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BOYD GAMING CORP - Quarter Report: 2023 June (Form 10-Q)

bgc20230630_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, 2023

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", "non-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 July 31, 2023 was 100,012,042.

 

 

 

 

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2023

TABLE OF CONTENTS

 

 

 

Page

No.

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022

5

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the six months ended June 30, 2023 and 2022

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

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 5. Other Information 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)

 

2023

  

2022

 

ASSETS

        

Current assets

        

Cash and cash equivalents

 $260,787  $283,472 

Restricted cash

  11,615   11,593 

Accounts receivable, net

  104,333   109,053 

Inventories

  21,408   22,173 

Prepaid expenses and other current assets

  52,079   49,379 

Income taxes receivable

  8,824   2,558 

Total current assets

  459,046   478,228 

Property and equipment, net

  2,451,856   2,394,236 

Operating lease right-of-use assets

  810,300   830,345 

Other assets, net

  133,172   147,439 

Intangible assets, net

  1,420,692   1,427,135 

Goodwill, net

  1,029,415   1,033,744 

Total assets

 $6,304,481  $6,311,127 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current liabilities

        

Accounts payable

 $96,883  $129,946 

Current maturities of long-term debt

  44,275   44,275 

Accrued liabilities

  405,408   411,913 

Total current liabilities

  546,566   586,134 

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

  2,899,691   3,005,134 

Operating lease liabilities, net of current portion

  735,345   758,440 

Deferred income taxes

  308,654   318,609 

Other liabilities

  65,416   52,185 

Commitments and contingencies (Notes 6 and 7)

          

Stockholders' equity

        

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

      

Common stock, $0.01 par value, 200,000,000 shares authorized; 100,012,042 and 102,816,110 shares outstanding

  1,000   1,028 

Additional paid-in capital

  102,723   305,152 

Retained earnings

  1,645,682   1,285,827 

Accumulated other comprehensive loss

  (596)  (1,382)

Total stockholders' equity

  1,748,809   1,590,625 

Total liabilities and stockholders' equity

 $6,304,481  $6,311,127 

 

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)

 

2023

  

2022

  

2023

  

2022

 

Revenues

                

Gaming

 $660,729  $684,925  $1,325,037  $1,352,879 

Food & beverage

  70,366   70,299   141,950   134,042 

Room

  49,761   49,904   99,826   92,313 

Online

  85,002   56,774   207,865   111,850 

Management fee

  17,446      37,476    

Other

  33,646   32,548   68,762   64,109 

Total revenues

  916,950   894,450   1,880,916   1,755,193 

Operating costs and expenses

                

Gaming

  249,999   254,500   499,794   504,542 

Food & beverage

  58,622   57,456   117,951   111,390 

Room

  18,580   17,285   35,700   33,275 

Online

  71,393   48,899   173,398   94,888 

Other

  11,003   11,678   22,570   22,614 

Selling, general and administrative

  99,070   95,662   199,389   187,709 

Master lease rent expense

  27,099   26,654   53,927   52,960 

Maintenance and utilities

  37,591   34,517   73,617   67,407 

Depreciation and amortization

  62,220   66,757   123,780   129,235 

Corporate expense

  31,705   34,872   60,360   63,876 

Project development, preopening and writedowns

  5,201   912   (13,673)  (9,117)

Impairment of assets

        4,537    

Other operating items, net

  438   188   658   286 

Total operating costs and expenses

  672,921   649,380   1,352,008   1,259,065 

Operating income

  244,029   245,070   528,908   496,128 

Other expense (income)

                

Interest income

  (2,715)  (483)  (20,860)  (903)

Interest expense, net of amounts capitalized

  42,715   36,466   86,581   74,124 

Loss on early extinguishments and modifications of debt

     16,509      19,809 

Other, net

  522   3,750   626   3,497 

Total other expense, net

  40,522   56,242   66,347   96,527 

Income before income taxes

  203,507   188,828   462,561   399,601 

Income tax provision

  (11,053)  (42,065)  (70,376)  (89,910)

Net income

 $192,454  $146,763  $392,185  $309,691 
                 
                 

Basic net income per common share

 $1.89  $1.33  $3.81  $2.79 

Weighted average basic shares outstanding

  102,025   110,118   102,818   111,151 
                 
                 

Diluted net income per common share

 $1.89  $1.33  $3.81  $2.78 

Weighted average diluted shares outstanding

  102,071   110,259   102,867   111,303 

 

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)

 

2023

  

2022

  

2023

  

2022

 

Net income

 $192,454  $146,763  $392,185  $309,691 

Other comprehensive income (loss), net of tax:

                

Fair value adjustments to available-for-sale securities

  112   (619)  586   (803)

Foreign currency translation adjustments

  196      200    

Comprehensive income

 $192,762  $146,144  $392,971  $308,888 

 

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, 2023

  102,816,110  $1,028  $305,152  $1,285,827  $(1,382) $1,590,625 

Net income

           199,731      199,731 

Comprehensive income, net of tax

              474   474 

Foreign currency translation adjustments

              4   4 

Stock options exercised

  32,000      315         315 

Release of restricted stock units, net of tax

  45,942   1   (1,926)        (1,925)

Release of performance stock units, net of tax

  318,878   3   (12,777)        (12,774)

Shares repurchased and retired

  (1,726,308)  (17)  (106,994)        (107,011)

Dividends declared ($0.16 per share)

           (16,289)     (16,289)

Share-based compensation costs

        7,819         7,819 

Balances, March 31, 2023

  101,486,622   1,015   191,589   1,469,269   (904)  1,660,969 

Net income

           192,454      192,454 

Comprehensive income, net of tax

              112   112 

Foreign currency translation adjustments

              196   196 

Release of restricted stock units, net of tax

  17,871      (63)        (63)

Shares repurchased and retired

  (1,492,451)  (15)  (101,001)        (101,016)

Dividends declared ($0.16 per share)

           (16,041)     (16,041)

Share-based compensation costs

        12,198         12,198 

Balances, June 30, 2023

  100,012,042  $1,000  $102,723  $1,645,682  $(596) $1,748,809 

 

 

                  

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 

 

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)

 

2023

   

2022

 

Cash Flows from Operating Activities

               

Net income

  $ 392,185     $ 309,691  

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

               

Depreciation and amortization

    123,780       129,235  

Amortization of debt financing costs and discounts on debt

    3,944       4,258  

Non-cash operating lease expense

    40,256       28,736  

Non-cash expected credit loss (income) on note receivable

    (34,371 )      

Share-based compensation expense

    20,017       22,833  

Deferred income taxes

    (10,015 )     18,798  

Non-cash impairment of assets

    4,537        

Gain on sale of assets

          (12,800 )

Loss on early extinguishments and modifications of debt

          19,809  

Other operating activities

    205       (99 )

Changes in operating assets and liabilities:

               

Accounts receivable, net

    4,739       2,724  

Inventories

    765       (1,001 )

Prepaid expenses and other current assets

    (2,220 )     496  

Income taxes (receivable) payable, net

    (6,266 )     (5,369 )

Other assets, net

    223       3,649  

Accounts payable and accrued liabilities

    (38,185 )     (40,098 )

Operating lease liabilities

    (40,256 )     (28,736 )

Other liabilities

    3,937       4,086  

Net cash provided by operating activities

    463,275       456,212  

Cash Flows from Investing Activities

               

Capital expenditures

    (171,386 )     (98,699 )

Payments received on note receivable

    49,720        

Proceeds received from disposition of assets

          21,350  

Other investing activities

    (2,255 )      

Net cash used in investing activities

    (123,921 )     (77,349 )

Cash Flows from Financing Activities

               

Borrowings under credit facilities

    753,200       1,207,000  

Payments under credit facilities

    (862,500 )     (1,025,897 )

Retirements of senior notes

          (300,000 )

Premium fees

          (12,939 )

Debt financing costs

          (13,680 )

Share-based compensation activities

    (14,447 )     (9,033 )

Shares repurchased and retired

    (206,356 )     (299,773 )

Dividends paid

    (31,764 )     (16,480 )

Other financing activities

    (87 )     (1,170 )

Net cash used in financing activities

    (361,954 )     (471,972 )

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

    (63 )      

Change in cash, cash equivalents and restricted cash

    (22,663 )     (93,109 )

Cash, cash equivalents and restricted cash, beginning of period

    295,065       357,128  

Cash, cash equivalents and restricted cash, end of period

  $ 272,402     $ 264,019  

Supplemental Disclosure of Cash Flow Information

               

Cash paid for interest, net of amounts capitalized

  $ 84,121     $ 70,697  

Cash received for interest

    8,513        

Cash paid for income taxes

    86,208       76,128  

Supplemental Schedule of Non-cash Investing and Financing Activities

               

Payables incurred for capital expenditures

  $ 7,693     $ 3,987  

Dividends declared not yet paid

    16,041       16,026  

Expected credit loss (income) on note receivable

    (34,371 )      

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, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

 

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, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. In addition, we own and operate Boyd Interactive, a business-to-business ("B2B") and business-to-consumer ("B2C") online casino gaming business. We also manage the Sky River Casino located in California under a management agreement with Wilton Rancheria.

 

 

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, 2022, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 24, 2023.

 

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.

 

Recasted Condensed Consolidated Statements of Operations (Unaudited)

In first quarter 2023, the Company separated out online revenue and management fee revenue from other revenue. This change was a result of increased contributions to the Company in these two areas and related update to our reportable segments discussed in Note 10, Segment Information. Revenue for the three and six months ended June 30, 2022 has been recast to conform to this presentation. The disaggregation of online revenue and management fee revenue from other revenue did not impact the Company's total revenues, net income or earnings per share as previously reported for the three and six months ended June 30, 2022.

 

Additionally, during the first quarter 2023, the Company evaluated its reportable segments and changed them to the following four reportable segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest & South; and (iv) Online. To reconcile to the condensed consolidated information, the Company has aggregated nonreportable operating segments into a Managed & Other category. These changes reflect the growth of the Company beyond its traditional wholly owned gaming entertainment properties and the increasing importance to the Company of other growth sources. Segment information for the three and six months ended June 30, 2022 has been recast to conform to this presentation. See Note 10, Segment Information, for additional information.

 

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; (ii) amounts restricted by regulation for the value in players' online casino gaming accounts; and (iii) 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 values of these instruments approximate their fair values 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)

 

2023

  

2022

  

2022

  

2021

 

Cash and cash equivalents

 $260,787  $283,472  $250,195  $344,557 

Restricted cash

  11,615   11,593   13,824   12,571 

Total cash, cash equivalents and restricted cash

 $272,402  $295,065  $264,019  $357,128 

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

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. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. 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. The incremental borrowing rate is determined based on the weighted average incremental borrowing rate at the lease commencement or modification date that is commensurate with the rate of interest in a similar economic environment that we would have to pay to borrow an amount equal to our future lease payments on a collateralized basis over a similar term, including reasonably certain options to extend or terminate. The determination of the incremental borrowing rate could materially impact our lease liabilities. Operating right-of-use ("ROU") assets and finance lease assets are generally 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. Lease and non-lease components are accounted for separately.

 

Revenue Recognition

The Company’s revenue contracts with customers consist of gaming wagers (including both those made at our casino properties and online B2C wagers), hotel room sales, food & beverage offerings and other amenity transactions. See Collaborative Arrangements below for further discussion of revenues earned under our online collaborative arrangements. 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.

 

We have established player loyalty programs to encourage repeat business from frequent and active slot machine customers and other patrons. Members earn points based on gaming activity and such points can be redeemed for complimentary slot play, food & beverage, hotel rooms and other free goods and services.

 

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 player loyalty 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 player loyalty 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 5, Accrued Liabilities, for the balance outstanding related to player loyalty programs.

 

The Company collects advance 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 5, 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 5, Accrued Liabilities, for the balance related to outstanding chips.

 

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). 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)

 

2023

  

2022

  

2023

  

2022

 

Food & beverage

 $29,336  $29,330  $57,595  $56,908 

Room

  15,346   16,706   30,494   31,789 

Other

  2,061   2,334   3,937   4,347 

 

9

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

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 in the condensed consolidated statements of operations as a gaming expense for gaming entertainment properties and online expense for Boyd Interactive operations. Gaming taxes recorded as gaming expense totaled approximately $129.7 million and $135.1 million for the three months ended June 30, 2023 and 2022, respectively, and were $259.8 million and $266.9 million for the six months ended June 30, 2023 and 2022, respectively. Gaming taxes recorded as online expense, excluding taxes paid under collaborative arrangements (see Collaborative Arrangements below for further discussion), totaled $1.2 million and $1.8 million for the three and six months ended June 30, 2023, respectively. There was not any gaming tax recorded as online expense for the three and six months ended June 30, 2022.

 

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.

 

In performing our second quarter valuation allowance analysis, we determined that the positive evidence in favor of releasing a portion of our valuation allowance for certain state jurisdictions, outweighed the negative evidence. We utilize a rolling twelve quarters of pre-tax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters ended June 30, 2023. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during the three months ended June 30, 2023 provided positive evidence that supported the release of the valuation allowance against a significant portion of our state deferred tax assets. As such, we concluded that it was more likely than not that the benefit from our deferred tax assets would be realized. As a result, during the second quarter, we released $35.9 million of valuation allowance on our state income tax net operating loss carryforwards and other deferred tax assets.

 

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. Accrued interest and penalties are included in other long-term tax liabilities on the condensed consolidated balance sheets.

 

Collaborative Arrangements

We hold a five percent equity ownership in and have a strategic partnership with FanDuel Group ("FanDuel"), the nation's leading sports-betting operator, to pursue sports-betting opportunities across the country, both at our properties and online. Subject to state law and regulatory approvals, we have established a presence in the sports wagering industry, both at our properties and online, by leveraging FanDuel's technology and related services. We offer online sports wagering under the FanDuel brand or under market access agreements with other companies in Illinois, Indiana, Iowa, Kansas, Louisiana, Ohio and Pennsylvania. We also operate sportsbooks under the FanDuel brand at one of our Downtown Las Vegas properties, our properties in Mississippi and all of the properties in the states noted above where we offer online sports wagering. In addition, we offer online casino gaming in Pennsylvania through our partnership with FanDuel. Under our online collaborative arrangements, we receive a revenue share from the third-party operator based on actual wagering wins and losses. The activities related to these collaborative arrangements are recorded in online revenue and online expense on the condensed consolidated statements of operations. The activities related to sportsbooks at our properties are recorded in gaming revenue and gaming expense.

 

Under certain of our collaborative arrangements, we are the primary obligor and are responsible for paying gaming taxes and other license payments owed as the gaming licensee for the related online gaming activities. We are reimbursed for these taxes and other payments by the third-party operators. We report these gaming taxes and other expenses paid as online expense and the reimbursements we receive as online revenues. These taxes and other payments totaled approximately $63.3 million and $48.0 million for the three months ended June 30, 2023 and 2022, respectively, and $159.3 million and $89.9 million for the six months ended June 30, 2023 and 2022, respectively.

 

Currency Translation

The Company translates the financial statements of its foreign subsidiary that are not denominated in U.S. dollars. Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. If a material income statement event occurs, the transaction would be translated at the exchange rate in effect on the date of occurrence. Translation adjustments resulting from this process are recorded in other comprehensive income (loss). Gains or losses from foreign currency transaction remeasurements are recorded as other non-operating income (expense).

 

 

10

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

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 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 condensed consolidated financial statements.

 

NOTE 2.    ACQUISITION

Pala Interactive

On November 1, 2022, Boyd Interactive Gaming Inc. ("Boyd Interactive Inc."), a wholly owned subsidiary of the Company, completed its previously announced acquisition of Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Interactive Canada Inc. ("Pala Canada"), pursuant to a Purchase Agreement and Plan of Merger (the "Merger Agreement"), entered into on March 28, 2022, by and among Boyd Interactive Inc., Boyd Phoenix Acquisition, LLC ("Merger Sub"), a wholly owned subsidiary of Boyd Interactive Inc., Boyd Phoenix Canada Inc., a wholly owned subsidiary of Boyd Gaming, Pala Interactive, Pala Canada Holdings, LLC and Shareholder Representative Services LLC as representative of the holders of the membership interests of Pala Interactive. Pursuant to the Merger Agreement, Merger Sub merged with and into Pala Interactive (the "Merger"), with Pala Interactive surviving the Merger. Pala Interactive is now a wholly owned subsidiary of Boyd Interactive Inc.

 

Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a B2B and B2C basis in regulated markets across the United States and Canada. We view this acquisition as an important step forward in our online growth strategy as it provides us with the talent and technology to begin building our regional online casino business. While online casinos are now limited to just a few states, over the long term, we believe there is growth and additional profit potential for our Company from online gaming. By owning and operating an online gaming business, we are able to leverage our nationwide portfolio and extensive customer database to grow in the online casino space. The acquired company is aggregated into our Online segment (See Note 10, Segment Information).

 

Consideration Transferred

The fair value of the consideration transferred on the date of the Merger included the purchase price of the net assets transferred. The total gross cash consideration was $175.2 million (with $7.3 million of cash acquired, for total cash paid for acquisitions, net of cash received of $167.9 million).

 

Status of Purchase Price Allocation

The Company followed the acquisition method of accounting pursuant to FASB Accounting Standards Codification Topic 805 ("ASC 805"). For purposes of these condensed consolidated financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as determined by management with the assistance from third-party specialists. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company has recognized the assets acquired and liabilities assumed in the acquisition based on fair value estimates as of the date of the Merger. In second quarter 2023, the Company finalized its determination of the fair value of the intangible assets acquired, along with the related allocation of goodwill. There was no change in the fair value of the intangible assets acquired or the related allocation of goodwill from the preliminary values included in the consolidated financial statements at December 31, 2022, to the final fair value determination included in the condensed consolidated financial statements at  June 30, 2023

 

The following table summarizes the purchase price allocation as of June 30, 2023 and December 31, 2022:

 

(In thousands)

 

As Recorded

 

Current assets

 $10,456 

Property and equipment

  445 

Other assets

  740 

Intangible assets

  77,000 

Total acquired assets

  88,641 
     

Current liabilities

  4,462 

Other liabilities

  3,007 

Total liabilities assumed

  7,469 

Net identifiable assets acquired

  81,172 

Goodwill

  94,037 

Net assets acquired

 $175,209 

 

11

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

The following table summarizes the values assigned to acquired property and equipment and estimated useful lives:

 

  

Useful Lives

     

(In thousands)

 

(in years)

  

As Recorded

 

Buildings and improvements

 5  $22 

Furniture and equipment

 2 - 5   423 

Property and equipment acquired

     $445 

 

The following table summarizes the values assigned to acquired intangible assets and weighted average useful lives of definite-lived intangible assets:

 

  

Useful Lives

     

(In thousands)

 

(in years)

  

As Recorded

 

Developed technology

 10  $36,000 

B2B relationships

 7 - 10   28,000 

B2C relationships

 12   13,000 

Total intangible assets acquired

     $77,000 

 

The goodwill recognized is the excess of the purchase price over the values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to reporting units included in the Online reportable segment. All of the goodwill, except $7.8 million allocated to Pala Canada, is expected to be deductible for income tax purposes.

 

The Company expensed acquisition related costs of less than $0.1 million and $0.5 million for the three months ended June 30, 2023 and 2022, respectively, and $0.1 million and $2.3 million for the six months ended June 30, 2023 and 2022, respectively. These costs are included in project development, preopening and writedowns on the condensed consolidated statements of operations.

 

The revenue and earnings from the Merger are not material for the period subsequent to acquisition through December 31, 2022. The pro-forma revenue and earnings from the Merger assuming all impacts as if it had been completed on January 1, 2022 are not material through December 31, 2022.

 

NOTE 3.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2023

  

2022

 

Land

 $333,899  $334,368 

Buildings and improvements

  3,195,184   3,172,676 

Furniture and equipment

  1,794,152   1,707,212 

Riverboats and barges

  241,966   241,898 

Construction in progress

  137,981   87,612 

Total property and equipment

  5,703,182   5,543,766 

Less accumulated depreciation

  (3,251,326)  (3,149,530)

Property and equipment, net

 $2,451,856  $2,394,236 

 

Depreciation expense is as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

 

Depreciation expense

 $58,066  $64,953  $115,465  $125,628 

   

12

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

 

NOTE 4.    GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

 

  

June 30, 2023

 
  

Weighted

                     
  

Useful Life

  

Gross

      

Accumulated

  

Effect of Foreign

     
  

Remaining

  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Intangible

 

(In thousands)

 

(in years)

  

Value

  

Amortization

  

Losses

  

Exchange

  

Assets, Net

 

Amortizing intangibles

                        

Customer relationships

  0.6  $35,050  $(34,540) $  $  $510 

Host agreements

  9.9   58,000   (19,656)        38,344 

Development agreement

  6.1   21,373   (2,671)        18,702 

Developed technology

  9.3   38,081   (2,469)     228   35,840 

B2B relationships

  6.6   28,000   (2,609)     55   25,446 

B2C relationships

  11.3   13,000   (722)        12,278 
       193,504   (62,667)     283   131,120 
                         

Indefinite lived intangible assets

                        

Trademarks

 

Indefinite

   204,000      (36,375)     167,625 

Gaming license rights

 

Indefinite

   1,378,081   (33,960)  (222,174)     1,121,947 
       1,582,081   (33,960)  (258,549)     1,289,572 

Balances, June 30, 2023

     $1,775,585  $(96,627) $(258,549) $283  $1,420,692 

 

  

December 31, 2022

 
  

Weighted

                     
  

Useful Life

  

Gross

      

Accumulated

  

Effect of Foreign

     
  

Remaining

  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Intangible

 

(In thousands)

 

(in years)

  

Value

  

Amortization

  

Losses

  

Exchange

  

Assets, Net

 

Amortizing intangibles

                        

Customer relationships

  0.6  $63,050  $(62,070) $  $  $980 

Host agreements

  10.4   58,000   (17,722)        40,278 

Development agreement

  6.6   21,373   (1,145)        20,228 

Developed technology

  9.8   36,445   (600)     53   35,898 

B2B relationships

  7.0   28,000   (652)     12   27,360 

B2C relationships

  11.8   13,000   (181)        12,819 
       219,868   (82,370)     65   137,563 
                         

Indefinite lived intangible assets

                        

Trademarks

 

Indefinite

   204,000      (36,375)     167,625 

Gaming license rights

 

Indefinite

   1,378,081   (33,960)  (222,174)     1,121,947 
       1,582,081   (33,960)  (258,549)     1,289,572 

Balances, December 31, 2022

     $1,801,949  $(116,330) $(258,549) $65  $1,427,135 

 

The following table presents the future amortization expense for our amortizing intangible assets as of  June 30, 2023:

 

(In thousands)

 

Customer Relationships

  

Host Agreements

  

Development Agreement

  

Developed Technology

  

B2B Relationships

  

B2C Relationships

  

Total

 

For the year ending December 31,

                            

2023 (excluding six months ended June 30, 2023)

 $470  $1,933  $1,527  $2,319  $2,000  $542  $8,791 

2024

  40   3,867   3,053   3,986   3,914   1,083   15,943 

2025

     3,867   3,053   3,986   3,914   1,083   15,903 

2026

     3,867   3,053   3,986   3,914   1,083   15,903 

2027

     3,867   3,053   3,985   3,914   1,083   15,902 

Thereafter

     20,943   4,963   17,578   7,790   7,404   58,678 

Total future amortization

 $510  $38,344  $18,702  $35,840  $25,446  $12,278  $131,120 

 

 

13

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

Goodwill consists of the following:

 

  June 30, 2023 
              

Effect of

     
  

Gross

      

Accumulated

  

Foreign

     
  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Goodwill,

 

(In thousands)

 

Value

  

Amortization

  

Losses

  

Exchange

  

Net

 

Goodwill, net by Segment

                    

Las Vegas Locals

 $593,567  $  $(188,079) $  $405,488 

Downtown Las Vegas

  6,997   (6,134)        863 

Midwest & South

  636,269      (107,470)     528,799 

Online

  94,037         228   94,265 

Managed & Other

  30,529      (30,529)      

Balances, June 30, 2023

 $1,361,399  $(6,134) $(326,078) $228  $1,029,415 

 

 

  

December 31, 2022

 
              

Effect of

     
  

Gross

      

Accumulated

  

Foreign

     
  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Goodwill,

 

(In thousands)

 

Value

  

Amortization

  

Losses

  

Exchange

  

Net

 

Goodwill, net by Segment

                    

Las Vegas Locals

 $593,567  $  $(188,079) $  $405,488 

Downtown Las Vegas

  6,997   (6,134)        863 

Midwest & South

  636,269      (107,470)     528,799 

Online

  94,037         20   94,057 

Managed & Other

  30,529      (25,992)     4,537 

Balances, December 31, 2022

 $1,361,399  $(6,134) $(321,541) $20  $1,033,744 

 

Goodwill as of December 31, 2022 has been recast to reflect changes made in first quarter 2023 to the Company's segments. Goodwill in total as of December 31, 2022 did not change. See additional discussion in Note 10, Segment Information.

 

During the six months ended June 30, 2023, we recorded goodwill impairment charges of $4.5 million related to Managed & Other, our aggregated other nonreportable operating segments category. These noncash impairment charges are recorded in impairment of assets on the condensed consolidated statements of operations.

 

NOTE 5.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2023

  

2022

 

Payroll and related

 $64,686  $73,619 

Interest

  17,480   17,864 

Gaming

  74,338   77,638 

Player loyalty programs

  24,104   25,852 

Advance deposits

  17,056   20,792 

Outstanding chips

  7,712   7,704 

Dividends payable

  16,041   15,476 

Operating leases

  92,929   88,776 

Other

  91,062   84,192 

Total accrued liabilities

 $405,408  $411,913 

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

NOTE 6.    LONG-TERM DEBT

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

 

  

June 30, 2023

 
  

Interest

          

Unamortized

     
  

Rates at

          

Origination

     
  

June 30,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2023

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Credit facility

  6.652% $1,078,500  $  $(15,572) $1,062,928 

4.750% senior notes due 2027

  4.750%  1,000,000      (8,766)  991,234 

4.750% senior notes due 2031

  4.750%  900,000      (10,785)  889,215 

Other

  5.208%  589         589 

Total long-term debt

      2,979,089      (35,123)  2,943,966 

Less current maturities

      44,275         44,275 

Long-term debt, net

     $2,934,814  $  $(35,123) $2,899,691 

 

  

December 31, 2022

 
  

Interest

          

Unamortized

     
  Rates at          Origination     
  

December 31,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2022

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Credit facility

 6.166% $1,187,800  $  $(17,865) $1,169,935 

4.750% senior notes due 2027

 4.750%  1,000,000      (9,740)  990,260 

4.750% senior notes due 2031

 4.750%  900,000      (11,460)  888,540 

Other

 5.208%  674         674 

Total long-term debt

     3,088,474      (39,065)  3,049,409 

Less current maturities

     44,275         44,275 

Long-term debt, net

    $3,044,199  $  $(39,065) $3,005,134 

  

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

 

  

June 30,

  

December 31,

 

(In thousands)

 

2023

  

2022

 

Revolving credit facility

 $200,000  $285,000 

Term A loan

  825,000   847,000 

Swing loan

  53,500   55,800 

Total outstanding principal amounts

 $1,078,500  $1,187,800 

 

With a total revolving credit commitment of $1,450.0 million available under the Credit Facility, $200.0 million and $53.5 million in borrowings outstanding on the Revolving Credit Facility and the Swing Loan, respectively, and $13.8 million allocated to support various letters of credit, there was a remaining contractual availability under the Credit Facility of $1,182.7 million as of June 30, 2023

 

Early Extinguishments and Modifications of Debt

During the three and six months ended June 30, 2022, the Company incurred $16.5 million in loss on early extinguishments and modifications of debt due to the redemption of $300.0 million of our 8.625% senior notes due 2025 ("8.625% Senior Notes"), which was accounted for as a debt extinguishment. The $16.5 million incurred is comprised of $12.9 million related to premium fees paid and $3.6 million related to the write-off of unamortized deferred finance charges. In addition, during the six months ended June 30, 2022, the Company incurred $3.3 million in loss on early extinguishments and modifications of debt as a result of entering into a new credit agreement (the "Credit Facility") that replaced the then existing credit agreement. The $3.3 million incurred related to the write-off of unamortized deferred finance charges associated with the portion accounted for as a debt extinguishment.

 

Covenant Compliance

As of  June 30, 2023, we were in compliance with the financial covenants of our debt instruments.

 

   

15

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

 

NOTE 7.    COMMITMENTS AND CONTINGENCIES

Wilton Rancheria Agreements
In 2012, the Company entered into a development agreement and a management agreement with Wilton Rancheria. The development agreement obligated us to fund certain pre-development costs to assist Wilton Rancheria in its development and oversight of the gaming facility construction. The pre-development costs financed by us are to be repaid under the terms of a note receivable with Wilton Rancheria bearing interest at 12.5% with payment timing and the payment amount subject to an excess cash flow waterfall payment prioritization and maintenance of a certain leverage ratio, among other restrictions under Wilton Rancheria’s third-party credit agreement that provided funding for the construction project. Given the significant barriers of the project, a majority of the advances made during the 10-year period were historically reserved in full when advanced. The Sky River Casino opened on August 15, 2022 and after generating cash flows from operations, we updated our evaluation of expected losses on the note receivable which resulted in a partial release of the allowance during fourth quarter 2022. The Wilton Rancheria amended their third-party credit agreement in March 2023 and such amendment effectively allowed Sky River Casino to begin making previously disallowed distributions, under the excess cash flow waterfall. Given the amendment in the first quarter, the Company updated its evaluation of its expected losses on the note receivable. As the amendment allowed for quarterly payments to begin and given the sustained operating strength of the recently opened property, the Company concluded it expects to receive all payments due under the note receivable. As such, the Company removed the remaining allowance on the note receivable in first quarter 2023, which represented a reserve on both the development advances and interest on the note. The allowance reduction is thus allocated accordingly and $20.1 million is recorded in project development, preopening and writedowns and $14.3 million in interest income, both reflected in the condensed consolidated statement of operations for the  six months ended June 30, 2023. The Company has received $49.7 million in principal payments and $8.5 million in interest due under the note receivable during the six months ended June 30, 2023 and as of June 30, 2023, the principal and interest outstanding on the note receivable total  $66.3 million. Separately, the management agreement provides for us to manage the gaming facility upon opening for a period of seven years and receive a monthly management fee for our services based on monthly performance of the gaming facility. The management fee of $17.4 million and  $37.5 million for our management services for the three and six months ended June 30, 2023, respectively, is paid monthly and recorded in management fee revenue on the condensed consolidated statement of operations.
 
Commitments
As of June 30, 2023, other than the changes related to agreements with Wilton Rancheria as discussed above, there have been no material changes to our commitments described under Note 9, Commitments and Contingencies, in our Annual Report on Form  10-K for the year ended December 31, 2022, as filed with the SEC on February 24, 2023.
 
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 effect on our business, financial position, results of operations or cash flows.
 
 

NOTE 8.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase Program
On October 21, 2021, our Board of Directors authorized a share repurchase program of $300.0 million (the "Share Repurchase Program"). In addition, our Board of Directors authorized increases to the Share Repurchase Program of  $500.0 million on June 1, 2022, and $500.0 million on May 4, 2023. As of  June 30, 2023,  $532.6 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)

 

2023

  

2022

  

2023

  

2022

 

Shares repurchased (2)

  1,492   3,018   3,219   5,115 

Total cost, including brokerage fees (3)

 $100,028  $167,984  $206,356  $299,773 

Average repurchase price per share (4)

 $67.02  $55.66  $64.11  $58.61 

 

(1) Shares repurchased reflect repurchases settled during the three and six months ended June 30, 2023 and 2022. These amounts exclude repurchases, if any, traded but not yet settled on or before June 30, 2023 and 2022, respectively.

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

(3) Costs exclude 1% excise tax on corporate stock buybacks that was enacted under the Inflation Reduction Act of 2022 and became effective January 1, 2023.

(4) Amounts in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on unrounded numbers and excludes the 1% excise tax.

 

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 

December 8, 2022

 

December 19, 2022

 

January 15, 2023

  0.15 

February 14, 2023

 

March 15, 2023

 

April 15, 2023

  0.16 

May 4, 2023

 

June 15, 2023

 

July 15, 2023

  0.16 

  

16

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

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)

 

2023

  

2022

  

2023

  

2022

 

Gaming

 $307  $292  $528  $521 

Food & beverage

  59   56   101   100 

Room

  28   26   48   47 

Selling, general and administrative

  1,563   1,487   2,683   2,651 

Corporate expense

  10,241   12,239   16,657   19,514 

Total share-based compensation expense

 $12,198  $14,100  $20,017  $22,833 

 

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 2019 and 2018 fully vested during first quarter 2023 and 2022, respectively. Common shares under the 2019 and 2018 grants were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth and Earnings Before Interest, Taxes, Depreciation and Amortization and Rent under master leases ("EBITDAR") growth for the three-year performance period of the 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.

 

The PSU grant awarded in December 2019 resulted in a total of 519,782 shares being issued during first quarter 2023, representing approximately 2.00 shares per PSU. Of the 519,782 shares issued, a total of 200,904 were surrendered by the participants for payroll taxes, resulting in a net issuance of 318,878 shares due to the vesting of the 2019 grant. The actual achievement level under the award metrics equaled the estimated performance as of the year-end 2022; therefore, the vesting of the PSUs did not impact compensation costs in our 2023 condensed consolidated statement of operations.

 

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.

 

Unamortized Stock Compensation Expense and Recognition Period

As of June 30, 2023, there was approximately $15.5 million, $5.6 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, 2023, the unrecognized share-based compensation costs related to our RSUs, PSUs and career shares are expected to be recognized over approximately 2.2 years, 2.2 years and 3.6 years, respectively.

 

 

NOTE 9.     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.

 

 

17

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

Balances Measured at Fair Value

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

 

  

June 30, 2023

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $260,787  $260,787  $  $ 

Restricted cash

  11,615   11,615       

Investment available for sale

  13,215         13,215 

 

  

December 31, 2022

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $283,472  $283,472  $  $ 

Restricted cash

  11,593   11,593       

Investment available for sale

  13,670         13,670 

 

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 as of  June 30, 2023 and December 31, 2022.

 

Investment Available for Sale

We have an investment in a single municipal bond issuance of $17.1 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale 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 estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities and degrees of risk and a discounted cash flows analysis as of  June 30, 2023 and December 31, 2022. 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, 2023 and  December 31, 2022 is a discount rate of 12.3% and 12.4%, 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 and in the condensed consolidated statement of other comprehensive income (loss). At both  June 30, 2023 and December 31, 2022, $0.7 million 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, 2023 and December 31, 2022, $12.5 million and $13.0 million, respectively, is included in other assets, net on the condensed consolidated balance sheets. The discount associated with this investment of $2.1 million and $2.2 million as of  June 30, 2023 and December 31, 2022, respectively, 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.

 

The following table summarizes the changes in fair value of the Company's Level 3 investment available for sale asset:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

 

Balance at beginning of reporting period

 $14,348  $15,612  $13,670  $15,822 

Total gains (losses) (realized or unrealized):

                

Included in interest income

  44   42   87   84 

Included in other comprehensive income (loss)

  (497)  (903)  138   (1,155)

Purchases, sales, issuances and settlements:

                

Settlements

  (680)  (635)  (680)  (635)

Balance at end of reporting period

 $13,215  $14,116  $13,215  $14,116 

 

 

18

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

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.

 

The fair value of indefinite-lived intangible assets, classified in the fair value hierarchy as Level 3, is utilized in performing the Company's impairment analyses.

 

Balances Disclosed at Fair Value

The following tables provide the fair value measurement information about our note receivable and obligation under assessment agreements:

 

  

June 30, 2023

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Asset

             

Note receivable

 $66,335  $66,335  $65,893 

Level 3

Liabilities

             

Obligation under assessment arrangements

  21,261   18,546   24,739 

Level 3

   

  

December 31, 2022

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Asset

             

Note receivable

 $118,162  $83,791  $82,338 

Level 3

Liabilities

             

Obligation under assessment arrangements

  22,293   19,304   25,738 

Level 3

 

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

 

  

June 30, 2023

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Credit facility

 $1,078,500  $1,062,928  $1,072,313 

Level 2

4.750% senior notes due 2027

  1,000,000   991,234   945,000 

Level 1

4.750% senior notes due 2031

  900,000   889,215   802,125 

Level 1

Other

  589   589   589 

Level 3

Total debt

 $2,979,089  $2,943,966  $2,820,027  

 

  

December 31, 2022

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Credit facility

 $1,187,800  $1,169,935  $1,183,565 

Level 2

4.750% senior notes due 2027

  1,000,000   990,260   928,750 

Level 1

4.750% senior notes due 2031

  900,000   888,540   784,125 

Level 1

Other

  674   674   674 

Level 3

Total debt

 $3,088,474  $3,049,409  $2,897,114  

 

The estimated fair values of our note receivable and our obligation under assessment arrangements are based on a discounted cash flow approach after giving consideration to the changes in market rates of interest, creditworthiness of both parties and credit spread. The estimated fair value of our Credit Facility is based on a relative value analysis performed on or about  June 30, 2023 and December 31, 2022. The estimated fair values of our senior notes are based on quoted market prices as of  June 30, 2023 and December 31, 2022. The other debt is fixed-rate debt consisting of finance leases with various maturity dates from 2024 to 2025. 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, 2023 and 2022.

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

 

NOTE 10.    SEGMENT INFORMATION

During the first quarter of 2023, the Company evaluated its reportable segments and changed them from three reportable segments consisting of: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest & South, to the following four reportable segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest & South; and (iv) Online, (collectively "Reportable Segments"). This change reflects the growth of the Company beyond its traditional wholly owned gaming entertainment properties and the increasing importance to the Company of other growth sources. The Online segment includes the operating results of our online gaming operations through collaborative arrangements with third parties throughout the United States and the operations from our recent acquisition of Pala Interactive and Pala Canada (individually and collectively rebranded, "Boyd Interactive") on November 1, 2022, and operating results were previously included with the Midwest & South segment. To reconcile Reportable Segments information to the condensed consolidated information, the Company has aggregated nonreportable operating segments into a Managed & Other category. The Managed & Other category includes management fees earned under our management contract with Wilton Rancheria for the management of Sky River Casino in northern California and the operating results of Lattner Entertainment Group Illinois, LLC, our Illinois distributed gaming operator. These nonreportable operating segments were previously aggregated with our Midwest & South segment. The table below lists the Reportable Segment classification of each of our gaming entertainment properties that were aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate and their management and reporting structure.

 

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

 

East Peoria, Illinois

Belterra Casino Resort (2)

 

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 (2)

 

Kansas City, Missouri

Ameristar Casino * Resort * Spa St. Charles (2)

 

St. Charles, Missouri

Belterra Park (2)

 

Cincinnati, Ohio

Valley Forge Casino Resort

 

King of Prussia, Pennsylvania

 

(1) Due to the current levels of demand in the market, Eastside Cannery remains closed since it was closed on March 18, 2020, in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus.

(2) 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 profitability based on Adjusted EBITDAR, which represents 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 Adjusted EBITDAR for each of the properties included in our Las Vegas Locals, Downtown Las Vegas and Midwest & South segments and Adjusted EBITDAR related to the online operations in our Online segment. 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. 

 

20

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

EBITDAR is a commonly used measure of performance in our industry that we believe, when considered with measures calculated in accordance with GAAP, facilitates comparisons between us and our competitors and provides our investors a more complete understanding of our operating results before the impact of investing transactions, financing transactions and income taxes. 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 and our Managed & Other category to reconcile to total revenues:

 

  

Three Months Ended June 30, 2023

 
      

Food &

          

Management

         
  

Gaming

  

Beverage

  

Room

  

Online

  

Fee

  

Other

  

Total

 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                            

Las Vegas Locals

 $171,986  $22,219  $23,295  $  $  $13,440  $230,940 

Downtown Las Vegas

  34,432   10,142   5,636         2,781   52,991 

Midwest & South

  443,440   38,005   20,830         16,571   518,846 

Online

           85,002         85,002 

Managed & Other

  10,871            17,446   854   29,171 

Total Revenues

 $660,729  $70,366  $49,761  $85,002  $17,446  $33,646  $916,950 

 

  

Three Months Ended June 30, 2022 (1)

 
      

Food &

          

Management

         
  

Gaming

  

Beverage

  

Room

  

Online

  

Fee

  

Other

  

Total

 

(In thousands)

 

Revenue

  

Revenue

  

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

  460,879   36,926   20,811         16,321   534,937 

Online

           56,774         56,774 

Managed & Other

  12,237               142   12,379 

Total Revenues

 $684,925  $70,299  $49,904  $56,774  $  $32,548  $894,450 

 

  

Six Months Ended June 30, 2023

 
      

Food &

          

Management

         
  

Gaming

  

Beverage

  

Room

  

Online

  

Fee

  

Other

  

Total

 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                            

Las Vegas Locals

 $348,307  $44,982  $48,676  $  $  $29,245  $471,210 

Downtown Las Vegas

  70,849   20,639   12,485         5,575   109,548 

Midwest & South

  883,525   76,329   38,665         32,500   1,031,019 

Online

           207,865         207,865 

Managed & Other

  22,356            37,476   1,442   61,274 

Total Revenues

 $1,325,037  $141,950  $99,826  $207,865  $37,476  $68,762  $1,880,916 

 

  

Six Months Ended June 30, 2022 (1)

 
      

Food &

          

Management

         
  

Gaming

  

Beverage

  

Room

  

Online

  

Fee

  

Other

  

Total

 

(In thousands)

 

Revenue

  

Revenue

  

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

  911,393   70,623   38,167         31,815   1,051,998 

Online

           111,850         111,850 

Managed & Other

  23,644               295   23,939 

Total Revenues

 $1,352,879  $134,042  $92,313  $111,850  $  $64,109  $1,755,193 

 

(1) Revenues for the three and six months ended June 30, 2022 have been recast to reflect the breakout of online revenue and management fee revenue from other revenue and the segment changes made during first quarter 2023.

   

21

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

The following table reconciles, for the periods indicated, our Reportable Segments and our Managed & Other category Adjusted EBITDAR to net income, as reported in our accompanying condensed consolidated statements of operations with Adjusted EBITDAR for the three and six months ended June 30, 2022 recast to reflect the segment changes made during first quarter 2023:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2023

  

a2022 (1)

  

2023

  

a2022 (1)

 

Adjusted EBITDAR

                

Las Vegas Locals

 $118,395  $125,334  $244,555  $244,029 

Downtown Las Vegas

  19,652   22,123   42,019   40,512 

Midwest & South

  201,833   218,859   400,517   431,059 

Online

  13,400   7,678   34,023   16,566 

Managed & Other

  19,546   2,512   41,097   4,905 

Corporate expense

  (21,464)  (22,633)  (43,703)  (44,362)

Adjusted EBITDAR

  351,362   353,873   718,508   692,709 

Other operating costs and expenses

                

Deferred rent

  177   192   354   384 

Master lease rent expense

  27,099   26,654   53,927   52,960 

Depreciation and amortization

  62,220   66,757   123,780   129,235 

Share-based compensation expense

  12,198   14,100   20,017   22,833 

Project development, preopening and writedowns

  5,201   912   (13,673)  (9,117)

Impairment of assets

        4,537    

Other operating items, net

  438   188   658   286 

Total other operating costs and expenses

  107,333   108,803   189,600   196,581 

Operating income

  244,029   245,070   528,908   496,128 

Other expense (income)

                

Interest income

  (2,715)  (483)  (20,860)  (903)

Interest expense, net of amounts capitalized

  42,715   36,466   86,581   74,124 

Loss on early extinguishments and modifications of debt

     16,509      19,809 

Other, net

  522   3,750   626   3,497 

Total other expense, net

  40,522   56,242   66,347   96,527 

Income before income taxes

  203,507   188,828   462,561   399,601 

Income tax provision

  (11,053)  (42,065)  (70,376)  (89,910)

Net income

 $192,454  $146,763  $392,185  $309,691 

 

(1) Adjusted EBITDAR for the three and six months ended June 30, 2022 has been recast to reflect the segment changes made during first quarter 2023.

 

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

 

Total Reportable Segment Assets

The Company's assets by Reportable Segment and Managed & Other category consisted of the following amounts with assets as of December 31, 2022 recast to reflect the segment changes made during first quarter 2023:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2023

  

2022

 

Assets

        

Las Vegas Locals

 $1,604,868  $1,613,553 

Downtown Las Vegas

  278,520   265,876 

Midwest & South

  3,741,120   3,745,476 

Online

  234,073   226,800 

Managed & Other

  191,818   207,962 

Corporate

  254,082   251,460 

Total Assets

 $6,304,481  $6,311,127 

 

 

 

NOTE 11.    SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after June 30, 2023. 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.

 

 

 

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".

 

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. In addition, we own and operate Boyd Interactive, a business-to-business ("B2B") and business-to-consumer ("B2C") online casino gaming business. We also manage the Sky River Casino located in California under a management agreement with Wilton Rancheria. During the first quarter of 2023, the Company evaluated its reportable segments and changed them from three reportable segments consisting of: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest & South, to the following four reportable segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest & South; and (iv) Online, (collectively "Reportable Segments"). This change reflects the growth of the Company beyond its traditional wholly owned gaming entertainment properties and the increasing importance to the Company of other growth sources. The Online segment includes the operating results of our online gaming operations through collaborative arrangements with third parties throughout the United States and the operations from our recent acquisition of Pala Interactive and Pala Canada (individually and collectively rebranded, "Boyd Interactive") on November 1, 2022, and operating results were previously included with the Midwest & South segment. To reconcile Reportable Segments information to the condensed consolidated information, the Company has aggregated nonreportable operating segments into a Managed & Other category. The Managed & Other category includes management fees earned under our management contract with Wilton Rancheria for the management of Sky River Casino in northern California and the operating results of Lattner Entertainment Group Illinois, LLC, our Illinois distributed gaming operator ("Lattner"). These nonreportable operating segments were previously aggregated with our Midwest & South segment. The table below lists the Reportable Segment classification of each of our gaming entertainment properties that were aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate and their management and reporting structure.

 

     

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

 

East Peoria, Illinois

Belterra Casino Resort (2)

 

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 (2)

 

Kansas City, Missouri

Ameristar Casino * Resort * Spa St. Charles (2)

 

St. Charles, Missouri

Belterra Park (2)

 

Cincinnati, Ohio

Valley Forge Casino Resort

 

King of Prussia, Pennsylvania

 

(1) Due to the current levels of demand in the market, Eastside Cannery remains closed since it was closed on March 18, 2020, in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus.

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

 

We also own 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.

 

 

 

Most of our gaming entertainment properties also include hotel, dining, sportsbook, 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 and the ability to transfer digital funds from the players' cashless wallet "BoydPay", 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, repurchase our debt or equity securities, and pay income taxes and dividends.

 

Our Strategy

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

 

Growing Revenues and Operating Efficiently

We are committed to growing revenues and building loyalty among core customers through targeted marketing investments and a focus on maximizing gaming revenues while operating as efficiently as possible. 

 

Balance Sheet Strength

We are committed to maintaining the strength of our balance sheet and finding opportunities to diversify and increase our 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.

 

Commitment to ESG

We fulfill our commitment to ESG through four core pillars: Environment, People, Communities and Corporate Governance. We are committed to the well-being of our communities and future generations through reducing our carbon footprint and economic contributions, strive to be an employer of choice where every team member is treated with dignity and respect, and conduct business with the highest level of integrity.

 

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, expanding and enhancing online sports wagering and online casino offerings as they are legalized in and around the states we operate today, and asset acquisitions.

 

Maintaining Our Brand

The ability of our team members to deliver great customer service helps distinguish our Company and our brands from our competitors. Our team members are an important reason that our customers continue to choose our properties over the competition across the country. In addition, we have established nationwide branding and a loyalty program. Our players use their "Boyd Rewards" cards to earn and redeem points at nearly all of our properties. The "Boyd Rewards" club, among other benefits, rewards players for their loyalty by entitling them to qualify for promotions, earn rewards toward gaming and nongaming activities and receive benefits such as vacations and luxury gifts.

 

 

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, including digital funds transferred from the players' cashless wallet "BoydPay", 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; and the cost per room, which is a measure of operating margin.

 

RESULTS OF OPERATIONS

Overview

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2023

   

2022

   

2023

   

2022

 

Total revenues

  $ 917.0     $ 894.5     $ 1,880.9     $ 1,755.2  

Operating income

    244.0       245.1       528.9       496.1  

Net income

    192.5       146.8       392.2       309.7  

 

Total Revenues

Total revenues for the three months ended June 30, 2023increased by $22.5 million, or 2.5%, compared to the prior year comparable period, primarily due to an increase in our online revenue of $28.2 million, including an increase of $15.3 million over the prior year comparable period of revenues from reimbursements of gaming taxes and other expenses paid on behalf of our online partners. Total revenues for the six months ended June 30, 2023, increased $125.7 million, or 7.2%, as compared to the prior year comparable period primarily due to an increase in our online revenue of $96.0 million, including an increase of $69.3 million over the prior year comparable period of revenues from reimbursements of gaming taxes and other expenses paid on behalf of our online partners. Online revenues increased year over year due primarily to: (i) the launch of online gaming in Ohio in January 2023; (ii) the increase in revenues from reimbursements of gaming taxes and other expenses, as discussed above; (iii) organic growth in Pennsylvania as the online market continues to mature; and (iv) the acquisition on November 1, 2022, of Pala Interactive, LLC, our online gaming technology company that provides proprietary solutions on both a B2B and B2C basis. Other than our online operations in Pennsylvania, there was not any revenue associated with these new markets and business for the three and six months ended June 30, 2022. Additionally, during the three and six months ended June 30, 2023, we earned $17.4 million and $37.5 million, respectively, in management fees related to our management agreement with Wilton Rancheria. As Sky River Casino opened on August 15, 2022, there was not any revenue associated with this management agreement for the three and six months ended June 30, 2022. Offsetting the increase in online revenue and Sky River Casino management fee income, is a decline of $24.2 million and $27.8 million in gaming revenue for the three and six months ended June 30, 2023, respectively, as compared to prior year comparable periods. The decline in gaming revenue is primarily due to softness in retail play throughout all three of our gaming entertainment property segments as the retail player is generally more sensitive to changes in the economy. In addition, we had a strong prior year comparable period particularly in Las Vegas as Las Vegas benefited from the lifting of mask mandates and COVID restrictions for the first full quarter since the COVID closures in 2020.

 

Operating Income

Operating income remained consistent for the three months ended June 30, 2023, compared to the prior year comparable period. While revenues grew by $22.5 million during the three months ended June 30, 2023, $15.3 million of the revenue growth is due to reimbursements of gaming taxes and other expenses paid on behalf of our online partners that results in zero operating income as an equal amount of the reimbursement is also recorded as expense. Operating income increased $32.8 million, or 6.6%, for the six months ended June 30, 2023, compared to the prior year comparable period, primarily due to a 7.2% growth in revenues, including the $37.5 million in management fees, as discussed above. Operating income was also favorably impacted by a $20.1 million reduction of the allowance on a note receivable with Wilton Rancheria ("Wilton Note") during first quarter 2023 for development advances over the last 10 years as we evaluated the current expected credit losses after an amendment to Wilton's third-party construction loan in March 2023 that allowed for payments to us to begin in March 2023. Operating income was unfavorably impacted by a $4.5 million increase in impairment of assets related to a goodwill impairment in our Managed & Other category during first quarter 2023. The operating income net increase over the prior year comparable period, was offset by a $12.8 million gain on disposition of assets that favorably impacted operating income for the six months ended June 30, 2022 and did not reoccur during the six months ended June 30, 2023.

 

Net Income
Net income  increased  $45.7  million for the three months ended  June 30, 2023 , compared to the prior year comparable period, primarily due  to: (i) a decrease in income tax provision of $31.0 million due primarily to the release of state tax valuation allowances of $35.9 million; (ii) a decrease of $16.5 million in loss on early extinguishments and modifications of debt due to the retirement of the remaining $300.0 million aggregate principal amount of 8.625% Senior Notes due 2025 ("8.625% Senior Notes") during the three months ended June 30, 2022; and  (iii) an increase in interest income of $2.2  million due to interest earned on the Wilton Note during the three months ended  June 30, 2023 . Net income was unfavorably impacted by a $6.2 million increase in interest expense, which was primarily driven by a 110-basis point increase in the weighted average interest rate over the prior year comparable period.
 
Net income  increased  $82.5 million for the six months ended  June 30, 2023 , compared to the prior year comparable period, primarily due  to: (i) the  $32.8 million increase in operating income, as discussed above; (ii) an increase in interest income of $20.0  million due to an adjustment to the expected loss for interest on the Wilton Note and interest earned on the Wilton Note during the six months ended  June 30, 2023 ; (iii) a decrease of $19.8 million in loss on early extinguishments and modifications of debt due to the retirement of the remaining $300.0 million 8.625% Senior Notes and the retirement of term loans under a former credit agreement d uring the six months ended June 30, 2022; and (iv) a decrease in the income tax provision of $19.5 million which was driven by the release of state tax valuation allowances of $35.9 million offset by taxes on the Company's increased operational performance.  Net income was unfavorably impacted by a $12.5 million increase in interest expense, which was primarily driven by a 120-basis point increase in the weighted average interest rate over the prior year comparable period.
  
 
Operating Revenues
We derive the majority of our revenues from our gaming operations, which produced approximately  72% and 77% of revenues for the three months ended  June 30, 2023 and 2022, respectively, and  70% and  77% of revenues for the six months ended June 30, 2023 and 2022, respectively. Online revenues, including reimbursements received from our third-party operators for gaming taxes and other expenses we pay under collaborative arrangements, represent our next most significant revenue source, generating  9% and  6% of revenues for the three months ended  June 30, 2023  and 2022 , respectively, and 11% and 6% of revenues for the six months ended June 30, 2023 and 2022, respectively . Food & beverage revenues, room revenues, management fee revenues and other revenues separately contributed 8% or less of revenues during these periods. 
 
   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2023

   

2022

   

2023

   

2022

 

REVENUES

                               

Gaming

  $ 660.7     $ 684.9     $ 1,325.0     $ 1,352.9  

Food & beverage

    70.4       70.3       141.9       134.0  

Room

    49.8       49.9       99.8       92.3  

Online

    85.0       56.8       207.9       111.9  

Management fee

    17.4             37.5        

Other

    33.7       32.6       68.8       64.1  

Total revenues

  $ 917.0     $ 894.5     $ 1,880.9     $ 1,755.2  
                                 

DEPARTMENTAL OPERATING EXPENSES

                               

Gaming

  $ 250.0     $ 254.5     $ 499.8     $ 504.5  

Food & beverage

    58.6       57.5       118.0       111.4  

Room

    18.6       17.3       35.7       33.3  

Online

    71.4       48.9       173.4       94.9  

Other

    11.0       11.7       22.6       22.6  

Total departmental operating expenses

  $ 409.6     $ 389.9     $ 849.5     $ 766.7  
                                 

MARGINS

                               

Gaming

    62.2 %     62.8 %     62.3 %     62.7 %

Food & beverage

    16.8 %     18.2 %     16.8 %     16.9 %

Room

    62.7 %     65.3 %     64.2 %     63.9 %

Online

    16.0 %     13.9 %     16.6 %     15.2 %

Other

    67.4 %     64.1 %     67.2 %     64.7 %

  

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 $24.2 million, or 3.5%, during the three months ended June 30, 2023, compared to the prior year comparable period, was primarily due to declines in slot handle of 5.1%, slot win of 3.7%, table game drop of 7.1% and table game hold of 5.9%. While core customer play was in line with the prior year, which was the strongest core customer performance in our history, softness in our retail customer, which is more sensitive to changes in the economy, drove gaming revenue declines year over year. In addition, the second quarter of 2022 was particularly strong as Las Vegas benefited from the lifting of mask mandates and COVID restrictions for the first full quarter since the COVID closures in 2020. 

 

The decrease in gaming revenues of $27.8 million, or 2.1%, during the six months ended June 30, 2023, compared to the prior year comparable period, was primarily due to declines in slot handle of 3.0%, slot win of 2.0%, table game drop of 5.6% and table game hold of 6.3%. The decline in gaming revenue is primarily due to softness in the retail customer, as discussed above.

 

Food & Beverage

Food & beverage revenues remained consistent during the three months ended June 30, 2023, compared to the prior year comparable period, however food and beverage margins declined from 18.2% to 16.8% for the three months ended June 30, 2023, primarily due to an increase in cost per guest served of 6.4%. 

 

Food & beverage revenues increased $7.9 million, or 5.9%, during the six months ended June 30, 2023, compared to the prior year comparable period, primarily due to an increase in average guest check of 5.4%. Food & beverage margins remained consistent for the six months ended June 30, 2023, due to an increase in cost per guest served of 5.9% that offsets the increase in average guest check.

 

Room

Room revenues remained consistent during the three months ended June 30, 2023, compared to the prior year comparable period, however room margins declined from 65.3% to 62.7% for the three months ended June 30, 2023, primarily due to an increase in cost per room of 10.5%.

 

Room revenues increased $7.5 million, or 8.1%, during the three months ended June 30, 2023, compared to the prior year comparable period, primarily due to an increase in average daily rate of 3.2%. Room margins remained consistent for the six months ended June 30, 2023, due to an increase in cost per room of 4.9% that offsets the increase in average daily rate.

 

Online

Online revenues increased $28.2 million and $96.0 million during the three and six months ended June 30, 2023, compared to the prior year comparable period, primarily driven by the launch of online gaming in Ohio, growth in Pennsylvania and the acquisition of Pala Interactive in the fourth quarter of 2022, all as discussed above. Online revenues include reimbursements of gaming taxes and other expenses paid on behalf of our online partners which represented $15.3 million and $69.3 million of the increase for the three and six months ended June 30, 2023, respectively, from the prior year comparable periods.

 

 

Management fee

Management fee revenue during the three and six months ended June 30, 2023 of $17.4 million and $37.5 million, respectively, relates to our management agreement with Wilton Rancheria to manage the Sky River Casino in northern California. As the Sky River Casino opened on August 15, 2022, there were not any management fees earned under this agreement for the three and six months ended June 30, 2022. 

 

Other

Other revenues relate to patronage visits at the other amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Other revenues increased $1.1 million, or 3.4%, and $4.7 million, or 7.3%, during the three and six months ended June 30, 2023, as compared to the corresponding periods of the prior year. The increase is driven primarily by the Las Vegas Locals and Downtown Las Vegas segments as tourism and convention business has grown over the prior year comparable periods with the lifting of mask mandates and COVID restrictions in February 2022 in Las Vegas.

 

Revenues and Adjusted EBITDAR by Reportable Segment

We determine each property's profitability based on 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 gaming entertainment properties comprising our Las Vegas Locals, Downtown Las Vegas and Midwest & South segments and our Online segment. Results for Downtown Las Vegas include the results of our travel agency and captive insurance company in Hawaii. Results for our nonreportable operating segments, including Lattner and our Sky River Casino management fees are aggregated in the Managed & Other category. Corporate expense represents unallocated payroll, professional fees, rent, aircraft expenses and various other expenses that are not directly related to our casino, hotel and online 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"), facilitates comparisons between us and our competitors and provides our investors a more complete understanding of our operating results before the impact of investing transactions, financing transactions and income taxes. 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 total revenues and Adjusted EBITDAR by our Reportable Segments and our Managed & Other category to reconcile to total revenues and total Adjusted EBITDAR:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2023

   

2022

   

2023

   

2022

 

Total revenues

                               

Las Vegas Locals

  $ 230.9     $ 236.5     $ 471.2     $ 464.0  

Downtown Las Vegas

    53.0       53.9       109.5       103.4  

Midwest & South

    518.9       534.9       1,031.0       1,052.0  

Online

    85.0       56.8       207.9       111.9  

Managed & Other

    29.2       12.4       61.3       23.9  

Total revenues

  $ 917.0     $ 894.5     $ 1,880.9     $ 1,755.2  
                                 

Adjusted EBITDAR (1)

                               

Las Vegas Locals

  $ 118.4     $ 125.3     $ 244.6     $ 244.0  

Downtown Las Vegas

    19.7       22.1       42.0       40.5  

Midwest & South

    201.8       218.9       400.5       431.0  

Online

    13.4       7.7       34.0       16.6  

Managed & Other

    19.6       2.5       41.1       4.9  

Corporate expense

    (21.5 )     (22.6 )     (43.7 )     (44.3 )

Adjusted EBITDAR

  $ 351.4     $ 353.9     $ 718.5     $ 692.7  

  

(1) Refer to Note 10, 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 decreased by $5.5 million, or 2.3%, during the three months ended June 30, 2023, as compared to the prior year comparable period, due primarily to a $4.9 million decline in gaming revenue. The decrease in gaming revenue was attributable to declines in table game hold of 12.0%, table game drop of 11.2%, slot handle of 6.0% and slot win of 3.8% over the prior year comparable period. While core guest counts grew slightly year over year, softness in play from out-of-town gaming customers and retail customers drove declines in the current year quarter. In addition, the second quarter of 2022 was particularly strong as Las Vegas benefited from the lifting of mask mandates and COVID restrictions for the first full quarter since the COVID closures in 2020.

 

Total revenues increased by $7.2 million, or 1.5%, during the six months ended June 30, 2023, as compared to the prior year comparable period, reflecting revenue increases in all departmental categories, except gaming revenue. Room revenue was the primary driver of the growth, increasing $6.1 million due to an increase in hotel occupancy rate of 3.1% and average daily rate of 5.1% over the prior year comparable period. Food & beverage revenue increased by $1.8 million as average guest check increased 6.6% over the prior year comparable period. Other revenue increased $1.4 million, which was primarily driven by increased entertainment over the prior year comparable period with the lifting of COVID restrictions in February 2022. These revenue increases were offset by a decline in gaming revenue of $2.2 million primarily due to a 10.2% decrease in table game hold and a 10.0% decrease in table game drop over the prior year comparable period. Overall, the Las Vegas Locals segment benefited from increased visitation to Las Vegas.

  

 

Adjusted EBITDAR decreased by  $6.9  million, or 5.5%, during the three months ended  June 30, 2023 , as compared to the prior year comparable period, primarily due to the revenue decline discussed above.
 
Adjusted EBITDAR remained consistent  during the six months ended June 30, 2023, as compared to the prior year comparable period. Despite the revenue growth during the six months ended June 30, 2023, adjusted EBITDAR declined primarily due to a change in revenue mix from the most profitable revenue stream to other lower margin non-gaming amenities.
 
Downtown Las Vegas
Total revenues decreased slightly by  $0.9 million, or  1.7% , during the three months ended  June 30, 2023 , as compared to the prior year comparable period. Total revenues increased  $6.2 million, or 6.0% , during the  six months ended June 30, 2023 , as compared to the corresponding prior year period, reflecting revenue increases in all departmental categories. During the six months ended June 30, 2023, the hotel occupancy rate increased 120 basis points with 80 basis points of the increase related to our Hawaiian customers. I ncreased visitation to downtown Las Vegas drove a 7.6%  increase in room revenue. Total revenues for the six months ended June 30, 2023 , particularly during the first quarter of 2023, were also impacted by Fremont's new food hall, expanded slot offering and FanDuel sportsbook, which debuted in December 2022. After the debut of these new amenities in December 2022, we began work on a renovation of the Fremont's gaming floor and accelerated this renovation and related disruption during the second quarter of 2023 and the slower summer season. This renovation, along with a Main Street hotel remodel that resulted in only 20% of Main Street's rooms being available during the quarter, drove the declines during the three months ended June 30, 2023.
 
Adjusted EBITDAR decreased by $2.5 million, or 11.2%,  during the three months ended  June 30, 2023 , as compared to the prior year comparable period, primarily due to the revenue decline and construction disruption, as discussed above.
 
Adjusted EBITDAR increased  $1.5 million, or 3.7%, during the six months ended June 30, 2023, as compared to the prior year comparable period,  due primarily to revenue growth from the Hawaiian customer, increased visitation to the downtown area and our recent investments at Fremont, as discussed above.
 

Midwest & South 

Total revenues decreased by $16.1 million, or 3.0%, during the three months ended June 30, 2023, as compared to the corresponding period of the prior year, due primarily to a $17.4 million decline in gaming revenue. The decrease in gaming revenue was attributable to declines in table game hold of 3.6%, table game drop of 4.2%, slot handle of 4.7% and slot win of 3.6% over the prior year comparable period. The gaming revenue decline is driven by continued softness in Louisiana and Mississippi as well as softness in the retail customer throughout our markets.

 

Total revenues decreased by $21.0 million, or 2.0%, during the six months ended June 30, 2023, as compared to the corresponding period of the prior year, due primarily to a $27.9 million decline in gaming revenue. The decrease in gaming revenue was attributable to declines in table game hold of 5.3%, table game drop of 2.8%, slot handle of 3.0% and slot win of 2.4% over the prior year comparable period. The gaming revenue decline is driven primarily by our properties in Louisiana and Mississippi and softness in those overall markets, particularly in the first quarter with trends improving sequentially from the first to second quarter, as well as overall softness in the retail customer throughout the segment. Offsetting the gaming revenue decline, was an increase in food & beverage revenue of $5.7 million, which was driven by a 4.3% increase in average guest check.

 

Adjusted EBITDAR decreased by $17.0 million, or 7.8%, and $30.5 million, or 7.1%, during the three and six months ended June 30, 2023, respectively, as compared to the corresponding prior year periods, due primarily to the gaming revenue declines, as discussed above.

 

Online

Online revenues increased $28.2 million and $96.0 million, during the three and six months ended June 30, 2023, respectively, compared to the prior year comparable period, primarily driven by the launch of online gaming in Ohio, growth in Pennsylvania and the acquisition of Pala Interactive in the fourth quarter of 2022, all as discussed above. Online revenues include reimbursements of gaming taxes and other expenses paid on behalf of our online partners which represented $15.3 million and $69.3 million of the increase for the three and six months ended June 30, 2023, respectively, from the prior year comparable periods.

 

Adjusted EBITDAR increased by $5.7 million and $17.5 million, during the three and six months ended June 30, 2023, respectively, as compared to the corresponding period of the prior year, due primarily to the increase in revenue, excluding reimbursements of gaming taxes paid on behalf of our online partners.

 

Managed & Other
Total reven ues increased by  $16.8 million and $37.3 million, during the  three and six months ended June 30, 2023, respectively, as compared to the corresponding period of the prior year, due primarily to $17.4 million and $37.5 million in Sky River Casino management fees during the three and six months ended June 30, 2023, respectively .
 
Adjusted EBITDAR increased by $17.0 million and $36.2 million, during the  three and six months ended June 30, 2023 , respectively, as compared to the corresponding period of the prior year, due primarily to $17.4 million and $37.5 million in Sky River Casino management fees during the three and six months ended June 30, 2023, respectively .

 

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)

 

2023

   

2022

   

2023

   

2022

 

Selling, general and administrative

  $ 99.1     $ 95.7     $ 199.4     $ 187.7  

Master lease rent expense

    27.1       26.7       53.9       53.0  

Maintenance and utilities

    37.6       34.5       73.6       67.4  

Depreciation and amortization

    62.2       66.8       123.8       129.2  

Corporate expense

    31.7       34.9       60.4       63.9  

Project development, preopening and writedowns

    5.2       0.9       (13.7 )     (9.1 )

Impairment of assets

                4.5        

Other operating items, net

    0.4       0.2       0.7       0.3  

 

   

 
Selling, General and Administrative
Selling, general and administrative expenses were consistent, as a percentage of revenues, and were  10.8% and 10.7% during the three months ended June 30, 2023 and 2022, respectively, and  10.6% and  10.7% during the six months ended June 30, 2023 and 2022, 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 generally flat period over period at $27.1 million and $26.7 million during the three months ended June 30, 2023 and 2022, respectively, and  $53.9 million and  $53.0 million during the six months ended June 30, 2023 and 2022, respectively. 
 
Maintenance and Utilities
Maintenance and utilities expenses, as a percentage of revenues, remained consistent at 4.1% and  3.9% during the three months ended June 30, 2023 and 2022, respectively, and 3.9% and  3.8% during the six months ended June 30, 2023 and 2022, respectively. 
 
Depreciation and Amortization
Depreciation and amortization expenses, as a percentage of revenu es, were   6.8% and  7.5% during the  three months ended June 30, 2023 and 2022, respectively, and  6.6% and  7.4% during the six months ended June 30, 2023 and 2022, respectively. The decline as a percentage of revenues was primarily due to an increase in revenue during both the three and six months ended June 30, 2023 from the online segment and from management fees, both of which have limited fixed assets.
 
Corporate Expense
Corporate expense represents unallocated payroll, professional fees, rent, aircraft expenses and various other expenses that are not directly related to our casino, hotel and online operations, in addition to the corporate portion of share-based compensation expense. Corporate expense was generally consistent and represented  3.5% and  3.9% of revenues during the three months ended June 30, 2023 and 2022, respectively, and  3.2% and  3.6% of revenues during the six months ended June 30, 2023 and 2022, respectively. Contributing to the slight decline, as a percentage of revenues, is management fee revenue during the three and six months ended June 30, 2023.
 
Project Development, Preopening and Writedowns
Project development, preopening and writedowns represent: (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 writedowns; 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 fluctuates. During the three months ended June 30, 2023, the Company incurred $4.1 million related to preopening costs. During the six months ended June 30, 2023, the Company benefited from a $20.1 million reduction of the allowance on the Wilton Note for development advances over the last 10 years offset by preopening costs of $5.0 million. During the six months ended June 30, 2022, the Company benefited from a $12.8 million gain on disposition of assets offset by Pala Interactive acquisition-related costs of $2.3 million.
 
Impairment of Assets

During the six months ended June 30, 2023, as a result of our first quarter impairment review, the Company recorded an impairment charge of $4.5 million for goodwill related to our Managed & Other category.

 
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. 

 

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)

 

2023

   

2022

   

2023

   

2022

 

Interest Expense, Net of Capitalized Interest and Interest Income

  $ 40.0     $ 36.0     $ 65.7     $ 73.2  

Average Long-Term Debt Balance (1)

    2,966.0       3,032.7       3,000.6       3,052.5  

Weighted Average Interest Rates

    5.4 %     4.3 %     5.4 %     4.2 %

  

(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, 2023, increased $4.0 million, or 11.2%, from the prior year comparable period primarily due to a $6.2 million interest expense increase driven by a 110-basis point increase in the weighted average interest rate offset by a $66.7 million decline in the weighted average debt balance. The increase in interest expense is offset by a $2.2 million interest income increase driven by interest earned on the Wilton Note during the three months ended June 30, 2023.

 

Interest expense, net of capitalized interest and interest income, for the six months ended June 30, 2023, decreased $7.5 million, or 10.2%, from the prior year comparable period primarily due to a $20.0 million interest income increase driven by a reduction of the allowance for the expected loss for interest on the Wilton Note and interest earned on such note during the six months ended June 30, 2023. The increase in interest income is offset by a $12.5 million interest expense increase driven by a 120-basis point increase in the weighted average interest rate offset by a $51.9 million decline in the weighted average debt balance.  

 

 

Loss on Early Extinguishments and Modifications of Debt

During the three and six months ended June 30, 2022, the Company incurred $16.5 million in loss on early extinguishments and modifications of debt due to the redemption of $300.0 million of our 8.625% Senior Notes, of which $12.9 million related to premium fees paid and $3.6 million related to the write-off of unamortized deferred finance charges. In addition, during the six months ended June 30, 2022, the Company incurred $3.3 million in loss on early extinguishments and modifications of debt as a result of entering into a new credit agreement (the "Credit Facility") that replaced the then existing credit agreement. The $3.3 million incurred related to the write-off of unamortized deferred finance charges associated with the portion accounted for as a debt extinguishment.

 

Income Taxes 

The effective tax rates during the six months ended June 30, 2023 and 2022 were 15.2% and 22.5%, respectively. Our tax rate for the six months ended June 30, 2023, was favorably impacted by a $35.9 million release of state valuation allowances, the inclusion of excess tax benefits which were partially offset by the unfavorable impact of state taxes and certain nondeductible expenses, as a component of the provision for income taxes. Our tax rate for the six months ended June 30, 2022, was 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.

 

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, 2023 and December 31, 2022, we had balances of cash and cash equivalents of $260.8 million and $283.5 million, respectively. In addition, we held restricted cash balances of $11.6 million at both June 30, 2023 and December 31, 2022. Our working capital deficit at June 30, 2023 and December 31, 2022, wa$87.5 million and $107.9 million, respectively.

 

We believe that current cash balances together with the available borrowing capacity under our Revolving Credit Facility (as defined in "Indebtedness" below) 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 and maintenance capital expenditures. See "Indebtedness", below, for further detail regarding funds available through our 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)

 

2023

   

2022

 

Net cash provided by operating activities

  $ 463.3     $ 456.2  
                 

Cash flows from investing activities

               

Capital expenditures

    (171.4 )     (98.7 )

Payments received on note receivable

    49.7        

Proceeds received from disposition of assets

          21.4  

Other investing activities

    (2.3 )      

Net cash used in investing activities

    (124.0 )     (77.3 )
                 

Cash flows from financing activities

               

Net borrowings (payments) under credit facilities

    (109.3 )     181.1  

Retirements of senior notes

          (300.0 )

Premium fees

          (12.9 )

Debt financing costs

          (13.7 )

Share-based compensation activities

    (14.4 )     (9.0 )

Shares repurchased and retired

    (206.4 )     (299.8 )

Dividends paid

    (31.8 )     (16.5 )

Other financing activities

    (0.1 )     (1.2 )

Net cash used in financing activities

    (362.0 )     (472.0 )

Decrease in cash, cash equivalents and restricted cash

  $ (22.7 )   $ (93.1 )

 

Cash Flows from Operating Activities

During the six months ended June 30, 2023 and 2022, we generated operating cash flow of $463.3 million and $456.2 million, respectively. Generally, operating cash flows increased during 2023 as compared to the prior year period due to $8.5 million received related to interest earned on the Wilton Note.

 

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, 2023, we incurred net cash outflows for investing activities of $124.0 million comprised of capital expenditures of $171.4 million, primarily related to our Treasure Chest land-based casino project, Fremont food hall, slot floor expansion and renovation, various guest room remodels, IT equipment and building projects at various properties offset by $49.7 million in payments received related to the outstanding principal on the Wilton Note. 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.

 

 

Cash Flows from Financing Activities

We rely on 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, 2023, primarily reflect share repurchases, payments on the outstanding principal under our Credit Facility, share-based compensation and dividends paid. The net cash outflows from financing activities in 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 new Credit Agreement and dividends paid, offset by an increase in the outstanding principal under the Credit Facility (see "Indebtedness").

 

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, 2023

   

December 31, 2022

   

Decrease

 

Credit facility

  $ 1,078.5     $ 1,187.8     $ (109.3 )

4.750% senior notes due 2027

    1,000.0       1,000.0        

4.750% senior notes due 2031

    900.0       900.0        

Other

    0.6       0.7       (0.1 )

Total long-term debt

    2,979.1       3,088.5       (109.4 )

Less current maturities

    44.3       44.3        

Long-term debt, net of current maturities

  $ 2,934.8     $ 3,044.2     $ (109.4 )

 

Amounts Outstanding

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

 

   

June 30,

   

December 31,

 

(In millions)

 

2023

   

2022

 

Revolving credit facility

  $ 200.0     $ 285.0  

Term A loan

    825.0       847.0  

Swing loan

    53.5       55.8  

Total outstanding principal amounts

  $ 1,078.5     $ 1,187.8  

 

With a total revolving credit commitment of $1,450.0 million available under the Credit Facility, $200.0 million and $53.5 million in borrowings outstanding on the Revolving Credit Facility and the Swing Loan, respectively, and $13.8 million allocated to support various letters of credit, there is a remaining contractual availability under the Credit Facility of $1,182.7 million as of June 30, 2023. 

 

The blended interest rate for outstanding borrowings under the Credit Facility was 6.7% at June 30, 2023 and 6.2% at December 31, 2022.

 

Debt Service Requirements

Debt service requirements for the Term A Loan include amortization in an annual amount equal to 5.00% of the original principal amount thereof, payable on a quarterly basis. Additionally, under the Credit Facility we have monthly to quarterly interest payment obligations, depending on the rates we lock in, for the Term A Loan, unused line interest payments and any outstanding borrowings under the Revolving Credit Facility, including the Swing Loan. 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 $1.0 billion aggregate principal amount of 4.750% Senior Notes due 2027 ("4.750% Senior Notes due 2027") and our $0.9 billion aggregate principal amount of 4.750% Senior Notes due 2031 ("4.750% Senior Notes due 2031").

 

Covenant Compliance

As of June 30, 2023, we were in compliance with the financial 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, which is 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 and our 4.750% Senior Notes due 2031 (collectively, the "Guaranteed Notes" or "Senior 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.

 

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

 

   

June 30,

   

December 31,

 

(In millions)

 

2023

   

2022

 

Current assets

  $ 415.6     $ 443.7  

Noncurrent assets

    9,211.4       8,767.9  

Current liabilities

    491.1       534.2  

Noncurrent liabilities

    4,017.3       4,136.8  

 

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

 

   

Six Months Ended

 

(In millions)

 

June 30, 2023

 

Revenues

  $ 1,859.5  

Operating income

    930.6  

Income before income taxes

    844.2  

Net income

    789.6  

 

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 our 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 stock repurchase program with existing cash resources, cash generated from operations 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"). In addition, our Board of Directors authorized increases to the Share Repurchase Program of $500.0 million on June 1, 2022, and $500.0 million on May 4, 2023. As of June 30, 2023, we were authorized to repurchase up to an additional $532.6 million in shares of our common stock under 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 1.5 million and 3.0 million shares during the three months ended June 30, 2023 and 2022, respectively, and 3.2 million and 5.1 million shares during the six months ended June 30, 2023 and 2022, respectively. 

 

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 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  

December 8, 2022

 

December 19, 2022

 

January 15, 2023

    0.15  

February 14, 2023

 

March 15, 2023

 

April 15, 2023

    0.16  

May 4, 2023

 

June 15, 2023

 

July 15, 2023

    0.16  

 

Other Items Affecting Liquidity

We anticipate funding our capital requirements using cash on hand, cash being generated from our operations and availability under our 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

Capital Spending and Development

We currently estimate that our annual cash capital requirements to perform ongoing refurbishment and maintenance at our properties is approximately $240 million to $260 million. We fund our capital expenditures through cash on hand, our Credit Facility and operating cash flows.

 

 

In addition to the maintenance capital spending discussed above, we continue to pursue other potential development projects that may require us to invest significant amounts of capital, including construction of a land-based facility at Treasure Chest which will replace our existing riverboat and renovating the Fremont slot floor, the last phase of the Fremont project. Both of these projects are in addition to our maintenance capital spending, and we expect to spend $100 million during 2023 related to these projects.

 

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 and online gaming is not currently permitted in order to be prepared to develop projects upon approval of casino or online 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 or online 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 effect on our business, financial position, results of operations or cash flows.

 

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, 2022, as filed with the SEC on February 24, 2023.

 

Critical Accounting Estimates

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 year ended December 31, 2022, as filed with the SEC on February 24, 2023.

 

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 general effect, and expectation, of the national and global economy on our business, including but not limited to interest rates and inflationary pressures, as well as the economies where each of our properties are located;
  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 online 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;
  our ability to maintain the integrity of our information technology systems and to protect our internal information;
 

indebtedness, including our ability to refinance or pay amounts outstanding under our credit agreement and our 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 effect on our business, financial position, results of operations or cash flows;
 

our estimates and expectations regarding anticipated taxes, tax credits or tax refunds;
 

our compliance with government regulations, including our 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 year ended December 31, 2022, 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. We are exposed to a lesser extent to foreign currency exchange risk for funds held in our Canadian operating and restricted cash accounts. While there is risk of fluctuations in the foreign exchange rate between the Canadian dollar and US dollar, our exposure is limited given the size of our Canadian operations and the minimal amount of cash held in Canadian bank accounts. A weakening or strengthening of the US dollar to the Canadian dollar by 2x the current conversion rate, would not cause the value of the funds held in the Canadian operating and restricted cash accounts to change significantly. We do not currently utilize derivative financial instruments for trading or speculative purposes.

 

As of June 30, 2023, our long-term variable-rate borrowings represented approximately 36.2% of total long-term debt. Based on June 30, 2023 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 $10.8 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, 2022, as filed with the SEC on February 24, 2023.

 

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, 2022, as filed with the SEC on February 24, 2023.

 

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, 2023.

 

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, 2023 through April 30, 2023

    433,671     $ 65.35       433,671     $ 104,294,121  

May 1, 2023 through May 31, 2023

    539,049       68.04       539,049       567,617,420  

June 1, 2023 through June 30, 2023

    519,731       67.36       519,731       532,607,760  

Total

    1,492,451     $ 67.02       1,492,451     $ 532,607,760  

 

(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 to the Share Repurchase Program on each of June 1, 2022 and May 4, 2023 for a total authorization of $1.3 billion. The Share Repurchase Program has no expiration date.

 

 

Item 5.       Other Information

None of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended June 30, 2023, as such terms are defined under Item 408(a) of Regulation S-K.

 

  

 

Item 6.

Exhibits

 

Exhibit Number

 

Document of Exhibit

 

Method of Filing

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, 2022, filed with the SEC on February 24, 2023
         

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.

 

Furnished 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.

 

Furnished electronically herewith

 

 

 

 

 

101

 

The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022, (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the six months ended June 30, 2023 and 2022, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022, 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 3, 2023.

 

 

 

BOYD GAMING CORPORATION

 

 

 

 

By:

/s/ Lori M. Nelson

 

 

Lori M. Nelson

 

 

Senior Vice President Financial Operations and Reporting and

    Chief Accounting Officer

 

 

38