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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________

FORM 10-Q

 ____________________________________________________

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to              

Commission file number: 1-12882

___________________________________________________

 

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

 ____________________________________________________

 

Nevada

88-0242733

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6465 South Rainbow Boulevard, Las Vegas, NV 89118

(Address of principal executive offices) (Zip Code)

(702) 792-7200

(Registrant's telephone number, including area code)

3883 Howard Hughes Parkway, Ninth Floor, Las Vegas, NV 89169

(Former name, former address and former fiscal year, if changed since last report)

 ____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

 

 

Common stock, $0.01 par value

 

BYD

 

New York Stock Exchange

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

☐ 

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

The number of shares outstanding of the registrant’s common stock as of July 26, 2021 was 112,223,991.

 

 

 

 

 

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2021

TABLE OF CONTENTS

 

 

 

Page

No.

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020

5

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the six months ended June 30, 2021 and 2020

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22
     

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

 

 

 

Item 4.

Controls and Procedures

34

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

35

 

 

 

Item 1A.

Risk Factors

35

 

 

 

Item 6.

Exhibits

36

 

 

 

Signature Page

37

 

 

 

 

 

PART I. Financial Information

 

Item 1.        Financial Statements (Unaudited)

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 

  

June 30,

  

December 31,

 

(In thousands, except share data)

 

2021

  

2020

 

ASSETS

        

Current assets

        

Cash and cash equivalents

 $334,537  $519,182 

Restricted cash

  21,312   15,817 

Accounts receivable, net

  57,514   53,456 

Inventories

  19,998   22,616 

Prepaid expenses and other current assets

  39,463   39,198 

Income taxes receivable

     8 

Total current assets

  472,824   650,277 

Property and equipment, net

  2,446,808   2,525,887 

Operating lease right-of-use assets

  929,922   928,814 

Other assets, net

  95,201   100,510 

Intangible assets, net

  1,375,871   1,382,173 

Goodwill, net

  971,287   971,287 

Total assets

 $6,291,913  $6,558,948 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current liabilities

        

Accounts payable

 $81,471  $96,863 

Current maturities of long-term debt

  39,324   30,740 

Accrued liabilities

  407,921   396,419 

Income tax payable

  192    

Total current liabilities

  528,908   524,022 

Long-term debt, net of current maturities and debt issuance costs

  3,300,226   3,866,743 

Operating lease liabilities, net of current portion

  846,551   848,825 

Deferred income taxes

  191,916   131,052 

Other liabilities

  66,045   64,363 

Commitments and contingencies (Notes 5 and 6)

          

Stockholders' equity

        

Preferred stock, $0.01 par value, 5,000,000 shares authorized

      

Common stock, $0.01 par value, 200,000,000 shares authorized; 112,223,991 and 111,830,857 shares outstanding

  1,122   1,118 

Additional paid-in capital

  895,227   876,433 

Retained earnings

  462,132   246,242 

Accumulated other comprehensive income (loss)

  (214)  150 

Total stockholders' equity

  1,358,267   1,123,943 

Total liabilities and stockholders' equity

 $6,291,913  $6,558,948 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
3

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands, except per share data)

 

2021

  

2020

  

2021

  

2020

 

Revenues

                

Gaming

 $727,462  $185,111  $1,345,388  $694,876 

Food & beverage

  57,428   10,661   101,540   100,545 

Room

  39,077   6,918   65,067   53,645 

Other

  69,635   7,169   134,914   41,318 

Total revenues

  893,602   209,859   1,646,909   890,384 

Operating costs and expenses

                

Gaming

  259,378   76,761   491,491   315,461 

Food & beverage

  46,819   16,745   85,732   106,584 

Room

  14,207   5,097   26,339   28,082 

Other

  44,487   2,169   86,394   23,616 

Selling, general and administrative

  90,473   60,268   180,480   173,698 

Master lease rent expense

  26,175   25,413   52,090   50,078 

Maintenance and utilities

  31,157   21,654   59,388   54,800 

Depreciation and amortization

  67,279   69,213   131,746   136,178 

Corporate expense

  34,716   13,963   58,031   38,921 

Project development, preopening and writedowns

  1,454   3,825   2,869   7,333 

Impairment of assets

           171,100 

Other operating items, net

  11,115   1,099   12,272   8,642 

Total operating costs and expenses

  627,260   296,207   1,186,832   1,114,493 

Operating income (loss)

  266,342   (86,348)  460,077   (224,109)

Other expense (income)

                

Interest income

  (455)  (569)  (964)  (1,008)

Interest expense, net of amounts capitalized

  55,131   59,208   113,021   111,053 

Loss on early extinguishments and modifications of debt

  65,475   412   65,475   587 

Other, net

  237   115   2,169   (229)

Total other expense, net

  120,388   59,166   179,701   110,403 

Income (loss) before income taxes

  145,954   (145,514)  280,376   (334,512)

Income tax benefit (provision)

  (32,225)  36,970   (64,486)  78,409 

Net income (loss)

 $113,729  $(108,544) $215,890  $(256,103)
                 
                 

Basic net income (loss) per common share

 $1.00  $(0.96) $1.90  $(2.26)

Weighted average basic shares outstanding

  113,779   113,257   113,703   113,482 
                 
                 

Diluted net income (loss) per common share

 $1.00  $(0.96) $1.89  $(2.26)

Weighted average diluted shares outstanding

  114,040   113,257   114,005   113,482 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Net income (loss)

 $113,729  $(108,544) $215,890  $(256,103)

Other comprehensive income (loss), net of tax:

                

Fair value adjustments to available-for-sale securities, net of tax

  (43)  (445)  (364)  682 

Comprehensive income (loss)

 $113,686  $(108,989) $215,526  $(255,421)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

 

                                   

Accumulated Other

         
   

Common Stock

   

Additional

   

Retained

   

Comprehensive

         

(In thousands, except share data)

 

Shares

   

Amount

   

Paid-in Capital

   

Earnings

   

Income (Loss)

   

Total

 

Balances, January 1, 2021

    111,830,857     $ 1,118     $ 876,433     $ 246,242     $ 150     $ 1,123,943  

Net income

                      102,161             102,161  

Comprehensive loss, net of tax

                            (321 )     (321 )

Stock options exercised

    158,568       2       1,743                   1,745  

Release of restricted stock units, net of tax

    29,808             (609 )                 (609 )

Release of performance stock units, net of tax

    61,654       1       (1,901 )                 (1,900 )

Share-based compensation costs

                5,701                   5,701  

Balances, March 31, 2021

    112,080,887       1,121       881,367       348,403       (171 )     1,230,720  

Net income

                      113,729             113,729  

Comprehensive loss, net of tax

                            (43 )     (43 )

Stock options exercised

    100,068             1,037                   1,037  

Release of restricted stock units, net of tax

    43,036       1                         1  

Share-based compensation costs

                12,823                   12,823  

Balances, June 30, 2021

    112,223,991     $ 1,122     $ 895,227     $ 462,132     $ (214 )   $ 1,358,267  

 

 

                                   

Accumulated Other

         
   

Common Stock

   

Additional

   

Retained

   

Comprehensive

         

(In thousands, except share data)

 

Shares

   

Amount

   

Paid-in Capital

   

Earnings

   

Income (Loss), Net

   

Total

 

Balances, January 1, 2020

    111,542,108     $ 1,115     $ 883,715     $ 380,942     $ (530 )   $ 1,265,242  

Net loss

                      (147,559 )           (147,559 )

Comprehensive income, net of tax

                            1,127       1,127  

Stock options exercised

    3,000             25                   25  

Release of restricted stock units, net of tax

    76,502       1       (767 )                 (766 )

Release of performance stock units, net of tax

    241,118       2       (3,372 )                 (3,370 )

Shares repurchased and retired

    (682,596 )     (6 )     (11,114 )                 (11,120 )

Share-based compensation costs

                8,191                   8,191  

Balances, March 31, 2020

    111,180,132       1,112       876,678       233,383       597       1,111,770  

Net loss

                      (108,544 )           (108,544 )

Comprehensive loss, net of tax

                            (445 )     (445 )

Stock options exercised

    1,000             8                   8  

Release of restricted stock units, net of tax

    183,741       2       (6 )                 (4 )

Release of performance stock units, net of tax

    20,082       1                         1  

Shares repurchased and retired

          (1 )                       (1 )

Share-based compensation costs

                2,693                   2,693  

Balances, June 30, 2020

    111,384,955     $ 1,114     $ 879,373     $ 124,839     $ 152     $ 1,005,478  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

   

Six Months Ended

 
   

June 30,

 

(In thousands)

 

2021

   

2020

 

Cash Flows from Operating Activities

               

Net income (loss)

  $ 215,890     $ (256,103 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

               

Depreciation and amortization

    131,746       136,178  

Amortization of debt financing costs and discounts on debt

    5,931       5,307  

Non-cash operating lease expense

    30,329       34,225  

Share-based compensation expense

    18,524       10,884  

Deferred income taxes

    60,864       (78,092 )

Non-cash impairment of assets

          171,100  

Loss on early extinguishments and modifications of debt

    65,475       587  

Other operating activities

    8,510       4,738  

Changes in operating assets and liabilities:

               

Accounts receivable, net

    (4,058 )     19,630  

Inventories

    2,618       (2,912 )

Prepaid expenses and other current assets

    (647 )     (19,275 )

Income taxes (receivable) payable, net

    200       1,541  

Other assets, net

    (2,715 )     (1,113 )

Accounts payable and accrued liabilities

    (8,315 )     (54,763 )

Operating lease liabilities

    (30,329 )     (34,225 )

Other long-term tax liabilities

          95  

Other liabilities

    5,319       9,393  

Net cash provided by (used in) operating activities

    499,342       (52,805 )

Cash Flows from Investing Activities

               

Capital expenditures

    (96,339 )     (75,916 )

Insurance proceeds received for hurricane losses

    40,240        

Other investing activities

    6,672        

Net cash used in investing activities

    (49,427 )     (75,916 )

Cash Flows from Financing Activities

               

Borrowings under bank credit facility

          965,100  

Payments under bank credit facility

    (11,536 )     (344,848 )

Proceeds from issuance of senior notes

    900,000       600,000  

Debt financing costs, net

    (14,596 )     (12,918 )

Retirements of senior notes

    (1,450,000 )      

Premium and consent fees

    (51,863 )      

Share-based compensation activities, net

    274       (4,106 )

Shares repurchased and retired

          (11,121 )

Dividends paid

          (7,808 )

Other financing activities

    (1,344 )     (593 )

Net cash provided by (used in) financing activities

    (629,065 )     1,183,706  

Change in cash, cash equivalents and restricted cash

    (179,150 )     1,054,985  

Cash, cash equivalents and restricted cash, beginning of period

    534,999       270,448  

Cash, cash equivalents and restricted cash, end of period

  $ 355,849     $ 1,325,433  

Supplemental Disclosure of Cash Flow Information

               

Cash paid for interest, net of amounts capitalized

  $ 131,778     $ 112,220  

Cash paid for (received from) income taxes

    3,298       (1,448 )

Supplemental Schedule of Non-cash Investing and Financing Activities

               

Payables incurred for capital expenditures

  $ 3,072     $ 12,250  

Mortgage settlement in exchange for real estate

          57,684  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

7

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

as of June 30, 2021 and December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

 

NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Boyd Gaming Corporation (and together with its subsidiaries, the "Company," "Boyd," "Boyd Gaming," "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD."

 

We are a geographically diversified operator of 28 wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania.

 

Impact of the COVID 19 Pandemic

In mid- March 2020, all of our gaming facilities were closed in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus. As of June 30, 2021, 26 of our 28 gaming facilities are open and operating. Two of our properties in Las Vegas remain closed to the public due to the current levels of the demand in the market and our cost containment efforts. No dates have been set for re-opening these properties. We cannot predict whether we will be required to temporarily close some or all of our open casinos in the future. Further, we cannot currently predict the ongoing impact of the pandemic on consumer demand and the negative effects on our workforce, suppliers, contractors and other partners. In responding to these circumstances, the safety and well-being of our team members and customers is our utmost priority. We have developed and implemented a broad range of safety protocols at our properties to ensure the health and safety of our team members and our customers.

 

The closures in 2020 of our properties had a material impact on our business, and the COVID-19 pandemic, its associated impacts on customer behavior and the requirements of health and safety protocols are expected to continue to have an impact on our business. The severity and duration of such business impacts cannot currently be estimated and the ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, potential resurgences or new variants of the virus, the logistics of distribution, level of participation and overall efficacy of vaccine programs, changes in consumer behavior and demand and the related impact on economic activity, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in additional business disruptions, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time.

 

We currently anticipate funding our operations over the next 12 months with the cash being generated by our open properties, supplemented, if necessary, by the cash we currently have available and the borrowing capacity available under our Revolving Credit Facility. We assessed the recoverability of our assets as of the end of first quarter and second quarter and no impairment charges were required. If our expectations regarding projected revenues and cash flows related to our assets are not achieved, we may be subject to impairment charges in the future, which could have a material adverse impact on our consolidated financial statements. 

 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2020, as filed with the U.S. Securities and Exchange Commission ("SEC") on March 1, 2021.

 

The results for the periods indicated are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods.

 

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming and its wholly owned subsidiaries. Investments in unconsolidated affiliates, which do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

8

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, which include cash on hand and in banks, interest-bearing deposits and money market funds with maturities of three months or less at their date of purchase. The instruments are not restricted as to withdrawal or use and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.

 

Restricted Cash

Restricted cash consists primarily of advance payments related to: (i) future bookings with our Hawaiian travel agency; and (ii) amounts restricted by regulation for gaming and racing purposes. These restricted cash balances are invested in highly liquid instruments with a maturity of 90 days or less. These restricted cash balances are held by high credit quality financial institutions. The carrying value of these instruments approximates their fair value due to their short maturities.

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash balances reported within the condensed consolidated balance sheets to the total balance shown in the condensed consolidated statements of cash flows.

 

  

June 30,

  

December 31,

  

June 30,

  

December 31,

 

(In thousands)

 

2021

  

2020

  

2020

  

2019

 

Cash and cash equivalents

 $334,537  $519,182  $1,308,347  $249,977 

Restricted cash

  21,312   15,817   17,086   20,471 

Total cash, cash equivalents and restricted cash

 $355,849  $534,999  $1,325,433  $270,448 

 

Leases

Management determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. For our operating leases for which the rate implicit in the lease is not readily determinable, we generally use an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating right-of-use ("ROU") assets and finance lease assets are recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease and non-lease components are accounted for separately.

 

Revenue Recognition

The Company’s revenue contracts with customers consist of gaming wagers, hotel room sales, food & beverage offerings and other amenity transactions. The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gross gaming revenues. The transaction price for hotel, food & beverage and other contracts is the net amount collected from the customer for such goods and services. Hotel, food & beverage and other services have been determined to be separate, stand-alone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over their stay at the hotel, when the delivery is made for the food & beverage or when the service is provided for other amenity transactions.

 

Gaming wager contracts involve two performance obligations for those customers earning points under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for a hotel room stay, food & beverage or other amenities. Sales and usage-based taxes are excluded from revenues. An amount is allocated to the gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately. The loyalty point contract liability amount is deferred and recognized as revenue when the customer redeems the points for a hotel room stay, food & beverage or other amenities and such goods or services are delivered to the customer. See Note 4, Accrued Liabilities, for the balance outstanding related to player loyalty programs.

 

9

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

The Company collects advanced deposits from hotel customers for future reservations representing obligations of the Company until the hotel room stay is provided to the customer. See Note 4, Accrued Liabilities, for the balance outstanding related to advance deposits.

 

The Company's outstanding chip liability represents the amounts owed in exchange for gaming chips held by a customer. Outstanding chips are expected to be recognized as revenue or redeemed for cash within one year of being purchased. See Note 4, Accrued Liabilities, for the balance outstanding related to the chip liability.

 

The retail value of hotel accommodations, food & beverage, and other services furnished to guests without charge is recorded as departmental revenues. Gaming revenues are net of incentives earned in our slot bonus program such as cash and the estimated retail value of goods and services (such as complimentary hotel rooms and food & beverage). We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food & beverage, and to a lesser extent for other goods or services, depending upon the property.

 

The estimated retail value related to goods and services provided to customers without charge or upon redemption of points under our player loyalty programs, included in departmental revenues and therefore reducing our gaming revenues, are as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Food & beverage

 $26,202  $5,235  $48,904  $49,415 

Rooms

  15,310   3,069   28,249   22,155 

Other

  1,489   172   2,565   3,054 

 

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are recorded as a gaming expense in the condensed consolidated statements of operations. These taxes totaled approximately $177.5 million and $34.8 million for the three months ended June 30, 2021 and 2020, respectively, and $336.3 million and $144.8 million for the six months ended June 30, 2021 and 2020, respectively.

 

Income Taxes

Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

 

Other Long-Term Tax Liabilities

The Company's income tax returns are subject to examination by the Internal Revenue Service and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

 

Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. Recognition occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement is only addressed if the position is deemed to be more likely than not to be sustained. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.

 

Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the "more likely than not" standard. If it is subsequently determined that a previously recognized tax position no longer meets the "more likely than not" standard, it is required that the tax position is derecognized. Accounting standards for uncertain tax positions specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. 

 

Collaborative Arrangements

We have a strategic partnership with FanDuel Group ("FanDuel"), the nation's leading sports-betting and iGaming operator, to pursue sports betting and online gaming opportunities across the country. Subject to state law and regulatory approvals, we have established a presence in the online gaming and sports wagering industry by leveraging FanDuel's technology and related services to operate Boyd Gaming-branded mobile and online sports-betting and gaming services. In turn, FanDuel has established and operates mobile and online sports-betting and gaming services under the FanDuel brand in some of the states where we are licensed. We currently offer these services in Illinois, Indiana, Iowa, Mississippi and Pennsylvania. We have also entered into agreements with other companies for the operation of online gaming offerings under a market-access agreement with MGM Resorts. The activities related to these collaborative arrangements are recorded in other revenue and other expense on the condensed consolidated statements of operations.

 

10

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

Recently Adopted Accounting Pronouncements

Accounting Standards Update ("ASU") 2020-01, Investments - Equity Securities, Topic 321, Investments - Equity Method and Joint Ventures, Topic 323, and Derivative and Hedging, Topic 815 ("Update 2020-01")

In January 2020, the Financial Accounting Standards Board ("FASB") issued Update 2020-01 to clarify guidance in accounting for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative. Update 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted Update 2020-01 during first quarter 2021 and the impact of the adoption to its condensed consolidated financial statements was not material.

 

ASU 2019-12, Income Taxes, Topic 740, Simplifying the Accounting for Income Taxes ("Update 2019-12")

In December 2019, the FASB issued Update 2019-12 to simplify the accounting for income taxes by removing certain exceptions and clarifying the guidance in certain areas of Topic 740. Update 2019-12 is effective for financial statements issued for annual periods and interim periods beginning after December 15, 2020. The Company adopted Update 2019-12 on January 1, 2021 and the impact of the adoption to its condensed consolidated financial statements was not material.

 

Recently Issued Accounting Pronouncements

A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

 

 

NOTE 2.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2021

  

2020

 

Land

 $345,194  $346,485 

Buildings and improvements

  3,097,960   3,074,896 

Furniture and equipment

  1,625,281   1,609,637 

Riverboats and barges

  241,167   241,043 

Construction in progress

  36,667   43,883 

Total property and equipment

  5,346,269   5,315,944 

Less accumulated depreciation

  (2,899,461)  (2,790,057)

Property and equipment, net

 $2,446,808  $2,525,887 

 

Depreciation expense is as follows:

 

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Depreciation expense

 $64,122  $64,368  $125,432  $126,497 

 

11

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

_________________________________________________________________________________________________

_____

 

 

NOTE 3.    GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

 

  

June 30, 2021

 
  

Weighted

  

Gross

      

Accumulated

     
  

Useful Life

  

Carrying

  

Accumulated

  

Impairment

  

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                   

Customer relationships

 2.0  $68,100  $(59,431) $  $8,669 

Host agreements

 11.9   58,000   (11,922)     46,078 

Development agreement

    21,373         21,373 
      147,473   (71,353)     76,120 
                    

Indefinite lived intangible assets

                   

Trademarks

 Indefinite   204,000      (24,800)  179,200 

Gaming license rights

 Indefinite   1,376,685   (33,960)  (222,174)  1,120,551 
      1,580,685   (33,960)  (246,974)  1,299,751 

Balances, June 30, 2021

    $1,728,158  $(105,313) $(246,974) $1,375,871 

 

  

December 31, 2020

 
  

Weighted

  

Gross

      

Accumulated

     
  

Useful Life

  

Carrying

  

Accumulated

  

Impairment

  

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                   

Customer relationships

 2.5  $68,100  $(55,062) $  $13,038 

Host agreements

 12.4   58,000   (9,989)     48,011 

Development agreement

    21,373         21,373 
      147,473   (65,051)     82,422 
                    

Indefinite lived intangible assets

                   

Trademarks

 

Indefinite

   204,000      (24,800)  179,200 

Gaming license rights

 

Indefinite

   1,376,685   (33,960)  (222,174)  1,120,551 
      1,580,685   (33,960)  (246,974)  1,299,751 

Balances, December 31, 2020

    $1,728,158  $(99,011) $(246,974) $1,382,173 

 

Goodwill, net consists of the following:

 

  

Gross

      

Accumulated

     
  

Carrying

  

Accumulated

  

Impairment

  

Goodwill,

 

(In thousands)

 

Value

  

Amortization

  

Losses

  

Net

 

Goodwill, net by Reportable Segment

                

Las Vegas Locals

 $593,567  $  $(188,079) $405,488 

Downtown Las Vegas

  6,997   (6,134)     863 

Midwest & South

  666,798      (101,862)  564,936 

Balances, June 30, 2021

 $1,267,362  $(6,134) $(289,941) $971,287 

 

The following table sets forth the changes in our goodwill, net, during the six months ended June 30, 2021.

 

(In thousands)

 

Goodwill, Net

 

Balance, January 1, 2021

 $971,287 

Additions

   

Impairments

   

Balance, June 30, 2021

 $971,287 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

 

NOTE 4.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

 

   

June 30,

   

December 31,

 

(In thousands)

 

2021

   

2020

 

Payroll and related expenses

  $ 87,024     $ 73,802  

Interest

    11,446       36,055  

Gaming liabilities

    73,926       72,655  

Player loyalty program liabilities

    28,800       27,935  

Advance deposits

    19,597       16,037  

Outstanding chip liabilities

    6,541       6,021  

Operating lease liabilities

    94,427       90,478  

Other accrued liabilities

    86,160       73,436  

Total accrued liabilities

  $ 407,921     $ 396,419  

 

 

NOTE 5.    LONG-TERM DEBT

Long-term debt, net of current maturities and debt issuance costs, consists of the following:

 

  

June 30, 2021

 
  

Interest

          

Unamortized

     
  Rates at          Origination     
  

June 30,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2021

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Bank credit facility

 2.471% $884,648  $(382) $(10,587) $873,679 

4.750% senior notes due 2027

 4.750%  1,000,000      (12,662)  987,338 

8.625% senior notes due 2025

 8.625%  600,000      (9,322)  590,678 

4.750% senior notes due 2031

 4.750%  900,000      (14,440)  885,560 

Other

 6.184%  2,295         2,295 

Total long-term debt

 .   3,386,943   (382)  (47,011)  3,339,550 

Less current maturities

     39,324         39,324 

Long-term debt, net

    $3,347,619  $(382) $(47,011) $3,300,226 

 

  

December 31, 2020

 
  

Interest

          

Unamortized

     
  Rates at          Origination     
  

December 31,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2020

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Bank credit facility

 2.486% $896,185  $(472) $(12,924) $882,789 

6.375% senior notes due 2026

 6.375%  750,000      (6,947)  743,053 

6.000% senior notes due 2026

 6.000%  700,000      (7,849)  692,151 

4.750% senior notes due 2027

 4.750%  1,000,000      (13,636)  986,364 

8.625% senior notes due 2025

 8.625%  600,000      (10,512)  589,488 

Other

 6.137%  3,638         3,638 

Total long-term debt

     3,949,823   (472)  (51,868)  3,897,483 

Less current maturities

     30,740         30,740 

Long-term debt, net

    $3,919,083  $(472) $(51,868) $3,866,743 

 

13

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

The outstanding principal amounts under our bank credit facility are comprised of the following:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2021

  

2020

 

Revolving Credit Facility

 $  $ 

Term A Loan

  128,582   133,796 

Refinancing Term B Loans

  756,066   762,389 

Swing Loan

      

Total outstanding principal amounts under the bank credit facility

 $884,648  $896,185 

 

With a total revolving credit commitment of $1,033.7 million available under the bank credit facility, no borrowings on the Revolving Credit Facility and the Swing Loan and $11.9 million allocated to support various letters of credit, there is a remaining contractual availability of $1,021.8 million as of June 30, 2021

 

Bank Credit Agreement Amendment

On May 25, 2021, the Company entered into an Amendment No. 5 (the "Amendment") among the Company, certain direct and indirect subsidiary guarantors of the Company (the "Guarantors"), Bank of America, N.A., as administrative agent, and certain other financial institutions party thereto as lenders. The Amendment modifies that certain Third Amended and Restated Credit Agreement (as amended prior to the execution of the Amendment, the "Existing Credit Agreement," and as amended by the Amendment, the "Credit Agreement"), dated as of August 14, 2013, among the Company, Bank of America, N.A., as administrative agent and letter of credit issuer, Wells Fargo Bank, National Association, as swing line lender, and certain other financial institutions party thereto as lenders.

 

The Amendment modifies the Existing Credit Agreement to remove certain of the limitations imposed during the covenant relief period by a prior amendment on (i) the Company’s ability to refinance debt previously incurred under the ratio debt basket and (ii) the Company’s ability to repay junior secured or unsecured indebtedness, such that, during the covenant relief period, subject to certain limitations, including the achievement of a total net leverage ratio of 5.50 to 1.00 on a pro forma basis, the absence of events of default, pro forma compliance with financial covenants (to the extent applicable during the covenant relief period), the use of no more than $200 million of proceeds of borrowings under the revolving credit facility under the Credit Agreement for such purpose and no use of any cash or cash equivalents held in casino cages for such purpose, the Company may repay junior secured or unsecured indebtedness with cash on hand and borrowings under such revolving credit facility.

 

4.750% Senior Notes due June 2031

On June 8, 2021, we issued $900 million aggregate principal amount of 4.750% senior notes due June 2031 (the "4.750% Notes due 2031"). The 4.750% Notes due 2031 require semi-annual interest payments on March 15 and September 15 of each year, commencing on September 15, 2021. The 4.750% Notes due 2031 will mature on June 15, 2031 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The net proceeds from the 4.750% Notes due 2031 and cash on hand were used to finance the redemption of our outstanding 6.375% senior notes due April 2026 ("6.375% Notes") and 6.000% senior notes due August 2026 ("6.000% Notes").

 

In conjunction with the issuance of the 4.750% Notes due 2031, we incurred approximately $14.5 million in debt financing costs that have been deferred and are being amortized over the term of the 4.750% Notes due 2031 using the effective interest method.

 

At any time prior to June 15, 2026, we may redeem the 4.750% Notes due 2031, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. In addition, at any time prior to June 15, 2024, we may redeem up to 40% of the aggregate principal amount of the 4.750% Notes due 2031 at a redemption price (expressed as percentages of the principal amount) equal to 104.750%, plus accrued and unpaid interest and Additional Interest.

 

Redemption of 6.375% Senior Notes due April 2026

On June 9, 2021, we redeemed all our 6.375% Notes at a redemption price of 103.188% plus accrued and unpaid interest to the redemption date. The redemption was funded through the issuance of the 4.750% Notes due 2031. The Company used operating cash to pay the redemption premium, accrued and unpaid interest, fees, expenses and commissions related to this redemption.

 

Redemption of 6.000% Senior Notes due August 2026

On June 9, 2021, we redeemed all our 6.000% Notes at a redemption price of 103.993% plus accrued and unpaid interest to the redemption date. The redemption was funded through the issuance of the 4.750% Notes due 2031 and cash on hand. The Company used operating cash to pay the redemption premium, accrued and unpaid interest, fees, expenses and commissions related to this redemption.

 

Covenant Compliance

On May 8, 2020, we amended the Bank Credit Agreement to, among other things, waive the financial covenants for the period beginning on March 30, 2020 through the earlier of (x) the date on which the Company delivers to the administrative agent a covenant relief period termination notice, (y) the date on which the administrative agent receives a compliance certificate with respect to the Company’s fiscal quarter ending June 30, 2021, and (z) the date on which the Company fails to satisfy the conditions to covenant relief set forth in the amendment. 

 

As of  June 30, 2021, we believe that we were in compliance with the covenants of our debt instruments.

 

14

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

 

NOTE 6.    COMMITMENTS AND CONTINGENCIES

Commitments
As of June 30, 2021, there have been no material changes to our commitments described under Note 9, Commitments and Contingencies, in our Annual Report on Form  10-K for the year ended December 31, 2020, as filed with the SEC on March 1, 2021.

 

Contingencies
Legal Matters
We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position, results of operations or cash flows.
 
 

NOTE 7.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase Program
On December 12, 2018, our Board of Directors authorized a share repurchase program of $100 million, which as of June 30, 2021, had  $61.4 million remaining under the plan. On March 16, 2020, the Company suspended share repurchases under the program in order to preserve liquidity due to the COVID- 19 pandemic. During the six months ended June 30, 2020, the Company repurchased 0.7 million shares, at a total cost, including brokerage fees, of $11.1 million, for an average repurchase price per share of $16.29.  There were no share repurchases for the three months ended June 30, 2021 and 2020 and for the six months ended June 30, 2021.

 

 

Dividends

The dividends declared by the Board of Directors and reflected in the periods presented are:

 

Declaration date

 

Record date

 

Payment date

 Amount per share 

December 17, 2019

 

December 27, 2019

 

January 15, 2020

 $0.07 

 

On March 25, 2020, the Company announced that the cash dividend program has been suspended to help mitigate the financial impact of the COVID-19 pandemic.

 

Share-Based Compensation

We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.

 

The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated statements of operations.

 

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Gaming

 $266  $141  $426  $353 

Food & beverage

  51   27   82   67 

Room

  25   13   39   32 

Selling, general and administrative

  1,353   720   2,168   1,796 

Corporate expense

  11,128   1,792   15,809   8,636 

Total share-based compensation expense

 $12,823  $2,693  $18,524  $10,884 

 

Performance Shares

Our stock incentive plan provides for the issuance of Performance Stock Unit ("PSU") grants which may be earned, in whole or in part, upon passage of time and the attainment of performance criteria. We periodically review our estimates of performance against the defined criteria to assess the expected payout of each outstanding PSU grant and adjust our stock compensation expense accordingly.

 

The PSU grants awarded in fourth quarter 2017 and 2016 vested during first quarter 2021 and 2020, respectively. Common shares were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") growth and customer service scores for the three-year performance period of each grant. As provided under the provisions of our stock incentive plan, certain of the participants elected to surrender a portion of the shares to be received to pay the withholding and other payroll taxes payable on the compensation resulting from the vesting of the PSUs.

 

The PSU grant awarded in November 2017 resulted in a total of 90,444 shares being issued during first quarter 2021, representing approximately 0.33 shares per PSU. Of the 90,444 shares issued, a total of 30,129 were surrendered by the participants for payroll taxes, resulting in a net issuance of 60,315 shares due to the vesting of the 2017 grant. The actual achievement level under the award metrics equaled the estimated performance as of the year-end 2020; therefore, the vesting of the PSUs did not impact compensation costs in our 2021 condensed consolidated statement of operations.

 

15

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

The PSU grant awarded in November 2016 resulted in a total of 364,810 shares being issued during first quarter 2020, representing approximately 1.53 shares per PSU. Of the 364,810 shares issued, a total of 126,465 were surrendered by the participants for payroll taxes, resulting in a net issuance of 238,345 shares due to the vesting of the 2016 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2019; therefore, the vesting of the PSUs did not impact compensation costs in our 2020 condensed consolidated statement of operations.

 

Unamortized Stock Compensation Expense and Recognition Period

As of June 30, 2021, there was approximately $14.5 million, $0.9 million and $1.6 million of total unrecognized share-based compensation costs related to unvested restricted stock units (“RSUs”), PSUs and career shares, respectively.  As of June 30, 2021, the unrecognized share-based compensation costs related to our RSUs, PSUs and career shares are expected to be recognized over approximately 2.1 years, 1.3 years and 4.2 years, respectively.

 

 

NOTE 8.     FAIR VALUE MEASUREMENTS

The authoritative accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These inputs create the following fair value hierarchy:

 

Level 1: Quoted prices for identical instruments in active markets.

 

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

 

Balances Measured at Fair Value

The following tables show the fair values of certain of our financial instruments:

 

  

June 30, 2021

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $334,537  $334,537  $  $ 

Restricted cash

  21,312   21,312       

Investment available for sale

  15,696         15,696 
                 

Liabilities

                

Contingent payments

 $489  $  $  $489 

 

  

December 31, 2020

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $519,182  $519,182  $  $ 

Restricted cash

  15,817   15,817       

Investment available for sale

  16,692         16,692 
                 

Liabilities

                

Contingent payments

 $924  $  $  $924 

 

Cash and Cash Equivalents and Restricted Cash

The fair values of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks at  June 30, 2021 and December 31, 2020.

 

Investment Available for Sale

We have an investment in a single municipal bond issuance of $18.4 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 with a maturity date of June 1, 2037 that is classified as available for sale. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The fair value of the instrument is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation at  June 30, 2021 and  December 31, 2020 is a discount rate of 10.2% and 9.6%, respectively. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the condensed consolidated balance sheets. At both  June 30, 2021 and December 31, 2020, $0.6 million of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at  June 30, 2021 and December 31, 2020, $15.1 million and $16.1 million, respectively, is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $2.4 million as of  June 30, 2021 and $2.5 million as of December 31, 2020, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.

 

16

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

Contingent Payments

In connection with the development of the Kansas Star Casino ("Kansas Star"), Kansas Star agreed to pay a former casino project promoter 1% of Kansas Star's EBITDA each month for a period of ten years ending on December 20, 2021. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at June 30, 2021 and December 31, 2020, is a discount rate of 4.5% and 6.1%, respectively. At June 30, 2021 and December 31, 2020, there was a current liability of $0.5 million and $0.9 million, respectively, related to this agreement, which is recorded in accrued liabilities on the respective condensed consolidated balance sheets.

 

The following tables summarize the changes in fair value of the Company's Level 3 assets and liabilities:

 

  

Three Months Ended

 
  

June 30, 2021

  

June 30, 2020

 
  

Asset

  

Liability

  

Asset

  

Liability

 

(In thousands)

 

Investment Available for Sale

  

Contingent Payments

  

Investment Available for Sale

  

Contingent Payments

 

Balance at beginning of reporting period

 $16,297  $(769) $17,745  $(1,520)

Total gains (losses) (realized or unrealized):

                

Included in interest income (expense)

  41   (8)  39   (22)

Included in other comprehensive income (loss)

  (52)     (367)   

Included in other items, net

     (23)     238 

Purchases, sales, issuances and settlements:

                

Settlements

  (590)  311   (550)  29 

Balance at end of reporting period

 $15,696  $(489) $16,867  $(1,275)

 

  

Six Months Ended

 
  

June 30, 2021

  

June 30, 2020

 
  

Asset

  

Liability

  

Asset

  

Liability

 

(In thousands)

 

Investment Available for Sale

  

Contingent Payments

  

Investment Available for Sale

  

Contingent Payments

 

Balance at beginning of reporting period

 $16,692  $(924) $16,151  $(1,712)

Total gains (losses) (realized or unrealized):

                

Included in interest income (expense)

  82   (21)  78   (48)

Included in other comprehensive income (loss)

  (488)     1,188    

Included in other items, net

     3      221 

Purchases, sales, issuances and settlements:

                

Settlements

  (590)  453   (550)  264 

Balance at end of reporting period

 $15,696  $(489) $16,867  $(1,275)

 

We are exposed to valuation risk on our Level 3 financial instruments. We estimate our risk exposure using a sensitivity analysis of potential changes in the significant unobservable inputs of our fair value measurements. Our Level 3 financial instruments are most susceptible to valuation risk caused by changes in the discount rate. If the discount rate in our fair value measurements increased or decreased by 100 basis points, the change would not cause the value of our fair value measurements to change significantly.

 

Balances Disclosed at Fair Value

The following tables provide the fair value measurement information about our obligation under assessment agreements and other financial instruments:

 

  

June 30, 2021

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

Liabilities

             

Obligation under assessment arrangements

 $25,289  $25,590  $27,042 

Level 3

 

 

17

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

  

December 31, 2020

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

Liabilities

             

Obligation under assessment arrangements

 $26,246  $22,062  $26,542 

Level 3

 

The following tables provide the fair value measurement information about our long-term debt:

 

  

June 30, 2021

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

Bank credit facility

 $884,648  $873,679  $882,436 

Level 2

4.750% senior notes due 2027

  1,000,000   987,338   1,032,500 

Level 1

8.625% senior notes due 2025

  600,000   590,678   660,750 

Level 1

4.750% senior notes due 2031

  900,000   885,560   933,750 

Level 1

Other

  2,295   2,295   2,295 

Level 3

Total debt

 $3,386,943  $3,339,550  $3,511,731  

 

  

December 31, 2020

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

Bank credit facility

 $896,185  $882,789  $888,511 

Level 2

6.375% senior notes due 2026

  750,000   743,053   778,125 

Level 1

6.000% senior notes due 2026

  700,000   692,151   728,000 

Level 1

4.750% senior notes due 2027

  1,000,000   986,364   1,038,750 

Level 1

8.625% senior notes due 2025

  600,000   589,488   667,500 

Level 1

Other

  3,638   3,638   3,638 

Level 3

Total debt

 $3,949,823  $3,897,483  $4,104,524  

 

The estimated fair value of our bank credit facility is based on a relative value analysis performed on or about  June 30, 2021 and December 31, 2020. The estimated fair values of our Senior Notes are based on quoted market prices as of  June 30, 2021 and December 31, 2020. The other debt is fixed-rate debt consisting of the following: (i) finance leases with various maturity dates from 2021 to 2022; and (ii) a purchase obligation with quarterly payments maturing in July 2022. The other debt is not traded and does not have an observable market input; therefore, we have estimated its fair value to be equal to the carrying value.

 

There were no transfers between Level 1, Level 2 and Level 3 measurements during the six months ended June 30, 2021 and 2020.

 

18

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

 

NOTE 9.    SEGMENT INFORMATION

We aggregate certain of our gaming entertainment properties in order to present three Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest & South. The table below lists the classification of each of our properties.

 

Las Vegas Locals

  

Gold Coast Hotel and Casino

 

Las Vegas, Nevada

The Orleans Hotel and Casino

 

Las Vegas, Nevada

Sam's Town Hotel and Gambling Hall

 

Las Vegas, Nevada

Suncoast Hotel and Casino

 

Las Vegas, Nevada

Eastside Cannery Casino and Hotel

 

Las Vegas, Nevada

Aliante Casino + Hotel + Spa

 

North Las Vegas, Nevada

Cannery Casino Hotel

 

North Las Vegas, Nevada

Jokers Wild Casino

 

Henderson, Nevada

Downtown Las Vegas

  

California Hotel and Casino

 

Las Vegas, Nevada

Fremont Hotel and Casino

 

Las Vegas, Nevada

Main Street Station Casino, Brewery and Hotel

 

Las Vegas, Nevada

Midwest & South

  

Par-A-Dice Hotel Casino

 

East Peoria, Illinois

Belterra Casino Resort

 

Florence, Indiana

Blue Chip Casino, Hotel & Spa

 

Michigan City, Indiana

Diamond Jo Dubuque

 

Dubuque, Iowa

Diamond Jo Worth

 

Northwood, Iowa

Kansas Star Casino

 

Mulvane, Kansas

Amelia Belle Casino

 

Amelia, Louisiana

Delta Downs Racetrack Casino & Hotel

 

Vinton, Louisiana

Evangeline Downs Racetrack and Casino

 

Opelousas, Louisiana

Sam's Town Hotel and Casino

 

Shreveport, Louisiana

Treasure Chest Casino

 

Kenner, Louisiana

IP Casino Resort Spa

 

Biloxi, Mississippi

Sam's Town Hotel and Gambling Hall

 

Tunica, Mississippi

Ameristar Casino Hotel Kansas City

 

Kansas City, Missouri

Ameristar Casino Resort Spa St. Charles

 

St. Charles, Missouri

Belterra Park

 

Cincinnati, Ohio

Valley Forge Casino Resort

 

King of Prussia, Pennsylvania

 

Total Reportable Segment Departmental Revenues and Adjusted EBITDAR

We evaluate each of our property's profitability based upon Property Adjusted EBITDAR, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, deferred rent, share-based compensation expense, project development, preopening and writedowns expenses, impairments of assets, other operating items, net, gain or loss on early retirements of debt, and master lease rent expense, as applicable. Total Reportable Segment Adjusted EBITDAR is the aggregate sum of the Property Adjusted EBITDAR for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest & South segments. Results for Downtown Las Vegas include the results of our Hawaii-based travel agency and captive insurance company. Results for Lattner, our Illinois distributed gaming operator, and for our online gaming initiatives are included in our Midwest & South segment.

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

The following tables set forth, for the periods indicated, departmental revenues for our Reportable Segments:

 

  

Three Months Ended June 30, 2021

 

 

     Food &             

 

 Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $187,511  $19,117  $18,481  $10,986  $236,095 

Downtown Las Vegas

  27,190   6,502   3,448   1,640   38,780 

Midwest & South

  512,761   31,809   17,148   57,009   618,727 

Total Revenues

 $727,462  $57,428  $39,077  $69,635  $893,602 

 

  

Three Months Ended June 30, 2020

 

 

     Food &             

 

 Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $40,846  $3,367  $2,383  $2,095  $48,691 

Downtown Las Vegas

  3,140   882   327   315   4,664 

Midwest & South

  141,125   6,412   4,208   4,759   156,504 

Total Revenues

 $185,111  $10,661  $6,918  $7,169  $209,859 

 

  

Six Months Ended June 30, 2021

 

 

     Food &             

 

 Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $336,733  $32,547  $29,168  $20,070  $418,518 

Downtown Las Vegas

  42,036   10,314   5,269   2,594   60,213 

Midwest & South

  966,619   58,679   30,630   112,250   1,168,178 

Total Revenues

 $1,345,388  $101,540  $65,067  $134,914  $1,646,909 

 

  

Six Months Ended June 30, 2020

 

 

     Food &             

 

 Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $157,164  $34,538  $24,364  $13,389  $229,455 

Downtown Las Vegas

  32,985   12,607   6,475   6,710   58,777 

Midwest & South

  504,727   53,400   22,806   21,219   602,152 

Total Revenues

 $694,876  $100,545  $53,645  $41,318  $890,384 

 

20

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2021 and  December 31, 2020 and for the three and six months ended June 30, 2021 and 2020

______________________________________________________________________________________________________

 

The following table reconciles, for the periods indicated, total Adjusted EBITDAR to operating income, as reported in our accompanying condensed consolidated statements of operations:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Adjusted EBITDAR

                

Las Vegas Locals

 $133,570  $2,858  $224,212  $49,620 

Downtown Las Vegas

  15,421   (7,220)  17,861   2,736 

Midwest & South

  259,992   32,655   478,141   138,484 

Corporate expense

  (23,588)  (12,171)  (42,222)  (30,285)

Adjusted EBITDAR

  385,395   16,122   677,992   160,555 
                 

Other operating costs and expenses

                

Deferred rent

  207   227   414   449 

Master lease rent expense

  26,175   25,413   52,090   50,078 

Depreciation and amortization

  67,279   69,213   131,746   136,178 

Share-based compensation expense

  12,823   2,693   18,524   10,884 

Project development, preopening and writedowns

  1,454   3,825   2,869   7,333 

Impairment of assets

           171,100 

Other operating items, net

  11,115   1,099   12,272   8,642 

Total other operating costs and expenses

  119,053   102,470   217,915   384,664 

Operating income (loss)

 $266,342  $(86,348) $460,077  $(224,109)

 

For purposes of this presentation, corporate expense excludes its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations.

 

Total Reportable Segment Assets

The Company's assets by Reportable Segment consisted of the following amounts:

 

  

June 30,

  

December 31,

 

(In thousands)

 

2021

  

2020

 

Assets

        

Las Vegas Locals

 $1,673,175  $1,690,511 

Downtown Las Vegas

  241,533   213,507 

Midwest & South

  3,930,588   3,984,063 

Total Reportable Segment Assets

  5,845,296   5,888,081 

Corporate

  446,617   670,867 

Total Assets

 $6,291,913  $6,558,948 

 

 

NOTE 10.    SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after June 30, 2021. During this period, up to the filing date, we did not identify any subsequent events, the effects of which would require disclosure or adjustment to our financial position or results of operations.

 

21

 
 

Item 2.         Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Boyd Gaming Corporation (and together with its subsidiaries, the "Company," "Boyd," "Boyd Gaming," "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD."

 

In mid-March 2020, all of our gaming facilities were closed in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus. As of June 30, 2021, and as reflected in the table below, 26 of our 28 gaming facilities are open and operating. Two of our properties in Las Vegas remain closed to the public due to the current levels of the demand in the market and our cost containment efforts. No dates have been set for re-opening these properties. We cannot predict whether we will be required to temporarily close some or all of our open casinos in the future. Further, we cannot currently predict the ongoing impact of the pandemic on consumer demand and the negative effects on our workforce, suppliers, contractors and other partners. In responding to these circumstances, the safety and well-being of our team members and customers is our utmost priority. We have developed and implemented a broad range of safety protocols at our properties to ensure the health and safety of our team members and our customers.

 

The closures in 2020 of our properties had a material impact on our business, and the COVID-19 pandemic, its associated impacts on customer behavior and the requirements of health and safety protocols are expected to continue to have an impact on our business. The severity and duration of such business impacts cannot currently be estimated and the ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, potential resurgences or new variants of the virus, the logistics of distribution, level of participation and overall efficacy of vaccine programs, changes in consumer behavior and demand and the related impact on economic activity, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in additional business disruptions, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time.

 

We currently anticipate funding our operations over the next 12 months with the cash generated from property operations, to the extent our properties remain open, supplemented, as necessary, by the cash we currently have available and the borrowing capacity available under our Revolving Credit Facility. 

 

22

 

We are a geographically diversified operator of 28 gaming entertainment properties. Headquartered in Las Vegas, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. We view each operating property as an operating segment. For financial reporting purposes, we aggregate our properties into the following three reportable segments:

 

       

Closure Date

 

Re-open Date

Las Vegas Locals

           

Gold Coast Hotel and Casino

 

Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

The Orleans Hotel and Casino

 

Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

Sam's Town Hotel and Gambling Hall

 

Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

Suncoast Hotel and Casino

 

Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

Eastside Cannery Casino and Hotel

 

Las Vegas, Nevada

 

3/18/2020

 

TBD

Aliante Casino + Hotel + Spa

 

North Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

Cannery Casino Hotel

 

North Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

Jokers Wild Casino

 

Henderson, Nevada

 

3/18/2020

 

6/4/2020

Downtown Las Vegas

           

California Hotel and Casino

 

Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

Fremont Hotel and Casino

 

Las Vegas, Nevada

 

3/18/2020

 

6/4/2020

Main Street Station Casino, Brewery and Hotel

 

Las Vegas, Nevada

 

3/18/2020

 

TBD

Midwest & South

           

Par-A-Dice Hotel Casino

 

East Peoria, Illinois

 

3/16/2020

 

7/1/2020*

Belterra Casino Resort

 

Florence, Indiana

 

3/16/2020

 

6/15/2020

Blue Chip Casino, Hotel & Spa

 

Michigan City, Indiana

 

3/16/2020

 

6/15/2020

Diamond Jo Dubuque

 

Dubuque, Iowa

 

3/17/2020

 

6/1/2020

Diamond Jo Worth

 

Northwood, Iowa

 

3/17/2020

 

6/1/2020

Kansas Star Casino

 

Mulvane, Kansas

 

3/18/2020

 

5/23/2020

Amelia Belle Casino

 

Amelia, Louisiana

 

3/17/2020

 

5/27/2020

Delta Downs Racetrack Casino & Hotel

 

Vinton, Louisiana

 

3/17/2020

 

5/20/2020

Evangeline Downs Racetrack and Casino

 

Opelousas, Louisiana

 

3/17/2020

 

5/20/2020

Sam's Town Hotel and Casino

 

Shreveport, Louisiana

 

3/17/2020

 

5/27/2020

Treasure Chest Casino

 

Kenner, Louisiana

 

3/17/2020

 

5/20/2020

IP Casino Resort Spa

 

Biloxi, Mississippi

 

3/17/2020

 

5/21/2020

Sam's Town Hotel and Gambling Hall

 

Tunica, Mississippi

 

3/17/2020

 

5/21/2020

Ameristar Casino Hotel Kansas City

 

Kansas City, Missouri

 

3/17/2020

 

6/1/2020

Ameristar Casino Report Spa St. Charles

 

St. Charles, Missouri

 

3/17/2020

 

6/1/2020

Belterra Park

 

Cincinnati, Ohio

 

3/14/2020

 

6/19/2020

Valley Forge Casino Resort

 

King of Prussia, Pennsylvania

 

3/13/2020

 

6/26/2020**

 

*Par-A-Dice was temporarily closed on November 20, 2020 and subsequently re-opened on January 16, 2021.

**Valley Forge was temporarily closed on December 12, 2020 and subsequently re-opened on January 4, 2021.

 

We also own and operate a travel agency and a captive insurance company that underwrites travel-related insurance, each located in Hawaii. Financial results for these operations are included in our Downtown Las Vegas segment, as our Downtown Las Vegas properties concentrate their marketing efforts on gaming customers from Hawaii.

 

Results for Lattner Entertainment Group Illinois, LLC ("Lattner"), our Illinois distributed gaming operator, are included in our Midwest & South segment. Lattner's operations were suspended on March 16, 2020, resumed on July 1, 2020, temporarily closed on November 20, 2020 and subsequently re-opened on January 16, 2021. The Midwest & South segment also includes our online sportsbook and gaming business, including those developed in partnership with FanDuel Group.

 

Most of our gaming entertainment properties also include hotel, dining, retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the number of visits and spending levels of customers at our properties.

 

Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. While we do provide casino credit, subject to certain gaming regulations and jurisdictions, most of our customers wager with cash and pay for non-gaming services with cash or by credit card.

 

Our industry is capital intensive, and we rely heavily on the ability of our properties to generate operating cash flow in order to fund maintenance capital expenditures, fund acquisitions, provide excess cash for future development, repay debt financing and associated interest costs, repurchase our debt or equity securities, and pay income taxes and dividends.

 

Our Strategy

Our strategy is to increase shareholder value by pursuing strategic initiatives that improve and grow our business.

 

Strengthening Our Balance Sheet

We are committed to finding opportunities to strengthen our balance sheet through diversifying and increasing cash flow to reduce our debt.

 

23

 

Operating Efficiently

We are committed to operating more efficiently. As we re-opened our properties and adjusted our operations to address the impacts of the COVID-19 pandemic, the efficiencies of our refined business model positioned us to flow a substantial portion of the revenue directly to the bottom line.

 

Evaluating Acquisition Opportunities

Our evaluations of potential transactions and acquisitions are strategic, deliberate, and disciplined. Our goal is to identify and pursue opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price.

 

Maintaining Our Brand

The ability of our employees to deliver great customer service helps distinguish our Company and our brands from our competitors. Our employees are an important reason that our customers continue to choose our properties over the competition across the country.

 

Our Key Performance Indicators

We use several key performance measures to evaluate the operations of our properties. These key performance measures include the following:

 

Gaming revenue measures: slot handle, which means the dollar amount wagered in slot machines, and table game drop, which means the total amount of cash deposited in table games drop boxes, plus the sum of markers issued at all table games, are measures of volume and/or market share.  Slot win and table game hold, which mean the difference between customer wagers and customer winnings on slot machines and table games, respectively, represent the amount of wagers retained by us and recorded as gaming revenues. Slot win percentage and table game hold percentage, which are not fully controllable by us, represent the relationship between slot handle to slot win and table game drop to table game hold, respectively.

   

Food & beverage revenue measures: average guest check, which means the average amount spent per customer visit and is a measure of volume and product offerings; number of guests served ("food covers"), which is an indicator of volume; and the cost per guest served, which is a measure of operating margin.

   

Room revenue measures: hotel occupancy rate, which measures the utilization of our available rooms; and average daily rate ("ADR"), which is a price measure.

 

RESULTS OF OPERATIONS

Overview

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2021

   

2020

   

2021

   

2020

 

Total revenues

  $ 893.6     $ 209.9     $ 1,646.9     $ 890.4  

Operating income (loss)

    266.3       (86.3 )     460.1       (224.1 )

Net income (loss)

    113.7       (108.5 )     215.9       (256.1 )

 

Total Revenues

Total revenues increased $683.7 million and $756.5 million during the three and six months ended June 30, 2021, respectively, as compared to the prior year comparable periods, due primarily to the COVID-19 property closures that began in mid-March 2020 and extended through most of second quarter 2020 (the "Property Closures") and increased revenues from our online gaming initiatives.

 

Operating Income (Loss)

Operating income (loss) increased $352.6 million for the three months ended June 30, 2021, compared to the prior year comparable period, primarily due to the impact of the Property Closures on our financial results. Operating income (loss) increased $684.2 million for the six months ended June 30, 2021, compared to the prior year comparable periods, primarily due to the impact of the Property Closures on our financial results, including a $171.1 million intangible asset impairment charge in first quarter 2020. After the property re-openings, the Company implemented a strategic shift in its operating model to focus on maximizing gaming revenues, streamlining our cost structure, targeting our marketing investments and reducing lower margin offerings, allowing us to flow a higher percentage of our revenues to the bottom line.

 

Net Income (Loss)

Net income (loss) increased $222.3 million for the three months ended June 30, 2021, compared to the prior year comparable period. The increase is attributable to the operating income increase of $352.6 million, as discussed above. This increase is offset by a $65.1 million increase in loss on early extinguishments and modifications of debt due to the retirements of the $750 million aggregate principal amount of 6.375% Senior Notes due 2026 ("6.375% Notes") and the $700 million aggregate principal amount of 6.000% Senior Notes due 2026 ("6.000% Notes") in June 2021 and an increase in the income tax provision of $69.2 million due to the Company's improved operational performance.

 

Net income (loss) increased $472.0 million for the six months ended June 30, 2021, compared to the prior year comparable period. The increase is attributable to the operating income increase of $684.2 million, as discussed above. This increase is offset by a $64.9 million increase in loss on early extinguishments and modifications of debt due to the retirements of the 6.375% Notes and the 6.000% Notes in June 2021 and an increase in the income tax provision of $142.9 million due to the Company's improved operational performance.

 

24

 

Operating Revenues

We derive the majority of our revenues from our gaming operations, which produced approximately 81% and 88% of revenues for the three months ended June 30, 2021 and 2020, respectively, and 82% and 78% for the six months ended June 30, 2021 and 2020, respectively. Food & beverage revenues represent our next most significant revenue source, generating approximately 6% and 5% of revenues for the three months ended June 30, 2021 and 2020, respectively, and 6% and 11% for the six months ended June 30, 2021 and 2020, respectively. Room revenues and other revenues separately contributed less than 10% of revenues during these periods. The shift in percentage contributions of revenues from the non-gaming departments to gaming in these periods versus our historical averages reflects the impact of operating restrictions as properties re-opened following the Property Closures, which limited our offerings of non-gaming amenities, compounded by the strategic shift in our operating model as properties re-opened, which focused on maximizing gaming revenues. 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2021

   

2020

   

2021

   

2020

 

REVENUES

                               

Gaming

  $ 727.5     $ 185.1     $ 1,345.4     $ 694.9  

Food & beverage

    57.4       10.7       101.5       100.5  

Room

    39.1       6.9       65.1       53.6  

Other

    69.6       7.2       134.9       41.4  

Total revenues

  $ 893.6     $ 209.9     $ 1,646.9     $ 890.4  
                                 

COSTS AND EXPENSES

                               

Gaming

  $ 259.4     $ 76.8     $ 491.5     $ 315.5  

Food & beverage

    46.8       16.7       85.7       106.6  

Room

    14.2       5.1       26.3       28.1  

Other

    44.5       2.2       86.4       23.6  

Total costs and expenses

  $ 364.9     $ 100.8     $ 689.9     $ 473.8  
                                 

MARGINS

                               

Gaming

    64.3 %     58.5 %     63.5 %     54.6 %

Food & beverage

    18.5 %     -56.1 %     15.6 %     -6.1 %

Room

    63.7 %     26.1 %     59.6 %     47.6 %

Other

    36.1 %     69.4 %     36.0 %     43.0 %

 

Gaming

Gaming revenues are comprised primarily of the net win from our slot machine operations and to a lesser extent from table games win. The increase in gaming revenues of $542.4 million and $650.5 million during the three and six months ended June 30, 2021, respectively, as compared to the corresponding period of the prior year, was due primarily to the impact of the Property Closures on the prior year period. Gaming margins were enhanced by effectively yielding the casino floor while maintaining a focus on costs under our revised operating model.

 

Food & Beverage

Food & beverage revenues increased   $46.8 million during the three months ended  June 30, 2021, compared to the prior year comparable period , primarily due to the impact of the Property Closures. In the prior year, food & beverage venues were open for only a month on average during the quarter and after re-opening, had restrictions on capacity. Overall food & beverage margins increased from the prior year comparable period, as we effectively maximized the contributions realized from these outlets as reflected by an increase in average check of 15.6% while cost per cover decreased 47.3% due to our focus on costs under our revised operating model.
 
Food & beverage revenues remained flat during the six months ended June 30, 2021, compared to the prior year period. Due to the Property Closures i n the prior year, food & beverage venues were open for three and a half months on average during the six months ended June 30, 2020.  For those food & beverage venues that re-opened, there are still capacity restrictions that have impacted the financial performance for the  six months ended June 30, 2021 as covers declined by 15.2%. Overall food & beverage margins increased from the prior year comparable period, as we effectively maximized the contributions realized from these outlets as reflected by an increase in average check of 12.5% while cost per cover decreased 13.8%.
 
Room

Room revenues increased$32.2 million during the three months ended June 30, 2021, as compared to the prior year comparable period, primarily due to the lifting of operating restrictions and increased visitation from the prior year comparable period. Overall room margins increased to 63.7% from 26.1% in the prior year comparable period, due primarily to a decrease in cost per room of 44.4% reflecting the impact of the new operating model, along with an increase in average daily rate of 8.1%.

 

Room revenues increased $11.4 million during thsix months ended June 30, 2021, as compared to the corresponding period of the prior year, due primarily to the lifting of operating restrictions and increased visitation from the prior year comparable period. Overall room margins increased to 59.6% from 47.6% in the prior year comparable period, due primarily to a decrease in cost per room of 18.7% reflecting the impact of the new operating model, along with an increase in average daily rate of 5.9%.

 

Other

Other revenues relate to our online gaming initiatives and patronage visits at the amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Other revenues increased$62.5 million and $93.6 million during the three and six months ended June 30, 2021, respectively, as compared to the corresponding period of the prior year, due primarily to increased online gaming revenues, including the revenues from reimbursements of gaming taxes paid on behalf of our online partners. These increases were partially offset by the limited entertainment offerings after property re-openings. Corresponding period-over-period increases in other expenses reflect primarily the gaming taxes paid on behalf of our online partners.

 

25

 

Revenues and Adjusted EBITDAR by Reportable Segment

We determine each of our property's profitability based upon Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Rent expense related to master leases ("Adjusted EBITDAR"), which represents earnings before interest expense, income taxes, depreciation and amortization, deferred rent, master lease rent expense, share-based compensation expense, project development, preopening and writedowns expenses, impairments of assets and other operating items, net, as applicable. Reportable Segment Adjusted EBITDAR is the aggregate sum of the Adjusted EBITDAR for each of the properties comprising our Las Vegas Locals, Downtown Las Vegas and Midwest & South segments. Results for Downtown Las Vegas include the results of our travel agency and captive insurance company in Hawaii. Results for our Illinois distributed gaming operator and our online gaming initiatives are included in our Midwest & South segment. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations. Furthermore, corporate expense excludes its portion of share-based compensation expense.

 

EBITDAR is a commonly used measure of performance in our industry that we believe, when considered with measures calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"), provides our investors a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Management has historically adjusted EBITDAR when evaluating operating performance because we believe that the exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results.

 

The following table presents our total revenues and Adjusted EBITDAR by Reportable Segment:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2021

   

2020

   

2021

   

2020

 

Total revenues

                               

Las Vegas Locals

  $ 236.1     $ 48.7     $ 418.5     $ 229.5  

Downtown Las Vegas

    38.8       4.7       60.2       58.8  

Midwest & South

    618.7       156.5       1,168.2       602.1  

Total revenues

  $ 893.6     $ 209.9     $ 1,646.9     $ 890.4  
                                 

Adjusted EBITDAR (1)

                               

Las Vegas Locals

  $ 133.6     $ 2.9     $ 224.2     $ 49.6  

Downtown Las Vegas

    15.4       (7.2 )     17.9       2.7  

Midwest & South

    260.0       32.6       478.1       138.5  

Corporate expense

    (23.6 )     (12.2 )     (42.2 )     (30.3 )

Adjusted EBITDAR

  $ 385.4     $ 16.1     $ 678.0     $ 160.5  

 

(1) Refer to Note 9, Segment Information, in the notes to the condensed consolidated financial statements (unaudited) for a reconciliation of Adjusted EBITDAR to operating income, as reported in accordance with GAAP in our accompanying condensed consolidated statements of operations.

 

Las Vegas Locals 

Total revenues increased by $187.4 million during the three months ended June 30, 2021, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories, primarily due to the Property Closures in second quarter 2020.

 

Total revenues increased by $189.1 million during the six months ended June 30, 2021, as compared to the corresponding period of the prior year, reflecting revenue increases in gaming, room and other revenue departmental categories. Gaming revenue was the driving factor, increasing by $179.6 million, followed by an increase in other revenue of $6.7 million and room revenue of $4.8 million from the prior year comparable period. The increase in these departmental categories is primarily due to the Property Closures in second quarter 2020.  

 

Adjusted EBITDAR increased by $130.7 million and $174.6 million during the three and six months ended June 30, 2021, respectively, as compared to the corresponding period of the prior year, due primarily to a strategic shift in the Company’s operating model when operations resumed following the Property Closures.

 

Downtown Las Vegas 

Total revenues increased by $34.1 million during the three months ended June 30, 2021, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories, primarily due to the Property Closures in second quarter 2020.

 

Total revenues increased by $1.4 million during the six months ended June 30, 2021, as compared to the corresponding period of the prior year. Gaming revenues increased by $9.1 million offset by declines in other revenue of $4.1 million, food & beverage revenue of $2.3 million and room revenue of $1.2 million, as compared to prior year comparable period, given that our Downtown properties cater to the Hawaiian market, which has been negatively impacted by restrictions on travel to and from Hawaii since re-opening. 

 

Adjusted EBITDAR increased by $22.6 million and $15.1 million during the three and six months ended June 30, 2021, respectively, as compared to the corresponding periods of the prior year, due primarily to a strategic shift in the Company's operating model when operations resumed following the Property Closures.

 

 

26

 

Midwest & South 

Total revenues increased by $462.2 million during the three months ended June 30, 2021, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories, primarily due to the Property Closures in second quarter 2020.

 

Total revenues increased by $566.0 million during the six months ended June 30, 2021, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories. Gaming revenue was the driving factor, increasing by $461.9 million, followed by an increase in other revenue of $91.0 million, room revenue of $7.8 million and food & beverage revenue of $5.3 million, from the prior year comparable period. The increase in these departmental categories is primarily due to the Property Closures in second quarter 2020. In addition, increases in other revenue are attributable to our online gaming initiatives. 

 

Adjusted EBITDAR increased by $227.3 million and $339.7 million during the three and six months ended June 30, 2021, respectively, as compared to the corresponding periods of the prior year, due primarily to a strategic shift in the Company’s operating model when operations resumed following the Property Closures and contributions from our online gaming initiatives.

 

Other Operating Costs and Expenses 

The following costs and expenses, as presented in our condensed consolidated statements of operations, are further discussed below:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2021

   

2020

   

2021

   

2020

 

Selling, general and administrative

  $ 90.5     $ 60.3     $ 180.5     $ 173.7  

Master lease rent expense

    26.2       25.4       52.1       50.1  

Maintenance and utilities

    31.2       21.7       59.4       54.8  

Depreciation and amortization

    67.3       69.2       131.7       136.2  

Corporate expense

    34.7       14.0       58.0       38.9  

Project development, preopening and writedowns

    1.5       3.8       2.9       7.3  

Impairment of assets

                      171.1  

Other operating items, net

    11.1       1.1       12.3       8.6  

 

Selling, General and Administrative

Selling, general and administrative expenses, as a percentage of revenues, were 10.1% and 28.7% during the three months ended June 30, 2021 and 2020, respectively, and 11.0% and 19.5% during the six months ended June 30, 2021 and 2020, respectively. In the prior year, selling, general and administrative expenses, as a percentage of revenues were higher due to the significant reduction in revenue as a result of the Property Closures along with the continued fixed costs incurred during the closure period. In addition, as operations resumed after the Property Closures, the Company changed its operating model and has continued to focus on disciplined and targeted marketing spend.

 

Master Lease Rent Expense

Master lease rent expense represents rent expense incurred by those properties that we acquired in October 2018 which are subject to two master lease agreements with a real estate investment trust. Master lease rent expense, as a percentage of revenues, was 2.9% and 12.1% during the three months ended June 30, 2021 and 2020, respectively, and 3.2% and 5.6% during the six months ended June 30, 2021 and 2020, respectively.

 

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of revenues, were 3.5% and 10.3% during the three months ended June 30, 2021 and 2020, respectively, and 3.6% and 6.2% during the six months ended June 30, 2021 and 2020, respectively. In the prior year, maintenance and utilities expenses, as a percentage of revenues, were higher due to the significant reduction in revenue as a result of the Property Closures.

 

Depreciation and Amortization

Depreciation and amortization expenses, as a percentage of revenues, were 7.5% and 33.0% during the three months ended June 30, 2021 and 2020, respectively, and 8.0% and 15.3% during the six months ended June 30, 2021 and 2020, respectively. The decline from prior year comparable period is primarily driven by a $3.4 million decrease in intangible asset amortization as our customer relationships are amortized using an accelerated method. The dollar amount of depreciation expense remained consistent period over period therefore the remaining percentage decrease is attributable to revenue growth.

 

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our property operations, in addition to the corporate portion of share-based compensation expense. Corporate expense represented 3.9% and 6.7% of revenues during the three months ended June 30, 2021 and 2020, respectively, and 3.5% and 4.4% during the six months ended June 30, 2021 and 2020, respectively.

 

Project Development, Preopening and Writedowns

Project development, preopening and writedowns represent: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, strategic initiatives, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred in our ongoing efforts to develop gaming activities in new jurisdictions and expenses related to other new business development activities that do not qualify as capital costs; and (iii) asset write-downs. Such costs are generally nonrecurring in nature and vary from period to period as the volume of underlying activities fluctuate.

 

27

 

Impairment of Assets

We had no impairments of assets for the six months ended June 30, 2021. Impairment of assets for the six months ended June 30, 2020, include non-cash impairment charges of $8.0 million for trademarks and $22.6 million for goodwill in our Las Vegas Locals segment and non-cash impairment charges of $8.9 million for trademarks, $42.2 million for gaming license rights and $89.4 million for goodwill in our Midwest & South segment. 

 

Other Operating Items, net

Other operating items, net, is generally comprised of miscellaneous non-recurring operating charges, including direct costs associated with the Property Closures, including severance payments to separated employees, natural disasters and severe weather, including hurricane and flood expenses, and subsequent recoveries of such costs, as applicable. During the six months ended June 30, 2021, $10.7 million of other operating items, net, related to non-recurring employee bonus payments. During the six months ended June 30, 2020, $6.7 million of other operating items, net, related to incremental, non-recurring costs associated with the Property Closures.

 

Other Expenses

Interest Expense, net

The following table summarizes information with respect to our interest expense on outstanding indebtedness:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2021

   

2020

   

2021

   

2020

 

Interest Expense, net

  $ 54.7     $ 58.6     $ 112.1     $ 110.0  

Average Long-Term Debt Balance (1)

    3,791.5       4,671.9       3,866.8       4,277.6  

Weighted Average Interest Rates

    5.3 %     4.6 %     5.3 %     4.8 %

(1) Average debt balance calculation does not include the related discounts or deferred finance charges.

 

Interest expense, net of capitalized interest and interest income, for the three months ended June 30, 2021, decreased $4.0 million, or 6.8%, from the prior year comparable period. The decline is attributable to a decrease in the average long-term debt balance of $880.3 million offset by an increase in the weighted average interest rate percentage point of 0.7 for the three months ended June 30, 2021. The decline in the average long-term debt balance is primarily attributable to the following: (i) full repayment of the outstanding balance on the Revolving Credit Facility in third quarter 2020; (ii) retirements of the 6.375% Notes and the 6.000% Notes in June 2021; offset by (iii) the issuance of the $900 million aggregate principal amount of 4.750% Senior Notes due 2031 ("4.750% Notes due 2031") in June 2021.

 

Interest expense, net of capitalized interest and interest income, for the six months ended June 30, 2021, increased $2.0 million, or 1.8%, as compared to the prior year comparable period. The increase is attributable to an increase in the weighted average interest rate percentage point of 0.5 offset by a decrease in the average long-term debt balance of $410.9 million for the six months ended June 30, 2021. The decline in the average long-term debt balance is primarily attributable to the following: (i) full repayment of the outstanding balance on the Revolving Credit Facility in third quarter 2020; (ii) retirements of the 6.375% Notes and the 6.000% Notes in June 2021; (iii) repayment of $98.7 million on the Term A Loan, (iv) the extinguishment of $57.7 million of other debt; offset by (v) the issuance of the 4.750% Notes due 2031 in June 2021.

 

Loss on Early Extinguishments and Modifications of Debt

The components of the loss on early extinguishments and modifications of debt, are as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In millions)

 

2021

   

2020

   

2021

   

2020

 

6.375% Senior Notes premium and consent fees

  $ 23.9     $     $ 23.9     $  

6.375% Senior Notes deferred finance charges

    6.4             6.4        

6.000% Senior Notes premium and consent fees

    28.0             28.0        

6.000% Senior Notes deferred finance charges

    7.2             7.2        

Boyd Gaming Credit Facility deferred financing charges

          0.4             0.6  

Total loss on early extinguishments and modifications of debt

  $ 65.5     $ 0.4     $ 65.5     $ 0.6  

 

Income Taxes 

The effective tax rates during the six months ended June 30, 2021 and 2020 were 23.0% and 23.4%, respectively. Our tax rates for the six months ended June 30, 2021 and 2020 were unfavorably impacted by state taxes and certain nondeductible expenses which were partially offset by the inclusion of excess tax benefits, related to equity compensation, as a component of the provision for income taxes. 

 

As a result of and response to the COVID-19 pandemic, the U.S. government enacted Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and it was signed into law on March 27, 2020. Included in the CARES Act are provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, interest expense deductions, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. Our financial results for the six months ended June 30, 2021 and 2020, include the estimated payroll tax credits we will receive under the CARES Act, partially offsetting the expenses incurred during this period for compensation and benefits provided to qualifying employees.

 

28

 

LIQUIDITY AND CAPITAL RESOURCES

Financial Position

At June 30, 2021 and December 31, 2020, we had balances of cash and cash equivalents of $334.5 million and $519.2 million, respectively. In addition, we held restricted cash balances of $21.3 million and $15.8 million at June 30, 2021 and December 31, 2020, respectively. 

 

We believe that current cash balances together with the available borrowing capacity under our Revolving Credit Facility and cash flows from operating activities will be sufficient to meet our liquidity and capital resource needs for the next twelve months, including our projected operating requirements and maintenance capital expenditures. See "Indebtedness", below, for further detail regarding the bank credit facility.

 

The Company may seek to secure additional working capital, repay respective current debt maturities, or fund respective development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings, to the extent such offerings are allowed under our debt agreements.

 

Cash Flows Summary

 

   

Six Months Ended

 
   

June 30,

 

(In millions)

 

2021

   

2020

 

Net cash provided by (used in) operating activities

  $ 499.3     $ (52.8 )
                 

Cash flows from investing activities

               

Capital expenditures

    (96.3 )     (75.9 )

Insurance proceeds received for hurricane losses

    40.2        

Other investing activities

    6.7        

Net cash used in investing activities

    (49.4 )     (75.9 )
                 

Cash flows from financing activities

               

Net borrowings (payments) under bank credit facility

    (11.5 )     620.3  

Proceeds from issuance of senior notes

    900.0       600.0  

Debt issuance costs

    (14.6 )     (12.9 )

Retirements of senior notes

    (1,450.0 )      

Premium and consent fees

    (51.9 )      

Dividends paid

          (7.8 )

Shares repurchased and retired

          (11.1 )

Other financing activities

    (1.1 )     (4.8 )

Net cash provided by (used in) financing activities

    (629.1 )     1,183.7  

Increase (decrease) in cash, cash equivalents and restricted cash

  $ (179.2 )   $ 1,055.0  

 

Cash Flows from Operating Activities

During the six months ended June 30, 2021 and 2020, we generated operating cash flow of $499.3 million and utilized operating cash flow of $52.8 million, respectively. Generally, operating cash flows increased during 2021 as compared to the prior year period due to the negative impact of the Property Closures on prior year cash flows, increased cash flows in the current year due to the strategic shift of the Company's operating model and timing of working capital spending.

 

Cash Flows from Investing Activities

Our industry is capital intensive and we use cash flows for acquisitions, facility expansions, investments in future development or business opportunities and maintenance capital expenditures.

 

During the six months ended June 30, 2021, we incurred net cash outflows for investing activities of $49.4 million comprised of capital expenditure spending of $96.3 million, primarily related to building improvements at Delta Downs as a result of Hurricane Laura damage, which was offset by $40.2 million of insurance recovery proceeds and $6.7 million of reimbursed expense associated with the Wilton Rancheria project. During the six months ended June 30, 2020, we incurred net cash outflows for investing activities of $75.9 million, related to the purchase of real estate and information technology purchases for new software.

 

Cash Flows from Financing Activities

We rely upon our financing cash flows to provide funding for investment opportunities, repayments of obligations and ongoing operations.

 

The net cash outflows from financing activities in the six months ended June 30, 2021, primarily reflect the retirements of the 6.375% Notes and the 6.000% Notes, payment of associated premium and consent fees related to the retirements, the quarterly payments on our Term Loans and debt issuance costs. The inflows for 2021 reflect the issuance of the 4.750% Notes due 2031. The net cash inflows from financing activities in the six months ended June 30, 2020, reflect primarily the additional borrowings under our Revolving Credit Facility and senior note issuance to preserve liquidity during the closure period. The outflows in 2020 reflect the use of cash flow to pay debt financing costs, repurchase outstanding common stock under our share repurchase program and pay cash dividends to our shareholders.

 

29

 

Indebtedness

The outstanding principal balances of long-term debt, before unamortized discounts and fees, and the changes in those balances are as follows:

 

(In millions)

  June 30, 2021     December 31, 2020     Increase / (Decrease)  

Bank credit facility

  $ 884.6     $ 896.2     $ (11.6 )

6.375% senior notes due 2026

          750.0       (750.0 )

6.000% senior notes due 2026

          700.0       (700.0 )

4.750% senior notes due 2027

    1,000.0       1,000.0        

8.625% senior notes due 2025

    600.0       600.0        

4.750% senior notes due 2031

    900.0             900.0  

Other

    2.3       3.6       (1.3 )

Total long-term debt

    3,386.9       3,949.8       (562.9 )

Less current maturities

    39.3       30.7       8.6  

Long-term debt, net of current maturities

  $ 3,347.6     $ 3,919.1     $ (571.5 )

 

Amounts Outstanding

The principal amounts under the bank credit facility are comprised of the following:

 

   

June 30,

   

December 31,

 

(In millions)

 

2021

   

2020

 

Revolving Credit Facility

  $     $  

Term A Loan

    128.6       133.8  

Refinancing Term B Loans

    756.0       762.4  

Swing Loan

           

Total outstanding principal amounts under the bank credit facility

  $ 884.6     $ 896.2  

 

With a total revolving credit commitment of $1,033.7 million available under the bank credit facility, no borrowings on the Revolving Credit Facility and the Swing Loan and $11.9 million allocated to support various letters of credit, there is a remaining contractual availability of $1,021.8 million as of June 30, 2021. 

 

The blended interest rate for outstanding borrowings under the bank credit facility was 2.5% at June 30, 2021 and December 31, 2020.

 

Debt Service Requirements

Debt service requirements under our current outstanding senior notes consist of semi-annual interest payments (based upon fixed annual interest rates ranging from 4.750% to 8.625%) and principal repayments of our 8.625% Notes due in June 2025, our 4.750% Notes due in December 2027 and our 4.750% Notes due in June 2031.

 

Covenant Compliance

On May 8, 2020, we amended our credit facility to, among other things, waive the financial covenants  for the period beginning on March 30, 2020 through the earlier of (x) the date on which the Company delivers to the administrative agent a covenant relief period termination notice, (y) the date on which the administrative agent receives a compliance certificate with respect to the Company’s fiscal quarter ending June 30, 2021, and (z) the date on which the Company fails to satisfy the conditions to covenant relief set forth in the amendment. 

 

As of June 30, 2021, we believe that we were in compliance with the covenants contained in our debt instruments.

 

The indentures governing the senior notes contain provisions that allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, the fixed charge coverage ratio (as defined in the respective indentures, essentially a ratio of our consolidated EBITDA to fixed charges, including interest) for the trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Should this provision prohibit the incurrence of additional debt, we may still borrow under our existing bank credit facility, to the extent that borrowing capacity remains under that agreement, as well as from other funding sources as provided under our debt agreements.

 

30

 

Guarantor Financial Information

In connection with the issuance of our 6.375% Notes, our 6.000% Notes, our 4.750% senior notes due December 2027 ("4.750% Notes due 2027"), our 8.625% senior notes due June 2025 ("8.625% Notes") and our 4.750% Notes due 2031 (collectively, the "Guaranteed Notes"), certain of the Company's wholly owned subsidiaries (the "Guarantors") provide guarantees of those indentures. These Guaranteed Notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. With the exception of one subsidiary, the guarantors of the 6.375% Notes are the same as for our 6.000% Notes, both 4.750% Notes and 8.625% Notes (collectively, the "Other Notes"). On June 9, 2021, the 6.375% Notes and 6.000% Notes were redeemed.

 

Summarized combined balance sheet information for the parent company and the Guarantors are as follows:

 

   

June 30,

   

December 31,

 

(In millions)

 

2021

   

2020

 

Current assets

  $ 449.9     $ 637.2  

Noncurrent assets

    9,826.3       9,508.2  

Current liabilities

    488.4       494.3  

Noncurrent liabilities

    4,393.7       4,908.1  

 

Summarized combined results of operations for the parent company and the Guarantors are as follows:

 

   

Six Months Ended

 

(In millions)

 

June 30, 2021

 

Revenues

  $ 1,661.8  

Operating income

    871.4  

Income before income taxes

    691.7  

Net income

    627.0  

 

Share Repurchase Program

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and bank credit facility. Purchases under our stock repurchase program can be discontinued at any time at our sole discretion. On December 12, 2018, our Board of Directors authorized a share repurchase program of $100 million. During the six months ended June 30, 2020, we repurchased 0.7 million shares of our common stock. There were no share repurchases during the six months ended June 30, 2021. We are currently authorized to repurchase up to an additional $61.4 million in shares of our common stock under the share repurchase program. We are not obligated to purchase any shares under our stock repurchase program. We suspended share repurchases in March 2020 in order to preserve liquidity due to the Property Closures.

 

We have in the past, and may in the future, acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.

 

Quarterly Dividend Program

The dividends declared by the Board of Directors under this program and reflected in the periods presented are:

 

Declaration date

 

Record date

 

Payment date

  Amount per share  

December 17, 2019

 

December 27, 2019

 

January 15, 2020

  $ 0.07  

 

On March 25, 2020, the Company announced that the cash dividend program has been suspended to help mitigate the financial impact of the COVID-19 pandemic.

 

Other Items Affecting Liquidity

We anticipate funding our capital requirements using cash on hand, cash being generated by our open properties and availability under our Revolving Credit Facility, to the extent borrowing capacity exists after we meet our working capital needs for the next twelve months. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. The outcome of the specific matters discussed herein, including our commitments and contingencies, may also affect our liquidity.

 

Commitments

Capital Spending and Development

We currently estimate that our annual cash capital requirements to perform on-going refurbishment and maintenance at our properties ranges from between $190 million and $210 million. We fund our capital expenditures through cash on hand, our bank credit facility and operating cash flows.

 

31

 

In addition to the capital spending discussed above, we continue to pursue other potential development projects that may require us to invest significant amounts of capital.

 

We also continue to work with the Wilton Rancheria, to develop and manage Sky River Casino, a gaming entertainment complex to be located about 15 miles southeast of Sacramento, California. Wilton Rancheria has secured third-party financing to fund construction, which began in first quarter 2021. Sky River Casino is expected to open in the fourth quarter 2022.

 

Other Opportunities

We regularly investigate and pursue additional expansion opportunities in markets where casino gaming is currently permitted. We also pursue expansion opportunities in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. Such expansions will be affected and determined by several key factors, which may include the following:

 

 

the outcome of gaming license selection processes;

 

the approval of gaming in jurisdictions where we have been active but where casino gaming is not currently permitted;

 

identification of additional suitable investment opportunities in current gaming jurisdictions; and

 

availability of acceptable financing.

 

Additional projects may require us to make substantial investments or may cause us to incur substantial costs related to the investigation and pursuit of such opportunities, which investments and costs we may fund through cash flow from operations or availability under our bank credit facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources, to the extent such financing is available.

 

Contingencies

Legal Matters

We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.

 

Off Balance Sheet Arrangements 

There have been no material changes to our off balance sheet arrangements as defined in Item 303(a)(4)(ii) and described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 1, 2021.

 

Critical Accounting Policies

There have been no material changes to our critical accounting policies described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the period ended December 31, 2020, as filed with the SEC on March 1, 2021.

 

Recently Issued Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, see Note 1, Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements, in the notes to the condensed consolidated financial statements (unaudited).

 

Important Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements contain words such as "may," "will," "might," "expect," "believe," "anticipate," "could," "would," "estimate," "pursue," "target," "project," "intend," "plan," "seek," "should," "assume," and "continue," or the negative thereof or comparable terminology. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include:

 

  our expectations with respect to the recent global pandemic of COVID-19 (as defined herein), caused by a novel strain of the coronavirus, and the response thereto;
  the factors that contribute to our ongoing success and our ability to be successful in the future;
  our business model, areas of focus and strategy for driving business results;
  competition, including expansion of gaming into additional markets including internet gaming, the impact of competition on our operations, our ability to respond to such competition, and our expectations regarding continued competition in the markets in which we compete;
 

the general effect, and expectation, of the national and global economy on our business, as well as the economies where each of our properties are located;

 

indebtedness, including Boyd Gaming’s ability to refinance or pay amounts outstanding under its credit agreement and Boyd Gaming’s unsecured notes, when they become due and our compliance with related covenants, and our expectation that we will need to refinance all or a portion of our respective indebtedness at or before maturity;
 

our expectation regarding the trends that will affect the gaming industry over the next few years and the impact of these trends on growth of the gaming industry, future development opportunities and merger and acquisition activity in general;

 

our intention to pursue expansion opportunities, including acquisitions, that are a good fit for our business, deliver a solid return for stockholders, and are available at the right price;

 

that our credit agreement and our cash flows from operating activities will be sufficient to meet our respective projected operating and maintenance capital expenditures for the next twelve months;

 

Adjusted EBITDAR and its usefulness as a measure of operating performance or valuation;

 

32

 

 

our ability to utilize our net operating loss carryforwards and certain other tax attributes;
 

our belief that all pending litigation claims, if adversely decided, will not have a material adverse effect on our business, financial position or results of operations;
 

that margin improvements will remain a driver of profit growth for us going-forward;
 

regulations, including anticipated taxes, tax credits or tax refunds expected, and the ability to receive and maintain necessary approvals for our projects;
 

our expectations regarding the expansion of sports betting and online wagering;
 

our asset impairment analyses and our intangible asset and goodwill impairment tests;

 

the likelihood of interruptions to our rights in the land we lease under long-term leases for certain of our hotel and casinos;

 

that estimates and assumptions made in the preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles may differ from actual results; and
 

our estimates as to the effect of any changes in our Consolidated EBITDA on our ability to remain in compliance with certain covenants in the credit agreement.

 

Additional factors that could cause actual results to differ are discussed in Part I. Item 1A. Risk Factors of our Annual Report on Form 10-K for the period ended December 31, 2020, and in other current and periodic reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

 

Item 3.        Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not hold any market risk sensitive instruments for trading purposes. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market, short-term and long-term LIBOR rates, and short-term Eurodollar rates, and their potential impact on our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our bank credit facility. We do not currently utilize derivative financial instruments for trading or speculative purposes.

 

As of June 30, 2021, our long-term variable-rate borrowings represented approximately 26.1% of total long-term debt. Based on June 30, 2021 debt levels, a 100 basis point change in the interest rate would cause our annual interest costs to change by approximately $8.8 million.

 

See also "Liquidity and Capital Resources" above.

 

33

 

Item 4.        Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q (the "Report"), we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

 

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

34

 

PART II. Other Information

 

Item 1.        Legal Proceedings

We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position, results of operations or cash flows.

 

Item 1A.     Risk Factors

There were no material changes from the risk factors previously disclosed in Part I. Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

35

 

Item 6.

Exhibits

 

Exhibit Number

 

Document of Exhibit

 

Method of Filing

4.1   Indenture governing the Company's 4.750% Senior Notes due 2031, dated June 8, 2021, by and among the Company, the guarantors named therein and Wilmington Trust, National Association, as trustee.   Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed June 8, 2021.
         
4.2   Form of 4.750% Senior Note due 2031 (included in Exhibit 4.1).   Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed June 8, 2021.
         
10.1   Amendment No. 5 dated as of May 25, 2021, among the Company, the Guarantors, Bank of America, N.A., as administrative agent and letter of credit issuer, Wells Fargo Bank, National Association as swing line lender, and certain other financial institutions party thereto as lenders.   Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed May 26, 2021.
         
22   List of Guarantor Subsidiaries of Boyd Gaming Corporation.   Filed electronically herewith
         

31.1

 

Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

 

Filed electronically herewith

 

 

 

 

 

31.2

 

Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

 

Filed electronically herewith

 

 

 

 

 

32.1

 

Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. § 1350.

 

Filed electronically herewith

 

 

 

 

 

32.2

 

Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. § 1350.

 

Filed electronically herewith

 

 

 

 

 

101

 

The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, (iii) Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the six months ended June 30, 2021 and 2020, iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, and (vi) Notes to Condensed Consolidated Financial Statements.

 

Filed electronically herewith

         
104  

Inline XBRL for cover page of the Company's Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.

  Filed electronically herewith

 

36

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on July 29, 2021.

 

 

 

BOYD GAMING CORPORATION

 

 

 

 

By:

/s/ Anthony D. McDuffie

 

 

Anthony D. McDuffie

 

 

Vice President and Chief Accounting Officer

 

 

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