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 September 30, 1997
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
October 31, 1997
Class Outstanding
----- -----------
Common stock, $.01 par value 61,523,988
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BOYD GAMING CORPORATION
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1997
and June 30, 1997 3
Condensed Consolidated Statements of Operations for the three
months ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Changes in Stockholders'
Equity for the three months ended September 30, 1997 5
Condensed Consolidated Statements of Cash Flows for the three
months ended September 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
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Part I. Financial Information
Item 1. Financial Statements
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) September 30, June 30,
(In thousands, except share data) 1997 1997
- --------------------------------- ---------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 60,666 $ 55,220
Accounts receivable, net 14,710 16,946
Inventories 8,745 8,501
Prepaid expenses 16,151 14,873
---------- ----------
Total current assets 100,272 95,540
Property and equipment, net 736,996 744,038
Other assets and deferred charges 62,327 56,944
Deferred income taxes 7,442 8,533
Goodwill and other intangible assets, net 124,326 125,130
---------- ----------
Total assets $1,031,363 $1,030,185
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,862 $ 1,841
Accounts payable 28,682 30,760
Accrued liabilities
Payroll and related 26,741 24,648
Interest and other 55,811 40,725
Income taxes payable 2,705 1,103
---------- ----------
Total current liabilities 115,801 99,077
Long-term debt, net of current maturities 718,370 739,792
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares, authorized -- --
Common stock, $.01 par value; 200,000,000 shares authorized;
61,523,988 shares outstanding 615 615
Additional paid-in capital 138,091 138,091
Retained earnings 58,486 52,610
---------- ----------
Total stockholders' equity 197,192 191,316
---------- ----------
Total liabilities and stockholders' equity $1,031,363 $1,030,185
========== ==========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
(Unaudited) ------------------------
(In thousands, except per share data) 1997 1996
- ------------------------------------- --------- ---------
Revenues
Casino $ 153,442 $ 130,197
Food and beverage 38,063 35,894
Room 18,940 17,201
Other 17,235 12,409
Management fees and joint venture 11,089 10,312
--------- ---------
Gross revenues 238,769 206,013
Less promotional allowances 21,021 20,123
--------- ---------
Net revenues 217,748 185,890
--------- ---------
Costs and expenses
Casino 78,471 72,070
Food and beverage 26,397 24,878
Room 6,618 6,260
Other 15,212 10,344
Selling, general and administrative 31,640 30,634
Maintenance and utilities 9,534 9,037
Depreciation and amortization 16,829 15,117
Corporate expense 5,036 6,429
--------- ---------
Total 189,737 174,769
--------- ---------
Operating income 28,011 11,121
--------- ---------
Other income (expense)
Interest income 135 177
Interest expense, net of amounts capitalized (18,268) (13,258)
--------- ---------
Total (18,133) (13,081)
--------- ---------
Income (loss) before provision (benefit) for income taxes 9,878 (1,960)
Provision (benefit) for income taxes 4,002 (745)
--------- ---------
Net income (loss) $ 5,876 $ (1,215)
========= =========
Net income (loss) per common share $ 0.10 $ (0.02)
========= =========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended September 30, 1997
(Unaudited)
(In thousands, except share data)
Common Stock Additional Total
--------------------- Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
------------ ------ --------- -------- ------------
Balances, July 1, 1997 61,523,988 $ 615 $ 138,091 $52,610 $191,316
Net income 5,876 5,876
---------- ----- --------- ------- --------
Balances, September 30, 1997 61,523,988 $ 615 $ 138,091 $58,486 $197,192
========== ===== ========= ======= ========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
(Unaudited) -----------------------
(In thousands) 1997 1996
- -------------- --------- --------
Cash Flows from Operating Activities
Net income (loss) $ 5,876 $ (1,215)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 16,829 15,117
Deferred income taxes 1,091 (1,324)
Other -- 363
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net 2,236 (262)
Increase in inventories (244) (215)
Increase in prepaid expenses (1,278) (2,554)
Decrease in other assets 92 11
Increase in other current liabilities 21,412 3,921
(Decrease) increase in income taxes payable 1,602 (678)
--------- --------
Net cash provided by operating activities 47,616 13,164
--------- --------
Cash Flows from Investing Activities
Acquisition of property, equipment and other assets (15,294) (39,675)
Proceeds from sale of riverboat -- 20,000
--------- --------
Net cash used in investing activities (15,294) (19,675)
--------- --------
Cash Flows from Financing Activities
Proceeds from issuance of debt 244,525 --
Net borrowings under credit agreements (271,000) 21,000
Payments on long-term debt (401) (17,950)
--------- --------
Net cash provided by (used in) financing activities (26,876) 3,050
--------- --------
Net increase (decrease) in cash and cash equivalents 5,446 (3,461)
Cash and cash equivalents, beginning of period 55,220 48,980
--------- --------
Cash and cash equivalents, end of period $ 60,666 $ 45,519
========= ========
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized $ 7,175 $ 13,357
Cash paid for income taxes $ 1,279 $ 1,339
========= ========
Supplemental Schedule of Non-Cash Investing and Financing Activities
Property additions acquired on contracts and trade
payables which were accrued, but not yet paid $ 662 $ 20,722
Debt issuance costs $ 5,475 $ --
========= ========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of Boyd Gaming Corporation and its wholly-owned subsidiaries,
collectively referred to herein as the "Company". The Company owns and operates
ten asino entertainment facilities located in Las Vegas, Nevada; Tunica,
Mississippi; Kansas City, Missouri and East Peoria, Illinois, as well as a
travel agency located in Honolulu, Hawaii. In addition, the Company manages a
casino entertainment facility in Philadelphia, Mississippi, for which it has a
seven year management contract that expires in 2001. On October 30, 1997, the
Company completed the acquisition of the remaining 85% equity interest in the
Treasure Chest riverboat gaming operation in Kenner, Louisiana which it had
previously managed and held a minority equity interest (see Note 2). All
material intercompany accounts and transactions have been eliminated.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the results of its
operations and cash flows for the three month periods ended September 30, 1997
and 1996. It is suggested that this report be read in conjunction with the
Company's audited consolidated financial statements included in the Annual
Report on Form 10-K for the fiscal year ended June 30, 1997. The operating
results and cash flows for the three month period ended September 30, 1997 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 61,523,988 and 57,213,720 for the three month periods ended
September 30, 1997 and 1996, 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. Significant estimates used by the Company
included the estimated useful lives for depreciable and amortizable assets, the
estimated allowance for doubtful accounts receivable, the estimated valuation
allowance for deferred tax assets, and estimated cash flows in assessing the
recoverability of long-lived assets. Actual results could differ from those
estimates.
Reclassifications
Certain amounts in the 1996 condensed consolidated financial statements
have been reclassified to conform to the 1997 presentation. These
reclassifications had no net effect on the Company's net income.
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Change in Fiscal Year
Effective July 1, 1997, the Company changed its fiscal year from a June 30
year end to a December 31 year end.
2. ADDITIONAL INFORMATION
Treasure Chest Casino Acquisition
On October 30, 1997, the Company completed the acquisition of the
remaining 85% equity interest in Treasure Chest Casino, L.L.C. ("Treasure
Chest") that was not owned by the Company for approximately $113 million,
including the assumption of debt. Intangible license rights, representing the
excess of the purchase price over the fair value of the net assets acquired, was
approximately $85 million. Treasure Chest owns the Treasure Chest Casino, a
riverboat casino operation on Lake Pontchartrain in Kenner, Louisiana. The
Company has been managing the Treasure Chest since its opening in September
1994. The Company funded the acquisition and the repayment of Treasure Chest's
debt with borrowings under its bank credit facility ("Bank Credit Facility").
The Company's pro forma consolidated results of operations, as if the
acquisition had occurred on July 1, 1996, are as follows:
Three Months Ended
September 30,
-------------------------
1997 1996
---------- ----------
In thousands, except per share data
Pro forma
Net revenues $ 243,726 $ 210,952
Net income (loss) 6,043 (619)
========== ==========
Net income (loss) per common share $ 0.10 $ (0.01)
========== ==========
Long-term Debt
On July 22, 1997, the Company issued, through a private placement, $250 million
principal amount of 9.50% Senior Subordinated Notes (the "9.50% Notes") due July
2007. The net proceeds from this offering were used to reduce outstanding
indebtedness under the Company's Bank Credit Facility. Upon consummation of this
offering, availability under the Bank Credit Facility was reduced by
approximately $193 million and will subsequently be increased when the Company
redeems its $185 million principal amount of 11% Senior Subordinated Notes (the
"11% Notes") prior to their scheduled maturity. On October 29, 1997, the Company
gave formal notice of redemption to call the 11% Notes in December 1997.
Additionally, on October 31, 1997, the Company made an offer to exchange the
9.50% Notes for identical notes that have been registered with the Securities
and Exchange Commission.
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
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partner of a partnership which had recently opened a 208-room hotel adjacent to
the Par-A-Dice casino. The purchase price for the acquisition was approximately
$173 million, subject to certain adjustments as set forth in the stock purchase
agreement. Intangible license rights, representing the excess of the purchase
price over the fair value of the net assets acquired, was approximately $116
million. The Company's pro forma consolidated results of operations, as if the
acquisition had occurred on July 1, 1996, are as follows:
Three Months Ended
September 30,
-------------------------
1997 1996
---------- ----------
In thousands, except per share data
Pro forma
Net revenues $ 217,748 $ 212,028
Net income 5,876 604
========== ==========
Net income per common share $ 0.10 $ 0.01
========== ==========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
data for the Company's properties. As used herein, "Boulder Strip Properties"
consist of Sam's Town Las Vegas, the Eldorado and the Jokers Wild; "Downtown
Properties" consist of the California, the Fremont, Main Street Station (opened
November 1996) and Vacations Hawaii, the Company's wholly-owned travel agency
which operates for the benefit of the Downtown casino properties; and "Central
Region" consists of Sam's Town Tunica, Sam's Town Kansas City, 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.
Net revenues displayed in this table and discussed in this section are net of
promotional allowances; as such, references to food and beverage revenue and
room revenue do not agree to the amounts on the Condensed Consolidated
Statements of Operations. Operating income from properties for the purposes of
this table excludes corporate expense, including related depreciation and
amortization expense.
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
Net revenues
Stardust $ 41,640 $ 45,266
Boulder Strip Properties 43,951 45,219
Downtown Properties 46,969 36,438
Central Region 85,188 58,967
-------- --------
Total Properties $217,748 $185,890
======== ========
Operating income
Stardust $ 3,432 $ 3,472
Boulder Strip Properties 3,980 3,812
Downtown Properties 435 2,002
Central Region 25,948 9,201
-------- --------
Total Properties $ 33,795 $ 18,487
======== ========
REVENUES
Consolidated net revenues increased 17.1% during the quarter ended September
1997 compared to the same quarter in the prior fiscal year. Company-wide casino
revenue increased 17.9%, food and beverage revenue increased 6.5% and room
revenue increased 20.2% due primarily to the opening of Main Street Station in
November 1996 and the acquisition of Par-A-Dice in December 1996. In the Nevada
region, net revenues increased 4.4% primarily as a result of the opening of Main
Street Station in November 1996, as well as enhanced utilization of the
Company's wholly-owned travel agency, Vacations Hawaii. These increases were
partially offset by declines in net revenues experienced principally at the
Stardust (8.0%), due to increased competition, and the Fremont (14.8%), due
primarily to a major hotel refurbishment project which began in July 1997 and
reduced available rooms by approximately 25% during the quarter. Net revenues in
the Central Region increased 44.5% primarily as a result of the acquisition of
Par-A-Dice in December 1996 and an 18.4% increase in net revenues at Sam's Town
Tunica. These increases were partially offset by a decline in net
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revenues experienced principally at Sam's Town Kansas City (43.4%) due to
increased competition with the January 1997 opening of a significantly larger
facility in that gaming market.
OPERATING INCOME
Consolidated operating income and operating income margin were $28.0 million and
12.9%, respectively, during the quarter ended September 1997 compared to $11.1
million and 6.0%, respectively, for the same quarter in the prior fiscal year.
Operating income in the Nevada region declined by 15.5% due primarily to a $1.7
million operating loss at Main Street Station. In the Central Region, operating
income increased 182% primarily as a result of operating income from Par-A-Dice
(acquired in December 1996) and a $6.3 million increase in operating income
experienced at Sam's Town Tunica.
STARDUST
Net revenues at the Stardust declined by 8.0% during the quarter ended September
1997 versus the comparable quarter from the prior fiscal year. The majority of
the decline is attributable to an 7.4% reduction in casino revenues as a result
of a decline in slot and table game wagering. In addition, room and food and
beverage revenue declined by 5.6% due to a decline in the number of occupied
rooms and food guests. Operating income margin increased from 7.7% during the
September 1996 quarter to 8.2% during the September 1997 quarter. The increase
in margin is primarily attributable to improved operating efficiencies in the
casino department.
BOULDER STRIP PROPERTIES
Net revenues at the Boulder Strip Properties declined by 2.8% during the quarter
ended September 1997 versus the comparable quarter from the prior fiscal year
due to increased competition on the Boulder Strip. Casino revenue declined by
approximately 1% principally due to a decline in slot wagering volume, partially
offset by an increase in slot win percentage. Operating income margin increased
from 8.4% to 9.1% during the comparable quarters ended September 30, 1996 and
1997, respectively, due to the implementation of cost reduction programs at
Sam's Town Las Vegas, as well as an increase in slot revenue at the Eldorado.
DOWNTOWN PROPERTIES
Net revenues at the Downtown Properties increased 28.9% during the quarter ended
September 1997 compared to the same quarter in the prior fiscal year. The
increase is attributable to the November 1996 opening of Main Street Station as
well as increased revenues from the Company's wholly-owned travel agency,
Vacations Hawaii. (Hawaiian customers comprise a majority of the occupied room
nights at the three downtown casino properties). These increases in net revenues
were partially offset by declines in net revenues at the Fremont and California
of 14.8% and 2.5%, respectively. The decline in net revenues at the Fremont is
primarily attributable to a rooms remodel project which began in July 1997 and
is expected to be completed in December 1997. Operating income and operating
income margin for the Downtown properties declined to $.4 million and 0.9%,
respectively, for the quarter ended September 1997. These declines are primarily
attributable to operating losses at Main Street Station and Vacations Hawaii of
$1.7 million and $0.4 million, respectively, as well as the decline in net
revenues and operating income at the Fremont as a result of the rooms remodel
project.
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CENTRAL REGION
Net revenues from the Central Region increased 44.5% during the quarter ended
September 1997 compared to the same quarter from the prior fiscal year. The
majority of the increase is attributable to Par-A-Dice, which was acquired in
December 1996. Par-A-Dice generated net revenues of $27.9 million during the
current year's quarter. In addition, Sam's Town Tunica experienced an 18.4%
increase in net revenues due to the addition of a 350-room hotel tower and 1,000
space parking garage project which was completed in December 1996. These
increases were partially offset by a decline in net revenues at Sam's Town
Kansas City (43.4%) due to increased market competition. Operating income and
operating income margin for the Central Region increased to $25.9 million and
30.5%, respectively, during the quarter ended September 1997 from $9.2 million
and 15.6%, respectively, during the quarter ended September 1996. These
increases are due to the addition of $7.4 million in operating income from
Par-A-Dice, as well as a $6.3 million increase in operating income at Sam's Town
Tunica and a reduction in the operating loss at Sam's Town Kansas City of $2.2
million. In addition, management fees and joint venture income from Silver Star
and Treasure Chest operating income increased 7.5% during the September 1997
quarter compared to the same quarter in the prior fiscal year. On October 30,
1997, the Company acquired the remaining 85% equity interest in Treasure Chest
that it did not already own. See - "Liquidity and Capital Resources."
OTHER OPERATING EXPENSES
Depreciation and amortization expense increased by $1.7 million during the
quarter ended September 1997 compared to the same quarter from the prior fiscal
year due to increased levels of property and equipment in service, as well as an
increase in intangible assets related to the acquisition of Par-A-Dice in
December 1996.
OTHER INCOME (EXPENSE)
Other income and expense is primarily comprised of interest expense, net of
amounts capitalized. Interest expense increased by $5.0 million during the
quarter ended September 1997 compared to the same quarter from the prior fiscal
year. The increase is attributable to higher levels of average debt outstanding
due to, among other things, the December 1996 acquisition of Par-A-Dice for
approximately $173 million and the major renovation and expansion projects
related to Main Street Station and Sam's Town Tunica. In addition, the Company
capitalized $1.5 million in interest costs during the quarter ended September
1996 related to renovation and expansion of Main Street Station and Sam's Town
Tunica. There were no such costs capitalized during the comparable quarter in
the current fiscal year.
PROVISION (BENEFIT) FOR INCOME TAXES
The Company's effective tax rate was 40.5% and (38.0%), respectively, for the
fiscal quarters ended September 1997 and 1996. The fluctuation in the rates is
primarily attributable to state taxes, which have increased due to the enhanced
earnings levels generated from the Company's Central Region properties.
NET INCOME (LOSS)
As a result of these factors, the Company reported net income of $5.9 million
during the quarter ended September 1997 compared to a net loss of $1.2 million
during the comparable quarter in the prior fiscal year.
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LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW AND WORKING CAPITAL
During the quarter ended September 1997, the Company generated operating cash
flows of $47.6 million compared to $13.2 million during the comparable quarter
in the prior fiscal year. Operating cash flows during the September 1997 quarter
were enhanced by increased earnings as well as the timing of payments related to
the Company's current liabilities. At September 30, 1997, the Company had cash
and cash equivalents of $60.7 million and a working capital deficit of $15.5
million. The Company has historically operated with negative working capital in
order to minimize borrowings (and related interest cost) under its Bank Credit
Facility. The working capital deficits are funded through cash generated from
operations as well as borrowings under the Bank Credit Facility.
CAPITAL EXPENDITURES
Cash used for investing activities was $15.3 million during the quarter ended
September 1997 compared to $19.7 million during the quarter ended September
1996. The Company is committed to continually maintaining and enhancing its
existing facilities, most notably, by upgrading and remodeling its casinos,
hotel rooms, restaurants and public spaces and by providing the latest slot
machines for its customers. The Company's capital expenditures for these
purposes were approximately $15.3 million and $13.7 million during the quarters
ended September 1997 and 1996, respectively. In addition, the Fremont is
currently undergoing a rooms remodel which is expected to cost approximately
$5.0 million and be completed by the end of calendar 1997.
DEBT FACILITIES AND EQUITY FINANCING
Funding for the Company's renovation and expansion projects comes from debt and
equity financings, as well as cash flows from existing operations. Cash flows
used for financing activities totalled $26.9 million during the quarter ended
September 1997 as the Company paid down outstanding debt with its free cash flow
generated from operations. At September 30, 1997, outstanding borrowings and
unused availability under the Bank Credit Facility were $80 million and $227
million, respectively. The unused availability was reduced by $193 million in
July 1997 in connection with the issuance of $250 million principal amount of
9.50% Senior Subordinated Notes (the "9.50% Notes") described below. Interest on
the Bank Credit Facility is based upon the agent bank's quoted reference rate or
London Interbank Offered Rate, at the discretion of the Company. The rate under
the Bank Credit Facility at September 30, 1997 was 8.3%.
In July 1997, the Company issued, through a private placement, $250 million
principal amount of 9.50% Senior Subordinated Notes due July 2007. The net
proceeds from this offering were used to reduce outstanding indebtedness under
the Company's Bank Credit Facility. Management intends to use the availability
under the Bank Credit Facility to redeem the Company's $185 million principal
amount of 11% Senior Subordinated Notes (the "11% Notes") in December 1997,
prior to their scheduled maturity. In connection with the issuance of the 9.50%
Notes, availability under the Bank Credit Facility was reduced by approximately
$193 million and will subsequently be increased when the Company redeems the 11%
Notes. On October 31, 1997, the Company made an offer to exchange the 9.50%
Notes for identical notes that have been registered with the Securities and
Exchange Commission.
The Company, through its wholly-owned subsidiary, California Hotel Finance
Company, has $185 million
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principal amount of 11% Senior Subordinated Notes due December 2002. The 11%
Notes contain certain covenants, including but not limited to limitations on
restricted payments (as defined in the indenture related to the 11% Notes). As a
result of these restrictions, at June 30, 1997 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 $29.7 million and $84.9 million, respectively,
that were not available for distribution as dividends to the Company. On October
29, 1997, the Company gave formal notice of redemption to call the 11% Notes in
December 1997.
Certain indebtedness of the Company contains restrictive covenants which, among
other things, impose significant restrictions on the Company's operations and
its ability to seek alternative financing means.
The Company's ability to service its debt will be dependent on its future
performance, which will be affected by, among other things, prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control.
NEW EXPANSION PROJECTS
The Company, as part of its ongoing strategic planning process, has 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 focus its growth efforts on the Stardust. The Company is
analyzing various alternatives to utilize the 61-acre Stardust site, including
additional hotel rooms and other amenities to more effectively compete with the
new generation of Las Vegas properties.
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 for the Atlantic City
Project. The Mirage Joint Venture Agreement 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 Mirage Joint Venture
capital contributions primarily from cash flow from operations and availability
under the Company's Bank Credit Facility.
Substantial funds would be required for each of the expansion projects discussed
above. There can be no assurance that any of the above mentioned projects will
go forward or 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 flow from operations and availability under the Company's
Bank Credit Facility. Based on current plans, the Company does not anticipate
issuing additional equity or obtaining new borrowings in excess of amounts
available under the Bank Credit Facility in the next 12 months. In the future,
the Company may require additional funds to support its working capital
requirements or for other purposes and may seek to raise such additional funds
through public or private equity and/or debt financings or from other sources.
No assurance can be given that additional financing will be available or that,
if available, such financing will be available on terms favorable to the Company
or its stockholders.
The Company continues to pursue and investigate additional expansion
opportunities both in Nevada and in other markets where casino gaming is
currently permitted. Such expansion will be affected and determined by several
key factors, including license selection processes, identification of additional
suitable investment opportunities in current gaming jurisdictions, and
availability of acceptable financing. Additional projects will require the
Company to make substantial investments, which the Company intends to fund
through cash flow from operations and availability under the Bank Credit
Facility. To the extent such sources of funds are not
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sufficient, the Company may also seek to raise such additional funds through
public or private equity and/or debt financings or from other sources. No
assurance can be given that additional financing will be available or that, if
available, such financing will be available on terms favorable to the Company
and its stockholders.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. Certain information included in this Form 10-Q
and other materials filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by the Company) contains statements that
are forward looking, such as statements relating to plans for future expansion
and other business development activities as well as 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 from those
expressed in any forward looking statements made by or on behalf of the Company.
These risks and uncertainties include, but are not limited to, those related to
construction 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, 1997.
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 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. 27. Financial Data Schedule
(b) Reports on Form 8-K:
(i) The Company filed a current report on Form 8-K dated July 11,
1997 related to the definitive purchase agreement to acquire
the remaining 85% of Treasure Chest Casino, L.L.C.
(ii) The Company filed a current report on Form 8-K dated October
30, 1997 related to the acquisition of the remaining 85% of
Treasure Chest Casino, L.L.C.
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SIGNATURE
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: November 14, 1997 By /s/ Keith E. Smith
---------------------------------
Keith E. Smith
Senior Vice President and
Controller (Chief Accounting Officer)
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EXHIBITS INDEX
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Exhibit No. Description
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27 Financial Data Schedule