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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________

FORM 10-Q

 ____________________________________________________

(Mark One)

 

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

 

For the quarterly period ended June 30, 2021

OR

 

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

 

For the transition period from              to              

Commission file number: 1-12882

___________________________________________________

 

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 July 26, 2021 was 112,223,991.

 

 

 

 

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2021

TABLE OF CONTENTS

 

 

 

Page

No.

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

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

3

 

 

 

 

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

4

 

 

 

 

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

5

 

 

 

 

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

6

 

 

 

 

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

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

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

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

 

 

 

Item 4.

Controls and Procedures

34

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

35

 

 

 

Item 1A.

Risk Factors

35

 

 

 

Item 6.

Exhibits

36

 

 

 

Signature Page

37

 

 

 

 

PART I. Financial Information

 

Item 1.        Financial Statements (Unaudited)

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 

   

June 30,

   

December 31,

 

(In thousands, except share data)

 

2021

   

2020

 

ASSETS

               

Current assets

               

Cash and cash equivalents

  $ 334,537     $ 519,182  

Restricted cash

    21,312       15,817  

Accounts receivable, net

    57,514       53,456  

Inventories

    19,998       22,616  

Prepaid expenses and other current assets

    39,463       39,198  

Income taxes receivable

          8  

Total current assets

    472,824       650,277  

Property and equipment, net

    2,446,808       2,525,887  

Operating lease right-of-use assets

    929,922       928,814  

Other assets, net

    95,201       100,510  

Intangible assets, net

    1,375,871       1,382,173  

Goodwill, net

    971,287       971,287  

Total assets

  $ 6,291,913     $ 6,558,948  

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Current liabilities

               

Accounts payable

  $ 81,471     $ 96,863  

Current maturities of long-term debt

    39,324       30,740  

Accrued liabilities

    407,921       396,419  

Income tax payable

    192        

Total current liabilities

    528,908       524,022  

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

    3,300,226       3,866,743  

Operating lease liabilities, net of current portion

    846,551       848,825  

Deferred income taxes

    191,916       131,052  

Other liabilities

    66,045       64,363  

Commitments and contingencies (Notes 5 and 6)

                 

Stockholders' equity

               

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

           

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

    1,122       1,118  

Additional paid-in capital

    895,227       876,433  

Retained earnings

    462,132       246,242  

Accumulated other comprehensive income (loss)

    (214 )     150  

Total stockholders' equity

    1,358,267       1,123,943  

Total liabilities and stockholders' equity

  $ 6,291,913     $ 6,558,948  

 

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

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands, except per share data)

 

2021

   

2020

   

2021

   

2020

 

Revenues

                               

Gaming

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

Food & beverage

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

Room

    39,077       6,918       65,067       53,645  

Other

    69,635       7,169       134,914       41,318  

Total revenues

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

Operating costs and expenses

                               

Gaming

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

Food & beverage

    46,819       16,745       85,732       106,584  

Room

    14,207       5,097       26,339       28,082  

Other

    44,487       2,169       86,394       23,616  

Selling, general and administrative

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

Master lease rent expense

    26,175       25,413       52,090       50,078  

Maintenance and utilities

    31,157       21,654       59,388       54,800  

Depreciation and amortization

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

Corporate expense

    34,716       13,963       58,031       38,921  

Project development, preopening and writedowns

    1,454       3,825       2,869       7,333  

Impairment of assets

                      171,100  

Other operating items, net

    11,115       1,099       12,272       8,642  

Total operating costs and expenses

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

Operating income (loss)

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

Other expense (income)

                               

Interest income

    (455 )     (569 )     (964 )     (1,008 )

Interest expense, net of amounts capitalized

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

Loss on early extinguishments and modifications of debt

    65,475       412       65,475       587  

Other, net

    237       115       2,169       (229 )

Total other expense, net

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

Income (loss) before income taxes

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

Income tax benefit (provision)

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

Net income (loss)

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

Basic net income (loss) per common share

  $ 1.00     $ (0.96 )   $ 1.90     $ (2.26 )

Weighted average basic shares outstanding

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

Diluted net income (loss) per common share

  $ 1.00     $ (0.96 )   $ 1.89     $ (2.26 )

Weighted average diluted shares outstanding

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

 

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

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands)

 

2021

   

2020

   

2021

   

2020

 

Net income (loss)

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

Other comprehensive income (loss), net of tax:

                               

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

    (43 )     (445 )     (364 )     682  

Comprehensive income (loss)

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

 

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

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

 

                                   

Accumulated Other

         
   

Common Stock

   

Additional

   

Retained

   

Comprehensive

         

(In thousands, except share data)

 

Shares

   

Amount

   

Paid-in Capital

   

Earnings

   

Income (Loss)

   

Total

 

Balances, January 1, 2021

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

Net income

                      102,161             102,161  

Comprehensive loss, net of tax

                            (321 )     (321 )

Stock options exercised

    158,568       2       1,743                   1,745  

Release of restricted stock units, net of tax

    29,808             (609 )                 (609 )

Release of performance stock units, net of tax

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

Share-based compensation costs

                5,701                   5,701  

Balances, March 31, 2021

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

Net income

                      113,729             113,729  

Comprehensive loss, net of tax

                            (43 )     (43 )

Stock options exercised

    100,068             1,037                   1,037  

Release of restricted stock units, net of tax

    43,036       1                         1  

Share-based compensation costs

                12,823                   12,823  

Balances, June 30, 2021

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

 

 

                                   

Accumulated Other

         
   

Common Stock

   

Additional

   

Retained

   

Comprehensive

         

(In thousands, except share data)

 

Shares

   

Amount

   

Paid-in Capital

   

Earnings

   

Income (Loss), Net

   

Total

 

Balances, January 1, 2020

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

Net loss

                      (147,559 )           (147,559 )

Comprehensive income, net of tax

                            1,127       1,127  

Stock options exercised

    3,000             25                   25  

Release of restricted stock units, net of tax

    76,502       1       (767 )                 (766 )

Release of performance stock units, net of tax

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

Shares repurchased and retired

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

Share-based compensation costs

                8,191                   8,191  

Balances, March 31, 2020

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

Net loss

                      (108,544 )           (108,544 )

Comprehensive loss, net of tax

                            (445 )     (445 )

Stock options exercised

    1,000             8                   8  

Release of restricted stock units, net of tax

    183,741       2       (6 )                 (4 )

Release of performance stock units, net of tax

    20,082       1                         1  

Shares repurchased and retired

          (1 )                       (1 )

Share-based compensation costs

                2,693                   2,693  

Balances, June 30, 2020

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

 

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

 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

   

Six Months Ended

 
   

June 30,

 

(In thousands)

 

2021

   

2020

 

Cash Flows from Operating Activities

               

Net income (loss)

  $ 215,890     $ (256,103 )

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

               

Depreciation and amortization

    131,746       136,178  

Amortization of debt financing costs and discounts on debt

    5,931       5,307  

Non-cash operating lease expense

    30,329       34,225  

Share-based compensation expense

    18,524       10,884  

Deferred income taxes

    60,864       (78,092 )

Non-cash impairment of assets

          171,100  

Loss on early extinguishments and modifications of debt

    65,475       587  

Other operating activities

    8,510       4,738  

Changes in operating assets and liabilities:

               

Accounts receivable, net

    (4,058 )     19,630  

Inventories

    2,618       (2,912 )

Prepaid expenses and other current assets

    (647 )     (19,275 )

Income taxes (receivable) payable, net

    200       1,541  

Other assets, net

    (2,715 )     (1,113 )

Accounts payable and accrued liabilities

    (8,315 )     (54,763 )

Operating lease liabilities

    (30,329 )     (34,225 )

Other long-term tax liabilities

          95  

Other liabilities

    5,319       9,393  

Net cash provided by (used in) operating activities

    499,342       (52,805 )

Cash Flows from Investing Activities

               

Capital expenditures

    (96,339 )     (75,916 )

Insurance proceeds received for hurricane losses

    40,240        

Other investing activities

    6,672        

Net cash used in investing activities

    (49,427 )     (75,916 )

Cash Flows from Financing Activities

               

Borrowings under bank credit facility

          965,100  

Payments under bank credit facility

    (11,536 )     (344,848 )

Proceeds from issuance of senior notes

    900,000       600,000  

Debt financing costs, net

    (14,596 )     (12,918 )

Retirements of senior notes

    (1,450,000 )      

Premium and consent fees

    (51,863 )      

Share-based compensation activities, net

    274       (4,106 )

Shares repurchased and retired

          (11,121 )

Dividends paid

          (7,808 )

Other financing activities

    (1,344 )     (593 )

Net cash provided by (used in) financing activities

    (629,065 )     1,183,706  

Change in cash, cash equivalents and restricted cash

    (179,150 )     1,054,985  

Cash, cash equivalents and restricted cash, beginning of period

    534,999       270,448  

Cash, cash equivalents and restricted cash, end of period

  $ 355,849     $ 1,325,433  

Supplemental Disclosure of Cash Flow Information

               

Cash paid for interest, net of amounts capitalized

  $ 131,778     $ 112,220  

Cash paid for (received from) income taxes

    3,298       (1,448 )

Supplemental Schedule of Non-cash Investing and Financing Activities

               

Payables incurred for capital expenditures

  $ 3,072     $ 12,250  

Mortgage settlement in exchange for real estate

          57,684  

 

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

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

______________________________________________________________________________________________________

 

 

NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

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

 

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

 

Impact of the COVID 19 Pandemic

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

 

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

 

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

 

Basis of Presentation

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

 

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

 

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

 

8

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

Cash and Cash Equivalents

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

 

Restricted Cash

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

 

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

 

   

June 30,

   

December 31,

   

June 30,

   

December 31,

 

(In thousands)

 

2021

   

2020

   

2020

   

2019

 

Cash and cash equivalents

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

Restricted cash

    21,312       15,817       17,086       20,471  

Total cash, cash equivalents and restricted cash

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

 

Leases

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

 

Revenue Recognition

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

 

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

 

9

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

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

 

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

 

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

 

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

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands)

 

2021

   

2020

   

2021

   

2020

 

Food & beverage

  $ 26,202     $ 5,235     $ 48,904     $ 49,415  

Rooms

    15,310       3,069       28,249       22,155  

Other

    1,489       172       2,565       3,054  

 

Gaming Taxes

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

 

Income Taxes

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

 

Other Long-Term Tax Liabilities

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

 

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

 

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

 

Collaborative Arrangements

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

 

10

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

Use of Estimates

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

 

Recently Adopted Accounting Pronouncements

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

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

 

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

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

 

Recently Issued Accounting Pronouncements

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

 

 

NOTE 2.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

 

   

June 30,

   

December 31,

 

(In thousands)

 

2021

   

2020

 

Land

  $ 345,194     $ 346,485  

Buildings and improvements

    3,097,960       3,074,896  

Furniture and equipment

    1,625,281       1,609,637  

Riverboats and barges

    241,167       241,043  

Construction in progress

    36,667       43,883  

Total property and equipment

    5,346,269       5,315,944  

Less accumulated depreciation

    (2,899,461 )     (2,790,057 )

Property and equipment, net

  $ 2,446,808     $ 2,525,887  

 

Depreciation expense is as follows:

 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands)

 

2021

   

2020

   

2021

   

2020

 

Depreciation expense

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

 

11

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

_________________________________________________________________________________________________

_____

 

 

NOTE 3.    GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

 

   

June 30, 2021

 
   

Weighted

   

Gross

           

Accumulated

         
   

Useful Life

   

Carrying

   

Accumulated

   

Impairment

   

Intangible

 

(In thousands)

 

Remaining (in years)

   

Value

   

Amortization

   

Losses

   

Assets, Net

 

Amortizing intangibles

                                     

Customer relationships

  2.0     $ 68,100     $ (59,431 )   $     $ 8,669  

Host agreements

  11.9       58,000       (11,922 )           46,078  

Development agreement

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

Indefinite lived intangible assets

                                     

Trademarks

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

Gaming license rights

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

Balances, June 30, 2021

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

 

   

December 31, 2020

 
   

Weighted

   

Gross

           

Accumulated

         
   

Useful Life

   

Carrying

   

Accumulated

   

Impairment

   

Intangible

 

(In thousands)

 

Remaining (in years)

   

Value

   

Amortization

   

Losses

   

Assets, Net

 

Amortizing intangibles

                                     

Customer relationships

  2.5     $ 68,100     $ (55,062 )   $     $ 13,038  

Host agreements

  12.4       58,000       (9,989 )           48,011  

Development agreement

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

Indefinite lived intangible assets

                                     

Trademarks

 

Indefinite

      204,000             (24,800 )     179,200  

Gaming license rights

 

Indefinite

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

Balances, December 31, 2020

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

 

Goodwill, net consists of the following:

 

   

Gross

           

Accumulated

         
   

Carrying

   

Accumulated

   

Impairment

   

Goodwill,

 

(In thousands)

 

Value

   

Amortization

   

Losses

   

Net

 

Goodwill, net by Reportable Segment

                               

Las Vegas Locals

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

Downtown Las Vegas

    6,997       (6,134 )           863  

Midwest & South

    666,798             (101,862 )     564,936  

Balances, June 30, 2021

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

 

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

 

(In thousands)

 

Goodwill, Net

 

Balance, January 1, 2021

  $ 971,287  

Additions

     

Impairments

     

Balance, June 30, 2021

  $ 971,287  

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

 

NOTE 4.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

 

   

June 30,

   

December 31,

 

(In thousands)

 

2021

   

2020

 

Payroll and related expenses

  $ 87,024     $ 73,802  

Interest

    11,446       36,055  

Gaming liabilities

    73,926       72,655  

Player loyalty program liabilities

    28,800       27,935  

Advance deposits

    19,597       16,037  

Outstanding chip liabilities

    6,541       6,021  

Operating lease liabilities

    94,427       90,478  

Other accrued liabilities

    86,160       73,436  

Total accrued liabilities

  $ 407,921     $ 396,419  

 

 

NOTE 5.    LONG-TERM DEBT

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

 

   

June 30, 2021

 
   

Interest

                   

Unamortized

         
    Rates at                     Origination          
   

June 30,

   

Outstanding

   

Unamortized

   

Fees and

   

Long-Term

 

(In thousands)

 

2021

   

Principal

   

Discount

   

Costs

   

Debt, Net

 

Bank credit facility

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

4.750% senior notes due 2027

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

8.625% senior notes due 2025

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

4.750% senior notes due 2031

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

Other

  6.184 %     2,295                   2,295  

Total long-term debt

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

Less current maturities

          39,324                   39,324  

Long-term debt, net

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

 

   

December 31, 2020

 
   

Interest

                   

Unamortized

         
    Rates at                     Origination          
   

December 31,

   

Outstanding

   

Unamortized

   

Fees and

   

Long-Term

 

(In thousands)

 

2020

   

Principal

   

Discount

   

Costs

   

Debt, Net

 

Bank credit facility

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

6.375% senior notes due 2026

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

6.000% senior notes due 2026

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

4.750% senior notes due 2027

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

8.625% senior notes due 2025

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

Other

  6.137 %     3,638                   3,638  

Total long-term debt

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

Less current maturities

          30,740                   30,740  

Long-term debt, net

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

 

13

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

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

 

   

June 30,

   

December 31,

 

(In thousands)

 

2021

   

2020

 

Revolving Credit Facility

  $     $  

Term A Loan

    128,582       133,796  

Refinancing Term B Loans

    756,066       762,389  

Swing Loan

           

Total outstanding principal amounts under the bank credit facility

  $ 884,648     $ 896,185  

 

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

 

Bank Credit Agreement Amendment

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

 

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

 

4.750% Senior Notes due June 2031

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

 

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

 

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

 

Redemption of 6.375% Senior Notes due April 2026

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

 

Redemption of 6.000% Senior Notes due August 2026

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

 

Covenant Compliance

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

 

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

 

14

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

 

NOTE 6.    COMMITMENTS AND CONTINGENCIES

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

 

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

NOTE 7.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

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

 

 

Dividends

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

 

Declaration date

 

Record date

 

Payment date

  Amount per share  

December 17, 2019

 

December 27, 2019

 

January 15, 2020

  $ 0.07  

 

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

 

Share-Based Compensation

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

 

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

 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands)

 

2021

   

2020

   

2021

   

2020

 

Gaming

  $ 266     $ 141     $ 426     $ 353  

Food & beverage

    51       27       82       67  

Room

    25       13       39       32  

Selling, general and administrative

    1,353       720       2,168       1,796  

Corporate expense

    11,128       1,792       15,809       8,636  

Total share-based compensation expense

  $ 12,823     $ 2,693     $ 18,524     $ 10,884  

 

Performance Shares

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

 

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

 

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

 

15

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

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

 

Unamortized Stock Compensation Expense and Recognition Period

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

 

 

NOTE 8.     FAIR VALUE MEASUREMENTS

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

 

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

 

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

 

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

 

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

 

Balances Measured at Fair Value

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

 

   

June 30, 2021

 

(In thousands)

 

Balance

   

Level 1

   

Level 2

   

Level 3

 

Assets

                               

Cash and cash equivalents

  $ 334,537     $ 334,537     $     $  

Restricted cash

    21,312       21,312              

Investment available for sale

    15,696                   15,696  
                                 

Liabilities

                               

Contingent payments

  $ 489     $     $     $ 489  

 

   

December 31, 2020

 

(In thousands)

 

Balance

   

Level 1

   

Level 2

   

Level 3

 

Assets

                               

Cash and cash equivalents

  $ 519,182     $ 519,182     $     $  

Restricted cash

    15,817       15,817              

Investment available for sale

    16,692                   16,692  
                                 

Liabilities

                               

Contingent payments

  $ 924     $     $     $ 924  

 

Cash and Cash Equivalents and Restricted Cash

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

 

Investment Available for Sale

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

 

16

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

Contingent Payments

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

 

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

 

   

Three Months Ended

 
   

June 30, 2021

   

June 30, 2020

 
   

Asset

   

Liability

   

Asset

   

Liability

 

(In thousands)

 

Investment Available for Sale

   

Contingent Payments

   

Investment Available for Sale

   

Contingent Payments

 

Balance at beginning of reporting period

  $ 16,297     $ (769 )   $ 17,745     $ (1,520 )

Total gains (losses) (realized or unrealized):

                               

Included in interest income (expense)

    41       (8 )     39       (22 )

Included in other comprehensive income (loss)

    (52 )           (367 )      

Included in other items, net

          (23 )           238  

Purchases, sales, issuances and settlements:

                               

Settlements

    (590 )     311       (550 )     29  

Balance at end of reporting period

  $ 15,696     $ (489 )   $ 16,867     $ (1,275 )

 

   

Six Months Ended

 
   

June 30, 2021

   

June 30, 2020

 
   

Asset

   

Liability

   

Asset

   

Liability

 

(In thousands)

 

Investment Available for Sale

   

Contingent Payments

   

Investment Available for Sale

   

Contingent Payments

 

Balance at beginning of reporting period

  $ 16,692     $ (924 )   $ 16,151     $ (1,712 )

Total gains (losses) (realized or unrealized):

                               

Included in interest income (expense)

    82       (21 )     78       (48 )

Included in other comprehensive income (loss)

    (488 )           1,188        

Included in other items, net

          3             221  

Purchases, sales, issuances and settlements:

                               

Settlements

    (590 )     453       (550 )     264  

Balance at end of reporting period

  $ 15,696     $ (489 )   $ 16,867     $ (1,275 )

 

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

 

Balances Disclosed at Fair Value

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

 

   

June 30, 2021

(In thousands)

 

Outstanding Face Amount

   

Carrying Value

   

Estimated Fair Value

 

Fair Value Hierarchy

Liabilities

                         

Obligation under assessment arrangements

  $ 25,289     $ 25,590     $ 27,042  

Level 3

 

 

17

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

   

December 31, 2020

(In thousands)

 

Outstanding Face Amount

   

Carrying Value

   

Estimated Fair Value

 

Fair Value Hierarchy

Liabilities

                         

Obligation under assessment arrangements

  $ 26,246     $ 22,062     $ 26,542  

Level 3

 

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

 

   

June 30, 2021

(In thousands)

 

Outstanding Face Amount

   

Carrying Value

   

Estimated Fair Value

 

Fair Value Hierarchy

Bank credit facility

  $ 884,648     $ 873,679     $ 882,436  

Level 2

4.750% senior notes due 2027

    1,000,000       987,338       1,032,500  

Level 1

8.625% senior notes due 2025

    600,000       590,678       660,750  

Level 1

4.750% senior notes due 2031

    900,000       885,560       933,750  

Level 1

Other

    2,295       2,295       2,295  

Level 3

Total debt

  $ 3,386,943     $ 3,339,550     $ 3,511,731    

 

   

December 31, 2020

(In thousands)

 

Outstanding Face Amount

   

Carrying Value

   

Estimated Fair Value

 

Fair Value Hierarchy

Bank credit facility

  $ 896,185     $ 882,789     $ 888,511  

Level 2

6.375% senior notes due 2026

    750,000       743,053       778,125  

Level 1

6.000% senior notes due 2026

    700,000       692,151       728,000  

Level 1

4.750% senior notes due 2027

    1,000,000       986,364       1,038,750  

Level 1

8.625% senior notes due 2025

    600,000       589,488       667,500  

Level 1

Other

    3,638       3,638       3,638  

Level 3

Total debt

  $ 3,949,823     $ 3,897,483     $ 4,104,524    

 

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

 

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

 

18

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

 

NOTE 9.    SEGMENT INFORMATION

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

 

Las Vegas Locals

   

Gold Coast Hotel and Casino

 

Las Vegas, Nevada

The Orleans Hotel and Casino

 

Las Vegas, Nevada

Sam's Town Hotel and Gambling Hall

 

Las Vegas, Nevada

Suncoast Hotel and Casino

 

Las Vegas, Nevada

Eastside Cannery Casino and Hotel

 

Las Vegas, Nevada

Aliante Casino + Hotel + Spa

 

North Las Vegas, Nevada

Cannery Casino Hotel

 

North Las Vegas, Nevada

Jokers Wild Casino

 

Henderson, Nevada

Downtown Las Vegas

   

California Hotel and Casino

 

Las Vegas, Nevada

Fremont Hotel and Casino

 

Las Vegas, Nevada

Main Street Station Casino, Brewery and Hotel

 

Las Vegas, Nevada

Midwest & South

   

Par-A-Dice Hotel Casino

 

East Peoria, Illinois

Belterra Casino Resort

 

Florence, Indiana

Blue Chip Casino, Hotel & Spa

 

Michigan City, Indiana

Diamond Jo Dubuque

 

Dubuque, Iowa

Diamond Jo Worth

 

Northwood, Iowa

Kansas Star Casino

 

Mulvane, Kansas

Amelia Belle Casino

 

Amelia, Louisiana

Delta Downs Racetrack Casino & Hotel

 

Vinton, Louisiana

Evangeline Downs Racetrack and Casino

 

Opelousas, Louisiana

Sam's Town Hotel and Casino

 

Shreveport, Louisiana

Treasure Chest Casino

 

Kenner, Louisiana

IP Casino Resort Spa

 

Biloxi, Mississippi

Sam's Town Hotel and Gambling Hall

 

Tunica, Mississippi

Ameristar Casino Hotel Kansas City

 

Kansas City, Missouri

Ameristar Casino Resort Spa St. Charles

 

St. Charles, Missouri

Belterra Park

 

Cincinnati, Ohio

Valley Forge Casino Resort

 

King of Prussia, Pennsylvania

 

Total Reportable Segment Departmental Revenues and Adjusted EBITDAR

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

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

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

______________________________________________________________________________________________________

 

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

 

   

Three Months Ended June 30, 2021

 

 

          Food &                          

 

  Gaming     Beverage     Room     Other     Total  

(In thousands)

 

Revenue

    Revenue    

Revenue

   

Revenue

   

Revenue

 

Revenues

                                       

Las Vegas Locals

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

Downtown Las Vegas

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

Midwest & South

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

Total Revenues

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

 

   

Three Months Ended June 30, 2020

 

 

          Food &                          

 

  Gaming     Beverage     Room     Other     Total  

(In thousands)

 

Revenue

    Revenue    

Revenue

   

Revenue

   

Revenue

 

Revenues

                                       

Las Vegas Locals

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

Downtown Las Vegas

    3,140       882       327       315       4,664  

Midwest & South

    141,125       6,412       4,208