Boyd Gaming Corporation — Q3 2020 Form 10-Q
Business context and reporting period
Quarter ended September 30, 2020; unaudited results compare with the three and nine months ended September 30, 2019. Boyd operated 29 gaming properties across 10 states. Following pandemic-related closures beginning in mid-March, 26 properties had reopened by September 30, subject to occupancy limits and other safety measures; three Las Vegas properties remained closed.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $652.2m | $819.6m | $1,542.6m | $2,493.0m |
| Operating income (loss) | $127.1m | $113.4m | $(97.0)m | $357.7m |
| Net income (loss) | $38.1m | $39.4m | $(218.0)m | $133.3m |
| Adjusted EBITDAR | $238.8m | $213.5m | $399.4m | $669.1m |
- Q3 revenue fell 20.4% year over year; nine-month revenue fell 38.1%. Q3 operating margin was approximately 19.5%, compared with 13.8% a year earlier. Q3 net income declined 3.3%.
- Q3 gaming revenue decreased 7.7%; food and beverage revenue decreased 64.1%, room revenue 55.6%, and other revenue 44.9%. The reduced availability of non-gaming amenities increased gaming’s share of revenue.
- Q3 gaming department margin rose to 62.0% from 55.0%; food and beverage margin fell to 0.3% from 5.6%, and room margin to 52.0% from 53.2%. Management attributed improved Q3 operating income and segment EBITDAR to cost and marketing adjustments after reopening.
- Nine-month operating results included $171.1m of noncash asset impairments recorded in Q1: $112.0m goodwill, $42.2m gaming license rights and $16.9m trademarks. No additional impairment was recorded in Q2 or Q3.
- Operating cash flow for the first nine months was $124.0m, down from $415.4m. Capital expenditures were $105.1m, and net cash used in investing activities was $116.3m. Cash and cash equivalents at September 30 were $506.0m; restricted cash was $15.0m.
- Debt principal totaled $4.04bn at September 30, up $229.5m from year-end 2019, including $600m of 8.625% notes issued in May. Long-term debt, net of current maturities and issuance costs, was $3.96bn. The company had $932.9m of remaining revolving-credit availability; stated current maturities were $29.2m.
- Current assets were $640.6m and current liabilities $521.2m. Total assets were $6.57bn and stockholders’ equity $1.04bn.
Material changes, outlook and risks
- Management cited property closures, capacity restrictions and reduced amenities as the principal causes of lower year-to-date revenue and operating results. Q3 revenue remained below 2019 levels, despite stronger operating income and Adjusted EBITDAR.
- Management expected to fund operations and maintenance needs over the following 12 months with cash from reopened properties, existing cash and, if needed, revolving-credit availability. It estimated annual maintenance and refurbishment capital needs of $125m–$135m. No specific revenue or earnings guidance was provided.
- The May credit amendment waived specified financial covenant testing during a relief period, subject to conditions including minimum liquidity of $250m and restrictions on certain transactions. Amendment No. 4, effective October 8, extended the Revolving Credit Facility and Term A Loan to September 2023 and increased revolving capacity by $88.2m. Boyd reported it believed it was in compliance with debt covenants at September 30.
- The company suspended its quarterly dividend and share repurchases in March 2020 and curtailed nonessential spending to preserve liquidity. The Q3 share-based compensation credit of $0.9m reflected lower estimated performance-share achievement levels.
- COVID-19 remains the principal uncertainty: future closures, customer demand and behavior, occupancy restrictions, unemployment and discretionary spending could further affect operations, cash flows and liquidity. Management said the duration and severity of the effects could not be estimated; additional impairment charges may result if cash-flow expectations are not met.
- Other risks include leverage and refinancing, interest-rate exposure, gaming regulation and taxes, competition, construction and development execution, and potential future asset impairments. A 100-basis-point interest-rate change was estimated to affect annual interest costs by about $9.9m. Ordinary-course legal proceedings were not expected by management to have a material adverse effect.
Important facts for investors to verify
- Reopening status, occupancy limits and demand at the three closed Las Vegas properties, and the effect of restrictions on customer volumes and non-gaming revenue.
- Cash generation and liquidity against debt service, minimum-liquidity requirements, covenant-relief conditions and the amended credit-facility terms.
- Whether operating improvements and cost reductions persist as revenues recover, particularly in food and beverage, rooms and Downtown Las Vegas.
- Assumptions behind goodwill and intangible-asset valuations, and the possibility of further impairment charges.
- Timing and funding of maintenance capital spending and any proposed development projects; the filing gives no project-specific updated budget or financing details.