Boyd Gaming Corporation — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Figures below are in millions of dollars unless noted. Boyd operated 29 gaming properties across 10 states. All gaming facilities closed in mid-March in response to COVID-19 orders, so the quarter includes only a partial period of closures.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $680.5 | $827.3; down 17.7% |
| Operating income (loss) | $(137.8) | $117.6 |
| Net income (loss) | $(147.6); $(1.30) per diluted share | $45.5; $0.40 per diluted share |
| Operating cash flow | $23.6 | $164.1 |
| Capital expenditures | $48.0 | $89.3 |
| Cash and cash equivalents at March 31 | $831.2 | $250.0 at December 31, 2019 |
| Debt principal at March 31 | $4,440.8 | $3,814.0 at December 31, 2019 |
Operating cash flow less capital expenditures was approximately negative $24.5 million. The increase in cash chiefly reflects $670 million borrowed on March 16 as a precautionary liquidity measure. Restricted cash was an additional $18.5 million. At quarter-end, only $3 million remained available under the revolving commitment after borrowings and letters of credit. Gross debt less cash was approximately $3.61 billion, excluding lease liabilities; operating lease liabilities totaled $919.9 million.
Reported operating loss included $171.1 million of non-cash impairment charges: $112.0 million of goodwill, $42.2 million of gaming license rights and $16.9 million of trademarks. Excluding this item does not remove the substantial operating impact of property closures.
Material changes versus the prior period
- Revenue declined across gaming, food and beverage, rooms, and other activities, primarily because of the mid-March closures. Gaming revenue was $509.8 million, down 17.8%; food and beverage revenue was $89.9 million, down 19.1%.
- Departmental margins were 53.2% for gaming versus 55.4% a year earlier, 0.1% for food and beverage versus 8.0%, 50.7% for rooms versus 53.0%, and 37.2% for other versus 38.2%. Management attributed the food and beverage margin decline in part to cost per cover rising faster than average check.
- Total segment Adjusted EBITDAR was $162.5 million versus $245.7 million. By segment, Las Vegas Locals reported $46.8 million, Downtown Las Vegas $10.0 million, and Midwest & South $105.8 million; all were lower year over year.
- Operating cash flow fell to $23.6 million from $164.1 million. Lower capital spending partly offset the decline.
- Long-term debt principal increased $626.8 million from year-end, chiefly reflecting precautionary credit-facility borrowing. Net interest expense declined to $51.4 million from $61.2 million, reflecting lower average debt and interest rates.
Outlook, management commentary and risks
- Management said the duration of closures, reopening dates and conditions, customer demand, and the pandemic’s financial effects could not be estimated. It expected COVID-19 and health protocols to continue materially affecting operations after reopening.
- Management expected available cash and revenues after reopening to fund operations for the next 12 months, including projected operating needs and maintenance capital expenditures. This expectation depends on reopening and future operating performance; the filing provides no numerical revenue or earnings guidance.
- Management furloughed most team members effective April 11, announced salary reductions and suspended non-essential spending, director compensation, the quarterly dividend and share repurchases. It also described safety protocols under development for reopening.
- On May 8, 2020, the company amended its credit agreement after quarter-end. Financial covenants are not tested during a defined relief period, subject to conditions; the company must maintain at least $250 million of liquidity and faces restrictions on certain debt, investment and restricted-payment activities. The relief period can run no later than receipt of a compliance certificate for the quarter ending June 30, 2021, subject to the agreement’s terms.
- On May 6, 2020, Boyd completed a transaction transferring Belterra Park real estate to a GLP subsidiary in satisfaction of a $57.7 million note and mortgage. Boyd’s operating subsidiary was to become a subtenant under the GLP master lease, subject to required approvals.
- Further risks include prolonged or restricted reopening, weaker discretionary spending and customer traffic, additional impairment charges, covenant and refinancing pressures, and the possibility that future financing may be unavailable or costly. The company reported compliance with debt covenants at March 31 but said subsequent noncompliance had become reasonably possible before the amendment.
Most important facts for investors to verify
- Actual reopening dates, operating restrictions, customer demand and cash burn during closures.
- Cash availability and facility capacity, including compliance with the $250 million minimum-liquidity requirement and all amendment conditions.
- Debt balances, interest costs, covenant relief terms and the company’s ability to meet amended covenants after the relief period.
- Whether post-reopening results support management’s 12-month liquidity expectation and whether additional impairments are required.
- Effects of the Belterra Park real-estate transaction on rent, lease obligations and operating economics; also confirm the status of the suspended dividend and repurchases.