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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.
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 Borgatas 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.
Borgatas 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 Borgatas 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. Borgatas 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, Borgatas 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.
Bruce Sherman of Private Capital Management.
Stocks Discussed: BYD,