Business Context and Reporting Period
Company: Boyd Gaming Corp
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 2000
Operations: The Company owns and operates eleven casino entertainment facilities in Nevada, Mississippi, Illinois, Louisiana, and Indiana, plus a travel agency in Hawaii. A management contract for Silver Star Resort and Casino in Mississippi terminated on January 31, 2000.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended June 30, 2000 |
Three Months Ended June 30, 1999 |
Six Months Ended June 30, 2000 |
Six Months Ended June 30, 1999 |
|---|---|---|---|---|
| Net Revenues | $269,719 | $241,936 | $622,426 | $485,194 |
| Operating Income | $29,741 | $33,066 | $142,520 | $68,485 |
| Net Income | $6,653 | $9,705 | $63,722 | $18,607 |
| Diluted EPS | $0.11 | $0.16 | $1.02 | $0.30 |
| Cash from Operations | N/A | N/A | $150,393 | $80,127 |
| Cash & Equivalents (End) | $72,069 | $71,829 | $72,069 | $71,829 |
| Total Debt (Current + Long-term) | $882,164 | N/A | $882,164 | N/A |
Note: Total Debt calculated as Current maturities ($1,585) + Long-term debt ($880,579) as of June 30, 2000.
Material Changes vs. Prior Period
- Revenue Growth: Net revenues increased 11.5% for the quarter and 28.3% for the six-month period compared to the prior year. This growth was primarily driven by the November 1999 acquisition of Blue Chip Casino, which contributed $47 million in revenue for the quarter and $95 million for the six-month period.
- Termination Fee: The six-month 2000 results include a one-time net termination fee of $70,988,000 received from the Mississippi Band of Choctaw Indians upon the termination of the Silver Star management contract. This significantly boosted operating income and net income for the six-month period.
- Property Performance: While Blue Chip drove growth, revenues declined at Sam's Town Las Vegas (15.9% Q/Q), Sam's Town Tunica (21% Q/Q), and Treasure Chest (17.8% Q/Q) due to construction disruptions and intense competition.
- Preopening Expenses: Increased to $2.0 million for the quarter (from $0.3 million prior year) largely due to $1.5 million in unsuccessful efforts to develop a Rhode Island Indian casino.
- Interest Expense: Net interest expense increased due to higher debt levels associated with the Blue Chip acquisition, partially offset by increased capitalized interest ($1.3 million for the quarter).
Guidance, Outlook, and Risks
- Expansion Projects: The Company is undertaking an $86 million renovation and expansion at Sam's Town Las Vegas (expected completion mid-November 2000) and a $21 million renovation at Sam's Town Tunica (expected completion Dec 31, 2000).
- The Borgata Joint Venture: The Company is developing a casino resort in Atlantic City with MGM MIRAGE. The budget is under discussion to increase from $750 million to $1.035 billion. The Company expects to contribute $90 million in equity (potentially increasing to $207 million) contingent on financing and permits. Completion is expected late 2002 or mid-2003 depending on scope.
- Liquidity: The Company has a $600 million bank credit facility with $174.3 million unused availability as of June 30, 2000. A working capital deficit of $47 million exists, attributed to cash usage and construction payables.
- Risks: Significant risks include the success of new construction projects, the competitive environment in existing markets, regulatory approvals for new developments (specifically a proposed locals casino in Las Vegas currently subject to litigation), and the ability to secure financing for The Borgata.
Investor Verification Checklist
- Blue Chip Integration: Verify the sustained performance of the Blue Chip Casino acquisition beyond the initial ramp-up period.
- Construction Timelines: Monitor the completion dates and budget adherence for the Sam's Town Las Vegas and Tunica renovations, as delays could impact revenue recovery.
- The Borgata Financing: Confirm the finalization of the joint venture agreement, the total project budget, and the securing of the $621 million non-recourse financing.
- Debt Covenants: Review compliance with the Bank Credit Facility covenants, particularly leverage ratios and interest coverage, given the high debt load ($882 million).
- Competitive Landscape: Assess the long-term impact of competition on the underperforming properties (Sam's Town Las Vegas, Tunica, and Treasure Chest).