Boyd Gaming Corporation (NYSE: BYD) — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, with quarterly results also reported. Boyd Gaming operates 28 wholly owned gaming properties across 10 states, organized into Las Vegas Locals, Downtown Las Vegas, and Midwest & South segments.
Key financial results
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $2.178 billion | $3.326 billion |
| Operating income | $14.3 million | $472.6 million |
| Net income (loss) | $(134.7) million | $157.6 million |
| Operating cash flow | $289.0 million | $549.0 million |
| Capital expenditures | $175.0 million | $207.6 million |
| Cash and cash equivalents at year-end | $519.2 million | $250.0 million |
| Long-term debt principal, including current maturities | $3.950 billion | $3.814 billion |
| Adjusted EBITDAR | $609.9 million | $896.7 million |
Operating margin was approximately 0.7% (versus 14.2% in 2019). Departmental margins were 58.6% for gaming, -2.1% for food and beverage, 49.3% for rooms, and 43.8% for other revenue. Operating cash flow less capital expenditures was approximately $114.0 million; this is a simple calculation, not a company-reported free-cash-flow measure. Interest expense, net of capitalized interest, was $230.5 million. Face-value debt was approximately 77.3% fixed-rate and 22.7% variable-rate.
Fourth quarter: Revenue was $635.9 million, operating income $111.3 million, and net income $83.3 million. The quarter included combined pretax gains of $53.9 million related to the Eldorado sale and property closures; results therefore include unusual items.
Material changes versus the prior comparable period
- Annual revenue fell 34.5%, primarily because all properties closed in mid-March during the pandemic and reopened at different dates, with occupancy limits and reduced amenities thereafter.
- Gaming revenue declined 28.5%; food and beverage revenue declined 60.1%; room revenue declined 55.7%. Gaming rose to about 81% of revenue from 75% in 2019 as non-gaming offerings were curtailed.
- Operating income declined by $458.3 million. Adjusted EBITDAR fell about 32.0%; management said cost and marketing adjustments helped increase overall operating margins after reopening despite the revenue contraction.
- Net loss included $174.7 million of non-cash impairment charges: $112.0 million goodwill, $42.2 million gaming license rights, and $20.5 million trademarks. The company also recorded a $36.3 million income tax benefit.
- Operating cash flow decreased $260.0 million. Cash increased by $269.2 million year over year, primarily supported by issuing $600 million of 8.625% senior notes in May 2020.
- Debt principal increased $135.8 million year over year, while borrowings under the bank credit facility declined. Interest expense fell 3.0%, mainly due to lower benchmark rates, partly offset by higher average debt.
Liquidity, debt, outlook, and risks
- At December 31, 2020, cash was $519.2 million, restricted cash $15.8 million, and working capital surplus $126.3 million. Revolving credit availability was $1.021 billion after letters of credit. Management expects cash from reopened properties, existing cash, and revolver capacity to fund operations and maintenance needs for the next 12 months.
- Credit-facility financial covenant testing was waived during a defined relief period, subject to maintaining at least $250 million of liquidity and other restrictions. The revolver and Term A Loan were extended to September 2023; the company reported compliance with its debt covenants at year-end. Approximately $827.4 million of bank-facility principal is scheduled for 2023.
- Boyd suspended its quarterly dividend in March 2020 and share repurchases in March to preserve liquidity. The filing gives no specific resumption date or numerical earnings guidance.
- Annual maintenance capital spending is estimated at $150 million–$170 million. Wilton Rancheria construction was expected to begin in Q1 2021, with an anticipated opening in the second half of 2022. Online and mobile gaming expansion, including a planned Pennsylvania iCasino launch in April 2021, was subject to regulatory approval.
- Four properties are subject to GLPI master leases; annual rent was $101.9 million, with potential escalators and additional property obligations. Total operating lease liabilities were $939.3 million.
- Key uncertainties include the pandemic’s duration and effects on demand, capacity restrictions and further closures; competition and discretionary consumer spending; refinancing and covenant requirements; lease and rent burdens; regulatory and gaming-tax changes; and potential additional asset impairments. Management cannot estimate the pandemic’s ultimate financial impact.
Important facts for investors to verify
- Current property operating status, capacity limits, customer demand, and the reopening plans for the two Las Vegas properties still closed as of February 22, 2021.
- Cash generation and liquidity after the high-coupon $600 million note issuance, including the 2023 credit-facility maturity and covenant-relief conditions.
- Whether revenue and cash-flow assumptions supporting goodwill, gaming-license, and trademark valuations are achieved; further impairments could be material.
- Actual results and capital requirements for the GLPI-leased properties and the Wilton Rancheria development, including regulatory approvals and timing.
- The filing reports an unqualified audit opinion and effective internal control over financial reporting; goodwill and indefinite-lived intangibles were identified as a critical audit matter because valuation depends on significant projections and assumptions.