Boyd Gaming Corporation — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Amounts below are in millions of dollars except per-share data. The filing is unaudited.
Business context
Boyd operated 29 gaming properties across 10 states, grouped into Las Vegas Locals, Downtown Las Vegas, and Midwest & South segments. All properties closed in mid-March because of COVID-19. By July 1, 26 had reopened with occupancy and other operating restrictions; three Las Vegas properties remained closed, with no reopening dates set.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $209.9 | $846.1 | $890.4 | $1,673.4 |
| Operating income (loss) | $(86.3) | $126.7 | $(224.1) | $244.3 |
| Net income (loss) | $(108.5) | $48.5 | $(256.1) | $93.9 |
| Diluted earnings (loss) per share | $(0.96) | $0.43 | $(2.26) | $0.83 |
| Adjusted EBITDAR | $16.1 | $232.6 | $160.6 | $455.6 |
| Cash from operating activities | Not presented quarterly | $(52.8) | $264.3 |
- Q2 revenue fell 75.2%; six-month revenue fell 46.8%, principally due to property closures. Gaming revenue declined 70.8% in Q2 and 44.6% for the six-month period.
- Q2 food and beverage revenue fell 90.5%, and room revenue fell 88.7%. Limited amenities and operating restrictions contributed to steep reductions in these departments; Q2 food and beverage margin was negative 56.1%.
- Q2 net loss included a $37.0 tax benefit, compared with a $17.7 tax provision in Q2 2019. The six-month loss included a $171.1 noncash impairment charge recorded in Q1: $112.0 goodwill, $42.2 gaming license rights, and $16.9 trademarks. No additional impairment was recorded in Q2.
- Cash and cash equivalents were $1,308.3 at June 30, versus $250.0 at December 31, 2019; restricted cash was $17.1. Six-month investing cash outflow was $75.9, including $75.9 of capital expenditures.
- Debt principal was $4,976.3 at June 30, up $1,162.3 from year-end. This included $600.0 of 8.625% senior notes due 2025 and increased revolving-credit borrowings. Long-term debt, net of current maturities and issuance costs, was $4,893.9.
- The $945.5 revolving commitment was nearly fully used: $865.0 revolver borrowings, $64.9 swing-loan borrowings, and $12.6 supporting letters of credit left $3.0 of contractual availability. The credit amendment requires at least $250.0 of liquidity during the covenant relief period; the company reported covenant compliance at June 30.
- Annual maintenance and refurbishment capital needs were estimated at $115–$125. Management estimated that, if properties remained closed for the rest of 2020, average monthly cash requirements would be about $44, excluding interest, plus about $21 of monthly cash interest.
Material changes and management actions
- On May 21, Boyd issued $600.0 of 8.625% notes due June 2025; net proceeds were about $588.0 and were intended for general corporate purposes, including working capital.
- On March 16, Boyd borrowed $670.0 under its credit facility to bolster liquidity. On May 8, it amended the facility, suspending financial covenant testing during the specified relief period, subject to conditions and minimum liquidity requirements. The relief period can extend through delivery of a compliance certificate for the quarter ending June 30, 2021, unless it ends earlier under the amendment.
- Boyd suspended its quarterly dividend and share repurchases in March, halted nonessential spending, reduced staffing and executive compensation, and limited gaming devices, restaurant seating, amenities, and property occupancy.
- Boyd transferred Belterra Park real estate to a GLP subsidiary in satisfaction of a $57.7 mortgage note; the transaction resulted in a $40.9 operating lease right-of-use asset and liability.
Outlook, risks and contingencies
The filing provides no formal earnings or revenue guidance. Management expected to fund the next 12 months through cash generated by reopened properties, supplemented as needed by available cash. It cautioned that the pandemic’s duration and effects on customer demand, operations, and financial results could not be estimated and could materially adversely affect the business. Future closures, occupancy restrictions, reduced discretionary spending, workforce and supplier impacts, and further impairments were identified as risks. Additional financing may not be available or may be available only on unfavorable terms.
Management reported ordinary-course legal proceedings and believed their adverse resolution would not materially affect the company. The filing also noted that state deferred tax assets were subject to a valuation allowance. Disclosure controls and procedures were assessed as effective.
Important facts for investors to verify
- Subsequent reopening status, operating restrictions, customer demand, and the timing of reopening the three closed Las Vegas properties.
- Cash burn and operating cash flow as reopened properties operate under capacity and amenity limits; confirm liquidity against the credit agreement’s $250.0 minimum.
- Debt service capacity, refinancing needs, covenant-relief conditions, and the cost of the 8.625% notes.
- Whether projected cash flows support asset values or lead to further impairment charges, and whether state tax attributes remain realizable.
- Resumption, if any, of dividends or share repurchases; both programs were suspended.