Business Context and Reporting Period
Company: Boyd Gaming Corp
Filing Type: Form 10-Q (Unaudited)
Period Ended: September 30, 2008
Operations: Diversified operator of 15 wholly-owned gaming entertainment properties and a 50% joint venture (Borgata Hotel Casino & Spa). Operations span Nevada, Mississippi, Illinois, Louisiana, Indiana, and New Jersey.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended Sep 30, 2008 | Nine Months Ended Sep 30, 2008 | Nine Months Ended Sep 30, 2007 |
|---|---|---|---|
| Net Revenues | $426,455 | $1,358,337 | $1,518,476 |
| Operating Income | $45,750 | $93,559 | $273,495 |
| Net Income (Loss) | $8,698 | $(2,231) | $271,806 |
| Diluted EPS (Continuing Ops) | $0.10 | $(0.03) | $1.01 |
| Cash from Operating Activities | N/A | $179,218 | $218,003 |
| Total Debt (Long-term + Current) | $2,624,100 | $2,624,100 | $2,266,558 |
| Cash and Cash Equivalents | $123,573 | $123,573 | $152,845 |
Material Changes vs. Prior Period
- Revenue Decline: Net revenues decreased 13% year-over-year for the three months and 10.5% for the nine months ended September 30, 2008, driven by a significant economic downturn, reduced consumer spending, and hurricane-related closures in Louisiana.
- Profitability Collapse: Operating income dropped 50% for the quarter and 66% for the nine-month period compared to 2007. The company reported a net loss from continuing operations of $2.2 million for the nine months ended September 30, 2008, compared to a net income of $89.9 million in the prior year period.
- Asset Write-Downs: The company recorded $94.7 million in write-downs and other charges for the nine months ended September 30, 2008. This includes an $84.0 million non-cash impairment charge related to the indefinite postponement of redevelopment plans for the Dania Jai-Alai facility.
- Capital Expenditures: Capital expenditures surged to $559.5 million for the nine months ended September 30, 2008, compared to $203.7 million in the prior year, primarily due to the Echelon development project and the Blue Chip hotel expansion.
Guidance, Outlook, and Risks
- Echelon Project Delay: On August 1, 2008, the company announced a delay of its Echelon development project on the Las Vegas Strip due to difficult capital market conditions and weak economic outlook. Construction is unlikely to resume in 2009. The company is evaluating alternative development options, including phased development or strategic partnerships.
- Dania Jai-Alai: Redevelopment plans to operate slot machines at the Dania Jai-Alai facility have been indefinitely postponed due to legal challenges regarding the Florida slot initiative and market performance issues.
- Dividend Suspension: In July 2008, the Board of Directors suspended the quarterly dividend for current and future periods.
- Liquidity: The company maintains a $4.0 billion revolving bank credit facility with approximately $2.2 billion available as of September 30, 2008. Management believes cash flows and credit facility availability are sufficient to meet projected needs for the next 12 months.
- Legal Risks: Ongoing litigation regarding the Treasure Chest Casino license (Copeland matter) poses a risk of license revocation. Additionally, the validity of the Florida slot initiative remains under legal challenge.
Investor Verification Checklist
- Echelon Financing: Verify the company's ability to secure alternative financing or partnerships for the Echelon project given the current credit market environment.
- Asset Impairment: Monitor for potential future impairment charges on goodwill and intangible assets, as the company's market capitalization is significantly below book value.
- Dania Jai-Alai Litigation: Track the status of the Florida Supreme Court case regarding the slot initiative, which determines the viability of the Dania Jai-Alai asset.
- Treasure Chest License: Review developments in the Copeland litigation to assess the risk of losing the Treasure Chest Casino license.
- Debt Covenants: Confirm continued compliance with the bank credit facility's financial covenants, specifically the minimum interest coverage ratio and maximum total leverage ratio.