<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 2000
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 1-12168
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0242733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 INDUSTRIAL ROAD
LAS VEGAS, NEVADA
89109
(Address of principal executive offices)
(Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
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 filing requirements
for the past 90 days.
Yes [X] No [ ]
Shares outstanding of each of the Registrant's classes of common stock as of
April 30, 2000:
Class Outstanding
- ---------------------------- -----------
Common stock, $.01 par value 62,229,154
<PAGE> 2
BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2000
and December 31, 1999 3
Condensed Consolidated Statements of Operations for the
three month periods ended March 31, 2000 and 1999 4
Condensed Consolidated Statement of Changes in
Stockholders' Equity for the three month period ended
March 31, 2000 5
Condensed Consolidated Statements of Cash Flows for the three
month periods ended March 31, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosure about Market Risk 24
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 25
Signature Page 26
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents ......................................... $ 71,876 $ 86,192
Accounts receivable, net .......................................... 13,165 17,585
Inventories ....................................................... 5,083 6,181
Prepaid expenses and other ........................................ 13,943 14,718
Income taxes receivable ........................................... -- 1,108
Deferred income taxes ............................................. 10,891 16,835
---------- ----------
Total current assets ...................................... 114,958 142,619
Property and equipment, net .......................................... 904,862 901,014
Other assets and deferred charges, net ............................... 46,330 45,689
Intangible assets, net ............................................... 352,321 354,659
---------- ----------
Total assets .............................................. $1,418,471 $1,443,981
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt .............................. $ 1,617 $ 1,744
Trade payables .................................................... 30,708 36,531
Construction payables ............................................. 7,021 8,609
Accrued liabilities
Payroll and related ........................................... 29,500 31,184
Interest and other ............................................ 67,092 58,862
Income taxes payable .......................................... 26,343 --
---------- ----------
Total current liabilities ................................. 162,281 136,930
Long-term debt, net of current maturities ............................ 871,734 982,149
Deferred income taxes and other liabilities .......................... 60,404 57,923
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized ...... -- --
Common stock, $.01 par value; 200,000,000 shares authorized;
62,228,487 and 62,227,753 shares outstanding ................... 622 622
Additional paid-in capital ......................................... 141,990 141,986
Retained earnings .................................................. 181,440 124,371
---------- ----------
Total stockholders' equity ................................ 324,052 266,979
---------- ----------
Total liabilities and stockholders' equity ................ $1,418,471 $1,443,981
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
Revenues
Casino .............................................. $ 225,628 $ 179,533
Food and beverage ................................... 40,910 40,968
Room ................................................ 18,395 19,304
Other ............................................... 17,208 17,345
Management fee ...................................... 3,815 10,813
Termination fee, net ................................ 70,988 --
--------- ---------
Gross revenues ......................................... 376,944 267,963
Less promotional allowances ............................ 24,237 24,705
--------- ---------
Net revenues ................................ 352,707 243,258
--------- ---------
Costs and expenses
Casino .............................................. 109,815 90,298
Food and beverage ................................... 25,275 25,833
Room ................................................ 5,706 6,242
Other ............................................... 16,515 15,401
Selling, general and administrative ................. 41,639 35,038
Maintenance and utilities ........................... 11,706 9,654
Depreciation ........................................ 19,102 17,294
Amortization of intangible license rights and
acquisition costs ................................ 2,450 1,438
Corporate expense ................................... 7,338 6,102
Preopening expense .................................. 382 539
--------- ---------
Total ....................................... 239,928 207,839
--------- ---------
Operating income ....................................... 112,779 35,419
--------- ---------
Other income (expense)
Interest income ..................................... 134 57
Interest expense, net of amounts capitalized ........ (20,118) (17,131)
--------- ---------
Total ....................................... (19,984) (17,074)
--------- ---------
Income before provision for income taxes and
cumulative effect .................................. 92,795 18,345
Provision for income taxes ............................. 35,726 7,705
--------- ---------
Income before cumulative effect ........................ 57,069 10,640
Cumulative effect of a change in accounting for
start-up activities, net of tax benefit of $936 .... -- (1,738)
--------- ---------
Net income ............................................. $ 57,069 $ 8,902
========= =========
Basic and diluted net income per common share:
Income before cumulative effect ..................... $ 0.92 $ 0.17
Cumulative effect, net of tax ....................... -- (0.03)
--------- ---------
Net income .......................................... $ 0.92 $ 0.14
========= =========
Average basic shares outstanding ....................... 62,228 62,028
Average diluted shares outstanding ..................... 62,305 62,028
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
THREE MONTH PERIOD ENDED MARCH 31, 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 2000 .... 62,227,753 $ 622 $ 141,986 $ 124,371 $ 266,979
Net income ................... -- -- -- 57,069 57,069
Stock options exercised ...... 734 -- 4 -- 4
---------- ---------- ---------- ---------- ----------
BALANCES, MARCH 31, 2000 ..... 62,228,487 $ 622 $ 141,990 $ 181,440 $ 324,052
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................... $ 57,069 $ 8,902
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .............................. 21,552 18,732
Cumulative effect of a change in accounting principle ...... -- 2,674
Deferred income taxes ...................................... 8,199 5,732
Equity loss in unconsolidated subsidiaries ................. 446 835
Changes in assets and liabilities:
Accounts receivable, net ................................. 4,461 839
Inventories .............................................. 1,098 1,914
Prepaid expenses and other ............................... 775 603
Other assets ............................................. 524 237
Other current liabilities ................................ 1,313 (255)
Other liabilities ........................................ 226 198
Income taxes receivable .................................. 1,108 4,883
Income taxes payable ..................................... 26,343 --
--------- ---------
Net cash provided by operating activities ....................... 123,114 45,294
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, equipment and other assets .......... (25,024) (15,989)
Investment in and advances to unconsolidated subsidiaries .... (1,868) (2,027)
--------- ---------
Net cash used in investing activities ........................... (26,892) (18,016)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt ................................... (292) (468)
Net payments under credit agreements ......................... (110,250) (37,000)
Proceeds from issuance of common stock ....................... 4 --
--------- ---------
Net cash used in financing activities ........................... (110,538) (37,468)
--------- ---------
Net decrease in cash and cash equivalents ....................... (14,316) (10,190)
Cash and cash equivalents, beginning of period .................. 86,192 75,937
--------- ---------
Cash and cash equivalents, end of period ........................ $ 71,876 $ 65,747
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest, net of amounts capitalized ........... $ 18,166 $ 18,803
Cash paid for income taxes ................................... 77 253
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Property additions acquired on construction and trade
payables which were accrued, but not yet paid .............. $ 8,431 $ 2,259
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of Boyd Gaming Corporation and its wholly-owned subsidiaries,
collectively referred to herein as the "Company." The Company owns and operates
eleven casino entertainment facilities located in Las Vegas, Nevada, Tunica,
Mississippi, East Peoria, Illinois, Kenner, Louisiana, and Michigan City,
Indiana as well as a travel agency located in Honolulu, Hawaii. In addition, the
Company managed a casino entertainment facility in Philadelphia, Mississippi for
which it had a management contract that expired on January 31, 2000 (see
Note 3). All material intercompany accounts and transactions have been
eliminated.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the results of its
operations and cash flows for the three month periods ended March 31, 2000 and
1999. It is suggested that this report be read in conjunction with the Company's
audited consolidated financial statements included in the Annual Report on Form
10-K for the year ended December 31, 1999. The operating results and cash flows
for the three month periods ended March 31, 2000 and 1999 are not necessarily
indicative of the results that will be achieved for the full year or future
periods.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts in
the condensed consolidated financial statements and accompanying notes.
Significant estimates used by the Company include the estimated useful lives for
depreciable and amortizable assets, the estimated allowance for doubtful
accounts receivable, the estimated valuation allowance for deferred tax assets,
and estimated cash flows in assessing the recoverability of long-lived assets.
Actual results could differ from those estimates.
Capitalized Interest
Interest costs associated with major construction projects are capitalized.
When no debt is incurred specifically for a project, interest is capitalized on
amounts expended for the project using the Company's weighted average cost of
borrowing. Capitalization of interest ceases when the project or discernible
portions of the project are substantially complete. Capitalized interest during
the three month periods ended March 31, 2000 and 1999 was $1.0 million and $0.2
million, respectively.
7
<PAGE> 8
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Preopening Expenses
The Company expenses certain costs of start-up activities as incurred.
During the three month periods ended March 31, 2000 and 1999, the Company
expensed $0.4 million and $0.5 million, respectively, in preopening costs that
related primarily to the Company's share of preopening expense in The Borgata,
the Company's Atlantic City joint venture.
Reclassifications
Certain prior period amounts in the condensed consolidated financial
statements have been reclassified to conform to the March 31, 2000 presentation.
These reclassifications had no effect on the Company's net income.
Recently Issued Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments for fiscal years beginning after June 15,
2000. Management has not yet completed an analysis of its existing contracts,
agreements, and other commitments to determine the potential impact that the
adoption of this statement will have on the consolidated financial statements.
NOTE 2. NET INCOME PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" that requires the presentation of basic and diluted net
income per share. Basic per share amounts are computed by dividing net income by
the average shares outstanding during the period. Diluted per share amounts are
computed by dividing net income by average shares outstanding plus the dilutive
effects of common share equivalents. Diluted net income per share during the
three month periods ended March 31, 2000 and 1999 is determined considering the
dilutive effects of outstanding stock options. The effect of stock options
outstanding to purchase approximately 5.4 million and 5.6 million shares,
respectively, were not included in the diluted calculation during the three
month periods ended March 31, 2000 and 1999 since the exercise price of such
options was greater than the average price of the Company's common shares during
the period.
NOTE 3. TERMINATION OF MANAGEMENT CONTRACT
On October 20, 1999, the Company signed an agreement with the Mississippi
Band of Choctaw Indians (the "Tribe") to terminate the Company's management of
the Silver Star Resort and Casino in Philadelphia Mississippi. Under the
agreement, the Company continued to manage Silver Star under the terms of the
management contract through January 31, 2000, at which time the Tribe made a $72
million termination payment to the Company and the Company recorded the
termination fee, net of certain expenses. The agreement with the Tribe
terminated the Company's original management contract 17 months prior to its
8
<PAGE> 9
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
scheduled maturity date. The one-time payment will accelerate the utilization of
the Company's tax credits and net operating losses carried forward from prior
years. As such, the majority of the Company's deferred tax assets are classified
as part of current assets on the accompanying condensed consolidated balance
sheets as of March 31, 2000 and December 31, 1999.
NOTE 4. ACQUISITION
On November 10, 1999, the Company acquired Blue Chip Casino, L.L.C. ("Blue
Chip") for approximately $261 million in net cash, including $10.3 million for a
hotel and parking facility that was under construction and attached to the
existing casino complex. Intangible license rights, representing the excess of
the purchase price over the fair value of the net assets acquired, was
approximately $158 million. The purchase price excludes a contingent purchase
price payment of $5.0 million. The contingent purchase price payment will be
made to the former owners of Blue Chip Casino, Inc. in the event that, over a
period of 36 months, Blue Chip's aggregated earnings before interest, taxes,
depreciation and amortization and certain other qualified expenses exceeds a
specified amount. Blue Chip opened in August 1997. The Company's pro forma
consolidated results of operations, as if the acquisition had occurred on
January 1, 1999, are as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999
---------------
<S> <C>
Pro forma (in thousands, except per share data):
Net revenues ...................................... $281,149
Income before cumulative effect ................... $ 15,339
Net income ........................................ $ 13,601
Basic and diluted net income per common share:
Income before cumulative effect ................... $ 0.25
Net income ........................................ $ 0.22
</TABLE>
NOTE 5. SEGMENT INFORMATION
The Company's management reviews the results of operations based on the
following distinct geographic gaming market segments: the Stardust Resort and
Casino on the Las Vegas Strip; Sam's Town Hotel and Gambling Hall, the Eldorado
Casino and Jokers Wild Casino on the Boulder Strip; the Downtown Properties;
Sam's Town Hotel and Gambling Hall in Tunica, Mississippi; Par-A-Dice Hotel and
Casino in East Peoria, Illinois; Treasure Chest Casino in Kenner, Louisiana;
Blue Chip Casino in Michigan City, Indiana (acquired November 10, 1999); and
management fee income from Silver Star Resort and Casino located near
Philadelphia, Mississippi (through January 31, 2000). As used herein, "Downtown
Properties" consist of the California Hotel and Casino, the Fremont Hotel and
Casino, Main Street Station Casino, Brewery and Hotel and Vacations Hawaii.
9
<PAGE> 10
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Casino Revenue
Stardust .................................. $ 25,696 $ 27,532
Sam's Town Las Vegas ...................... 30,960 29,907
Eldorado and Jokers Wild .................. 7,756 7,692
Downtown Properties ....................... 33,579 33,353
Sam's Town Tunica ......................... 22,393 25,006
Par-A-Dice ................................ 32,204 25,176
Treasure Chest ............................ 27,045 30,867
Blue Chip ................................. 45,995 --
--------- ---------
Total casino revenue .............. $ 225,628 $ 179,533
========= =========
EBITDA(1)
Stardust .................................. $ 4,757 $ 6,214
Sam's Town Las Vegas ...................... 8,727 7,895
Eldorado & Jokers Wild .................... 1,920 2,254
Downtown Properties ....................... 10,087 9,346
Sam's Town Tunica ......................... 3,003 7,043
Par-A-Dice ................................ 12,182 8,620
Treasure Chest ............................ 5,705 9,067
Silver Star ............................... 74,803 10,353
Blue Chip ................................. 20,867 --
--------- ---------
Property EBITDA ......................... 142,051 60,792
--------- ---------
Other Costs and Expenses
Corporate expense ......................... 7,338 6,102
Depreciation and amortization ............. 21,552 18,732
Preopening expense ........................ 382 539
Other expense, net ........................ 19,984 17,074
--------- ---------
Total other costs and expenses .... 49,256 42,447
--------- ---------
Income before provision for income taxes
and other items ............................ 92,795 18,345
Provision for income taxes .................. 35,726 7,705
--------- ---------
Income before cumulative effect ............. 57,069 10,640
Cumulative effect, net of tax ............... -- (1,738)
--------- ---------
Net income .................................. $ 57,069 $ 8,902
========= =========
</TABLE>
(1) EBITDA is earnings before interest, taxes, depreciation, amortization and
preopening expense. The Company believes that EBITDA is a useful financial
measurement for assessing the operating performances of its properties.
EBITDA does not represent net income or cash flows from operating, investing
or financing activities as defined by accounting principles generally
accepted in the United States of America.
10
<PAGE> 11
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 6. GUARANTOR INFORMATION
The Company's 9.25% Notes are guaranteed by a majority of the Company's
wholly-owned existing significant subsidiaries. These guaranties are full,
unconditional, and joint and several. The Company has significant subsidiaries
that do not guarantee the 9.25% Notes. As such, the following consolidating
schedules present separate condensed financial statement information on a
combined basis for the parent only, as well as the Company's guarantor
subsidiaries and non-guarantor subsidiaries, as of March 31, 2000 and December
31, 1999 and for the three month periods ended March 31, 2000 and 1999.
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets .............................. $ 3,987 $ 83,760 $ 28,948 $ (1,737)(1) $ 114,958
Property and equipment, net ................. 45,158 705,683 154,021 -- 904,862
Other assets and deferred charges, net ...... 1,136,938 (462,799) 488,487 (1,116,296)(1)(2) 46,330
Intangible assets, net ...................... -- 115,293 237,028 -- 352,321
----------- ----------- ----------- ----------- -----------
Total assets ............................ $ 1,186,083 $ 441,937 $ 908,484 $(1,118,033) $ 1,418,471
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ......................... $ 33,321 $ 87,699 $ 43,180 $ (1,919)(1) $ 162,281
Long-term debt, net of current maturities ... 813,750 57,984 -- -- 871,734
Deferred income taxes and other liabilities.. 14,960 44,057 1,387 -- 60,404
Stockholders' equity ........................ 324,052 252,197 863,917 (1,116,114)(2) 324,052
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity ............................. $ 1,186,083 $ 441,937 $ 908,484 $(1,118,033) $ 1,418,471
=========== =========== =========== =========== ===========
</TABLE>
- ----------
Elimination Entries
(1) To eliminate intercompany payables and receivables.
(2) To eliminate investment in subsidiaries and subsidiaries' equity.
11
<PAGE> 12
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets .............................. $ 17,583 $ 100,696 $ 26,599 $ (2,259)(1) $ 142,619
Property and equipment, net ................. 43,559 708,072 149,383 -- 901,014
Other assets and deferred charges, net ...... 1,163,857 (524,688) 464,362 (1,057,842)(1)(2) 45,689
Intangible assets, net ...................... -- 116,107 238,552 -- 354,659
----------- ----------- ----------- ----------- -----------
Total assets ............................ $ 1,224,999 $ 400,187 $ 878,896 $(1,060,101) $ 1,443,981
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ......................... $ 36,470 $ 62,993 $ 39,640 $ (2,173)(1) $ 136,930
Long-term debt, net of current maturities ... 914,028 68,088 33 -- 982,149
Deferred income taxes and other liabilities.. 7,522 49,059 1,342 -- 57,923
Stockholders' equity ........................ 266,979 220,047 837,881 (1,057,928)(2) 266,979
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity ............................. $ 1,224,999 $ 400,187 $ 878,896 $(1,060,101) $ 1,443,981
=========== =========== =========== =========== ===========
</TABLE>
- ----------
Elimination Entries
(1) To eliminate intercompany payables and receivables.
(2) To eliminate investment in subsidiaries and subsidiaries' equity.
12
<PAGE> 13
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues
Casino ............................... $-- $ 152,588 $ 73,040 $-- $ 225,628
Food and beverage .................... -- 36,474 4,436 -- 40,910
Room ................................. -- 18,059 336 -- 18,395
Other ................................ 2,999 7,204 10,752 (3,747)(1) 17,208
Management fee and equity income ..... 104,633 4,890 20,460 (126,168)(1) 3,815
Termination fee, net ................. -- 70,988 -- -- 70,988
--------- --------- --------- --------- ---------
Gross revenues ......................... 107,632 290,203 109,024 (129,915) 376,944
Less promotional allowances ............ -- 21,701 2,536 -- 24,237
--------- --------- --------- --------- ---------
Net revenues ................. 107,632 268,502 106,488 (129,915) 352,707
--------- --------- --------- --------- ---------
Costs and expenses
Casino ............................... -- 82,649 27,166 -- 109,815
Food and beverage .................... -- 20,581 4,694 -- 25,275
Room ................................. -- 5,509 197 -- 5,706
Other ................................ -- 59,950 16,345 (59,780)(1) 16,515
Selling, general and administrative .. -- 28,458 13,181 -- 41,639
Maintenance and utilities ............ -- 8,398 3,308 -- 11,706
Depreciation and amortization ........ 504 15,960 5,088 -- 21,552
Corporate expense .................... 10,569 62 454 (3,747)(1) 7,338
Preopening expense ................... 14 28 340 -- 382
--------- --------- --------- --------- ---------
Total ........................ 11,087 221,595 70,773 (63,527) 239,928
--------- --------- --------- --------- ---------
Operating income ....................... 96,545 46,907 35,715 (66,388) 112,779
Other income (expense), net ............ (18,811) (1,361) 188 -- (19,984)
--------- --------- --------- --------- ---------
Income before income taxes ............. 77,734 45,546 35,903 (66,388) 92,795
Provision for income taxes ............. 20,665 12,481 2,580 -- 35,726
--------- --------- --------- --------- ---------
Net income ............................. $ 57,069 $ 33,065 $ 33,323 $ (66,388) $ 57,069
========= ========= ========= ========= =========
</TABLE>
- ----------
Elimination Entries
(1) To eliminate intercompany revenue and expense.
13
<PAGE> 14
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
COMBINED
COMBINED NON- ELIMINATION
PARENT GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues
Casino ................................. $ -- $ 148,666 $ 30,867 $ -- $ 179,533
Food and beverage ...................... -- 38,478 2,490 -- 40,968
Room ................................... -- 19,304 -- -- 19,304
Other .................................. 2,846 8,793 9,249 (3,543)(1) 17,345
Management fee and equity income ....... 36,959 12,651 5,112 (43,909)(1) 10,813
--------- --------- --------- --------- ---------
Gross revenues ........................... 39,805 227,892 47,718 (47,452) 267,963
Less promotional allowances .............. -- 22,868 1,837 -- 24,705
--------- --------- --------- --------- ---------
Net revenues ................... 39,805 205,024 45,881 (47,452) 243,258
--------- --------- --------- --------- ---------
Costs and expenses
Casino ................................. -- 78,689 11,609 -- 90,298
Food and beverage ...................... -- 23,322 2,511 -- 25,833
Room ................................... -- 6,242 -- -- 6,242
Other .................................. -- 18,318 10,100 (13,017)(1) 15,401
Selling, general and administrative .... -- 28,504 6,534 -- 35,038
Maintenance and utilities .............. -- 8,103 1,551 -- 9,654
Depreciation and amortization .......... 446 16,057 2,229 -- 18,732
Corporate expense ...................... 9,221 29 395 (3,543)(1) 6,102
Preopening expense ..................... 45 -- 494 -- 539
--------- --------- --------- --------- ---------
Total .......................... 9,712 179,264 35,423 (16,560) 207,839
--------- --------- --------- --------- ---------
Operating income ......................... 30,093 25,760 10,458 (30,892) 35,419
Other income (expense), net .............. (15,816) (1,540) 282 -- (17,074)
--------- --------- --------- --------- ---------
Income before income taxes ............... 14,277 24,220 10,740 (30,892) 18,345
Provision for income taxes ............... 3,637 4,068 -- -- 7,705
--------- --------- --------- --------- ---------
Income before cumulative effect .......... 10,640 20,152 10,740 (30,892) 10,640
Cumulative effect, net of taxes .......... (1,738) -- -- -- (1,738)
--------- --------- --------- --------- ---------
Net income ............................... $ 8,902 $ 20,152 $ 10,740 $ (30,892) $ 8,902
========= ========= ========= ========= =========
</TABLE>
- ---------
Elimination Entries
(1) To eliminate intercompany revenue and expense.
14
<PAGE> 15
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
PARENT GUARANTORS GUARANTORS CONSOLIDATED
----------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities .................... $ 100,645 $ 6,373 $ 16,096 $ 123,114
--------- --------- --------- ---------
Cash flows from investing activities
Acquisition of property, equipment and other assets..... (2,351) (12,883) (9,790) (25,024)
Investment in and advances to unconsolidated
subsidiaries ......................................... -- -- (1,868) (1,868)
--------- --------- --------- ---------
Net cash used in investing activities ................... (2,351) (12,883) (11,658) (26,892)
--------- --------- --------- ---------
Cash flows from financing activities
Net payments under credit agreements .................. (110,250) -- -- (110,250)
Proceeds from issuance of common stock ................ 4 -- -- 4
Receipt/(payment) of dividends ........................ 2,189 (2) (2,187) --
Receipt/ (payments) on long-term debt ................. 9,805 (10,097) -- (292)
--------- --------- --------- ---------
Net cash used in financing activities ................... (98,252) (10,099) (2,187) (110,538)
--------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents..... 42 (16,609) 2,251 (14,316)
Cash and cash equivalents, beginning of period .......... 138 62,755 23,299 86,192
--------- --------- --------- ---------
Cash and cash equivalents, end of period ................ $ 180 $ 46,146 $ 25,550 $ 71,876
========= ========= ========= =========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
COMBINED
COMBINED NON-
PARENT GUARANTORS GUARANTORS CONSOLIDATED
----------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities .................. $ 33,963 $ 7,307 $ 4,024 $ 45,294
-------- -------- -------- --------
Cash flows from investing activities
Acquisition of property, equipment and other assets... (1,242) (14,115) (632) (15,989)
Investment in and advances to unconsolidated
subsidiaries ....................................... -- (162) (1,865) (2,027)
-------- -------- -------- --------
Net cash used in investing activities ................. (1,242) (14,277) (2,497) (18,016)
-------- -------- -------- --------
Cash flows from financing activities
Net payments under credit agreements ................ (37,000) -- -- (37,000)
Receipt/(payment) of dividends ...................... 4,150 (1,967) (2,183) --
Payments on long-term debt .......................... (368) (100) -- (468)
-------- -------- -------- --------
Net cash used in financing activities ................. (33,218) (2,067) (2,183) (37,468)
-------- -------- -------- --------
Net decrease in cash and cash equivalents ............. (497) (9,037) (656) (10,190)
Cash and cash equivalents, beginning of period ........ 1,054 55,492 19,391 75,937
-------- -------- -------- --------
Cash and cash equivalents, end of period .............. $ 557 $ 46,455 $ 18,735 $ 65,747
======== ======== ======== ========
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
data for the Company's properties. As used herein, "Boulder Strip Properties"
consist of Sam's Town Hotel and Gambling Hall ("Sam's Town Las Vegas"), the
Eldorado Casino (the "Eldorado") and Jokers Wild Casino ("Jokers Wild");
"Downtown Properties" consist of the California Hotel and Casino (the
"California"), the Fremont Hotel and Casino (the "Fremont"), Main Street
Station, Casino, Brewery and Hotel ("Main Street Station") and Vacations Hawaii,
the Company's wholly-owned travel agency which operates for the benefit of the
Downtown casino properties; and "Central Region Properties" consist of Sam's
Town Hotel and Gambling Hall in Tunica, Mississippi ("Sam's Town Tunica"),
Par-A-Dice Hotel and Casino ("Par-A-Dice"), Treasure Chest Casino ("Treasure
Chest"), Blue Chip Casino (acquired in November 1999), and management fee income
from Silver Star Resort and Casino (through January 31, 2000). Net revenues
displayed in this table and discussed in this section are net of promotional
allowances; as such, references to room revenue and food and beverage revenue do
not agree to the amounts on the Condensed Consolidated Statements of Operations.
Operating income from properties for the purpose of this table excludes
corporate expense, including related depreciation and amortization, preopening
expense and the termination fee.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net revenues
Stardust ...................... $ 39,341 $ 41,290
Boulder Strip Properties ...... 47,198 48,579
Downtown Properties (a) ....... 55,039 53,993
Central Region Properties ..... 140,141 99,396
-------- --------
Total properties ....... $281,719 $243,258
======== ========
Operating income
Stardust ...................... $ 1,068 $ 3,295
Boulder Strip Properties ...... 7,138 6,390
Downtown Properties ........... 5,995 5,497
Central Region Properties ..... 36,257 27,608
-------- --------
Total properties ....... $ 50,458 $ 42,790
======== ========
</TABLE>
- --------
(a) Includes revenues related to Vacations Hawaii, a Honolulu Travel Agency, of
$9,651 and $8,472, respectively, for the three months ended March 31, 2000
and 1999.
REVENUES
Consolidated net revenues before the termination fee increased 15.8% during
the quarter ended March 31, 2000 compared to the quarter ended March 31, 1999.
Company-wide casino revenue increased 26%, food and beverage revenue decreased
2.1% and room revenue decreased 7.4%. Net revenues from the Stardust, Boulder
Strip and Downtown Properties (the "Nevada Region") decreased 1.6% during the
quarter ended
16
<PAGE> 17
March 31, 2000 compared to the quarter ended March 31, 1999. Net revenues at the
Downtown Properties increased 1.9%, while net revenues at the Stardust and
Boulder Strip Properties decreased 4.7% and 2.8%, respectively. Net revenues in
the Central Region increased $41 million or 41% during the quarter ended March
31, 2000 compared to the same period in the prior year due primarily to the
acquisition of Blue Chip in November 1999. Blue Chip contributed $48 million in
revenue during the quarter ended March 31, 2000. Net revenues at Par-A-Dice
increased 26% due primarily to the change to dockside operations in June 1999.
The increase in net revenues in the Central Region was partially offset by
declines at Sam's Town Tunica and Treasure Chest of 11.6% and 11.8%,
respectively, due to their highly competitive environments. Management fee
income from Silver Star declined 65% for the quarter ended March 31, 2000
compared to the quarter ended March 31, 1999 as the management contract was
terminated in January 2000. See further discussion under "Termination Fee" later
in this section.
OPERATING INCOME
Consolidated operating income before preopening expense and termination fee
increased 17.3% to $42 million during the quarter ended March 31, 2000 from $36
million during the quarter ended March 31, 1999. Operating income in the Nevada
Region declined 6.5% as the gains experienced at the Boulder Strip and Downtown
Properties of 11.7% and 9.1%, respectively, did not offset the 68% decline in
operating income the Stardust experienced as a result of the competitive
environment on the Las Vegas Strip. In the Central Region, operating income
increased $8.6 million or 31% due primarily to the acquisition of Blue Chip as
well as a 61% increase in operating income at Par-A-Dice. These operating income
increases were partially offset by operating income declines at Sam's Town
Tunica and Treasure Chest due to increased competition in their respective
gaming markets as well as the termination of the Silver Star management contract
in January 2000.
STARDUST
For the quarter ended March 31, 2000, net revenues at the Stardust declined
by 4.7% versus the same period in the prior year due to the competitive
environment on the Las Vegas Strip. Casino revenue declined 6.7% due primarily
to a decline in slot and table game wagering. Room revenue declined 17.8%
resulting from a 23% decline in the number of available rooms due to the
permanent closure of motor inn rooms in April 1999. Operating income at the
Stardust declined $2.2 million or 68% and operating income margin declined to
2.7% during the quarter ended March 31, 2000 as compared to 8.0% during the
quarter ended March 31, 1999. These declines in operating income and operating
income margin are a result of the decline in net revenues.
BOULDER STRIP PROPERTIES
Net revenues at the Boulder Strip Properties declined 2.8% during the
quarter ended March 31, 2000 compared to the quarter ended March 31, 1999 due
mainly to construction disruption related to the ongoing $86 million renovation
and expansion project at Sam's Town Las Vegas, which began during the last half
of 1999. Casino revenue at the Boulder Strip Properties increased 3.0% as
increases in slot win and table game win percentages more than offset the slight
declines in slot and table game wagering. Non-gaming revenue at the Boulder
Strip Properties declined 23% primarily due to the permanent closure of Sam's
Town's Western Emporium retail store in September 1999 as part of the property's
renovation and expansion project. For the quarter ended March 31, 2000,
operating income increased 11.7% compared to the quarter ended March 31,
17
<PAGE> 18
1999. Operating income margin increased to 15.1% for the quarter ended March 31,
2000 from 13.2% for the quarter ended March 31, 1999. The increases in operating
income and operating income margin are due primarily to the increase in casino
revenue.
DOWNTOWN PROPERTIES
Net revenues at the Downtown Properties increased 1.9% during the quarter
ended March 31, 2000 compared to the quarter ended March 31, 1999 due primarily
to increased revenue at Vacations Hawaii, the Company's Honolulu travel agency.
Casino revenue remained virtually unchanged as increases in slot and table game
wagering were nearly offset by a decline in table game win percentage. Operating
income at the Downtown Properties increased 9.1% to $6.0 million during the
quarter ended March 31, 2000 compared to the quarter ended March 31, 1999. This
increase in operating income is attributable to cost consolidation efforts and
effective marketing at the Downtown casino properties.
CENTRAL REGION
Net revenues from the Central Region increased $41 million or 41% during the
quarter ended March 31, 2000 compared to the quarter ended March 31, 1999. The
majority of the increase is due to the November 1999 acquisition of Blue Chip,
which earned $48 million in revenue during the quarter ended March 31, 2000.
Also contributing to the increase in net revenues was a 26% increase at
Par-A-Dice due mainly to the change to dockside operations in June 1999. Sam's
Town Tunica and Treasure Chest experienced declines in net revenues of 11.6% and
11.8%, respectively, due primarily to their highly competitive environments.
Management fee income from Silver Star declined $7.0 million as the management
contract was terminated on January 31, 2000. Operating income in the Central
Region increased 31% to $36 million during the quarter ended March 31, 2000
compared to $28 million during the quarter ended March 31, 1999. This increase
in operating income is due primarily to the acquisition of Blue Chip and the
increase in net revenues at Par-A-Dice, partially offset by declines in
operating income at Sam's Town Tunica and Treasure Chest.
TERMINATION FEE
On October 20, 1999, the Company agreed to terminate its management contract
with the Mississippi Band of Choctaw Indians (the "Tribe") prior to the
contract's expiration date in June 2001 in exchange for a one-time payment of
$72 million. Pursuant to that agreement, the Company continued to manage Silver
Star under the terms of the management contract through January 31, 2000, at
which time the Tribe made the one-time termination payment and the Company
recorded the termination fee, net of certain expenses.
OTHER EXPENSES
Depreciation and amortization expense increased 15.1% during the quarter
ended March 31, 2000 compared to the quarter ended March 31, 1999 primarily as a
result of depreciation and amortization expense related to the fixed assets,
intangible license rights and acquisition costs of Blue Chip (acquired in
November 1999).
18
<PAGE> 19
OTHER INCOME (EXPENSE)
Other income and expense is primarily comprised of interest expense, net of
capitalized interest. Net interest expense increased by $3.0 million during the
quarter ended March 31, 2000 compared to the quarter ended March 31, 1999. The
increase is attributable to higher average debt levels attributable to the
borrowings related to the November 1999 acquisition of Blue Chip. Net interest
expense was partially offset by $1.0 million in capitalized interest costs
during the quarter ended March 31, 2000 compared to $0.2 million during the
quarter ended March 31, 1999.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING FOR START-UP ACTIVITIES
During the quarter ended March 31, 1999, the Company reported a charge of
$1.7 million, net of $0.9 million in tax benefit, as the cumulative effect of a
change in accounting for start-up activities. The American Institute of
Certified Public Accountants issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" that required the Company to expense certain
previously capitalized costs of start-up activities as a cumulative effect of
change in accounting principle.
NET INCOME
As a result of these factors, the Company reported net income of $57.1
million and $8.9 million, respectively, during the quarters ended March 31, 2000
and 1999.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATING ACTIVITIES AND WORKING CAPITAL
The Company's policy is to use operating cash flow in combination with debt
financing to fund renovations and expansion of its business.
During the quarter ended March 31, 2000, the Company generated operating
cash flow of $123 million compared to $45 million during the quarter ended March
31, 1999. The increase in operating cash flow is primarily attributable to the
$72 million termination payment received from Silver Star as well as the
incremental earnings from Blue Chip, which was acquired in November 1999. As of
March 31, 2000 and 1999, the Company had balances of cash and cash equivalents
of $72 million and $66 million, respectively, and a working capital deficit of
$47 million at March 31, 2000 compared to working capital of $3.1 million at
March 31, 1999. Much of the working capital deficit at March 31, 2000 is
attributable to the $26 million in income taxes payable principally related to
the income generated from the $72 million termination payment. In addition, the
Company had $7.0 million of construction payables at March 31, 2000 due
primarily to the expansion and renovation of Sam's Town Las Vegas and the
construction of Blue Chip's hotel and parking garage. The Company has
historically operated with minimal or negative levels of working capital in
order to minimize borrowings and related interest costs under its $600 million
bank credit facility (the "Bank Credit Facility").
19
<PAGE> 20
CASH FLOWS FROM INVESTING ACTIVITIES
The Company is committed to continually maintaining and enhancing its
existing facilities, most notably by upgrading and remodeling its casinos, hotel
rooms, restaurants, and other public spaces and by providing the latest slot
machines for its customers. The Company's capital expenditures primarily related
to these purposes were approximately $19.4 million and $16.0 million,
respectively, during the quarters ended March 31, 2000 and 1999. The Company
also incurred $5.7 million in capital expenditures during the quarter ended
March 31, 2000 for the expansion of Sam's Town Las Vegas.
CASH FLOWS FROM FINANCING ACTIVITIES
Substantially all of the funding for the Company's acquisitions and
renovation and expansion projects comes from cash flows from existing operations
as well as debt financing. During the quarter ended March 31, 2000, the Company
paid down debt by $110 million as compared to $37 million during the quarter
ended March 31, 1999. The termination payment accounted for $72 million of the
debt reduction during the quarter ended March 31, 2000. At March 31, 2000,
outstanding borrowings and unused availability under the Bank Credit Facility
were $416 million and $183.5 million, respectively.
The Company's Bank Credit Facility consists of a $500 million revolver
component (the "Revolver") and a term loan component (the "Term Loan") with an
original principal balance of $100 million, both of which mature in June 2003.
Availability under the Revolver will be reduced by $15.6 million on December 31,
2001 and at the end of each quarter thereafter until March 31, 2003. The Term
Loan is being repaid in increments of $0.25 million per quarter which began on
September 30, 1999 and will continue through March 31, 2003, bringing the March
31, 2000 outstanding balance to $99.3 million. The interest rate on the Bank
Credit Facility is based upon either the agent bank's quoted base rate or the
Eurodollar rate, plus an applicable margin that is determined by the level of a
predefined financial leverage ratio. In addition, the Company incurs a
commitment fee on the unused portion of the Revolver which ranges from 0.375% to
0.50% per annum. The blended rate on outstanding borrowings under the Bank
Credit Facility as of March 31, 2000 was 8.1%. The Bank Credit Facility is
secured by substantially all of the real and personal property of the Company
and its subsidiaries, including eleven casino properties. The obligations of the
Company under the Bank Credit Facility are guaranteed by the significant
subsidiaries of the Company.
The Bank Credit Facility contains certain financial and other covenants,
including, without limitation, various covenants (i) requiring the maintenance
of a minimum net worth, (ii) requiring the maintenance of a minimum interest
coverage ratio, (iii) establishing a maximum permitted total leverage ratio and
senior secured leverage ratio, (iv) imposing limitations on the incurrence of
additional indebtedness, (v) imposing limitations on the maximum permitted
expansion capital expenditures during the term of the Bank Credit Facility, (vi)
imposing limits on the maximum permitted maintenance capital expenditures during
each year of the term of the Bank Credit Facility, and (vii) imposing
restrictions on investments, dividends and certain other payments. Management
believes the Company and its subsidiaries are in compliance with the Bank Credit
Facility covenants.
The Company's $200 million principal amount of Senior Notes (the "9.25%
Notes") and $250 million principal amount of Senior Subordinated Notes (the
"9.50% Notes") contain limitations on, among other things, (a) the ability of
the Company and its Restricted Subsidiaries (as defined in the Indenture
Agreements)
20
<PAGE> 21
to incur additional indebtedness, (b) the payment of dividends and other
distributions with respect to the capital stock of the Company and its
Restricted Subsidiaries and the purchase, redemption or retirement of capital
stock of the Company and its Restricted Subsidiaries, (c) the making of certain
investments, (d) asset sales, (e) the incurrence of liens, (f) transactions with
affiliates, (g) payment restrictions affecting restricted subsidiaries and (h)
certain consolidations, mergers and transfers of assets. Management believes the
Company and its subsidiaries are in compliance with the covenants related to the
9.25% and 9.50% Notes at March 31, 2000.
The Company's ability to service its debt will be dependent on its future
performance, which will be affected by, among other things, prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control.
EXPANSION AND OTHER PROJECTS
The Company, as part of its ongoing strategic planning process, is currently
establishing its priorities for the future. In Nevada, the Company is exploring
development opportunities in the Las Vegas locals market. In January 2000, the
Company reached an agreement in principle with Nevso, L.L.C. to purchase
approximately 18 acres of land in western Las Vegas to develop a locals hotel
and casino. The purchase of the land and development of the project is subject
to a number of contingencies, including but not limited to, the parties reaching
a definitive agreement and securing various regulatory and development
approvals. The zoning to allow the construction of the project and its use as a
locals resort casino was reversed upon administrative appeal and is the subject
of litigation. The Company can make no assurances that this project will go
forward or that if the project goes forward that it will be successful. In
addition, the Company has initiated an $86 million expansion and renovation
project at Sam's Town Las Vegas. The project includes, among other things, the
remodeling of the casino and restaurants, an 18 screen state-of-the-art movie
theatre complex, childcare facilities, an arcade, additional casino space for
500 slot machines, an 11,200 square foot multi-purpose events center for
concerts and meetings, a new 650 seat buffet, and a reconfigured and remodeled
porte cochere and valet parking area to improve access to the property. As of
March 31, 2000, the Company had incurred $31 million in cumulative costs
associated with the Sam's Town Las Vegas expansion and renovation. The
renovation portion of the project is expected to continue through the summer of
2000 and the expansion is expected to be completed by December 31, 2000. There
can be no assurances that the Sam's Town Las Vegas renovation and expansion
project will be completed on time or within budget.
Outside Nevada, the Company is pursuing several other projects. On May 29,
1996, the Company, through a wholly-owned subsidiary, entered into a joint
venture agreement with Mirage Resorts, Incorporated, through a wholly-owned
subsidiary ("Mirage"), to jointly develop and own a casino hotel entertainment
facility in Atlantic City, New Jersey. Certain aspects of the joint venture
agreement were subsequently modified into an amended and restated joint venture
agreement (the "Agreement") on July 14, 1998. The Agreement provides for a hotel
of at least 1,200 rooms and a casino and related amenities (collectively named
"The Borgata") adjacent and connected to Mirage's planned wholly-owned resort
and contemplates a total cost of $750 million. Any project costs exceeding the
$750 million budget shall be funded by the Company without any proportionate
increase in the ownership of the joint venture by the Company. The Agreement
provides for each party to make an equity contribution of $150 million. The
Company will contribute $90 million when Mirage contributes land to the venture.
The Agreement further provides for the venture to arrange $450 million in
non-recourse financing for the project. The Company has recently
21
<PAGE> 22
had discussions with Mirage to increase the size of the Borgata to at least
2,000 rooms and to increase the budget to $1.035 billion. Under the recent
discussions, cash equity contributions by the Company would increase to $207
million, while Mirage's cash equity contributions would increase to $117
million. Mirage would also contribute land to the venture, valued at $90
million. In addition, the joint venture would obtain $621 million in
non-recourse financing. Funding of the Company's capital contributions to The
Borgata is expected to be derived from cash flow from operations, availability
under the Company's Bank Credit Facility, incremental bank financing, or
additional debt offerings. The Borgata will be subject to the many risks
inherent in the establishment of a new business enterprise, including potential
unanticipated design, construction, regulatory, environmental and operating
problems, increased project costs, timing delays, lack of adequate financing and
the significant risks commonly associated with implementing a marketing strategy
in a new market. Once construction begins, if The Borgata does not become
operational within the time frame and budget currently contemplated or does not
compete successfully in its new market, it could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company has begun work on the planning stages of this development. As of March
31, 2000, the Company has contributed or advanced total funds of $7.6 million to
The Borgata. The Company expects to contribute its $90 million capital
contribution contemporaneously with Mirage's contribution of land, which is
expected to occur when a significant portion of the building plans are complete,
permits and obtained and financing is arranged. If The Borgata is increased in
size pursuant to recent discussions, such date is expected to change to the
fourth quarter of this year. In addition, the increase in size will result in a
longer construction period and would move the expected completion date from late
2002 to the middle of 2003.
The Company recently began a $21 million renovation project at Sam's Town
Tunica to reconfigure and remodel the casino, redesign and enhance its
restaurant product, remodel the atrium and build an RV park adjacent to the
property. The renovation project is expected to be completed by December 31,
2000, although there can be no assurances that the project will be completed on
time or within budget. As of March 31, 2000, the Company had incurred $0.1
million in total costs associated with the Sam's Town Tunica renovation project.
On January 18, 2000, the Company signed a Memorandum of Understanding (the
"Memorandum") with the Narragansett Indian Tribe (the "Narragansetts") to assist
in the development and operation of the proposed Narragansett Indian Casino in
West Warwick, Rhode Island. The Memorandum provides that the Company's role in
this project may include, without limitation, assisting in lobbying efforts,
assisting in procurement of project financing, assisting in the design and
construction of the project, and potentially participating in the ownership and
management of the project. The Company's participation in the project is
contingent upon a number of factors, including but not limited to, negotiation
of a definitive agreement between the Company and the Narragansetts; approval of
legislation by the Rhode Island Legislature and approval of the project by the
voters of Rhode Island in a state-wide referendum, both of which are necessary
to enable the project to go forward; and the resolution of a dispute with
Capital Gaming Development, Inc. ("Capital") relating to the termination of the
management agreement between the Narragansetts and Capital. The Company can make
no assurances that this project will go forward or that if the project goes
forward that it will be successful. As of March 31, 2000, the Company had
incurred $0.3 million in total costs associated with the Rhode Island project,
substantially all of which was advanced to the Narragansetts or used for options
to purchase land in Rhode Island.
The Company has undertaken a Customer Information System ("CIS") project
that will standardize the Company's customer tracking systems. The purpose of
the CIS project is to link all points of customer contact at a particular
property to enable the Company to better monitor customer activity in order to
enhance and direct marketing efforts. As of March 31, 2000, the Company had
incurred $11.3 million in cumulative costs
22
<PAGE> 23
associated with the CIS project, substantially all of which was capitalized. The
Company expects to spend $20 million in 2000 on the next phases of the CIS
project. The Company has never undertaken a technology project of this magnitude
and may experience difficulties in the integration and implementation of this
project. In addition, given the inherent difficulties of a project of this
magnitude and the resources required, the timing and costs involved could differ
materially from those anticipated by the Company. There can be no assurance that
the CIS project will be completed successfully, on schedule, or within budget.
Substantial funds are required for The Borgata, the other projects
discussed above, and for other future expansion projects. There are no
assurances that any of the above mentioned projects will go forward on a timely
basis, if at all, or ultimately become operational. The source of funds required
to meet the Company's working capital needs (including maintenance capital
expenditures) is expected to be cash flow from operations and availability under
the Company's Bank Credit Facility. The source of funds for the Company's
expansion projects may come from cash flow from operations and availability
under the Company's Bank Credit Facility, incremental bank financing, additional
debt or equity offerings, joint venture partners or other sources. No assurance
can be given that additional financing will be available or that, if available,
such financing will be obtainable on terms favorable to the Company or its
stockholders.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information included in this
Form 10-Q and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are forward looking, such as statements relating to
plans for future expansion and other business development activities as well as
capital spending, financing sources, and the effects of regulation (including
gaming and tax regulation) and competition. Such forward looking statements
involve important risks and uncertainties that could significantly affect
anticipated results in the future, and accordingly, actual results may differ
materially from those expressed in any forward looking statements made by or on
behalf of the Company. These risks and uncertainties include, but are not
limited to, those related to construction, expansion and development activities,
economic conditions, changes in tax laws, changes in laws or regulations
affecting gaming licenses, changes in competition, and factors affecting
leverage and debt service including sensitivity to fluctuation in interest rates
and other factors described from time to time in the Company's reports filed
with the Securities and Exchange Commission, including the Company's Annual
Report on Form 10-K for the year ended December 31, 1999. Any forward looking
statements are made pursuant to the Private Securities Litigation Reform Act of
1995 and, as such, speak only as of the date made.
23
<PAGE> 24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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. The Company's primary exposure to market risk is interest rate
risk associated with its long-term debt. The Company attempts to limit its
exposure to interest rate risk by managing the mix of its long-term fixed-rate
borrowings and short-term borrowings under the Bank Credit Facility. Borrowings
under the Bank Credit Facility bear interest, at the Company's option, at the
agent bank's quoted base rate or at a specified premium over the Eurodollar
rate. However, the amount of outstanding borrowings is expected to fluctuate and
may be reduced from time to time. The Company currently does not utilize hedging
instruments.
24
<PAGE> 25
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
(i) None
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements 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 May 11, 2000.
BOYD GAMING CORPORATION
By: /s/ ELLIS LANDAU
---------------------------------------
Ellis Landau
Executive Vice President,
Chief Financial Officer,
Treasurer (Principal Financial Officer)
26
<PAGE> 27
EXHIBIT LIST
27. Financial Data Schedule
27
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 71,876
<SECURITIES> 0
<RECEIVABLES> 18,300
<ALLOWANCES> 5,135
<INVENTORY> 5,083
<CURRENT-ASSETS> 114,958
<PP&E> 1,406,092
<DEPRECIATION> 501,230
<TOTAL-ASSETS> 1,418,471
<CURRENT-LIABILITIES> 162,281
<BONDS> 871,734
0
0
<COMMON> 622
<OTHER-SE> 323,430
<TOTAL-LIABILITY-AND-EQUITY> 1,418,471
<SALES> 0
<TOTAL-REVENUES> 352,707
<CGS> 0
<TOTAL-COSTS> 239,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,118
<INCOME-PRETAX> 92,795
<INCOME-TAX> 35,726
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,069
<EPS-BASIC> $0.92
<EPS-DILUTED> $0.92
</TABLE>
