Business Context and Reporting Period
Company: Boyd Gaming Corp
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and nine months ended September 30, 1998
Operations: The Company owns and operates ten casino entertainment facilities in Nevada, Mississippi, Illinois, and Louisiana, plus a travel agency in Hawaii. It also manages a facility in Philadelphia, Mississippi.
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended Sep 30, 1998 | 9 Months Ended Sep 30, 1998 | 9 Months Ended Sep 30, 1997 |
|---|---|---|---|
| Net Revenues | $234,593 | $730,120 | $652,849 |
| Operating Income | $28,772 | $89,740 | $(47,896) |
| Net Income (Loss) | $5,937 | $19,295 | $(68,399) |
| Diluted EPS | $0.10 | $0.31 | $(1.11) |
| Cash from Operations (9mo) | $84,662 (1998) vs $80,662 (1997) | ||
| Total Debt (Long-term + Current) | $783,061 (Sep 30, 1998) | ||
| Cash and Equivalents | $68,051 (Sep 30, 1998) |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated net revenues increased 7.7% for the quarter and 11.8% for the nine-month period compared to 1997. This was driven by a 13.0% increase in casino revenue and the full consolidation of Treasure Chest Casino (acquired Oct 1997).
- Profitability Turnaround: The Company reported net income of $19.3 million for the nine months ended Sep 30, 1998, a significant improvement from a net loss of $68.4 million in the same period in 1997. The 1997 loss included a $126 million impairment charge related to Sam's Town Kansas City.
- Restructuring: A $5.9 million restructuring charge was recorded in Q2 1998 to cease operations at Sam's Town Kansas City. The property closed in July 1998, and assets were sold for $12.5 million.
- Regional Performance:
- Central Region: Net revenues increased 29% (9 months) due to Treasure Chest acquisition, offset by the closure of Sam's Town Kansas City.
- Nevada Region: Revenues were relatively flat. The Stardust property saw an 8.7% revenue decline due to competition and a suite remodel project, while Downtown Properties saw an 11.5% revenue increase.
Guidance, Outlook, and Risks
- Expansion Projects: The Company is pursuing a joint venture with Mirage Resorts for a $750 million casino in Atlantic City, requiring at least $150 million in capital contributions from Boyd. Plans for a new property on the Stardust site in Las Vegas have been postponed pending market analysis.
- Liquidity: The Company maintains a $500 million revolving credit facility with $177 million available as of Sep 30, 1998. Working capital was $23 million, an improvement from a deficit in the prior year.
- Year 2000 Compliance: The Company estimates $7.6 million in total costs for Year 2000 remediation. $1.7 million has been incurred to date. Management believes manual backups exist for critical systems but notes risks regarding electronic monitoring requirements in Central Region jurisdictions.
- Tax Benefits: The sale of Sam's Town Kansas City assets generated a tax loss of approximately $100 million, creating a $10.9 million income tax receivable and a $9.2 million deferred tax asset.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with the Bank Credit Facility and Senior Notes covenants, specifically the fixed charge coverage ratio and funded debt to EBITDA ratio.
- Atlantic City Funding: Confirm the availability of capital for the $150 million+ commitment to the Atlantic City joint venture and the impact on leverage ratios.
- Stardust Performance: Monitor the recovery of the Stardust property following the suite remodel and competitive pressures on the Las Vegas Strip.
- Year 2000 Costs: Track actual remediation costs against the $7.6 million estimate and assess potential operational disruptions if waivers for electronic monitoring are not granted.
- Tax Receivables: Confirm the realization of the $10.9 million tax refund from the Kansas City asset sale.