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Boyd Gaming Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 9, 2009 12:05AM

Boyd Gaming Corp. (BYD) filed Quarterly Report for the period ended 2009-03-31. BOYD GAMING CORP. is a multi-jurisdictional gaming company which currently owns or operates ten casino entertainment facilities is in the process ofconstructing its eleventh property acquiring its twelfth property and recently acquired land upon which it intends to construct its thirteenth property. The Company owns and operates six facilities in three distinct markets in Las Vegas Nevada: the Stardust on the Las Vegas Strip; Sam's Town Las Vegas the Eldorado and Jokers Wild on the Boulder Strip; and the California and the Fremont in downtown Las Vegas. Boyd Gaming Corp. has a market cap of $1.06 billion; its shares were traded at around $12.24 with a P/E ratio of 13.2 and P/S ratio of 0.6. Boyd Gaming Corp. had an annual average earning growth of 10.2% over the past 10 years. GuruFocus rated Boyd Gaming Corp. the business predictability rank of 3.5-star.

Highlight of Business Operations:

In conjunction with this amendment, we recorded the remaining $28.4 million of the $75 million contingent liability as an additional cost of the acquisition (goodwill) during the three months ended March 31, 2009. During the three months ended March 31, 2009, we tested the goodwill for recoverability, which resulted in a noncash impairment charge of $28.4 million.

On September 23, 2007, The Water Club, then under construction, sustained a fire that caused damage to property with a carrying value of approximately $11.4 million. Borgata carries insurance policies that management believes will cover most of the replacement costs related to property damage, with the exception of minor amounts principally related to insurance deductibles and certain other limitations. As of March 31, 2009, Borgata has received insurance advances related to property damage totaling $22.9 million. Borgata has recorded a deferred gain of $11.6 million on its condensed consolidated balance sheet at March 31, 2009, representing the amount of insurance advances related to property damage in excess of the $11.3 million carrying value of assets damaged or destroyed by the fire (after its $0.1 million deductible). The deferred gain, and any other deferred gain that may arise from further advances from insurance recoveries related to property damage, will not be recognized on Borgata’s condensed

During the three months ended March 31, 2009 and 2008, we purchased and retired $10.5 million and $16.8 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was approximately $8.1 million and $15.6 million, respectively, resulting in a gain of approximately $2.4 million and $1.0 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statements of operations for the respective periods. The transactions were funded by availability under our bank credit facility.

As a result of the factors discussed above, we reported net losses of $13.8 million and $32.6 million for the three months ended March 31, 2009 and 2008, respectively.

Borgata’s amended bank credit agreement allows for certain limited distributions to be made to its partners. Our distributions from Borgata were $9.7 million and $14.7 million during the three months ended March 31, 2009 and 2008, respectively. The distributions from Borgata declined as a result of the decline in Borgata’s operating results. Borgata has significant uses for its cash flows, including maintenance and expansion capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata’s cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness. In addition, Borgata’s amended bank credit facility contains certain covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum required fixed-charge coverage ratio, (ii) establishing a maximum permitted total leverage ratio, (iii) imposing limitations on the incurrence of additional secured indebtedness, and (iv) imposing restrictions on investments, dividends and certain other payments. In the event that Borgata fails to comply with its covenants, it may be prevented from making any distributions to us during such period of noncompliance.

As of March 31, 2009 and 2008, we had balances of cash and cash equivalents of $98.2 million and $152.5 million, respectively. We had working capital deficits of $139.6 million and $66.4 million as of March 31, 2009 and 2008, respectively.

Read the The complete Report

BYD is in the portfolios of Bruce Sherman of Private Capital Management.


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