Boyd Gaming Corporation — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed February 27, 2020. This annual filing also reports fourth-quarter results. Boyd operated 29 gaming properties across 10 states, reported in Las Vegas Locals, Downtown Las Vegas, and Midwest & South segments.
Financial performance
| Metric | FY2019 | FY2018 | Change |
|---|---|---|---|
| Revenue | $3,326.1 million | $2,626.7 million | +26.6% |
| Operating income | $472.6 million | $355.3 million | +33.0% |
| Net income | $157.6 million | $115.0 million | +37.0% |
| Diluted earnings per share | $1.38 | $1.00 | +38.0% |
| Operating cash flow | $549.0 million | $434.5 million | +26.4% |
| Cash capital expenditures | $207.6 million | $161.5 million | +28.5% |
- Revenue growth was led by acquired operations; Midwest & South revenue rose 45.3% to $2,187.5 million. Las Vegas Locals revenue grew 0.9% and Downtown Las Vegas 3.9%.
- Gaming produced $2,483.3 million, about 75% of revenue. Gaming revenue increased 29.0%, primarily reflecting the acquisitions.
- Operating margin was approximately 14.2%, compared with 13.5% in 2018; net margin was approximately 4.7%, compared with 4.4% (calculated from reported figures).
- Adjusted EBITDAR, a company-defined non-GAAP measure, was $896.7 million, up from $681.3 million. This measure excludes items including interest, taxes, depreciation, and master lease rent; it is not equivalent to operating cash flow.
- Simple operating cash flow less cash capital expenditures was approximately $341.4 million. This is a calculated measure, not a company-reported free-cash-flow figure.
Quarterly results and material changes
Fourth-quarter 2019 revenue was $833.1 million, operating income was $114.9 million, and net income was $24.3 million. In fourth-quarter 2018, revenue was $791.6 million, operating income $94.7 million, and net income $22.9 million.
- Full-year revenue increased $699.4 million, primarily because 2019 included a full year of results from Lattner, Valley Forge, and the four Pinnacle properties acquired during 2018. The acquisitions make year-over-year comparisons less representative of same-property growth.
- Operating income also benefited from cost controls and $24.0 million less project development, preopening, and writedown expense than in 2018.
- Net income included a $34.9 million pretax loss on early extinguishment and modification of debt, principally related to refinancing. Interest expense, net of capitalized amounts, rose to $237.5 million from $204.2 million.
- Food and beverage margin improved to 7.8% from 5.5%; gaming margin declined to 55.0% from 56.1%.
Debt, liquidity, and capital allocation
- Year-end gross debt principal was $3.814 billion, down from $4.030 billion in 2018. Cash and cash equivalents were $250.0 million; restricted cash was $20.5 million.
- Revolver availability was $656.6 million after borrowings and letters of credit. Working capital was negative $157.4 million, versus a $70.0 million deficit in 2018; management said cash flows and available facility capacity should cover projected needs for the next 12 months, subject to covenants.
- In December, Boyd issued $1.0 billion of 4.750% notes due 2027 and redeemed all $750 million of 6.875% notes due 2023, using remaining proceeds to prepay Term B loans. The company reported $295.0 million of Term B prepayments since the second quarter of 2019.
- Debt maturities include approximately $509.5 million in 2021 and $757.1 million in 2023. The company reported compliance with debt covenants at year-end. A 100-basis-point change in interest rates was estimated to change annual interest costs by about $13.1 million.
- Operating lease liabilities totaled approximately $928.0 million at year-end following adoption of the new lease standard. Annual rent under the GLPI master lease was $97.7 million; total 2019 operating lease cost was $163.0 million.
- Boyd repurchased 1.1 million shares for $28.0 million in 2019 and declared dividends totaling $0.27 per share for the year. The 2018 repurchase authorization had $72.5 million remaining at year-end.
Outlook, risks, and unusual items
- Management emphasized operating efficiency, debt reduction, investment in existing properties, and disciplined evaluation of acquisitions. It estimated annual maintenance and refurbishment cash capital needs of $190 million to $210 million.
- The Wilton Rancheria casino project near Sacramento remained in planning, with budget, design, and construction preparation underway. Management expected third-party financing and an 18-to-24-month construction period once the project commenced and financing was arranged; timing and completion are not assured.
- Online gaming and sports betting are strategic opportunities through MGM Resorts and FanDuel partnerships. FanDuel-branded sportsbooks opened at five properties during 2019, subject to applicable approvals and laws.
- Key risks include high leverage and refinancing needs, gaming competition and regulatory or tax changes, sensitivity to discretionary consumer spending, lease obligations, weather and flood exposure, cybersecurity and privacy risks, and labor negotiations. The company noted ongoing contract negotiations at several Las Vegas properties.
- The annual goodwill and indefinite-lived intangible-asset impairment tests recorded no impairment. However, goodwill was $1.083 billion and gaming license rights were $1.163 billion; future impairments could result if operating assumptions deteriorate.
- The 2019 effective tax rate was 21.8%, compared with 26.0% in 2018. The 2017 comparison included a $60.1 million tax benefit from federal tax-law changes. No specific earnings or revenue guidance was provided in the filing.
Most important facts for investors to verify
- How much of reported growth and EBITDAR improvement reflects acquired properties versus same-property operating performance.
- Debt repayment and refinancing capacity, especially the 2021 and 2023 maturities, covenant headroom, and the cost and terms of future borrowing.
- Cash available after maintenance capital spending, dividends, share repurchases, and the substantial rent and other obligations under the GLPI master lease.
- Whether growth in sports betting, online gaming, and planned development produces material returns after costs, financing, and regulatory approvals.
- The sensitivity of goodwill and gaming-license valuations to revenue, margin, competition, and discount-rate assumptions. Deloitte issued unqualified opinions on the financial statements and internal controls; goodwill and indefinite-lived intangibles were identified as a critical audit matter.