Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 ____________________________________________________

(Mark One)

 

☒

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

 

For the quarterly period ended September 30, 20222023

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)

 ____________________________________________________

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,"filer", "accelerated filer", "non-accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☒

Accelerated filer

☐

 

 

 

 

Non-accelerated filer

☐ 

Smaller reporting company

☐

 

 

 

 

 

 

Emerging growth company

☐

 

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

 

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

 

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

 

The number of shares outstanding of the registrant’s common stock as of October 3130, 20222023 was 104,375,08497,862,123..

 

 
Table of Contents

 

 

 

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30 2022, 2023

TABLE OF CONTENTS

 

 

 

Page

No.

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 20222023 and December 31, 20212022

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 20222023 and 20212022

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20222023 and 20212022

5

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the three month quarterly periodsquarters within the nine months ended September 30, 20222023 and 20212022

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30September 30,, 2023 and 2022 and 2021

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

   
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations23
   

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

 

 

 

Item 4.

Controls and Procedures

35

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

36

 

 

 

Item 1A.

Risk Factors

36

   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds36
Item 5.Other Information36

 

 

 

Item 6.

Exhibits

37

 

 

 

Signature Page

38

 

 

 
Table of Contents

 

 

PART I. Financial Information

 

Item 1.        Financial Statements (Unaudited)

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 

 

September 30,

 

December 31,

  

September 30,

 

December 31,

 

(In thousands, except share data)

 

2022

 

2021

  

2023

 

2022

 

ASSETS

        

Current assets

        

Cash and cash equivalents

 $252,344  $344,557  $269,155  $283,472 

Restricted cash

 17,185  12,571  2,479  11,593 

Accounts receivable, net

 86,518  89,483  103,577  109,053 

Inventories

 22,323  20,090  20,640  22,173 

Prepaid expenses and other current assets

 60,962  41,102  72,174  49,379 

Income taxes receivable

  1,223   2,558 

Total current assets

  439,332   507,803  469,248  478,228 

Property and equipment, net

 2,355,747  2,394,184  2,499,725  2,394,236 

Operating lease right-of-use assets

 836,921  884,241  798,932  830,345 

Other assets, net

 95,365  98,234  97,257  147,439 

Intangible assets, net

 1,357,218  1,368,420  1,417,230  1,427,135 

Goodwill, net

 971,287  971,287   1,029,219   1,033,744 

Total assets

 $6,055,870  $6,224,169  $6,311,611  $6,311,127 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current liabilities

        

Accounts payable

 $100,277  $102,031  $105,664  $129,946 

Current maturities of long-term debt

 44,275  41,673  44,275  44,275 

Accrued liabilities

 426,938  412,945  433,480  411,913 

Income taxes payable

 4,323 393 

Total current liabilities

  575,813   557,042   583,419   586,134 

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

 2,825,052  2,989,921  2,864,850  3,005,134 

Operating lease liabilities, net of current portion

 768,703  815,974  722,229  758,440 

Deferred income taxes

 291,689  264,912  308,608  318,609 

Other liabilities

 53,817  57,574  64,024  52,185 

Commitments and contingencies (Notes 5 and 6)

        

Commitments and contingencies (Notes 6 and 7)

        

Stockholders' equity

        

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

 —  —  —  — 

Common stock, $0.01 par value, 200,000,000 shares authorized; 104,375,084 and 111,303,140 shares outstanding

 1,044  1,113 

Common stock, $0.01 par value, 200,000,000 shares authorized; 98,386,239 and 102,816,110 shares outstanding

 984  1,028 

Additional paid-in capital

 412,267  827,725  3,355  305,152 

Retained earnings

 1,128,619  710,088  1,765,111  1,285,827 

Accumulated other comprehensive loss

  (1,134)  (180)  (969)  (1,382)

Total stockholders' equity

  1,540,796   1,538,746   1,768,481   1,590,625 

Total liabilities and stockholders' equity

 $6,055,870  $6,224,169  $6,311,611  $6,311,127 

 

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

 

 
3
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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

  

September 30,

  

September 30,

  

September 30,

 

(In thousands, except per share data)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

  

2023

  

2022

 

Revenues

                

Gaming

 $667,975  $674,227  $2,020,854  $2,019,615  $641,168  $667,975  $1,966,205  $2,020,854 

Food & beverage

 67,792  61,101  201,834  162,641  70,986  67,792  212,936  201,834 

Room

 46,672  44,317  138,985  109,384  48,720  46,672  148,546  138,985 

Online

 90,288  52,353  298,153  164,203 

Management fee

 17,153  10,159  54,629  10,159 

Other

  94,824   63,415   270,783   198,329   34,849   32,312   103,611   96,421 

Total revenues

  877,263   843,060   2,632,456   2,489,969   903,164   877,263   2,784,080   2,632,456 

Operating costs and expenses

                

Gaming

 251,814  249,685  756,356  741,176  251,536  251,814  751,330  756,356 

Food & beverage

 58,502  50,659  169,892  136,391  59,672  58,502  177,623  169,892 

Room

 17,783  15,074  51,058  41,413  19,180  17,783  54,880  51,058 

Online

 79,080  45,827  252,478  140,715 

Other

 57,197  41,644  174,699  128,038  11,549  11,370  34,119  33,984 

Selling, general and administrative

 92,950  91,159  280,659  271,639  99,944  92,950  299,333  280,659 

Master lease rent expense

 26,828  26,306  79,788  78,396  27,236  26,828  81,163  79,788 

Maintenance and utilities

 40,789  35,868  108,196  95,256  41,720  40,789  115,337  108,196 

Depreciation and amortization

 64,956  67,586  194,191  199,332  64,797  64,956  188,577  194,191 

Corporate expense

 26,375  28,264  90,251  86,295  27,872  26,375  88,232  90,251 

Project development, preopening and writedowns

 9,645  10,646  528  13,515  2,405  9,645  (11,268) 528 

Impairment of assets

 5,575 — 5,575 —  —  5,575  4,537  5,575 

Other operating items, net

  (12,610)  3,023   (12,324)  15,295   301   (12,610)  959   (12,324)

Total operating costs and expenses

  639,804   619,914   1,898,869   1,806,746   685,292   639,804   2,037,300   1,898,869 

Operating income

  237,459   223,146   733,587   683,223   217,872   237,459   746,780   733,587 

Other expense (income)

                

Interest income

 (2,073) (442) (2,976) (1,406) (1,585) (2,073) (22,445) (2,976)

Interest expense, net of amounts capitalized

 36,001  45,171  110,125  158,192  42,352  36,001  128,933  110,125 

Loss on early extinguishments and modifications of debt

 —  42  19,809  65,517  —  —  —  19,809 

Other, net

  170   119   3,667   2,288   (30)  170   596   3,667 

Total other expense, net

  34,098   44,890   130,625   224,591   40,737   34,098   107,084   130,625 

Income before income taxes

 203,361  178,256  602,962  458,632  177,135  203,361  639,696  602,962 

Income tax provision

  (46,359)  (40,082)  (136,269)  (104,568)  (41,902)  (46,359)  (112,278)  (136,269)

Net income

 $157,002  $138,174  $466,693  $354,064  $135,233  $157,002  $527,418  $466,693 
  
  

Basic net income per common share

 $1.46  $1.21  $4.24  $3.11  $1.34  $1.46  $5.16  $4.24 

Weighted average basic shares outstanding

  107,743   114,095   110,002   113,835   100,804  107,743  102,139  110,002 
  
  

Diluted net income per common share

 $1.46  $1.21  $4.24  $3.10  $1.34  $1.46  $5.16  $4.24 

Weighted average diluted shares outstanding

  107,840   114,284   110,135   114,099   100,850  107,840  102,187  110,135 

 

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

 

4
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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

  

September 30,

  

September 30,

 

(In thousands)

 

2022

 

2021

 

2022

 

2021

  

2023

  

2022

  

2023

  

2022

 

Net income

 $157,002  $138,174  $466,693  $354,064  $135,233  $157,002  $527,418  $466,693 

Other comprehensive income (loss), net of tax:

  

Fair value adjustments to available-for-sale securities

  (151)  245   (954)  (119) (119) (151) 467  (954)

Foreign currency translation adjustments

  (254)  —   (54)  — 

Comprehensive income

 $156,851  $138,419  $465,739  $353,945  $134,860  $156,851  $527,831  $465,739 

 

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

 

5
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

 

             

Accumulated Other

                

Accumulated Other

   
 

Common Stock

 

Additional

 

Retained

 

Comprehensive

    

Common Stock

 

Additional

 

Retained

 

Comprehensive

   

(In thousands, except share data)

 

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Loss

  

Total

  

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Loss

  

Total

 

Balances, January 1, 2022

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

Balances, January 1, 2023

 102,816,110  $1,028  $305,152  $1,285,827  $(1,382) $1,590,625 

Net income

 —  —  —  162,928  —  162,928  —  —  —  199,731  —  199,731 

Comprehensive loss, net of tax

 —  —  —  —  (184) (184)

Release of restricted stock units, net of tax

 115,686  1  (2,720) —  —  (2,719)

Release of performance stock units, net of tax

 294,344  3  (8,113) —  —  (8,110)

Shares repurchased and retired

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

Dividends declared ($0.15 per share)

 —  —  —  (16,480) —  (16,480)

Share-based compensation costs

  —   —   8,734   —   —   8,734 

Balances, March 31, 2022

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

Net income

 —  —  —  146,763  —  146,763 

Comprehensive loss, net of tax

 —  —  —  —  (619) (619)

Comprehensive income, net of tax

 —  —  —  —  474  474 

Foreign currency translation adjustments

 — — — — 4 4 

Stock options exercised

 101,675  1  1,804  —  —  1,805  32,000 — 315 — — 315 

Release of restricted stock units, net of tax

 140,899  1  (2) —  —  (1) 45,942  1  (1,926) —  —  (1,925)

Release of performance stock units, net of tax

 307  —  (8) —  —  (8) 318,878  3  (12,777) —  —  (12,774)

Shares repurchased and retired

 (3,018,031) (30) (167,954) —  —  (167,984) (1,726,308) (17) (106,994) —  —  (107,011)

Dividends declared ($0.15 per share)

 —  —  —  (16,026) —  (16,026)

Dividends declared ($0.16 per share)

 —  —  —  (16,289) —  (16,289)

Share-based compensation costs

  —   —   14,099   —   —   14,099   —   —   7,819   —   —   7,819 

Balances, June 30, 2022

 106,841,360   1,068   541,797   987,273   (983)  1,529,155 

Balances, March 31, 2023

 101,486,622  1,015  191,589  1,469,269  (904) 1,660,969 

Net income

 — — — 192,454 — 192,454 

Comprehensive income, net of tax

 — — — — 112 112 

Foreign currency translation adjustments

 — — — — 196 196 

Release of restricted stock units, net of tax

 17,871 — (63) — — (63)

Shares repurchased and retired

 (1,492,451) (15) (101,001) — — (101,016)

Dividends declared ($0.16 per share)

 — — — (16,041) — (16,041)

Share-based compensation costs

  —  —  12,198  —  —  12,198 

Balances, June 30, 2023

  100,012,042  1,000  102,723  1,645,682  (596)  1,748,809 

Net income

 — — — 157,002 — 157,002  — — — 135,233 — 135,233 

Comprehensive loss, net of tax

 — — — — (151) (151) — — — — (119) (119)

Foreign currency translation adjustments

 — — — — (254) (254)

Release of restricted stock units, net of tax

 7,407 1 (212) — — (211) 1,974 — (56) — — (56)

Shares repurchased and retired

 (2,473,683) (25) (134,971) — — (134,996) (1,627,777) (16) (107,345) — — (107,361)

Dividends declared ($0.15 per share)

 — — — (15,656) — (15,656)

Dividends declared ($0.16 per share)

 — — — (15,804) — (15,804)

Share-based compensation costs

  —  —  5,653  —  —  5,653   —  —  8,033  —  —  8,033 

Balances, September 30, 2022

  104,375,084 $1,044 $412,267 $1,128,619 $(1,134) $1,540,796 

Balances, September 30, 2023

  98,386,239 $984 $3,355 $1,765,111 $(969) $1,768,481 

 

 

             

Accumulated Other

                

Accumulated Other

   
 

Common Stock

  

Additional

  

Retained

  

Comprehensive

     

Common Stock

  

Additional

  

Retained

  

Comprehensive

    

(In thousands, except share data)

 

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Income (Loss)

  

Total

  

Shares

  

Amount

  

Paid-in Capital

  

Earnings

  

Loss

  

Total

 

Balances, January 1, 2021

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

Balances, January 1, 2022

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

Net income

 —  —  —  162,928  —  162,928 

Comprehensive loss, net of tax

 —  —  —  —  (184) (184)

Release of restricted stock units, net of tax

 115,686  1  (2,720) —  —  (2,719)

Release of performance stock units, net of tax

 294,344  3  (8,113) —  —  (8,110)

Shares repurchased and retired

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

Dividends declared ($0.15 per share)

 — — — (16,480) — (16,480)

Share-based compensation costs

  —   —   8,734   —   —   8,734 

Balances, March 31, 2022

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

Net income

 —  —  —  102,161  —  102,161  — — — 146,763 — 146,763 

Comprehensive loss, net of tax

 —  —  —  —  (321) (321) — — — — (619) (619)

Stock options exercised

 158,568  2  1,743  —  —  1,745  101,675 1 1,804 — — 1,805 

Release of restricted stock units, net of tax

 29,808  —  (609) —  —  (609) 140,899 1 (2) — — (1)

Release of performance stock units, net of tax

 61,654  1  (1,901) —  —  (1,900) 307 — (8) — — (8)

Shares repurchased and retired

 (3,018,031) (30) (167,954) — — (167,984)

Dividends declared ($0.15 per share)

 — — — (16,026) — (16,026)

Share-based compensation costs

  —   —   5,701   —   —   5,701   —  —  14,099  —  —  14,099 

Balances, March 31, 2021

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

Balances, June 30, 2022

 106,841,360 1,068 541,797 987,273 (983) 1,529,155 

Net income

 — — — 113,729 — 113,729  — — — 157,002 —  157,002 

Comprehensive loss, net of tax

 — — — — (43) (43) — — — — (151) (151)

Stock options exercised

 100,068 — 1,037 — — 1,037 

Release of restricted stock units, net of tax

 43,036 1 — — — 1  7,407 1 (212) — —  (211)

Shares repurchased and retired

 (2,473,683) (25) (134,971) — —  (134,996)

Dividends declared ($0.15 per share)

 — — — (15,656) —  (15,656)

Share-based compensation costs

  —  —  12,823  —  —  12,823   —  —  5,653  —  —   5,653 

Balances, June 30, 2021

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

Net income

 — — — 138,174 —  138,174 

Comprehensive income, net of tax

 — — — — 245  245 

Stock options exercised

 112,380 1 1,625 — —  1,626 

Release of restricted stock units, net of tax

 8,894 — (150) — —  (150)

Release of performance stock units, net of tax

 329 — (7) — —  (7)

Share-based compensation costs

  —  —  9,783  —  —   9,783 

Balances, September 30, 2021

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

Balances, September 30, 2022

  104,375,084 $1,044 $412,267 $1,128,619 $(1,134) $1,540,796 

 

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

 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

Nine Months Ended

  

Nine Months Ended

 
 

September 30,

  

September 30,

 

(In thousands)

 

2022

  

2021

  

2023

 

2022

 

Cash Flows from Operating Activities

        

Net income

 $466,693  $354,064  $527,418  $466,693 

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

        

Depreciation and amortization

 194,191  199,332  188,577  194,191 

Amortization of debt financing costs and discounts on debt

 6,307  8,627  5,854  6,307 

Non-cash operating lease expense

 46,892 46,702  59,302  46,892 

Non-cash expected credit loss (income) on note receivable

 (34,371) — 

Share-based compensation expense

 28,486  28,307  28,050  28,486 

Deferred income taxes

 26,777  99,669  (9,995) 26,777 

Non-cash impairment of assets

 5,575 —  4,537  5,575 

Gain on sale of assets

 (12,800) —  —  (12,800)

Loss on early extinguishments and modifications of debt

 19,809  65,517  —  19,809 

Other operating activities

 8,422  9,765  (516) 8,422 

Changes in operating assets and liabilities:

        

Accounts receivable, net

 2,965  (2,217) 5,473  2,965 

Inventories

 (2,233) 3,066  1,533  (2,233)

Prepaid expenses and other current assets

 (19,333) (14,313) (22,086) (19,333)

Income taxes payable, net

 3,930  85 

Income taxes (receivable) payable, net

 1,335  3,930 

Other assets, net

 1,896  (4,861) 3,262  1,896 

Accounts payable and accrued liabilities

 (3,932) 27,913  (2,876) (3,932)

Operating lease liabilities

 (46,892) (46,702) (59,302) (46,892)

Other liabilities

  1,281   2,762   1,057   1,281 

Net cash provided by operating activities

  728,034   777,716   697,252   728,034 

Cash Flows from Investing Activities

        

Capital expenditures

 (173,032) (139,176) (279,023) (173,032)

Payments received on note receivable

 82,459  — 

Insurance proceeds received from hurricane losses

 530 44,480  — 530 

Proceeds received from disposition of assets

 21,350 —  —  21,350 

Other investing activities

  —   5,472   (3,022)  — 

Net cash used in investing activities

  (151,152)  (89,224)  (199,586)  (151,152)

Cash Flows from Financing Activities

        

Borrowings under credit facilities

 1,554,400  —  1,086,700  1,554,400 

Payments under credit facilities

 (1,412,897) (18,175) (1,232,700) (1,412,897)

Proceeds from issuance of senior notes

 — 900,000 

Retirements of senior notes

 (300,000) (1,450,000) —  (300,000)

Premium fees

 (12,939) (51,863) —  (12,939)

Debt financing costs

 (15,315) (14,596) —  (15,315)

Share-based compensation activities

 (9,244) 1,743  (14,503) (9,244)

Shares repurchased and retired

 (434,769) —  (312,656) (434,769)

Dividends paid

 (32,506) —  (47,805) (32,506)

Other financing activities

  (1,211)  (2,282)  (138)  (1,211)

Net cash used in financing activities

  (664,481)  (635,173)  (521,102)  (664,481)

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

  5   — 

Change in cash, cash equivalents and restricted cash

 (87,599) 53,319  (23,431) (87,599)

Cash, cash equivalents and restricted cash, beginning of period

  357,128   534,999   295,065   357,128 

Cash, cash equivalents and restricted cash, end of period

 $269,529  $588,318  $271,634  $269,529 

Supplemental Disclosure of Cash Flow Information

        

Cash paid for interest, net of amounts capitalized

 $102,553  $150,675  $124,132  $102,553 

Cash received for interest

 10,804  — 

Cash paid for income taxes

 105,158  4,774  120,449  105,158 

Supplemental Schedule of Non-cash Investing and Financing Activities

        

Payables incurred for capital expenditures

 $3,786  $4,070  $8,091  $3,786 

Dividends declared not yet paid

 15,656  —  15,804  15,656 

Expected credit loss (income) on note receivable

 (34,371) — 

Operating lease right-of-use asset and liability remeasurements

 (11,224) —  —  (11,224)

 

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

 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

 

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, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. In addition, we own and operate Boyd Interactive, a business-to-business ("B2B") and business-to-consumer ("B2C") online casino gaming business. We also manage the Sky River Casino located in California under a management agreement with Wilton Rancheria. The Sky River Casino opened on August 15, 2022.

 

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 COVID-19. As of September 30, 2022, 27 of our 28 gaming facilities are open and operating. One of our properties in Las Vegas remains closed due to the current levels of demand in the market. 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 any potential negative effects on our workforce, suppliers, contractors and other partners.

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

We currently anticipate funding our operations over the next 12 months with the cash being generated by our operations, supplemented, if necessary, by the cash we currently have available and the borrowing capacity available under our Revolving Credit Facility. We assessed the recoverability of our assets as of the end of the first quarter, second quarter and third quarter. See further discussion in Note 3,Goodwill and Intangible Assets, Net. 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 consolidated financial statements and notes for the year ended December 31, 20212022, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 28, 2022.24, 2023.

 

The results for the periods indicated are unaudited but reflect all adjustments, (consistingconsisting only of normal recurring adjustments)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 the Company and its subsidiaries. Investments in unconsolidated affiliates, which are 50% or less owned and do not meet the controlling financial interest consolidation criteria of the authoritative accounting guidance for voting interest or variable interest entities, are accounted for under the equity method. All intercompany accounts and transactions have been eliminated in consolidation.

 

8
Table

Recasted Condensed Consolidated Statements of Contents

Operations (Unaudited)

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

asIn the first quarter of September 30, 20222023, the Company separated out online revenue and management fee revenue from other revenue. This change was a result of increased contributions to the Company in these December 31, 2021two areas and related update to our reportable segments discussed in Note 10,Segment Information. Revenue for the three and nine months ended September 30, 2022has been recast to conform to this presentation. The disaggregation of online revenue and management fee revenue from other revenue did not impact the Company's total revenues, net income or earnings per share as previously reported for the three and 2021nine months ended September 30, 2022.

Additionally, during the first quarter of 2023, the Company evaluated its reportable segments and changed them to the following four reportable segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest & South; and (iv) Online. To reconcile to the condensed consolidated information, the Company has aggregated nonreportable operating segments into a Managed & Other category. These changes reflect the growth of the Company beyond its traditional wholly owned gaming entertainment properties and the increasing importance to the Company of other growth sources. Segment information for the three and nine months ended September 30,2022 has been recast to conform to this presentation. See Note 10,Segment Information, for additional information.

 

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:of: (i) amounts restricted by regulation for gaming and racing purposes; (ii) amounts restricted by regulation for the value in players' online casino gaming accounts; and (ii)(iii) advance payments received for future bookings with our Hawaiian travel agency. These restricted cash balances are invested in highly liquid instruments with a maturity of 90 days or less. These restricted cash balances are held by high credit quality financial institutions. The carrying values of these instruments approximate their fair values due to their short maturities.

 

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

 

 

September 30,

 

December 31,

 

September 30,

 

December 31,

  

September 30,

 

December 31,

 

September 30,

 

December 31,

 

(In thousands)

 

2022

  

2021

  

2021

  

2020

  

2023

 

2022

 

2022

 

2021

 

Cash and cash equivalents

 $252,344  $344,557  $570,926  $519,182  $269,155  $283,472  $252,344  $344,557 

Restricted cash

  17,185   12,571   17,392   15,817   2,479   11,593   17,185   12,571 

Total cash, cash equivalents and restricted cash

 $269,529  $357,128  $588,318  $534,999  $271,634  $295,065  $269,529  $357,128 

 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022

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. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. 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. The incremental borrowing rate is determined based on the weighted average incremental borrowing rate at the lease commencement or modification date that is commensurate with the rate of interest in a similar economic environment that we would have to pay to borrow an amount equal to our future lease payments on a collateralized basis over a similar term, including reasonably certain options to extend or terminate. The determination of the incremental borrowing rate could materially impact our lease liabilities. Operating right-of-use ("ROU") assets and finance lease assets are generally 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 (including both those made at our gaming entertainment properties and online B2C wagers), hotel room sales, food & beverage offerings and other amenity transactions. See Collaborative Arrangements below for further discussion of revenues earned under our online collaborative arrangements. 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 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.

 

We have established a player loyalty program to encourage repeat business from frequent and active slot machine customers and other patrons. Members earn points based on gaming activity and such points can be redeemed for complimentary slot play, food & beverage, hotel rooms and other free goods and services.

Gaming wager contracts involve two performance obligations for those customers earning points under the Company’s player loyalty programsprogram and a single performance obligation for customers who do not participate in the programs.program. 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 player loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for a hotel room stay, food & beverage or other amenities. Sales and usage-based taxes are excluded from revenues. An amount is allocated to the gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers, excluding race and sports wagers, is recognized when the wagers occur as all such wagers settle immediately. The allocated revenue for race and sports wagers is recognized when the specific event or game occurs. The player 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 4,5, Accrued Liabilities, for the balance outstanding related to the player loyalty programs.program.

 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2022 and December 31, 2021 and for the three and nine months ended September 30, 2022 and 2021

The Company collects advance deposits from hotel customers for future hotel reservations and other future events such as banquets and ticketed events. These advance deposits represent obligations of the Company until the hotel room stay is provided to the customer or the banquet or ticketed event occurs. See Note 4,5, 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 4,5, Accrued Liabilities, for the balance related to outstanding chips.

 

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

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

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

 

Food & beverage

 $29,978  $29,062  $87,573  $85,970 

Room

  15,873   16,879   46,367   48,668 

Other

  2,328   2,371   6,265   6,718 

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

Food & beverage

 $29,062  $26,380  $85,970  $75,284 

Room

  16,879   15,721   48,668   43,970 

Other

  2,371   1,904   6,718   4,469 
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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022

 

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the condensed consolidated statements of operations. In addition, we are responsibleoperations as a gaming expense for the payment of gaming taxes owedentertainment properties and online expense for the online gaming activities conducted by third party operators under certain collaborative arrangements. We are reimbursed for these taxes by the third-party operators. We report these gaming taxes paid as other expense and the reimbursements we receive as other revenues.Boyd Interactive operations. Gaming taxes recorded as gaming expense totaled approximately $175.3$128.1 million and $162.2$130.9 million for the three months ended September 30, 20222023 and 20212022, respectively, including taxes deposited pursuant to the online collaborative agreements of $44.5and were $387.8 million and $29.1 million for the three months ended September 30, 2022 and 2021, respectively. Gaming taxes totaled approximately $527.5 million and $498.6$397.8 million for the nine months ended September 30, 20222023 and 20212022, respectively, includingrespectively. Gaming taxes deposited pursuant to therecorded as online expense, excluding taxes paid under collaborative agreements of $129.8 arrangements (see Collaborative Arrangements below for further discussion), totaled $2.1 million and $98.1$3.9 million for thethree and nine months ended September 30, 2022 and 20212023, respectively. There was not any gaming tax recorded as online expense for the three and nine months ended September 30, 2022.

 

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, as facts and circumstances change, and at a minimum quarterly, based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

 

In performing our second quarter valuation allowance analysis, we determined that the positive evidence in favor of releasing a portion of our valuation allowance for certain state jurisdictions, outweighed the negative evidence. We utilize a rolling twelve quarters of pre-tax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters ended June 30, 2023. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during the three months ended June 30,2023 provided positive evidence that supported the release of the valuation allowance against a significant portion of our state deferred tax assets. As such, we concluded that it was more likely than not that the benefit from our deferred tax assets would be realized. As a result, during the second quarter of 2023, we released $35.9 million of valuation allowance on our state income tax net operating loss carryforwards and other deferred tax assets. During the three months ended September 30, 2023, we determined that there were not any adjustments necessary to our valuation allowance.

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. If applicable, accrued interest and penalties would be included in other long-term tax liabilities on the condensed consolidated balance sheets.

 

Collaborative Arrangements

We hold a five percent equity ownership in and have a strategic partnership with FanDuel Group ("FanDuel"), one of the nation's leaders in onlineleading sports-betting operator, to pursue sports-betting opportunities across the country, both at our properties and online, across the country.online. Subject to state law and regulatory approvals, we have established a presence in the sports wagering industry, both at our gaming entertainment properties and online, by leveraging FanDuel's technology and related services. We offer online sports wagering in Illinois, Indiana, Iowa, Kansas, Louisiana and Pennsylvania under either the FanDuel brand or under market access agreements with other companies.companies in Illinois, Indiana, Iowa, Kansas, Louisiana, Ohio and Pennsylvania. We also operate sportsbooks under the FanDuel brand at one of our Downtown Las Vegas gaming entertainment properties, our gaming entertainment properties in Mississippi and all of the gaming entertainment properties in the states noted above where we offer online sports wagering. In addition, we offer real money online casino gaming in Pennsylvania and New Jersey under the Stardust brand through our partnership with FanDuel. Under our online collaborative arrangements, we receive a revenue share from the third-party operator based on actual wagering wins and losses. The activities related tounder these collaborative arrangements related to online wagering, are recorded in otheronline revenue and otheronline expense on the condensed consolidated statements of operations. The activities under these collaborative arrangements related to sportsbooks at our gaming entertainment properties, are recorded in gaming revenue and gaming expense.

 

Under certain of our collaborative arrangements, we are the primary obligor and are responsible for paying gaming taxes and other license payments owed as the gaming licensee for the related online gaming activities. We are reimbursed for these taxes and other payments by the third-party operators. We report these gaming taxes and other expenses paid as online expense and the reimbursements we receive as online revenues. These taxes and other payments totaled approximately $71.4 million and $45.2 million for the three months ended September 30, 2023 and 2022, respectively, and $230.6 million and $135.1 million for the nine months ended September 30, 2023 and 2022, respectively.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

Currency Translation

The Company translates the financial statements of its foreign subsidiary that are not denominated in U.S. dollars. Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. If a material income statement event occurs, the transaction would be translated at the exchange rate in effect on the date of occurrence. Translation adjustments resulting from this process are recorded in other comprehensive income (loss). Gains or losses from foreign currency transaction remeasurements are recorded as other non-operating income (expense).

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

ASU 2021-08, Business Combinations, Topic 805 ("Update 2021-08")

In October 2021, the Financial Accounting Standards Board ("FASB") issued Update 2021-08 to improve the accounting for acquired revenue contracts with customers in a business combination. Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination at fair value on the acquisition date. ASU 2021-08 requires acquiring entities to apply Topic 606,Revenue Recognition, to recognize and measure contract assets and liabilities in a business combination. Update 2021-08 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted Update 2021-08 during third quarter 2022, and the guidance will be applied to the accounting for the Pala acquisition.

 

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

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

 

NOTE 2.    PROPERTY AND EQUIPMENT, NETACQUISITION

Property and equipment, net consistsPala Interactive

On November 1, 2022, Boyd Interactive Gaming Inc. ("Boyd Interactive Inc."), a wholly owned subsidiary of the following:Company, completed its previously announced acquisition of Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Interactive Canada Inc. ("Pala Canada"), pursuant to a Purchase Agreement and Plan of Merger (the "Merger Agreement"), entered into on March 28, 2022, by and among Boyd Interactive Inc., Boyd Phoenix Acquisition, LLC ("Merger Sub"), a wholly owned subsidiary of Boyd Interactive Inc., Boyd Phoenix Canada Inc., a wholly owned subsidiary of Boyd Gaming, Pala Interactive, Pala Canada Holdings, LLC and Shareholder Representative Services LLC as representative of the holders of the membership interests of Pala Interactive. Pursuant to the Merger Agreement, Merger Sub merged with and into Pala Interactive (the "Merger"), with Pala Interactive surviving the Merger. Pala Interactive is now a wholly owned subsidiary of Boyd Interactive Inc.

 

  

September 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

 

Land

 $335,234  $343,963 

Buildings and improvements

  3,152,464   3,146,697 

Furniture and equipment

  1,728,254   1,653,451 

Riverboats and barges

  241,599   241,447 

Construction in progress

  62,649   912 

Total property and equipment

  5,520,200   5,386,470 

Less accumulated depreciation

  (3,164,453)  (2,992,286)

Property and equipment, net

 $2,355,747  $2,394,184 

Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a B2B and B2C basis in regulated markets across the United States and Canada. We view this acquisition as an important step forward in our online growth strategy as it provides us with the talent and technology to begin building our regional online casino business. While online casinos are now limited to just a few states, over the long term, we believe there is growth and additional profit potential for our Company from online gaming. By owning and operating an online gaming business, we are able to leverage our nationwide portfolio and extensive customer database to grow in the online casino space. The acquired company is aggregated into our Online segment (See Note 10,Segment Information).

 

Depreciation expense is as follows:Consideration Transferred

The fair value of the consideration transferred on the date of the Merger included the purchase price of the net assets transferred. The total gross cash consideration was $175.2 million (with $7.3 million of cash acquired, for total cash paid for acquisitions, net of cash received of $167.9 million).

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

Depreciation expense

 $62,771  $64,429  $188,399  $189,861 

11
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Purchase Price Allocation

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

The Company followed the acquisition method of accounting pursuant to FASB Accounting Standards Codification Topic 805 ("ASC 805"). For purposes of these condensed consolidated financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as determined by management with the assistance from third-party specialists. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company has recognized the assets acquired and liabilities assumed in the acquisition based on fair value estimates as of the date of the Merger. In the second quarter of 2023, the Company finalized its determination of the fair value of the intangible assets acquired, along with the related allocation of goodwill. There was no change in the fair value of the intangible assets acquired or the related allocation of goodwill from the preliminary values included in the consolidated financial statements at December 31, 2022, to the final fair value determination included in the condensed consolidated financial statements at September 30, 2022 and December 31, 2021 and for the three and nine months ended September 30, 2022 and 20212023. 

NOTE 3.    GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

  

September 30, 2022

 
  

Weighted

  

Gross

      

Accumulated

     
  

Useful Life

  

Carrying

  

Accumulated

  

Impairment

  

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                   

Customer relationships

 0.8  $68,100  $(66,289) $—  $1,811 

Host agreements

 10.7   58,000   (16,756)  —   41,244 

Development agreement (1)

 6.9   21,373   (382)  —   20,991 
      147,473   (83,427)  —   64,046 
                    

Indefinite lived intangible assets

                   

Trademarks

 Indefinite   204,000   —   (32,775)  171,225 

Gaming license rights

 Indefinite   1,378,081   (33,960)  (222,174)  1,121,947 
      1,582,081   (33,960)  (254,949)  1,293,172 

Balances, September 30, 2022

    $1,729,554  $(117,387) $(254,949) $1,357,218 

(1) Amortization of the development agreement began on August 15, 2022 upon the opening of the Sky River Casino.

  

December 31, 2021

 
  

Weighted

  

Gross

      

Accumulated

     
  

Useful Life

  

Carrying

  

Accumulated

  

Impairment

  

Intangible

 

(In thousands)

 

Remaining (in years)

  

Value

  

Amortization

  

Losses

  

Assets, Net

 

Amortizing intangibles

                   

Customer relationships

 1.5  $68,100  $(63,798) $—  $4,302 

Host agreements

 11.4   58,000   (13,856)  —   44,144 

Development agreement

 —   21,373   —   —   21,373 
      147,473   (77,654)  —   69,819 
                    

Indefinite lived intangible assets

                   

Trademarks

 

Indefinite

   204,000   —   (27,200)  176,800 

Gaming license rights

 

Indefinite

   1,377,935   (33,960)  (222,174)  1,121,801 
      1,581,935   (33,960)  (249,374)  1,298,601 

Balances, December 31, 2021

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

 

The following table presentssummarizes the future amortization expense for our amortizing intangible assetspurchase price allocation as of the acquisition date of November 1, 2022, December 31, 2022 and  September 30, 20222023:

 

(In thousands)

 

Customer Relationships

  

Host Agreements

  

Development Agreement

  

Total

 

For the year ending December 31,

                

2022 (excluding nine months ended September 30, 2022)

 $831  $967  $763  $2,561 

2023

  940   3,867   3,053   7,860 

2024

  40   3,867   3,053   6,960 

2025

  —   3,867   3,053   6,920 

2026

  —   3,867   3,053   6,920 

Thereafter

  —   24,809   8,016   32,825 

Total future amortization

 $1,811  $41,244  $20,991  $64,046 

(In thousands)

 

As Recorded

 

Current assets

 $10,456 

Property and equipment

  445 

Other assets

  740 

Intangible assets

  77,000 

Total acquired assets

  88,641 
     

Current liabilities

  4,462 

Other liabilities

  3,007 

Total liabilities assumed

  7,469 

Net identifiable assets acquired

  81,172 

Goodwill

  94,037 

Net assets acquired

 $175,209 

 

As a result of our third quarter 2022 impairment review, the Company recorded an impairment charge of $5.6 million for a trademark related to a property in our Midwest & South segment, which is included in impairment of assets for the three and nine months ended September 30, 2022. To the extent gaming volumes deteriorate in the near future, discount rates continue to increase significantly, or we do not meet our projected performance, we may recognize further impairments, and such impairments could be material.

1211
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

The following table summarizes the values assigned to acquired property and equipment and estimated useful lives:

Goodwill consists

  

Useful Lives

     

(In thousands)

 

(in years)

  

As Recorded

 

Buildings and improvements

 5  $22 

Furniture and equipment

 2 - 5   423 

Property and equipment acquired

     $445 

The following table summarizes the values assigned to acquired intangible assets and weighted average useful lives of definite-lived intangible assets:

  

Useful Lives

     

(In thousands)

 

(in years)

  

As Recorded

 

Developed technology

 10  $36,000 

B2B relationships

 7 - 10   28,000 

B2C relationships

 12   13,000 

Total intangible assets acquired

     $77,000 

The goodwill recognized is the excess of the following:purchase price over the values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to reporting units included in the Online reportable segment. All of the goodwill, except $7.8 million allocated to Pala Canada, is expected to be deductible for income tax purposes.

 

  

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, September 30, 2022

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

There have beenThe Company expensed acquisition related costs of less than $0.1 million and $0.3 million for the nothree changes in goodwill, net, duringmonths ended September 30, 2023 and 2022, respectively, and $0.1 million and $2.6 million for the nine months ended September 30, 2023 and 2022, respectively. These costs are included in project development, preopening and writedowns on the condensed consolidated statements of operations.

The revenue and earnings from the Merger are not material for the period subsequent to acquisition through December 31, 2022. The pro-forma revenue and earnings from the Merger assuming all impacts as if it had been completed on January 1, 2022 are not material through December 31, 2022.

 

NOTE 4.3.    ACCRUED LIABILITIESPROPERTY AND EQUIPMENT, NET

Accrued liabilities consist of the following:

  

September 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

 

Payroll and related

 $75,773  $99,880 

Interest

  20,514   19,210 

Gaming

  83,555   78,552 

Player loyalty program

  24,471   28,430 

Advance deposits

  16,939   15,320 

Outstanding chips

  8,087   7,407 

Dividends payable

  15,656   — 

Operating leases

  85,787   84,884 

Other

  96,156   79,262 

Total accrued liabilities

 $426,938  $412,945 

NOTE 5.    LONG-TERM DEBT

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

 

  

September 30, 2022

 
  

Interest

          

Unamortized

     
  

Rates at

          

Origination

     
  

September 30,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2022

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Credit Facility

  4.236% $1,009,400  $—  $(18,756) $990,644 

4.750% senior notes due 2027

  4.750%  1,000,000   —   (10,227)  989,773 

4.750% senior notes due 2031

  4.750%  900,000   —   (11,796)  888,204 

Other

  5.208%  706   —   —   706 

Total long-term debt

      2,910,106   —   (40,779)  2,869,327 

Less current maturities

      44,275   —   —   44,275 

Long-term debt, net

     $2,865,831  $—  $(40,779) $2,825,052 

  

December 31, 2021

 
  

Interest

          

Unamortized

     
  Rates at          Origination     
  

December 31,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2021

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Prior Credit Facility

 2.286% $867,897  $(293) $(8,498) $859,106 

4.750% senior notes due 2027

 4.750%  1,000,000   —   (11,688)  988,312 

8.625% senior notes due 2025

 8.625%  300,000   —   (4,066)  295,934 

4.750% senior notes due 2031

 4.750%  900,000   —   (13,254)  886,746 

Other

 5.932%  1,496   —   —   1,496 

Total long-term debt

     3,069,393   (293)  (37,506)  3,031,594 

Less current maturities

     41,673   —   —   41,673 

Long-term debt, net

    $3,027,720  $(293) $(37,506) $2,989,921 
  

September 30,

  

December 31,

 

(In thousands)

 

2023

  

2022

 

Land

 $333,899  $334,368 

Buildings and improvements

  3,213,915   3,172,676 

Furniture and equipment

  1,823,169   1,707,212 

Riverboats and barges

  241,980   241,898 

Construction in progress

  174,964   87,612 

Total property and equipment

  5,787,927   5,543,766 

Less accumulated depreciation

  (3,288,202)  (3,149,530)

Property and equipment, net

 $2,499,725  $2,394,236 

 

Depreciation expense is as follows:

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

 

Depreciation expense

 $60,586  $62,771  $176,051  $188,399 

   

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Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

Credit FacilityNOTE 4.    GOODWILL AND INTANGIBLE ASSETS, NET

Credit Agreement

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

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

The outstanding principal amounts under the Credit Facility and Prior Credit Facility are comprisedIntangible assets, net consist of the following:

 

  

September 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

 

Revolving Credit Facility

 $75,000  $— 

Term A Loan

  858,000   — 

Prior Term A Loan

  —   118,153 

Prior Refinancing Term B Loan

  —   749,744 

Swing Loan

  76,400   — 

Total outstanding principal amounts

 $1,009,400  $867,897 
  

September 30, 2023

 
  

Weighted

                     
  

Useful Life

  

Gross

      

Accumulated

  

Effect of Foreign

     
  

Remaining

  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Intangible

 

(In thousands)

 

(in years)

  

Value

  

Amortization

  

Losses

  

Exchange

  

Assets, Net

 

Amortizing intangibles

                        

Customer relationships

  0.4  $35,050  $(34,776) $—  $—  $274 

Host agreements

  9.7   58,000   (20,622)  —   —   37,378 

Development agreement

  5.9   21,373   (3,434)  —   —   17,939 

Developed technology

  8.8   39,068   (3,464)  —   35   35,639 

B2B relationships

  6.3   28,000   (3,588)  —   9   24,421 

B2C relationships

  11.1   13,000   (993)  —   —   12,007 
       194,491   (66,877)  —   44   127,658 
                         

Indefinite lived intangible assets

                        

Trademarks

 

Indefinite

   204,000   —   (36,375)  —   167,625 

Gaming license rights

 

Indefinite

   1,378,081   (33,960)  (222,174)  —   1,121,947 
       1,582,081   (33,960)  (258,549)  —   1,289,572 

Balances, September 30, 2023

     $1,776,572  $(100,837) $(258,549) $44  $1,417,230 

  

December 31, 2022

 
  

Weighted

                     
  

Useful Life

  

Gross

      

Accumulated

  

Effect of Foreign

     
  

Remaining

  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Intangible

 

(In thousands)

 

(in years)

  

Value

  

Amortization

  

Losses

  

Exchange

  

Assets, Net

 

Amortizing intangibles

                        

Customer relationships

  0.6  $63,050  $(62,070) $—  $—  $980 

Host agreements

  10.4   58,000   (17,722)  —   —   40,278 

Development agreement

  6.6   21,373   (1,145)  —   —   20,228 

Developed technology

  9.8   36,445   (600)  —   53   35,898 

B2B relationships

  7.0   28,000   (652)  —   12   27,360 

B2C relationships

  11.8   13,000   (181)  —   —   12,819 
       219,868   (82,370)  —   65   137,563 
                         

Indefinite lived intangible assets

                        

Trademarks

 

Indefinite

   204,000   —   (36,375)  —   167,625 

Gaming license rights

 

Indefinite

   1,378,081   (33,960)  (222,174)  —   1,121,947 
       1,582,081   (33,960)  (258,549)  —   1,289,572 

Balances, December 31, 2022

     $1,801,949  $(116,330) $(258,549) $65  $1,427,135 

 

With a total revolving credit commitment of $1,450.0 million available underThe following table presents the Credit Facility, $75.0 million and $76.4 million in borrowings outstanding on the Revolving Credit Facility and the Swing Loan, respectively, and $13.8 million allocated to support various letters of credit, there is a remaining contractual availability under the Credit Facility of $1,284.8 millionfuture amortization expense for our amortizing intangible assets as of September 30, 20222023. :

 

Interest and Fees

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

(In thousands)

 

Customer Relationships

  

Host Agreements

  

Development Agreement

  

Developed Technology

  

B2B Relationships

  

B2C Relationships

  

Total

 

For the year ending December 31,

                            

2023 (excluding nine months ended September 30, 2023)

 $234  $967  $764  $1,058  $975  $271  $4,269 

2024

  40   3,867   3,053   4,208   3,914   1,083   16,165 

2025

  —   3,867   3,053   4,208   3,914   1,083   16,125 

2026

  —   3,867   3,053   4,208   3,914   1,083   16,125 

2027

  —   3,867   3,053   4,208   3,914   1,083   16,125 

Thereafter

  —   20,943   4,963   17,749   7,790   7,404   58,849 

Total future amortization

 $274  $37,378  $17,939  $35,639  $24,421  $12,007  $127,658 

 

Optional and Mandatory Prepayments

Pursuant to the terms of the Credit Agreement (i) the loans under the Term A Loan will amortize in an annual amount equal to 5.00% of the original principal amount thereof, commencing June 30,2022, payable on a quarterly basis, and (ii) the Company is required to use a portion of its annual excess cash flow to prepay loans outstanding under the Credit Agreement if the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) exceeds certain thresholds set forth in the Credit Agreement.

Amounts outstanding under the Credit Agreement may be prepaid without premium or penalty, and the unutilized portion of the commitments may be terminated without penalty, subject to certain conditions.

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

Guarantees and Collateral

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

The Credit Agreement includes an accordion feature which permits the incurrence of one or more new tranches of revolving credit commitments or term loans and increases to the Revolving Credit Facility and Term A Loan in an aggregate amount up to the sum of (i) $1,000.0 million, (ii) the amount of certain voluntary prepayments of senior secured indebtedness of the Company and (iii) the maximum amount of incremental commitments which, after giving effect thereto, would not cause the Consolidated First Lien Net Leverage Ratio (as defined in the Credit Agreement) to exceed 3.00 to 1.00 on a pro forma basis, in each case, subject to the satisfaction of certain conditions.

 

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

Goodwill consists of the following:

  September 30, 2023 
              

Effect of

     
  

Gross

      

Accumulated

  

Foreign

     
  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Goodwill,

 

(In thousands)

 

Value

  

Amortization

  

Losses

  

Exchange

  

Net

 

Goodwill, net by Segment

                    

Las Vegas Locals

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

Downtown Las Vegas

  6,997   (6,134)  —   —   863 

Midwest & South

  636,269   —   (107,470)  —   528,799 

Online

  94,037   —   —   32   94,069 

Managed & Other

  30,529   —   (30,529)  —   — 

Balances, September 30, 2023

 $1,361,399  $(6,134) $(326,078) $32  $1,029,219 

  

December 31, 2022

 
              

Effect of

     
  

Gross

      

Accumulated

  

Foreign

     
  

Carrying

  

Accumulated

  

Impairment

  

Currency

  

Goodwill,

 

(In thousands)

 

Value

  

Amortization

  

Losses

  

Exchange

  

Net

 

Goodwill, net by Segment

                    

Las Vegas Locals

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

Downtown Las Vegas

  6,997   (6,134)  —   —   863 

Midwest & South

  636,269   —   (107,470)  —   528,799 

Online

  94,037   —   —   20   94,057 

Managed & Other

  30,529   —   (25,992)  —   4,537 

Balances, December 31, 2022

 $1,361,399  $(6,134) $(321,541) $20  $1,033,744 

Goodwill as of December 31, 2022 has been recast to reflect changes made in first quarter 2023 to the Company's segments. Goodwill in total as of December 31, 2022 did not change. See additional discussion in Note 10,Financial andSegment Information.

During the nine months ended September 30, 2023, we recorded goodwill impairment charges of $4.5 million related to Managed & Other, Covenants

The Credit Agreement contains certain financial andour aggregated other covenants, including, without limitation, various covenants (i) requiring the maintenancenonreportable operating segments category. These noncash impairment charges are recorded in impairment of a minimum consolidated interest coverage ratio on a quarterly basis of 2.50 to 1.00, (ii) requiring the maintenance of a maximum Consolidated Total Net Leverage Ratio on a quarterly basis, (iii) imposing limitationsassets on the incurrencecondensed consolidated statements of indebtedness and liens, (iv) imposing limitations on transfers, sales and other dispositions and (v) imposing restrictions on investments, dividends and certain other payments.operations.

NOTE 5.    ACCRUED LIABILITIES

Accrued liabilities consist of the following:

 

  

September 30,

  

December 31,

 

(In thousands)

 

2023

  

2022

 

Payroll and related

 $73,011  $73,619 

Interest

  18,739   17,864 

Gaming

  69,890   77,638 

Player loyalty program

  22,588   25,852 

Advance deposits

  19,315   20,792 

Outstanding chips

  7,778   7,704 

Dividends payable

  15,804   15,476 

Operating leases

  94,458   88,776 

Other

  111,897   84,192 

Total accrued liabilities

 $433,480  $411,913 

The maximum permitted Consolidated Total Net Leverage Ratio is calculated

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as Consolidated Net Indebtedness to twelve-month trailing Consolidated EBITDA, as defined by the Credit Agreement. The maximum Consolidated Total Net Leverage Ratio for the fiscal quarter endingof September 30, 2022 through the fiscal quarter ending June 30, 2023must be no higher than 5.00 toand 1.00December 31, 2022 and for the fiscal quarter endingthree and nine months ended September 30, 2023and each fiscal quarter thereafter, 4.502022

NOTE 6.    LONG-TERM DEBT

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

  

September 30, 2023

 
  

Interest

          

Unamortized

     
  

Rates at

          

Origination

     
  

September 30,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2023

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Credit facility

  6.901% $1,041,800  $—  $(14,485) $1,027,315 

4.750% senior notes due 2027

  4.750%  1,000,000   —   (8,279)  991,721 

4.750% senior notes due 2031

  4.750%  900,000   —   (10,449)  889,551 

Other

  5.208%  538   —   —   538 

Total long-term debt

      2,942,338   —   (33,213)  2,909,125 

Less current maturities

      44,275   —   —   44,275 

Long-term debt, net

     $2,898,063  $—  $(33,213) $2,864,850 

  

December 31, 2022

 
  

Interest

          

Unamortized

     
  Rates at          Origination     
  

December 31,

  

Outstanding

  

Unamortized

  

Fees and

  

Long-Term

 

(In thousands)

 

2022

  

Principal

  

Discount

  

Costs

  

Debt, Net

 

Credit facility

 6.166% $1,187,800  $—  $(17,865) $1,169,935 

4.750% senior notes due 2027

 4.750%  1,000,000   —   (9,740)  990,260 

4.750% senior notes due 2031

 4.750%  900,000   —   (11,460)  888,540 

Other

 5.208%  674   —   —   674 

Total long-term debt

     3,088,474   —   (39,065)  3,049,409 

Less current maturities

     44,275   —   —   44,275 

Long-term debt, net

    $3,044,199  $—  $(39,065) $3,005,134 

The outstanding principal amounts under the Credit Facility are comprised of the following:

  

September 30,

  

December 31,

 

(In thousands)

 

2023

  

2022

 

Revolving credit facility

 $175,000  $285,000 

Term A loan

  814,000   847,000 

Swing loan

  52,800   55,800 

Total outstanding principal amounts

 $1,041,800  $1,187,800 

With a total revolving credit commitment of $1,450.0 million available under the Credit Facility, $175.0 million and $52.8 million in borrowings outstanding on the Revolving Credit Facility and the Swing Loan, respectively, and $13.4 million allocated to support various letters of credit, there was a remaining contractual availability under the Credit Facility of $1,208.8 million as of 1.00.September 30, 2023. 

 

Redemption of8.625%Senior Notes dueJune 2025

On June 1, 2022, we redeemed all outstanding 8.625% Senior Notes due June 2025 (the "8.625% Senior Notes") at a redemption price of 104.313% plus accrued and unpaid interest to the redemption date. The redemption, including the redemption premium, accrued and unpaid interest, fees, expenses and commissions related to this redemption, was funded through a combination of cash on hand and borrowings under our Revolving Credit Facility.

Early Extinguishments and Modifications of Debt

In accordance with authoritative accounting guidance for debt extinguishments and debt modifications, we accounted forDuring the retirement ofnine months ended September 30, 2022, the Prior Term A Loan and the Prior Refinancing Term B Loan as extinguishments of debt, resulting in the write-off of unamortized deferred finance charges totaling $2.8Company incurred $16.5 million which is included in loss on early extinguishments and modifications of debt due to the redemption of $300.0 million of our 8.625% senior notes due 2025 ("8.625% Senior Notes"), which was accounted for as a debt extinguishment. The $16.5 million incurred is comprised of $12.9 million related to premium fees paid and $3.6 million related to the write-off of unamortized deferred finance charges. In addition, during the nine months ended September 30, 2022. 2022As, the borrowing capacity of the Revolving Credit Facility under the Credit Agreement equaled or exceeded that under the Prior Credit Facility and the lenders under the Credit Agreement were substantially similar to the lenders under the Prior Credit Facility, we accounted for the Revolving Credit Facility as a modification of debt and $4.3Company incurred $3.3 million of unamortized deferred finance charges related to the Prior Credit Facility were added to the $14.5 million incurred under the Credit Agreement and are being amortized over the term of the Credit Agreement. An additional $0.5 million of unamortized deferred finance charges corresponding to the percentage of lenders under the Prior Credit Facility that did not continue to participate under the Credit Agreement is included in loss on early extinguishments and modifications of debt foras a result of entering into a new credit agreement (the "Credit Facility") that replaced the nine months ended September 30, 2022.

then existing credit agreement. The 8.625% Senior Notes redemption (as discussed above) was$3.3 million incurred related to the write-off of unamortized deferred finance charges associated with the portion accounted for as an extinguishment ofa debt and the premium paid and deferred finance charges written off are included in loss on early extinguishments and modifications of debt for the nine months ended September 30, 2022.extinguishment.

During the nine months ended September 30, 2021, the Company redeemed in full its $750.0 million 6.375% Senior Notes due 2026 (the "6.375% Senior Notes") and its $700.0 million 6.000% Senior Notes due 2026 (the "6.000% Senior Notes", and collectively with the 6.375% Senior Notes, the "Senior Notes"). The Senior Notes were accounted for as extinguishments of debt and the premiums paid and deferred finance charges written off are included in loss on early extinguishments and modifications of debt for the nine months ended September 30, 2021.

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

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

6.375% Senior Notes premium fees paid

 $—  $—  $—  $23,910 

6.375% Senior Notes deferred finance charges written off

  —   —   —   6,370 

6.000% Senior Notes premium fees paid

  —   —   —   27,953 

6.000% Senior Notes deferred finance charges written off

  —   —   —   7,242 

8.625% Senior Notes premium fees paid

  —   —   12,939   — 

8.625% Senior Notes deferred finance charges written off

  —   —   3,570   — 

Prior Credit Facility deferred finance charges written off

  —   42   3,300   42 

Total loss on early extinguishments and modifications of debt

 $—  $42  $19,809  $65,517 

 

Covenant Compliance

As of September 30, 20222023, we were in compliance with the financial covenants of our debt instruments.

 

NOTE 6.    COMMITMENTS AND CONTINGENCIES

Acquisition

On November 1, 2022, the Company completed its previously announced acquisition of Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. ("Pala Canada"), for total net cash consideration of $170.1 million. Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a business-to-business ("B2B") and business-to-consumer ("B2C") basis in regulated markets across the United States and Canada. We financed the transaction with borrowings under our Revolving Credit Facility.

   

15
 

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

NOTE 7.    COMMITMENTS AND CONTINGENCIES

Wilton Rancheria Agreements
The
In 2012, the Company hasentered into a development agreement and a management agreement with Wilton Rancheria. The development agreement obligated us to fund certain pre-development costs which were estimated to be approximately $1 million to $2 million annually, to assist Wilton Rancheria in its development and oversight of the gaming facility construction. During the  nine months ended September 30, 2022, we funded pre-development costs of approximately $0.7 million. The pre-development costs fundedfinanced by us willare to be repaid under the terms of a note receivable with Wilton Rancheria bearing interest at 12.5% with payment timing and arethe payment amount subject to an excess cash flow waterfall payment prioritization and maintenance of a certain leverage ratio, among other restrictions under Wilton Rancheria’s third-party credit agreement that provided funding for the construction project. Given the significant barriers of the project, a majority of the advances made during the 10-year period were historically reserved in full when advanced. The Sky River Casino opened on August 15, 2022 and after generating cash flows from operations, we updated our evaluation of expected losses on the note receivable which resulted in a partial release of the allowance during the fourth quarter of 2022. The Wilton Rancheria amended their third-party credit agreement in March 2023 and such amendment effectively allowed Sky River Casino to begin making previously disallowed distributions, under the excess cash flow waterfall. Given the amendment in the first quarter of 2023, the Company updated its evaluation of its expected losses on the note receivable. As the amendment allowed for quarterly payments to begin and given the sustained operating strength of the recently opened property, the Company concluded it expects to receive all payments due under the note receivable. As such, the Company removed the remaining allowance on the note receivable in the first quarter of 2023, which represented a reserve on both the development advances and interest on the note. The allowance reduction is thus allocated accordingly and $20.1 million is recorded in project development, preopening and writedowns and $14.3 million is recorded in interest income, both reflected in the condensed consolidated statement of operations for the  nine months ended September 30, 2023. The Company has received $82.5 million in principal payments and $10.8 million in interest due under the note receivable during the nine months ended September 30, 2023 and as of September 30, 2023, the principal and interest outstanding on the note receivable total  $32.5 million. Separately, the management agreement provides for us to manage the gaming facility upon opening for a period of seven years and receive a monthly management fee for our services based on the monthly performance of the gaming facility. The gaming facility construction was substantially complete this quartermanagement fee of $17.2 million and the Sky River Casino opened on August 15, 2022. The monthly management fee $10.2 million for our management services for the three months ended September 30, 2023 and 2022, respectively, and $54.6 million and  $10.2 million for the nine months ended September 30, 2023 and 2022, respectively, is paid monthly and recorded in othermanagement fee revenue on the condensed consolidated statementstatements of operations.
 
Commitments
As of September 30, 20222023, other than the acquisition of Pala Interactive as well as the opening of Sky River Casino and thechanges related impact onto agreements with Wilton Rancheria as discussed above, there have been no material changes to our commitments described under Note 8,9, Commitments and Contingencies, in our Annual Report on Form  10-K for the year ended December 31, 20212022, as filed with the SEC on February 28, 2022.24, 2023.
 
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.
 
Hurricane Laura Insurance Recovery
On August 27, 2020, Hurricane Laura made landfall in Vinton, Louisiana, which caused the closure of our Delta Downs property for approximately three weeks. The Company maintains insurance, subject to certain deductibles, that covers business interruption, including lost profits. As the Company deemed it probable that insurance recoveries would exceed any loss incurred, the Company accounted for the proceeds in excess of the loss incurred as a gain contingency in the period received in accordance with authoritative accounting guidance. During the three months ended September 30, 2022, we settled our business interruption and lost profits claim with our insurance carriers and received payments totaling $13.2 million. After consideration of expenses incurred related to the claim, included in other operating items, net for the three and nine months ended September 30, 2022 is a $12.6 million gain representing business interruption insurance for lost profits from the closure of Delta Downs in 2020 due to Hurricane Laura.
 

NOTE 7.8.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase ProgramsProgram
On October 21, 2021, our Board of Directors authorized a share repurchase program of $300.0 million (the "Share Repurchase Program"). On June 1, 2022, In addition, our Board of Directors authorized a $500.0 million increaseincreases to the Share Repurchase Program. Program of  $500.0 million on June 1, 2022, and $500.0 million on May 4, 2023. As of  September 30, 20222023,  $345.8$426.3 million remains available under the Share Repurchase Program. Under the Share Repurchase Program, the Company may repurchase shares of its common stock from time to time on the open market or in privately negotiated transactions. We are not obligated to repurchase any shares under this program. Repurchases of common stock may also be made under Rule 10b5- 1 plans, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. We are not obligated to repurchase any shares under this program. The timing, volume and nature of share repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws and other factors, and may be suspended or discontinued at any time.
 
The following table provides information regarding share repurchases during the referenced periods  (1).
 
 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

  

September 30,

  

September 30,

 

(In thousands, except per share data)

 

2022

 

2021

 

2022

 

2021

  

2023

  

2022

  

2023

  

2022

 

Shares repurchased (2)

 2,474  —  7,588  —  1,628  2,474  4,847  7,588 

Total cost, including brokerage fees(3)

 $134,996  $—  $434,769  $—  $106,302  $134,996  $312,656  $434,769 

Average repurchase price per share (3)(4)

 $54.57  $—  $57.29  $—  $65.30  $54.57  $64.51  $57.29 

 

(1) Shares repurchased reflect repurchases settled during the three and nine months ended September 30, 20222023. and 2022. These amounts exclude repurchases, if any, traded but not yet settled on or before September 30, 2023 and 2022,. respectively.

(2) All shares repurchased have been retired and constitute authorized but unissued shares.

(3) Costs exclude 1% excise tax on corporate stock buybacks that was enacted under the Inflation Reduction Act of 2022 and became effective January 1, 2023.

(4) Amounts in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on unrounded numbers.numbers and excludes the 1% excise tax.

 

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 

February 3, 2022

 

March 15, 2022

 

April 15, 2022

 $0.15 

June 1, 2022

 

June 30, 2022

 

July 15, 2022

  0.15 

September 15, 2022

 

September 30, 2022

 

October 15, 2022

  0.15 

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

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

 

February 3, 2022

 

March 15, 2022

 

April 15, 2022

 $0.15 

June 1, 2022

 

June 30, 2022

 

July 15, 2022

  0.15 

September 15, 2022

 

September 30, 2022

 

October 15, 2022

  0.15 

December 8, 2022

 

December 19, 2022

 

January 15, 2023

  0.15 

February 14, 2023

 

March 15, 2023

 

April 15, 2023

  0.16 

May 4, 2023

 

June 15, 2023

 

July 15, 2023

  0.16 

August 15, 2023

 

September 15, 2023

 

October 15, 2023

  0.16 

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

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

  

September 30,

  

September 30,

  

September 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

  

2023

  

2022

 

Gaming

 $191  $230  $712  $656  $278  $191  $806  $712 

Food & beverage

 36  43  136  125  53  36  154  136 

Room

 18  21  65  60  26  18  74  65 

Selling, general and administrative

 967  1,169  3,618  3,337  1,415  967  4,098  3,618 

Corporate expense

  4,441   8,320   23,955   24,129   6,261   4,441   22,918   23,955 

Total share-based compensation expense

 $5,653  $9,783  $28,486  $28,307  $8,033  $5,653  $28,050  $28,486 

 

Performance Shares

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

 

The PSU grants awarded in fourth quarter 20182019 and 20172018 fully vested during the first quarter of 20222023 and 2021,2022, respectively. Common shares under the 2019 and 2018 grantgrants were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth and Earnings Before Interest, Taxes, Depreciation and Amortization and Rent under master leases ("EBITDAR") growth for the three-year performance period of the grant. Common shares under the 2017 grant 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 the 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 December 2019 resulted in a total of 519,782 shares being issued during the first quarter of 2023, representing approximately 2.00 shares per PSU. Of the 519,782 shares issued, a total of 200,904 were surrendered by the participants for payroll taxes, resulting in a net issuance of 318,878 shares due to the vesting of the 2019 grant. The actual achievement level under the award metrics equaled the estimated performance as of the year-end 2022; therefore, the vesting of the PSUs did not impact compensation costs in our 2023 condensed consolidated statement of operations.

The PSU grant awarded in November 2018 resulted in a total of 408,609 shares being issued during the first quarter of 2022, representing approximately 1.58 shares per PSU. Of the 408,609 shares issued, a total of 114,265 were surrendered by the participants for payroll taxes, resulting in a net issuance of 294,344 shares due to the vesting of the 2018 grant. The actual achievement level under the award metrics equaled the estimated performance as of the year-end 2021; therefore, the vesting of the PSUs did not impact compensation costs in our 2022 condensed consolidated statement of operations.

 

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

Unamortized Stock Compensation Expense and Recognition Period

As of September 30, 20222023, there was approximately $9.2$10.7 million, $3.1$2.7 million and $1.5$1.6 million of total unrecognized share-based compensation costs related to unvested restricted stock units ("RSUs"), PSUs and career shares, respectively. As of September 30, 20222023, the unrecognized share-based compensation costs related to our RSUs, PSUs and career shares are expected to be recognized over approximately 1.92.0 years, 1.9 years and 3.73.6 years, respectively.

 

 

NOTE 8.9.     FAIR VALUE MEASUREMENTS

We have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions.

17
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022

 

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.

 

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

 

17
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 2022 and December 31, 2021 and for the three and nine months ended September 30, 2022 and 2021

Balances Measured at Fair Value

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

 

 

September 30, 2022

  

September 30, 2023

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

  

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                        

Cash and cash equivalents

 $252,344  $252,344  $—  $—  $269,155  $269,155  $—  $— 

Restricted cash

 17,185  17,185  —  —  2,479  2,479  —  — 

Investment available for sale

 13,953  —  —  13,953  13,098  —  —  13,098 

 

 

December 31, 2021

  

December 31, 2022

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

  

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                        

Cash and cash equivalents

 $344,557  $344,557  $—  $—  $283,472  $283,472  $—  $— 

Restricted cash

 12,571  12,571  —  —  11,593  11,593  —  — 

Investment available for sale

 15,822  —  —  15,822  13,670  —  —  13,670 

Liability

            

Contingent payments

 $62  $—  $—  $62 

 

Cash and Cash Equivalents and Restricted Cash

The fair values of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks as of September 30, 20222023 and December 31, 20212022.

 

Investment Available for Sale

We have an investment in a single municipal bond issuance of $17.8$17.1 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale with a maturity date of June 1, 2037. 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 estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities and degrees of risk and a discounted cash flows analysis as of September 30, 2023 and December 31, 2022. The fair value of the instrument is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation at September 30, 20222023 and December 31, 20212022 is a discount rate of 12.3%13.1% and 10.1%12.4%, 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.sheets and in the condensed consolidated statement of other comprehensive income (loss). At both September 30, 20222023 and December 31, 20212022, $0.7 million and $0.6 million, respectively, of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at September 30, 20222023 and December 31, 20212022, $13.3$12.4 million and $15.2$13.0 million, respectively, is included in other assets, net on the condensed consolidated balance sheets. The discount associated with this investment of $2.2$2.1 million and $2.3$2.2 million as of September 30, 20222023 and December 31, 20212022, respectively, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.

 

Contingent Payments

In connection with the development of the Kansas Star Casino ("Kansas Star"), Kansas Star agreed to pay a former casino project promoter 1% of Kansas Star's EBITDA each month for a period of ten years, which ended on December 20, 2021. The liability was recorded at the estimated fair value of the contingent payments using a discounted cash flows approach. There was no liability at September 30, 2022 and at December 31, 2021 there was a current liability of $0.1 million, related to this agreement, which is recorded in accrued liabilities on the condensed consolidated balance sheet.

The following tables summarizetable summarizes the changes in fair value of the Company's Level 3 assets and liabilities:investment available for sale asset:

 

 

Three Months Ended

 
 

September 30, 2022

  

September 30, 2021

 
 

Asset

  

Liability

  

Asset

  

Liability

 
 Investment   Investment     

Three Months Ended

 

Nine Months Ended

 
 Available Contingent Available Contingent  

September 30,

 

September 30,

 

(In thousands)

 

for Sale

  

Payments

  

for Sale

  

Payments

  

2023

 

2022

 

2023

 

2022

 

Balance at beginning of reporting period

 $14,116  $—  $15,696  $(489) $13,215  $14,116  $13,670  $15,822 

Total gains (losses) (realized or unrealized):

          

Included in interest income (expense)

 40  —  39  (4)

Included in interest income

 41  40  128  125 

Included in other comprehensive income (loss)

 (203) —  328  —  (158) (203) (20) (1,359)

Included in other items, net

 —  —  —  18 

Purchases, sales, issuances and settlements:

          

Settlements

  —   —   —   195   —   —   (680)  (635)

Balance at end of reporting period

 $13,953  $—  $16,063  $(280) $13,098  $13,953  $13,098  $13,953 

 

18
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

  

Nine Months Ended

 
  

September 30, 2022

  

September 30, 2021

 
  

Asset

  

Liability

  

Asset

  

Liability

 
  Investment     Investment    
  Available  Contingent  Available  Contingent 

(In thousands)

 

for Sale

  

Payments

  

for Sale

  

Payments

 

Balance at beginning of reporting period

 $15,822  $(62) $16,692  $(924)

Total gains (losses) (realized or unrealized):

                

Included in interest income (expense)

  125   —   121   (26)

Included in other comprehensive income (loss)

  (1,359)  —   (160)  — 

Included in other items, net

  —   —   —   21 

Purchases, sales, issuances and settlements:

                

Settlements

  (635)  62   (590)  649 

Balance at end of reporting period

 $13,953  $—  $16,063  $(280)

 

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.

 

The fair value of indefinite-lived intangible assets, classified in the fair value hierarchy as Level 3, is utilized in performing the Company's impairment analyses.

Balances Disclosed at Fair Value

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

 

 

September 30, 2022

 

September 30, 2023

 Outstanding Carrying Estimated 

Fair Value

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Asset

       

Note receivable

 $32,498 $32,498 $32,498 

Level 3

Liabilities

                    

Obligation under assessment arrangements

 $22,731  $19,597  $26,299 

Level 3

  20,659   18,079   23,835 

Level 3

   

 

December 31, 2021

 

December 31, 2022

 Outstanding Carrying Estimated 

Fair Value

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Asset

       

Note receivable

 $118,162 $83,791 $82,338 

Level 3

Liabilities

                    

Obligation under assessment arrangements

 $24,306  $20,734  $26,908 

Level 3

  22,293   19,304   25,738 

Level 3

 

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

 

 

September 30, 2022

 

September 30, 2023

 Outstanding Carrying Estimated 

Fair Value

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Credit Facility

 $1,009,400  $990,644  $1,005,110 

Level 2

Credit facility

 $1,041,800  $1,027,315  $1,019,415 

Level 2

4.750% senior notes due 2027

 1,000,000  989,773  881,250 

Level 1

 1,000,000  991,721  917,500 

Level 1

4.750% senior notes due 2031

 900,000  888,204  726,750 

Level 1

 900,000  889,551  762,750 

Level 1

Other

  706   706   706 

Level 3

  538   538   538 

Level 3

Total debt

 $2,910,106  $2,869,327  $2,613,816   $2,942,338  $2,909,125  $2,700,203  

 

 

December 31, 2021

 

December 31, 2022

 Outstanding Carrying Estimated 

Fair Value

 Outstanding Carrying Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Prior Credit Facility

 $867,897  $859,106  $866,812 

Level 2

Credit facility

 $1,187,800  $1,169,935  $1,183,565 

Level 2

4.750% senior notes due 2027

 1,000,000  988,312  1,023,750 

Level 1

 1,000,000  990,260  928,750 

Level 1

8.625% senior notes due 2025

 300,000 295,934 320,250 

Level 1

4.750% senior notes due 2031

 900,000  886,746  915,750 

Level 1

 900,000  888,540  784,125 

Level 1

Other

  1,496   1,496   1,496 

Level 3

  674   674   674 

Level 3

Total debt

 $3,069,393  $3,031,594  $3,128,058   $3,088,474  $3,049,409  $2,897,114  

 

The estimated fair value of our Credit Facilityobligation under assessment arrangements and Priorthe estimated fair value of our note receivable as of December 31, 2022, is based on a discounted cash flow approach after giving consideration to the changes in market rates of interest, creditworthiness of both parties and credit spread. The fair value of our note receivable as of September 30, 2023, was estimated to equal its carrying value after consideration of the expected repayment timing of the remaining balance. The estimated fair value of our Credit Facility is based on a relative value analysis performed on or about September 30, 20222023 and December 31, 20212022, respectively.. The estimated fair values of our senior notes are based on quoted market prices as of September 30, 20222023 and December 31, 20212022. The other debt is fixed-rate debt consisting of: (i)of finance leases with various maturity dates from 2024 to 2025;2025. and (ii) a purchase obligation that matured in July 2022. The other debt is not traded and does not have an observable market input; therefore, we have estimated fair value to be equal to the carrying value for these obligations.

 

Other than the retirement of the 8.625% Senior Notes (Level 1) during the nine months ended September 30, 2022, that was funded through a combination of cash on hand and borrowings under the Credit Facility (Level 2), there were no transfers between Level 1, Level 2 and Level 3 measurements during the three months ended September 30, 2023 and2022, and no transfers during the nine months ended September 30, 2022 and 20212023.

 

19
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

 

NOTE 9.10.    SEGMENT INFORMATION

We have aggregated our properties in order to presentDuring the first quarter of 2023, the Company evaluated its reportable segments and changed them from three Reportable Segments:reportable segments consisting of: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest & South.South, to the following four reportable segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest & South; and (iv) Online, (collectively "Reportable Segments"). This change reflects the growth of the Company beyond its traditional wholly owned gaming entertainment properties and the increasing importance to the Company of other growth sources. The Online segment includes the operating results of our online gaming operations through collaborative arrangements with third parties throughout the United States and the operations from our recent acquisition of Pala Interactive and Pala Canada (individually and collectively rebranded, "Boyd Interactive") on November 1, 2022, and such operating results were previously included with the Midwest & South segment. To reconcile Reportable Segments information to the condensed consolidated information, the Company has aggregated nonreportable operating segments into a Managed & Other category. The Managed & Other category includes management fees earned under our management contract with Wilton Rancheria for the management of Sky River Casino in northern California and the operating results of Lattner Entertainment Group Illinois, LLC, our Illinois distributed gaming operator. These nonreportable operating segments were previously aggregated with our Midwest & South segment. The table below lists the Reportable Segment classification of each of our properties.gaming entertainment properties that were aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate and their management and reporting structure.

 

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

EastsideCannery Casino and Hotel (1)

 

Las Vegas, Nevada

Aliante Casino + Hotel + Spa

 

North Las Vegas, Nevada

Cannery Casino Hotel

 

North Las Vegas, Nevada

Jokers Wild

 

Henderson, Nevada

Downtown Las Vegas

  

California Hotel and Casino

 

Las Vegas, Nevada

Fremont Hotel & Casino

 

Las Vegas, Nevada

Main Street Station Hotel and Casino

 

Las Vegas, Nevada

Midwest & South

  

Par-A-Dice Casino(2)

 

East Peoria, Illinois

Belterra Casino Resort (4)(2)

 

Florence, Indiana

Blue Chip Casino Hotel Spa

 

Michigan City, Indiana

Diamond Jo Casino

 

Dubuque, Iowa

Diamond Jo Worth

 

Northwood, Iowa

Kansas Star Casino

 

Mulvane, Kansas

Amelia Belle Casino

 

Amelia, Louisiana

Delta Downs Racetrack Hotel & Casino

 

Vinton, Louisiana

Evangeline Downs Racetrack & Casino

 

Opelousas, Louisiana

Sam's Town Shreveport

 

Shreveport, Louisiana

Treasure Chest Casino

 

Kenner, Louisiana

IP Casino Resort Spa

 

Biloxi, Mississippi

Sam's Town Hotel and Gambling Hall Tunica

 

Tunica, Mississippi

Ameristar Casino * Hotel Kansas City (4)(2)

 

Kansas City, Missouri

Ameristar Casino * Resort * Spa St. Charles (4)(2)

 

St. Charles, Missouri

Belterra Park (4)(2)

 

Cincinnati, Ohio

Valley Forge Casino Resort(3)

 

King of Prussia, Pennsylvania

 

(1) Eastside Cannery remains closed since March 18, 2020 dueDue to the current levels of demand in the market.market, Eastside Cannery remains closed since it was closed on March 18, 2020, in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus.

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

(3) Valley Forge was temporarily closed on December 12, 2020 and subsequently reopened on January 4, 2021.

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

 

Results of Operations - Total Reportable Segment Revenues and Adjusted EBITDAR

We evaluate each property's profitability based on 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 writedown expenses, impairments of assets, other operating items, net, gain or loss on early extinguishments and modifications of debt, other items, net and master lease rent expense, as applicable. Total Reportable Segment Adjusted EBITDAR is the aggregate sum of the Property Adjusted EBITDAR for each of the properties included in our Las Vegas Locals, Downtown Las Vegas and Midwest & South segments.segments and Adjusted EBITDAR related to the online operations in our Online segment. Results for Downtown Las Vegas include the results of our Hawaii-based travel agency and captive insurance company as our Downtown Las Vegas properties cater to the Hawaiian market. Results for our Midwest & South segment include the following non-reportable segments: (i) Lattner, our Illinois distributed gaming operator; (ii) online gaming operations, which are in New Jersey and six of the nine states in the Midwest & South where we operate properties; and (iii) our management agreement with Wilton Rancheria.

 

20
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

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

 

The following tables set forth, for the periods indicated, departmental revenues for our Reportable Segments:Segments and our Managed & Other category to reconcile to total revenues:

 

 

Three Months Ended September 30, 2022

  

Three Months Ended September 30, 2023

 
   Food &           

Food &

       

Management

      
 Gaming Beverage Room Other Total  

Gaming

 

Beverage

 

Room

 

Online

 

Fee

 

Other

 

Total

 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                        

Las Vegas Locals

 $172,263  $21,120  $19,982  $12,426  $225,791  $165,153  $21,454  $21,324  $—  $—  $13,902  $221,833 

Downtown Las Vegas

 31,872  9,583  5,552  2,500  49,507  31,916  9,876  5,312  —  —  2,441  49,545 

Midwest & South

  463,840   37,089   21,138   79,898   601,965  433,650  39,656  22,084  —  —  17,638  513,028 

Online

 —  —  —  90,288  —  —  90,288 

Managed & Other

  10,449   —   —   —   17,153   868   28,470 

Total Revenues

 $667,975  $67,792  $46,672  $94,824  $877,263  $641,168  $70,986  $48,720  $90,288  $17,153  $34,849  $903,164 

 

 

Three Months Ended September 30, 2021

  

Three Months Ended September 30, 2022 (1)

 
   Food &           

Food &

       

Management

      
 Gaming Beverage Room Other Total  

Gaming

 

Beverage

 

Room

 

Online

 

Fee

 

Other

 

Total

 

(In thousands)

 

Revenue

  Revenue  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

  

Revenue

 

Revenues

                        

Las Vegas Locals

 $179,441  $20,412  $20,176  $11,235  $231,264  $172,263  $21,120  $19,982  $—  $—  $12,426  $225,791 

Downtown Las Vegas

 28,132  7,343  4,000  2,662  42,137  31,872  9,583  5,552  —  —  2,500  49,507 

Midwest & South

  466,654   33,346   20,141   49,518   569,659  452,052  37,089  21,138  —  —  17,257  527,536 

Online

 —  —  —  52,353  —  —  52,353 

Managed & Other

  11,788   —   —   —   10,159   129   22,076 

Total Revenues

 $674,227  $61,101  $44,317  $63,415  $843,060  $667,975  $67,792  $46,672  $52,353  $10,159  $32,312  $877,263 

 

 

Nine Months Ended September 30, 2022

  

Nine Months Ended September 30, 2023

 
    

Food &

             

Food &

       

Management

      
 

Gaming

 

Beverage

 

Room

 

Other

 

Total

  

Gaming

 

Beverage

 

Room

 

Online

 

Fee

 

Other

 

Total

 

(In thousands)

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

  

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenues

                        

Las Vegas Locals

 $522,728  $64,257  $62,528  $40,301  $689,814  $513,460  $66,436  $70,000  $—  $—  $43,147  $693,043 

Downtown Las Vegas

 99,249  29,865  17,152  6,624  152,890   102,765  30,515  17,797  —  —  8,016  159,093 

Midwest & South

  1,398,877   107,712   59,305   223,858   1,789,752  1,317,175  115,985  60,749  —  —  50,138  1,544,047 

Online

 —  —  —  298,153  —  —  298,153 

Managed & Other

  32,805   —   —   —   54,629   2,310   89,744 

Total Revenues

 $2,020,854  $201,834  $138,985  $270,783  $2,632,456  $1,966,205  $212,936  $148,546  $298,153  $54,629  $103,611  $2,784,080 

 

 

Nine Months Ended September 30, 2021

  

Nine Months Ended September 30, 2022 (1)

 
     

Food &

                 

Food &

         

Management

        
 

Gaming

 

Beverage

 

Room

 

Other

 

Total

  

Gaming

 

Beverage

 

Room

 

Online

 

Fee

 

Other

 

Total

 

(In thousands)

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

  

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Revenues

                        

Las Vegas Locals

 $516,174  $52,959  $49,344  $31,305  $649,782  $522,728  $64,257  $62,528  $—  $—  $40,301  $689,814 

Downtown Las Vegas

 70,168  17,657  9,269  5,256  102,350  99,249  29,865  17,152  —  —  6,624  152,890 

Midwest & South

  1,433,273   92,025   50,771   161,768   1,737,837  1,363,445  107,712  59,305  —  —  49,072  1,579,534 

Online

 —  —  —  164,203  —  —  164,203 

Managed & Other

  35,432   —   —   —   10,159   424   46,015 

Total Revenues

 $2,019,615  $162,641  $109,384  $198,329  $2,489,969  $2,020,854  $201,834  $138,985  $164,203  $10,159  $96,421  $2,632,456 

(1) Revenues for the three and nine months ended September 30, 2022 have been recast to reflect the breakout of online revenue and management fee revenue from other revenue and the segment changes made during the first quarter of 2023.

   

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BOYD GAMING CORPORATION AND SUBSIDIARIES

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

as of September 30, 20222023 and December 31, 20212022 and for the three and nine months ended September 30, 20222023 and 20212022

 

The following table reconciles, for the periods indicated, Totalour Reportable SegmentSegments and our Managed & Other category Adjusted EBITDAR to net income, as reported in our accompanying condensed consolidated statements of operations:operations with Adjusted EBITDAR for the three and nine months ended September 30, 2022 recast to reflect the segment changes made during the first quarter of 2023:

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

  

September 30,

  

September 30,

 

September 30,

 

(In thousands)

 

2022

 

2021

 

2022

 

2021

  

2023

 

2022 (1)

 

2023

 

2022 (1)

 

Adjusted EBITDAR

                

Las Vegas Locals

 $111,733  $125,360  $355,762  $349,572  $105,985  $111,733  $350,540  $355,762 

Downtown Las Vegas

 17,704  13,222  58,216  31,083  15,857  17,704  57,876  58,216 

Midwest & South

 230,195  222,058  682,725  700,199  190,588  211,292  591,105  642,351 

Online

 11,005  6,350  45,028  22,916 

Managed & Other

 18,997  12,553  60,094  17,458 

Corporate expense

  (21,934)  (19,943)  (66,296)  (62,165)  (21,611)  (21,934)  (65,314)  (66,296)

Adjusted EBITDAR

  337,698   340,697   1,030,407   1,018,689   320,821   337,698   1,039,329   1,030,407 

Other operating costs and expenses

                

Deferred rent

 192  207  576  621  177  192  531  576 

Master lease rent expense

 26,828  26,306  79,788  78,396  27,236  26,828  81,163  79,788 

Depreciation and amortization

 64,956  67,586  194,191  199,332  64,797  64,956  188,577  194,191 

Share-based compensation expense

 5,653  9,783  28,486  28,307  8,033  5,653  28,050  28,486 

Project development, preopening and writedowns

 9,645  10,646  528  13,515  2,405  9,645  (11,268) 528 

Impairment of assets

 5,575 — 5,575 —  —  5,575  4,537  5,575 

Other operating items, net

  (12,610)  3,023   (12,324)  15,295   301   (12,610)  959   (12,324)

Total other operating costs and expenses

  100,239   117,551   296,820   335,466   102,949   100,239   292,549   296,820 

Operating income

  237,459   223,146   733,587   683,223   217,872   237,459   746,780   733,587 

Other expense (income)

                

Interest income

 (2,073) (442) (2,976) (1,406) (1,585) (2,073) (22,445) (2,976)

Interest expense, net of amounts capitalized

 36,001  45,171  110,125  158,192  42,352  36,001  128,933  110,125 

Loss on early extinguishments and modifications of debt

 —  42  19,809  65,517  —  —  —  19,809 

Other, net

  170   119   3,667   2,288   (30)  170   596   3,667 

Total other expense, net

  34,098   44,890   130,625   224,591   40,737   34,098   107,084   130,625 

Income before income taxes

 203,361  178,256  602,962  458,632  177,135  203,361  639,696  602,962 

Income tax provision

  (46,359)  (40,082)  (136,269)  (104,568)  (41,902)  (46,359)  (112,278)  (136,269)

Net income

 $157,002  $138,174  $466,693  $354,064  $135,233  $157,002  $527,418  $466,693 

(1) Adjusted EBITDAR for the three and nine months ended September 30, 2022 has been recast to reflect the segment changes made during the first quarter of 2023.

 

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

 

Total Reportable Segment Assets

The Company's assets by Reportable Segment and Managed & Other category consisted of the following amounts:amounts with assets as of December 31, 2022 recast to reflect the segment changes made during the first quarter of 2023:

 

 

September 30,

 

December 31,

  

September 30,

 

December 31,

 

(In thousands)

 

2022

  

2021

  

2023

 

2022

 

Assets

        

Las Vegas Locals

 $1,604,202  $1,641,409  $1,612,047  $1,613,553 

Downtown Las Vegas

 249,654  228,161  291,815  265,876 

Midwest & South

  3,862,883   3,947,076  3,759,733  3,745,476 

Total Reportable Segment Assets

 5,716,739  5,816,646 

Online

 223,566  226,800 

Managed & Other

 154,187  207,962 

Corporate

  339,131   407,523   270,263   251,460 

Total Assets

 $6,055,870  $6,224,169  $6,311,611  $6,311,127 

 

 

 

NOTE 10.11.    SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after September 30, 20222023. During this period, up to the filing date, other than the $170.1 million acquisition of Pala Interactive on November 1, 2022 as discussed in Note 6,Commitments and Contingencies, we did not identify any subsequent events, the effects of which would require disclosure or adjustment to our financial position or results of operations.

 

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

Executive Overview

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

 

In mid-March 2020, all of our gaming facilities were closed in compliance with orders issued by state officials as precautionary measures intended to slow the spread of COVID-19. As of September 30, 2022, and as reflected in the table below, 27 of our 28 gaming facilities are open and operating. One of our properties in Las Vegas remains closed due to the current levels of demand in the market. 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.

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

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

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

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We are a geographically diversified operator of 28 gaming entertainment properties. Headquartered in Las Vegas, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. In addition, we own and operate Boyd Interactive, a business-to-business ("B2B") and business-to-consumer ("B2C") online casino gaming business. We view each operating property as partalso manage the Sky River Casino located in California under a management agreement with Wilton Rancheria. During the first quarter of an operating segment. For financial reporting purposes, we aggregate our properties into2023, the Company evaluated its reportable segments and changed them from three reportable segments consisting of: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest & South, to the following threefour reportable segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest & South; and (iv) Online, (collectively "Reportable Segments"). This change reflects the growth of the Company beyond its traditional wholly owned gaming entertainment properties and the increasing importance to the Company of other growth sources. The Online segment includes the operating results of our online gaming operations through collaborative arrangements with third parties throughout the United States and the operations from our recent acquisition of Pala Interactive, LLC ("Pala Interactive") and Pala Interactive Canada Inc. (individually and collectively rebranded, "Boyd Interactive") on November 1, 2022, and such operating results were previously included with the Midwest & South segment. To reconcile Reportable Segments information to the condensed consolidated information, the Company has aggregated nonreportable operating segments into a Managed & Other category. The Managed & Other category includes management fees earned under our management contract with Wilton Rancheria for the management of Sky River Casino in northern California and the operating results of Lattner Entertainment Group Illinois, LLC, our Illinois distributed gaming operator ("Lattner"). These nonreportable operating segments were previously aggregated with our Midwest & South segment. The table below lists the Reportable Segment classification of each of our gaming entertainment properties that were aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate and their management and reporting structure.

 

   

Las Vegas Locals

  

Gold Coast Hotel and Casino

 

Las Vegas, Nevada

The Orleans Hotel and Casino

 

Las Vegas, Nevada

Sam's Town Hotel and Gambling Hall

 

Las Vegas, Nevada

Suncoast Hotel and Casino

 

Las Vegas, Nevada

Eastside Cannery Casino and Hotel (1)

 

Las Vegas, Nevada

Aliante Casino + Hotel + Spa

 

North Las Vegas, Nevada

Cannery Casino Hotel

 

North Las Vegas, Nevada

Jokers Wild

 

Henderson, Nevada

Downtown Las Vegas

  

California Hotel and Casino

 

Las Vegas, Nevada

Fremont Hotel & Casino

 

Las Vegas, Nevada

Main Street Station Hotel and Casino

 

Las Vegas, Nevada

Midwest & South

  

Par-A-Dice Casino(2)

 

East Peoria, Illinois

Belterra Casino Resort (4)(2)

 

Florence, Indiana

Blue Chip Casino Hotel Spa

 

Michigan City, Indiana

Diamond Jo Casino

 

Dubuque, Iowa

Diamond Jo Worth

 

Northwood, Iowa

Kansas Star Casino

 

Mulvane, Kansas

Amelia Belle Casino

 

Amelia, Louisiana

Delta Downs Racetrack Hotel & Casino

 

Vinton, Louisiana

Evangeline Downs Racetrack & Casino

 

Opelousas, Louisiana

Sam's Town Shreveport

 

Shreveport, Louisiana

Treasure Chest Casino

 

Kenner, Louisiana

IP Casino Resort Spa

 

Biloxi, Mississippi

Sam's Town Hotel and Gambling Hall Tunica

 

Tunica, Mississippi

Ameristar Casino * Hotel Kansas City (4)(2)

 

Kansas City, Missouri

Ameristar Casino * Resort * Spa St. Charles (4)(2)

 

St. Charles, Missouri

Belterra Park (4)(2)

 

Cincinnati, Ohio

Valley Forge Casino Resort(3)

 

King of Prussia, Pennsylvania

 

(1) Eastside Cannery remains closed since March 18, 2020 dueDue to the current levels of demand in the market.market, Eastside Cannery remains closed since it was closed on March 18, 2020, in compliance with orders issued by state officials as precautionary measures intended to slow the spread of the COVID-19 virus.

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

(3) Valley Forge was temporarily closed on December 12, 2020 and subsequently reopened on January 4, 2021.

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

 

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

 

Results for Lattner Entertainment Group Illinois, LLC ("Lattner"), our Illinois distributed gaming operator, are included in our Midwest & South segment. Lattner's operations were temporarily suspended on November 20, 2020 due to a state mandated closure to stop the spread

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Table of COVID-19 and subsequently resumed on January 16, 2021.

We have online sports-betting or online real money casino gaming offerings through market-access agreements with other companies in New Jersey and six of the nine states where we operate throughout the Midwest & South segment. Financial results for online sports betting and real money casino gaming operations are included in our Midwest & South segment.

We also manage the Sky River Casino located in California under a management agreement with Wilton Rancheria. The Sky River Casino opened on August 15, 2022. Financial results under the management agreement are included in our Midwest & South segment.

Contents

 

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

 

Our gaming entertainment properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. While we do provide casino credit and the ability to transfer digital funds from the players' cashless wallet "BoydPay", subject to certain gaming regulations and jurisdictions, most of our customers wager with cash and pay for non-gaming services with cash or by credit card.

 

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

 

Our Strategy

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

 

Strengthening Our Balance SheetGrowing Revenues and Operating Efficiently

We are committed to growing revenues and building loyalty among core customers through targeted marketing investments and a focus on maximizing gaming revenues while operating as efficiently as possible. 

Balance Sheet Strength

We are committed to maintaining a strong balance sheet and finding opportunities to strengthendiversify and increase our balance sheet through diversifying and increasing cash flow. We intend to take a balanced approach to our cash flows, with a current emphasis on investing in our business and returning capital to shareholders.

 

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Operating EfficientlyEnvironmental, Social and Governance ("ESG") Commitment

We fulfill our commitment to ESG through four core pillars: Environment, People, Communities and Corporate Governance. We are committed to operating efficiently. As we reopened our properties and adjusted our operations to address the impacts of the COVID-19 pandemic, the efficiencieswell-being of our disciplinedcommunities and future generations through reducing our carbon footprint and economic contributions, strive to be an employer of choice where every team member is treated with dignity and respect, and conduct business model positions us to flow a substantial portionwith the highest level of our revenue directly to the bottom line.integrity.

 

Evaluating Acquisition Opportunities

Our evaluations of potential investments and growth opportunities are strategic, deliberate, and disciplined. Our goal is to identify and pursue opportunities that grow our business, are available at the right price and deliver a solid return for shareholders. These investments can take the form of expanding and enhancing offerings and amenities at existing properties, development of new properties, acquisitions, or expanding and enhancing online sports wagering and real moneyonline casino gaming offerings as they are legalized in and around the states we operate today.today, and asset acquisitions.

 

Maintaining Our Brand

The ability of our employeesteam members to deliver great customer service helps distinguish our Company and our brands from our competitors. Our employeesteam members are an important reason that our customers continue to choose our properties over the competition across the country. In addition, we have established nationwide branding and a loyalty program. Our players use their "Boyd Rewards" cards to earn and redeem points at all of our gaming entertainment properties and online casino gaming offerings. The "Boyd Rewards" club, among other benefits, rewards players for their loyalty by entitling them to qualify for promotions, earn rewards toward gaming and nongaming activities and receive benefits such as vacations and luxury gifts.

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Our Key Performance Indicators

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

 

•

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

  

•

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

  

•

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

 

RESULTS OF OPERATIONS

Overview

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

  

September 30,

  

September 30,

  

September 30,

 

(In millions)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

  

2023

  

2022

 

Total revenues

 $877.3  $843.1  $2,632.5  $2,490.0  $903.2  $877.3  $2,784.1  $2,632.5 

Operating income

 237.5  223.1  733.6  683.2  217.9  237.5  746.8  733.6 

Net income

 157.0  138.2  466.7  354.1  135.2  157.0  527.4  466.7 

 

Total Revenues

Total revenues for the three months ended September 30, 20222023 increased by $34.225.9 million, or 4.1%, as compared to the prior year comparable period. The revenue growth in the third quarter was driven by increases in online gaming activities and the management fee we started earning upon the August 15, 2022 opening of Sky River Casino, a property in California that we manage on behalf of Wilton Rancheria. Total revenues for the nine months ended September 30, 2022, increased $142.5 million, or 5.7%, as compared to the prior year comparable period. The revenue growth for the nine months ended September 30, 2022 was due primarily to the continued recovery from the COVID-19 pandemic. The second quarter of 2021 marked the point when many COVID-related restrictions impacting our business were lifted, vaccination rates started to rise, destination travel started to return and we opened additional amenities that had been closed. Additionally, we benefited from limited competing entertainment options early on in the prior year period. This recovery, while building since we reopened our properties, accelerated in the second quarter of 2021 and drove revenue growth in the first quarter of 2022 of $107.4 million. We also continue to focus on our core customer, leveraging more robust marketing and analytical tools since reopening the majority of our properties in the second quarter of 2020. 

Operating Income

Operating income increased $14.3 million, or 6.4%, for the three months ended September 30, 20223.0%, compared to the prior year comparable period, primarily due to aan increase in our online revenues of $37.9 million, including an increase of $26.2 million over the prior year comparable period of revenues from reimbursements of gaming taxes and other expenses paid on behalf of our online partners. Total revenues for the nine months ended September 30, 2023, increased 4.1%$151.6 million, or 5.8%, as compared to the prior year comparable period primarily due to an increase in our online revenue of $134.0 million, including an increase of $95.5 million over the prior year comparable period of revenues from reimbursements of gaming taxes and other expenses paid on behalf of our online partners. Online revenues increased year over year due primarily to: (i) the launch of online gaming in Ohio in January 2023; (ii) the increase in revenues from reimbursements of gaming taxes and other expenses, as discussed above; (iii) organic growth in revenues. Pennsylvania as the online market continues to mature; and (iv) the acquisition on November 1, 2022, of Pala Interactive, our online gaming technology company that provides proprietary solutions on both a B2B and B2C basis. Other than our online operations in Pennsylvania, there was not any revenue associated with these new markets and business for the three and nine months ended September 30, 2022. Additionally, during the three and nine months ended September 30, 2023, we earned $17.2 million and $54.6 million, respectively, in management fees related to our management agreement with Wilton Rancheria. As Sky River Casino opened on August 15, 2022, there was only $10.2 million of revenue associated with this management agreement for both the three and nine months ended September 30, 2022. Offsetting the increase in online revenue and Sky River Casino management fee income, is a decline of $26.8 million and $54.6 million in gaming revenue for the three and nine months ended September 30, 2023, respectively, as compared to prior year comparable periods. The decline in gaming revenue is primarily due to softness in retail play throughout all three of our gaming entertainment property segments that became more prominent starting in the fourth quarter of the prior year as the retail player is generally more sensitive to changes in the economy. In addition, we had a strong prior year comparable period, particularly in Las Vegas, for the nine months ended September 30, 2023, as Las Vegas benefited from the lifting of mask mandates and COVID restrictions during the prior year second quarter, which was the first full quarter without restrictions since the COVID closures in 2020.

Operating Income

Operating income decreased by $19.6 million, or 8.2%, for the three months ended September 30, 2023, compared to the prior year comparable period. While revenues grew by $25.9 million during the three months ended September 30, 2023, $26.2 million of the revenue growth is due to reimbursements of gaming taxes and other expenses paid on behalf of our online partners that results in zero operating income as an equal amount of the reimbursement is also recorded as expense. Operating income was also favorably impacted during the three months ended September 30, 2022 by a $12.6 million one-time gain from insurance proceeds received in the third quarter of 2022 related to Hurricane Laura.Laura, that was not recurring in the current year. Operating income was further impacted by inflationary impacts and increases in costs including wages, utilities and property insurance costs during the three months ended September 30, 2023 as compared to the prior year comparable period.

 

Operating income increased $50.4$13.2 million, or 7.4%1.8%, duringfor the nine months ended September 30, 2022, as 2023, compared to the prior year comparable period, primarily due to a 5.7%5.8% growth in revenues, year over yearincluding a $44.5 million increase in management fees, as discussed above. While an increase in online revenues of $134.0 million contributed to the revenue growth, as noted above, $95.5 million of the revenue growth is due to reimbursements of gaming taxes and other expenses paid on behalf of our online partners that results in zero operating income as an equal amount of the reimbursement is also recorded as expense. Operating income was also favorably impacted by a $20.1 million reduction of the allowance on a note receivable with continued recovery from the COVID-19 pandemic, including the impact of reopening additional amenities that were closed for all or a portion ofWilton Rancheria ("Wilton Note") during the first quarter of 2021, our focus on our core customers,2023 for development advances over the last 10 years as we evaluated the current expected credit losses after an increaseamendment to Wilton's third-party construction loan in online gaming activities and the Sky River Casino management fee in the third quarter 2022, all as discussed above. In addition, we transformed our operating model after reopening our properties, and this streamlined operating model, with a focus and discipline on costs, hasMarch 2023 that allowed for payments to us to flow a greater portion of our revenue growth to operating income. Operating income forbegin in March 2023. For the nine months ended September 30, 2022, operating income was also favorably impacted by the following: (i) a $12.8 million gain on disposition of assets; (ii) a $12.6 millionmillion one-time gain on insurance proceeds received related to Hurricane Laura; and offset by (iii) a $5.6 million non-cash impairment charge for a trademark related to a propertyLaura, that was not recurring in our Midwest & South segment.the current year. Operating income for the nine months ended September 30, 20212023, as compared to the prior year comparable period, was unfavorablynegatively impacted year over year by a $10.7$49.6 million non-recurring employee bonusdecline in gaming profit due to softness in the second quarter of 2021.

retail player and inflationary pressures as discussed above.

 

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Net Income
Net income de increased creased $18.821.8  million for the three months ended September 30, 2022,2023 , compared to the prior year comparable period. The increase was priperiod, primarily due to: (i) the $19.6 marily attributable to million decrease in operating income, as discussed above; and (ii) an increase in operating income of $14.3 million, as discussed above, along with a decrease in interest expense, net of $9.2amounts capitalized of $6.4 million asdriven by a result of a $490.5102-basis point increase in the weighted average interest rate and an $11.6 million declineincrease in the weighted average debt balance. The reduction in the weighted average debt balanceNet income was drivenfavorably impacted by the retirement of the $600.0 million aggregate principal amount of 8.625% Senior Notes due 2025 ("8.625% Senior Notes"), with $300.0 million retired in each of November 2021 and June 2022. These items were offset by an increasea decrease in the income tax provision of $6.3$4.5 million due towhich was driven by a decline in pre-tax income over the Company's improved operational performance.prior year comparable period.
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Net income increased  $112.6 $60.7 million for the nine months ended September 30, 2022,2023 , compared to the prior year comparable period. Theperiod, primarily due  to: (i) the $13.2 million increase was attribut able to the following: (i)in operating income,increase of$50.4  million, as discussed above; (ii) an increase in interest expenseincome of $19.5 million primarily due to an adjustment to the expected loss for interest on the Wilton Note and interest earned on the Wilton Note during the nine months ended September 30, 2023; (iii) a decrease of $48.1$19.8 million due to a $706.0 million decline in the weighted average debt balance, which was driven by the retirements of the $750.0 million aggregate principal amount of 6.375% Senior Notes due 2026 ("6.375% Senior Notes") and $700.0 million aggregate principal amount of 6.000% Senior Notes due 2026 ("6.000% Senior Notes") in June 2021, the retirement of $300.0 million aggregate principal amount of our 8.625% Senior Notes in November 2021 and the remaining $300.0 million outstanding balance of our 8.625% Senior Notes in June 2022, offset by the issuance of $900.0 million aggregate principal amount of 4.750% Senior Notes due 2031 ("4.750% Senior Notes due 2031") in June 2021; and (iii) decrease in loss on early extinguishments and modifications of debt due to the retirement of $45.7the remaining $300.0 million arising from8.625% Senior Notes and the retirements noted above (see additional discussion in "Liquidityretirement of term loans under a former credit agreement during the nine months ended September 30, 2022; and Capital Resources"). These items were offset by an increase(iv) a decrease in the income tax provision of $31.7$24.0 million due towhich was driven by the release of state tax valuation allowances of $35.9 million in the second quarter of 2023, offset by taxes on the Company's improvedincreased operational performance.Net income was unfavorably impacted by an $18.8 million increase in interest expense, which was primarily driven by a 119-basis point increase in the weighted average interest rate offset by a $31.4 million decline in the weighted average debt balance over the prior year comparable period.
 
Operating Revenues

We derive the majority of our revenues from our gaming operations, which produced approximately  76%71% and 80%76% of revenues for the three months ended  September 30, 20222023 and 2021,2022, respectively, and  71% and  77% and 81%of revenues for the nine months ended September 30, 2023 and 2022, respectively. Online revenues, including reimbursements received from our third-party operators for gaming taxes and 2021, respectively. Other revenues, which include online offerings and beginning in third quarter 2022, our Sky River Casino management fee,other expenses we pay under collaborative arrangements, represent our next most significant revenue source, generating 11% 10% and 8% 6% of revenues for the three months ended September 30, 2023  and 2022 and 2021,, respectively, and 10%11% and 8%6% of revenues for the nine months ended September 30, 2023 and 2022, and 2021, respectively.respectively . Food & beverage revenues, room revenues, management fee revenues and roomother revenues separately contributed 8% or less of revenues during these periods. 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In millions)

 

2022

  

2021

  

2022

  

2021

 

REVENUES

                

Gaming

 $668.0  $674.2  $2,020.9  $2,019.6 

Food & beverage

  67.8   61.1   201.8   162.6 

Room

  46.7   44.3   139.0   109.4 

Other

  94.8   63.5   270.8   198.4 

Total revenues

 $877.3  $843.1  $2,632.5  $2,490.0 
                 

COSTS AND EXPENSES

                

Gaming

 $251.8  $249.7  $756.4  $741.2 

Food & beverage

  58.5   50.7   169.9   136.4 

Room

  17.8   15.1   51.1   41.4 

Other

  57.2   41.6   174.7   128.0 

Total costs and expenses

 $385.3  $357.1  $1,152.1  $1,047.0 
                 

MARGINS

                

Gaming

  62.3%  63.0%  62.6%  63.3%

Food & beverage

  13.7%  17.0%  15.8%  16.1%

Room

  61.9%  65.9%  63.2%  62.2%

Other

  39.7%  34.5%  35.5%  35.5%
  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In millions)

 

2023

  

2022

  

2023

  

2022

 

REVENUES

                

Gaming

 $641.2  $668.0  $1,966.2  $2,020.9 

Food & beverage

  71.0   67.8   212.9   201.8 

Room

  48.7   46.7   148.6   139.0 

Online

  90.3   52.3   298.2   164.2 

Management fee

  17.2   10.2   54.6   10.2 

Other

  34.8   32.3   103.6   96.4 

Total revenues

 $903.2  $877.3  $2,784.1  $2,632.5 
                 

DEPARTMENTAL OPERATING EXPENSES

                

Gaming

 $251.5  $251.8  $751.3  $756.4 

Food & beverage

  59.7   58.5   177.6   169.9 

Room

  19.2   17.8   54.9   51.1 

Online

  79.1   45.8   252.5   140.7 

Other

  11.5   11.4   34.1   34.0 

Total departmental operating expenses

 $421.0  $385.3  $1,270.4  $1,152.1 
                 

MARGINS

                

Gaming

  60.8%  62.3%  61.8%  62.6%

Food & beverage

  15.9%  13.7%  16.6%  15.8%

Room

  60.6%  61.9%  63.1%  63.2%

Online

  12.4%  12.4%  15.3%  14.3%

Other

  67.0%  64.7%  67.1%  64.7%

  

Gaming

Gaming revenues are comprised primarily of the net win from our slot machine operations and to a lesserlesser extent from table games win. The decrease in gaming revenues of $6.326.8 million, or 0.9%4.0%, during the three months ended September 30, 20222023, compared to the prior year comparable period, was primarily due to a 0.7% decreasedeclines in slot handle of 3.2%, slot win of 2.5%, table game drop of 4.4% and a 0.5% declinetable game hold of 8.6%. While core customer play was up over the prior year in slot win. While we saw growthall three of our gaming entertainment property segments, softness in our coreretail customer, which is more sensitive to changes in the economy, drove gaming revenue declines year over year, we saw a decline in unrated play as gaming revenues for July 2021 were favorably impacted by government stimulus payments to our customers.year.

 

GamingThe decrease in gaming revenues remained consistentof $54.6 million, or 2.7%, during the nine months ended September 30, 2022 as2023, compared to the prior year comparable period.period, was primarily due to declines in slot handle of 3.1%, slot win of 2.1%, table game drop of 5.2% and table game hold of 7.1%. The decline in gaming revenue is primarily due to softness in the retail customer, as discussed above. In addition, the second quarter of 2022 was particularly strong as Las Vegas benefited from the lifting of mask mandates and COVID restrictions for the first full quarter since the COVID closures in 2020. 

 

Food & Beverage

Food & beverage revenues increased $6.73.2 million, or 11.0%4.7%, during the three months ended September 30, 20222023, compared to the prior year comparable period, primarily due to an increase in food coversaverage guest check of 7.0%4.5%. Food and anbeverage margins increased from 13.7% to 15.9% for the three months ended September 30, 2023, primarily due to the increase in average guest check of 4.4%.check.

 

Food & beverage revenues increased $39.211.1 million, or 24.1%5.5%, during the nine months ended September 30, 20222023, compared to the prior year comparable period, primarily due to an increase in food coversaverage guest check of 16.0% and an5.0%. Food & beverage margins increased from 15.8% to 16.6% for the nine months ended September 30, 2023, due to the increase in average guest check of 5.4%.check.

 

Room

Room revenues increased $2.42.0 million, or 5.3%4.4%, during the three months ended September 30, 20222023, compared to the prior year comparable period, primarily due to a 4.6% increase in occupancy and 2.3%an increase in average daily rate of 0.8%. Despite the increase in our Downtown Las Vegas Segment.average daily rate, room margins for the three months ended September 30, 2023, declined due to an increase in cost per room of 8.2% driven primarily by increased wages.

 

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Room revenues increasedincreased $29.6$9.6 million, or 27.1%6.9%, during the nine months ended September 30, 2022, as2023, compared to the prior year comparablecomparable period, primarily due to an increase in occupancy of 5.4% and an increase in average daily rate of 4.7%2.4%. Room margins were essentially flat at 63.1% and 63.2% for the nine months ended September 30, 2023 and 2022, respectively.

Online

Online revenuesincreased $37.9 million and $134.0 million during the three and nine months ended September 30, 2023, compared to the prior year comparable periods, primarily driven by the launch of online gaming in Ohio in January 2023, organic growth in Pennsylvania and results from Pala Interactive which was acquired in the fourth quarter of 2022, all as discussed above. Online revenues include reimbursements of gaming taxes and other expenses paid on behalf of our online partners which represented $26.2 million and $95.5 million of the increase for the three and nine months ended September 30, 2023, respectively, as compared to the prior year comparable periods.

Management fee

Management fee revenues during the three and nine months ended September 30, 2023 of $17.2 million and $54.6 million, respectively, relates to our management agreement with Wilton Rancheria to manage the Sky River Casino in northern California. The Sky River Casino opened on August 15, 2022, and thus the $10.2 million of management fees earned under this agreement for both the three and nine months ended September 30, 2022, represented less than two months of fees earned in the prior year.

 

Other

Other revenues relate to: (i) our online gaming initiatives; (ii)to patronage visits at the other amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues; and (iii) beginning in the third quarter of 2022, our Sky River Casino management fee.venues. Other revenuesrevenues increased $31.4$2.5 million, or 49.5%7.9%, and $72.5$7.2 million, or 36.5%7.5%, during the three and nine months ended September 30, 2022, respectively,2023, as compared to the corresponding periods of the prior year. The increase is driven primarily by the Las Vegas Locals segment as tourism and convention business has grown over the prior year due primarily to increased online gaming revenues, includingcomparable periods with the revenues from reimbursements of gaming taxes paid on behalf of our online partners, and as other amenities such as entertainment and group business started to return again after the COVID-related closures and lifting of large group restrictions. Corresponding period-over-period increasesmask mandates and COVID restrictions in other expenses reflect primarily the gaming taxes paid on behalf of our online partners and the corresponding costs of entertainment and group business. February 2022 in Las Vegas.

 

Revenues and Adjusted EBITDAR by Reportable Segment

We determine each property's profitability based uponon Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ("Adjusted EBITDAR"), which represents earnings before interest expense, income taxes, depreciation and amortization, deferred rent, master lease rent expense, other operating items, net, share-based compensation expense, project development, preopening and writedown expenses, impairments of assets, loss on early extinguishments and modifications of debt and other items, net, as applicable. Reportable Segment Adjusted EBITDAR is the aggregate sum of the Adjusted EBITDAR for each of the gaming entertainment properties comprising our Las Vegas Locals, Downtown Las Vegas and Midwest & South segments.segments and our Online segment. Results for Downtown Las Vegas include the results of our travel agency and captive insurance company in Hawaii. Results for our non-reportablenonreportable operating segments, including our Illinois distributed gaming operator, our online gaming initiativesLattner and our Sky River Casino management agreement with Wilton Rancheriafees are includedaggregated in our Midwestthe Managed & South segment.Other category. Corporate expense represents unallocated payroll, professional fees, rent, aircraft expenses and various other expenses that are not directly related to our casino, hotel and hotelonline operations. Furthermore, for purposes of this presentation, corporate expense excludes its portion of share-based compensation expense.

 

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

 

The following table presents our total revenues and Adjusted EBITDAR by our Reportable Segment:Segments and our Managed & Other category to reconcile to total revenues and total Adjusted EBITDAR:

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

  

September 30,

  

September 30,

  

September 30,

 

(In millions)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

  

2023

  

2022

 

Total revenues

                

Las Vegas Locals

 $225.8  $231.3  $689.8  $649.8  $221.8  $225.8  $693.0  $689.8 

Downtown Las Vegas

 49.5  42.1  152.9  102.4  49.6  49.5  159.1  152.9 

Midwest & South

  602.0   569.7   1,789.8   1,737.8  513.0  527.5  1,544.1  1,579.6 

Online

 90.3  52.4  298.2  164.2 

Managed & Other

  28.5   22.1   89.7   46.0 

Total revenues

 $877.3  $843.1  $2,632.5  $2,490.0  $903.2  $877.3  $2,784.1  $2,632.5 
  

Adjusted EBITDAR (1)

                

Las Vegas Locals

 $111.7  $125.4  $355.8  $349.6  $106.0  $111.7  $350.5  $355.8 

Downtown Las Vegas

 17.7  13.2  58.2  31.1  15.8  17.7  57.9  58.2 

Midwest & South

 230.2  222.1  682.7  700.2  190.6  211.3  591.1  642.3 

Online

 11.0  6.3  45.0  22.9 

Managed & Other

 19.0  12.6  60.1  17.5 

Corporate expense

  (21.9)  (20.0)  (66.3)  (62.2)  (21.6)  (21.9)  (65.3)  (66.3)

Adjusted EBITDAR

 $337.7  $340.7  $1,030.4  $1,018.7  $320.8  $337.7  $1,039.3  $1,030.4 

  

(1) Refer to Note 9,10, Segment Information, in the notes to the condensed consolidated financial statements (unaudited) for a reconciliation of Adjusted EBITDAR to net income, as reported in accordance with GAAP in our accompanying condensed consolidated statements of operations.

 

Las Vegas Locals 

Total revenues decreased by $5.54.0 million, or 2.4%1.8%, during the three months ended September 30, 2022. For the three months ended September 30, 2022, gaming revenues decreased $7.2 million primarily due to a decrease in slot win of 3.3% and table game hold of 14.1% from the prior year comparable period. The decline in gaming revenues was offset by an increase in other revenues of $1.2 million as entertainment venues expanded the number of events.

Total revenues increased by $40.0 million, or 6.2%, during the nine months ended September 30, 2022, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories. For the nine months ended September 30, 2022, room revenues increased $13.2 million due to an increase in hotel occupancy rate of 6.6% and average daily rate of 13.0% from the prior year comparable period. Food & beverage revenues increased $11.3 million due to an increase in food covers of 17.2% and average guest check of 4.9% from the prior year comparable period. Other revenues increased $9.0 million as entertainment venues expanded the number of events and demand for other amenities grew over the prior year comparable period. Gaming revenues increased $6.6 million primarily due to an increase in table game hold of 4.6% from the prior year comparable period. The Las Vegas Locals segment benefited from the COVID-19 recovery year over year as discussed further in the items impacting the Company's total revenue growth as well as the continued focus on our core customer.

Adjusted EBITDAR decreased by $13.6 million during the three months ended September 30, 2022. The decline was primarily driven by the following: (i) a decrease in gaming revenues from the prior year comparable period, which is our highest margin revenue stream; (ii) declines in unrated play partially offset by growth in our core customer, which impacts margins as there is no marketing investment in the unrated player; and (iii) an increase of $2.5 million in maintenance and utility costs due to elevated business volumes and rising energy costs. 

Adjusted EBITDAR increased by $6.2 million during the nine months ended September 30, 20222023, as compared to the prior year comparable period, due primarily to a $7.1 million decline in gaming revenues. The decrease in gaming revenues was attributable to declines in table game hold of 6.8%, table game drop of 6.7%, slot handle of 4.3% and slot win of 4.2% over the prior year comparable period. While core guest play grew year over year, softness in play from retail customers drove declines in the current year quarter. Offsetting the decline in gaming revenues were increases in other revenue of $1.5 million, which was primarily driven by increased entertainment, and room revenue of $1.3 million, which was driven by an increase in average daily rate of 0.7% and hotel occupancy rate of 0.6%.

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Total revenues increased by $3.2 million, or 0.5%, during the nine months ended September 30, 2023, as compared to the prior year comparable period, reflecting revenue increases in all departmental categories, except gaming revenue. Room revenues primarily drove the growth, increasing $7.5 million due to an increase in hotel occupancy rate of 2.3% and average daily rate of 3.8% over the prior year comparable period. Other revenues increased $2.8 million, which was primarily driven by increased entertainment, bowling and spa services over the prior year comparable period with the lifting of COVID restrictions in February 2022. Food & beverage revenue increased by $2.2 million as average guest check increased 7.1% over the prior year comparable period. These revenue increases were offset by a decline in gaming revenues of $9.3 million primarily due to declines in table game hold of 9.1%, table game drop of 9.0%, slot handle of 3.8% and slot win of 2.6% over the prior year comparable period. Overall, the Las Vegas Locals segment benefited from increased visitation to Las Vegas with the lifting of COVID restrictions in February 2022.
Adjusted EBITDAR decreased by $5.7  million, or 5.1%, during the three months ended September 30, 2023 , as compared to the prior year comparable period, primarily due to the revenue decline discussed above and inflationary pressures and cost increases, including wages, utilities and property insurance costs.
Adjusted EBITDAR decreased by $5.2  million, or 1.5%, during the nine months ended September 30, 2023 , as compared to the prior year comparable period. Despite the revenue growth offset byduring the nine months ended September 30, 2023 , Adjusted EBITDAR declined primarily due to a change in revenue mix from the most profitable revenue stream to other lower margin non-gaming amenities, coupled with a decline in unrated play as well as inflationary pressures and cost increases impacting the prior year was impacted by government stimulus payments to our customers.three months ended September 30, 2023, as noted above.

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Downtown Las Vegas

Total revenues remained consistent at $49.5 million during the three months ended September 30, 2023 , as compared to the prior year comparable period. Total revenues increased by $7.46.2 million, or 17.5%4.1% , during the nine months ended September 30, 2023 , as compared to the corresponding prior year period, reflecting revenue increases in all departmental categories. Total revenues for the nine months ended September 30, 2023 , particularly during the first quarter of 2023, were favorably impacted by Fremont's new food hall, expanded slot offering and FanDuel sportsbook, which all debuted in December 2022. After the debut of these new amenities in December 2022, we began work on a renovation of the Fremont's gaming floor and accelerated this renovation and related disruption during the second quarter of 2023 and the slower summer season. Despite this construction disruption, Fremont grew revenues year over year, however this growth was offset by declines at Main Street Station, which is undergoing a hotel remodel that began in the second quarter of 2023 and resulted in only 35% of Main Street Station's rooms being available during the third quarter of 2023.
Adjusted EBITDAR decreased by $50.51.8 million, or 49.4%10.4% , during the three months ended September 30, 2023 , as compared to the prior year comparable period, primarily due to the construction disruption, as discussed above, and the wage, utility and property insurance cost increases and inflationary pressures also impacting the Las Vegas Locals segment.
Adjusted EBITDAR decreased $0.3 million, or 0.6%, during the nine months ended September 30, 2023, as compared to the prior year comparable period. Despite the revenue growth during the nine months ended September 30, 2023 , Adjusted EBITDAR declined primarily due to the construction disruption and inflationary pressures and increased costs, as discussed above.

Midwest & South

Total revenues decreased by $14.5 million, or 2.8%, during the three months ended September 30, 2023, as compared to the corresponding period of the prior year, due primarily to an $18.4 million decline in gaming revenues. The decrease in gaming revenues was attributable to declines in table game hold of 10.5%, table game drop of 3.0%, slot handle of 2.7% and slot win of 2.0% over the prior year comparable period. The gaming revenues decline is primarily driven by softness in the retail customer throughout the segment. Offsetting the gaming revenues decline was an increase in food & beverage revenues of $2.6 million, which was driven by a 2.0% increase in average guest check.

Total revenues decreased by $35.5million, or 2.2%, during the nine months ended September 30, 2023, as compared to the corresponding period of the prior year, due primarily to a $46.3 million decline in gaming revenues. The decrease in gaming revenues was attributable to declines in table game hold of 7.0%, table game drop of 2.9%, slot handle of 2.9% and slot win of 2.2% over the prior year comparable period. The gaming revenues decline is driven primarily by our properties in Louisiana and Mississippi and softness in those overall markets, particularly in the first quarter with trends improving sequentially from quarter to quarter, as well as overall softness in the retail customer throughout the segment. Offsetting the gaming revenues decline was an increase in food & beverage revenues of $8.3 million, which was driven by a 3.4% increase in average guest check.

Adjusted EBITDAR decreased by $20.7 million, or 9.8%, and$51.2 million, or 8.0%, during the three and nine months ended September 30, 2022 2023, respectively, as compared to the corresponding periods of the prior year reflectingperiods, due primarily to the gaming revenue increases in all departmental categories, with the exception of other revenue for the three months ended September 30, 2022. The Downtowndeclines, as discussed above, as well as inflationary pressures and increased wages, utilities and property insurance costs, as noted above as impacting both Las Vegas segment caters more to customers from Hawaii, which had stringent travel restrictions related to COVID-19 during the first half of 2021, and to the destination traveler, which was slower to return after the COVID-19 closures than our regional and local customer in other segments of our business. In addition to the revenue growth due to the reduction in COVID-19 restrictions, one of our downtown properties reopened in early September 2021 as destination travel started returning. segments.

Adjusted EBITD

Online

Online revenuARes increasedby $4.5 $37.9 million and $27.1$134.0 million, during the three and nine months ended September 30, 2022, as2023, respectively, compared to the corresponding periodsprior year comparable period, primarily driven by the launch of online gaming in Ohio in January 2023, organic growth in Pennsylvania and results from Pala Interactive which was acquired in the fourth quarter of 2022, all as discussed above. Online revenues include reimbursements of gaming taxes and other expenses paid on behalf of our online partners and represented $26.2 million and $95.5 million of the prior year, due primarily to revenue growth from the Hawaiian customer and return of destination travel combined with the reopening of one of our properties, as discussed above.

Midwest & South

Totalonline revenues increased by $32.3 million duringincrease for the three months ended September 30, 2022, as compared to the corresponding period of the prior year. The increase was primarily attributable to an increase in other revenues of $30.4 million, which was primarily driven by the gaming taxes we pay and are reimbursed for related to our online revenue collaborative agreements as well as general online revenue growth supplemented by the management fee income for Sky River Casino.

Total revenu es increased by $51.9 million during the nine months ended September 30, 2022, as compared to t 2023he corresponding period of the prior year, reflecting revenue increases in all departmental categories, with the exception of gaming revenue. Other revenue increased $62.1 million,, respectively, as compared to the prior year comparable period, due to our online revenue growth, both the tax payment reimbursement and general overall growth, and Sky River Casino management fee income, as discussed above. Food & beverage revenueperiods.

Adjusted EBITDAR increased by $15.7$4.7 million as compared toand $22.1 million during the prior year comparable period, due primarily to a 3.1% increase in food coversthree and a 5.6% increase in average guest check. Room revenue increased by $8.5 million, as compared to the prior year comparable period, as room occupancy and average daily rate increased 0.6% and 2.1%, respectively. These revenue increases were offset by a gaming revenue decline of $34.4 million, as compared to the prior year comparable period, due to a 2.5% decrease in slot win driven primarily by government stimulus payments to our customers in the second quarter of 2021 and limited entertainment options during the nine months ended September 30, 2021.

Adjusted EBITDA2023R increased by $8.1 million during the three months ended September 30, 2022, as compared to the corresponding period of the prior year, due primarily to management fee income for Sky River Casino.

Adjusted EBITDAR decreased by $17.5 million during the nine months ended September 30, 2022, , respectively, as compared to the corresponding period of the prior year, due primarily to the declineincrease in revenue, excluding reimbursements of gaming revenue.taxes and other expenses paid on behalf of our online partners.

 

Managed & Other
During the  three and nine months ended September 30, 2023 , total reven ues increased by $6.4 million and $43.7 million, respectively, and A djusted EBITDAR increased by $6.4 million and $42.6 million , respectively, as compared to the corresponding period of the prior year , due primarily to $17.2 million and $54.6 million in Sky River Casino management fees during the three and nine months ended September 30, 2023, respectively . The Sky River Casino opened on August 15, 2022, and thus the $10.2 million of management fees earned under this agreement for both the three and nine months ended September 30, 2022, represented less than two months of fees earned in the prior year.
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Other Operating Costs and Expenses 

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

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

  

September 30,

  

September 30,

  

September 30,

 

(In millions)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

  

2023

  

2022

 

Selling, general and administrative

 $93.0  $91.2  $280.7  $271.6  $99.9  $93.0  $299.3  $280.7 

Master lease rent expense

 26.8  26.3  79.8  78.4  27.2  26.8  81.2  79.8 

Maintenance and utilities

 40.8  35.9  108.2  95.3  41.7  40.8  115.3  108.2 

Depreciation and amortization

 65.0  67.6  194.2  199.3  64.8  65.0  188.6  194.2 

Corporate expense

 26.4  28.3  90.3  86.3  27.9  26.4  88.2  90.3 

Project development, preopening and writedowns

 9.6  10.6  0.5  13.5  2.4  9.6  (11.3) 0.5 

Impairment of assets

 5.6 — 5.6 —  —  5.6  4.5  5.6 

Other operating items, net

 (12.6) 3.0  (12.3) 15.3  0.3  (12.6) 1.0  (12.3)

 

Selling, General and Administrative

Selling, general and administrative expensesexpens es were generally consistent, as a percentagepercentage of revenues, and were  10.6%11.1% and 10.8%10.6% during the three months ended September 30, 20222023 and 2021,2022, respectively, and  10.7%10.8% and  10.9%10.7% during the nine months ended September 30, 2023 and 2022, and 2021, respectively. WeWhile we continue to focus on our disciplined operating model and targeted marketing approach.

approach, selling, general and administrative expenses were impacted by increased property insurance costs during the three months ended September 30, 2023.

Master Lease Rent Expense

Master lease rent expense represents rent expense incurred by four of our properties which are subject to two master lease agreements with a real estate investment trust. Master lease rent expenseexpe nse remained consistent,generally flat period over period at $27.2 million and $26.8 million during the three months ended September 30, 2023 and 2022, respectively, and  $81.2 million and  $79.8 million during the nine months ended September 30, 2023 and 2022, respectively. 
Maintenance and Utilities
Maintenance and utilities expenses, as a percentage of revenues, and was 3.1%re venues, remained consistent at 4.6% during both the three months ended September 30, 2023 and 2022 and 2021 and 3.0% and 3.1%4.1% during both the nine months ended September 30, 20222023 and 2021, respectively.

2022. 

MaintenanceDepreciation and UtilitiesAmortization

Maintenance

D epreciation and utilitiesamortization expenses as a percentage of revenues, remained generally consistent at 4.6%$64.8 million and 4.3%$65.0 million during the three months ended September 30, 2023 and 2022 and 2021,, respectively, and 4.1%$188.6 million and 3.8%$194.2 million  during the nine months ended September 30, 2023 and 2022 and 2021,, respectively. The small growth in 2022 was driven primarily by rising energy costs.

Depreciation and Amortization

Depreciation and amortization expenses, as a percentage of revenues, remained consistent at 7.4% during the three and nine months ended September 30, 2022 compared to 8.0% during the three and nine months ended September 30, 2021.The percentage of revenue decrease to the comparable periods in the prior year was primarily attributable to revenue growth.

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, rent, aircraft expenses and various other administrative expenses that are not directly related to our propertycasino, hotel and online operations, in addition to the corporate portion of share-based compensation expense. Corporate expenseexpens e was generally consistent and represented  3.0%3.1% and  3.4%3.0% of revenues during the three months ended September 30, 20222023 and 2021,2022, respectively, and  3.2% and  3.4% and 3.5%of revenues during the nine months ended September 30, 2023 and 2022, and 2021, respectively.

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Project Development, Preopening and Writedowns
Project development, preopening and writedowns represents:represent: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, strategic initiatives, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred in our ongoing efforts to develop gaming activities in new jurisdictions and expenses related to other new business development activities that do not qualify as capital costs; (iii) asset writedowns; and (iv) realized gains arising from asset dispositions. Such costs are generally nonrecurring in nature and vary from period to period as the volume of underlying activities fluctuate.fluctuates. During the three months ended September 30, 2023 , the Company incurred $2.6 million related to preopening costs. During the nine months ended September 30, 2023, the Company benefited from a $20.1 million reduction of the allowance on the Wilton Note for development advances over the last 10 years offset by preopening costs of $7.6 million. During the three months ended September 30, 2022, and 2021, the Company incurred $8.3 million and $8.5 million, respectively, in non-cash asset writed owns.writedowns. During thenine months ended September 30, 2022, , the Company also benefited from a $12.8 million gain on disposition of assets. assets offset by $8.3 million of non-cash asset writedowns and Pala Interactive acquisition-related costs of $2.6 million.
 
Impairment of assetsAssets

During the nine months ended September 30, 2023, as a result of our first quarter impairment review, the Company recorded an impairment charge of $4.5 million for goodwill related to our Managed & Other category.During the three and nine months ended September 30, 2022, as a result of our third quarter impairment review, the Company recorded an impairment charge of $5.6 million for a trademark related to a property in our Midwest & South segment.

 
Other Operating Items, net

Other operating items, net, is generally comprised of miscellaneous non-recurring operating charges, including severance payments to separated employees, natural disasters and severe weather impact, including hurricane and flood expenses, and subsequent recoveries of such costs, as applicable. During the three andnine months ended September 30, 2022, $12.6 million of other operating items, net, related to a gain from the settlement of our insurance claim for business interruption and lost profits from the closure of Delta Downs for approximately three weeks in August and September 2020 due to Hurricane Laura. During the nine months ended September 30, 2021, $10.7 million of other operating items, net, related to non-recurring employee bonus payments. 

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Other Expenses

Interest Expense, net

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

 

 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

 

Nine Months Ended

 
 

September 30,

  

September 30,

  

September 30,

  

September 30,

 

(In millions)

 

2022

  

2021

  

2022

  

2021

  

2023

  

2022

  

2023

  

2022

 

Interest Expense, Net of Capitalized Interest and Interest Income

 $33.9  $44.7  $107.1  $156.8  $40.8  $33.9  $106.5  $107.1 

Average Long-Term Debt Balance (1)

 2,888.1  3,378.5  2,998.0  3,704.0  2,899.7  2,888.1  2,966.6  2,998.0 

Weighted Average Interest Rates

 4.4% 4.8% 4.2% 5.2% 5.5% 4.4% 5.4% 4.2%

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

 

Interest expense, net of capitalized interest andand interest income, for the three months ended September 30, 2022,2023 decreased $10.8, increased $6.8 million, or 24.1%20.2%, from the prior year comparable period asprimarily due to a result of$6.4 million interest expense increase driven by a $490.5 million decline in the weighted average debt balance and a 40 basis102-basis point decreaseincrease in the weighted average interest rate which was driven byand an $11.6 million increase in the retirement of the $600.0 million aggregate principal amount of 8.625% Senior Notes, with $300.0 million retired in each of November 2021 and June 2022.weighted average debt balance.

 

Interest expense, net of capitalized interest and interest income, for the nine months ended September 30, 20222023, decreased $49.6$0.7 million, or 31.7%0.6%, from the prior year comparable period. The decline was attributableperiod primarily due to a $706.0$19.5 million interest income increase driven by a reduction of the allowance for the expected loss for interest on the Wilton Note and interest earned on such note during the nine months ended September 30, 2023. The increase in interest income is offset by an $18.8 million interest expense increase driven by a 119-basis point increase in the weighted average interest rate offset by a $31.4 million decline in the weighted average debt balance and a 100 basis point decrease in the weighted average interest rate, which was driven by the retirements of the 6.375% Senior Notes and 6.000% Senior Notes in June 2021, the retirement of $300.0 million aggregate principal amount of 8.625% Senior Notes in November 2021 and the remaining $300.0 million outstanding balance of 8.625% Senior Notes in June 2022, offset by the issuance of the 4.750% Senior Notes due 2031 in June 2021.balance.

 

Loss on Early Extinguishments and Modifications of Debt

The components ofDuring the nine months ended September 30, 2022, the Company incurred $16.5 million in loss on early extinguishments and modifications of debt aredue to the redemption of $300.0 million of our 8.625% Senior Notes, of which $12.9 million related to premium fees paid and $3.6 million related to the write-off of unamortized deferred finance charges. In addition, during the nine months ended September 30, 2022, the Company incurred $3.3 million in loss on early extinguishments and modifications of debt as follows:a result of entering into a new credit agreement (the "Credit Facility") that replaced the then existing credit agreement. The $3.3 million incurred related to the write-off of unamortized deferred finance charges associated with the portion accounted for as a debt extinguishment.

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 

(In millions)

 

2022

  

2021

  

2022

  

2021

 

6.375% Senior Notes premium fees paid

 $—  $—  $—  $23.9 

6.375% Senior Notes deferred finance charges written off

  —   —   —   6.4 

6.000% Senior Notes premium fees paid

  —   —   —   28.0 

6.000% Senior Notes deferred finance charges written off

  —   —   —   7.2 

8.625% Senior Notes premium fees paid

  —   —   12.9   — 

8.625% Senior Notes deferred finance charges written off

  —   —   3.6   — 

Prior Credit Facility deferred finance charges written off

  —   —   3.3   — 

Total loss on early extinguishments and modifications of debt

 $—  $—  $19.8  $65.5 

 

Income Taxes 

The effective tax rates during the nine months ended September 30, 2023 and 2022 were 17.6% and 2021 were 22.6% and 22.8%, respectively. Our tax rate for the nine months ended September 30, 2023, was favorably impacted by a second quarter 2023 release of state valuation allowances and the inclusion of excess tax benefits which were partially offset by the unfavorable impact of state taxes and certain nondeductible expenses, as a component of the provision for income taxes. Our tax rate for the nine months ended September 30, 2022 and 2021, was unfavorably impacted by state taxes and certain nondeductible expenses which were partially offset by the inclusion of excess tax benefits, related to equity compensation, as a component of the provision for income taxes. As of December 31, 2021, the Company exhausted its federal net operating loss carryforwards which results in higher cash taxes in the current and prospective periods.

 

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LIQUIDITY AND CAPITAL RESOURCES

Financial Position

We generally operate with minimal or negative levels of working capital in order to minimize borrowings and related interest costs. At September 30, 20222023 and December 31, 2021,2022, we had balances of cash and cash equivalents of $252.3$269.2 million and $344.6$283.5 million, respectively. In addition, we held restricted cash balances of $17.2$2.5 million and $12.6$11.6 million at September 30, 20222023 and December 31, 2021,2022, respectively. Our working capital deficit at September 30, 20222023 and December 31, 20212022, was $136.5$114.2 million and $49.2$107.9 million, respectively.

 

We believe that current cash balances together with the available borrowing capacity under our Revolving Credit Facility (as defined in "Indebtedness" below) and cash flows from operating activities will be sufficient to meet our liquidity and capital resource needs for the next twelve months, including our projected operating requirements and maintenance and development project capital expenditures and our acquisition of Pala Interactive LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc.expenditures. See "Indebtedness", below, for further detail regarding thefunds available through our Credit Facility.

 

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

 

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Cash Flows Summary

 

 

Nine Months Ended

  

Nine Months Ended

 
 

September 30,

  

September 30,

 

(In millions)

 

2022

  

2021

  

2023

  

2022

 

Net cash provided by operating activities

 $728.0  $777.7  $697.3  $728.0 
  

Cash flows from investing activities

            

Capital expenditures

 (173.0) (139.2) (279.0) (173.0)

Payments received on note receivable

 82.4 — 

Insurance proceeds received for hurricane losses

 0.5 44.5  — 0.5 

Proceeds from disposition of assets

 21.4 — 

Proceeds received from disposition of assets

 — 21.4 

Other investing activities

  —   5.5   (3.0)  — 

Net cash used in investing activities

  (151.1)  (89.2)  (199.6)  (151.1)
  

Cash flows from financing activities

            

Net borrowings (payments) under credit facilities

 141.5  (18.2) (146.0) 141.5 

Proceeds from issuance of senior notes

 — 900.0 

Retirements of senior notes

 (300.0) (1,450.0) — (300.0)

Premium fees

 (12.9) (51.9) — (12.9)

Debt financing costs

 (15.3) (14.6) — (15.3)

Share-based compensation activities

 (9.2) 1.7  (14.5) (9.2)

Shares repurchased and retired

 (434.8) —  (312.7) (434.8)

Dividends paid

 (32.6) —  (47.8) (32.6)

Other financing activities

  (1.2)  (2.2)  (0.1)  (1.2)

Net cash used in financing activities

  (664.5)  (635.2)  (521.1)  (664.5)

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

 $(87.6) $53.3 

Decrease in cash, cash equivalents and restricted cash

 $(23.4) $(87.6)

 

Cash Flows from Operating Activities

During the nine months ended September 30, 20222023 and 20212022, we generated operating cash flowflows of$697.3 million and $728.0 million, and $777.7 million, respectively. Generally, operating cash flows decreased during Operating c2022 as compared to the prior year period due to the timing of working capital spend. Cashash flows for the nine months ended September 30, 2022 are favorably impacted by2023 declined due to $12.6 million in business interruption insurance proceeds received related to Hurricane Laura.Laura during the nine months ended September 30, 2022. Additionally, cash flows decreased over the prior year comparable period due primarily to a $15.3 million increase in income taxes paid and a $21.6 million increase in interest expense paid offset by a $10.8 million increase in interest income received.

 

Cash Flows from Investing Activities

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

 

During the nine months ended September 30, 2023, we incurred net cash outflows for investing activities of $199.6 million comprised of capital expenditures of $279.0 million, primarily related to our Treasure Chest land-based casino project, Fremont food hall and slot floor expansion and renovation, various guest room remodels, IT equipment and building projects at various properties offset by $82.4 million in payments received related to the outstanding principal on the Wilton Note. During the nine months ended September 30, 2022, we incurred net cash outflows for investing activities of $151.1 million comprised of capital expenditures of $173.0 million, primarily related to furniture and equipment purchases and building projects at various properties, offset by $21.4 million in proceeds from disposition of assets. During the nine months ended September 30, 2021, we incurred net cash outflows for investing activities of $89.2 million comprised of capital expenditures of $139.2 million, primarily related to building improvements at Delta Downs as a result of Hurricane Laura damage, which was offset by $44.5 million of insurance recovery proceeds and $6.7 million of development proceeds associated with the Wilton Rancheria project.

 

Cash Flows from Financing Activities

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

 

The net cashcash outflows from financingfinancing activities during the nine months ended September 30, 2023, primarily reflect share repurchases, payments on the outstanding principal under our Credit Facility, share-based compensation and dividends paid. The net cash outflows from financing activities in the nine months ended September 30, 2022, primarily reflect share repurchases, the retirement of the 8.625% Senior Notes, payment of the associated premium fees related to the retirement of the $300.0 million 8.625% Senior Notes, debt financing costs related to the new Credit AgreementFacility and dividends paid, offset by an increase in the outstanding principal under the Credit Facility, (see "Indebtedness"). The net cash outflows from financing activitieswhich was used in part to retire the nine months ended September 30, 2021, primarily reflect the retirements of the 6.375%8.625% Senior Notes and the 6.000% Senior Notes, payment of the associated premium fees related to both retirements, the quarterly payments on our Prior Term Loans and debt issuance costs for the 4.750% Senior Notes due 2031 offset by inflows for the nine months ended September 30, 2021 from the issuance of the 4.750% Senior Notes due 2031.(see "Indebtedness").

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Indebtedness

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

 

(In millions)

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

September 30, 2023

 

December 31, 2022

 

Decrease

 

Credit Facility

 $1,009.4  $—  $1,009.4 

Prior Credit Facility

 — 867.9 (867.9)

Credit facility

 $1,041.8  $1,187.8  $(146.0)

4.750% senior notes due 2027

 1,000.0  1,000.0  —  1,000.0  1,000.0  — 

8.625% senior notes due 2025

 — 300.0 (300.0)

4.750% senior notes due 2031

 900.0 900.0 —  900.0  900.0  — 

Other

  0.7   1.5   (0.8)  0.5   0.7   (0.2)

Total long-term debt

 2,910.1 3,069.4 (159.3) 2,942.3  3,088.5  (146.2)

Less current maturities

  44.3   41.7   2.6   44.3   44.3   — 

Long-term debt, net of current maturities

 $2,865.8 $3,027.7 $(161.9) $2,898.0  $3,044.2  $(146.2)

 

Credit Facility

Credit Agreement

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

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

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Amounts Outstanding

The outstanding principal amounts under the Credit Facility and Prior Credit Facility are comprised of the following:

 

  

September 30,

  

December 31,

 

(In millions)

 

2022

  

2021

 

Revolving Credit Facility

 $75.0  $— 

Term A Loan

  858.0   — 

Prior Term A Loan

  —   118.2 

Prior Refinancing Term B Loan

  —   749.7 

Swing Loan

  76.4   — 

Total outstanding principal amounts

 $1,009.4  $867.9 
  

September 30,

  

December 31,

 

(In millions)

 

2023

  

2022

 

Revolving credit facility

 $175.0  $285.0 

Term A loan

  814.0   847.0 

Swing loan

  52.8   55.8 

Total outstanding principal amounts

 $1,041.8  $1,187.8 

 

With a total revolving credit commitment of $1,450.0 million available under the Credit Facility, $75.0$175.0 million and $76.4$52.8 million in borrowings outstanding on the Revolving Credit Facility and the Swing Loan, respectively, and $13.8$13.4 million allocated to support various letters of credit, there iswas a remaining contractual availability under the Credit Facility of $1,284.8$1,208.8 million as of September 30, 2022.2023. 

 

The blended interest rate for outstanding borrowings under the Credit Facility was 4.2%6.9% at September 30, 20222023 and 2.3%6.2% at December 31, 2021.

Redemption of8.625%Senior Notes dueJune 2025

On June 1, 2022, we redeemed the outstanding $300.0 million 8.625% Senior Notes at a redemption price of 104.313% plus accrued and unpaid interest to the redemption date. The redemption, including the redemption premium, accrued and unpaid interest, fees, expenses and commissions related to this redemption, was funded through a combination of cash on hand and borrowings under our Revolving Credit Facility.2022.

 

Debt Service Requirements

Debt service requirements for the Term A Loan include amortization in an annual amount equal to 5.00% of the original principal amount thereof, commencing June 30, 2022, payable on a quarterly basis. Additionally, under the Credit Facility we have monthly to quarterly interest payment obligations, depending on the rates we lock in, for the Term A Loan, unused line interest payments and any outstanding borrowings under the Revolving Credit Facility.Facility, including the Swing Loan. Debt service requirements under our current outstanding senior notes consist of semi-annual interest payments (based upon a fixed annual interest rate of 4.750%) and principal repayments of our $1.0 billion aggregate principal amount of 4.750% Senior Notes due 2027 ("4.750% Senior Notes due 2027") and our $0.9 billion aggregate principal amount of 4.750% Senior Notes due 2031.2031 ("4.750% Senior Notes due 2031").

 

Covenant Compliance

As of September 30, 2022,2023, we were in compliance with the financial covenants of our debt instruments.

 

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

 

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Guarantor Financial Information

In connection with the issuance of our 4.750% Senior Notes due 2027 our 8.625% Senior Notes and our 4.750% Senior Notes due 2031 (collectively, the "Guaranteed Notes" or "Senior Notes"), certain of the Company's wholly owned subsidiaries (the "Guarantors") provide guarantees of those indentures. These Guaranteed Notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. On June 1, 2022, the remaining 8.625% Senior Notes were fully redeemed.

 

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

 

 

September 30,

 

December 31,

  

September 30,

 

December 31,

 

(In millions)

 

2022

 

2021

  

2023

 

2022

 

Current assets

 $410.2  $487.7  $435.0  $443.7 

Noncurrent assets

 10,634.2  10,158.4  9,418.7  8,767.9 

Current liabilities

 547.9  538.1  525.5  534.2 

Noncurrent liabilities

 3,949.3  4,138.4  3,960.4  4,136.8 

 

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

 

 

Nine Months Ended

  

Nine Months Ended

 

(In millions)

 

September 30, 2022

  

September 30, 2023

 

Revenues

 $2,699.4  $2,755.7 

Operating income

 1,327.4  1,312.8 

Income before income taxes

 1,195.0  1,184.4 

Net income

 1,061.0  1,091.3 

 

Share Repurchase ProgramsProgram

On October 21, 2021, our Board of Directors authorized a share repurchase program of $300.0 million (the "Share Repurchase Program"). In addition, our Board of Directors authorized increases to the Share Repurchase Program of $500.0 million on June 1, 2022, and $500.0 million on May 4, 2023. As of September 30, 2023, we were authorized to repurchase up to an additional $426.3 million in shares of our common stock under the Share Repurchase Program. We repurchased 1.6 million and 2.5 million shares during the three months ended September 30, 2023 and 2022, respectively, and 4.8 million and 7.6 million shares during the nine months ended September 30, 2023 and 2022, respectively. 

Subject to applicable corporate securities laws, repurchases under our share repurchase programthe Share Repurchase Program may be made at such times and in such amounts as we deem appropriate. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding senior notesSenior Notes and Credit Facility. Purchases under our share repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the share repurchase program with existing cash resources, cash generated from operations and availability under our Credit Facility.

On October 21, 2021, our Board of Directors authorized a share repurchase program of $300.0 million (the "Share Repurchase Program"). On June 1, 2022, our Board of Directors authorized a $500.0 million increase to the Share Repurchase Program. We are not obligated to repurchase any shares under this program, and purchases under the Share Repurchase Program can be discontinued at any time at our sole discretion. We repurchased 2.5 millionintend to fund the repurchases under the Share Repurchase Program with existing cash resources, cash generated from operations and 7.6 million shares during the three and nine months ended September 30, 2022, respectively. There were no share repurchases during the three and nine months ended September 30, 2021 as we had suspended all share repurchases in March 2020 due to the impact of the COVID-19 pandemic onavailability under our business. As of September 30, 2022, we are authorized to repurchase up to an additional $345.8 million in shares of our common stock.Credit Facility.

 

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

 

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Quarterly Dividend Program

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

 

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

 

Declaration date

 

Record date

 

Payment date

 Amount per share  

Record date

 

Payment date

 

Amount per share

 

February 3, 2022

 

March 15, 2022

 

April 15, 2022

 $0.15  

March 15, 2022

 

April 15, 2022

 $0.15 

June 1, 2022

 

June 30, 2022

 

July 15, 2022

 0.15  

June 30, 2022

 

July 15, 2022

 0.15 

September 15, 2022

 

September 30, 2022

 

October 15, 2022

 0.15  

September 30, 2022

 

October 15, 2022

  0.15 

December 8, 2022

 

December 19, 2022

 

January 15, 2023

 0.15 

February 14, 2023

 

March 15, 2023

 

April 15, 2023

 0.16 

May 4, 2023

 

June 15, 2023

 

July 15, 2023

 0.16 

August 15, 2023

 

September 15, 2023

 

October 15, 2023

 0.16 

 

Other Items Affecting Liquidity

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

 

Commitments

Acquisition

On November 1, 2022, the Company completed its previously announced acquisition of Pala Interactive, LLC ("Pala Interactive") and its subsidiaries, including its Canadian subsidiary Pala Canada Interactive Inc. ("Pala Canada"), for total net cash consideration of $170.1 million. Pala Interactive is an innovative online gaming technology company that provides proprietary solutions on both a business-to-business ("B2B") and business-to-consumer ("B2C") basis in regulated markets across the United States and Canada. We financed the transaction with borrowings under our Revolving Credit Facility.

Capital Spending and Development

We currently estimate that our annual cash capital requirements to perform ongoing refurbishment and maintenance at our properties is approximately $225$240 million to $245$260 million. We fund our capital expenditures through cash on hand, operating cash flows and our Credit Facility and operating cash flows.Facility.

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In addition to the maintenance capital spending discussed above, we continue to pursue other potential development projects that may require us to invest significant amounts of capital, including beginning construction onof a land-based facility at Treasure Chest which will replace our existing riverboat and expansionrenovating the Fremont slot floor, the last phase of the Fremont's casino space and dining options.Fremont project. Both of these projects are in addition to our maintenance capital spending, and we expectexpect to spend an additional $120 million$100 million during 2023 related to these projects through the end of 2023.projects.

 

Other Opportunities

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

 

 

•

the outcome of gaming license selection processes;

 

•

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

 

•

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

 

•

availability of acceptable financing.

 

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

 

Contingencies

Legal Matters

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

 

Off Balance Sheet Arrangements 

There have been no material changes to our off balance sheet arrangements described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the SEC on February 28, 2022.24, 2023.

 

Critical Accounting PoliciesEstimates

There have been no material changes to our critical accounting policies described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the periodyear ended December 31, 2021,2022, as filed with the SEC on February 28, 2022.24, 2023.

 

Recently Issued Accounting Pronouncements

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

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Important Information Regarding Forward-Looking Statements

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

 

 •the general effect, and expectation, of the national and global economy on our business, including but not limited to interest rates and inflationary pressures, as well as the economies where each of our properties are located;
•the factors that contribute to our ongoing success and our ability to be successful in the future;
 •impacts caused by the COVID-19 pandemic or any other public health emergencies we may encounter;
 •our business model, areas of focus and strategy for driving business results;
 •competition, including expansion of gaming into additional markets including internetonline gaming, the impact of competition on our operations, our ability to respond to such competition, and our expectations regarding continued competition in the markets in which we compete;
 

•

our ability to maintain the general effect, and expectation, of the national and global economy on our business, including but not limited to interest rates and inflationary pressures, as well as the economies where eachintegrity of our properties are located;

information technology systems and to protect our internal information;
 

•

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

•

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

 

•

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

 

•

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

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•

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

•

that margin improvements will remain a driver of profit growth for us going forward;our estimates and expectations regarding anticipated taxes, tax credits or tax refunds;
 

•

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

•

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

•

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

 

•

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

 

•

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

•

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

 

Additional factors that could cause actual results to differ are discussed in Part I. Item 1A. Risk Factors of our Annual Report on Form 10-K for the periodyear ended December 31, 2021,2022, and in other current and periodic reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

 

Item 3.        Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not hold any market risk sensitive instruments for trading purposes. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market, short-term and long-term SOFR rates, and their potential impact on our long-term debt. From March 2022 through September 2022, the Federal Reserve has increased the federalWe are exposed to a lesser extent to foreign currency exchange risk for funds rate by 300 basis points. These recent increasesheld in our Canadian operating and restricted cash accounts. While there is risk of fluctuations in the federalforeign exchange rate between the Canadian dollar and US dollar, our exposure is limited given the size of our Canadian operations and the minimal amount of cash held in Canadian bank accounts. A weakening or strengthening of the US dollar to the Canadian dollar by 2x the current conversion rate, would not cause the value of the funds rate may impact the interest paid on our variable-rate borrowings both now andheld in the future. We attemptCanadian operating and restricted cash accounts to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our Credit Facility.change significantly. We do not currently utilize derivative financial instruments for trading or speculative purposes.

 

As of September 30, 2022,2023, our long-term variable-rate borrowings represented approximately 34.7%35.4% of total long-term debt. Based on September 30, 20222023 debt levels, a 100 basis point change in the interest rate would cause our annual interest costs on variable-rate borrowings to change by approximately $10.1$10.4 million. We believe there have been no other material changes in our exposure to market risks as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the SEC on February 28, 2022.24, 2023.

 

See also "Liquidity and Capital Resources" above.

 

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Item 4.        Controls and Procedures

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

 

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

 

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PART II. Other Information

 

Item 1.        Legal Proceedings

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

 

Item 1A.     Risk Factors

There were no material changes from the risk factors previously disclosed in Part I. Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the SEC on February 28, 2022.24, 2023.

 

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

 

The following table discloses share repurchases that we have made pursuant to our share repurchase program during the three months ended September 30, 2022.2023.

 

Period

 

Total Number of Shares Purchased (1)

  

Average Price Paid Per Share

  

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

  

Approximate Dollar Value That May Yet Be Purchased Under the Plan

 

July 1, 2022 through July 31, 2022

  —  $—   —  $480,832,551 

August 1, 2022 through August 31, 2022

  1,072,078   55.97   1,072,078   420,832,103 

September 1, 2022 through September 30, 2022

  1,401,605   53.51   1,401,605   345,836,872 

Total

  2,473,683  $54.57   2,473,683  $345,836,872 

Period

 

Total Number of Shares Purchased (1)

  

Average Price Paid Per Share

  

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

  

Approximate Dollar Value That May Yet Be Purchased Under the Plan

 

July 1, 2023 through July 31, 2023

  —  $—   —  $532,607,760 

August 1, 2023 through August 31, 2023

  864,583   66.53   864,583   475,086,710 

September 1, 2023 through September 30, 2023

  763,194   63.92   763,194   426,306,209 

Total

  1,627,777  $65.30   1,627,777  $426,306,209 

 

(1) All shares repurchased are covered by our share repurchase program as approved by our Board of Directors (the "Share Repurchase Program"). The Board of Directors approved $300.0 million for our Share Repurchase Program on October 21, 2021, and an additional $500.0 million to the Share Repurchase Program on each of June 1, 2022 and May 4, 2023 for a total authorization of $800.0 million.$1.3 billion. The Share Repurchase Program has no expiration date.

Item 5.Other Information

None of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended September 30, 2023, as such terms are defined under Item 408(a) of Regulation S-K.

 

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Item 6.

Exhibits

 

Exhibit Number

 

Document of Exhibit

 

Method of Filing

2.1Purchase Agreement and Plan of Merger, dated as of March 28, 2022, by and among Boyd Interactive, Boyd Phoenix Acquisition, LLC, Boyd Phoenix Canada Inc., Pala Interactive, Pala Canada Holdings, LLC and Shareholder Representative Services LLC as representative of the holders of the membership interests of Pala Interactive.Incorporated by reference to Exhibit 2.1 of the Registrant's Quarterly Report on Form 10-Q, filed with the SEC on May 6, 2022
22 List of Guarantor Subsidiaries of Boyd Gaming Corporation. Incorporated by reference to Exhibit 22 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2021,2022, filed with the SEC on February 28, 202224, 2023
     

31.1

 

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

 

Filed electronically herewith

 

 

 

 

 

31.2

 

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

 

Filed electronically herewith

 

 

 

 

 

32.1

 

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

 

Furnished electronically herewith

 

 

 

 

 

32.2

 

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

 

Furnished electronically herewith

 

 

 

 

 

101

 

The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022,2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 20222023 and December 31, 2021,2022, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 20222023 and 2021,2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20222023 and 2021,2022, (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity for each of the three month quarterly periodsquarters within the nine months ended September 30, 20222023 and 2021,2022, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 20222023 and 2021,2022, and (vi) Notes to Condensed Consolidated Financial Statements.

 

Filed electronically herewith

     
104 

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

 Filed electronically herewith

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, onon November 1, 2023 2022.

 

 

 

BOYD GAMING CORPORATION

 

 

 

 

By:

/s/ Lori M. Nelson

 

 

Lori M. Nelson

 

 

Senior Vice President Financial Operations and Reporting (Authorized Signatory and Interim

Chief Accounting Officer)

Officer

 

 

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