for general corporate purposes.

 

The outstanding principal amounts under the Credit Facility and Prior Credit Facility are comprised of the following:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

 

Revolving Credit Facility

 $135,000  $ 

Term A Loan

  869,000    

Prior Term A Loan

     118,153 

Prior Refinancing Term B Loan

     749,744 

Swing Loan

  45,000    

Total outstanding principal amounts

 $1,049,000  $867,897 

 

With a total revolving credit commitment of $1,450.0 million available under the Credit Facility, $135.0 million and $45.0 million in borrowings outstanding on the Revolving Credit Facility and the Swing Loan, respectively, and $14.2 million allocated to support various letters of credit, there is a remaining contractual availability under the Credit Facility of $1,255.8 million as of June 30, 2022

 

Interest and Fees

The interest rate on the outstanding balance of the Revolving Credit Facility and the Term A Loan is based upon, at the Company’s option, either: (i) a rate based on the Secured Overnight Financing Rate ("SOFR") administered by the Federal Reserve Bank of New York or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the Consolidated Total Net Leverage Ratio and ranges from 1.25% to 2.25% (if using SOFR) and from 0.25% to 1.25% (if using the base rate). A fee of a percentage per annum (which ranges from 0.20% to 0.35% determined in accordance with a specified pricing grid based on the Consolidated Total Net Leverage Ratio) will be payable on the unused portions of the Revolving Credit Facility. The rates based on SOFR will be determined based upon, at the Company’s option, (i) a forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited or any successor administrator, and based on interest periods of one, three or six months or such other interest period that is twelve months or less subject to the consent of lenders and the administrative agent, or (ii) a daily SOFR rate published by the Federal Reserve Bank of New York, and will include credit spread adjustments as set forth in the Credit Agreement. The "base rate" under the Credit Agreement is the highest of (x) Bank of America’s publicly-announced prime rate, (y) the federal funds rate published by the Federal Reserve Bank of New York plus 0.50%, or (z) the SOFR rate for a one month interest period plus 1.00%.

 

Optional and Mandatory Prepayments

Pursuant to the terms of the Credit Agreement (i) the loans under the Term A Loan will amortize in an annual amount equal to 5.00% of the original principal amount thereof, commencing June 30, 2022, payable on a quarterly basis, and (ii) the Company is required to use a portion of its annual excess cash flow to prepay loans outstanding under the Credit Agreement if the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) exceeds certain thresholds set forth in the Credit Agreement.

 

Amounts outstanding under the Credit Agreement may be prepaid without premium or penalty, and the unutilized portion of the commitments may be terminated without penalty, subject to certain conditions.

 

Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Credit Agreement in connection with certain asset sales and issuances of certain additional non-permitted or refinancing indebtedness.

 

Guarantees and Collateral

The Company’s obligations under the Credit Agreement, subject to certain exceptions, are guaranteed by certain of the Company’s subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Credit Agreement.

 

The Credit Agreement includes an accordion feature which permits the incurrence of one or more new tranches of revolving credit commitments or term loans and increases to the Revolving Credit Facility and Term A Loan in an aggregate amount up to the sum of (i) $1,000.0 million, (ii) the amount of certain voluntary prepayments of senior secured indebtedness of the Company and (iii) the maximum amount of incremental commitments which, after giving effect thereto, would not cause the Consolidated First Lien Net Leverage Ratio (as defined in the Credit Agreement) to exceed 3.00 to 1.00 on a pro forma basis, in each case, subject to the satisfaction of certain conditions.

 

Financial and Other Covenants

The Credit Agreement contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio on a quarterly basis of 2.50 to 1.00, (ii) requiring the maintenance of a maximum Consolidated Total Net Leverage Ratio on a quarterly basis, (iii) imposing limitations on the incurrence of indebtedness and liens, (iv) imposing limitations on transfers, sales and other dispositions and (v) imposing restrictions on investments, dividends and certain other payments.

 

The maximum permitted Consolidated Total Net Leverage Ratio is calculated as Consolidated Net Indebtedness to twelve-month trailing Consolidated EBITDA, as defined by the Credit Agreement. The maximum Consolidated Total Net Leverage Ratio for the fiscal quarter ending June 30, 2022 through the fiscal quarter ending June 30, 2023 must be no higher than 5.00 to 1.00 and for the fiscal quarter ending September 30, 2023 and each fiscal quarter thereafter, 4.50 to 1.00.

 

14

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

Redemption of 8.625% Senior Notes due  June 2025

On  June 1, 2022, we redeemed all outstanding 8.625% Senior Notes due June 2025 (the "8.625% Senior Notes") at a redemption price of 104.313% plus accrued and unpaid interest to the redemption date. The redemption, including the redemption premium, accrued and unpaid interest, fees, expenses and commissions related to this redemption, was funded through a combination of cash on hand and borrowings under our Revolving Credit Facility.

 

Early Extinguishments and Modifications of Debt

In accordance with authoritative accounting guidance for debt extinguishments and debt modifications, we accounted for the retirement of the Prior Term A Loan and the Prior Refinancing Term B Loan as extinguishments of debt, resulting in the write-off of unamortized deferred finance charges totaling $2.8 million, which is included in loss on early extinguishments and modifications of debt for the six months ended June 30, 2022. As the borrowing capacity of the Revolving Credit Facility under the Credit Agreement equaled or exceeded that under the Prior Credit Facility and the lenders under the Credit Agreement were substantially similar to the lenders under the Prior Credit Facility, we accounted for the Revolving Credit Facility as a modification of debt and $4.3 million of unamortized deferred finance charges related to the Prior Credit Facility were added to the $14.5 million incurred under the Credit Agreement and are being amortized over the term of the Credit Agreement. An additional $0.5 million of unamortized deferred finance charges corresponding to the percentage of lenders under the Prior Credit Facility that did not continue to participate under the Credit Agreement is included in loss on early extinguishments and modifications of debt for the six months ended June 30, 2022.

 

In addition to the termination of the Prior Credit Facility in March 2022 and the 8.625% Senior Notes retirement in June 2022 (see discussion above for both), during the three and six months ended June 30, 2021 the Company redeemed in full its $750.0 million 6.375% Senior Notes due 2026 (the "6.375% Senior Notes") and its $700.0 million 6.000% Senior Notes due 2026 (the "6.000% Senior Notes", and collectively with the 8.625% Senior Notes and the 6.375% Senior Notes, the "Senior Notes"). The Senior Notes were accounted for as extinguishments of debt.

 

The components of the loss on early extinguishments and modifications of debt are as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

6.375% Senior Notes premium fees paid

 $  $23,910  $  $23,910 

6.375% Senior Notes deferred finance charges written off

     6,370      6,370 

6.000% Senior Notes premium fees paid

     27,953      27,953 

6.000% Senior Notes deferred finance charges written off

     7,242      7,242 

8.625% Senior Notes premium fees paid

  12,939      12,939    

8.625% Senior Notes deferred finance charges written off

  3,570      3,570    

Prior Credit Facility deferred finance charges written off

        3,300    

Total loss on early extinguishments and modifications of debt

 $16,509  $65,475  $19,809  $65,475 

 

Covenant Compliance

As of  June 30, 2022, we were in compliance with the covenants of our debt instruments.

 

 

NOTE 6.    COMMITMENTS AND CONTINGENCIES

Pending Acquisitions

On March 28, 2022, we announced that we had entered into a definitive agreement to acquire Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. ("Pala Canada"), for total cash consideration of $170.0 million. Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a business-to-business (B2B) and business-to-consumer (B2C) basis in regulated markets across the United States and Canada. The transaction is expected to close around the end of the year, subject to the satisfaction of customary closing conditions and the receipt of all required regulatory approvals. We intend to finance the transaction through cash flow from operations and availability under our Revolving Credit Facility.

 
Commitments
As of June 30, 2022, other than the pending acquisition of Pala Interactive as discussed above, there have been no material changes to our commitments described under Note 8, Commitments and Contingencies, in our Annual Report on Form  10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022.

 

Contingencies
Legal Matters
We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position, results of operations or cash flows.
 
 

 

15

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

NOTE 7.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase Programs
On October 21, 2021, our Board of Directors authorized a share repurchase program of $300.0 million (the "Share Repurchase Program"). On June 1, 2022, our Board of Directors authorized a $500.0 million increase to the Share Repurchase Program. As of  June 30, 2022,  $480.8 million remains available under the Share Repurchase Program. Under the Share Repurchase Program, the Company may repurchase shares of its common stock from time to time on the open market or in privately negotiated transactions. We are not obligated to repurchase any shares under this program. Repurchases of common stock may also be made under Rule 10b5- 1 plans, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing, volume and nature of share repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws and other factors, and may be suspended or discontinued at any time.
 
The following table provides information regarding share repurchases during the referenced periods  (1).
 
  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands, except per share data)

 

2022

  

2021

  

2022

  

2021

 

Shares repurchased (2)

  3,018      5,115    

Total cost, including brokerage fees

 $167,984  $  $299,773  $ 

Average repurchase price per share (3)

 $55.66  $  $58.61  $ 

 

(1) Shares repurchased reflect repurchases settled during the three and six months ended June 30, 2022. These amounts exclude repurchases, if any, traded but not yet settled on or before June 30, 2022.

(2All shares repurchased have been retired and constitute authorized but unissued shares.

(3) Amounts in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on unrounded numbers.

 

Dividends

The dividends declared by the Board of Directors and reflected in the periods presented are:

 

Declaration date

 

Record date

 

Payment date

 Amount per share 

February 3, 2022

 

March 15, 2022

 

April 15, 2022

 $0.15 

June 1, 2022

 

June 30, 2022

 

July 15, 2022

  0.15 

 

Share-Based Compensation

We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.

 

The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated statements of operations.

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

Gaming

 $292  $266  $521  $426 

Food & beverage

  56   51   100   82 

Room

  26   25   47   39 

Selling, general and administrative

  1,487   1,353   2,651   2,168 

Corporate expense

  12,239   11,128   19,514   15,809 

Total share-based compensation expense

 $14,100  $12,823  $22,833  $18,524 

 

Performance Shares

Our stock incentive plan provides for the issuance of Performance Share Units ("PSU") grants which may be earned, in whole or in part, upon passage of time and the attainment of performance criteria. We periodically review our estimates of performance against the defined criteria to assess the expected payout of each outstanding PSU grant and adjust our stock compensation expense accordingly.

 

The PSU grants awarded in fourth quarter 2018 and 2017 fully vested during first quarter 2022 and 2021, respectively. Common shares were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") growth and customer service scores for the three-year performance period of each grant. As provided under the provisions of our stock incentive plan, certain of the participants elected to surrender a portion of the shares to be received to pay the withholding and other payroll taxes payable on the compensation resulting from the vesting of the PSUs.

 

16

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

The PSU grant awarded in November 2018 resulted in a total of 408,609 shares being issued during first quarter 2022, representing approximately 1.58 shares per PSU. Of the 408,609 shares issued, a total of 114,265 were surrendered by the participants for payroll taxes, resulting in a net issuance of 294,344 shares due to the vesting of the 2018 grant. The actual achievement level under the award metrics equaled the estimated performance as of the year-end 2021; therefore, the vesting of the PSUs did not impact compensation costs in our 2022 condensed consolidated statement of operations.

 

The PSU grant awarded in November 2017 resulted in a total of 90,444 shares being issued during first quarter 2021, representing approximately 0.33 shares per PSU. Of the 90,444 shares issued, a total of 30,129 were surrendered by the participants for payroll taxes, resulting in a net issuance of 60,315 shares due to the vesting of the 2017 grant. The actual achievement level under the award metrics equaled the estimated performance as of the year-end 2020; therefore, the vesting of the PSUs did not impact compensation costs in our 2021 condensed consolidated statement of operations.

 

Unamortized Stock Compensation Expense and Recognition Period

As of June 30, 2022, there was approximately $13.5 million, $5.7 million and $1.7 million of total unrecognized share-based compensation costs related to unvested restricted stock units ("RSUs"), PSUs and career shares, respectively. As of June 30, 2022, the unrecognized share-based compensation costs related to our RSUs, PSUs and career shares are expected to be recognized over approximately 2.1 years, 2.2 years and 3.8 years, respectively.

 

 

NOTE 8.     FAIR VALUE MEASUREMENTS

We have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions.

 

These inputs create the following fair value hierarchy:

 

Level 1: Quoted prices for identical instruments in active markets.

 

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

 

Balances Measured at Fair Value

The following tables show the fair values of certain of our financial instruments:

 

  

June 30, 2022

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $250,195  $250,195  $  $ 

Restricted cash

  13,824   13,824       

Investment available for sale

  14,116         14,116 

 

  

December 31, 2021

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $344,557  $344,557  $  $ 

Restricted cash

  12,571   12,571       

Investment available for sale

  15,822         15,822 

Liability

                

Contingent payments

 $62  $  $  $62 

 

Cash and Cash Equivalents and Restricted Cash

The fair values of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks at  June 30, 2022 and December 31, 2021.

 

17

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

Investment Available for Sale

We have an investment in a single municipal bond issuance of $17.8 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 with a maturity date of June 1, 2037. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The fair value of the instrument is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation at  June 30, 2022 and  December 31, 2021 is a discount rate of 11.6% and 10.1%, respectively. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the condensed consolidated balance sheets. At June 30, 2022 and December 31, 2021, $0.7 million and $0.6 million, respectively, of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at  June 30, 2022 and December 31, 2021, $13.4 million and $15.2 million, respectively, is included in other assets, net on the condensed consolidated balance sheets. The discount associated with this investment of $2.3 million at both June 30, 2022 and December 31, 2021, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.

 

Contingent Payments

In connection with the development of the Kansas Star Casino ("Kansas Star"), Kansas Star agreed to pay a former casino project promoter 1% of Kansas Star's EBITDA each month for a period of ten years, which ended on December 20, 2021. The liability was recorded at the estimated fair value of the contingent payments using a discounted cash flows approach. There was no liability at June 30, 2022 and at December 31, 2021 there was a current liability of $0.1 million, related to this agreement, which is recorded in accrued liabilities on the condensed consolidated balance sheets.

 

The following tables summarize the changes in fair value of the Company's Level 3 assets and liabilities:

 

  

Three Months Ended

 
  

June 30, 2022

  

June 30, 2021

 
  

Asset

  

Liability

  

Asset

  

Liability

 
  Investment    Investment    
  Available  Contingent  Available  Contingent 

(In thousands)

 

for Sale

  

Payments

  

for Sale

  

Payments

 

Balance at beginning of reporting period

 $15,612  $  $16,297  $(769)

Total gains (losses) (realized or unrealized):

                

Included in interest income (expense)

  42      41   (8)

Included in other comprehensive income (loss)

  (903)     (52)   

Included in other items, net

           (23)

Purchases, sales, issuances and settlements:

                

Settlements

  (635)     (590)  311 

Balance at end of reporting period

 $14,116  $  $15,696  $(489)

 

 

  

Six Months Ended

 
  

June 30, 2022

  

June 30, 2021

 
  

Asset

  

Liability

  

Asset

  

Liability

 
  Investment     Investment    
  Available  Contingent  Available  Contingent 

(In thousands)

 

for Sale

  

Payments

  

for Sale

  

Payments

 

Balance at beginning of reporting period

 $15,822  $(62) $16,692  $(924)

Total gains (losses) (realized or unrealized):

                

Included in interest income (expense)

  84      82   (21)

Included in other comprehensive income (loss)

  (1,155)     (488)   

Included in other items, net

           3 

Purchases, sales, issuances and settlements:

                

Settlements

  (635)  62   (590)  453 

Balance at end of reporting period

 $14,116  $  $15,696  $(489)

 

We are exposed to valuation risk on our Level 3 financial instruments. We estimate our risk exposure using a sensitivity analysis of potential changes in the significant unobservable inputs of our fair value measurements. Our Level 3 financial instruments are most susceptible to valuation risk caused by changes in the discount rate. If the discount rate in our fair value measurements increased or decreased by 100 basis points, the change would not cause the value of our fair value measurements to change significantly.

 

18

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

Balances Disclosed at Fair Value

The following tables provide the fair value measurement information about our obligation under assessment agreements and other financial instruments:

 

  

June 30, 2022

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Liabilities

             

Obligation under assessment arrangements

 $23,311  $20,032  $26,748 

Level 3

 

 

  

December 31, 2021

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Liabilities

             

Obligation under assessment arrangements

 $24,306  $20,734  $26,908 

Level 3

 

The following tables provide the fair value measurement information about our long-term debt:

 

  

June 30, 2022

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Credit facility

 $1,049,000  $1,030,966  $1,045,741 

Level 2

4.750% senior notes due 2027

  1,000,000   989,286   905,000 

Level 1

4.750% senior notes due 2031

  900,000   887,867   756,000 

Level 1

Other

  745   745   745 

Level 3

Total debt

 $2,949,745  $2,908,864  $2,707,486  

 

  

December 31, 2021

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Credit facility

 $867,897  $859,106  $866,812 

Level 2

4.750% senior notes due 2027

  1,000,000   988,312   1,023,750 

Level 1

8.625% senior notes due 2025

  300,000   295,934   320,250 

Level 1

4.750% senior notes due 2031

  900,000   886,746   915,750 

Level 1

Other

  1,496   1,496   1,496 

Level 3

Total debt

 $3,069,393  $3,031,594  $3,128,058  

 

The estimated fair value of our credit facility is based on a relative value analysis performed on or about  June 30, 2022 and December 31, 2021. The estimated fair values of our senior notes are based on quoted market prices as of  June 30, 2022 and December 31, 2021. The other debt is fixed-rate debt consisting of: (i) finance leases with various maturity dates from 2024 to 2025; and (ii) a purchase obligation with quarterly payments maturing in July 2022. The other debt is not traded and does not have an observable market input; therefore, we have estimated fair value to be equal to the carrying value for these obligations.

 

Other than the retirement of the 8.625% Senior Notes (Level 1) during the six months ended June 30, 2022, that was funded through a combination of cash on hand and borrowings under the Credit Facility (Level 2), there were no transfers between Level 1, Level 2 and Level 3 measurements during the six months ended June 30, 2022 and 2021.

 

19

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

 

NOTE 9.    SEGMENT INFORMATION

We have aggregated our properties in order to present three Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest & South. The table below lists the classification of each of our properties.

 

Las Vegas Locals

  

Gold Coast Hotel and Casino

 

Las Vegas, Nevada

The Orleans Hotel and Casino

 

Las Vegas, Nevada

Sam's Town Hotel and Gambling Hall

 

Las Vegas, Nevada

Suncoast Hotel and Casino

 

Las Vegas, Nevada

Eastside Cannery Casino and Hotel (1)

 

Las Vegas, Nevada

Aliante Casino + Hotel + Spa

 

North Las Vegas, Nevada

Cannery Casino Hotel

 

North Las Vegas, Nevada

Jokers Wild

 

Henderson, Nevada

Downtown Las Vegas

  

California Hotel and Casino

 

Las Vegas, Nevada

Fremont Hotel & Casino

 

Las Vegas, Nevada

Main Street Station Hotel and Casino

 

Las Vegas, Nevada

Midwest & South

  

Par-A-Dice Casino (2)

 

East Peoria, Illinois

Belterra Casino Resort (4)

 

Florence, Indiana

Blue Chip Casino Hotel Spa

 

Michigan City, Indiana

Diamond Jo Casino

 

Dubuque, Iowa

Diamond Jo Worth

 

Northwood, Iowa

Kansas Star Casino

 

Mulvane, Kansas

Amelia Belle Casino

 

Amelia, Louisiana

Delta Downs Racetrack Hotel & Casino

 

Vinton, Louisiana

Evangeline Downs Racetrack & Casino

 

Opelousas, Louisiana

Sam's Town Shreveport

 

Shreveport, Louisiana

Treasure Chest Casino

 

Kenner, Louisiana

IP Casino Resort Spa

 

Biloxi, Mississippi

Sam's Town Hotel and Gambling Hall Tunica

 

Tunica, Mississippi

Ameristar Casino * Hotel Kansas City (4)

 

Kansas City, Missouri

Ameristar Casino * Resort * Spa St. Charles (4)

 

St. Charles, Missouri

Belterra Park (4)

 

Cincinnati, Ohio

Valley Forge Casino Resort (3)

 

King of Prussia, Pennsylvania

 

(1) Eastside Cannery remains closed since March 18, 2020 due to the current levels of demand in the market.

(2) Par-A-Dice was temporarily closed on November 20, 2020 and subsequently reopened on January 16, 2021.

(3) Valley Forge was temporarily closed on December 12, 2020 and subsequently reopened on January 4, 2021.

(4) Property is subject to a master lease agreement with a real estate investment trust.

 

Results of Operations - Total Reportable Segment Revenues and Adjusted EBITDAR

We evaluate each property's profitability based on Property Adjusted EBITDAR, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, deferred rent, share-based compensation expense, project development, preopening and writedown expenses, impairments of assets, other operating items, net, gain or loss on early extinguishments and modifications of debt, other items, net and master lease rent expense, as applicable. Total Reportable Segment Adjusted EBITDAR is the aggregate sum of the Property Adjusted EBITDAR for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest & South segments. Results for Downtown Las Vegas include the results of our Hawaii-based travel agency and captive insurance company as our Downtown Las Vegas properties cater to the Hawaiian market. Results for Lattner, our Illinois distributed gaming operator, and for our online gaming operations, which are in New Jersey and six of the nine states in the Midwest & South where we operate properties, are included in our Midwest & South segment.

 

20

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

EBITDAR is a commonly used measure of performance in our industry that we believe, when considered with measures calculated in accordance with GAAP, provides our investors a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Management has historically adjusted EBITDAR when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results.

 

The following tables set forth, for the periods indicated, departmental revenues for our Reportable Segments:

 

  

Three Months Ended June 30, 2022

 
      Food &             
  Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $176,875  $22,800  $22,889  $13,897  $236,461 

Downtown Las Vegas

  34,934   10,573   6,204   2,188   53,899 

Midwest & South

  473,116   36,926   20,811   73,237   604,090 

Total Revenues

 $684,925  $70,299  $49,904  $89,322  $894,450 

 

  

Three Months Ended June 30, 2021

 
      Food &             
  Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $187,511  $19,117  $18,481  $10,986  $236,095 

Downtown Las Vegas

  27,190   6,502   3,448   1,640   38,780 

Midwest & South

  512,761   31,809   17,148   57,009   618,727 

Total Revenues

 $727,462  $57,428  $39,077  $69,635  $893,602 

 

  

Six Months Ended June 30, 2022

 
      

Food &

             
  

Gaming

  

Beverage

  

Room

  

Other

  

Total

 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $350,465  $43,137  $42,546  $27,875  $464,023 

Downtown Las Vegas

  67,377   20,282   11,600   4,124   103,383 

Midwest & South

  935,037   70,623   38,167   143,960   1,187,787 

Total Revenues

 $1,352,879  $134,042  $92,313  $175,959  $1,755,193 

 

  

Six Months Ended June 30, 2021

 
      

Food &

             
  

Gaming

  

Beverage

  

Room

  

Other

  

Total

 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $336,733  $32,547  $29,168  $20,070  $418,518 

Downtown Las Vegas

  42,036   10,314   5,269   2,594   60,213 

Midwest & South

  966,619   58,679   30,630   112,250   1,168,178 

Total Revenues

 $1,345,388  $101,540  $65,067  $134,914  $1,646,909 

 

21

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2022 and  December 31, 2021 and for the three and six months ended June 30, 2022 and 2021

______________________________________________________________________________________________________

 

The following table reconciles, for the periods indicated, Total Reportable Segment Adjusted EBITDAR to net income, as reported in our accompanying condensed consolidated statements of operations:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

Adjusted EBITDAR

                

Las Vegas Locals

 $125,334  $133,570  $244,029  $224,212 

Downtown Las Vegas

  22,123   15,421   40,512   17,861 

Midwest & South

  229,049   259,992   452,530   478,141 

Corporate expense

  (22,633)  (23,588)  (44,362)  (42,222)

Adjusted EBITDAR

  353,873   385,395   692,709   677,992 

Other operating costs and expenses

                

Deferred rent

  192   207   384   414 

Master lease rent expense

  26,654   26,175   52,960   52,090 

Depreciation and amortization

  66,757   67,279   129,235   131,746 

Share-based compensation expense

  14,100   12,823   22,833   18,524 

Project development, preopening and writedowns

  912   1,454   (9,117)  2,869 

Other operating items, net

  188   11,115   286   12,272 

Total other operating costs and expenses

  108,803   119,053   196,581   217,915 

Operating income

  245,070   266,342  $496,128  $460,077 

Other expense (income)

                

Interest income

  (483)  (455)  (903)  (964)

Interest expense, net of amounts capitalized

  36,466   55,131   74,124   113,021 

Loss on early extinguishments and modifications of debt

  16,509   65,475   19,809   65,475 

Other, net

  3,750   237   3,497   2,169 

Total other expense, net

  56,242   120,388   96,527   179,701 

Income before income taxes

  188,828   145,954   399,601   280,376 

Income tax provision

  (42,065)  (32,225)  (89,910)  (64,486)

Net income

 $146,763  $113,729  $309,691  $215,890 

 

For purposes of this presentation, corporate expense excludes its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations.

 

Total Reportable Segment Assets

The Company's assets by Reportable Segment consisted of the following amounts:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

 

Assets

        

Las Vegas Locals

 $1,610,604  $1,641,409 

Downtown Las Vegas

  238,764   228,161 

Midwest & South

  3,886,878   3,947,076 

Total Reportable Segment Assets

  5,736,246   5,816,646 

Corporate

  313,907   407,523 

Total Assets

 $6,050,153  $6,224,169 

 

 

NOTE 10.    SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after June 30, 2022. During this period, up to the filing date, we did not identify any subsequent events, the effects of which would require disclosure or adjustment to our financial position or results of operations.

 

22

 
 

Item 2.         Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Boyd Gaming Corporation (and together with its subsidiaries, the "Company", "Boyd", "Boyd Gaming", "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD".

 

In mid-March 2020, all of our gaming facilities were closed in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus. As of June 30, 2022, and as reflected in the table below, 27 of our 28 gaming facilities are open and operating. One of our properties in Las Vegas remains closed due to the current levels of demand in the market. We cannot predict whether we will be required to temporarily close some or all of our open casinos in the future. Further, we cannot currently predict the ongoing impact of the pandemic on consumer demand and the negative effects on our workforce, suppliers, contractors and other partners.

 

The closures of our properties in 2020 had a material impact on our business, and the COVID-19 pandemic, the associated impacts on customer behavior and the requirements of health and safety protocols may further impact our business in the future. The severity and duration of such potential business impacts cannot currently be estimated, and the ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, potential resurgences or new variants of the virus, the logistics of distribution, level of participation and overall efficacy of vaccine programs and treatments, the development and effectiveness of COVID-19 treatments, change in consumer behavior and demand and the related impact on economic activity, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in additional business disruptions, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time.

 

After the property reopenings in 2020, we implemented a strategic shift in our operating philosophy to increase our focus on building loyalty with core customers and adopted a more efficient approach to doing business. This operating model is focused on maximizing gaming revenues, streamlining our cost structure, targeting our marketing investments and reducing lower margin offerings, which allows us to flow a higher percentage of our revenues to the bottom line. We continue this strategy in 2022 and remain focused on our disciplined approach to operating the business.

 

We currently anticipate funding our operations over the next 12 months with the cash generated from our operations, supplemented, as necessary, by the cash we currently have available and the borrowing capacity available under our Revolving Credit Facility. 

 

 

We are a geographically diversified operator of 28 gaming entertainment properties. Headquartered in Las Vegas, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. We view each operating property as part of an operating segment. For financial reporting purposes, we aggregate our properties into the following three reportable segments:

 

     

Las Vegas Locals

   

Gold Coast Hotel and Casino

 

Las Vegas, Nevada

The Orleans Hotel and Casino

 

Las Vegas, Nevada

Sam's Town Hotel and Gambling Hall

 

Las Vegas, Nevada

Suncoast Hotel and Casino

 

Las Vegas, Nevada

Eastside Cannery Casino and Hotel (1)

 

Las Vegas, Nevada

Aliante Casino + Hotel + Spa

 

North Las Vegas, Nevada

Cannery Casino Hotel

 

North Las Vegas, Nevada

Jokers Wild

 

Henderson, Nevada

Downtown Las Vegas

   

California Hotel and Casino

 

Las Vegas, Nevada

Fremont Hotel & Casino

 

Las Vegas, Nevada

Main Street Station Hotel and Casino

 

Las Vegas, Nevada

Midwest & South

   

Par-A-Dice Casino (2)

 

East Peoria, Illinois

Belterra Casino Resort (4)

 

Florence, Indiana

Blue Chip Casino Hotel Spa

 

Michigan City, Indiana

Diamond Jo Casino

 

Dubuque, Iowa

Diamond Jo Worth

 

Northwood, Iowa

Kansas Star Casino

 

Mulvane, Kansas

Amelia Belle Casino

 

Amelia, Louisiana

Delta Downs Racetrack Hotel & Casino

 

Vinton, Louisiana

Evangeline Downs Racetrack & Casino

 

Opelousas, Louisiana

Sam's Town Shreveport

 

Shreveport, Louisiana

Treasure Chest Casino

 

Kenner, Louisiana

IP Casino Resort Spa

 

Biloxi, Mississippi

Sam's Town Hotel and Gambling Hall Tunica

 

Tunica, Mississippi

Ameristar Casino * Hotel Kansas City (4)

 

Kansas City, Missouri

Ameristar Casino * Resort * Spa St. Charles (4)

 

St. Charles, Missouri

Belterra Park (4)

 

Cincinnati, Ohio

Valley Forge Casino Resort (3)

 

King of Prussia, Pennsylvania

 

(1) Eastside Cannery remains closed since March 18, 2020 due to the current levels of demand in the market.

(2) Par-A-Dice was temporarily closed on November 20, 2020 and subsequently reopened on January 16, 2021.

(3) Valley Forge was temporarily closed on December 12, 2020 and subsequently reopened on January 4, 2021.

(4) Property is subject to a master lease agreement with a real estate investment trust.

 

We also own and operate a travel agency and a captive insurance company that underwrites travel-related insurance, each located in Hawaii. As our Downtown Las Vegas properties cater to the Hawaiian market, financial results for these operations are included in our Downtown Las Vegas segment.

 

Results for Lattner Entertainment Group Illinois, LLC ("Lattner"), our Illinois distributed gaming operator, are included in our Midwest & South segment. Lattner's operations were temporarily suspended on November 20, 2020 due to a state mandated closure to stop the spread of COVID-19 and subsequently resumed on January 16, 2021.

 

We have online sports-betting offerings through market-access agreements with other companies in New Jersey and six of the nine states where we operate throughout the Midwest & South segment. We also have online real money gaming offerings in two of these states. Financial results for online sports betting and real money gaming operations are included in our Midwest & South segment.

 

Most of our gaming entertainment properties also include hotel, dining, retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the number of visits and spending levels of customers at our properties.

 

Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. While we do provide casino credit, subject to certain gaming regulations and jurisdictions, most of our customers wager with cash and pay for non-gaming services with cash or by credit card.

 

Our industry is capital intensive, and we rely heavily on the ability of our properties to generate operating cash flow to fund maintenance capital expenditures, fund acquisitions, provide excess cash for future development, repay debt financing and associated interest costs and pay income taxes.

 

Our Strategy

Our strategy is to increase shareholder value by pursuing strategic initiatives that improve and grow our business.

 

Strengthening Our Balance Sheet

We are committed to finding opportunities to strengthen our balance sheet through diversifying and increasing cash flow. We intend to take a balanced approach to our cash flows, with a current emphasis on investing in our business and returning capital to shareholders.

 

 

Operating Efficiently

We are committed to operating efficiently. As we re-opened our properties and adjusted our operations to address the impacts of the COVID-19 pandemic, the efficiencies of our disciplined business model positions us to flow a substantial portion of our revenue directly to the bottom line.

 

Evaluating Acquisition Opportunities

Our evaluations of potential investments and growth opportunities are strategic, deliberate, and disciplined. Our goal is to identify and pursue opportunities that grow our business, are available at the right price and deliver a solid return for shareholders. These investments can take the form of expanding and enhancing offerings and amenities at existing properties, development of new properties, acquisitions, or expanding and enhancing online sports wagering and real money gaming offerings as they are legalized in and around the states we operate today.

 

Maintaining Our Brand

The ability of our employees to deliver great customer service helps distinguish our Company and our brands from our competitors. Our employees are an important reason that our customers continue to choose our properties over the competition across the country.

 

Our Key Performance Indicators

We use several key performance measures to evaluate the operations of our properties. These key performance measures include the following:

 

Gaming revenue measures: slot handle, which means the dollar amount wagered in slot machines, and table game drop, which means the total amount of cash deposited in table games drop boxes, plus the sum of markers issued at all table games, are measures of volume and/or market share.  Slot win and table game hold, which mean the difference between customer wagers and customer winnings on slot machines and table games, respectively, represent the amount of wagers retained by us and recorded as gaming revenues. Slot win percentage and table game hold percentage, which are not fully controllable by us, represent the relationship between slot handle to slot win and table game drop to table game hold, respectively.

   

Food & beverage revenue measures: average guest check, which means the average amount spent per customer visit and is a measure of volume and product offerings; number of guests served ("food covers"), which is an indicator of volume; and the cost per guest served, which is a measure of operating margin.

   

Room revenue measures: hotel occupancy rate, which measures the utilization of our available rooms; and average daily rate ("ADR"), which is a price measure.

 

RESULTS OF OPERATIONS

Overview

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2022

   

2021

   

2022

   

2021

 

Total revenues

  $ 894.5     $ 893.6     $ 1,755.2     $ 1,646.9  

Operating income

    245.1       266.3       496.1       460.1  

Net income

    146.8       113.7       309.7       215.9  

 

Total Revenues

Total revenues for the three months ended June 30, 2022 increased slightly by $0.8 million, or 0.1%, as compared to the prior year comparable period. Total revenues for the six months ended June 30, 2022, increased $108.3 million, or 6.6%, as compared to the prior year comparable period due primarily to the continued recovery from the COVID-19 pandemic. The second quarter of 2021 marked the point when many COVID-related restrictions impacting our business were lifted, vaccination rates started to rise, destination travel started to return and we opened additional amenities that had been closed. Additionally, we benefited from limited competing entertainment options in the prior year period. This recovery, while building since we reopened our properties, accelerated in the second quarter of 2021 and drove revenue growth in the first quarter of 2022. We also continue to focus on our core customer, leveraging more robust marketing and analytical tools since reopening the majority of our properties in the second quarter of 2020. This focus has driven revenue growth from our core customers year over year and allowed us to grow revenues year over year despite a decline in unrated play in the second quarter of 2022 driven by government stimulus in the second quarter of 2021.

 

Operating Income

Operating income decreased $21.3 million, or 8.0%, for the three months ended June 30, 2022, compared to the prior year comparable period. The decline is primarily driven by a change in revenue mix as gaming revenues, one of our most profitable revenue streams, declined $42.5 million, or 5.8%, while food & beverage and other revenues, two of our least profitable revenue streams, increased $32.6 million, or 25.6%. As noted above, the second quarter of 2021 had government stimulus that drove higher levels of unrated play and contributed favorably to gaming revenues in that period. The second quarter of 2021 also marked the quarter where many restrictions were lifted and we started opening additional amenities. In the second quarter of 2022 we benefited from a full quarter of having these restrictions lifted and additional amenities open. Operating income for the three months ended June 30, 2022 as compared to the prior year comparable period, was favorably impacted by a $10.7 million non-recurring employee bonus that occurred in the second quarter of 2021.

 

Operating income increased $36.1 million, or 7.8%, during the six months ended June 30, 2022, as compared to the prior year comparable period primarily due to a 6.6% growth in revenues year over year with continued recovery from the COVID-19 pandemic, including the impact of reopening additional amenities that were closed for all or a portion of the first quarter of 2021, and our focus on our core customers as discussed above. In addition, we transformed our operating model after reopening our properties, and this streamlined operating model, with a focus and discipline on costs, has allowed us to flow a greater portion of our revenue growth to operating income. Operating income was also favorably impacted by a $12.8 million gain on disposition of assets during the six months ended June 30, 2022 and increased over the prior year by $10.7 million due to a non-recurring employee bonus in the second quarter of 2021.

 

 

 

Net Income
Net income increased  $33.0 million for the three months ended  June 30, 2022, compared to the prior year comparable period. The increase is primarily attributable to a $49.0 million decline in loss on early extinguishments and modifications of debt. During the three months ended  June 30, 2022, the Company retired the remaining $300.0 million aggregate principal amount of 8.625% Senior Notes due 2025 ("8.625% Senior Notes"), resulting in a $16.5 million loss on extinguishment. During the three months ended June 30, 2021, the Company retired the $750.0 million aggregate principal amount of 6.375% Senior Notes due 2026 ("6.375% Senior Notes") and the $700.0 million aggregate principal amount of 6.000% Senior Notes due 2026 ("6.000% Senior Notes") resulting in a $65.5 million loss on extinguishment. In addition, interest expense decreased by $18.7 million as a result of a $758.8 million decline in the weighted average debt balance, which is driven by the following: (i) retirements of the 6.375% Senior Notes and 6.000% Senior Notes in June 2021, (ii) retirement of $300 million aggregate principal amount of our 8.625% Senior Notes in November 2021, (iii) retirement of the remaining $300.0 million outstanding balance of our 8.625% Senior Notes in June 2022, and (iv) offset by the issuance of the $900.0 million aggregate principal amount of 4.750% Senior Notes due 2031 ("4.750% Senior Notes due 2031") in June 2021. The reductions in loss on early extinguishments and interest expense are offset by a decrease in operating income of  $21.3 million, as discussed above, along with an increase in the income tax provision of $9.8 million. The increase in the income tax provision is a result of the Company's improved operational performance.
 
Net income increased  $93.8 million for the six months ended June 30, 2022, compared to the prior year comparable period. The increase is attributable to the following: (i) operating income increase of  $36.1 million, as discussed above, (ii) decrease in loss on early extinguishments and modifications of debt of $45.7 million due to the 8.625% Senior Notes retirement in June 2022, the retirement of the Prior Term A Loan and Prior Refinancing Term B Loan under the Prior Credit Facility in March 2022 (see additional discussion in " Liquidity and Capital Resources") and the 6.375% Senior Notes and 6.000% Senior Notes retirements in June 2021, (iii) interest expense decrease of $38.9 million due to an $814.3 million decline in the weighted average debt balance, which is driven by the retirements of the 6.375% Senior Notes and 6.000% Senior Notes in June 2021, the retirement of $300.0 million aggregate principal amount of our 8.625% Senior Notes in November 2021 and the remaining $300.0 million outstanding balance of our 8.625% Senior Notes in June 2022, offset by the issuance of the $900.0 million aggregate principal amount of 4.750% Senior Notes due 2031 in June 2021. These items are offset by an increase in the income tax provision of $25.4 million due to the Company's improved operational performance.
 
Operating Revenues

We derive the majority of our revenues from our gaming operations, which produced approximately 77% and 81% of revenues for the three months ended June 30, 2022 and 2021, respectively, and 77% and 82% for the six months ended June 30, 2022 and 2021, respectively. Other revenues, which include online offerings, represent our next most significant revenue source, generating 10% of revenues for each of the three and six months ended June 30, 2022 and 8% for each of the three and six months ended June 30, 2021. Food & beverage revenues and room revenues separately contributed less than 8% of revenues during these periods. 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2022

   

2021

   

2022

   

2021

 

REVENUES

                               

Gaming

  $ 684.9     $ 727.5     $ 1,352.9     $ 1,345.4  

Food & beverage

    70.3       57.4       134.0       101.5  

Room

    49.9       39.1       92.3       65.1  

Other

    89.4       69.6       176.0       134.9  

Total revenues

  $ 894.5     $ 893.6     $ 1,755.2     $ 1,646.9  
                                 

COSTS AND EXPENSES

                               

Gaming

  $ 254.5     $ 259.4     $ 504.5     $ 491.5  

Food & beverage

    57.5       46.8       111.4       85.7  

Room

    17.3       14.2       33.3       26.3  

Other

    60.6       44.5       117.5       86.4  

Total costs and expenses

  $ 389.9     $ 364.9     $ 766.7     $ 689.9  
                                 

MARGINS

                               

Gaming

    62.8 %     64.3 %     62.7 %     63.5 %

Food & beverage

    18.2 %     18.5 %     16.9 %     15.6 %

Room

    65.3 %     63.7 %     63.9 %     59.6 %

Other

    32.2 %     36.1 %     33.2 %     36.0 %

 

Gaming

Gaming revenues are comprised primarily of the net win from our slot machine operations and to a lesser extent from table games win. The decrease in gaming revenues of $42.5 million, or 5.8%, during the three months ended June 30, 2022, compared to the prior year comparable period, is primarily due to a 5.1% decline in slot win. Gaming revenues for the three months ended June 2021, were favorably impacted by government stimulus and limited entertainment options.

 

Gaming revenues increased $7.5 million, or 0.6%, during the six months ended June 30, 2022, as compared to the corresponding period of the prior year, due primarily to gaming revenue growth in the first quarter of 2022 over the prior year comparable period as we benefited from the lifting of COVID-related restrictions that occurred in the second quarter of 2021.

 

Food & Beverage

Food & beverage revenues increased $12.9 million, or 22.4%, during the three months ended June 30, 2022, compared to the prior year comparable period, primarily due to an increase in food covers of 12.4% and an increase in average guest check of 5.9%. 

 

Food & beverage revenues increased $32.5 million, or 32.0%, during the six months ended June 30, 2022, compared to the prior year comparable period, primarily due to an increase in food covers of 21.3% and an increase in average guest check of 5.8%. 

 

Room

Room revenues increased$10.8 million, or 27.7%, during the three months ended June 30, 2022, compared to the prior year comparable period, primarily due to an increase in occupancy of 4.6% and an increase in average daily rate of 6.1%.

 

 

 

Room revenues increased $27.2 million, or 41.9%, during the six months ended June 30, 2022, as compared to the prior year comparable period, primarily due to an increase in occupancy of 8.5% and an increase in average daily rate of 9.5%.

 

Other

Other revenues relate to our online gaming initiatives and patronage visits at the other amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Other revenues increased $19.7 million, or 28.3%, and $41.0 million, or 30.4%, during the three and six months ended June 30, 2022, respectively, as compared to the corresponding periods of the prior year, due primarily to increased online gaming revenues, including the revenues from reimbursements of gaming taxes paid on behalf of our online partners, and as other amenities such as entertainment and group business started to return again after the COVID-related closures and lifting of large group restrictions. Corresponding period-over-period increases in other expenses reflect primarily the gaming taxes paid on behalf of our online partners and the corresponding costs of entertainment and group business.

 

Revenues and Adjusted EBITDAR by Reportable Segment

We determine each property's profitability based upon Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ("Adjusted EBITDAR"), which represents earnings before interest expense, income taxes, depreciation and amortization, deferred rent, master lease rent expense, other operating items, net, share-based compensation expense, project development, preopening and writedown expenses, impairments of assets, loss on early extinguishments and modifications of debt and other items, net, as applicable. Reportable Segment Adjusted EBITDAR is the aggregate sum of the Adjusted EBITDAR for each of the properties comprising our Las Vegas Locals, Downtown Las Vegas and Midwest & South segments. Results for Downtown Las Vegas include the results of our travel agency and captive insurance company in Hawaii. Results for our Illinois distributed gaming operator and our online gaming initiatives are included in our Midwest & South segment. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations. Furthermore, for purposes of this presentation, corporate expense excludes its portion of share-based compensation expense.

 

EBITDAR is a commonly used measure of performance in our industry that we believe, when considered with measures calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"), provides our investors a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Management has historically adjusted EBITDAR when evaluating operating performance because we believe that the exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results.

 

The following table presents our total revenues and Adjusted EBITDAR by Reportable Segment:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2022

   

2021

   

2022

   

2021

 

Total revenues

                               

Las Vegas Locals

  $ 236.5     $ 236.1     $ 464.0     $ 418.5  

Downtown Las Vegas

    53.9       38.8       103.4       60.2  

Midwest & South

    604.1       618.7       1,187.8       1,168.2  

Total revenues

  $ 894.5     $ 893.6     $ 1,755.2     $ 1,646.9  
                                 

Adjusted EBITDAR (1)

                               

Las Vegas Locals

  $ 125.3     $ 133.6     $ 244.0     $ 224.2  

Downtown Las Vegas

    22.1       15.4       40.5       17.9  

Midwest & South

    229.1       260.0       452.5       478.1  

Corporate expense

    (22.6 )     (23.6 )     (44.3 )     (42.2 )

Adjusted EBITDAR

  $ 353.9     $ 385.4     $ 692.7     $ 678.0  

 

(1) Refer to Note 9, Segment Information, in the notes to the condensed consolidated financial statements (unaudited) for a reconciliation of Adjusted EBITDAR to net income, as reported in accordance with GAAP in our accompanying condensed consolidated statements of operations.

 

Las Vegas Locals 

Total revenues remained consistent, increasing slightly by $0.4 million, or 0.2%, during the three months ended June 30, 2022. Total revenues increased by $45.5 million, or 10.9%, during the six months ended June 30, 2022, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories. For the six months ended June 30, 2022, gaming revenues increased $13.7 million primarily due to an increase in slot win of 2.7% and table game hold of 15.8% from the prior year comparable period. Room revenues increased $13.4 million due to an increase in hotel occupancy rate of 10.5% and average daily rate of 22.0% from the prior year comparable period. Food & beverage revenues increased $10.6 million due to an increase in food covers of 26.6% and average guest check of 6.5% from the prior year comparable period. Other revenues increased $7.8 million as entertainment venues expanded the number of events and demand for other amenities grew over the prior year comparable period. The Las Vegas Locals segment benefited from the COVID-19 recovery year over year as discussed further in the items impacting the Company's total revenue growth.

 

Adjusted EBITDAR decreased by $8.2 million during the three months ended June 30, 2022. The decline is primarily driven by a decrease in gaming margins of 172 basis points from the prior year comparable period due to a 5.7% reduction in gaming revenue, which was driven by a 5.6% decrease in slot win. In addition, maintenance and utility costs increased $1.8 million due to an increase in business volumes and rising energy costs. 

 

Adjusted EBITDAR increased by $19.8 million during the six months ended June 30, 2022, as compared to the prior year comparable period, due primarily to revenue growth and a continuation of our disciplined operating model shift when operations resumed following the reopening of our properties in 2020.

 

Downtown Las Vegas 

Total revenues increased by $15.1 million, or 39.0%, and $43.2 million, or 71.7%during the three and six months ended June 30, 2022, respectively, as compared to the corresponding periods of the prior year, reflecting revenue increases in all departmental categories. Given that our Downtown properties cater to the Hawaiian market, the year over year reduction in restrictions in Hawaii drove an increase in Hawaiian visitation during the three and six months ended June 30, 2022 over the prior year comparable periods, which drove the overall departmental revenue increases. In addition, one of our downtown properties reopened in early September 2021 as destination travel started returning. 

 

 

 

 

Adjusted EBITDAR increased by $6.7 million and $22.7 million during the three and six months ended June 30, 2022, as compared to the corresponding periods of the prior year, due primarily to the revenue growth from the Hawaiian customer and return of destination travel. The Downtown Las Vegas segment caters more to customers from Hawaii, which had stringent travel restrictions related to COVID-19 during the first half of 2021, and to the destination traveler, which was slower to return after the COVID-19 closures than our regional and local customer in other segments of our business.

 

Midwest & South 

Total revenues decreased by $14.6 million during the three months ended June 30, 2022, as compared to the corresponding period of the prior year. Gaming revenues declined $39.6 million over the comparable prior year period as slot win decreased 7.4%. The decline is offset by the following: (i) an increase in other revenues of $16.2 million over the comparable prior year period as a result of online revenue growth, (ii) an increase in food & beverage revenue of $5.1 million as food covers and average guest check increased by 1.3% and 5.9%, respectively, and (iii) an increase in room revenue of $3.7 million as room occupancy and average daily rate increased 1.6% and 2.1%, respectively. Overall, the prior year comparable period, specifically gaming revenue, benefited from government stimulus and limited entertainment options. Non-gaming revenue has increased in the current year as restaurant and entertainment venues have reopened and we've benefited from a full quarter with the lifting of COVID-related restrictions.

 

Total revenu es increased by $19.6 million during the  six months ended June 30, 2022, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories, with the exception of gaming revenue. Other revenue increased $31.7 million, as compared to the prior year comparable period, due to our online revenue growth. Food & beverage revenue increased by $11.9 million, as compared to the prior year comparable period, due primarily to a 2.9% increase in food covers and a 5.7% increase in average guest check. Room revenue increased by $7.5 million, as compared to the prior year comparable period, as room occupancy and average daily rate increased 1.7% and 6.1%, respectively. These revenue increases are offset by a gaming revenue decline of $31.6 million, as compared to prior year comparable period, due to a 3.4% decrease in slot win driven primarily by government stimulus in the second quarter of 2021 and limited entertainment options during the six months ended June 30, 2021.
 

Adjusted EBITDAR decreased by $30.9 million during the three months ended June 30, 2022, as compared to the corresponding period of the prior year, due primarily to the decline in gaming revenue and a gaming margin decrease of 175 basis points.

 

Adjusted EBITDAR decreased by $25.6 million during the six months ended June 30, 2022, as compared to the corresponding period of the prior year, due primarily to the decline in gaming revenue and a gaming margin decrease of 144 basis points.

 

Other Operating Costs and Expenses 

The following costs and expenses, as presented in our condensed consolidated statements of operations, are further discussed below:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2022

   

2021

   

2022

   

2021

 

Selling, general and administrative

  $ 95.7     $ 90.5     $ 187.7     $ 180.5  

Master lease rent expense

    26.7       26.2       53.0       52.1  

Maintenance and utilities

    34.5       31.2       67.4       59.4  

Depreciation and amortization

    66.8       67.3       129.2       131.7  

Corporate expense

    34.9       34.7       63.9       58.0  

Project development, preopening and writedowns

    0.9       1.5       (9.1 )     2.9  

Other operating items, net

    0.2       11.1       0.3       12.3  

 

Selling, General and Administrative

Selling, general and administrative expenses, as a percentage of revenues, were 10.7% and 10.1% during the three months ended June 30, 2022 and 2021, respectively, and 10.7% and 11.0% during the six months ended June 30, 2022 and 2021, respectively. We continue to focus on our disciplined operating model and targeted marketing approach.

 

Master Lease Rent Expense

Master lease rent expense represents rent expense incurred by four of our properties which are subject to two master lease agreements with a real estate investment trust. Master lease rent expense remained consistent, as a percentage of revenues, and was 3.0% and 2.9% during the three months ended June 30, 2022 and 2021, respectively, and 3.0% and 3.2% during the six months ended June 30, 2022 and 2021, respectively.

 

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of revenues, remained consistent at 3.9% and 3.5% during the three months ended June 30, 2022 and 2021, respectively, and 3.8% and 3.6% during the six months ended June 30, 2022 and 2021, respectively.

 

Depreciation and Amortization

Depreciation and amortization expenses, as a percentage of revenues, remained consistent at 7.5% during both the three months ended June 30, 2022 and 2021 and 7.4% and 8.0% during the six months ended June 30, 2022 and 2021, respectively.Depreciation expense remained consistent year over year and therefore the percentage of revenue decrease is primarily attributable to revenue growth.

 

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our property operations, in addition to the corporate portion of share-based compensation expense. Corporate expense was consistent and represented 3.9% of revenues during both the three months ended June 30, 2022 and 2021 and 3.6% and 3.5% during the six months ended June 30, 2022 and 2021, respectively.

 

 

 

 

 

Project, Development, Preopening and Writedowns
Project development, preopening and writedowns represents: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, strategic initiatives, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred in our ongoing efforts to develop gaming activities in new jurisdictions and expenses related to other new business development activities that do not qualify as capital costs; (iii) asset write-downs; and (iv) realized gains arising from asset dispositions. Such costs are generally nonrecurring in nature and vary from period to period as the volume of underlying activities fluctuate. During the   six months ended June 30, 2022,  the Company benefitted from a $12.8 million gain on disposition of assets.
 
Other Operating Items, net

Other operating items, net, is generally comprised of miscellaneous non-recurring operating charges, including severance payments to separated employees, natural disasters and severe weather impact, including hurricane and flood expenses, and subsequent recoveries of such costs, as applicable. During the three and six months ended June 30, 2021, $10.7 million of other operating items, net, related to non-recurring employee bonus payments.

 

Other Expenses

Interest Expense, net

The following table summarizes information with respect to our interest expense on outstanding indebtedness:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2022

   

2021

   

2022

   

2021

 

Interest Expense, Net of Capitalized Interest and Interest Income

  $ 36.0     $ 54.7     $ 73.2     $ 112.1  

Average Long-Term Debt Balance (1)

    3,032.7       3,791.5       3,052.5       3,866.8  

Weighted Average Interest Rates

    4.3 %     5.3 %     4.2 %     5.3 %

(1) Average debt balance calculation does not include the related discounts or deferred finance charges.

 

Interest expense, net of capitalized interest and interest income, for the three months ended June 30, 2022, decreased $18.7 million, or 34.2%, from the prior year comparable period as a result of a $758.8 million decline in the weighted average debt balance and a 100 basis point decrease in the weighted average interest rate, which is driven by the retirements of the 6.375% Senior Notes and 6.000% Senior Notes in June 2021, the retirement of $300.0 million aggregate principal amount of our 8.625% Senior Notes in November 2021 and the remaining $300.0 million outstanding balance of our 8.625% Senior Notes in June 2022, offset by the issuance of the 4.750% Senior Notes due 2031 in June 2021.

 

Interest expense, net of capitalized interest and interest income, for the six months ended June 30, 2022, decreased $38.8 million, or 34.7%, from the prior year comparable period. The decline is attributable to a $814.3 million decline in the weighted average debt balance and a 110 basis point decrease in the weighted average interest rate, which is driven by the retirements of the 6.375% Senior Notes and 6.000% Senior Notes in June 2021, the retirement of $300.0 million aggregate principal amount of our 8.625% Senior Notes in November 2021 and the remaining $300.0 million outstanding balance of our 8.625% Senior Notes in June 2022, offset by the issuance of the 4.750% Senior Notes due 2031 in June 2021.

 

Loss on Early Extinguishments and Modifications of Debt

The components of the loss on early extinguishments and modifications of debt are as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2022

   

2021

   

2022

   

2021

 

6.375% Senior Notes premium fees paid

  $     $ 23.9     $     $ 23.9  

6.375% Senior Notes deferred finance charges written off

          6.4             6.4  

6.000% Senior Notes premium fees paid

          28.0             28.0  

6.000% Senior Notes deferred finance charges written off

          7.2             7.2  

8.625% Senior Notes premium fees paid

    12.9             12.9        

8.625% Senior Notes deferred finance charges written off

    3.6             3.6        

Prior Credit Facility deferred finance charges written off

                3.3        

Total loss on early extinguishments and modifications of debt

  $ 16.5     $ 65.5     $ 19.8     $ 65.5  

 

Income Taxes 

The effective tax rates during the six months ended June 30, 2022 and 2021 were 22.5% and 23.0%, respectively. Our tax rate for the six months ended June 30, 2022 and 2021 were unfavorably impacted by state taxes and certain nondeductible expenses which were partially offset by the inclusion of excess tax benefits related to equity compensation as a component of the provision for income taxes. As of December 31, 2021, the Company exhausted its federal net operating loss carryforwards which results in higher cash taxes in the current and prospective periods.

 

 

LIQUIDITY AND CAPITAL RESOURCES

Financial Position

We generally operate with minimal or negative levels of working capital in order to minimize borrowings and related interest costs. At June 30, 2022 and December 31, 2021, we had balances of cash and cash equivalents of $250.2 million and $344.6 million, respectively. In addition, we held restricted cash balances of $13.8 million and $12.6 million at June 30, 2022 and December 31, 2021, respectively. Our working capital deficit at June 30, 2022 and December 31, 2021 was $116.8 million and $49.2 million, respectively.

 

We believe that current cash balances together with the available borrowing capacity under our Revolving Credit Facility and cash flows from operating activities will be sufficient to meet our liquidity and capital resource needs for the next twelve months, including our projected operating requirements, maintenance capital expenditures and our announced definitive agreement to acquire Pala Interactive LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. See "Indebtedness", below, for further detail regarding the Credit Facility.

 

The Company may also seek to secure additional working capital, repay respective current debt maturities, or fund respective development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings, to the extent such offerings are allowed under our debt agreements.

 

Cash Flows Summary

 

   

Six Months Ended

 
   

June 30,

 

(In millions)

 

2022

   

2021

 

Net cash provided by operating activities

  $ 456.2     $ 499.3  
                 

Cash flows from investing activities

               

Capital expenditures

    (98.7 )     (96.3 )

Insurance proceeds received for hurricane losses

          40.2  

Proceeds from disposition of assets

    21.4        

Other investing activities

          6.7  

Net cash used in investing activities

    (77.3 )     (49.4 )
                 

Cash flows from financing activities

               

Net borrowings (payments) under credit facilities

    181.1       (11.5 )

Proceeds from issuance of senior notes

          900.0  

Retirements of senior notes

    (300.0 )     (1,450.0 )

Premium fees

    (12.9 )     (51.9 )

Debt financing costs

    (13.7 )     (14.6 )

Share-based compensation activities

    (9.0 )     0.3  

Shares repurchased and retired

    (299.8 )      

Dividends paid

    (16.5 )      

Other financing activities

    (1.2 )     (1.4 )

Net cash used in financing activities

    (472.0 )     (629.1 )

Decrease in cash, cash equivalents and restricted cash

  $ (93.1 )   $ (179.2 )

 

Cash Flows from Operating Activities

During the six months ended June 30, 2022 and 2021, we generated operating cash flow of $456.2 million and $499.3 million, respectively. Generally, operating cash flows decreased during 2022 as compared to the prior year period due to the timing of working capital spend.

 

Cash Flows from Investing Activities

Our industry is capital intensive and we use cash flows for acquisitions, facility expansions, investments in future development or business opportunities and maintenance capital expenditures.

 

During the six months ended June 30, 2022, we incurred net cash outflows for investing activities of $77.3 million comprised of capital expenditures of $98.7 million, primarily related to furniture and equipment purchases and building projects at various properties, offset by $21.4 million in proceeds from disposition of assets. During the six months ended June 30, 2021, we incurred net cash outflows for investing activities of $49.4 million comprised of capital expenditures of $96.3 million, primarily related to building improvements at Delta Downs as a result of Hurricane Laura damage, which was offset by $40.2 million of insurance recovery proceeds and $6.7 million of reimbursed expense associated with the Wilton Rancheria project.

 

Cash Flows from Financing Activities

We rely upon our financing cash flows to provide funding for investment opportunities, repayments of obligations and ongoing operations.

 

The net cash outflows from financing activities during the six months ended June 30, 2022, primarily reflect share repurchases, the retirement of the 8.625% Senior Notes, payment of the associated premium fees related to the retirement of the 8.625% Senior Notes, debt financing costs related to the Credit Agreement and dividends paid, offset by an increase in the outstanding principal under the Credit Facility (see "Indebtedness"). The net cash outflows from financing activities in the six months ended June 30, 2021, primarily reflect the retirements of the 6.375% Senior Notes and the 6.000% Senior Notes, payment of the associated premium fees related to the retirements, the quarterly payments on our Term Loans and debt issuance costs for the 4.750% Senior Notes due 2031 offset by inflows for the six months ended June 30, 2021 from the issuance of the 4.750% Senior Notes due 2031.

 

 

Indebtedness

The outstanding principal balances of long-term debt, before unamortized discounts and fees, and the changes in those balances are as follows:

 

(In millions)

  June 30, 2022     December 31, 2021     Increase / (Decrease)  

Credit Facility

  $ 1,049.0     $     $ 1,049.0  

Prior Credit Facility

          867.9       (867.9 )

4.750% senior notes due 2027

    1,000.0       1,000.0        

8.625% senior notes due 2025

          300.0       (300.0 )

4.750% senior notes due 2031

    900.0       900.0        

Other

    0.8       1.5       (0.7 )

Total long-term debt

    2,949.8       3,069.4       (119.6 )

Less current maturities

    44.3       41.7       2.6  

Long-term debt, net of current maturities

  $ 2,905.5     $ 3,027.7     $ (122.2 )

 

Credit Facility

Credit Agreement

On March 2, 2022 (the "Closing Date"), the Company entered into a credit agreement (the "Credit Agreement") among the Company, certain direct and indirect subsidiaries of the Company as guarantors (the "Guarantors"), Bank of America, N.A., as administrative agent, collateral agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders. The Credit Agreement replaced the Third Amended and Restated Credit Agreement, dated as of August 14, 2013 (the "Prior Credit Facility"), among the Company, certain direct and indirect subsidiaries of the Company as guarantors, Bank of America, N.A., as administrative agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders.

 

The Credit Agreement provides for (i) a $1,450.0 million senior secured revolving credit facility (the "Revolving Credit Facility") and (ii) an $880.0 million senior secured term A loan (the "Term A Loan," collectively with the Revolving Credit Facility, the "Credit Facility"). The Revolving Credit Facility and the Term A Loan mature on the fifth anniversary of the Closing Date (or earlier upon the occurrence or non-occurrence of certain events). The Term A Loan was fully funded on the Closing Date. Proceeds from the Credit Agreement were used to refinance all outstanding obligations under the Prior Credit Facility, including a senior secured term loan A facility (the "Prior Term A Loan") and senior secured term loan B facility (the "Prior Refinancing Term B Loan", and collectively with the Prior Term A Loan, the "Prior Term Loans"), and to fund transaction costs in connection with the Credit Agreement. For additional information, refer to Note 5, Long-Term Debt in the notes to our condensed consolidated financial statements included herein.

 

Amounts Outstanding

The outstanding principal amounts under the Credit Facility and Prior Credit Facility are comprised of the following:

 

   

June 30,

   

December 31,

 

(In millions)

 

2022

   

2021

 

Revolving Credit Facility

  $ 135.0     $  

Term A Loan

    869.0        

Prior Term A Loan

          118.2  

Prior Refinancing Term B Loan

          749.7  

Swing Loan

    45.0        

Total outstanding principal amounts

  $ 1,049.0     $ 867.9  

 

With a total revolving credit commitment of $1,450.0 million available under the Credit Facility, $135.0 million and $45.0 million in borrowings outstanding on the Revolving Credit Facility and the Swing Loan, respectively, and $14.2 million allocated to support various letters of credit, there is a remaining contractual availability of $1,255.8 million as of June 30, 2022. 

 

The blended interest rate for outstanding borrowings under the Credit Facility was 3.0% at June 30, 2022 and 2.3% at December 31, 2021.

 

Redemption of 8.625% Senior Notes due June 2025

On June 1, 2022, we redeemed all outstanding 8.625% Senior Notes due June 2025 at a redemption price of 104.313% plus accrued and unpaid interest to the redemption date. The redemption, including the redemption premium, accrued and unpaid interest, fees, expenses and commissions related to this redemption, was funded through a combination of cash on hand and borrowings under our Revolving Credit Facility.

 

Debt Service Requirements

Debt service requirements for Term A Loan include amortization in an annual amount equal to 5.00% of the original principal amount thereof, commencing June 30, 2022, payable on a quarterly basis. Additionally, under the Credit Facility we have monthly Term A Loan interest payment obligations and quarterly unused line interest payments. Debt service requirements under our current outstanding senior notes consist of semi-annual interest payments (based upon a fixed annual interest rate of 4.750%) and principal repayments of our 4.750% Senior Notes due 2027 and our 4.750% Senior Notes due 2031.

 

Covenant Compliance

As of June 30, 2022, we were in compliance with the covenants of our debt instruments.

 

The indentures governing the senior notes contain provisions that allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, the fixed charge coverage ratio (as defined in the respective indentures, essentially a ratio of our consolidated EBITDA to fixed charges, including interest) for the trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Should this provision prohibit the incurrence of additional debt, we may still borrow under our existing Credit Facility to the extent that borrowing capacity remains under that agreement, as well as from other funding sources as provided under our debt agreements.

 

 

Guarantor Financial Information

In connection with the issuance of our 4.750% Senior Notes due 2027, our 8.625% Senior Notes and our 4.750% Senior Notes due 2031 (collectively, the "Guaranteed Notes"), certain of the Company's wholly owned subsidiaries (the "Guarantors") provide guarantees of those indentures. These Guaranteed Notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. On June 1, 2022, the 8.625% Senior Notes were fully redeemed.

 

Summarized combined balance sheet information for the parent company and the Guarantors is as follows:

 

   

June 30,

   

December 31,

 

(In millions)

 

2022

   

2021

 

Current assets

  $ 393.6     $ 487.7  

Noncurrent assets

    10,441.7       10,158.4  

Current liabilities

    510.4       538.1  

Noncurrent liabilities

    3,996.4       4,138.4  

 

Summarized combined results of operations for the parent company and the Guarantors is as follows:

 

   

Six Months Ended

 

(In millions)

 

June 30, 2022

 

Revenues

  $ 1,788.4  

Operating income

    902.3  

Income before income taxes

    805.8  

Net income

    715.6  

 

Share Repurchase Programs

Subject to applicable corporate securities laws, repurchases under our share repurchase program may be made at such times and in such amounts as we deem appropriate. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding senior notes and Credit Facility. Purchases under our share repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the share repurchase program with existing cash resources and availability under our Credit Facility.

 

On October 21, 2021, our Board of Directors authorized a share repurchase program of $300.0 million (the "Share Repurchase Program"). On June 1, 2022, our Board of Directors authorized a $500.0 million increase to the Share Repurchase Program. We are not obligated to repurchase any shares under this program, and purchases under the Share Repurchase Program can be discontinued at any time at our sole discretion. We repurchased 3.0 million and 5.1 million shares during the three and six months ended June 30, 2022, respectively. There were no share repurchases during the three and six months ended June 30, 2021 as we had suspended all share repurchases in March 2020 due to the impact of the COVID-19 pandemic on our business. As of June 30, 2022, we are authorized to repurchase up to an additional $480.8 million in shares of our common stock.

 

We have in the past, and may in the future, acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.

 

Quarterly Dividend Program

On February 3, 2022, the Company announced that its Board of Directors had authorized the reinstatement of the Company's cash dividend program.

 

The dividends declared by the Board of Directors under this program and reflected in the periods presented are:

 

Declaration date

 

Record date

 

Payment date

  Amount per share  

February 3, 2022

 

March 15, 2022

 

April 15, 2022

  $ 0.15  

June 1, 2022

 

June 30, 2022

 

July 15, 2022

    0.15  

 

Other Items Affecting Liquidity

We anticipate funding our capital requirements, including the acquisition of Pala Interactive, using cash on hand, cash being generated by our properties and availability under our Revolving Credit Facility, to the extent borrowing capacity exists after we meet our working capital needs for the next twelve months. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. The outcome of the specific matters discussed herein, including our commitments and contingencies, may also affect our liquidity.

 

Commitments

Pending Acquisitions

On March 28, 2022, we announced that we had entered into a definitive agreement to acquire Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. ("Pala Canada"), for total cash consideration of $170.0 million. Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a business-to-business (B2B) and business-to-consumer (B2C) basis in regulated markets across the United States and Canada. The transaction is expected to close around the end of the year, subject to the satisfaction of customary closing conditions and the receipt of all required regulatory approvals. We intend to finance the transaction through cash flow from operations and availability under our Revolving Credit Facility.

 

Capital Spending and Development

We currently estimate that our annual cash capital requirements to perform ongoing refurbishment and maintenance at our properties is approximately $215 million to $235 million. We fund our capital expenditures through cash on hand, our Credit Facility and operating cash flows.

 

 

In addition to the capital spending discussed above, we continue to pursue other potential development projects that may require us to invest significant amounts of capital, including beginning construction on a land-based facility at Treasure Chest which will replace our existing riverboat, and expansion of the Fremont's casino space and dining options. Both of these projects are in addition to our maintenance capital spending, and we expect to spend an additional $50 million to $65 million this year.

 

We also continue to work with the Wilton Rancheria to develop and manage Sky River Casino, a gaming entertainment complex to be located about 15 miles southeast of Sacramento, California. Wilton Rancheria has secured third-party financing to fund construction, which began in first quarter 2021. Sky River Casino is expected to open in the third quarter of this year.

 

Other Opportunities

We regularly investigate and pursue additional expansion opportunities in markets where casino gaming is currently permitted. We also pursue expansion opportunities in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. Such expansions will be affected and determined by several key factors, which may include the following:

 

 

the outcome of gaming license selection processes;

 

the approval of gaming in jurisdictions where we have been active but where casino gaming is not currently permitted;

 

identification of additional suitable investment opportunities in current gaming jurisdictions; and

 

availability of acceptable financing.

 

Additional projects may require us to make substantial investments or may cause us to incur substantial costs related to the investigation and pursuit of such opportunities, which we may fund through cash flow from operations or availability under our Credit Facility. To the extent such sources of funds are not sufficient, we may also seek to raise additional funds through public or private equity or debt financings or from other sources to the extent such financing is available.

 

Contingencies

Legal Matters

We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.

 

Off Balance Sheet Arrangements 

There have been no material changes to our off balance sheet arrangements described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022.

 

Critical Accounting Policies

There have been no material changes to our critical accounting policies described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the period ended December 31, 2021, as filed with the SEC on February 28, 2022.

 

Recently Issued Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, see Note 1, Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements, in the notes to the condensed consolidated financial statements (unaudited).

 

Important Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements contain words such as "may," "will," "might," "expect," "believe," "anticipate," "could," "would," "estimate," "pursue," "target," "project," "intend," "plan," "seek," "should," "assume," and "continue," or the negative thereof or comparable terminology. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include:

 

  the factors that contribute to our ongoing success and our ability to be successful in the future;
  impacts caused by the COVID-19 pandemic or any other public health emergencies we may encounter;
  our business model, areas of focus and strategy for driving business results;
  competition, including expansion of gaming into additional markets including internet gaming, the impact of competition on our operations, our ability to respond to such competition, and our expectations regarding continued competition in the markets in which we compete;
 

the general effect, and expectation, of the national and global economy on our business, as well as the economies where each of our properties are located;

 

indebtedness, including Boyd Gaming’s ability to refinance or pay amounts outstanding under its credit agreement and Boyd Gaming’s unsecured notes, when they become due and our compliance with related covenants, and our expectation that we will need to refinance all or a portion of our respective indebtedness at or before maturity;
 

our expectation regarding the trends that will affect the gaming industry over the next few years and the impact of these trends on growth of the gaming industry, future development opportunities and merger and acquisition activity in general;

 

our intention to pursue expansion opportunities, including acquisitions, that are a good fit for our business, deliver a solid return for stockholders, and are available at the right price;

 

that our credit agreement and our cash flows from operating activities will be sufficient to meet our respective projected operating and maintenance capital expenditures for the next twelve months;

 

 

 

our belief that all pending litigation claims, if adversely decided, will not have a material adverse effect on our business, financial position or results of operations;
 

that margin improvements will remain a driver of profit growth for us going forward;
 

regulations, including anticipated taxes, tax credits or tax refunds expected, and the ability to receive and maintain necessary approvals for our projects;
 

our expectations regarding the expansion of sports betting and online wagering;
 

our asset impairment analyses and our intangible asset and goodwill impairment tests;

 

the likelihood of interruptions to our rights in the land we lease under long-term leases for certain of our hotels and casinos;

 

that estimates and assumptions made in the preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles may differ from actual results; and
 

our estimates as to the effect of any changes in our Consolidated EBITDA on our ability to remain in compliance with certain covenants in the credit agreement.

 

Additional factors that could cause actual results to differ are discussed in Part I. Item 1A. Risk Factors of our Annual Report on Form 10-K for the period ended December 31, 2021, and in other current and periodic reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

 

Item 3.        Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not hold any market risk sensitive instruments for trading purposes. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market, short-term and long-term SOFR rates, and their potential impact on our long-term debt. From March 2022 through July 2022, the Federal Reserve has increased the federal funds rate by 225 basis points. These recent increases in the federal funds rate may impact the interest paid on our variable-rate borrowings both now and in the future. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our Credit Facility. We do not currently utilize derivative financial instruments for trading or speculative purposes.

 

As of June 30, 2022, our long-term variable-rate borrowings represented approximately 35.6% of total long-term debt. Based on June 30, 2022 debt levels, a 100 basis point change in the interest rate would cause our annual interest costs on variable-rate borrowings to change by approximately $10.5 million. We believe there have been no other material changes in our exposure to market risks as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022.

 

See also "Liquidity and Capital Resources" above.

 

 

Item 4.        Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q (the "Report"), we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

 

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

 

PART II. Other Information

 

Item 1.        Legal Proceedings

We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position, results of operations or cash flows.

 

Item 1A.     Risk Factors

There were no material changes from the risk factors previously disclosed in Part I. Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022.

 

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

 

The following table discloses share repurchases that we have made pursuant to our share repurchase program during the three months ended June 30, 2022.

 

Period

 

Total Number of Shares Purchased (1)

   

Average Price Paid Per Share

   

Total Number of Shares Purchased as Part of a Publicly Announced Plan

   

Approximate Dollar Value That May Yet Be Purchased Under the Plan

 

April 1, 2022 through April 30, 2022

        $           $ 148,816,087  

May 1, 2022 through May 31, 2022

    1,957,184       55.73       1,957,184       39,738,448  

June 1, 2022 through June 30, 2022

    1,060,847       55.53       1,060,847       480,832,551  

Total

    3,018,031     $ 55.66       3,018,031     $ 480,832,551  

 

(1) All shares repurchased are covered by our share repurchase program as approved by our Board of Directors (the "Share Repurchase Program"). The Board of Directors approved $300.0 million for our Share Repurchase Program on October 21, 2021 and an additional $500.0 million on June 1, 2022, for a total authorization of $800.0 million. The Share Repurchase Program has no expiration date.

 

 

Item 6.

Exhibits

 

Exhibit Number

 

Document of Exhibit

 

Method of Filing

2.1   Purchase Agreement and Plan of Merger, dated as of March 28, 2022, by and among Boyd Interactive, Boyd Phoenix Acquisition, LLC, Boyd Phoenix Canada Inc., Pala Interactive, Pala Canada Holdings, LLC and Shareholder Representative Services LLC as representative of the holders of the membership interests of Pala Interactive.   Incorporated by reference to Exhibit 2.1 of the Registrant's Quarterly Report on Form 10-Q, filed with the SEC on May 6, 2022
         
22   List of Guarantor Subsidiaries of Boyd Gaming Corporation.   Incorporated by reference to Exhibit 22 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022
         

31.1

 

Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

 

Filed electronically herewith

 

 

 

 

 

31.2

 

Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

 

Filed electronically herewith

 

 

 

 

 

32.1

 

Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. § 1350.

 

Filed electronically herewith

 

 

 

 

 

32.2

 

Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. § 1350.

 

Filed electronically herewith

 

 

 

 

 

101

 

The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021, (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the six months ended June 30, 2022 and 2021, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021, and (vi) Notes to Condensed Consolidated Financial Statements.

 

Filed electronically herewith

         
104  

Inline XBRL for cover page of the Company's Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.

  Filed electronically herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 4, 2022.

 

 

 

BOYD GAMING CORPORATION

 

 

 

 

By:

/s/ Lori M. Nelson

 

 

Lori M. Nelson

 

 

Senior Vice President Financial Operations and Reporting (Authorized Signatory and Interim Chief Accounting Officer)

 

 

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