1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-12168
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0242733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 SOUTH INDUSTRIAL ROAD
LAS VEGAS, NEVADA
89109
(Address of principal executive offices)
(Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No
--- ---
Shares outstanding of each of the Registrant's classes of common stock as of
January 31, 1997
Class Outstanding
----- -----------
Common stock, $.01 par value 61,363,015
2
BOYD GAMING CORPORATION
FORM 10-Q
QUARTER ENDED DECEMBER 31, 1996
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Condensed Financial Statements
Consolidated Condensed Balance Sheets at December 31, 1996
and June 30, 1996 3
Consolidated Condensed Statements of Operations for the three and
six months ended December 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows for the six
months ended December 31, 1996 and 1995 5
Consolidated Condensed Statements of Changes in Stockholders' Equity
for the six months ended December 31, 1996 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, JUNE 30,
(IN THOUSANDS, EXCEPT SHARE DATA) 1996 1996
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 70,426 $ 48,980
Accounts receivable, net 25,876 16,040
Inventories 8,850 6,531
Prepaid expenses 19,120 15,265
Income taxes receivable 7,144 --
---------- --------
Total current assets 131,416 86,816
Property, equipment and leasehold interests, net 887,334 797,593
Other assets and deferred charges 60,564 58,489
Goodwill and other intangible assets, net 125,091 10,527
---------- --------
Total assets $1,204,405 $953,425
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,778 $ 4,031
Accounts payable 70,679 47,193
Accrued liabilities
Payroll and related 25,619 22,956
Interest and other 32,231 20,956
Income taxes payable -- 678
---------- --------
Total current liabilities 130,307 95,814
Long-term debt, net of current maturities 775,577 590,808
Deferred income taxes 33,717 33,546
Commitments
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized -- --
Common stock, $.01 par value; 200,000,000 shares authorized;
61,363,015 and 57,213,720 shares outstanding 614 572
Additional paid-in capital 137,305 102,583
Retained earnings 126,885 130,102
---------- --------
Total stockholders' equity 264,804 233,257
---------- --------
Total liabilities and stockholders' equity $1,204,405 $953,425
========== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------- ------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------
Revenues
Casino $138,011 $142,714 $268,208 $269,408
Food and beverage 37,493 35,883 73,387 68,087
Rooms 18,248 17,335 35,449 34,330
Other 15,319 13,466 28,575 23,012
Management fees and joint ventures 10,094 9,746 20,406 20,210
-------- -------- -------- --------
Gross revenues 219,165 219,144 426,025 415,047
Less promotional allowances 20,052 18,855 40,175 35,698
-------- -------- -------- --------
Net revenues 199,113 200,289 385,850 379,349
-------- -------- -------- --------
Costs and expenses
Casino 73,858 69,917 145,928 131,425
Food and beverage 26,007 25,346 50,885 50,776
Rooms 5,784 5,830 12,044 12,299
Other 12,075 9,659 23,266 15,853
Selling, general and administrative 28,226 30,082 58,860 52,559
Maintenance and utilities 9,290 7,185 18,327 15,514
Depreciation and amortization 15,717 15,839 30,834 30,400
Corporate expense 4,315 5,151 10,744 10,510
Preopening expense 3,481 -- 3,481 10,004
-------- -------- -------- --------
Total 178,753 169,009 354,369 329,340
-------- -------- -------- --------
Operating income 20,360 31,280 31,481 50,009
-------- -------- -------- --------
Other income (expense)
Interest income 165 427 342 787
Interest expense, net of amounts
capitalized (13,811) (14,385) (27,069) (26,615)
-------- -------- -------- --------
Total (13,646) (13,958) (26,727) (25,828)
-------- -------- -------- --------
Income before provision for income taxes
and extraordinary item 6,714 17,322 4,754 24,181
Provision for income taxes 2,647 6,755 1,902 9,430
-------- -------- -------- --------
Income before extraordinary item 4,067 10,567 2,852 14,751
Extraordinary loss on early retirement
of debt 6,069 -- 6,069 --
-------- -------- -------- --------
Net income (loss) $ (2,002) $ 10,567 $ (3,217) $ 14,751
======== ======== ======== ========
NET INCOME (LOSS) PER COMMON SHARE
Net income before extraordinary item $ 0.07 $ 0.19 $ 0.05 $ 0.26
Extraordinary item (0.10) -- (0.10) --
-------- -------- -------- --------
Net income (loss) $(0.03) $ 0.19 $ (0.05) $ 0.26
======== ======== ======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
December 31,
--------------------
1996 1995
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (3,217) $ 14,751
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 30,834 30,400
Deferred income taxes 171 990
Extraordinary loss on early retirement of debt 6,069 --
Other 301 (17)
Changes in assets and liabilities:
Increase in accounts receivable, net (9,836) (1,266)
Increase in inventories (2,319) (602)
Increase in prepaid expenses (3,855) (2,098)
Increase in other assets (1,634) (2,825)
Increase in income taxes receivable (7,144) --
Increase in other current liabilities 33,016 23,036
Increase (decrease) in income taxes payable (678) 2,577
-------- --------
Net cash provided by operating activities 41,708 64,946
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash paid for acquisition of Par-A-Dice
Hotel and Casino (170,725)
Acquisition of property, equipment and other assets (79,132) (71,256)
Proceeds from sale of riverboat 20,000 --
-------- --------
Net cash used in investing activities (229,857) (71,256)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Early retirement of long-term debt (157,500) --
Proceeds from issuance of long-term debt 200,000 374
Net borrowings under credit agreements 150,850 (5,750)
Payments on long-term debt (18,334) (16,662)
Proceeds from issuance of common stock 34,579 1,150
-------- --------
Net cash provided by (used in) financing activities 209,595 (20,888)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 21,446 (27,198)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 48,980 83,169
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 70,426 $ 55,971
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized $ 29,950 $ 25,673
======== ========
Cash paid for income taxes $ 4,915 $ 5,881
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Property additions acquired on contracts and trade
payables which were accrued, but not yet paid $ 7,398 $ 3,545
======== ========
Acquisition of Par-A-Dice Hotel and Casino
Fair value of assets acquired $174,800 $ --
Cash paid 170,725 --
======== ========
Liabilities assumed $ 4,075 $ --
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
(In thousands, except share data)
- ------------------------------------------------------------------
Common Stock Additional Total
------------------- Paid-In Retained Stockholder's
Shares Amount Capital Earnings Equity
---------------------------------------------------------
Balances, July 1, 1996 57,213,720 $572 $102,583 $130,102 $233,257
Net loss for the six months
ended December 31, 1996 (3,217) (3,217)
Issuance of common stock 4,000,000 40 33,493 33,533
Stock issued in connection
with employee stock
purchase plan 149,295 2 1,229 1,231
---------- ---- -------- -------- --------
Balances, December 31, 1996 61,363,015 $614 $137,305 $126,885 $264,804
========== ==== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying Consolidated Condensed Financial Statements include the
accounts of Boyd Gaming Corporation and its wholly owned subsidiaries,
collectively referred to herein as the "Company". The Company owns and
operates seven casino entertainment facilities in Las Vegas, Nevada, one in
Tunica, Mississippi, one in Kansas City, Missouri which opened in September
1995 and one in East Peoria, Illinois which was acquired in December 1996. The
Company manages a casino entertainment facility in Philadelphia, Mississippi,
which opened July 1, 1994, for which it has a seven year management contract.
The Company is also part owner of and manages a riverboat gaming operation in
Kenner, Louisiana which opened in September 1994. The Company has recently
entered into an agreement to sell its interest in the entity which owns the
Kenner gaming operation (See Note 3. Additional Information - Treasure Chest
Casino). All material intercompany accounts and transactions have been
eliminated.
Basis of Presentation
In the opinion of the Company, the accompanying unaudited Consolidated
Condensed Financial Statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the results of its
operations for the three and six months ended December 31, 1996 and 1995 and
its cash flows for the six months ended December 31, 1996 and 1995. It is
suggested that this report be read in conjunction with the Company's audited
financial statements included in the Annual Report on Form 10-K for the fiscal
year ended June 30, 1996. The operating results for the three and six months
ended December 31, 1996 and cash flows for the six months ended December
31, 1996 are not necessarily indicative of the results that will be achieved
for the full fiscal year or for future periods.
Net Income (Loss) Per Common Share
Net income (loss) per common share is based upon the weighted average number of
common stock and common stock equivalents outstanding during the period which
were 61,084,908 and 57,000,283 for the three months ended December 31, 1996 and
1995, respectively, and 59,149,914 and 56,999,650 for the six months ended
December 31, 1996 and 1995, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of 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 those estimates.
Goodwill and Other Intangible Assets
The excess of total acquisition costs over the fair value of assets acquired is
amortized using the straight-line method over 40 years.
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Recently Adopted Accounting Standards
The FASB issued SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets to Be Disposed Of, in March 1995. This statement was adopted by the
Company for the fiscal year beginning July 1, 1996 and requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The adoption of SFAS No. 121 did
not have an effect on the financial position or results of operations of the
Company as of December 31, 1996.
The FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, in
October 1995. This statement was adopted by the Company for the fiscal year
beginning July 1, 1996 and requires certain disclosures about the impact on
results of operations of the fair value of stock based employee compensation
arrangements. Management intends to continue to account for stock based
employee compensation arrangements in accordance with Accounting Principles
Board No. 25, Accounting for Stock Issued to Employees, and accordingly
believes that adoption of SFAS No. 123 will not have a significant effect on
the financial position or results of operations of the Company. The Company
will include the pro forma effects of this statement in its notes to financial
statements for the year fiscal ending June 30, 1997.
NOTE 2. CAPITAL STOCK
Two hundred million shares of common stock with a par value of $.01 per share
are authorized, of which 61,363,015 and 57,213,720 shares were issued at
December 31, 1996 and June 30, 1996, respectively, including no treasury
shares at December 31, 1996 and June 30, 1996.
The Company has authorized 5,000,000 shares of $.01 par value preferred stock
of which no shares were issued at December 31, 1996 and June 30, 1996.
NOTE 3. ADDITIONAL INFORMATION
Sale of Riverboat
On August 23, 1996, the Company sold its riverboat Mary's Prize for $20 million
and retired debt of $17.6 million in connection therewith. Projects for which
Mary's Prize was constructed have either been delayed or did not materialize.
Debt and Equity Offerings
On October 4, 1996, the Company issued $200 million of 9.25% Senior Notes and
sold 4.0 million shares of the Company's Common Stock in two registered public
offerings. The net proceeds of these offerings of approximately $230 million
were used to reduce outstanding indebtedness under the Company's bank credit
facility.
On November 4, 1996, the Company redeemed its $150 million 10.75% Notes with
borrowings under its bank credit facility. As a result, the Company recognized
an extraordinary loss of $6.1 million, net of tax benefit of $3.3 million,
related to the early retirement of the 10.75% Notes.
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The $200 million in Senior Notes are guaranteed by all existing significant
subsidiaries of the Company. The guaranties are full, unconditional, and joint
and several. All of the Company's significant subsidiaries are wholly-owned.
Assets, equity, income and cash flows of all other subsidiaries of the Company
that do not guaranty the notes are less than 3% of the respective consolidated
amounts and are inconsequential, individually and in the aggregate, to the
Company. The Company has not included separate financial information of the
guarantors since such information is not material to investors.
The Company, through its wholly owned subsidiary California Hotel Finance
Company, has $185 million principal amount of 11% senior subordinated notes due
December 2002. The notes contain certain covenants regarding incurrence of
debt, sales and disposition of assets, mergers or consolidations and
limitations on restricted payments (as defined in the indenture to the notes).
As a result of these restrictions, at December 31, 1996 California Hotel and
Casino (a wholly owned subsidiary of the Company) had a portion of its retained
earnings and its net assets in the amounts of $31.7 million and $86.9 million ,
respectively, that were not available for distribution as dividends to the
Company.
Treasure Chest Casino
The Company has agreed to sell its 15% interest in Treasure Chest Casino L.L.C.,
owner of the Treasure Chest Casino in Kenner, Louisiana. The interest is being
purchased by both Treasure Chest Casino L.L.C. and its majority owner for a
purchase price of $15.2 million. The Company does not expect to record a
significant gain or loss on this sale. The sale, which is subject to various
governmental and regulatory approvals, is expected to close in the Company's
third fiscal quarter and will not result in a material gain or loss for the
Company. The Company, through its wholly owned subsidiary, Boyd Kenner, Inc.,
expects to manage Treasure Chest Casino until approximately October 1997.
Par-A-Dice Acquisition
On December 5, 1996 the Company completed the acquisition of Par-A-Dice Gaming
Corporation, owner and operator of the Par-A-Dice riverboat casino in East
Peoria, Illinois and East Peoria Hotel, Inc., the general partner of a
partnership which recently opened a 204-room hotel adjacent to the Par-A-Dice
casino for a purchase price of approximately $172 million subject to certain
adjustments as set forth in the stock purchase agreement. The fair value of the
net assets exceeded the purchase price by approximately $115 million. The pro
forma income statement effects of the acquisition as if it had occurred as of
July 1, 1995 are as follows:
SIX MONTHS ENDED
DECEMBER 31,
---------------------
PRO FORMA (IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995
- ----------------------------------------------- --------- --------
Net revenues $428,998 $432,371
-------- --------
Income before extraordinary item $ 5,860 $ 18,699
-------- --------
Net income (loss) $ (209) $ 18,699
-------- --------
Net income (loss) per common share:
- ----------------------------------
Net income before extraordinary item $ .10 $ .33
-------- --------
Net income (loss) $ .00 $ .33
======== ========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------- ------------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
NET REVENUES
Stardust $ 46,024 $ 48,612 $ 91,290 $ 96,406
Boulder Strip Properties 51,538 50,492 96,758 93,404
Downtown Properties 37,375 36,311 70,577 68,762
Central Region 60,465 64,086 119,432 119,989
-------- -------- -------- --------
TOTAL PROPERTIES $195,402 $199,501 $378,057 $378,561
-------- -------- -------- --------
OPERATING INCOME
Stardust $ 4,870 $ 7,114 $ 8,342 $ 12,917
Boulder Strip Properties 7,607 6,673 11,419 9,566
Downtown Properties 3,764 5,995 6,130 8,979
Central Region 12,581 17,747 21,782 40,888
Preopening expense (3,481) --- (3,481) (10,004)
-------- -------- -------- --------
TOTAL PROPERTIES $ 25,341 $ 37,529 $ 44,192 $ 62,346
======== ======== ======== ========
THE ABOVE TABLE SETS FORTH FOR THE PERIODS INDICATED CERTAIN INCOME STATEMENT
DATA FOR THE COMPANY'S PROPERTIES. AS USED HEREIN, "BOULDER STRIP PROPERTIES"
CONSIST OF SAM'S TOWN LAS VEGAS, THE ELDORADO AND JOKERS WILD; "DOWNTOWN
PROPERTIES" CONSIST OF THE CALIFORNIA, THE FREMONT AND MAIN STREET STATION
(OPENED NOVEMBER 1996); AND "CENTRAL REGION" CONSIST OF SAM'S TOWN TUNICA, SAM'S
TOWN KANSAS CITY (OPENED SEPTEMBER 1995), PAR-A-DICE (ACQUIRED DECEMBER 1996),
MANAGEMENT FEE INCOME FROM SILVER STAR HOTEL AND CASINO, AND MANAGEMENT FEE AND
JOINT VENTURE INCOME FROM TREASURE CHEST CASINO. OPERATING INCOME FROM
PROPERTIES AS SHOWN IN THE TABLE EXCLUDES CORPORATE EXPENSE, INCLUDING RELATED
DEPRECIATION AND AMORTIZATION, AND THE RESULTS OF THE COMPANY'S HAWAIIAN TRAVEL
AGENCY, WHICH ITEMS ARE NOT ALLOCATED TO THE PROPERTIES.
REVENUES
Consolidated net revenues declined slightly for the three-month period
ended December 31, 1996 compared to the same period in the prior fiscal year
with Company-wide casino revenue declining 3.3%, food and beverage revenue
increasing 6.7% and rooms revenue increasing 2.7%. Consolidated net revenues
for the current fiscal quarter were enhanced by the opening of Main Street
Station Casino, Brewery and Hotel in downtown Las Vegas on November 22, 1996,
the acquisition of Par-A-Dice Hotel and Casino, located in East Peoria,
Illinois on December 5, 1996 and the opening of a new 350-room hotel tower at
Sam's Town Tunica in December 1996. In the Company's Nevada Region revenues
decreased slightly (.4%) for the three month period ended December 31, 1996
compared to the same period in the prior fiscal year. Revenues at the Stardust
declined 5.3% while revenues increased 2.1% at the Boulder Strip properties and
revenues increased 2.9% at the Downtown Properties for the current three month
period versus the comparable period of the prior year. The increase in
revenues at the Downtown Properties was attributable to revenues from Main
Street Station which opened in November 1996. In the Company's Central Region
revenues decreased 5.7% for the three months ended December 31,
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1996 compared to the prior year period. Revenues from Par-A-Dice Hotel and
Casino, which was acquired in December 1996, partially offset declines in
revenues at Sam's Town Tunica and Sam's Town Kansas City. Management fee and
joint venture income increased 1.4% for the three months ended December 31,
1996.
Consolidated net revenues increased 1.7% for the six month period
ended December 31, 1996 compared to the same period in the prior fiscal year.
Company-wide casino revenue declined .4% and rooms revenue declined 4.1% from
the prior year while food and beverage revenue increased 6.7% compared to the
prior year. In the Company's Nevada Region revenues were unchanged for the six
month period ended December 31, 1996 compared to the same period in the prior
fiscal year. Revenue increases of 3.6% at the Boulder Strip Properties and
2.6% at the Downtown Properties were offset by a 5.3% decline in revenue at the
Stardust for the six month period. Revenues at the Downtown Properties were
enhanced for the six month period by the opening of Main Street Station in
November 1996. In the Central Region revenues declined slightly (.5%) for the
six months ended December 31, 1996. Central Region revenues were enhanced for
the six months ended December 31, 1996 with revenues from Par-A-Dice Hotel and
Casino, acquired in December 1996, the opening of a new 350-room hotel tower at
Sam's Town Tunica in December 1996 and Sam's Town Kansas City which operated
for only part of last year's first six month period.
OPERATING INCOME
Consolidated operating income for the second quarter of fiscal 1997
was $20.4 million versus $31.2 million in the prior year's second quarter.
Consolidated operating income for the current quarter includes preopening
expense of $3.5 million related to the opening of Main Street Station. The
decrease in consolidated operating income resulted from a 29% decline in
operating income in the Central Region and a 18% decline in operating income in
the Nevada Region. Operating income in the Central Region includes management
fees and joint venture income related to the Company's Silver Star Hotel and
Casino and Treasure Chest Casino operations. Consolidated operating income
margin declined to 10.2% from 15.6% for the second quarter of fiscal 1997
versus the same period in fiscal 1996. This decrease resulted primarily from
operating income margin in the Nevada Region declining to 12.0% from 14.6% and
operating income margin declining to 20.8% from 27.7% in the Central Region
for the second fiscal quarter of 1997 compared to the prior year's second
quarter.
Consolidated operating income for the six months ended December 31, 1996
was $31.5 million versus $50.0 million in the comparable period in the prior
fiscal year. Consolidated operating income for the current quarter includes
preopening expense of $3.5 million related to the opening of Main Street
Station. The decrease in consolidated operating income resulted primarily from a
47% decline in operating income in the Central Region and a 17.7% decline in
operating income in the Nevada Region. Consolidated operating income margin
declined to 8.2% from 13.2% for the six months ended December 31, 1996 compared
to the same period in the prior fiscal year. This decrease resulted primarily
from operating margin in the Nevada Region declining to 10.0% from 12.2% and
operating income margin in the Central Region declining to 18.2% from 34.1% for
the six months ended December 31, 1996 versus the comparable period in the prior
fiscal year.
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STARDUST
Net revenues at the Stardust decreased 5.3% for the second quarter of
fiscal 1997 versus the second quarter in the prior fiscal year. Casino revenue
declined 6.6% primarily as a result of lower win percentage in the race and
sports books partially offset by a 17% increase in wagering volume. Table
games and slots produced comparable wagering and win for the three months ended
December 31, 1996 versus the comparable period in the prior fiscal year. Rooms
revenue for the three months ended December 31, 1996 decreased 5.1% with a 1.2%
increase in occupied rooms offset by a .8% decline in average daily room rate.
Operating income decreased $2.2 million (32%) for the three months ended
December 31, 1996 versus the comparable period in the prior fiscal year.
Operating income margin for the second quarter of fiscal 1997 declined to 10.6%
from 14.6% in the prior year's second fiscal quarter. The decline in operating
income and operating income margin is primarily a result of lower revenues
leading to decreased operating income and operating income margins in the
casino and rooms departments and increased marketing and promotional expenses.
For the six months ended December 31, 1996 net revenues at the
Stardust decreased 5.3% compared to the comparable period in the prior fiscal
year. Casino revenue declined 6.0% as a result of lower win percentages in the
casino and race and sports book partially offset by increased wagering volumes.
Rooms revenue for the six months ended December 31, 1996 decreased 9.0% with a
1.2% increase in occupied rooms offset by an 1.7% decrease in average daily
room rate. Operating income margin for the six months ended December 31, 1996
declined to 9.1% from 13.4% in the prior year's six month period. Operating
income declined $4.6 million (35%) for the six months ended December 31, 1996
versus the comparable period in the prior fiscal year. The decline in
operating income and operating income margin is primarily a result of lower
revenues leading to decreased operating income and operating income margins in
the casino and rooms departments and increased marketing and promotional
expenses.
BOULDER STRIP PROPERTIES
Net revenues at the Boulder Strip Properties increased 2.1% for the
three months ended December 31, 1996 compared to the same period in the prior
fiscal year primarily as a result of a 3.0% increase in revenues at the Sam's
Town Las Vegas. Casino revenues at the Boulder Strip Properties increased 2.2%
for the three months ended December 31, 1996. Rooms revenue and food and
beverage revenue increased 22.5% and 4.1%, respectively, for the three months
ended December 31, 1996 compared to the comparable period in the prior fiscal
year. The operating income margin at the Boulder Strip Properties increase to
14.8% from 13.2% for the three months ended December 31, 1996 versus the
comparable period in the prior fiscal year due primarily to improved operating
margins at Sam's Town Las Vegas in the casino, rooms and food and beverage
departments.
For the six months ended December 31, 1996 net revenues at the Boulder
Strip Properties increased 3.6% compared to the same period in the prior fiscal
year primarily as a result of a 5.3% increase in revenues at Sam's Town Las
Vegas. Casino revenues at the Boulder Strip Properties increased 4.4% for the
six months ended December 31, 1996 versus the comparable period in the prior
fiscal year, while rooms revenue and food and beverage revenue increased
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9.5% and 2.1%, respectively. The operating income margin in the Boulder Strip
Properties increased to 11.8% from 10.2% for the six months ended December 31,
1996 versus the comparable period in the prior fiscal year due primarily to
improved operating margins at Sam's Town Las Vegas in the casino, rooms and
food and beverage departments.
DOWNTOWN PROPERTIES
Net revenues at the Downtown Properties increased 2.9% for the three
months ended December 31, 1996 compared to the same period in the prior year as
a result of the opening of Main Street Station in November 1996. Net revenues
at the California decreased 15.7% for the three months ended December 31, 1996
with casino revenue declining 16.8%, rooms revenue declining 24.1 % and food
beverage revenue declining 9.1%. Casino revenue at the California declined as
a result of lower wagering volumes and a lower win percentage for the three
months ended December 31, 1996 versus the comparable period in the prior fiscal
year. Rooms revenue at the California declined as a result of a 8.1% decrease
in occupied rooms for the three months ended December 31, 1996 versus the
comparable period in the prior fiscal year. At the Fremont, net revenues
decreased 2.9% for the three months ended December 31, 1996 versus the
comparable period in the prior fiscal year with casino revenue decreasing 7.0%
and food and beverage increasing 7.8% while rooms revenue was unchanged.
Operating income margins at the Downtown Properties were 10.1% for the three
months ended December 31, 1996 versus 16.5% in the comparable period in the
prior fiscal year with operating income margins at both the California and
Fremont declining. Operating income margins at the California declined in the
casino and rooms departments as a result of lower revenues, while operating
income margins at the Fremont declined due to decreases in the casino and rooms
departments as a result of lower revenues which were partially offset by
increased margins in the food and beverage departments. Downtown Properties
results for the three months ended December 31, 1996 include Main Street
Station which opened in November 1996. Through December 31, 1996, Main Street
Station contributed $4.6 million in revenue and produced a small operating loss
before preopening expense. Upon commencement of operations a preopening charge
of $3.5 million was recorded.
Net revenues at the Downtown Properties increased 2.6% for the six
months ended December 31, 1996 compared to the same period in the prior fiscal
year. Net revenues at the California decreased 11.0% for the first six months
of fiscal 1997 with casino revenue declining 11.7%, rooms revenue declining
15.6% and food and beverage revenue declining 6.6%. All revenues were impacted
due to a rooms remodel project at the California in the first quarter of fiscal
1997. The California had approximately 15% of its rooms base unavailable in
the first fiscal quarter of 1997. At the Fremont, net revenues increased 3.9%
for the six month period ended December 31, 1996 versus the comparable period
in the prior fiscal year, with casino revenue increasing .7% and rooms and food
and beverage increasing .4% and 17.1%, respectively. Operating income margins
at the Downtown Properties were 8.7% for the six months ended December 31, 1996
versus 13.1 % in the comparable period in the prior fiscal year with operating
income margins at both the California and Fremont declining primarily as a
result of lower revenues. Operating income margins at the California declined
in the casino and rooms departments while operating income margins at the
Fremont declined due to decreases in the casino and rooms departments which
were partially offset by increased margins in the food and beverage
departments. Revenues for the Downtown Properties were enhanced in all
departments
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by the opening of Main Street Station in November 1996 which contributed $4.6
million in revenues and produced a slight operating loss before preopening
expense.
CENTRAL REGION
The Central Region produced net revenues of $60.5 million for the
three months ended December 31, 1996 versus $64.1 million in last year's three
month period ended December 31, 1995. Sam's Town Tunica net revenues decreased
22.4% to 27.3 million in the second quarter of fiscal 1997 versus $35.1 million
in the second quarter of the prior fiscal year. Management fee and joint
venture income from Silver Star and Treasure Chest totaled $10.1 million for
the three months ended December 31, 1996 compared to $9.7 million in the prior
year's second fiscal quarter. Revenues for the three month period were
enhanced by the acquisition of Par-A-Dice Hotel and Casino on December 5, 1996
and the opening of a new 350-room hotel tower at Sam's Town Tunica. Par-A-Dice
produced net revenues of $7.5 million in its first 27 days of operation.
Operating income and operating income margin in the Central Region declined to
$12.6 million and 20.8%, respectively, for the second quarter of fiscal 1997
versus $17.7 million and 27.7%, respectively, in the comparable period in the
prior fiscal year. Contributing to the decline in operating income and
operating income margin in the Central Region was a $2.5 million operating loss
at Sam's Town Kansas City for the second quarter of fiscal 1997. Sam's Town
Kansas City continues to operate at a loss and management is currently
evaluating its options including additional aggressive cost containment
measures. In addition, Sam's Town Tunica reported a $4.3 million operating
income decline for the second fiscal quarter ended December 31, 1996 versus the
comparable period in the prior fiscal year. This decline was primarily due to
the effects of increased competition and the continuing effects of the
construction disruption related to a 350-room hotel addition along with an
additional 1,000 space parking garage. Both were open and operating in
December 1996. Operating income margin at Sam's Town Tunica declined to 14.2%
for the quarter ended December 31, 1996. The Central Region results include
the full revenues and income from Sam's Town Tunica, Sam's Town Kansas City
(opened September 1995), Par-A-Dice Hotel and Casino (acquired December 5,
1996), management fee income from Silver Star Hotel and Casino and management
fee and joint venture income from Treasure Chest Casino. The Company has
agreed to sell its 15% interest in Treasure Chest Casino L.L.C., owner of the
Treasure Chest Casino for a purchase price of $15.2 million. The sale,
which is subject to various governmental and regulatory approval is expected to
close during the Company's third quarter of fiscal 1997. The Company, through
its wholly owned subsidiary Boyd Kenner, Inc., expects to manage Treasure Chest
until approximately October 1997.
The Central Region produced net revenues of $119.4 million for the six
months ended December 31, 1996 versus $120.0 million in last year's comparable
period. Sam's Town Tunica net revenues decreased 24.0% to $57.5 million in the
first six months of fiscal 1997 versus $75.7 million for the first six months
of the prior fiscal year as a result of construction disruption and increased
competition in the Tunica market. Management fee and joint venture income from
Silver Star and Treasure Chest totaled $20.4 million for the six months ended
December 31, 1996 compared to $20.2 million in the prior year's first six
months. Revenues were enhanced by Sam's Town Kansas City, which was open for
the entire six months of the current year and produced net revenues of $34.0
million versus $24.1 million in last year's first six month period. Sam's Town
Kansas City opened September 13, 1995 and therefore only has 110 days of
results
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included in the prior year period. In addition, revenues were enhanced by the
acquisition of Par-A-Dice Hotel and Casino on December 5, 1996. Par-A-Dice
produced $7.5 million in revenues in its first 27 days of operations.
Operating income and operating income margin in the Central Region declined to
$21.8 million and 18.2%, respectively, for the first six months of fiscal 1997
versus $40.9 million and 34.1%, respectively, in the comparable period in the
prior fiscal year. Contributing to the decline in operating income and
operating income margin in the Central Region was a $6.6 million operating loss
at Sam's Town Kansas City for the first six months of fiscal 1997. Sam's Town
Kansas City continues to operate at a loss and management continues to evaluate
its options including additional aggressive cost containment measures. In
addition, Sam's Town Tunica reported a $13.5 million operating income decline
for the first six months of fiscal 1997 versus the comparable period in the
prior fiscal year. This decline was primarily due to the effects of increased
competition and the continuing effects of the construction disruption related
to the 350-room hotel tower addition along with an additional 1,000 space
parking garage. Operating income margin at Sam's Town Tunica declined to 11.8%
for the six months ended December 31, 1996.
In accordance with the provisions of SFAS No. 121, management has been
reviewing, on a quarterly basis, whether anticipated net cash flows from Sam's
Town Kansas City will be sufficient to recover the Company's investment in that
property. At December 31, 1996, the Company had approximately $138 million in
recorded net long-lived assets and intangibles associated with Sam's Town Kansas
City. A number of factors are considered in the evaluation of recoverability,
including, but not limited to, anticipated revenues and the duration thereof,
expected operating costs, the competitive environment and future legislative and
regulatory changes. Although at December 31, 1996 the results of the Company's
analysis prepared in accordance with the provisions of SFAS No. 121 did not have
an effect on the carrying amount of Sam's Town Kansas City, there can be no
assurance that this will be true in future periods. Management will continue to
monitor the effects of SFAS No. 121 on the carrying amount of Sam's Town Kansas
City. In addition to such monitoring, the Company is continuing its efforts to
improve operating results at Sam's Town Kansas City through, among other things,
property enhancements and improving operating efficiencies. However, under
Missouri's restrictive gaming laws and given the current competitive environment
the Company believes significant improvement to acceptable levels is unlikely.
The Company is encouraging elected officials in Missouri to change existing
regulations principally wagering limits and simulated cruising requirements, to
allow for a more customer friendly gaming experience and a more profitable
gaming operation which in turn will enhance Missouri's goal of tax revenue
generation, job creation and general economic development. If some legislative
and regulatory relief is not forthcoming, the Company will evaluate its
alternatives with respect to its operations at Sam's Town Kansas City and the
possible write down of its investment in that property.
Included in the three and six month results ended December 31, 1996 is
a preopening charge of $3.5 million taken upon the opening of Main Street
Station in November 1996. A $10.0 million preopening charge was taken in the
prior year's first six months related to the opening of Sam's Town Kansas City.
Interest expense, net of amounts capitalized was $13.8 million for the
second quarter of fiscal 1997 compared to $14.4 million in the second quarter
of the prior year. The Company incurred lower interest expense for the quarter
ended December 31, 1996 as a result of lower net
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borrowings during the second quarter of fiscal 1997 compared to the comparable
period in the prior year. Depreciation expense decreased slightly primarily as
a result of the opening of Sam's Town Kansas City and other expansion projects
offsetting lower depreciation on older properties in the Nevada Region.
Interest expense, net of amounts capitalized was $27.1 million for the
first six months of fiscal 1997 compared to $26.6 million in the prior years
first six months. Depreciation expense increased slightly with increased
depreciation from Sam's Town Kansas City and other expansion projects being
offset by lower depreciation in the Nevada Region.
In connection with the redemption of the Company's $150 million 10.75%
Notes the Company recognized an extraordinary loss of $6.1 million, net of tax,
in the second fiscal quarter of 1997.
As a result of these factors, the Company reported a net loss of $2.0
million in the second fiscal quarter of fiscal 1997 versus net income of $10.6
million in the prior years second fiscal quarter.
For the six months ended December 31,1996 the Company reported a net
loss of $3.2 million versus net income of $14.8 in the comparable period in the
prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31, 1996, the Company's principal
source of funds was net cash provided by operating activities and financing
activities. Net cash provided by operating activities was $41.8 million versus
$64.9 million in the prior year's first six months ended December 31, 1996.
Net cash provided by financing activities for the six months ended December 31,
1996 was $210 million which is primarily attributed to issuance of long-term
debt and proceeds received from the Company's issuance of 4.0 million shares of
common stock. As of December 31, 1996, the Company had balances of cash and
cash equivalents of approximately $70.4 million and had approximately $114
million available under bank credit agreements.
The Company's principal uses of funds for the six months ended
December 31, 1996 were cash used in investing activities, mainly for capital
expenditures. Net cash used in investing activities for the six months ended
December 31, 1996 was $230 million and included $172 million for the
acquisition of Par-A-Dice Hotel and Casino, completed on December 5, 1996.
In addition, $32 million was related to the Main Street Station project and
$32 million was related to a new 350-room hotel tower and a 1,000 space
parking garage project at Sam's Town Tunica.
On December 5, 1996 the Company completed the acquisition of
Par-A-Dice Gaming Corporation, owner and operator of the Par-A-Dice riverboat
casino in East Peoria, Illinois and East Peoria Hotel, Inc., the general
partner of a partnership which recently opened a 204-room hotel adjacent to the
Par-A-Dice casino. The total purchase price was approximately $172 million.
The Company's source of funds for the Par- A-Dice acquisition was borrowings
under its bank credit facility.
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The Company, as part of its ongoing strategic planning process, has
recently completed a review of its current growth opportunities. Based on this
review, the Company expects to be focusing its growth efforts in two areas. In
Nevada, the Company has decided to refocus its efforts on the Stardust Resort &
Casino. The Company is considering the next phase of its master plan for the
Stardust, which calls for, among other things, as many as two additional hotel
towers. In addition, the Company has determined that the 61-acre Stardust site
is capable of accommodating the development of an entirely new casino
entertainment facility adjacent to the existing Stardust and is continuing to
explore the feasibility of such a project. Outside Nevada, the Company is
focusing its efforts on its joint venture with Mirage Resorts, Inc. On May 29,
1996, the Company, through a wholly owned subsidiary, executed a joint venture
agreement with Mirage Resorts, Inc., (the "Mirage Joint Venture") to jointly
develop and own a casino hotel entertainment facility in the Marina district of
Atlantic City, New Jersey (the "Atlantic City Project"). The Atlantic City
Project is expected to include a hotel of at least 1,000 rooms and is expected
to be adjacent and connected to Mirage's planned wholly-owned resort. The
Company believes that certain highway improvements to permit greater access to
the Marina District of Atlantic City will be necessary to support the
multi-facility casino entertainment development master-planned by Mirage. On
January 10, 1997 Mirage and the State of New Jersey and South Jersey
Transportation Authority entered into a definitive agreement by which the
highway improvements can be funded and built. The Company's joint venture
agreement with Mirage provides for $100 million in capital contributions by the
Company during the course of the construction of the Atlantic City Project. The
Company plans to fund its capital contributions primarily from cash flow from
operations and availability under its bank credit facility. During the first
quarter of fiscal 1997 the Company purchased a casino hotel site in Reno, Nevada
with plans to develop Sam's Town Reno on the site. The Company has determined
that the development of the Stardust Master Plan and the Atlantic City Project
should take priority over the Sam's Town Reno project at this time.
There can be no assurance that any of the above mentioned projects
will go forward and ultimately become operational. The source of funds
required to meet the Company's working capital needs (including maintenance
capital expenditures) and those required to complete the above mentioned
projects is expected to be cash on hand, cash flow from operations,
availability under its bank credit facility, new borrowings to the extent
permitted under existing debt agreements, the issuance of additional equity and
vendor and other financing. No assurance can be given that required financing
strategies can be effected on satisfactory terms.
The Bank Credit Facility contains certain financial and other covenants,
including, without limitation, various covenants (i) requiring the maintenance
of a minimum Tangible Net Worth, (ii) requiring the maintenance of a minimum
Fixed Charge Coverage Ratio, (iii) establishing a maximum permitted Funded Debt
to EBITDA, (iv) imposing limitations on the incurrence of additional
indebtedness and the creation of liens, (v) imposing limits on the maximum
permitted Maintenance Capital Expenditures, restrictions on Investments, the
purchase or redemption of subordinated debt prior to its stated maturity,
dividends and other distributions and the redemption or purchase of capital
stock of the Company. As of December 31, 1996, the Company is in compliance with
all of its covenants under its bank credit facility; however, to provide for
continued compliance with its covenants in future periods and to provide the
Company with greater flexibility, the Company is currently in discussions with
its banks to amend a number of those covenants.
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The Company, through its wholly owned subsidiary California Hotel
Finance Company, has $185 million principal amount of 11% Senior Subordinated
Notes due December 2002. The Notes contain certain covenants, including but
not limited to limitations on restricted payments (as defined in the indenture
related to the notes). As a result of these restrictions, at December 31, 1996
California Hotel and Casino ( a wholly owned subsidiary of the Company) had a
portion of its retained earnings and net assets, in the amounts of $32.0
million and $87.2 million, respectively, that were not available for
distribution as dividends to the Company.
On October 4, 1996, the Company issued $200 million of 9.25% Senior
Notes and sold 4.0 million shares of the Company's Common Stock. The net
proceeds of these offerings of approximately $230 million were used to reduce
outstanding indebtedness under the Company's bank credit facility. On November
4, 1996, the Company redeemed its $150 million 10.75% Notes with borrowings
under its bank credit facility. Also, on August 23, 1996, the Company sold its
riverboat Mary's Prize for $20 million and retired debt of $17.6 million in
connection therewith.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information included in this
Form 10-Q and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are forward looking, such as statements relating to
plans for future expansion and other business development activities as well as
other capital spending, financing sources, and the effects of regulation (
including gaming and tax regulation) and competition. Such forward looking
statements involve important risks and uncertainties that could significantly
affect anticipated results in the future, and accordingly, actual results may
differ materially form those expressed in any forward looking statements made
by or on behalf of the Company. These risks and uncertainties include, but are
not limited to, those related to construction and development activities,
economic conditions, changes in tax laws, changes in laws or regulations
affecting gaming licenses, changes in competition, and factors affecting
leverage and debt service including sensitivity to fluctuation in interest
rates, and other factors described from time to time in the Company's reports
filed with the Securities and Exchange Commission, including the Company's Form
10-K for the year ended June 30, 1996 and its Registration Statements (File
Nos. 333-05555 and 333-05521) related to its recent offerings of 9.25% Senior
Notes and Common Stock. Any forward looking statements are made pursuant to
the Private Securities Litigation Reform Act of 1995 and, as such, speak only
as of the date made.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on November 22,
1996 to elect three Class II directors, to ratify the appointment of
the independent auditors of the Company and approve the Boyd Gaming
Corporation 1997 Stock Incentive Plan and authorize the number of
members of the Board of Director's to 15.
At the annual meeting, all of the nominees were elected as follows:
VOTES
-----
FOR WITHHELD
--- --------
Class II (term expiring in 1999)
William R. Boyd 52,939,749 348,216
Warren L. Nelson 52,957,259 330,706
Donald D. Snyder 53,028,485 259,480
In addition, the following individuals continue as directors:
Class III (term expiring in 1997)
Kenny Guinn
Marianne Boyd Johnson
Charles L. Ruthe
Class I (terms expiring in 1998)
William S. Boyd
Perry B. Whitt
The stockholders ratified the selection of Deloitte and Touche LLP as
independent auditors for the Company for the fiscal year ended June
30, 1997 with voting as follows: [53,131,338] for; [130,475] against;
[26,252] non-votes.
The stockholders approved the Boyd Gaming Corporation 1997 Stock
Incentive Plan as follows:
[51,078,854] for; [1,775,261] against; [120,439] non-votes.
The stockholders approved an increase in the authorized number of
members of the Board of Directors to 15 as follows: [52,117,957] for;
[1,125,188] against; [41,794] non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Restated Bylaws
27. Financial Data Schedule
(b) Reports on form 8-K.
None.
(c) Amended By Laws and Articles
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BOYD GAMING CORPORATION
(Registrant)
Date: February 14, 1997 By /s/ Keith Smith
----------------------------------
Keith Smith
Senior Vice President and
Controller (Chief Accounting Officer)
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