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Boyd Gaming Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 10, 2009 06:27PM
Boyd Gaming Corp. (BYD) filed Quarterly Report for the period ended 2009-06-30. 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 $870.4 million; its shares were traded at around $10.11 with a P/E ratio of 16.6 and P/S ratio of 0.5. 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:
law to operate 2,000 Class III slot machines. In March 2007, we paid approximately $81 million to close this transaction, and agreed to pay, in March 2010 or earlier, a contingent payment of an additional $75 million to the seller, plus interest accrued at the prime rate (the contingent payment), if certain legal conditions were satisfied.
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 six months ended June 30, 2009. During the six months ended June 30, 2009, we tested the goodwill for recoverability, which resulted in a noncash impairment charge of $28.4 million.
Sams Town Tunica reported net operating losses of $0.4 million and $4.4 million for the six months ended June 30, 2009 and 2008, respectively. Due to its history of operating losses, we tested the assets of Sams Town Tunica for recoverability pursuant to SFAS 144 during the six months ended June 30, 2009. The asset recoverability test required the estimation of its undiscounted future cash flows and the comparison of the aggregate total to the propertys carrying value. The test resulted in no impairment; however, we will continue to monitor the performance of Sams Town Tunica and, if necessary, continue to update our asset recoverability test under SFAS 144. If future asset recoverability tests indicate that the assets of Sams Town Tunica are impaired, we will be subject to a noncash write-down of its assets, which could have a material adverse impact on our consolidated statements of operations.
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 June 30, 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 June 30, 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 consolidated statement of operations until final settlement with its insurance carrier. In addition, Borgata has delay-in-completion insurance coverage for The Water Club for certain costs, subject to various limitations and deductibles, which may help offset some of the costs related to the postponement of its opening. Recoveries, if any, from the insurance carrier will be recorded when earned and realized. The management of Borgata continues to work with its insurance carrier on the scope of the claims and can provide no assurance with respect to the ultimate resolution of these matters.
As of June 30, 2009, we are a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we receive payments based upon the three-month LIBOR and make payments based upon a stipulated fixed rate. During the three and six months ended June 30, 2009, the effect of our swaps increased our interest expense by $6.6 million and $12.6 million, respectively, as market interest rates during the period were significantly lower than the 5.1% weighted average fixed rate associated with these swaps as of June 30, 2009.
During the three and six months ended June 30, 2009, we purchased and retired $34.2 million and $44.7 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was approximately $28.0 million and $36.1 million, respectively, resulting in a gain of approximately $6.1 million and $8.5 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statements ofBruce Sherman of Private Capital Management.
Stocks Discussed: BYD,