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 September 30, 2021March 31, 2022

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

 

logo1.jpg

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 October 25, 2021May 2, 2022 was 112,345,594109,583,710.

 

 
Table of Contents

 

 

 

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2021MARCH 31, 2022

TABLE OF CONTENTS

 

 

 

Page

No.

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2021March 31, 2022 and December 31, 20202021

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020

5

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the ninethree months ended September 30,March 31, 2022 and 2021 and 2020

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30,March 31, 2022 and 2021 and 2020

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

   
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations22
   

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 2.Unregistered Sales of Equity Securities and Use of Proceeds35

 

 

 

Item 6.

Exhibits

36

 

 

 

Signature Page

37

 

 

 
Table of Contents

 

 

PART I. Financial Information

 

Item 1.        Financial Statements (Unaudited)

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands, except share data)

 

2021

 

2020

  

2022

 

2021

 

ASSETS

        

Current assets

        

Cash and cash equivalents

 $570,926  $519,182  $402,975  $344,557 

Restricted cash

 17,392  15,817  16,249  12,571 

Accounts receivable, net

 55,673  53,456  97,096  89,483 

Inventories

 19,550  22,616  20,550  20,090 

Prepaid expenses and other current assets

 53,731  39,198   39,698   41,102 

Income taxes receivable

  0   8 

Total current assets

 717,272  650,277  576,568  507,803 

Property and equipment, net

 2,420,794  2,525,887  2,377,450  2,394,184 

Operating lease right-of-use assets

 919,258  928,814  860,972  884,241 

Other assets, net

 97,585  100,510  97,520  98,234 

Intangible assets, net

 1,373,921  1,382,173  1,366,623  1,368,420 

Goodwill, net

 971,287  971,287  971,287  971,287 

Total assets

 $6,500,117  $6,558,948  $6,250,420  $6,224,169 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current liabilities

        

Accounts payable

 $83,629  $96,863  $84,974  $102,031 

Current maturities of long-term debt

 41,853  30,740  44,316  41,673 

Accrued liabilities

 442,634  396,419  414,312  412,945 

Income tax payable

 77 0  38,534 393 

Total current liabilities

  568,193   524,022   582,136   557,042 

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

 3,292,858  3,866,743  2,989,861  2,989,921 

Operating lease liabilities, net of current portion

 836,025  848,825  793,396  815,974 

Deferred income taxes

 230,721  131,052  274,547  264,912 

Other liabilities

 64,382  64,363  59,354  57,574 

Commitments and contingencies (Notes 5 and 6)

                

Stockholders' equity

        

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

 0  0 

Common stock, $0.01 par value, 200,000,000 shares authorized; 112,345,594 and 111,830,857 shares outstanding

 1,123  1,118 

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

 0  0 

Common stock, $0.01 par value, 200,000,000 shares authorized; 109,616,510 and 111,303,140 shares outstanding

 1,096  1,113 

Additional paid-in capital

 906,478  876,433  693,858  827,725 

Retained earnings

 600,306  246,242  856,536  710,088 

Accumulated other comprehensive income

  31   150 

Accumulated other comprehensive income (loss)

  (364)  (180)

Total stockholders' equity

  1,507,938   1,123,943   1,551,126   1,538,746 

Total liabilities and stockholders' equity

 $6,500,117  $6,558,948  $6,250,420  $6,224,169 

 

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

 

 
3
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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

 

September 30,

  

March 31,

 

(In thousands, except per share data)

 

2021

 

2020

 

2021

 

2020

  

2022

  

2021

 

Revenues

            

Gaming

 $674,227  $565,965  $2,019,615  $1,260,841  $667,954  $617,926 

Food & beverage

 61,101  38,778  162,641  139,323  63,743  44,112 

Room

 44,317  26,925  109,384  80,570  42,409  25,990 

Other

  63,415   20,570   198,329   61,888   86,637   65,279 

Total revenues

  843,060   652,238   2,489,969   1,542,622   860,743   753,307 

Operating costs and expenses

            

Gaming

 249,685  214,984  741,176  530,445  250,042  232,113 

Food & beverage

 50,659  38,691  136,391  145,275  53,934  38,913 

Room

 15,074  12,931  41,413  41,013  15,990  12,132 

Other

 41,644  5,809  128,038  29,425  56,925  41,907 

Selling, general and administrative

 91,159  86,983  271,639  260,681  92,047  90,007 

Master lease rent expense

 26,306  25,914  78,396  75,992  26,306  25,915 

Maintenance and utilities

 35,868  33,751  95,256  88,551  32,890  28,231 

Depreciation and amortization

 67,586  69,320  199,332  205,498  62,478  64,467 

Corporate expense

 28,264  19,605  86,295  58,526  29,004  23,315 

Project development, preopening and writedowns

 10,646  2,249  13,515  9,582  (10,029) 1,415 

Impairment of assets

 0  0  0  171,100 

Other operating items, net

  3,023   14,928   15,295   23,570   98   1,157 

Total operating costs and expenses

  619,914   525,165   1,806,746   1,639,658   609,685   559,572 

Operating income (loss)

  223,146   127,073   683,223   (97,036)

Operating income

  251,058   193,735 

Other expense (income)

             

Interest income

 (442) (468) (1,406) (1,476) (420) (509)

Interest expense, net of amounts capitalized

 45,171  62,387  158,192  173,440  37,658  57,890 

Loss on early extinguishments and modifications of debt

 42  413  65,517  1,000  3,300  0 

Other, net

  119   (4,977)  2,288   (5,206)  (253)  1,932 

Total other expense, net

  44,890   57,355   224,591   167,758   40,285   59,313 

Income (loss) before income taxes

 178,256  69,718  458,632  (264,794)

Income tax benefit (provision)

  (40,082)  (31,602)  (104,568)  46,807 

Net income (loss)

 $138,174  $38,116  $354,064  $(217,987)

Income before income taxes

 210,773  134,422 

Income tax provision

  (47,845)  (32,261)

Net income

 $162,928  $102,161 
  
  

Basic net income (loss) per common share

 $1.21  $0.34  $3.11  $(1.92)

Basic net income per common share

 $1.45  $0.90 

Weighted average basic shares outstanding

  114,095   113,520   113,835   113,495   112,195   113,626 
  
  

Diluted net income (loss) per common share

 $1.21  $0.33  $3.10  $(1.92)

Diluted net income per common share

 $1.45  $0.90 

Weighted average diluted shares outstanding

  114,284   113,862   114,099   113,495   112,358   113,967 

 

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

 

4
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Net income (loss)

 $138,174  $38,116  $354,064  $(217,987)

Other comprehensive income (loss), net of tax:

                

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

  245   239   (119)  921 

Comprehensive income (loss)

 $138,419  $38,355  $353,945  $(217,066)
  

Three Months Ended

 
  

March 31,

 

(In thousands)

 

2022

  

2021

 

Net income

 $162,928  $102,161 

Other comprehensive income (loss), net of tax:

        

Fair value adjustments to available-for-sale securities

  (184)  (321)

Comprehensive income

 $162,744  $101,840 

 

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

 

5
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

 

             

Accumulated Other

                

Accumulated Other

   
 

Common Stock

 

Additional

 

Retained

 

Comprehensive

    

Common Stock

 

Additional

 

Retained

 

Comprehensive

   

(In thousands, except share data)

 

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Income (Loss)

  

Total

  

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 

Balances, January 1, 2022

 111,303,140  $1,113  $827,725  $710,088  $(180) $1,538,746 

Net income

 —  0  0  102,161  0  102,161  —  0  0  162,928  0  162,928 

Comprehensive loss, net of tax

 —  0  0  0  (321) (321) —  0  0  0  (184) (184)

Stock options exercised

 158,568  2  1,743  0  0  1,745 

Release of restricted stock units, net of tax

 29,808  0  (609) 0  0  (609) 115,686  1  (2,720) 0  0  (2,719)

Release of performance stock units, net of tax

 61,654  1  (1,901) 0  0  (1,900) 294,344  3  (8,113) 0  0  (8,110)

Shares repurchased and retired

 (2,096,660) (21) (131,768) 0 0 (131,789)

Dividends declared ($0.15 per share)

 — 0 0 (16,480) 0 (16,480)

Share-based compensation costs

  —   0   5,701   0   0   5,701   —   0   8,734   0   0   8,734 

Balances, March 31, 2021

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

Net income

 — 0 0 113,729 0 113,729 

Comprehensive loss, net of tax

 — 0 0 0 (43) (43)

Stock options exercised

 100,068 0 1,037 0 0 1,037 

Release of restricted stock units, net of tax

 43,036 1 0 0 0 1 

Share-based compensation costs

  —  0  12,823  0  0  12,823 

Balances, June 30, 2021

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

Net income

 — 0 0 138,174 0 138,174 

Comprehensive income, net of tax

 — 0 0 0 245 245 

Stock options exercised

 112,380 1 1,625 0 0 1,626 

Release of restricted stock units, net of tax

 8,894 0 (150) 0 0 (150)

Release of performance stock units, net of tax

 329 0 (7) 0 0 (7)

Share-based compensation costs

  —  0  9,783  0  0  9,783 

Balances, September 30, 2021

  112,345,594 $1,123 $906,478 $600,306 $31  $1,507,938 

Balances, March 31, 2022

  109,616,510  $1,096  $693,858  $856,536  $(364) $1,551,126 

 

 

             

Accumulated Other

                

Accumulated Other

   
 

Common Stock

  

Additional

  

Retained

  

Comprehensive

     

Common Stock

  

Additional

  

Retained

  

Comprehensive

    

(In thousands, except share data)

 

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Income (Loss)

  

Total

  

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Income (Loss)

  

Total

 

Balances, January 1, 2020

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

Net loss

 —  0  0  (147,559) 0  (147,559)

Comprehensive income, net of tax

 —  0  0  0  1,127  1,127 

Stock options exercised

 3,000  0  25  0  0  25 

Release of restricted stock units, net of tax

 76,502  1  (767) 0  0  (766)

Release of performance stock units, net of tax

 241,118  2  (3,372) 0  0  (3,370)

Shares repurchased and retired

 (682,596) (6) (11,114) 0  0  (11,120)

Share-based compensation costs

  —   0   8,191   0   0   8,191 

Balances, March 31, 2020

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

Net loss

 — 0 0 (108,544) 0 (108,544)

Balances, January 1, 2021

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

Net income

 —  0  0  102,161  0  102,161 

Comprehensive loss, net of tax

 — 0 0 0 (445) (445) —  0  0  0  (321) (321)

Stock options exercised

 1,000 0 8 0 0 8  158,568  2  1,743  0  0  1,745 

Release of restricted stock units, net of tax

 183,741 2 (6) 0 0 (4) 29,808  0  (609) 0  0  (609)

Release of performance stock units, net of tax

 20,082 1 0 0 0 1  61,654  1  (1,901) 0  0  (1,900)

Shares repurchased and retired

 0 (1) 0 0 0 (1)

Share-based compensation costs

  —  0  2,693  0  0  2,693   —   0   5,701   0   0   5,701 

Balances, June 30, 2020

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

Net income

 — 0 0 38,116 0 38,116 

Comprehensive income, net of tax

 — 0 0 0 239 239 

Stock options exercised

 139,065 1 1,159 0 0 1,160 

Release of restricted stock units, net of tax

 15,583 0 (224) 0 0 (224)

Release of performance stock units, net of tax

 0 0 0 0 0 0 

Shares repurchased and retired

 0 0 0 0 0 0 

Share-based compensation costs

  —  0  (858)  0  0  (858)

Balances, September 30, 2020

  111,539,603 $1,115 $879,450 $162,955 $391 $1,043,911 

Balances, March 31, 2021

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

 

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

 

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Table of Contents
 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

  

March 31,

 

(In thousands)

 

2021

  

2020

  

2022

  

2021

 

Cash Flows from Operating Activities

        

Net income (loss)

 $354,064  $(217,987)

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

    

Net income

 $162,928  $102,161 

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

 199,332  205,498  62,478  64,467 

Amortization of debt financing costs and discounts on debt

 8,627  9,066  2,264  3,024 

Non-cash operating lease expense

 46,702 43,806  10,013 16,043 

Share-based compensation expense

 28,307  10,026  8,734  5,701 

Deferred income taxes

 99,669  (40,794) 9,635  30,683 

Non-cash impairment of assets

 0 171,100 

Gain on sale of assets

 (12,725) 0 

Loss on early extinguishments and modifications of debt

 65,517  1,000  3,300  0 

Other operating activities

 9,765  (27) 0  2,591 

Changes in operating assets and liabilities:

        

Accounts receivable, net

 (2,217) 11,086  (7,613) (9,407)

Inventories

 3,066  (668) (460) 2,015 

Prepaid expenses and other current assets

 (14,313) (7,560) 1,467  3,107 

Income taxes payable, net

 85  5,260  38,141  1,499 

Other assets, net

 (4,861) (1,788) 524  (834)

Accounts payable and accrued liabilities

 27,913  (29,316) (32,149) 15,496 

Operating lease liabilities

 (46,702) (43,806) (10,013) (16,043)

Other long-term tax liabilities

 0  (3,840)

Other liabilities

  2,762   12,957   (2,815)  (3,817)

Net cash provided by operating activities

  777,716   124,013   233,709   216,686 

Cash Flows from Investing Activities

        

Capital expenditures

 (139,176) (105,077) (46,623) (35,477)

Insurance proceeds received for hurricane losses

 44,480 0 

Cash paid for acquisitions, net of cash received

 0 (11,201)

Insurance proceeds received from hurricane losses

 0 31,263 

Proceeds received from disposition of assets

 20,115 0 

Other investing activities

  5,472   0   0   6,672 

Net cash used in investing activities

  (89,224)  (116,278)

Net cash (used in) provided by investing activities

  (26,508)  2,458 

Cash Flows from Financing Activities

        

Borrowings under bank credit facility

 0  965,100  880,000  0 

Payments under bank credit facility

 (18,175) (1,281,421) (867,897) (4,899)

Proceeds from issuance of senior notes

 900,000 600,000 

Debt financing costs, net

 (14,596) (17,142)

Retirements of senior notes

 (1,450,000) 0 

Premium and consent fees

 (51,863) 0 

Share-based compensation activities, net

 1,743  (3,170)

Debt financing costs

 (13,635) 0 

Share-based compensation activities

 (10,829) (764)

Shares repurchased and retired

 0  (11,121) (131,789) 0 

Dividends paid

 0  (7,808)

Other financing activities

  (2,282)  (1,551)  (955)  (204)

Net cash provided by (used in) financing activities

  (635,173)  242,887 

Net cash used in financing activities

  (145,105)  (5,867)

Change in cash, cash equivalents and restricted cash

 53,319  250,622  62,096  213,277 

Cash, cash equivalents and restricted cash, beginning of period

  534,999   270,448   357,128   534,999 

Cash, cash equivalents and restricted cash, end of period

 $588,318  $521,070  $419,224  $748,276 

Supplemental Disclosure of Cash Flow Information

        

Cash paid for interest, net of amounts capitalized

 $150,675  $131,568  $26,413  $28,279 

Cash paid for (received from) income taxes

 4,774  (6,846) 0  (34)

Supplemental Schedule of Non-cash Investing and Financing Activities

        

Payables incurred for capital expenditures

 $4,070  $3,774  $4,720  $1,806 

Mortgage settlement in exchange for real estate

 0 57,684 

Dividends declared not yet paid

 16,480  0 

Operating lease right-of-use asset and liability remeasurements

 (11,224) 0 

 

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

 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and nine months ended September 30,March 31, 2022 and 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 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 September 30, 2021,March 31, 2022, 27 of our 28 gaming facilities are open and operating. One of our properties in Las Vegas remains closed to the public due to the current levels of the demand in the market.No date has been set for re-opening this property. 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 of our properties in 2020 of our properties had a material impact on our business, and the COVID-19 pandemic, itsthe associated impacts on customer behavior and the requirements of health and safety protocols may further impact our business.business in the future. The severity and duration of such potential 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, changeschange 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 operations, 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 second quarter and third 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, 20202021, as filed with the U.S. Securities and Exchange Commission ("SEC") on March 1, 2021.February 28, 2022.

 

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 Gamingthe Company and its wholly owned subsidiaries. Investments in unconsolidated affiliates, which are 50% or less owned and do not meet the controlling financial interest 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
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

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.purposes; and (ii) future bookings with our Hawaiian travel agency. 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.

 

 

September 30,

 

December 31,

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

March 31,

 

December 31,

 

(In thousands)

 

2021

  

2020

  

2020

  

2019

  

2022

  

2021

  

2021

  

2020

 

Cash and cash equivalents

 $570,926  $519,182  $506,046  $249,977  $402,975  $344,557  $730,908  $519,182 

Restricted cash

  17,392   15,817   15,024   20,471   16,249   12,571   17,368   15,817 

Total cash, cash equivalents and restricted cash

 $588,318  $534,999  $521,070  $270,448  $419,224  $357,128  $748,276  $534,999 

 

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, excluding race and sports wagers, is recognized when the wagers occur as all such wagers settle immediately. The allocated revenue for race and sports wagers is recognized when the specific event or game occurs. 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.

 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

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 player loyalty programs 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 player loyalty 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

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

 

September 30,

  

March 31,

 

(In thousands)

 

2021

 

2020

 

2021

 

2020

  

2022

  

2021

 

Food & beverage

 $26,380  $20,055  $75,284  $69,470  $27,578  $22,702 

Rooms

 15,721  12,007  43,970  34,162 

Room

 15,083  12,939 

Other

 1,904  1,211  4,469  4,265  2,013  1,076 

 

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the condensed consolidated statements of operations. In addition, we are responsible for the payment of gaming taxes owed for the online gaming activities conducted by third party operators under certain collaborative arrangements. We are reimbursed for these taxes by the third-party operators. We report the gaming taxes paid as other expense and the reimbursements we receive as other revenues. These taxes totaled approximately $162.2$171.5 million and $114.8$158.8 million for the three months ended September 30, 2021March 31, 2022 and 20202021, respectively, and $498.6including taxes deposited pursuant to the online collaborative agreements of $39.8 million and $259.7$34.6 million for the ninethree months ended September 30, 2021March 31, 2022 and 20202021, 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 and taxable income, 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 hold a five percent equity ownership in and have a strategic partnership with FanDuel Group ("FanDuel"), one of the nation's leadingleaders in online sports-betting, and iGaming operator, to pursue sports bettingsports-betting opportunities, both at our properties and online, gaming opportunities across the country. Subject to state law and regulatory approvals, we have established a presence in the retail gaming, 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, including 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 International.agreements. We operate retail gaming, and in some states online gaming, in Illinois, Indiana, Iowa, Louisiana, Mississippi and Pennsylvania under either the FanDuel brand or one of our other market access partners. The activities related to these collaborative arrangements are recorded in other revenue and other expense on the condensed consolidated statements of operations.

 

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Table of Contents

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

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

ASU 2021-05, Leases, Topic 842 ("Update 2021-05")

In July 2021, the FASBFinancial Accounting Standards Board ("FASB") issued Update 2021-05 to clarify guidance for lessors with lease contracts that have variable lease payments that do not depend on a reference index or rate and would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. Update 2021-05 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company is evaluatingadopted Update 2021-05 during first quarter 2022 and the impact of the adoption of Update 2021-05 however does not expect a material impact to its condensed consolidated financial statements.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:

 

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands)

 

2021

  

2020

  

2022

  

2021

 

Land

 $345,103  $346,485  $336,578  $343,963 

Buildings and improvements

 3,136,003  3,074,896  3,158,646  3,146,697 

Furniture and equipment

 1,645,466  1,609,637  1,686,559  1,653,451 

Riverboats and barges

 241,183  241,043  241,584  241,447 

Construction in progress

  4,994   43,883   7,044   912 

Total property and equipment

 5,372,749  5,315,944  5,430,411  5,386,470 

Less accumulated depreciation

  (2,951,955)  (2,790,057)  (3,052,961)  (2,992,286)

Property and equipment, net

 $2,420,794  $2,525,887  $2,377,450  $2,394,184 

 

Depreciation expense is as follows:

 

  

Three Months Ended

 
  

March 31,

 

(In thousands)

 

2022

  

2021

 

Depreciation expense

 $60,675  $61,310 

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Depreciation expense

 $64,429  $64,478  $189,861  $190,975 

11
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

 

NOTE 3.    GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

 

 

September 30, 2021

  

March 31, 2022

 
 

Weighted

 

Gross

    

Accumulated

    

Weighted

 

Gross

    

Accumulated

   
 

Useful Life

 

Carrying

 

Accumulated

 

Impairment

 

Intangible

  

Useful Life

 

Carrying

 

Accumulated

 

Impairment

 

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

  

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                              

Customer relationships

 1.7  $68,100  $(61,614) $0  $6,486  1.2  $68,100  $(64,629) $0  $3,471 

Host agreements

 11.7  58,000  (12,889) 0  45,111  11.2  58,000  (14,822) 0  43,178 

Development agreement

 —  21,373  0  0  21,373  —  21,373  0  0  21,373 
     147,473   (74,503)  0   72,970      147,473   (79,451)  0   68,022 
                      

Indefinite lived intangible assets

                              

Trademarks

 Indefinite  204,000  0  (24,800) 179,200  Indefinite  204,000  0  (27,200) 176,800 

Gaming license rights

 Indefinite   1,377,885   (33,960)  (222,174)  1,121,751  Indefinite   1,377,935   (33,960)  (222,174)  1,121,801 
     1,581,885   (33,960)  (246,974)  1,300,951      1,581,935   (33,960)  (249,374)  1,298,601 

Balances, September 30, 2021

    $1,729,358  $(108,463) $(246,974) $1,373,921 

Balances, March 31, 2022

    $1,729,408  $(113,411) $(249,374) $1,366,623 

 

 

December 31, 2020

  

December 31, 2021

 
 

Weighted

 

Gross

    

Accumulated

    

Weighted

 

Gross

    

Accumulated

   
 

Useful Life

 

Carrying

 

Accumulated

 

Impairment

 

Intangible

  

Useful Life

 

Carrying

 

Accumulated

 

Impairment

 

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

  

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                              

Customer relationships

 2.5  $68,100  $(55,062) $0  $13,038  1.5  $68,100  $(63,798) $0  $4,302 

Host agreements

 12.4   58,000   (9,989)  0   48,011  11.4   58,000   (13,856)  0   44,144 

Development agreement

 —  21,373  0  0  21,373  —  21,373  0  0  21,373 
     147,473   (65,051)  0   82,422      147,473   (77,654)  0   69,819 
                      

Indefinite lived intangible assets

                              

Trademarks

 

Indefinite

  204,000  0  (24,800) 179,200  

Indefinite

  204,000  0  (27,200) 176,800 

Gaming license rights

 

Indefinite

   1,376,685   (33,960)  (222,174)  1,120,551  

Indefinite

   1,377,935   (33,960)  (222,174)  1,121,801 
     1,580,685   (33,960)  (246,974)  1,299,751      1,581,935   (33,960)  (249,374)  1,298,601 

Balances, December 31, 2020

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

Balances, December 31, 2021

    $1,729,408  $(111,614) $(249,374) $1,368,420 

 

Goodwill, net consists of the following:

 

 

Gross

    

Accumulated

    

Gross

    

Accumulated

   
 

Carrying

 

Accumulated

 

Impairment

 

Goodwill,

  

Carrying

 

Accumulated

 

Impairment

 

Goodwill,

 

(In thousands)

 

Value

  

Amortization

  

Losses

  

Net

  

Value

  

Amortization

  

Losses

  

Net

 

Goodwill, net by Reportable Segment

                        

Las Vegas Locals

 $593,567  $0  $(188,079) $405,488  $593,567  $0  $(188,079) $405,488 

Downtown Las Vegas

 6,997  (6,134) 0  863  6,997  (6,134) 0  863 

Midwest & South

  666,798   0   (101,862)  564,936   666,798   0   (101,862)  564,936 

Balances, September 30, 2021

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

Balances, March 31, 2022

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

 

The following table sets forth the changes in our goodwill, net, during the ninethree months ended September 30, 2021March 31, 2022.

 

(In thousands)

 

Goodwill, Net

  

Goodwill, Net

 

Balance, January 1, 2021

 $971,287 

Balance, January 1, 2022

 $971,287 

Additions

 0  0 

Impairments

  0   0 

Balance, September 30, 2021

 $971,287 

Balance, March 31, 2022

 $971,287 

 

12
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

 

NOTE 4.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

 

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands)

 

2021

  

2020

  

2022

  

2021

 

Payroll and related expenses

 $85,648  $73,802  $66,380  $99,880 

Interest

 35,051  36,055  28,202  19,210 

Gaming liabilities

 81,955  72,655 

Player loyalty program liabilities

 25,019  27,935 

Gaming

 75,695  78,552 

Player loyalty program

 31,763  28,430 

Advance deposits

 17,716  16,037  19,879  15,320 

Outstanding chip liabilities

 6,817  6,021 

Operating lease liabilities

 94,133  90,478 

Other accrued liabilities

  96,295   73,436 

Outstanding chip

 7,251  7,407 

Dividend payable

 16,480 0 

Operating lease

 84,536  84,884 

Other accrued

  84,126   79,262 

Total accrued liabilities

 $442,634  $396,419  $414,312  $412,945 

 

 

NOTE 5.    LONG-TERM DEBT

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

 

 

September 30, 2021

  

March 31, 2022

 
 

Interest

       

Unamortized

    

Interest

       

Unamortized

   
 

Rates at

       

Origination

    

Rates at

       

Origination

   
 

September 30,

 

Outstanding

 

Unamortized

 

Fees and

 

Long-Term

  

March 31,

 

Outstanding

 

Unamortized

 

Fees and

 

Long-Term

 

(In thousands)

 

2021

 

Principal

 

Discount

 

Costs

 

Debt, Net

  

2022

 

Principal

 

Discount

 

Costs

 

Debt, Net

 

Bank credit facility

 2.312% $878,011  $(337) $(9,380) $868,294  2.073% $880,000  $0  $(18,473) $861,527 

4.750% senior notes due 2027

 4.750% 1,000,000  0  (12,175) 987,825  4.750% 1,000,000  0  (11,202) 988,798 

8.625% senior notes due 2025

 8.625% 600,000  0  (8,727) 591,273  8.625% 300,000  0  (3,769) 296,231 

4.750% senior notes due 2031

 4.750% 900,000  0  (14,079) 885,921  4.750% 900,000  0  (12,929) 887,071 

Other

 6.210%  1,398   0   0   1,398  5.534%  550   0   0   550 

Total long-term debt

    3,379,409 (337) (44,361) 3,334,711     3,080,550 0 (46,373) 3,034,177 

Less current maturities

     41,853   0   0   41,853      44,316   0   0   44,316 

Long-term debt, net

    $3,337,556  $(337) $(44,361) $3,292,858     $3,036,234  $0  $(46,373) $2,989,861 

 

 

December 31, 2020

  

December 31, 2021

 
 

Interest

       

Unamortized

    

Interest

       

Unamortized

   
 Rates at     Origination    Rates at     Origination   
 

December 31,

 

Outstanding

 

Unamortized

 

Fees and

 

Long-Term

  

December 31,

 

Outstanding

 

Unamortized

 

Fees and

 

Long-Term

 

(In thousands)

 

2020

  

Principal

  

Discount

  

Costs

  

Debt, Net

  

2021

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Bank credit facility

 2.486% $896,185  $(472) $(12,924) $882,789  2.286% $867,897  $(293) $(8,498) $859,106 

6.375% senior notes due 2026

 6.375% 750,000  0  (6,947) 743,053 

6.000% senior notes due 2026

 6.000% 700,000  0  (7,849) 692,151 

4.750% senior notes due 2027

 4.750% 1,000,000  0  (13,636) 986,364  4.750% 1,000,000  0  (11,688) 988,312 

8.625% senior notes due 2025

 8.625% 600,000 0 (10,512) 589,488  8.625% 300,000 0 (4,066) 295,934 

4.750% senior notes due 2031

 4.750% 900,000  0  (13,254) 886,746 

Other

 6.137%  3,638   0   0   3,638  5.932%  1,496   0   0   1,496 

Total long-term debt

    3,949,823  (472) (51,868) 3,897,483     3,069,393  (293) (37,506) 3,031,594 

Less current maturities

     30,740   0   0   30,740      41,673   0   0   41,673 

Long-term debt, net

    $3,919,083  $(472) $(51,868) $3,866,743     $3,027,720  $(293) $(37,506) $2,989,921 

 

Bank Credit Facility

Credit Agreement

On March 2,2022 (the "Closing Date"), the Company entered into a credit agreement (the "Credit Agreement") among the Company, certain direct and indirect subsidiaries of the Company as guarantors (the "Guarantors"), Bank of America, N.A., as administrative agent, collateral agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders. The Credit Agreement replaced the Third Amended and Restated Credit Agreement, dated as of August 14, 2013 (the "Prior Credit Agreement"), among the Company, certain direct and indirect subsidiaries of the Company as guarantors, Bank of America, N.A., as administrative agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders.

13
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

The Credit Agreement provides for (i) a $1,450.0 million senior secured revolving credit facility (the "Revolving Credit Facility") and (ii) an $880.0 million senior secured term A loan (the "Term A Loan," collectively with the Revolving Credit Facility, the "Credit Facility"). The Revolving Credit Facility and the Term A Loan mature on the fifth anniversary of the Closing Date (or earlier upon the occurrence or non-occurrence of certain events). The Term A Loan was fully funded on the Closing Date. Proceeds from the Credit Agreement were used to refinance all outstanding obligations under the Prior Credit Agreement, including a senior secured term loan A facility (the "Prior Term A Loan") and senior secured term loan B facility (the "Prior Refinancing Term B Loan"), and to fund transaction costs in connection with the Credit Agreement.

The outstanding principal amounts under our bank credit facilitythe Credit Facility and Prior Credit Agreement are comprised of the following:

 

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands)

 

2021

  

2020

  

2022

  

2021

 

Revolving Credit Facility

 $0  $0  $0  $0 

Term A Loan

 125,106  133,796  880,000  0 

Refinancing Term B Loans

 752,905  762,389 

Prior Term A Loan

 0 118,153 

Prior Refinancing Term B Loan

 0  749,744 

Swing Loan

  0   0   0   0 

Total outstanding principal amounts under the bank credit facility

 $878,011  $896,185  $880,000  $867,897 

 

With a total revolving credit commitment of $1,033.7$1,450.0 million available under the bank credit facility, no borrowings outstanding on the Revolving Credit Facility and the Swing Loanswing loan and $11.9$14.2 million allocated to support various letters of credit, there is a remaining contractual availability of $1,021.8$1,435.8 million as of September 30, 2021March 31, 2022. 

 

Interest and Fees

The interest rate on the outstanding balance of the Revolving Credit Facility and the Term A Loan is based upon, at the Company’s option, either: (i) a rate based on the Secured Overnight Financing Rate ("SOFR") administered by the Federal Reserve Bank of New York or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the Consolidated Total Net Leverage Ratio and ranges from 1.25% to 2.25% (if using SOFR) and from 0.25% to 1.25% (if using the base rate). A fee of a percentage per annum (which ranges from 0.20% to 0.35% determined in accordance with a specified pricing grid based on the Consolidated Total Net Leverage Ratio) will be payable on the unused portions of the Revolving Credit Facility. The rates based on SOFR will be determined based upon, at the Company’s option, (i) a forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited or any successor administrator, and based on interest periods of one, three or six months or such other interest period that is twelve months or less subject to the consent of lenders and the administrative agent, or (ii) a daily SOFR rate published by the Federal Reserve Bank of New York, and will include credit spread adjustments as set forth in the Credit Agreement. The "base rate" under the Credit Agreement Amendmentis the highest of (x) Bank of America’s publicly-announced prime rate, (y) the federal funds rate published by the Federal Reserve Bank of New York plus 0.50%, or (z) the SOFR rate for a one month interest period plus 1.00%.

Optional and Mandatory Prepayments

OnPursuant to the terms of the Credit Agreement (i) the loans under the Term A Loan will amortize in an annual amount equal to 5.00% of the original principal amount thereof, commencing May 25, June 30,2022, payable on a quarterly basis, and (ii) beginning with the fiscal year ending December 31,2021,the Company entered into an Amendmentwill be required to use a portion of its annual excess cash flow to prepay loans outstanding under the Credit Agreement if the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) exceeds certain thresholds set forth in the Credit Agreement.

Amounts outstanding under the Credit Agreement No.may be prepaid without premium or penalty, and the unutilized portion of the commitments 5may (the "Amendment") amongbe terminated without penalty, subject to certain conditions.

Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Credit Agreement in connection with certain directasset sales and indirect subsidiaryissuances of certain additional non-permitted or refinancing indebtedness.

Guarantees and Collateral

The Company’s obligations under the Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company’s subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Credit Facility.

The Credit Agreement includes an accordion feature which permits the incurrence of one or more new tranches of revolving credit commitments or term loans and increases to the Revolving Credit Facility and Term A Loan in an aggregate amount up to the sum of (i) $1,000.0 million, (ii) the amount of certain voluntary prepayments of senior secured indebtedness of the Company (the "Guarantors"), Bankand (iii) the maximum amount of America, N.A., as administrative agent, and certain other financial institutions partyincremental commitments which, after giving effect thereto, as lenders. The Amendment modifies that certain Third Amended and Restatedwould not cause the Consolidated First Lien Net Leverage Ratio (as defined in the Credit Agreement (as amended priorAgreement) 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 5.50exceed 3.00 to 1.00 on a pro forma basis, in each case, subject to the absencesatisfaction 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.certain conditions.

 

4.750% Senior Notes due June 2031Financial and Other Covenants

On June 8, 2021, we issued $900 million aggregate principal amountThe Credit Agreement contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of 4.750% senior notes due June 2031 (the "4.750% Notes due 2031"). The 4.750% Notes due 2031 require semi-annuala minimum consolidated 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,coverage ratio on a jointquarterly basis of 2.50 to 1.00, (ii) requiring the maintenance of a maximum Consolidated Total Net Leverage Ratio on a quarterly basis, (iii) imposing limitations on the incurrence of indebtedness and several basis, byliens, (iv) imposing limitations on transfers, sales and other dispositions and (v) imposing restrictions on investments, dividends and 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").other payments.

 

In conjunction withThe maximum permitted Consolidated Total Net Leverage Ratio is calculated as Consolidated Net Indebtedness to twelve-month trailing Consolidated EBITDA, as defined by the issuance ofCredit Agreement. The maximum Consolidated Total Net Leverage Ratio for 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

Onfiscal quarter ending June 9, 2021,30, 2022 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

Onfiscal quarter ending June 9, 2021,30, 2023 we redeemed all our 6.000% Notes at a redemption price of 103.993% plus accrued and unpaid interestmust be no higher than 5.00 to the redemption date. The redemption was funded through the issuance of the 4.750% Notes due 20311.00 and cash on hand. The Company used operating cash to payfor the redemption premium, accrued and unpaid interest, fees, expenses and commissions related to this redemption.

Covenant Compliance

As offiscal quarter ending September 30, 20212023 , we believe that we were in compliance with the covenants of our debt instruments.and each fiscal quarter thereafter, 4.50 to 1.00.

 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

Early Extinguishment and Modification of Debt

In accordance with authoritative accounting guidance for debt extinguishments and debt modifications, we accounted for the retirement of the Prior Term A Loan and the Prior Refinancing Term B Loan as extinguishments of debt, resulting in the write-off of unamortized deferred finance charges totaling $2.8 million, which is included in loss on early extinguishments and modifications of debt for the three months ended March 31, 2022. As the borrowing capacity of the Revolving Credit Facility under the Credit Agreement equals or exceeds that under the Prior Credit Agreement and the lenders under the Credit Agreement were substantially similar to the lenders under the Prior Credit Agreement, we accounted for the Revolving Credit Facility termination as a modification of debt and $4.3 million of unamortized deferred finance charges related to the Prior Credit Agreement were added to the $14.5 million incurred under the Credit Agreement and are being amortized over the term of the Credit Agreement. An additional $0.5 million of unamortized deferred finance charges corresponding to the percentage of lenders under the Prior Credit Agreement that did not continue to participate under the Credit Agreement is included in loss on early extinguishments and modifications of debt for the three months ended March 31, 2022. There was no loss on early extinguishment and modification of debt for the three months ended March 31, 2021.

Covenant Compliance

As of March 31, 2022, we believe that we were in compliance with the covenants of our debt instruments.

 

NOTE 6.    COMMITMENTS AND CONTINGENCIES

Pending Acquisitions

On March 28, 2022, we announced that we had entered into a definitive agreement to acquire Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. ("Pala Canada"), for total cash consideration of $170.0 million. Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a business-to-business (B2B) and business-to-consumer (B2C) basis in regulated markets across the United States and Canada. The transaction is expected to close by the first quarter of 2023, subject to the satisfaction of customary closing conditions and the receipt of all required regulatory approvals. We intend to finance the transaction through cash flow from operations and availability under our Revolving Credit Facility.

Commitments
As of September 30, 2021March 31, 2022, other than the pending acquisition of Pala Interactive as discussed above, there have been no material changes to our commitments described under Note 9,8, Commitments and Contingencies, in our Annual Report on Form  10-K for the year ended December 31, 20202021, as filed with the SEC on March 1, 2021.February 28, 2022.

 

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 Programs
On December 12, 2018,October 21, 2021, our Board of Directors authorized a share repurchase program of $100 million, which as of September 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. On October 21, 2021, our Board of Directors authorized an additional share repurchase program of $300.0 million. Under the stockthis repurchase programs,program, the Company may repurchase shares of its common stock from time to time on the open market or in privately negotiated transactions. We are not obligated to repurchase any shares under this program. Repurchases of common stock may also be made under Rule 10b5- 1 plans, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing, volume and nature of share repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws and other factors, and may be suspended or discontinued at any time.
 
During the ninethree months ended September 30, 2020, March 31, 2022, the Company repurchased  0.72.1 million shares, at a total cost, including brokerage fees, of  $11.1$131.8 million, for an average repurchase price per share of $16.29.$62.86. There were no0 share repurchases forduring the three months ended September 30,March 31, 2021and 2020 and for the nine months ended September 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.

Declaration date

 

Record date

 

Payment date

 Amount per share 

February 3, 2022

 

March 15, 2022

 

April 15, 2022

 $0.15 

 

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

 
  

March 31,

 

(In thousands)

 

2022

  

2021

 

Gaming

 $229  $160 

Food & beverage

  44   31 

Room

  21   14 

Selling, general and administrative

  1,165   815 

Corporate expense

  7,275   4,681 

Total share-based compensation expense

 $8,734  $5,701 

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

 

Gaming

 $230  $92  $656  $445 

Food & beverage

  43   18   125   85 

Room

  21   8   60   40 

Selling, general and administrative

  1,169   466   3,337   2,262 

Corporate expense

  8,320   (1,442)  24,129   7,194 

Total share-based compensation expense

 $9,783  $(858) $28,307  $10,026 
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The share-based compensation creditBOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of March 31, 2022 and December 31, 2021 and for the three months ended September 30, 2020, is due to a decline in the estimated achievement levels for Performance Share Units ("PSU") as a result of the COVID-19March 31, 2022 pandemic on Company performance.and 2021

 

Performance Shares

Our stock incentive plan provides for the issuance of PSUPerformance Share Units ("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 20172018 and 20162017 fully vested during first quarter 20212022 and 2020,2021, 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 15November 2018
Tableresulted in a total of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

408,609 shares being issued during first quarter 2022, representing approximately 1.58 shares per PSU. Of the 408,609 shares issued, a total of 114,265 were surrendered by the participants for payroll taxes, resulting in a net issuance of 294,344 shares due to the vesting of the 2018 grant. The actual achievement level under the award metrics equaled the estimated performance as of the year-end September 30, 20212021; andtherefore, the vesting of the PSUs did December 31, 2020not and for theimpact compensation costs in our three2022 and nine months ended September 30, 2021 and 2020

condensed consolidated statement of operations.

 

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.

 

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 September 30, 2021March 31, 2022, there was approximately $8.7$19.5 million, $5.4$9.1 million and $1.5$1.9 million of total unrecognized share-based compensation costs related to unvested restricted stock units (“RSUs”("RSUs"), PSUs and career shares, respectively. As of September 30, 2021March 31, 2022, the unrecognized share-based compensation costs related to our RSUs, PSUs and career shares are expected to be recognized over approximately 1.92.4 years, 1.72.4 years and 3.8 years, respectively.

 

 

NOTE 8.     FAIR VALUE MEASUREMENTS

TheWe have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and 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.

 

FinancialAs required by the guidance for fair value measurements, 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:

 

 

September 30, 2021

  

March 31, 2022

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

  

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                        

Cash and cash equivalents

 $570,926  $570,926  $0  $0  $402,975  $402,975  $0  $0 

Restricted cash

 17,392  17,392  0  0  16,249  16,249  0  0 

Investment available for sale

 16,063  0  0  16,063  15,612  0  0  15,612 
 

Liabilities

            

Contingent payments

 $280  $0  $0  $280 

 

 

December 31, 2020

  

December 31, 2021

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

  

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                        

Cash and cash equivalents

 $519,182  $519,182  $0  $0  $344,557  $344,557  $0  $0 

Restricted cash

 15,817  15,817  0  0  12,571  12,571  0  0 

Investment available for sale

 16,692  0  0  16,692  15,822  0  0  15,822 
 

Liabilities

            

Liability

            

Contingent payments

 $924  $0  $0  $924  $62  $0  $0  $62 

 

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 September 30, 2021March 31, 2022 and December 31, 20202021.

 

16
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

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, 20372037. 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 September 30, 2021March 31, 2022 and December 31, 20202021 is a discount rate of 10.2%10.8% and 9.6%10.1%, 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 September 30, 2021March 31, 2022 and December 31, 20202021, $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 September 30, 2021March 31, 2022 and December 31, 20202021, $15.4$15.0 million and $16.1$15.2 million, respectively, is included in other assets, net on the condensed consolidated balance sheets. The discount associated with this investment of $2.4$2.3 million as ofat both September 30, 2021March 31, 2022 and $2.5 million as of December 31, 20202021, 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.

 

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, endingwhich ended on December 20, 2021. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approachapproach. There was no current liability at March 31, 2022 and the significant unobservable input used in the valuation atSeptember 30, 2021 and December 31, 2020, is a discount rate of 4.4% and 6.1%, respectively. At September 30, 2021 and December 31, 2020, there was a current liability of $0.3$0.1 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

 
  

September 30, 2021

  

September 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

 $15,696  $(489) $16,867  $(1,275)

Total gains (losses) (realized or unrealized):

                

Included in interest income (expense)

  39   (4)  38   (18)

Included in other comprehensive income (loss)

  328   0   322   0 

Included in other items, net

  0   18   0   (59)

Purchases, sales, issuances and settlements:

                

Settlements

  0   195   0   206 

Balance at end of reporting period

 $16,063  $(280) $17,227  $(1,146)

 

Nine Months Ended

  

Three Months Ended

 
 

September 30, 2021

 

September 30, 2020

  

March 31, 2022

  

March 31, 2021

 
 

Asset

 

Liability

 

Asset

 

Liability

  

Asset

  

Liability

  

Asset

  

Liability

 

(In thousands)

 

Investment Available for Sale

 

Contingent Payments

 

Investment Available for Sale

 

Contingent Payments

  

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) $15,822  $(62) $16,692  $(924)

Total gains (losses) (realized or unrealized):

          

Included in interest income (expense)

 121  (26) 116  (66) 42  0  41  (13)

Included in other comprehensive income (loss)

 (160) 0  1,510  0  (252) 0  (436) 0 

Included in other items, net

 0  21  0  162  0  0  0  26 

Purchases, sales, issuances and settlements:

          

Settlements

  (590)  649   (550)  470   0   62   0   142 

Balance at end of reporting period

 $16,063  $(280) $17,227  $(1,146) $15,612  $0  $16,297  $(769)

 

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.

 

17
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

Balances Disclosed at Fair Value

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

 

 

March 31, 2022

 

September 30, 2021

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Liabilities

                    

Obligation under assessment arrangements

 $24,730  $21,005  $26,551 

Level 3

 $23,738  $20,315  $26,581 

Level 3

 

 

 

December 31, 2021

 

December 31, 2020

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Liabilities

                    

Obligation under assessment arrangements

 $26,246  $22,062  $26,542 

Level 3

 $24,306  $20,734  $26,908 

Level 3

 

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

 

 

March 31, 2022

 

September 30, 2021

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Bank credit facility

 $878,011  $868,294  $876,757 

Level 2

 $880,000  $861,527  $877,800 

Level 2

4.750% senior notes due 2027

 1,000,000  987,825  1,030,000 

Level 1

 1,000,000  988,798  987,500 

Level 1

8.625% senior notes due 2025

 600,000 591,273 648,750 

Level 1

 300,000 296,231 315,375 

Level 1

4.750% senior notes due 2031

 900,000  885,921  925,875 

Level 1

 900,000  887,071  864,000 

Level 1

Other

  1,398   1,398   1,398 

Level 3

  550   550   550 

Level 3

Total debt

 $3,379,409  $3,334,711  $3,482,780   $3,080,550  $3,034,177  $3,045,225  

 

 

December 31, 2021

 

December 31, 2020

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Outstanding Face Amount

  

Carrying Value

  

Estimated Fair Value

 

Fair Value Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Bank credit facility

 $896,185  $882,789  $888,511 

Level 2

 $867,897  $859,106  $866,812 

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

 1,000,000  988,312  1,023,750 

Level 1

8.625% senior notes due 2025

 600,000 589,488 667,500 

Level 1

 300,000 295,934 320,250 

Level 1

4.750% senior notes due 2031

 900,000  886,746  915,750 

Level 1

Other

  3,638   3,638   3,638 

Level 3

  1,496   1,496   1,496 

Level 3

Total debt

 $3,949,823  $3,897,483  $4,104,524   $3,069,393  $3,031,594  $3,128,058  

 

The estimated fair value of our bank credit facility is based on a relative value analysis performed on or about September 30, 2021March 31, 2022 and December 31, 20202021. The estimated fair values of our Senior Notessenior notes are based on quoted market prices as of September 30, 2021March 31, 2022 and December 31, 20202021. The other debt is fixed-rate debt consisting of the following:of: (i) finance leases with various maturity dates from 20212022 to 2022;2024; 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.value for these obligations.

 

There were no transfers between Level 1, Level 2 and Level 3 measurements during the ninethree months ended September 30, 2021March 31, 2022 and 20202021.

 

18
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

 

NOTE 9.    SEGMENT INFORMATION

We aggregate certain ofhave aggregated 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 (1)

 

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, BreweryHotel and HotelCasino

 

Las Vegas, Nevada

Midwest & South

  

Par-A-Dice Hotel Casino

 

East Peoria, Illinois

Belterra Casino Resort(2)

 

Florence, Indiana

Blue Chip Casino Hotel & Spa

 

Michigan City, Indiana

Diamond Jo DubuqueCasino

 

Dubuque, Iowa

Diamond Jo Worth

 

Northwood, Iowa

Kansas Star Casino

 

Mulvane, Kansas

Amelia Belle Casino

 

Amelia, Louisiana

Delta Downs Racetrack CasinoHotel & HotelCasino

 

Vinton, Louisiana

Evangeline Downs Racetrack and& Casino

 

Opelousas, Louisiana

Sam's Town Hotel and CasinoShreveport

 

Shreveport, Louisiana

Treasure Chest Casino

 

Kenner, Louisiana

IP Casino Resort Spa

 

Biloxi, Mississippi

Sam's Town Hotel and Gambling Hall Tunica

 

Tunica, Mississippi

Ameristar Casino * Hotel Kansas City(2)

 

Kansas City, Missouri

Ameristar Casino * Resort * Spa St. Charles(2)

 

St. Charles, Missouri

Belterra Park(2)

 

Cincinnati, Ohio

Valley Forge Casino Resort

 

King of Prussia, Pennsylvania

 

(1) Eastside Cannery is currently closed due to local market conditions.

(2) Property is subject to a master lease agreement with a real estate investment trust.

 

Results of Operations - Total Reportable Segment Departmental Revenues and Adjusted EBITDAR

We evaluate each of our property's profitability based uponon 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, other items, net 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.

 

19
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

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

 

 

Three Months Ended September 30, 2021

  

Three Months Ended March 31, 2022

 
   Food &          Food &       
 Gaming Beverage Room Other Total  Gaming Beverage Room Other Total 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

  

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $179,441  $20,412  $20,176  $11,235  $231,264  $173,590  $20,337  $19,657  $13,978  $227,562 

Downtown Las Vegas

 28,132  7,343  4,000  2,662  42,137  32,443  9,709  5,396  1,936  49,484 

Midwest & South

  466,654   33,346   20,141   49,518   569,659   461,921   33,697   17,356   70,723   583,697 

Total Revenues

 $674,227  $61,101  $44,317  $63,415  $843,060  $667,954  $63,743  $42,409  $86,637  $860,743 

 

 

Three Months Ended September 30, 2020

  

Three Months Ended March 31, 2021

 
   Food &          Food &       
 Gaming Beverage Room Other Total  Gaming Beverage Room Other Total 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

  

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $141,143  $12,501  $10,914  $6,518  $171,076  $149,222  $13,430  $10,687  $9,084  $182,423 

Downtown Las Vegas

 12,678  2,992  1,350  519  17,539  14,846  3,812  1,821  954  21,433 

Midwest & South

  412,144   23,285   14,661   13,533   463,623   453,858   26,870   13,482   55,241   549,451 

Total Revenues

 $565,965  $38,778  $26,925  $20,570  $652,238  $617,926  $44,112  $25,990  $65,279  $753,307 

 

  

Nine Months Ended September 30, 2021

 
      Food &             
  Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $516,174  $52,959  $49,344  $31,305  $649,782 

Downtown Las Vegas

  70,168   17,657   9,269   5,256   102,350 

Midwest & South

  1,433,273   92,025   50,771   161,768   1,737,837 

Total Revenues

 $2,019,615  $162,641  $109,384  $198,329  $2,489,969 

 

  

Nine Months Ended September 30, 2020

 
      Food &             
  Gaming  Beverage  Room  Other  Total 

(In thousands)

 

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                    

Las Vegas Locals

 $298,307  $47,039  $35,278  $19,907  $400,531 

Downtown Las Vegas

  45,663   15,599   7,825   7,229   76,316 

Midwest & South

  916,871   76,685   37,467   34,752   1,065,775 

Total Revenues

 $1,260,841  $139,323  $80,570  $61,888  $1,542,622 

20
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2021March 31, 2022 and December 31, 20202021 and for the three and ninemonths ended September 30, 2021March 31, 2022 and 20202021

 

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

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

  

September 30,

  

March 31,

 

(In thousands)

 

2021

  

2020

  

2021

  

2020

  

2022

  

2021

 

Adjusted EBITDAR

            

Las Vegas Locals

 $125,360  $78,900  $349,572  $128,520  $118,695  $90,642 

Downtown Las Vegas

 13,222  (1,511) 31,083  1,225  18,389  2,440 

Midwest & South

 222,058  182,502  700,199  320,986  223,481  218,149 

Corporate expense

  (19,943)  (21,048)  (62,165)  (51,333)  (21,729)  (18,634)

Adjusted EBITDAR

  340,697   238,843   1,018,689   399,398   338,836   292,597 
 

Other operating costs and expenses

            

Deferred rent

 207  217  621  666  191  207 

Master lease rent expense

 26,306  25,914  78,396  75,992  26,306  25,915 

Depreciation and amortization

 67,586  69,320  199,332  205,498  62,478  64,467 

Share-based compensation expense

 9,783  (858) 28,307  10,026  8,734  5,701 

Project development, preopening and writedowns

 10,646  2,249  13,515  9,582  (10,029) 1,415 

Impairment of assets

 0  0  0  171,100 

Other operating items, net

  3,023   14,928   15,295   23,570   98   1,157 

Total other operating costs and expenses

  117,551   111,770   335,466   496,434   87,778   98,862 

Operating income (loss)

 $223,146  $127,073  $683,223  $(97,036)

Operating income

  251,058   193,735 

Other expense (income)

 

Interest income

 (420) (509)

Interest expense, net of amounts capitalized

 37,658 57,890 

Loss on early extinguishments and modifications of debt

 3,300 — 

Other, net

  (253)  1,932 

Total other expense, net

  40,285  59,313 

Income before income taxes

 210,773 134,422 

Income tax provision

  (47,845)  (32,261)

Net income

 $162,928 $102,161 

 

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:

 

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

(In thousands)

 

2021

  

2020

  

2022

  

2021

 

Assets

        

Las Vegas Locals

 $1,663,707  $1,690,511  $1,625,364  $1,641,409 

Downtown Las Vegas

 247,110  213,507  238,713  228,161 

Midwest & South

  3,908,874   3,984,063   3,914,299   3,947,076 

Total Reportable Segment Assets

 5,819,691  5,888,081  5,778,376  5,816,646 

Corporate

  680,426   670,867   472,044   407,523 

Total Assets

 $6,500,117  $6,558,948  $6,250,420  $6,224,169 

 

 

NOTE 10.    SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after September 30, 2021March 31, 2022. 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
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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,""Company", "Boyd", "Boyd" "Boyd Gaming," 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 September 30, 2021,March 31, 2022, and as reflected in the table below, 27 of our 28 gaming facilities are open and operating. One of our properties in Las Vegas remains closed to the public due to the current levels of the demand in the market. No date has been set for re-opening this property. 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 in 2020 had a material impact on our business, and the COVID-19 pandemic, itsthe associated impacts on customer behavior and the requirements of health and safety protocols may further impact our business.business in the future. The severity and duration of such potential 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, changesthe development and effectiveness of COVID-19 treatments, change 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.

 

After the property re-openingsreopenings in 2020, we implemented a strategic shift in our operating philosophy to increase our focus on building loyalty with core customers and adopted a more efficient approach to doing business. This new operating model is focused on maximizing gaming revenues, streamlining our cost structure, targeting our marketing investments and reducing lower margin offerings, which allows us to flow a higher percentage of our revenues to the bottom line. We continue this strategy in 2022 and remain focused on our disciplined approach to operating the business.

 

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

 

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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 part of 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 (1)

 

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

3/18/2020Fremont Hotel & Casino

 

6/4/2020Las Vegas, Nevada

FremontMain Street Station Hotel and Casino

 

Las Vegas, Nevada

3/18/2020

6/4/2020

Main Street Station Casino, Brewery and HotelLas Vegas, Nevada3/18/20209/8/2021

Midwest & South

  

Par-A-Dice Hotel Casino (2)

 

East Peoria, Illinois

3/16/2020

7/1/2020*

Belterra Casino Resort (4)

 

Florence, Indiana

3/16/2020

6/15/2020

Blue Chip Casino Hotel & Spa

 

Michigan City, Indiana

3/16/2020

6/15/2020

Diamond Jo DubuqueCasino

 

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 CasinoHotel & HotelCasino

 

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 CasinoShreveport

 

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

 

Tunica, Mississippi

3/17/2020

5/21/2020

Ameristar Casino * Hotel Kansas City (4)

 

Kansas City, Missouri

3/17/2020

6/1/2020

Ameristar Casino Report* Resort * Spa St. Charles (4)

 

St. Charles, Missouri

3/17/2020

6/1/2020

Belterra Park (4)

 

Cincinnati, Ohio

3/14/2020

6/19/2020

Valley Forge Casino Resort (3)

 

King of Prussia, Pennsylvania

3/13/2020

6/26/2020**

 

*(1) Eastside Cannery remains closed since March 18, 2020.

(2) Par-A-Dice was temporarily closed on November 20, 2020 and subsequently re-openedreopened on January 16, 2021.

**(3) Valley Forge was temporarily closed on December 12, 2020 and subsequently re-openedreopened on January 4, 2021.

(4) Property is subject to a master lease agreement with a real estate investment trust.

 

We also own and operate a travel agency and a captive insurance company that underwrites travel-related insurance, each located in Hawaii. FinancialAs our Downtown properties cater to the Hawaiian market, financial results for these operations are included in our Downtown Las Vegas segment.

 

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 closedsuspended on November 20, 2020 and subsequently re-openedresumed on January 16, 2021. The

We have online sports-betting offerings through market-access agreements with other companies in New Jersey and six of the nine states we operate in throughout the Midwest & South segmentsegment. We also includeshave iGaming offerings in two of these states. Financial results for online sports betting and iGaming operations are included in our online sportsbook and gaming business, including those developed in partnership with FanDuel Group.Midwest & South segment.

 

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, pay income taxes, and to repurchase our equity securities and pay dividends to return capital to our shareholders.

 

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. We intend to take a balanced approach to our cash flows, with a current emphasis on investing in our business and returning capital to shareholders.

 

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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 refineddisciplined business model positioned us to flow a substantial portion of theour revenue directly to the bottom line.

 

Evaluating Acquisition Opportunities

Our evaluations of potential transactionsinvestments and acquisitionsgrowth opportunities are strategic, deliberate, and disciplined. Our goal is to identify and pursue opportunities that are a good fit forgrow our business and deliver a solid return for shareholders and are available at the right price. These investments can take the form of expanding and enhancing offerings and amenities at existing properties, development of new properties, acquisitions, or expanding and enhancing online and iGaming offerings as they are legalized in and around the states we operate in today.

 

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

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

 

September 30,

  

March 31,

 

(In millions)

 

2021

 

2020

 

2021

 

2020

  

2022

  

2021

 

Total revenues

 $843.1  $652.2  $2,490.0  $1,542.6  $860.7  $753.3 

Operating income (loss)

 223.1  127.1  683.2  (97.0)

Net income (loss)

 138.2  38.1  354.1  (218.0)

Operating income

 251.1  193.7 

Net income

 162.9  102.2 

 

Total Revenues

Total revenues increased $190.8$107.4 million, and $947.3 millionor 14.3%, during the three and nine months ended September 30, 2021March 31, 2022, respectively, as compared to the prior year comparable periods, period, due primarily to the impactcontinued recovery from the COVID-19 pandemic as many COVID-related restrictions impacting our business were lifted in the second quarter of 2021, vaccination rates increased year over year, destination travel grew and we opened additional amenities that were closed for all or a portion of the COVID-19 property closures that beganprior year period. We also continue to focus on our core customer, leveraging more robust marketing and analytical tools since reopening the majority of our properties in mid-March 2020 and extended through most ofthe second quarter of 2020, (the "Property Closures") and increased revenueswhich has driven revenue growth from our online gaming initiatives.core customers year over year.

 

Operating Income (Loss)

Operating income (loss) increased $96.1$57.3 million, or 29.6%, for the three months ended September 30, 2021,March 31, 2022, compared to the prior year comparable period, primarily due to a 14.3% growth in revenues year over year with continued recovery from the impactCOVID-19 pandemic and our focus on our core customers as discussed above. In addition, we transformed our operatingmodel after reopening our properties and this streamlined operating model, with a focus and discipline on costs, has allowed us to flow a greater portion of the Property Closures our revenue growth to operating income. Operating income was also favorably impacted by a $12.7 million gain on the financial resultsdisposition of assets for the prior year period. Operating income (loss) increased $780.3 million for the ninethree months ended September 30, 2021, compared to the prior year comparable period, 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. These results reflect the impact of the strategic shift in our operating model following property re-openings. March 31, 2022.

 

Net Income (Loss)

Net income (loss) increased $100.1$60.8 million for the three months ended September 30, 2021,March 31, 2022, compared to the prior year comparable period. The increase is attributable to the operating income increase of $96.1$57.3 million, as discussed above. In addition, income before income taxes increased due to a $17.2$20.2 million decrease in interest expense as a result of a $1.1 billion$870.1 million decline in the weighted average debt balance. This reduction is 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 the retirement of $300 million aggregate principal amount of our 8.625% Senior Notes due 2025 ("8.625% Notes) in November 2021, offset by the issuance of the $900 million aggregate principal amount of 4.750% Senior Notes due 2031 ("4.750% Notes due 2031") in June 2021. These increases in income are offset by a reduction in other income of $5.1 million and an increase in the income tax provision of $8.5 million due to the Company's improved operational performance.

Net income (loss) increased $572.1 million for the nine months ended September 30, 2021, compared to the prior year comparable period. The increase is attributable to the operating income increase of $780.3 million, as discussed above. This increase is offset by a $64.5 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 $151.4$15.6 million due to the Company's improved operational performance.

 

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Operating Revenues

We derive the majority of our revenues from our gaming operations, which produced approximately 80%78% and 87%82% of revenues for the three months ended September 30,March 31, 2022 and 2021, respectively. Other revenues, which include online offerings, represent our next most significant revenue source, generating 10% and 2020, respectively, and 81% and 82%9% of revenues for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. Food & beverage revenues room revenues and otherroom revenues separately contributed less than 10% of revenues during these periods. The shift in percentage contributions of revenues from gaming over the non-gaming departments to gaming in these periods versus our historical averages reflectsprior year is driven by the impact of operating restrictions as properties re-openedreopened following the Property Closures,COVID-related closures in 2020, which limited our offerings of non-gaming amenities, compoundedand was also impacted by limited destination travel, entertainment and group business in the strategic shift in our operating model as properties re-opened, which focused on maximizing gaming revenues. prior year.

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

 

September 30,

  

March 31,

 

(In millions)

 

2021

 

2020

 

2021

 

2020

  

2022

  

2021

 

REVENUES

            

Gaming

 $674.2  $566.0  $2,019.6  $1,260.8  $668.0  $617.9 

Food & beverage

 61.1  38.8  162.6  139.3  63.7  44.1 

Room

 44.3  26.9  109.4  80.6  42.4  26.0 

Other

  63.5   20.5   198.4   61.9   86.6   65.3 

Total revenues

 $843.1  $652.2  $2,490.0  $1,542.6  $860.7  $753.3 
  

COSTS AND EXPENSES

            

Gaming

 $249.7  $215.0  $741.2  $530.4  $250.0  $232.1 

Food & beverage

 50.7  38.7  136.4  145.3  53.9  38.9 

Room

 15.1  12.9  41.4  41.0  16.0  12.1 

Other

  41.6   5.8   128.0   29.4   56.9   41.9 

Total costs and expenses

 $357.1  $272.4  $1,047.0  $746.1  $376.8  $325.0 
  

MARGINS

            

Gaming

 63.0% 62.0% 63.3% 57.9% 62.6% 62.4%

Food & beverage

 17.0% 0.3% 16.1% -4.3% 15.4% 11.8%

Room

 65.9% 52.0% 62.2% 49.1% 62.3% 53.5%

Other

 34.5% 71.7% 35.5% 52.5% 34.3% 35.8%

 

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 $108.3$50.1 million, and $758.8 millionor 8.1%, during the three and nine months ended September 30, 2021, respectively,March 31, 2022, 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 6.8% increase in slot win and a 22.8% increase in table game hold as we continue to leverage our marketing and analytical tools to focus on costs under our revised operating model.core customers.

 

Food & Beverage

Food & beverage revenues increased $22.319.6 million, or 44.5%, during the three months ended  September 30, 2021,March 31, 2022, compared to the prior year comparable period , primarily due to the impactan increase in food covers of the Property Closures. In the prior year, food & beverage venues were re-opened however still 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 by32.7% and an increase in average guest check of 7.4% while cost per cover decreased 13.0% due to our focus on costs under our revised operating model.
Food & beverage revenues increased  $23.3 million during the nine months ended September 30, 2021, compared to the prior year period. Due to the Property Closures i n the prior year, food & beverage venues were open for six and a half months on average during the nine months ended September 30, 2020.  For those food & beverage venues that re-opened, there are still capacity restrictions that have impacted the financial performance for the nine months ended September 30, 2021  as covers remained flat period over period. 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 11.2% while cost per cover decreased 13.8%5.9%.
 
Room

Room revenues increased$17.416.4 million, or 63.2%, during the three months ended September 30, 2021,March 31, 2022, as compared to the prior year comparable period, primarily due to the liftingan increase in hotel occupancy rate of operating restrictions12.4% and increased visitation from the prior year comparable an increase in average daily rate of 15.1%period.. Overall room margins increased to 65.9%62.3% from 52.0%53.5% in the prior year comparable period, due primarily to a decrease in cost per room of 15.2% reflecting the impact of the new operating model,5.1% as certain minimum staffing levels and fixed costs were spread across more occupied rooms, along with anthe increase in average daily rate of 18.2%.

Room revenues increased $28.8 million during the nine months ended September 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 62.2% from 49.1% in the prior year comparable period, due primarily to a decrease in cost per room of 17.9% reflecting the impact of the new operating model, along with an increase in average daily rate of 10.6%.15.1% noted above.

 

Other

Other revenues relate to our online gaming initiatives and patronage visits at the other amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Other revenues increased$42.821.3 million, and $136.4 millionor 32.7%, during the three and nine months ended September 30, 2021, respectively,March 31, 2022, 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 bypartners, and as other amenities such as entertainment and group business started to return again after the limited entertainment offerings after property re-openings.COVID-related closures. Corresponding period-over-period increases in other expenses reflect primarily the gaming taxes paid on behalf of our online partners.partners and the corresponding costs of entertainment and group business.

 

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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, for purposes of this presentation, 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

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

  

September 30,

  

March 31,

 

(In millions)

 

2021

  

2020

  

2021

  

2020

  

2022

  

2021

 

Total revenues

            

Las Vegas Locals

 $231.3  $171.1  $649.8  $400.5  $227.6  $182.4 

Downtown Las Vegas

 42.1  17.5  102.4  76.3  49.5  21.4 

Midwest & South

  569.7   463.6   1,737.8   1,065.8   583.6   549.5 

Total revenues

 $843.1  $652.2  $2,490.0  $1,542.6  $860.7  $753.3 
  

Adjusted EBITDAR (1)

            

Las Vegas Locals

 $125.4  $78.9  $349.6  $128.5  $118.7  $90.6 

Downtown Las Vegas

 13.2  (1.5) 31.1  1.2  18.4  2.5 

Midwest & South

 222.1  182.5  700.2  321.0  223.5  218.1 

Corporate expense

  (20.0)  (21.0)  (62.2)  (51.3)  (21.8)  (18.6)

Adjusted EBITDAR

 $340.7  $238.9  $1,018.7  $399.4  $338.8  $292.6 

 

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

 

Las Vegas Locals 

Total revenues increased by $60.245.2 million during the three months ended September 30, 2021March 31, 2022, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories. Gaming revenues increased $38.3$24.4 million primarily due to an increase in slot handle of 23.3%11.0% and table game drop of 31.9% from the prior year comparable period. Room revenues increased $9.3$9.0 million due to an increase in hotel occupancy rate of 16.2% and average daily rate of 37.9%35.8% from the prior year comparable period. Food & beverage revenues increased $7.9$6.9 million due to an increase in food covers of 50.9% and average check of 13.6%9.3% from the prior year comparable period. Other revenues increased $4.7$4.9 million as entertainment venues began to re-open.

Total revenues increased by $249.3 million duringexpanded the nine months ended September 30, 2021, as compared to the corresponding periodnumber of the prior year, reflecting revenue increases in all departmental categories, primarily due to the Property Closures in 2020. Gaming revenue was the driving factor, increasing by $217.9 million primarily due to a 60.0% increase in slot handle from the prior year comparable period. Room revenues increased $14.1 million due to an increase in average daily rate of 11.1% from the prior year comparable period. Other revenues increased $11.4 million as entertainment venues began to re-open. Food & beverage revenues increased $5.9 million due to an increase in average check of 14.5% fromevents and demand for other amenities grew over the prior year comparable period.

 

Adjusted EBITDAR increased by $46.5 million and $221.1$28.1 million during the three and nine months ended September 30, 2021, respectively,March 31, 2022, as compared to the corresponding period of the prior year, due primarily to revenue growth and a strategic shift in the Company’scontinuation of our disciplined operating model shift when operations resumed following the Property Closures.reopening of our properties in 2020.

 

Downtown Las Vegas 

Total revenues increased by $24.6$28.1 million during the three months ended September 30, 2021,March 31, 2022, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories. Total revenues increased by $26.0 million during the nine months ended September 30, 2021, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories, except other revenues. Given that our Downtown properties cater to the Hawaiian market, the year over year reduction in restrictions in Hawaii drove an increase in Hawaiian visitation occurred induring the third quarter drivingthree months ended March 31, 2022 over the prior year comparable period, which drove the overall departmental revenue increases along withincreases. In addition, one of our downtown properties re-openingreopened in early September 2021.2021 as destination travel started returning. 

Adjusted EBITDAR increased by $14.7 million and $29.9$15.9 million during the three and nine months ended September 30, 2021, respectively,March 31, 2022, 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 followingrevenue growth from the Property Closures.Hawaiian customer.

 

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Midwest & South 

Total revenues increased by $106.034.1 million during the three months ended September 30, 2021,March 31, 2022, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories. Gaming revenues increased $54.5$8.0 million primarily due to an increase in table game drop of 12.1% from the prior year comparable period and a 1.4% increase in slot handle of 16.9% fromover the prior year comparable period. Other revenues increased $36.0$15.5 million as a result of our online gaming initiatives. Food & beverage revenues increased $10.1$6.8 million due to an increase in average guest check of 1.1%5.6% along with an increase in covers of 34.0%4.5% from the prior year comparable period. Room revenues increased $5.5$3.8 million due to an increase in average daily rate of 12.4%11.2% from the prior year comparable period.

 

Total revenues increased by $672.1 million during the nine months ended September 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 $516.4 million, followed by an increase in other revenue of $127.0 million, food & beverage revenue of $15.3 million and room revenue of $13.3 million, from the prior year comparable period. The increase in these departmental categories is primarily due to the Property Closures in first and second quarter 2020. In addition, increases in other revenue are attributable to our online gaming initiatives. 

Adjusted EBITDAR increased by $39.6 million and $379.25.4 million during the three and nine months ended September 30, 2021March 31, 2022, respectively, as compared to the corresponding periods of the prior year, due primarily to a strategic shiftnon-gaming amenity growth and the increases in the Company’s operating model when operations resumed following the Property Closuresaverage check and contributions from ouaverage daily rate as discussed abover 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

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

  

September 30,

  

March 31,

 

(In millions)

 

2021

  

2020

  

2021

  

2020

  

2022

  

2021

 

Selling, general and administrative

 $91.2  $87.0  $271.6  $260.7  $92.0  $90.0 

Master lease rent expense

 26.3  25.9  78.4  76.0  26.3  25.9 

Maintenance and utilities

 35.9  33.8  95.3  88.6  32.9  28.2 

Depreciation and amortization

 67.6  69.3  199.3  205.5  62.5  64.5 

Corporate expense

 28.3  19.6  86.3  58.5  29.0  23.3 

Project development, preopening and writedowns

 10.6  2.2  13.5  9.6  (10.0) 1.4 

Impairment of assets

 —  —  —  171.1 

Other operating items, net

 3.0  14.9  15.3  23.6  0.1  1.2 

 

Selling, General and Administrative

Selling, general and administrative expenses, as a percentage of revenues, were 10.8%10.7% and 13.3%11.9% during the three months ended September 30,March 31, 2022 and 2021, respectively. We continue to focus on our disciplined operating model and 2020, respectively, and 10.9% and 16.9% during the nine months ended September 30, 2021 and 2020, respectively. In the prior year, selling, general and administrative expenses, astargeted marketing, resulting in a percentage of revenues were higher due todecrease with significant revenue growth in the significant reduction in revenue as a result of the Property Closures along with the continued fixed costs incurred during the closurecurrent 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 thosefour of our 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 3.1% and 4.0%3.4% during the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and 3.1% and 4.9% during the nine months ended September 30, 2021 and 2020, respectively. In the prior year, master lease rent expense, as a percentage of revenues was higher due to the significant reduction in revenue as a result of the Property Closures.

 

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of revenues, were 4.3%remained consistent at 3.8% and 5.2%3.7% during the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and 3.8% and 5.7% during the nine months ended September 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 8.0%7.3% and 10.6%8.6% during the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and 8.0% and 13.3% during the nine months ended September 30, 2021 and 2020, respectively. The $2.0 million decline from prior year comparable period is primarily driven by a $5.0$1.4 million decrease in intangible asset amortization as our customer relationships are amortized using an accelerated method. The dollar amount of depreciationDepreciation expense remained consistent period over period therefore the remainingperiod. The percentage of revenue decrease is thus primarily 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 3.4% and 3.0%3.1% of revenues during the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and 3.5% and 3.8% during the nine months ended September 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.write-downs; and (iv) realized gains arising from asset dispositions. Such costs are generally nonrecurring in nature and vary from period to period as the volume of underlying activities fluctuate. During the three months ended September 30, 2021,March 31, 2022, the Company incurred $8.5benefitted from a $12.7 million in write-off expenses related to certain projects.gain on disposition of assets.

 

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Impairment of Assets

We had no impairments of assets for the nine months ended September 30, 2021. Impairment of assets for the nine months ended September 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 nine months ended September 30, 2021, $10.7 million of other operating items, net, related to non-recurring employee bonus payments. During the nine months ended September 30, 2020, $22.0 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

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

  

September 30,

  

March 31,

 

(In millions)

 

2021

  

2020

  

2021

  

2020

  

2022

  

2021

 

Interest Expense, net

 $44.7  $61.9  $156.8  $172.0 

Interest Expense, Net of Capitalized Interest and Interest Income

 $37.2  $57.4 

Average Long-Term Debt Balance (1)

 3,378.5  4,436.0  3,704.0  4,332.0  3,071.9  3,942.0 

Weighted Average Interest Rates

 4.8% 5.0% 5.2% 4.8% 4.3% 5.4%

(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 September 30, 2021,March 31, 2022, decreased $17.220.2 million, or 27.8%35.1%, from the prior year comparable period. The decline is attributable to a decrease in the average long-term debt balance of $1.1 billion$870.1 million along with a decline in the weighted average interest rate percentage point of 0.2106 basis points for the three months ended September 30, 2021March 31, 2022. 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; and (ii) redemption of $300.0 million of 8.625% Notes in November 2021; offset by (iii) the issuance of the 4.750% Notes due 2031 in June 2021.

Interest expense, net of capitalized interest and interest income, for the nine months ended September 30, 2021, decreased $15.2 million, or 8.8%, as compared to the prior year comparable period. The decrease is attributable to a decrease in the average long-term debt balance of $628.0 million offset by an increase in the weighted average interest rate percentage point of 0.4 for the nine months ended September 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$3.3 million loss on early extinguishmentsextinguishment and modifications of debt are as follows:for the three months ended March 31, 2022 is driven primarily by the retirement of the Prior Term A Loan and Prior Refinancing Term B Loan under the Prior Credit Agreement. See additional discussion in "Liquidity and Capital Resources".

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In millions)

 

2021

  

2020

  

2021

  

2020

 

6.375% Senior Notes premium and consent fees

 $—  $—  $23.9  $— 

6.375% Senior Notes deferred finance charges

  —   —   6.4   — 

6.000% Senior Notes premium and consent fees

  —   —   28.0   — 

6.000% Senior Notes deferred finance charges

  —   —   7.2   — 

Boyd Gaming Credit Facility deferred financing charges

  —   0.4   —   1.0 

Total loss on early extinguishments and modifications of debt

 $—  $0.4  $65.5  $1.0 

 

Income Taxes 

The effective tax rates during the ninethree months ended September 30,March 31, 2022 and 2021 were 22.7% and 2020 were 22.8% and 17.7%24.0%, respectively. Our tax ratesrate for the ninethree months ended September 30,March 31, 2022 and 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. Additionally,As of December 31, 2021, the effective tax rate for the nine months ended September 30, 2020 was favorably impacted by the settlement of a state audit offset by the creation of a valuation allowance applied to certain state deferred tax assets, including stateCompany exhausted its federal net operating loss carryforwards.

As acarryforwards which will 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. Includedin higher cash taxes in the CARES Act are provisions relating to payroll tax creditscurrent 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 nine months ended September 30, 2021 and 2020, include the payroll tax credits we received under the CARES Act, partially offsetting the expenses incurred during these periods for compensation and benefits provided to qualifying employees.prospective periods.

 

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LIQUIDITY AND CAPITAL RESOURCES

Financial Position

We generally operate with minimal or negative levels of working capital in order to minimize borrowings and related interest costs. At September 30, 2021March 31, 2022 and December 31, 2020,2021, we had balances of cash and cash equivalents of $570.9$403.0 million and $519.2$344.6 million, respectively. In addition, we held restricted cash balances of $17.4$16.2 million and $15.8$12.6 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Our working capital deficit at March 31, 2022 and December 31, 2021 was $5.6 million and $49.2 million, 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.expenditures and our announced definitive agreement to acquire Pala Interactive LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. See "Indebtedness", below, for further detail regarding the bank credit facility.

 

The Company may also 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

 

 

Nine Months Ended

  

Three Months Ended

 
 

September 30,

  

March 31,

 

(In millions)

 

2021

  

2020

  

2022

  

2021

 

Net cash provided by operating activities

 $777.7  $124.0  $233.7  $216.7 
  

Cash flows from investing activities

            

Capital expenditures

 (139.2) (105.1) (46.6) (35.5)

Insurance proceeds received for hurricane losses

 44.5 —  — 31.3 

Cash paid for acquisitions, net of cash received

 — (11.2)

Proceeds from disposition of assets

 20.1 — 

Other investing activities

  5.5   —   —   6.7 

Net cash used in investing activities

  (89.2)  (116.3)

Net cash (used in) provided by investing activities

  (26.5)  2.5 
  

Cash flows from financing activities

            

Net payments under bank credit facility

 (18.2) (316.3) 12.1  (4.9)

Proceeds from issuance of senior notes

 900.0 600.0 

Debt issuance costs

 (14.6) (17.1)

Retirements of senior notes

 (1,450.0) — 

Premium and consent fees

 (51.9) — 

Dividends paid

 —  (7.8)

Debt financing costs, net

 (13.6) — 

Share-based compensation activities, net

 (10.8) (0.8)

Shares repurchased and retired

 —  (11.1) (131.8) — 

Other financing activities

  (0.5)  (4.8)  (1.0)  (0.2)

Net cash provided by (used in) financing activities

  (635.2)  242.9 

Net cash used in financing activities

  (145.1)  (5.9)

Increase in cash, cash equivalents and restricted cash

 $53.3  $250.6  $62.1 $213.3 

 

Cash Flows from Operating Activities

During the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, we generated operating cash flow of $777.7$233.7 million and $124.0$216.7 million, respectively. Generally, operating cash flows increased during 20212022 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 currentover year due to the strategic shift of the Company's operating model and timing of working capital spending.revenue growth.

 

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 ninethree months ended September 30, 2021,March 31, 2022, we incurred net cash outflows for investing activities of $89.2$26.5 million comprised of capital expenditures of $46.6 million, primarily related to furniture and equipment purchases and building projects at various properties, offset by $20.1 million in proceeds from disposition of assets. During the three months ended March 31, 2021, we incurred net cash inflows for investing activities of $2.5 million comprised of capital expenditure spending of $139.2$35.5 million, primarily related to building improvements at Delta Downs as a result of Hurricane Laura damage, which was offset by $44.5$31.3 million of insurance recovery proceeds and $6.7 million of reimbursed expense associated with the Wilton Rancheria project.During the nine months ended September 30, 2020, we incurred net cash outflows for investing activities of $116.3 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 ninethree months ended September 30, 2021,March 31, 2022, primarily reflect the retirements of the 6.375% Notes and the 6.000% Notes, payment of associated premium and consent feesshare repurchases, debt financing costs related to the retirements,Credit Agreement and share-based compensation, offset by an increase in the quarterly payments on our Term Loans and debt issuance costs. The inflows for 2021 reflectoutstanding principal under the issuance of the 4.750% Notes due 2031.bank credit facility (see "Indebtedness"). The net cash inflowsoutflows from financing activities in the ninethree months ended September 30, 2020,March 31, 2021, primarily reflect primarily the senior note issuance to preserve liquidity during the Property Closure period. The outflows in 2020 reflect the use of cash flow to paydownquarterly payments on our Revolving Credit Facility, pay debt financing costs, repurchase outstanding common stock under our share repurchase program and pay cash dividends to our shareholders.Prior Term Loans.

 

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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)

 September 30, 2021  December 31, 2020  Increase / (Decrease)  March 31, 2022  December 31, 2021  Increase / (Decrease) 

Bank credit facility

 $878.0  $896.2  $(18.2) $880.0  $867.9  $12.1 

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  —  1,000.0  1,000.0  — 

8.625% senior notes due 2025

 600.0 600.0 —  300.0 300.0 — 

4.750% senior notes due 2031

 900.0 — 900.0  900.0 900.0 — 

Other

  1.4   3.6   (2.2)  0.5   1.5   (1.0)

Total long-term debt

 3,379.4  3,949.8  (570.4) 3,080.5  3,069.4  11.1 

Less current maturities

  41.9   30.7   11.2   44.3   41.7   2.6 

Long-term debt, net of current maturities

 $3,337.5  $3,919.1  $(581.6) $3,036.2  $3,027.7  $8.5 

Bank Credit Facility

Credit Agreement

On March 2, 2022 (the "Closing Date"), the Company entered into a credit agreement (the "Credit Agreement") among the Company, certain direct and indirect subsidiaries of the Company as guarantors (the "Guarantors"), Bank of America, N.A., as administrative agent, collateral agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders. The Credit Agreement replaced the Third Amended and Restated Credit Agreement, dated as of August 14, 2013 (the "Prior Credit Agreement"), among the Company, certain direct and indirect subsidiaries of the Company as guarantors, Bank of America, N.A., as administrative agent and letter of credit issuer, Wells Fargo Bank, National Association, as swingline lender, and certain other financial institutions party thereto as lenders.

The Credit Agreement provides for (i) a $1,450.0 million senior secured revolving credit facility (the "Revolving Credit Facility") and (ii) an $880.0 million senior secured term A loan (the "Term A Loan," collectively with the Revolving Credit Facility, the "Credit Facility"). The Revolving Credit Facility and the Term A Loan mature on the fifth anniversary of the Closing Date (or earlier upon the occurrence or non-occurrence of certain events). The Term A Loan was fully funded on the Closing Date. Proceeds from the Credit Agreement were used to refinance all outstanding obligations under the Prior Credit Agreement, including a senior secured term loan A facility (the "Prior Term A Loan") and senior secured term loan B facility (the "Prior Refinancing Term B Loan", and collectively with the Prior Term A Loan, the "Prior Term Loans"), and to fund transaction costs in connection with the Credit Agreement. For additional information, refer to Note 5, Long-Term Debt in the notes to our condensed consolidated financial statements included herein.

 

Amounts Outstanding

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

 

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

(In millions)

 

2021

  

2020

  

2022

  

2021

 

Revolving Credit Facility

 $—  $—  $—  $— 

Term A Loan

 125.1  133.8  880.0  — 

Refinancing Term B Loans

 752.9  762.4 

Prior Term A Loan

 — 118.2 

Prior Refinancing Term B Loan

 —  749.7 

Swing Loan

  —   —   —   — 

Total outstanding principal amounts under the bank credit facility

 $878.0  $896.2  $880.0  $867.9 

 

With a total revolving credit commitment of $1,033.7$1,450.0 million available under the bank credit facility, no borrowings on the Revolving Credit Facility and the Swing Loanswing loan and $11.9$14.2 million allocated to support various letters of credit, there is a remaining contractual availability of $1,021.8$1,435.8 million as of September 30, 2021.March 31, 2022. 

 

The blended interest rate for outstanding borrowings under the bank credit facility was 2.3%2.1% at September 30, 2021March 31, 2022 and 2.5%2.3% at December 31, 2020.2021.

 

Debt Service Requirements

Debt service requirements for Term A Loan include amortization in an annual amount equal to 5.00% of the original principal amount thereof, commencing June 30, 2022, payable on a quarterly basis. Additionally, under the bank credit facility we have monthly Term A Loan interest payment obligations and quarterly unused line interest payments. 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

As of September 30, 2021,March 31, 2022, 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.

 

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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")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 areis as follows:

 

 

September 30,

 

December 31,

  

March 31,

 

December 31,

 

(In millions)

 

2021

 

2020

  

2022

 

2021

 

Current assets

 $698.1  $637.2  $556.7  $487.7 

Noncurrent assets

 9,997.0  9,508.2  10,276.0  10,158.4 

Current liabilities

 534.1  494.3  562.6  538.1 

Noncurrent liabilities

 4,412.8  4,908.1  4,127.1  4,138.4 

 

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

 

 

Nine Months Ended

  

Three Months Ended

 

(In millions)

 

September 30, 2021

  

March 31, 2022

 

Revenues

 $2,513.0  $876.8 

Operating income

 1,300.2  448.8 

Income before income taxes

 1,075.6  408.5 

Net income

 970.5  360.5 

 

Share Repurchase Programs

Subject to applicable corporate securities laws, repurchases under our stockshare 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. Credit Facility. Purchases under our share repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the share repurchase program with existing cash resources and availability under our Credit Facility.

On December 12, 2018,October 21, 2021, our Board of Directors authorized a share repurchase program of $100$300 million. During the nine months ended September 30, 2020, we repurchased 0.7 million shares of our common stock. There were no share repurchases during the nine months ended September 30, 2021. We are currently authorized to repurchase up to an additional $61.4 million in shares of our common stock under this share repurchase program. On October 21, 2021, our Board of Directors authorized an additional share repurchase program of $300.0 million.  Under the stock repurchase programs, the Company may repurchase shares of its common stock from time to time on the open market or in privately negotiated transactions. Repurchases of common stock may also be made under Rule 10b5-1 plans, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws.  The timing, volume and nature of share repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws and other factors, and may be suspended or discontinued at any time. We are not obligated to purchaserepurchase any shares under our stock repurchase programs,this program, and purchases under our stockshare repurchase programsprogram can be discontinued at any time at our sole discretion. WeThere were 2.1 million shares repurchased during the three months ended March 31, 2022. There were no share repurchases during the three months ended March 31, 2021 as we had suspended all share repurchases in March 2020 in order to preserve liquidity due to the Property Closures.impact of the COVID-19 pandemic on our business. As of March 31, 2022, we are authorized to repurchase up to an additional $148.8 million shares of our common stock.

 

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

On February 3, 2022, the Company announced that its Board of Directors had authorized the reinstatement of the Company's cash 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.

Declaration date

 

Record date

 

Payment date

 Amount per share 

February 3, 2022

 

March 15, 2022

 

April 15, 2022

 $0.15 

 

Other Items Affecting Liquidity

We anticipate funding our capital requirements, including the acquisition of Pala Interactive, 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

Pending Acquisitions

On March 28, 2022, we announced that we had entered into a definitive agreement to acquire Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. ("Pala Canada"), for total cash consideration of $170.0 million. Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a business-to-business (B2B) and business-to-consumer (B2C) basis in regulated markets across the United States and Canada. The transaction is expected to close by the first quarter of 2023, subject to the satisfaction of customary closing conditions and the receipt of all required regulatory approvals. We intend to finance the transaction through cash flow from operations and availability under our Revolving Credit Facility.

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 betis approximately $240ween $190 million and $210 to $260 million. We fund our capital expenditures through cash on hand, our bank credit facilityCredit Facility and operating cash flows.

 

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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.capital, including beginning construction on a land-based facility at Treasure Chest which will replace our existing riverboat, and expansion of the Fremont's casino space and dining options. Both of these projects are in addition to our maintenance capital spending, and we expect to spend an additional $50 million to $65 million this year.

 

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.of this year.

 

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.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, 2020,2021, as filed with the SEC on March 1, 2021.February 28, 2022.

 

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, 2020,2021, as filed with the SEC on March 1, 2021.February 28, 2022.

 

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;
•impacts caused by the COVID-19 pandemic or any other public health emergencies we may encounter;
 •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;

 

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•

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;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 hotelhotels 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, 2020,2021, 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 EurodollarSOFR 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.Credit Facility. We do not currently utilize derivative financial instruments for trading or speculative purposes.

 

As of September 30, 2021,March 31, 2022, our long-term variable-rate borrowings represented approximately 26.0%28.6% of total long-term debt. Based on September 30, 2021March 31, 2022 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.

 

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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.

 

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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, 2020.2021, as filed with the SEC on February 28, 2022.

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

The following table discloses share repurchases that we have made pursuant to our share repurchase program during the three months ended March 31, 2022.

Period

 

Total Number of Shares Purchased (1)

  

Average Price Paid Per Share

  

Total Number of Shares Purchased as Part of a Publicly Announced Plan

  

Approximate Dollar Value That May Yet Be Purchased Under the Plan

 

January 1, 2022 through January 31, 2022

  872,971  $60.51   872,971  $227,783,271 

February 1, 2022 through February 28, 2022

  532,993   62.83   532,993   194,296,857 

March 1, 2022 through March 31, 2022

  690,696   65.85   690,696   148,816,087 

Total

  2,096,660  $62.86   2,096,660  $148,816,087 

(1) All shares repurchased are covered by our $300 million share repurchase program. The program was approved by our Board of Directors on October 21, 2021 and has no expiration date.

 

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Item 6.

Exhibits

 

Exhibit Number

 

Document of Exhibit

 

Method of Filing

2.1Purchase Agreement and Plan of Merger, dated as of March 28, 2022, by and among Boyd Interactive, Boyd Phoenix Acquisition, LLC, Boyd Phoenix Canada Inc., Pala Interactive, Pala Canada Holdings, LLC and Shareholder Representative Services LLC as representative of the holders of the membership interests of Pala Interactive.Filed electronically herewith
10.2Credit Agreement, dated as of March 2, 2022, among the Company, the Guarantors, Bank of America, N.A., as administrative agent, collateral agent and letter of credit issuer, Wells Fargo Bank, National Association as swingline 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 with the SEC on March 2, 2022
22 List of Guarantor Subsidiaries of Boyd Gaming Corporation. Incorporated by reference to Exhibit 10.122 of the Registrant's QuarterlyAnnual Report on Form 10-Q10-K for the year ended December 31, 2021, filed July 29, 2021.with the SEC on February 28, 2022
     

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 September 30, 2021,March 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2021March 31, 2022 and December 31, 2020,2021, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, (iii) Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the quarters within the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, iv) Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30,March 31, 2022 and 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

 

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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 October 28, 2021May 6, 2022.

 

 

 

BOYD GAMING CORPORATION

 

 

 

 

By:

/s/ Anthony D. McDuffieLori M. Nelson

 

 

Anthony D. McDuffieLori M. Nelson

 

 

Senior Vice President Financial Operations and Reporting (Authorized Signatory and Interim Chief Accounting OfficerOfficer)

 

 

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