ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information included in this Annual Report on Form 10-K. In addition to the historical information, certain statements in this discussion are forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements.
EXECUTIVE OVERVIEW
Boyd Gaming Corporation (the "Company," "Boyd Gaming," "we" or "us") is a multi-jurisdictional gaming company that has been in operation since 1975.
As of December, 31 2016, we are a diversified operator of 24 wholly-owned gaming entertainment properties. Headquartered in Las Vegas, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi. We view each operating property as an operating segment. For financial reporting purposes, we aggregate our wholly-owned properties into the following three reportable segments:
|
|
|
|
|
|
Las Vegas Locals
|
|
|
Gold Coast Hotel and Casino
|
Las Vegas, Nevada
|
|
The Orleans Hotel and Casino
|
Las Vegas, Nevada
|
|
Sam's Town Hotel and Gambling Hall
|
Las Vegas, Nevada
|
|
Suncoast Hotel and Casino
|
Las Vegas, Nevada
|
|
Eastside Cannery Casino and Hotel
|
Las Vegas, Nevada
|
|
Aliante Casino + Hotel + Spa
|
North Las Vegas, Nevada
|
|
Cannery Casino Hotel
|
North Las Vegas, Nevada
|
|
Eldorado Casino
|
Henderson, Nevada
|
|
Jokers Wild Casino
|
Henderson, Nevada
|
|
Downtown Las Vegas
|
|
|
California Hotel and Casino
|
Las Vegas, Nevada
|
|
Fremont Hotel and Casino
|
Las Vegas, Nevada
|
|
Main Street Station Casino, Brewery and Hotel
|
Las Vegas, Nevada
|
|
Midwest and South
|
|
|
Par-A-Dice Hotel and Casino
|
East Peoria, Illinois
|
|
Blue Chip Casino, Hotel & Spa
|
Michigan City, Indiana
|
|
Diamond Jo Dubuque
|
Dubuque, Iowa
|
|
Diamond Jo Worth
|
Northwood, Iowa
|
|
Kansas Star Casino
|
Mulvane, Kansas
|
|
Amelia Belle Casino
|
Amelia, Louisiana
|
|
Delta Downs Racetrack Casino & Hotel
|
Vinton, Louisiana
|
|
Evangeline Downs Racetrack and Casino
|
Opelousas, Louisiana
|
|
Sam's Town Hotel and Casino
|
Shreveport, Louisiana
|
|
Treasure Chest Casino
|
Kenner, Louisiana
|
|
IP Casino Resort Spa
|
Biloxi, Mississippi
|
|
Sam's Town Hotel and Gambling Hall
|
Tunica, Mississippi
|
In addition to these properties, we own and operate a travel agency and a captive insurance company that underwrites travel-related insurance, each located in Hawaii. Financial results for these operations are included in our Downtown Las Vegas segment, as our Downtown Las Vegas properties concentrate their marketing efforts on gaming customers from Hawaii.
On May 31, 2016, we announced that we had entered into an Equity Purchase Agreement to sell our 50% equity interest in the parent company of Borgata Hotel Casino and Spa ("Borgata") to MGM Resorts International ("MGM"). This transaction closed
on August 1, 2016. We accounted for our investment in Borgata by applying the equity method and reported its results as discontinued
operations for all periods presented in this Annual Report on Form 10-K.
In third quarter 2016, the Peninsula Gaming, LLC ("Peninsula") debt was refinanced, eliminating the financing structure that restricted our ability to transfer cash from Peninsula to Boyd Gaming. As a result of the elimination of this restriction, management concluded that the properties previously comprising the Peninsula segment would be aggregated into the Midwest and South reportable segment.
Our Las Vegas Locals segment includes our wholly-owned subsidiaries Aliante Casino + Hotel + Spa ("Aliante") for the period following its September 27, 2016 acquisition, and Cannery Casino Hotel and Eastside Cannery Casino and Hotel (together, the "Cannery Properties") for the period following their December 20, 2016 acquisition. See Note 2,
Acquisitions and Divestitures
, to our consolidated financial statements presented in Part II, Item 8.
We operate gaming entertainment properties, most of which also include hotel, dining, retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the number of visits and spending levels of customers at our properties, which affects our operating results.
Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. While we do provide casino credit, subject to certain gaming regulations and jurisdictions, most of our customers wager with cash and pay for non-gaming services by cash or credit card.
Our industry is capital intensive and we rely heavily on the ability of our properties to generate operating cash flow in order to fund maintenance capital expenditures, fund acquisitions, provide excess cash for future development, repay debt financing and associated interest costs, repurchase our debt or equity securities, pay income taxes and pay dividends.
Our primary areas of focus are: (i) ensuring our existing operations are managed as efficiently as possible, and remain positioned for growth, including our strategic investing in non-gaming amenities; (ii) improving our capital structure and strengthening our balance sheet, including paying down debt, improving operations and diversifying our asset base; and (iii) successfully implementing our growth strategy, which is built on identifying development opportunities and acquiring assets that are a good strategic fit and provide an appropriate return to our shareholders.
Our Strategy
Our overriding strategy is to increase shareholder value. We are focused on the following strategic initiatives to improve and grow our business.
Strengthening our Balance Sheet
We are committed to finding opportunities to strengthen our balance sheet through diversifying and increasing cash flow to reduce our debt.
Operating Efficiently
We are committed to operating more efficiently, and endeavor to prevent unneeded expense in our business. The efficiencies of our business model position us to flow a substantial portion of revenue gains directly to the bottom line. We manage our business operations to maintain and improve our margins in order to drive profit growth in our business.
Evaluating Acquisition Opportunities
Our evaluations of potential transactions and acquisitions are strategic, deliberate, and disciplined. Our goal is to identify and pursue opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price.
Maintaining our Brand
The ability of our employees to deliver great customer service helps distinguish our Company and our brands from our competitors. Our employees are an important reason that our customers continue to choose our properties over the competition across the country.
Our Key Performance Indicators
We use several key performance measures to evaluate the operations of our properties. These key performance measures include the following:
|
|
|
|
•
|
Gaming revenue measures
:
slot handle
, which means the dollar amount wagered in slot machines, and
table game drop
, which means the total amount of cash deposited in table games drop boxes, plus the sum of markers issued at all table games, are measures of volume and/or market share.
Slot win
and
table game hold
, which mean the difference between customer wagers and customer winnings on slot machines and table games, respectively, represent the amount of wagers retained by us and recorded as gaming revenues. Slot win percentage and table game hold percentage, which are not fully
|
controllable by us, represent the relationship between slot handle to slot win and table game drop to table game hold, respectively.
|
|
|
|
•
|
Food and beverage revenue measures
:
average guest check
, which means the average amount spent per customer visit and is a measure of volume and product offerings;
number of guests served
("food covers") is an indicator of volume; and the
cost per guest served
is a measure of operating margin.
|
|
|
|
|
•
|
Room revenue measures
:
hotel occupancy rate
, which measures the utilization of our available rooms; and
average daily rate
("ADR"), which is a price measure.
|
RESULTS OF OPERATIONS
Overview
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
2016
|
|
2015
|
|
2014
|
|
Net revenues
|
$
|
2,184.0
|
|
|
$
|
2,199.4
|
|
|
$
|
2,142.3
|
|
|
Operating income
|
260.6
|
|
|
271.2
|
|
|
173.7
|
|
|
Income (loss) from continuing operations, net of tax
|
205.5
|
|
|
10.7
|
|
|
(50.6
|
)
|
|
Income from discontinued operations, net of tax
|
212.5
|
|
|
36.5
|
|
|
9.0
|
|
|
Net income (loss) attributable to Boyd Gaming Corporation
|
418.0
|
|
|
47.2
|
|
|
(53.0
|
)
|
Net Revenues
Net revenues decreased approximately
$15.5 million
, or
0.7%
, for
2016
as compared to
2015
due to a $55.4 million decrease in net revenues in the Midwest and South segment, primarily in gaming revenue. These decreases were primarily at IP, Evangeline Downs and Par-A-Dice. The three markets in which these casinos operate continue to struggle with soft markets and increased gaming capacity. Offsetting this decrease were increases of $37.8 million and $2.2 million in net revenues in the Las Vegas Locals segment and the Downtown Las Vegas segment, respectively.
Net revenues increased approximately $57.2 million, or 2.7%, for 2015 as compared to 2014 due to increases of $29.8 million, $17.5 million and $9.9 million in the Midwest and South segment, Las Vegas Locals segment and the Downtown Las Vegas segment, respectively. These increases were due primarily to improved slot hold percentages and ADR percentage across all segments. Offsetting this increase were decreases of $1.2 million and $1.1 million in rooms revenue and food and beverage revenue, respectively, in the Midwest and South segment compared to the prior year.
Operating Income
In 2016, our operating income decreased
$10.6 million
as compared to 2015 due to a $19.7 million increase in impairment charges and a $15.2 million increase in project development, preopening and writedowns costs over the prior year period, related primarily to costs surrounding our acquisitions of Aliante and the Cannery Properties (the "Acquisitions"), which more than offset decreases in maintenance and utilities and depreciation and amortization expenses.
In 2015, our operating income increased $97.5 million from the operating income reported for 2014. The increase is due to a $30.1 million decrease in impairment charges in 2015 compared to in the prior year, as well as the impact of increased net revenues and controlled operating expenses in all segments.
Income (Loss) From Continuing Operations, Net of Tax
Income from continuing operations in 2016 increased $194.8 million, as compared to the comparable prior year period, due to an income tax benefit of $201.5 million related to the release of a valuation allowance on our federal and state income tax net operating loss carryforwards and other deferred tax assets. Interest expense, net of amounts capitalized, for 2016 decreased $11.9 million compared to the prior year primarily due to interest rate effects of our debt refinancing transactions. These items were offset by the increase in impairment charges and in project development, preopening and writedowns expenses.
Income from continuing operations for 2015 was $10.7 million, as compared to a loss from continuing operations of $50.6 million in the comparable prior year period. The improved operating results are due to the improvements in operating income discussed above and a $5.5 million decrease in interest expense, net of amounts capitalized, for 2015 compared to the prior year period due to a lower average long term debt balance. Partially offsetting these improvements was $39.2 million of additional loss on early extinguishment of debt in 2015 compared to the prior year period.
Income From Discontinued Operations, Net of Tax
Income from discontinued operation, net of tax, reflects the results of our equity method investment in Borgata. The increase in
2016 compared to 2015 is primarily a result of the $181.7 million after-tax gain on the sale of our equity interest in Borgata and the property tax refunds of $9.1 million received subsequent to the sale, both of which are included in discontinued operations in 2016. The increase in 2015 compared to 2014 is a result of an increase in Borgata's net income driven by increased revenues and decreased operating expenses and interest expense.
Net Income (Loss) Attributable to Boyd Gaming Corporation
For the year ended December 31, 2016, the net income attributable to Boyd Gaming was
$418.0 million
, compared with net income attributable to Boyd Gaming of
$47.2 million
for the corresponding period of the prior year. The
$370.8 million
increase is primarily due to an income tax benefit of $201.5 million related to the release of a valuation allowance on our federal and state income tax net operating loss carryforwards and other deferred tax assets and to the gain on the sale of our equity interest in Borgata on August 1, 2016.
For the year ended December 31, 2015, the net income attributable to Boyd Gaming was $47.2 million compared with net loss attributable to Boyd Gaming of $53.0 million for the corresponding period of the prior year. The $100.3 million increase is primarily due to increased gaming revenues and improved results at Borgata in discontinued operations, net of tax, and partially offset by an increase of $39.2 million of loss on early extinguishments and modifications of debt.
Operating Revenues
We derive the majority of our gross revenues from our gaming operations, which generated approximately
75%
of gross revenues for
2016
and 76% of gross revenues in both
2015
and
2014
. Food and beverage gross revenues represent our next most significant revenue source, generating approximately
13%
of gross revenues for
2016
,
2015
, and
2014
. Room revenues and other revenues separately contributed less than 10% of gross revenues during each year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
2016
|
|
2015
|
|
2014
|
|
REVENUES
|
|
|
|
|
|
|
Gaming
|
$
|
1,820.2
|
|
|
$
|
1,847.2
|
|
|
$
|
1,799.7
|
|
|
Food and beverage
|
306.1
|
|
|
307.4
|
|
|
303.4
|
|
|
Room
|
170.8
|
|
|
163.5
|
|
|
157.4
|
|
|
Other
|
122.5
|
|
|
124.0
|
|
|
122.3
|
|
|
Gross revenues
|
2,419.6
|
|
|
2,442.1
|
|
|
2,382.8
|
|
|
Less promotional allowances
|
235.6
|
|
|
242.7
|
|
|
240.5
|
|
|
Net revenues
|
$
|
2,184.0
|
|
|
$
|
2,199.4
|
|
|
$
|
2,142.3
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
Gaming
|
$
|
880.7
|
|
|
$
|
900.9
|
|
|
$
|
888.4
|
|
|
Food and beverage
|
170.1
|
|
|
168.1
|
|
|
168.7
|
|
|
Room
|
44.2
|
|
|
41.3
|
|
|
41.1
|
|
|
Other
|
76.7
|
|
|
80.5
|
|
|
86.2
|
|
|
Total costs and expenses
|
$
|
1,171.7
|
|
|
$
|
1,190.8
|
|
|
$
|
1,184.4
|
|
|
|
|
|
|
|
|
|
MARGINS
|
|
|
|
|
|
|
Gaming
|
51.61
|
%
|
|
51.23
|
%
|
|
50.64
|
%
|
|
Food and beverage
|
44.45
|
%
|
|
45.32
|
%
|
|
44.39
|
%
|
|
Room
|
74.10
|
%
|
|
74.74
|
%
|
|
73.87
|
%
|
|
Other
|
37.33
|
%
|
|
35.05
|
%
|
|
29.51
|
%
|
Gaming
Gaming revenues are comprised primarily of the net win from our slot machine operations and to a lesser extent from table games win. Gross gaming revenues decreased by
$27.0 million
, or
1.5%
, during 2016 as compared to the prior year, which was due to a decrease of $58.3 million in the Midwest and South segment. The Midwest and South segment experienced a 4.8% decrease in slot handle and a 5.1% decrease in table game drop. Partially offsetting this decrease was an increase of $29.2 million in the Las Vegas Locals segment attributable primarily to the acquisitions of Aliante and the Cannery Properties in September and December
2016, respectively, an overall increase in both table game drop and slot hold, as well as a $2.1 million increase in the Downtown Las Vegas segment. Gaming expenses decreased by
$20.2 million
, or 2.2%, reflective of the overall reduction in gaming revenues.
In 2015, gross gaming revenues increased by $47.4 million, or 2.6%, as compared to the prior year due to $26.6 million, $11.2 million and $9.6 million increases in the Midwest and South, Las Vegas Locals and Downtown Las Vegas segments, respectively, primarily related to increases in table game hold percentages across all segments. Our overall slot and table game hold increased 0.1% and 0.3%, respectively, from 2014 to 2015. Gaming margin improved in 2015 versus the prior year as gaming revenue increases outpaced the increase in expenses.
Food and Beverage
Food and beverage revenues decreased
$1.3 million
, or
0.4%
, during 2016 as compared to 2015 due to a $7.2 million decrease in the Midwest and South segment, primarily at Par-A-Dice and Evangeline Downs. The decrease in food and beverage revenue was also a result of a decline in food covers across all segments. Offsetting this decrease were increases of food and beverage revenues of $5.2 million and $0.7 million in the Las Vegas Locals segment and Downtown Las Vegas segment, respectively, related to the Acquisitions and to increases in average guest check. Food and beverage expenses increased by
$2.0 million
and margin remained consistent as compared to last year.
Food and beverage revenues increased $4.0 million, or 1.3%, during 2015 as compared to 2014 due to a $3.2 million and $1.9 million increase in the Las Vegas Locals and Downtown Las Vegas segments, respectively, related to increases in average guest check. Offsetting this increase was a decrease in food and beverage revenues of $1.1 million in the Midwest and South segment primarily related to a decrease in food covers. Food and beverage expenses decreased by $0.6 million and margin remained consistent as compared to 2014.
Room
Room revenues increased
$7.3 million
, or
4.5%
, in 2016 compared to 2015 due to an increases in average daily rates across all segments. The increase was offset by a $0.4 million decrease in the Midwest and South segment due primarily to a 3.1% decrease in hotel occupancy over the prior year.
Room revenues increased by $6.1 million, or 3.9%, in 2015 compared to 2014 due primarily to a $6.4 million increase in the Las Vegas Locals segment related to an 11.0% increase in average daily rate. The increase was partially offset by a $1.2 million decrease in the Midwest and South segment as a result of lower occupancy in some of the properties. Room expenses and margin remained consistent as compared to the prior period.
Other
Other revenues relate to patronage visits at the amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Other revenues decreased by
$1.5 million
, or
1.2%
, during 2016 as compared to the prior year due to decreased visitor spending.
Other revenues increased by $1.7 million, or 1.4%, during 2015 as compared to the prior year due to an increase in other revenue in the Midwest and South segment. Other operating margin remained consistent as compared to the prior period.
Revenues by Reportable Segment
The following table presents our net revenues by Reportable Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
2016
|
|
2015
|
|
2014
|
|
Net Revenues by Reportable Segment
|
|
|
|
|
|
|
Las Vegas Locals
|
$
|
647.9
|
|
|
$
|
610.1
|
|
|
$
|
592.7
|
|
|
Downtown Las Vegas
|
236.4
|
|
|
234.2
|
|
|
224.3
|
|
|
Midwest and South
|
1,299.7
|
|
|
1,355.1
|
|
|
1,325.3
|
|
|
Net revenues
|
$
|
2,184.0
|
|
|
$
|
2,199.4
|
|
|
$
|
2,142.3
|
|
Las Vegas Locals
Net revenues increased $37.8 million, or 6.2%, during 2016 as compared the comparable prior year period. Gaming revenues increased $29.2 million, or 6.4%, due primarily to the acquisitions of Aliante and the Cannery Properties in September and December 2016, respectively. Table game drop and slot hold increased 0.3 and 0.2 percentage points, respectively, as compared to prior year. Room revenue increased $7.3 million resulting from increases of 2.7% in ADR and 0.8% in hotel occupancy rate.
Food and beverage revenues increased by 5.0%, due primarily to a 2.0% increase in average guest check, offset by a 3.7% decrease in food covers.
Net revenues for our Las Vegas Locals segment in 2015 increased $17.5 million, or 2.9%, compared to the prior year. Gaming revenues increased $11.2 million, or 2.5%, due primarily to an increase in slot hold percentage point and table games drop. Increases of 9.2% in room revenues and 3.2% in food and beverage revenues reflect an 11.0% increase in average daily rate and a 5.2% increase in average guest check, respectively.
Downtown Las Vegas
Net revenues increased by $2.2 million, or 0.9%, in 2016 as compared to the prior year due to an increase in all Downtown Las Vegas revenue sources. Gaming revenues increased $2.1 million, resulting from a 0.8% increases in slot handle. Additionally, food and beverage increased $0.7 million due to 2.7% increase in average guest check, which more than offset a 2.7% decrease in food covers. Room revenues and other revenues remained largely consistent with the prior year.
Net revenues increased by $9.9 million, or 4.4%, in 2015 as compared to the prior year due to 6.7% and 3.8% increases in gaming and food and beverage revenues, respectively. Gaming revenues increased $9.6 million due to 1.0% and 0.2% increases in table games hold percentage and slot hold percentage, respectively, along with increases in both slot handle and table games drop. The $1.9 million increase in food and beverage revenues reflects a 4.0% increase in average guest check. Room revenues and other revenues remained largely consistent with the prior year.
Midwest and South
Net revenues decreased $55.4 million, or 4.1%, during 2016 as compared to 2015 due to a decrease in all revenue sources at many of the Midwest and South properties. This decrease was primarily due to a $58.3 million, or 4.7%, decrease in gaming revenues coupled with a $7.2 million, or 4.8%, decrease in food and beverage, offset by an $11.0 million decrease in promotional allowances. The decrease in food and beverage revenues from the prior year was due primarily to a 7.3% decrease in food covers. Room revenues remained largely consistent with the prior year.
Net revenues increased $29.8 million, or 2.2%, during 2015 as compared to 2014. This increase was primarily due to a $26.6 million, or 2.2%, increase in gaming revenues coupled with a $2.2 million, or 5.1%, increase in other revenues, and a $3.3 million decrease in promotional allowances. Table games hold percentage and slot hold percentage increased 0.4% and 0.1%, respectively, as compared to prior year. Food and beverage revenues decreased $1.1 million, or 0.7%, due primarily to a decrease in food covers. Room revenues decreased $1.2 million, or 1.8%, despite a 1.3% increase in average daily rate compared to the prior year.
Other Operating Costs and Expenses
The following operating costs and expenses, as presented in our consolidated statements of operations, are further discussed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
2016
|
|
2015
|
|
2014
|
|
Selling, general and administrative
|
$
|
322.0
|
|
|
$
|
322.4
|
|
|
$
|
327.6
|
|
|
Maintenance and utilities
|
100.0
|
|
|
104.5
|
|
|
109.5
|
|
|
Depreciation and amortization
|
196.2
|
|
|
207.1
|
|
|
208.9
|
|
|
Corporate expense
|
72.7
|
|
|
76.9
|
|
|
75.6
|
|
|
Project development, preopening and writedowns
|
22.1
|
|
|
6.9
|
|
|
13.7
|
|
|
Impairment of assets
|
38.3
|
|
|
18.6
|
|
|
48.7
|
|
|
Other operating items, net
|
0.3
|
|
|
0.9
|
|
|
—
|
|
Selling, General and Administrative
Selling, general and administrative expenses include marketing, technology, compliance and risk, surveillance and security. These costs, as a percentage of gross revenues, were
13.3%
, 13.2% and 13.7% for 2016, 2015 and 2014, respectively. We continue to focus on disciplined and targeted marketing spend and on our cost containment efforts.
Maintenance and Utilities
Maintenance and utilities expenses, as a percentage of gross revenues, were
4.1%
, 4.3% and 4.6% for 2016, 2015 and 2014, respectively. The decreases between the periods are primarily due to the fact that no major maintenance projects were undertaken in the periods, coupled with cost reductions associated with the Company's energy savings initiatives.
Depreciation and Amortization
Depreciation and amortization expense, as a percentage of gross revenues, was
8.1%
, 8.5% and 8.8% for 2016, 2015 and 2014, respectively. The overall year-over-year decreases are primarily due to the decrease in intangible asset amortization for the Midwest and South segment as its customer relationships are amortized using an accelerated method over their approximate useful life of five years.
Corporate Expense
Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense. Corporate expense, represented
3.0%
, 3.2% and 3.2%, of gross revenues, for 2016, 2015 and 2014, respectively.
Project Development, Preopening and Writedowns
Project development, preopening and writedowns represent: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred in our ongoing efforts to develop gaming activities in new jurisdictions and expenses related to other new business development activities that do not qualify as capital costs; and (iii) asset write-downs. The increase in such costs in the current year periods as compared to the prior year is primarily due to the costs incurred related to the acquisitions of Aliante and the Cannery Properties and to the pursuit of strategic initiatives.
Impairment of Assets
Impairments of assets of
$38.3 million
in 2016 include non-cash impairment charges of $23.6 million for a gaming license, $12.5 million for goodwill and $0.8 million for trademarks in our Midwest and South segment.
Impairment of assets of $18.6 million in 2015 include a $17.5 million non-cash impairment charge for a gaming license in our Midwest and South segment and a $1.1 million charge to write down the value of certain non-operating assets.
Impairment of assets in 2014 include non-cash impairment charges of $39.8 million for gaming licenses and $0.3 million for trademarks in our Midwest and South segment, and an $8.7 million charge to write down the value of certain non-operating assets.
Other Operating Items, Net
Other operating items, net, is generally comprised of miscellaneous non-recurring operating charges, including direct and non-reimbursable costs associated with natural disasters and severe weather, including hurricane and flood expenses and subsequent recoveries of such costs, as applicable.
Other Expense (Income)
Interest Expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
2016
|
|
2015
|
|
2014
|
|
Interest Expense, net
|
$
|
209.7
|
|
|
$
|
222.7
|
|
|
$
|
228.2
|
|
|
Average Long-Term Debt Balance
|
3,337.0
|
|
|
3,416.5
|
|
|
3,545.9
|
|
|
Loss on Early Extinguishments and Modifications of Debt
|
42.4
|
|
|
40.7
|
|
|
1.5
|
|
|
Weighted Average Interest Rates
|
5.3
|
%
|
|
5.3
|
%
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
Mix of Boyd Gaming Corporation Debt at Year End
|
|
|
|
|
|
|
Fixed rate debt
|
45.7
|
%
|
|
43.6
|
%
|
|
36.0
|
%
|
|
Variable rate debt
|
54.3
|
%
|
|
56.4
|
%
|
|
64.0
|
%
|
Interest expense, net of capitalized interest and interest income, for 2016 decreased
$13.0 million
, or
5.8%
, due to the reduction in our average long-term debt balance during the period.
Interest expense, net of capitalized interest and interest income, for 2015 decreased $5.4 million, or 2.4%, over the prior year, reflecting a $129.4 million reduction in average long-term borrowing outstanding and a lower average interest rate in 2015.
Loss on Early Extinguishments of Debt
The components of the loss on early extinguishments and modifications of debt, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
9.00% Senior Notes premium and consent fees
|
$
|
15,750
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
9.00% Senior Notes deferred finance charges
|
5,976
|
|
|
—
|
|
|
—
|
|
|
8.375% Senior Notes deferred finance charges
|
4,497
|
|
|
—
|
|
|
—
|
|
|
9.125% Senior Notes premium and consent fees
|
—
|
|
|
23,962
|
|
|
—
|
|
|
9.125% Senior Notes deferred finance charges
|
—
|
|
|
4,888
|
|
|
—
|
|
|
HoldCo Note
|
—
|
|
|
7,819
|
|
|
—
|
|
|
Boyd Gaming Credit Facility deferred finance charges
|
6,629
|
|
|
1,978
|
|
|
—
|
|
|
Peninsula Credit Facility deferred finance charges
|
9,512
|
|
|
2,086
|
|
|
1,536
|
|
|
Total loss on early extinguishments and modifications of debt
|
$
|
42,364
|
|
|
$
|
40,733
|
|
|
$
|
1,536
|
|
Income Taxes
The effective tax rate on income or loss from continuing operations during 2016, 2015 and 2014 was (2,472.2%), (163.4%) and 9.7%, respectively. Our effective tax rate is impacted by adjustments that are largely independent of our operating results before taxes. During 2016, our tax benefit was primarily a result of the release of a valuation allowance on our federal and state net operating loss carryforwards and other deferred tax assets. The tax benefit for the years ended December 31, 2015 and 2014 was favorably impacted by impairment charges to indefinite lived intangible assets which resulted in a reduction in our recognized deferred tax liability on these assets and adversely impacted by an accrual of non-cash tax expense in connection with the tax amortization of indefinite lived intangible assets. The deferred tax liabilities created by the tax amortization of these intangibles could not be used to offset our net operating loss or other deferred tax assets in determining our valuation allowance. In 2015, the tax benefit was favorably impacted by the partial release of the valuation allowance attributable to income from continuing operations and the federal and state release of unrecognized tax benefits (including associated interest reserves) in connection with our Internal Revenue Service (“IRS”) and New Jersey income tax examinations. The tax provision for the year ended December 31, 2014 was adversely impacted by the valuation allowance applied to our federal and state income tax net operating losses and certain other deferred tax assets. Additionally, in 2014, the tax provision was favorably impacted by the realization of certain unrecognized tax benefits, inclusive of the reversal of related accrued interest, as a result of statute expirations.
Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above. As part of our review in determining the need for a valuation allowance, we assess the positive and negative evidence in each tax jurisdiction. In performing our analysis in 2016, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilize a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters during 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from these deferred tax assets would be realized. As a result, during the year ended December 31, 2016, we released $201.5 million of valuation allowance on our federal and state income tax net operating loss carryforwards and other deferred tax assets.
We have maintained a valuation allowance of $28.4 million against certain federal and state deferred tax assets as of December 31, 2016 due to uncertainties related to our ability to realize the tax benefits associated with these assets. We considered, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies.
Income from Discontinued Operations, Net of Tax
Income from discontinued operations reflects the $181.7 million after-tax gain on the August 1, 2016, sale of our equity interest
in Borgata, our share of the results of Borgata through the date of sale and our portion of property tax refunds received in 2016 subsequent to the sale of our ownership interest. The Company applied the equity method of accounting to its 50% investment in Borgata.
LIQUIDITY AND CAPITAL RESOURCES
Financial Position
We operate our business with minimal or negative levels of working capital in order to minimize borrowings and related interest costs. Our cash and cash equivalents balance was
$193.9 million
and
$158.8 million
at
December 31, 2016
and
2015
, respectively. Our working capital deficit at
December 31, 2016
and
2015
was
$57.6 million
and $97.4 million, respectively.
Our credit facility generally provides any necessary funds for day-to-day operations, interest and tax payments, as well as capital expenditures. On a daily basis, we evaluate our cash position and adjust the balance under our credit facility, as necessary, by either borrowing or paying down with excess cash. We also plan the timing and the amounts of our capital expenditures. We believe that the borrowing capacity under our credit facility, subject to restrictive covenants, and cash flows from operating activities will be sufficient to meet our projected operating and maintenance capital expenditures for at least the next twelve months. The source of funds available to us for the repayment of our debt or to fund development projects is derived primarily from our cash flows from operations and availability under our credit facility, to the extent availability exists after we meet our working capital needs, and subject to restrictive covenants.
We could also seek to secure additional working capital, repay current debt maturities, or fund development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings. If availability does not exist under our credit facility, or we are not otherwise able to draw funds on our credit facility, additional financing may not be available to us, and if available, may not be on terms favorable us.
Cash Flows Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In millions)
|
2016
|
|
2015
|
|
2014
|
|
Net cash provided by operating activities
|
$
|
302.9
|
|
|
$
|
325.8
|
|
|
$
|
289.9
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
Capital expenditures
|
(160.4
|
)
|
|
(131.2
|
)
|
|
(137.8
|
)
|
|
Cash paid for acquisitions, net of cash received
|
(592.7
|
)
|
|
—
|
|
|
—
|
|
|
Investments in and advances to unconsolidated subsidiaries, net
|
—
|
|
|
—
|
|
|
0.2
|
|
|
Other investing activities
|
14.1
|
|
|
4.5
|
|
|
(5.9
|
)
|
|
Net cash used in investing activities
|
(739.0
|
)
|
|
(126.7
|
)
|
|
(143.5
|
)
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
Net payments of debt
|
(97.9
|
)
|
|
(203.4
|
)
|
|
(140.1
|
)
|
|
Share-based compensation activities, net
|
(1.3
|
)
|
|
3.7
|
|
|
1.8
|
|
|
Net cash used in financing activities
|
(99.2
|
)
|
|
(199.7
|
)
|
|
(138.3
|
)
|
|
Net cash provided by (used in) discontinued operations
|
570.3
|
|
|
14.1
|
|
|
(40.6
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
$
|
35.0
|
|
|
$
|
13.5
|
|
|
$
|
(32.5
|
)
|
Cash Flows from Operating Activities
During
2016
,
2015
and
2014
, we generated net operating cash flow of
$302.9 million
,
$325.8 million
and
$289.9 million
, respectively. Generally, operating cash flows decreased
$22.9 million
in
2016
compared to
2015
due to the flow through effect of lower revenues and increased project development expenses, offset by reduced interest expense. Generally, operating cash flows increased $35.9 million in 2015 compared to 2014 due to the flow through effect of higher revenues, partially offset by the timing of working capital spending.
Cash Flows from Investing Activities
Our industry is capital intensive and we use cash flows for acquisitions, facility expansions, investments in future development or business opportunities and maintenance capital expenditures.
During 2016, we incurred net cash outflows for investing activities of
$739.0 million
due to our acquisitions of Aliante and the Cannery Properties and capital expenditures during the period of
$160.4 million
.
During 2015, we incurred net cash outflows for investing activities of
$126.7 million
due to our capital expenditures during the period of
$131.2 million
.
In 2014, we incurred net cash outflows for investing activities of
$143.5 million
due to our capital expenditures during the period of
$137.8 million
.
Cash Flows from Financing Activities
We rely upon our financing cash flows to provide funding for investment opportunities, repayments of obligations and ongoing operations.
In 2016, 2015 and 2014, our net cash outflows for financing activities totaled
$99.2 million
,
$199.7 million
and
$138.3 million
, respectively, as we used cash generated from operations to extinguish outstanding debt.
Cash Flows from Discontinued Operations
Discontinued operations activities in 2016, 2015 and 2014 represents Borgata. The net cash inflow of
$570.3 million
in 2016 includes the pretax cash proceeds of $589 million received from the sale of our equity interest in Borgata.
Indebtedness
The balances of our long-term debt and the changes in those balances, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
December 31, 2016
|
|
December 31, 2015
|
|
Increase/ (Decrease)
|
|
Boyd Gaming Corporation Debt:
|
|
|
|
|
|
|
Bank credit facility
|
$
|
1,782.5
|
|
|
$
|
1,209.7
|
|
|
$
|
572.8
|
|
|
9.00% senior notes due 2020
|
—
|
|
|
350.0
|
|
|
(350.0
|
)
|
|
6.875% senior notes due 2023
|
750.0
|
|
|
750.0
|
|
|
—
|
|
|
6.375% senior notes due 2026
|
750.0
|
|
|
—
|
|
|
750.0
|
|
|
Other
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
|
3,283.1
|
|
|
2,309.7
|
|
|
973.4
|
|
|
|
|
|
|
|
|
|
Peninsula Gaming Debt:
|
|
|
|
|
|
|
Bank credit facility
|
—
|
|
|
662.8
|
|
|
(662.8
|
)
|
|
8.375% senior notes due 2018
|
—
|
|
|
350.0
|
|
|
(350.0
|
)
|
|
|
—
|
|
|
1,012.8
|
|
|
(1,012.8
|
)
|
|
Total long-term debt
|
3,283.1
|
|
|
3,322.5
|
|
|
(39.4
|
)
|
|
|
|
|
|
|
|
|
Less current maturities
|
30.3
|
|
|
29.8
|
|
|
0.5
|
|
|
Long-term debt, net
|
$
|
3,252.8
|
|
|
$
|
3,292.7
|
|
|
$
|
(39.9
|
)
|
The amount of current maturities includes certain non-extending balances scheduled to be repaid within the next twelve months under the bank credit facilities.
Boyd Gaming Corporation Debt
Credit Facility
On September 15, 2016, the Company entered into an Amendment No. 1 and Joinder Agreement (the "Amendment") among the Company, certain financial institutions, Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as swing line lender. The Amendment modified the Third Amended and Restated Credit Agreement dated August 14, 2013 (the "Prior Credit Facility" together with the Amendment referred to as the "Credit Facility" or the "Credit Agreement").
As modified by the Amendment, the Credit Facility provides for: (i) increased commitments under the existing senior secured revolving credit facility (the "Revolving Credit Facility") to an amount equal to
$775.0 million
, (ii) commitments under the existing senior secured term A loan (the "Term A Loan") in an amount equal to
$225.0 million
, and (iii) a new
$1.0 billion
senior secured term B-2 loan (the "Term B-2 Loan"). The maturity dates of the Revolving Credit Facility and the Term A Loan have been extended to September 15, 2021 (or earlier upon the occurrence or non-occurrence of certain events); the Term B-2 Loan matures on September 15, 2023 (or earlier upon the occurrence or non-occurrence of certain events); the maturity date of the existing senior secured term B-1 loan (the "Term B-1 Loan"), remains August 14, 2020. The increase to the Term A Loan and the new Term B-2 Loan were fully funded on the effective date of the Amendment. Proceeds from the Credit Facility were used to refinance all
outstanding obligations under the Prior Credit Facility, to fund transaction costs in connection with the Credit Facility, and for working capital and other general corporate purposes.
The Credit Facility includes an accordion feature which permits an increase in the Revolving Credit Facility and the issuance and increase of senior secured term loans in an amount up to (i)
$550.0 million
, plus (ii) certain voluntary permanent reductions of the Revolving Credit Facility and certain voluntary prepayments of the senior secured term loans, plus (iii) certain reductions in the outstanding principal amounts under the term loans or the Revolving Credit Facility, plus (iv) any additional amount if, after giving effect thereto, the First Lien Leverage Ratio (as defined in the Credit Agreement) would not exceed
4.25
to
1.00
on a pro forma basis, less (v) any Incremental Equivalent Debt (as defined in the Credit Agreement), in each case, subject to the satisfaction of certain conditions.
Pursuant to the terms of the Credit Facility (i) the loans under the Term A Loan amortize in an annual amount equal to
5.00%
of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis; (ii) the loans under the Term B-1 Loan amortize in an annual amount equal to
1.00%
of the original principal amount thereof, commencing December 31, 2013, payable on a quarterly basis; (iii) the loans under the Term B-2 Loan amortize in an annual amount equal to
1.00%
of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis; and (iv) beginning with the fiscal year ending December 31, 2016, the Company is required to use a portion of its annual Excess Cash Flow, as defined in the Credit Agreement, to prepay loans outstanding under the Credit Facility.
The interest rate on the outstanding balance from time to time of the Revolving Credit Facility and the Term A Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio and ranges from
1.75%
to
2.75%
(if using the Eurodollar rate) and from
0.75%
to
1.75%
(if using the base rate). A fee of a percentage per annum (which ranges from
0.25%
to
0.50%
determined in accordance with a specified pricing grid based on the total leverage ratio) will be payable on the unused portions of the Revolving Credit Facility.
The interest rate on the outstanding balance from time to time of the Term B-1 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a
1.00%
minimum) plus
3.00%
or (ii) the base rate plus
2.00%
. The interest rate on the outstanding balance from time to time of the Term B-2 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a
0.00%
minimum) plus
3.00%
or (ii) the base rate plus
2.00%
.
The "base rate" under the Credit Agreement remains the highest of (x) Bank of America’s publicly-announced prime rate, (y) the federal funds rate plus
0.50%
, or (z) the Eurodollar rate for a one-month period plus
1.00%
.
The blended interest rate for outstanding borrowings under for the Credit Facility was
3.4%
at
December 31, 2016
and
3.8%
at
December 31, 2015
.
Pursuant to the terms of the Credit Facility (i) the loans under the Term A Loan amortize in an annual amount equal to
5.00%
of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, (ii) the loans under the Term B-2 Loan amortize in an annual amount equal to
1.00%
of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, and (iii) beginning with the fiscal year ending December 31, 2016, the Company is required to use a portion of its annual Excess Cash Flow, as defined in the Credit Agreement, to prepay loans outstanding under the Credit Facility.
Amounts outstanding under the Credit Agreement may be prepaid without premium or penalty, and the unutilized portion of the commitments may be terminated without penalty, subject to certain exceptions, including a
1.00%
prepayment premium for any prepayment of the Term B-2 Loan prior to March 15, 2017 that is accompanied by a repricing of the Term B-2 Loan.
Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.
The Credit Facility contains certain financial and other covenants, including, without limitation, various covenants: (i) requiring the maintenance of a minimum consolidated interest coverage ratio 1.75 to 1.00; (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below); (iii) establishing a maximum permitted secured leverage ratio (discussed below); (iv) imposing limitations on the incurrence of indebtedness; (v) imposing limitations on transfers, sales and other dispositions; and (vi) imposing restrictions on investments, dividends and certain other payments
The Company's obligations under the Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors will grant the administrative agent first priority liens and security interests on substantially all of their
real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Credit Facility.
The outstanding principal amounts under the Credit Facility are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In millions)
|
2016
|
|
2015
|
|
Revolving Credit Facility
|
$
|
245.0
|
|
|
$
|
240.0
|
|
|
Term A Loan
|
222.2
|
|
|
183.3
|
|
|
Term B-1 Loan
|
271.8
|
|
|
730.8
|
|
|
Term B-2 Loan
|
997.5
|
|
|
—
|
|
|
Swing Loan
|
46.0
|
|
|
55.6
|
|
|
Total outstanding principal amounts under the Credit Facility
|
$
|
1,782.5
|
|
|
$
|
1,209.7
|
|
After consideration of
$12.0 million
allocated to support various letters of credit, approximately
$471.9 million
of availability remained under our Credit Facility at
December 31, 2016
.
Senior Notes
6.875% Senior Notes due May 2023
Significant Terms
On May 21, 2015, we issued $750 million aggregate principal amount of 6.875% senior notes due May 2023 (the "6.875% Notes"). The 6.875% Notes require semi-annual interest payments on May 15 and November 15 of each year, commencing on November 15, 2015. The 6.875% Notes will mature on May 15, 2023 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us.
The 6.875% Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the 6.875% Notes, together, the "6.875% Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the 6.875% Indenture), we will be required, unless certain conditions are met, to offer to repurchase the 6.875% Notes at a price equal to 101% of the principal amount of the 6.875% Notes, plus accrued and unpaid interest and Additional Interest (as defined in the 6.875% Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the 6.875% Notes.
At any time prior to May 15, 2018, we may redeem the 6.875% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to May 15, 2018, we may redeem all or a portion of the 6.875% Notes at redemption prices (expressed as percentages of the principal amount) ranging from 105.156% in 2018 to 100% in 2021 and thereafter, plus accrued and unpaid interest and Additional Interest.
Senior Notes
6.375%
Senior Notes due April 2026
Significant Terms
On March 28, 2016, we issued
$750 million
aggregate principal amount of
6.375%
senior notes due April 2026 (the "
6.375%
Notes"). The
6.375%
Notes require semi-annual interest payments on April 1 and October 1 of each year, commencing on October 1, 2016. The
6.375%
Notes will mature on April 1, 2026 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are
100%
owned by us. Net proceeds from the
6.375%
Notes were used to pay down the outstanding amount under the Revolving Credit Facility and the balance was deposited in money market funds and classified as cash equivalents on the consolidated balance sheets.
In conjunction with the issuance of the
6.375%
Notes, we incurred approximately
$13.0 million
in debt financing costs that have been deferred and are being amortized over the term of the
6.375%
Notes using the effective interest method.
The
6.375%
Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the
6.375%
Notes, together, the "6.375% Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change
of control (as defined in the 6.375% Indenture), we will be required, unless certain conditions are met, to offer to repurchase the
6.375%
Notes at a price equal to
101%
of the principal amount of the
6.375%
Notes, plus accrued and unpaid interest and Additional Interest (as defined in the 6.375% Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the
6.375%
Notes.
At any time prior to April 1, 2021, we may redeem the
6.375%
Notes, in whole or in part, at a redemption price equal to
100%
of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. After April 1, 2021, we may redeem all or a portion of the
6.375%
Notes at redemption prices (expressed as percentages of the principal amount) ranging from
103.188%
in 2021 to
100%
in 2024 and thereafter, plus accrued and unpaid interest and Additional Interest.
In connection with the private placement of the 6.375% Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the 6.375% Notes. We filed the required registration statement and commenced the exchange offer during December 2016. The exchange offer was completed on February 10, 2017 and our obligations under the registration rights agreement have been fulfilled.
Senior Notes
9.00%
Senior Notes due July 2020
On September 6, 2016 we redeemed all of our
9.00%
senior notes due July 2020 (the "
9.00%
Notes") at a redemption price of
104.50%
plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand.
As a result of this redemption, the
9.00%
Notes have been fully extinguished.
Peninsula Gaming Debt
Peninsula Credit Facility
On September 2, 2016, Peninsula repaid all of the outstanding amounts, including all principal and accrued interest amounts, under the Peninsula senior secured credit facility (the "Peninsula Credit Facility") pursuant to the Peninsula Credit Agreement. In connection with the repayment in full of the Peninsula Credit Facility (the "Repayment"), the Peninsula Credit Agreement was terminated.
Senior Notes
8.375%
Senior Notes due February 2018
On September 2, 2016 we redeemed all of our
8.375%
senior notes due February 2018 (the "
8.375%
Notes") at a redemption price of
100.0%
plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand.
As a result of this redemption, the 8.375% Notes have been fully extinguished.
Covenant Compliance
As of
December 31, 2016
, we believe that we were in compliance with the financial and other covenants contained in our debt instruments.
Scheduled Maturities of Long-Term Debt
The scheduled maturities of long-term debt, as discussed above, are as follows:
|
|
|
|
|
|
|
|
(In millions)
|
Total
|
|
For the year ending December 31,
|
|
|
2017
|
$
|
30.3
|
|
|
2018
|
76.4
|
|
|
2019
|
30.3
|
|
|
2020
|
266.1
|
|
|
2021
|
432.3
|
|
|
Thereafter
|
2,447.7
|
|
|
Total outstanding principal of long-term debt
|
$
|
3,283.1
|
|
Dividends
Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our Credit Facility. In July 2008, our Board
of Directors suspended the quarterly dividend for the current and future periods; therefore, we did not declare a dividend during
2016
,
2015
and
2014
.
Share Repurchase Program
Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our Credit Facility. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our Credit Facility.
In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the total amount of common stock available to be repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program, and we did not repurchase any shares of our common stock during
2016
,
2015
and
2014
. We are currently authorized to repurchase up to an additional $92.1 million in shares of our common stock under the share repurchase program.
We have in the past, and may in the future, acquire our debt or equity securities through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.
Other Items Affecting Liquidity
We anticipate the ability to fund our capital requirements using our free cash flow from operations and availability under our Credit Facility, to the extent availability exists after we meet our working capital needs for the next twelve months. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. The outcome of the following specific matters, including our commitments and contingencies, may also affect our liquidity.
Divestiture of Borgata
The proceeds we received upon the sale of our equity interest in Borgata did not include our 50% share of any future property tax settlement benefits, from the time period during which we held a 50% ownership in MDDHC, subsequently received by Borgata and to which Boyd Gaming retains the right to receive payment. On February 15, 2017, Borgata announced that it had entered into a settlement agreement under which it will receive payments totaling $72 million to resolve the property tax issues. We will receive 50% of those payments once Borgata receives the payments from the city.
Commitments
Capital Spending and Development
We continually perform on-going refurbishment and maintenance at our facilities to maintain our standards of quality. Certain of these maintenance costs are capitalized, if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. We must also comply with covenants and restrictions set forth in our debt agreements.
Our estimated total capital expenditures for 2017 are expected to be approximately $248 million, primarily comprised of land purchases totaling $78 million and various maintenance capital expenditures across our properties. We intend to fund such capital expenditures through our credit facility and operating cash flows.
In addition to the capital spending discussed above, we also continue to pursue other potential development projects that may require us to invest significant amounts of capital. We continue to work with Wilton Rancheria, a federally-recognized tribe located about 30 miles southeast of Sacramento, California, to develop and manage a gaming entertainment complex.
CONTRACTUAL OBLIGATIONS
The following summarizes our contractual obligations as of
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
(In millions)
|
Total
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
CONTRACTUAL OBLIGATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank credit facility
|
$
|
1,782.5
|
|
|
$
|
30.2
|
|
|
$
|
76.3
|
|
|
$
|
30.2
|
|
|
$
|
266.0
|
|
|
$
|
432.2
|
|
|
$
|
947.6
|
|
|
6.375% senior notes due 2026
|
750.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750.0
|
|
|
6.875% senior notes due 2023
|
750.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750.0
|
|
|
Other
|
0.6
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
Total long-term debt
|
3,283.1
|
|
|
30.3
|
|
|
76.4
|
|
|
30.3
|
|
|
266.1
|
|
|
432.3
|
|
|
2,447.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on Fixed Rate Debt
|
769.0
|
|
|
99.4
|
|
|
99.4
|
|
|
99.4
|
|
|
99.4
|
|
|
99.4
|
|
|
272.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on Variable Rate Debt (1)
|
336.7
|
|
|
61.2
|
|
|
60.2
|
|
|
59.2
|
|
|
53.7
|
|
|
43.1
|
|
|
59.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
430.8
|
|
|
46.0
|
|
|
18.5
|
|
|
16.3
|
|
|
14.1
|
|
|
13.7
|
|
|
322.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase Obligations (2)
|
38.5
|
|
|
11.4
|
|
|
6.2
|
|
|
3.2
|
|
|
2.3
|
|
|
2.3
|
|
|
13.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CONTRACTUAL OBLIGATIONS
|
$
|
4,858.1
|
|
|
$
|
248.3
|
|
|
$
|
260.7
|
|
|
$
|
208.4
|
|
|
$
|
435.6
|
|
|
$
|
590.8
|
|
|
$
|
3,114.3
|
|
|
|
|
|
(1)
|
Estimated interest payments are based on principal amounts and scheduled maturities of debt outstanding at
December 31, 2016
. Estimated interest payments for variable-rate debt are based on rates at
December 31, 2016
.
|
(2) Purchase obligations include various contracted amounts, including construction contacts and information technology, advertising, maintenance and other service agreements.
Other Opportunities
We regularly investigate and pursue additional expansion opportunities in markets where casino gaming is currently permitted. We also pursue expansion opportunities in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. Such expansions will be affected and determined by several key factors, which may include the following:
|
|
|
|
•
|
the outcome of gaming license selection processes;
|
|
|
|
|
•
|
the approval of gaming in jurisdictions where we have been active but where casino gaming is not currently permitted;
|
|
|
|
|
•
|
identification of additional suitable investment opportunities in current gaming jurisdictions; and
|
|
|
|
|
•
|
availability of acceptable financing.
|
Additional projects may require us to make substantial investments or may cause us to incur substantial costs related to the investigation and pursuit of such opportunities, which investments and costs we may fund through cash flow from operations or availability under our Credit Facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity 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 obtainable on terms favorable to us. Moreover, we can provide no assurances that any expansion opportunity will result in a completed transaction.
Off Balance Sheet Arrangements
Our off balance sheet arrangements consist of the following:
Indemnification
We have entered into certain agreements that contain indemnification provisions, as well as indemnification agreements involving certain of our executive officers and directors. These agreements provide indemnity insurance pursuant to which directors and officers are indemnified or insured against liability or loss under certain circumstances, which may include liability or related loss under the Securities Act and the Exchange Act. In addition, our Restated Articles of Incorporation and Restated Bylaws contain provisions that provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by law.
Outstanding Letters of Credit
At
December 31, 2016
, we had outstanding letters of credit totaling
$12.0 million
.
Other Arrangements
We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. In accordance with GAAP, we are required to make estimates and assumptions that affect the reported amounts included in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. On an ongoing basis, management reviews and refines those estimates, the following of which materially impact our consolidated financial statements: the recoverability of long-lived assets; application of acquisition method of accounting; valuation of indefinite-lived intangible assets and goodwill; determination of self-insured reserves; and provisions for deferred tax assets, certain tax liabilities and uncertain tax positions.
Judgments are based on information including, but not limited to, historical experience, industry trends, conventional practices, expert opinions, terms of existing agreements and information from outside sources. Judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from these estimates.
We believe the following critical accounting policies require a higher degree of judgment and complexity, the sensitivity of which could result in a material impact on our consolidated financial statements.
Recoverability of Long-Lived Assets
Our long-lived assets were carried at
$2.6 billion
at
December 31, 2016
, or
55.8%
of our consolidated total assets. We evaluate the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If triggering events are identified, we then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples.
A long-lived asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The following are examples of such events or changes in circumstances:
|
|
|
|
i.
|
a significant decrease in the market price of a long-lived asset;
|
|
|
|
|
ii.
|
a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition;
|
|
|
|
|
iii.
|
a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;
|
|
|
|
|
iv.
|
an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;
|
|
|
|
|
v.
|
a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and/or
|
|
|
|
|
vi.
|
a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
|
We reconsider changes in circumstances on a frequent basis, and if a triggering event related to potential impairment has occurred, we solicit third party valuation expertise to assist in the valuation of our investment. There are three generally accepted approaches available in developing an opinion of value: the cost, sales comparison and income approaches. We generally consider each of these approaches in developing a recommendation of the fair value of the asset; however the reliability of each approach is dependent upon the availability and comparability of the market data uncovered, as well as, the decision-making criteria used by market participants when evaluating a property. We will bifurcate our investment and apply the most indicative approach to overall fair valuation, or in some cases, a weighted analysis of any or all of these methods.
Developing an opinion of land value is typically accomplished using a sales comparison approach by analyzing recent sales transactions of similar sites. Potential comparables are researched and the pertinent facts are confirmed with parties involved in the transaction. This process fosters a general understanding of the potential comparable sales and facilitates the selection of the most relevant comparables by the appraiser. Valuation is typically accomplished using a unit of comparison such as price per
square foot of land or potential building area. Adjustments are applied to the unit of comparison from an analysis of comparable sales, and the adjusted unit of comparison is then used to derive a value for the property.
The cost approach is based on the premise that a prudent investor would pay no more for an asset of similar utility than its replacement or reproduction cost. The cost to replace the asset would include the cost of constructing a similar asset of equivalent utility at prices applicable at the time of the valuation date. To arrive at an estimate of the fair value using the cost approach, the replacement cost new is determined and reduced for depreciation of the asset. Replacement cost new is defined as the current cost of producing or constructing a similar new item having the nearest equivalent utility as the property being valued.
The income approach focuses on the income-producing capability of the asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in applying this approach include estimating the expected before-tax cash flows attributable to the asset over its life and converting these before-tax cash flows to present value through capitalization or discounting. The process uses a rate of return that accounts for both the time value of money and risk factors. There are two common methods for converting net income into value, those methods are the direct capitalization and discounted cash flow methods ("DCF"). Direct capitalization is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step by dividing the income estimate by an appropriate capitalization rate. Under the DCF method, anticipated future cash flows and a reversionary value are discounted to an opinion of net present value at a specific internal rate of return or a yield rate, because net operating income of the subject property is not fully stabilized.
Application of Acquisition Method of Accounting
Acquisition of Cannery Casino Hotel and Nevada Palace, LLC
On December 20, 2016, we acquired The Cannery Hotel and Casino, LLC (“Cannery”), the owner and operator of Cannery Casino Hotel, and Nevada Palace, LLC (“Eastside Cannery”), the owner and operator of Eastside Cannery Casino and Hotel, pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of April 25, 2016, as amended on October 28, 2016, by and among Boyd, Cannery Casino Resorts, LLC (“Seller”), Cannery and Eastside Cannery. Accordingly, the acquired assets and liabilities of Cannery and Eastside Cannery are included in our consolidated balance sheet as of December 31, 2016 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows, respectively, from December 20, 2016 through December 31, 2016, during the year ended December 31, 2016. The net purchase price was
$228.2 million
.
The Company is following the acquisition method of accounting per ASC 805 guidance. For purposes of these financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on preliminary estimates of fair value as determined by management based on its judgment with assistance from preliminary third party appraisals. The excess of the purchase price over the net book value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company will recognize the assets acquired and liabilities assumed in the acquisitions based on fair value estimates as of the date of the Acquisition. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) is currently in process. This determination requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to finalize the determination of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. The final fair value determinations are expected to be completed no later than third quarter of 2017. The final fair value determinations may be significantly different than those reflected in the consolidated financial statements at December 31, 2016.
Acquisition of Aliante
On September 27, 2016, we acquired ALST, the holding company of Aliante Gaming, LLC ("Aliante"), the owner and operator of the Aliante Casino + Hotel + Spa, pursuant to the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged (the "Merger") with and into ALST, with ALST surviving the Merger. ALST and Aliante are now wholly-owned subsidiaries of Boyd Gaming. Accordingly, the acquired assets and liabilities of Aliante are included in our consolidated balance sheet as of December 31, 2016 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows, respectively, from September 27, 2016 through December 31, 2016, during the year ended December 31, 2016. The net purchase price was
$372.3 million
.
The Company is following the acquisition method of accounting per ASC 805 guidance. In accordance with ASC 805, the Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, which was determined primarily by management with assistance from third-party appraisals. The excess of the purchase price over those fair values has been recorded as goodwill.
Valuation of Indefinite-Lived Intangible Assets
Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight and a limitation on the number of licenses available for issuance with these certain jurisdictions. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five-year period.
Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the brand name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years. Applying the selected pretax royalty rates to the applicable revenue base in each period yielded pretax income for each property's trademarks and trade name. These pretax totals were tax effected utilizing the applicable tax rate to arrive at net, after-tax cash flows. The net, after-tax flows were then discounted to present value utilizing an appropriate discount rate. The present value of the after-tax cash flows were then added to the present value of the amortization tax benefit (considering the 15-year amortization of intangible assets pursuant to recent tax legislation) to arrive at the recommended fair values for the trademarks and trade names.
Gaming license rights and trademarks are indefinite-lived intangible assets and are not subject to amortization, but are subject to an annual impairment test and between annual test dates in certain circumstances. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. Gaming license rights are tested for impairment using a discounted cash flow approach. Trademarks are tested for impairment using the relief-from-royalty method. As part of our annual impairment testing, management assesses the likelihood of impairment and solicits third party valuation expertise to assist in the valuation of indefinite-lived intangible assets that are deemed to have a greater likelihood of impairment.
Our annual impairment test, performed as of October 1,
2016
, resulted in a $23.6 million impairment charge for one of our gaming licenses.
We evaluate whether any triggering events or changes in circumstances had occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. This evaluation required significant judgment, including consideration of whether there had been any significant adverse changes in legal factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or likely sale or disposal of all or a significant portion of a reporting unit. Based upon this evaluation, we concluded that there had not been any triggering events or changes in circumstances that indicated an impairment condition existed as of
December 31, 2016
. If an event described above occurs, and results in a significant impact to our revenue and profitability projections, or any significant assumption in our valuations methods is adversely impacted, the impact could result in a material impairment charge in the future.
Valuation of Goodwill
The authoritative guidance related to goodwill impairment requires goodwill to be tested for impairment at the reporting unit level at least annually. The guidance permits an entity to make a qualitative assessment, referred to as “Step Zero,” of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying a two-step goodwill impairment test. If the entity concludes that it is not likely that the fair value of the reporting unit is less than its carrying amount, it is not required to perform the two-step test for that reporting unit. The guidance lists certain factors to consider when making this qualitative assessment. In the event that the entity concludes the two-step test is required, Step One of the test is a screen used to identify whether or not goodwill impairment may exist. In Step One, an entity compares the fair value of a reporting unit with its carrying amount. If a reporting unit's carrying amount exceeds its fair value, goodwill impairment may exist. Step Two of the test must then be performed to measure the amount of impairment, if any. In Step Two, an entity compares the implied fair value of goodwill with its carrying amount. An impairment loss is measured by the excess of the carrying amount of goodwill over its implied fair value. The implied fair value of goodwill should be determined in the same manner that goodwill is measured in a business combination; that is, an entity must allocate the fair value of a reporting unit to the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination.
As part of our annual impairment testing, management assesses the likelihood of impairment and solicits third party valuation expertise to assist in the performance of the Step One valuations of goodwill for those reporting units that are deemed to have a
greater likelihood of impairment. We perform the test as of October 1, using a weighting of two different approaches to determine fair value: (i) the income approach; and (ii) the market approach.
The income approach is based on a discounted cash flow method, which focuses on the expected cash flow of the subject company. In applying this approach, the cash flow available for distribution is calculated for a finite period of years. Cash flow available for distribution is defined, for purposes of this analysis, as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the subject company. The cash flow available for distribution and the terminal value (the value of the subject company at the end of the estimation period) are then discounted to present value to derive an indication of value of the business enterprise.
In the valuation of an asset, the income approach focuses on the income-producing capability of the subject asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in applying this approach include estimating the expected after-tax cash flows attributable to the asset over its life and converting these after-tax cash flows to present value through "discounting." The discounting process uses a rate of return which accounts for both the time value of money and investment risk factors. Finally, the present value of the after-tax cash flows over the life of the asset is totaled to arrive at an indication of the fair value of the asset.
The market approach is comprised of the guideline company method, which focuses on comparing the subject company to selected reasonably similar, or "guideline", publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the subject company relative to the selected guideline companies; and (iii) applied to the operating data of the subject company to arrive at an indication of value. In the valuation of an asset, the market approach measures value based on what typical purchasers in the market have paid for assets which can be considered reasonably similar to those being valued. When the market approach is utilized, data are collected on the prices paid for reasonably comparable assets. Adjustments are made to the similar assets to compensate for differences between reasonably similar assets and the asset being valued. The application of the market approach results in an estimate of the price reasonably expected to be realized from the sale of the subject asset.
The two methodologies were weighted 60.0% toward the income approach and 40.0% toward the market approach, to arrive at an overall fair value. At October 1, 2016, the fair value of our reporting units exceeded their carrying value with the exception of one reporting unit in our Midwest and South segment. For that reporting unit, we performed the Step 2 test and concluded that a $12.5 million impairment of goodwill had occurred. At
December 31, 2016
, we evaluated whether any triggering events or changes in circumstances had occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. This evaluation required significant judgment, including consideration of whether there had been any significant adverse changes in legal factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or likely sale or disposal of all or a significant portion of a reporting unit. Based upon this evaluation, we concluded that there had not been a triggering event or change in circumstances that indicated an impairment condition existed at December 31, 2016.
Although, with the one exception described above, we satisfied Step One for each reporting unit tested, changes to certain underlying assumptions and variables, many of which are derived from external factors, could greatly impact the results of future tests. We cannot control or influence the impact of these factors from a fair valuation perspective, but they could nonetheless have a material effect on the results of valuation, particularly the guideline company method under the market approach, in the future.
Additionally, several of the assumptions underlying the discounted cash flow method under the income approach could pose a high degree of sensitivity to the resulting fair value. These factors include, but are not limited to, the following: total revenue, depreciation expense, depreciation overhang, tax expense and effective rates, debt-free net working capital, capital additions, terminal year growth factor, discount rate and the capitalization rate. A change in any of these variables that cause our undiscounted cash flows or terminal value or both to adversely and materially change could result in the failure of the Step One test, and a resulting impairment of our goodwill in an amount up to its book value of
$826.5 million
.
The Company has determined that each of its properties is a reporting unit for goodwill impairment testing, since discrete financial information is available at the property level.
Determination of Self-Insured Reserves
We are fully self-insured for general liability costs and self-insured for workers' compensation costs up to a stop loss limit of $0.5 million. Self-insurance reserves include accruals of estimated settlements for known claims, ("Case Reserves") as well as accruals of estimates for claims incurred but not yet reported ("IBNR"). Case reserves represent estimated liability for unpaid loss, based on a claims administrator's estimates of future payments on individual reported claims, including Loss Adjustment Expenses
("LAE"). Generally, LAE includes claims settlement costs directly assigned to specific claims, such as legal fees. We estimate case and LAE reserves on a combined basis, but do not include claim administration costs in our estimated ultimate loss reserves. IBNR reserves include the provision for unreported claims, changes in case reserves, and future payments on reopened claims.
We have relied upon an industry-based method to establish our self-insurance reserves, which projects the ultimate losses estimated by multiplying the exposures by a selected ultimate loss rate. The selected ultimate loss rates were determined based on a review of ultimate loss rates for prior years, adjusted for loss and exposure trend, and benefit level changes. We believe this method best provides an appropriate result, given the maturing experience and relative stabilization of our claims history. In previous years, and in certain instances, loss rates were based on industry Loss Development Factors ("LDFs"). Industry LDFs are from various national sources for workers compensation and general liability claims, and we utilize the most recent information available, although there is some lag time between compilation and publishing of such reports, during which unfavorable trends or data could emerge, which would not be reflected in our reserves.
For workers' compensation, using payroll by state as weights, we calculate a weighted average industry LDF; for general liability claims, we use gross revenues as weights, and apply to a weighted average Industry LDF to yield an initial expectation of the ultimate loss amount. The paid LDFs are used to determine the percentage of the expected ultimate loss that is expected to be unpaid as of the reserving date. This future unpaid percentage is multiplied by the expected ultimate losses to derive the expected future paid losses. As a loss year matures, the expected future paid losses are replaced by actual paid losses.
In the computation of workers' compensation claims, we exclude any claim which has reached our stop loss limitation; and therefore, we do not include any allowance for expected recoverable from excess or reinsurance. We are, however, contingently liable in the event such reinsurer cannot meet its obligations. Although we place this risk with insurers rated better than A with AM Best, a national insurance company rating agency, there can be no assurance that such reinsurer will be able to meet their obligations in the future. At
December 31, 2016
, unpaid case reserves on claims in excess of $0.5 million, which we have subrogated to the reinsurer, totaled less than $0.9 million.
In estimating our reserves for unpaid losses, it is also necessary to project future loss payments. Actual future losses will not develop exactly as projected and may, in fact, vary significantly from the projections. Further, the projections make no provision for future emergence of new classes of losses or types of losses not sufficiently represented in our historical database or that are not yet quantifiable. Additionally, our results are estimates based on long term averages. Actual loss experience in any given year may differ from what is suggested by these averages. The sensitivity of key variables and assumptions in the analysis was considered. Key variables and assumptions include (but are not limited to) loss development factors, trend factors and the expected loss rates/ratios used. It is possible that reasonable alternative selections would produce materially different reserve estimates.
Management believes the estimates of future liability are reasonable based upon this methodology; however, changes in key variables and assumptions used above, or generally in health care costs, accident frequency and severity could materially affect the estimate for these reserves.
Provisions for Deferred Tax Assets, Certain Tax Liabilities and Uncertain Tax Positions
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with the usability of operating loss and tax credit carryforwards before expiration, and tax planning alternatives.
The Company's income tax returns are subject to examination by the Internal Revenue Service ("IRS") and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.
We recognize the tax benefit from an uncertain tax position only when it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.
We have established contingency reserves for material, known tax exposures. Our tax reserves reflect management's judgment as to the resolution of the issues involved if subject to judicial review. While we believe our reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a taxing authority will be resolved at a financial cost that does not exceed its related reserve. With respect to these reserves, our income tax expense would include: (i) any changes in tax reserves arising from material changes during the period in the facts and circumstances (i.e., new information) surrounding a tax issue; and (ii) any difference from our tax position as recorded in the financial statements and the final resolution of a tax issue during the period.
Our balance for uncertain tax benefits as of
December 31, 2016
was $2.5 million. While we believe that our reserves are adequate to cover reasonably expected tax risks, in the event that the ultimate resolution of our uncertain tax positions differ from our estimates, we may be exposed to material increases in income tax expense, which could materially impact our financial position, results of operations and cash flows.
Recently Issued Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1,
Summary of Significant Accounting Policies -
Recently Issued Accounting Pronouncements
, in the notes to the consolidated financial statements.
ITEM 8. Financial Statements and Supplementary Data
The following consolidated financial statements for the three years in the period ended
December 31, 2016
are filed as part of this Report:
The accompanying audited consolidated financial statements of Boyd Gaming Corporation (and together with its subsidiaries, the "Company," "we" or "us") have been prepared in accordance with the instructions to Form 10-K and Regulation S-X and include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States ("GAAP").
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders of
Boyd Gaming Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Boyd Gaming Corporation and Subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Boyd Gaming Corporation and subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in
Internal Control-Integrated Framework
(
2013
) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2017 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 23, 2017
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
______________________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands, except share data)
|
2016
|
|
2015
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
$
|
193,862
|
|
|
$
|
158,821
|
|
|
Restricted cash
|
16,488
|
|
|
19,030
|
|
|
Accounts receivable, net
|
30,371
|
|
|
25,289
|
|
|
Inventories
|
18,568
|
|
|
15,462
|
|
|
Prepaid expenses and other current assets
|
46,214
|
|
|
37,250
|
|
|
Income taxes receivable
|
2,444
|
|
|
1,380
|
|
|
Total current assets
|
307,947
|
|
|
257,232
|
|
|
Property and equipment, net
|
2,605,169
|
|
|
2,225,342
|
|
|
Other assets, net
|
49,205
|
|
|
48,341
|
|
|
Intangible assets, net
|
881,954
|
|
|
890,054
|
|
|
Goodwill, net
|
826,476
|
|
|
685,310
|
|
|
Investment in unconsolidated subsidiary held for sale
|
—
|
|
|
244,621
|
|
|
Total assets
|
$
|
4,670,751
|
|
|
$
|
4,350,900
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
|
Current maturities of long-term debt
|
$
|
30,336
|
|
|
$
|
29,750
|
|
|
Accounts payable
|
84,086
|
|
|
75,803
|
|
|
Accrued liabilities
|
251,082
|
|
|
249,518
|
|
|
Total current liabilities
|
365,504
|
|
|
355,071
|
|
|
Long-term debt, net of current maturities and debt issuance costs
|
3,199,119
|
|
|
3,239,799
|
|
|
Deferred income taxes
|
83,980
|
|
|
162,189
|
|
|
Other long-term tax liabilities
|
3,307
|
|
|
3,085
|
|
|
Other liabilities
|
84,715
|
|
|
82,745
|
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
Preferred stock, $0.01 par value, 5,000,000 shares authorized
|
—
|
|
|
—
|
|
|
Common stock, $0.01 par value, 200,000,000 shares authorized; 112,896,377 and 111,614,420 shares outstanding
|
1,129
|
|
|
1,117
|
|
|
Additional paid-in capital
|
953,440
|
|
|
945,041
|
|
|
Retained earnings (accumulated deficit)
|
(19,878
|
)
|
|
(437,881
|
)
|
|
Accumulated other comprehensive income (loss)
|
(615
|
)
|
|
(316
|
)
|
|
Total Boyd Gaming Corporation stockholders’ equity
|
934,076
|
|
|
507,961
|
|
|
Noncontrolling interest
|
50
|
|
|
50
|
|
|
Total stockholders’ equity
|
934,126
|
|
|
508,011
|
|
|
Total liabilities and stockholders’ equity
|
$
|
4,670,751
|
|
|
$
|
4,350,900
|
|
The accompanying notes are an integral part of these consolidated financial statements.
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
______________________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands, except per share data)
|
2016
|
|
2015
|
|
2014
|
|
Revenues
|
|
|
|
|
|
|
Gaming
|
$
|
1,820,176
|
|
|
$
|
1,847,167
|
|
|
$
|
1,799,724
|
|
|
Food and beverage
|
306,145
|
|
|
307,442
|
|
|
303,404
|
|
|
Room
|
170,816
|
|
|
163,509
|
|
|
157,427
|
|
|
Other
|
122,416
|
|
|
123,959
|
|
|
122,237
|
|
|
Gross revenues
|
2,419,553
|
|
|
2,442,077
|
|
|
2,382,792
|
|
|
Less promotional allowances
|
235,577
|
|
|
242,645
|
|
|
240,537
|
|
|
Net revenues
|
2,183,976
|
|
|
2,199,432
|
|
|
2,142,255
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
Gaming
|
880,716
|
|
|
900,922
|
|
|
888,414
|
|
|
Food and beverage
|
170,053
|
|
|
168,096
|
|
|
168,730
|
|
|
Room
|
44,245
|
|
|
41,298
|
|
|
41,132
|
|
|
Other
|
76,719
|
|
|
80,508
|
|
|
86,166
|
|
|
Selling, general and administrative
|
322,009
|
|
|
322,420
|
|
|
327,599
|
|
|
Maintenance and utilities
|
100,020
|
|
|
104,548
|
|
|
109,526
|
|
|
Depreciation and amortization
|
196,226
|
|
|
207,118
|
|
|
208,915
|
|
|
Corporate expense
|
72,668
|
|
|
76,941
|
|
|
75,626
|
|
|
Project development, preopening and writedowns
|
22,107
|
|
|
6,907
|
|
|
13,747
|
|
|
Impairments of assets
|
38,302
|
|
|
18,565
|
|
|
48,681
|
|
|
Other operating items, net
|
284
|
|
|
907
|
|
|
(13
|
)
|
|
Total operating costs and expenses
|
1,923,349
|
|
|
1,928,230
|
|
|
1,968,523
|
|
|
Operating income
|
260,627
|
|
|
271,202
|
|
|
173,732
|
|
|
Other expense (income)
|
|
|
|
|
|
|
Interest income
|
(2,961
|
)
|
|
(1,858
|
)
|
|
(1,879
|
)
|
|
Interest expense, net of amounts capitalized
|
212,692
|
|
|
224,590
|
|
|
230,060
|
|
|
Loss on early extinguishments and modifications of debt
|
42,364
|
|
|
40,733
|
|
|
1,536
|
|
|
Other, net
|
545
|
|
|
3,676
|
|
|
48
|
|
|
Total other expense, net
|
252,640
|
|
|
267,141
|
|
|
229,765
|
|
|
Income (loss) from continuing operations before income taxes
|
7,987
|
|
|
4,061
|
|
|
(56,033
|
)
|
|
Income taxes benefit
|
197,486
|
|
|
6,634
|
|
|
5,408
|
|
|
Income (loss) from continuing operations, net of tax
|
205,473
|
|
|
10,695
|
|
|
(50,625
|
)
|
|
Income from discontinued operations, net of tax
|
212,530
|
|
|
36,539
|
|
|
8,987
|
|
|
Income from discontinued operations attributable to noncontrolling interest, net of tax
|
—
|
|
|
—
|
|
|
(11,403
|
)
|
|
Net income (loss) attributable to Boyd Gaming Corporation
|
$
|
418,003
|
|
|
$
|
47,234
|
|
|
$
|
(53,041
|
)
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
1.79
|
|
|
$
|
0.10
|
|
|
$
|
(0.46
|
)
|
|
Discontinued operations
|
1.86
|
|
|
0.32
|
|
|
(0.02
|
)
|
|
Basic net income (loss) per common share
|
$
|
3.65
|
|
|
$
|
0.42
|
|
|
$
|
(0.48
|
)
|
|
Weighted average basic shares outstanding
|
114,507
|
|
|
112,789
|
|
|
109,979
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
1.78
|
|
|
$
|
0.10
|
|
|
$
|
(0.46
|
)
|
|
Discontinued operations
|
1.85
|
|
|
0.32
|
|
|
(0.02
|
)
|
|
Diluted net income (loss) per common share
|
$
|
3.63
|
|
|
$
|
0.42
|
|
|
$
|
(0.48
|
)
|
|
Weighted average diluted shares outstanding
|
115,189
|
|
|
113,676
|
|
|
109,979
|
|
The accompanying notes are an integral part of these consolidated financial statements.
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
______________________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Net income (loss)
|
$
|
418,003
|
|
|
$
|
47,234
|
|
|
$
|
(53,041
|
)
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
Fair value of adjustments to available-for-sale securities
|
(299
|
)
|
|
(263
|
)
|
|
1,464
|
|
|
Comprehensive income (loss)
|
$
|
417,704
|
|
|
$
|
46,971
|
|
|
$
|
(51,577
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
______________________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boyd Gaming Corporation Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Earnings/
|
|
Other
|
|
|
|
Total
|
|
|
Common Stock
|
|
Paid-in
|
|
(Accumulated
|
|
Comprehensive
|
|
Noncontrolling
|
|
Stockholders'
|
|
(In thousands, except share data)
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit)
|
|
Loss, Net
|
|
Interest
|
|
Equity
|
|
Balances, January 1, 2014
|
108,155,002
|
|
|
$
|
1,082
|
|
|
$
|
902,496
|
|
|
$
|
(432,074
|
)
|
|
$
|
(1,517
|
)
|
|
$
|
180,450
|
|
|
$
|
650,437
|
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(53,041
|
)
|
|
—
|
|
|
11,403
|
|
|
(41,638
|
)
|
|
Comprehensive income attributable to Boyd
|
—
|
|
|
—
|
|
|
(640
|
)
|
|
—
|
|
|
1,464
|
|
|
—
|
|
|
824
|
|
|
Stock options exercised
|
562,234
|
|
|
6
|
|
|
4,146
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,152
|
|
|
Release of restricted stock units, net of tax
|
559,824
|
|
|
5
|
|
|
(2,366
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,361
|
)
|
|
Share-based compensation costs
|
—
|
|
|
—
|
|
|
18,476
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,476
|
|
|
Noncontrolling interests contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
30
|
|
|
Deconsolidation of Borgata
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(191,833
|
)
|
|
(191,833
|
)
|
|
Balances, December 31, 2014
|
109,277,060
|
|
|
1,093
|
|
|
922,112
|
|
|
(485,115
|
)
|
|
(53
|
)
|
|
50
|
|
|
438,087
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
47,234
|
|
|
—
|
|
|
—
|
|
|
47,234
|
|
|
Comprehensive loss attributable to Boyd
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(263
|
)
|
|
—
|
|
|
(263
|
)
|
|
Stock options exercised
|
1,301,789
|
|
|
13
|
|
|
9,794
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,807
|
|
|
Release of restricted stock units, net of tax
|
553,822
|
|
|
6
|
|
|
(3,678
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,672
|
)
|
|
Release of performance stock units, net of tax
|
481,749
|
|
|
5
|
|
|
(2,451
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,446
|
)
|
|
Share-based compensation costs
|
—
|
|
|
—
|
|
|
19,264
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,264
|
|
|
Balances, December 31, 2015
|
111,614,420
|
|
|
1,117
|
|
|
945,041
|
|
|
(437,881
|
)
|
|
(316
|
)
|
|
50
|
|
|
508,011
|
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
418,003
|
|
|
—
|
|
|
—
|
|
|
418,003
|
|
|
Comprehensive loss attributable to Boyd
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(299
|
)
|
|
—
|
|
|
(299
|
)
|
|
Stock options exercised
|
452,898
|
|
|
4
|
|
|
2,936
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,940
|
|
|
Release of restricted stock units, net of tax
|
670,032
|
|
|
6
|
|
|
(3,374
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,368
|
)
|
|
Release of performance stock units, net of tax
|
159,027
|
|
|
2
|
|
|
(869
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(867
|
)
|
|
Tax effect from share-based compensation arrangements
|
—
|
|
|
—
|
|
|
(5,812
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,812
|
)
|
|
Share-based compensation costs
|
—
|
|
|
—
|
|
|
15,518
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,518
|
|
|
Balances, December 31, 2016
|
112,896,377
|
|
|
$
|
1,129
|
|
|
$
|
953,440
|
|
|
$
|
(19,878
|
)
|
|
$
|
(615
|
)
|
|
$
|
50
|
|
|
$
|
934,126
|
|
The accompanying notes are an integral part of these consolidated financial statements.
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net income (loss)
|
$
|
418,003
|
|
|
$
|
47,234
|
|
|
$
|
(53,041
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
(212,530
|
)
|
|
(36,539
|
)
|
|
(8,987
|
)
|
|
Income from discontinued operations attributable to noncontrolling interest, net of tax
|
—
|
|
|
—
|
|
|
11,403
|
|
|
Depreciation and amortization
|
196,226
|
|
|
207,118
|
|
|
208,915
|
|
|
Amortization of debt financing costs and discounts on debt
|
14,870
|
|
|
21,308
|
|
|
22,377
|
|
|
Share-based compensation expense
|
15,518
|
|
|
19,264
|
|
|
18,476
|
|
|
Deferred income taxes
|
(199,051
|
)
|
|
16,846
|
|
|
(870
|
)
|
|
Non-cash impairment of assets
|
38,302
|
|
|
18,565
|
|
|
48,681
|
|
|
Gain on sale of assets
|
(6,288
|
)
|
|
—
|
|
|
—
|
|
|
Loss on early extinguishments and modifications of debt
|
42,364
|
|
|
40,733
|
|
|
1,536
|
|
|
Other operating activities
|
1,625
|
|
|
2,145
|
|
|
467
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Restricted cash
|
2,542
|
|
|
(923
|
)
|
|
2,579
|
|
|
Accounts receivable, net
|
45
|
|
|
1,971
|
|
|
6,988
|
|
|
Inventories
|
884
|
|
|
(301
|
)
|
|
374
|
|
|
Prepaid expenses and other current assets
|
1,691
|
|
|
(4,275
|
)
|
|
2,161
|
|
|
Current other tax asset
|
—
|
|
|
1,802
|
|
|
88
|
|
|
Income taxes receivable
|
(1,064
|
)
|
|
(137
|
)
|
|
(1,137
|
)
|
|
Other assets, net
|
(626
|
)
|
|
922
|
|
|
2,146
|
|
|
Accounts payable and accrued liabilities
|
(11,824
|
)
|
|
13,207
|
|
|
28,572
|
|
|
Other long-term tax liabilities
|
222
|
|
|
(25,566
|
)
|
|
(1,067
|
)
|
|
Other liabilities
|
1,972
|
|
|
2,377
|
|
|
237
|
|
|
Net cash provided by operating activities
|
302,881
|
|
|
325,751
|
|
|
289,898
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
Capital expenditures
|
(160,358
|
)
|
|
(131,170
|
)
|
|
(137,751
|
)
|
|
Cash paid for acquisitions, net of cash received
|
(592,703
|
)
|
|
—
|
|
|
—
|
|
|
Investments in and advances to unconsolidated subsidiaries, net
|
—
|
|
|
—
|
|
|
153
|
|
|
Other investing activities
|
14,207
|
|
|
4,528
|
|
|
(5,912
|
)
|
|
Net cash used in investing activities
|
(738,854
|
)
|
|
(126,642
|
)
|
|
(143,510
|
)
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
_____________________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
Borrowings under Boyd Gaming bank credit facility
|
2,039,175
|
|
|
1,033,500
|
|
|
830,400
|
|
|
Payments under Boyd Gaming bank credit facility
|
(1,466,362
|
)
|
|
(1,211,200
|
)
|
|
(910,700
|
)
|
|
Borrowings under Peninsula bank credit facility
|
237,000
|
|
|
345,500
|
|
|
317,400
|
|
|
Payments under Peninsula bank credit facility
|
(899,750
|
)
|
|
(425,150
|
)
|
|
(377,150
|
)
|
|
Proceeds from issuance of senior notes
|
750,000
|
|
|
750,000
|
|
|
—
|
|
|
Debt financing costs, net
|
(42,220
|
)
|
|
(14,004
|
)
|
|
(83
|
)
|
|
Retirements of senior notes
|
(700,000
|
)
|
|
(657,813
|
)
|
|
—
|
|
|
Premium and consent fees paid
|
(15,750
|
)
|
|
(24,246
|
)
|
|
—
|
|
|
Payments under note payable
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
Share-based compensation activities, net
|
(1,295
|
)
|
|
3,689
|
|
|
1,791
|
|
|
Other financing activities
|
(45
|
)
|
|
—
|
|
|
30
|
|
|
Net cash used in financing activities
|
(99,247
|
)
|
|
(199,724
|
)
|
|
(138,321
|
)
|
|
|
|
|
|
|
|
|
Cash Flows from Discontinued Operations
|
|
|
|
|
|
|
Cash flows from operating activities
|
(27,796
|
)
|
|
14,095
|
|
|
32,961
|
|
|
Cash flows from investing activities
|
598,057
|
|
|
—
|
|
|
(36,470
|
)
|
|
Cash flows from financing activities
|
—
|
|
|
—
|
|
|
(37,055
|
)
|
|
Net cash provided by (used in) discontinued operations
|
570,261
|
|
|
14,095
|
|
|
(40,564
|
)
|
|
Change in cash and cash equivalents
|
35,041
|
|
|
13,480
|
|
|
(32,497
|
)
|
|
Cash and cash equivalents, beginning of period
|
158,821
|
|
|
145,341
|
|
|
140,311
|
|
|
Change in cash classified as discontinued operations
|
—
|
|
|
—
|
|
|
37,527
|
|
|
Cash and cash equivalents, end of period
|
$
|
193,862
|
|
|
$
|
158,821
|
|
|
$
|
145,341
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized
|
$
|
197,475
|
|
|
$
|
178,433
|
|
|
$
|
203,758
|
|
|
Cash paid (received) for income taxes, net of refunds
|
33,723
|
|
|
(1,159
|
)
|
|
1,255
|
|
|
Supplemental Schedule of Non-cash Investing and Financing Activities
|
|
|
|
|
|
|
Payables incurred for capital expenditures
|
$
|
9,334
|
|
|
$
|
7,235
|
|
|
$
|
16,844
|
|
The accompanying notes are an integral part of these consolidated financial statements.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Boyd Gaming Corporation (and together with its subsidiaries, the "Company", the "Registrant", "Boyd Gaming", "Boyd", "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD".
As of December 31, 2016, we are a diversified operator of
24
wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi, which we aggregate in order to present the following
three
reportable segments:
|
|
|
|
|
|
Las Vegas Locals
|
|
|
Gold Coast Hotel and Casino
|
Las Vegas, Nevada
|
|
The Orleans Hotel and Casino
|
Las Vegas, Nevada
|
|
Sam's Town Hotel and Gambling Hall
|
Las Vegas, Nevada
|
|
Suncoast Hotel and Casino
|
Las Vegas, Nevada
|
|
Eastside Cannery Casino and Hotel
|
Las Vegas, Nevada
|
|
Aliante Casino + Hotel + Spa
|
North Las Vegas, Nevada
|
|
Cannery Casino Hotel
|
North Las Vegas, Nevada
|
|
Eldorado Casino
|
Henderson, Nevada
|
|
Jokers Wild Casino
|
Henderson, Nevada
|
|
|
|
|
Downtown Las Vegas
|
|
|
California Hotel and Casino
|
Las Vegas, Nevada
|
|
Fremont Hotel and Casino
|
Las Vegas, Nevada
|
|
Main Street Station Casino, Brewery and Hotel
|
Las Vegas, Nevada
|
|
|
|
|
Midwest and South
|
|
|
Par-A-Dice Hotel Casino
|
East Peoria, Illinois
|
|
Blue Chip Casino, Hotel & Spa
|
Michigan City, Indiana
|
|
Diamond Jo Dubuque
|
Dubuque, Iowa
|
|
Diamond Jo Worth
|
Northwood, Iowa
|
|
Kansas Star Casino
|
Mulvane, Kansas
|
|
Amelia Belle Casino
|
Amelia, Louisiana
|
|
Delta Downs Racetrack Casino & Hotel
|
Vinton, Louisiana
|
|
Evangeline Downs Racetrack and Casino
|
Opelousas, Louisiana
|
|
Sam's Town Hotel and Casino
|
Shreveport, Louisiana
|
|
Treasure Chest Casino
|
Kenner, Louisiana
|
|
IP Casino Resort Spa
|
Biloxi, Mississippi
|
|
Sam's Town Hotel and Gambling Hall
|
Tunica, Mississippi
|
As a result of the sale of our equity interest in Borgata (see Note 2,
Acquisitions and Divestitures
), we no longer report our interest in Borgata as a Reportable Segment.
Our Las Vegas Locals segment includes the results of Aliante Gaming, LLC ("Aliante"), The Cannery Hotel and Casino, LLC (“Cannery”) and Nevada Palace, LLC (“Eastside Cannery”) (see Note 2,
Acquisitions and Divestitures
).
In addition to these properties, we own and operate a travel agency and a captive insurance company that underwrites travel-related insurance, each located in Hawaii. Financial results for our travel agency and our captive insurance company are included in our Downtown Las Vegas segment, as our Downtown Las Vegas properties concentrate significant marketing efforts on gaming customers from Hawaii.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries.
See Note 2,
Acquisitions and Divestitures
, for discussion of our acquisitions of Aliante, Cannery and Eastside Cannery, which were completed during the year ended December 31, 2016. We have not disclosed the pro forma impact of these acquisitions to our results of operations, as the pro forma impact was deemed immaterial.
Investments in unconsolidated affiliates, which are
50%
or less owned and do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Discontinued Operations
On August 1, 2016, Boyd Gaming completed the sale of its
50%
equity interest in Marina District Development Holding Company, LLC ("MDDHC"), the parent company of Borgata, to MGM Resorts International ("MGM") pursuant to an Equity Purchase Agreement (the "Purchase Agreement") enter into on May 31, 2016, as amended on July 19, 2016 by and among Boyd, Boyd Atlantic City, Inc., a wholly-owned subsidiary of Boyd, and MGM. (See Note 2,
Acquisitions and Divestitures
.) We accounted for our investment in Borgata by applying the equity method and reported its results as discontinued operations for all periods presented in these consolidated financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with maturities of
three months
or less at their date of purchase, and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.
Restricted Cash
Restricted cash consists primarily of advance payments related to: (i) future bookings with our Hawaiian travel agency; and (ii) amounts restricted by regulation for gaming and racing purposes. These restricted cash balances are invested in highly liquid instruments with a maturity of
90 days
or less. These restricted cash balances are held by high credit quality financial institutions. The carrying value of these instruments approximates their fair value due to their short maturities.
Accounts Receivable, net
Accounts receivable consist primarily of casino, hotel and other receivables. Accounts receivable are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible, based upon historical collection experience, the age of the receivable and other relevant economic factors. An estimated allowance for doubtful accounts is maintained to reduce our receivables to their carrying amount. As a result, the net carrying value approximates fair value.
The activity comprising our allowance for doubtful accounts is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Beginning balance, January 1,
|
$
|
2,087
|
|
|
$
|
1,971
|
|
|
$
|
2,913
|
|
|
Additions due to Acquisitions
|
87
|
|
|
—
|
|
|
—
|
|
|
Additions
|
345
|
|
|
361
|
|
|
277
|
|
|
Deductions
|
(548
|
)
|
|
(245
|
)
|
|
(1,219
|
)
|
|
Ending balance
|
$
|
1,971
|
|
|
$
|
2,087
|
|
|
$
|
1,971
|
|
Inventories
Inventories consist primarily of food and beverage and retail items and are stated at the lower of cost or market. Cost is determined using the weighted-average inventory method.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Property and Equipment, net
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, over the shorter of the asset's useful life or term of the lease.
The estimated useful lives of our major components of property and equipment are:
|
|
|
|
|
|
Building and improvements
|
3 through 40 years
|
|
Riverboats and barges
|
5 through 40 years
|
|
Furniture and equipment
|
1 through 10 years
|
Gains or losses on disposals of assets are recognized as incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.
For an asset that is held for sale, we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For a long-lived asset to be held and used, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. All resulting recognized impairment charges are recorded as Impairment of assets within operating expenses.
Capitalized Interest
Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. Interest capitalized during the years ended
December 31, 2016
,
2015
and
2014
was
$0.5 million
,
$0.1 million
and
$1.4 million
, respectively.
Investment in Available for Sale Securities
We have an investment in
$21.0 million
aggregate principal amount of
7.5%
Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 ("City Bonds"). This investment is classified as available-for-sale and is recorded at fair value. The fair value at
December 31, 2016
and
2015
was
$17.3 million
and
$17.8 million
, respectively. At both
December 31, 2016
and
2015
,
$0.4 million
is included in prepaid expenses and other current assets, and
$16.8 million
and
$17.4 million
, respectively, is included in other assets, net.
Future maturities of the City Bonds, excluding the discount, for the years ending December 31 are summarized as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
For the year ending December 31,
|
|
|
2017
|
$
|
440
|
|
|
2018
|
475
|
|
|
2019
|
510
|
|
|
2020
|
550
|
|
|
2021
|
590
|
|
|
Thereafter
|
18,395
|
|
|
Total
|
$
|
20,960
|
|
Intangible Assets
Intangible assets include customer relationships, favorable lease rates, development agreements, gaming license rights and trademarks.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Amortizing Intangible Assets
Customer relationships represent the value of repeat business associated with our customer loyalty programs. These intangible assets are being amortized on an accelerated method over their approximate useful life. Favorable lease rates represent the amount by which acquired lease rental rates are favorable to market terms. These favorable lease values are amortized over the remaining lease term, primarily on leasehold land interests, originally ranging in duration from
41
to
52 years
. Development agreements are contracts between two parties establishing an agreement for development of a product or service. These agreements are amortized over the respective cash flow period of the related agreement.
Indefinite-Lived Intangible Assets
Trademarks are based on the value of our brands, which reflect the level of service and quality we provide and from which we generate repeat business. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, and between annual test dates in certain circumstances. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method.
Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognized. Goodwill is not subject to amortization, but it is subject to an annual impairment test and between annual test dates in certain circumstances.
We evaluate goodwill using a weighted average allocation of both the income and market approach models. The income approach is based upon a discounted cash flow method, whereas the market approach uses the guideline public company method. Specifically, the income approach focuses on the expected cash flow of the subject reporting unit, considering the available cash flow for a finite period of years. Available cash flow is defined as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the reporting unit. The underlying premise of the income approach is that the value of goodwill can be measured by the present value of the net economic benefit to be received over the life of the reporting unit. The market approach focuses on comparing the reporting unit to selected reasonable similar (or "guideline") publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of our reporting unit relative to the selected guideline companies; and (iii) applied to the operating data of our reporting unit to arrive at an indication of value. The application of the market approach results in an estimate of the price reasonable expected to be realized from the sale of the subject reporting unit.
Player Loyalty Point Program
We have established promotional programs to encourage repeat business from frequent and active slot machine customers and other patrons. Members earn points based on gaming activity and such points can be redeemed for complimentary slot play, food and beverage, and other free goods and services. We record points redeemed for complimentary slot play as a reduction to gaming revenue and points redeemed for food and beverage and other free goods and services as promotional allowances. The accrual for unredeemed points is based on estimates and assumptions regarding the redemption mix of complimentary slot play, food and beverage, and other free goods and services and the costs of providing those benefits. Historical data is used to assist in the determination of the estimated accruals. The player loyalty point program accrual is included in accrued liabilities on our consolidated balance sheets.
Long-Term Debt, Net
Long-term debt, net is reported as the outstanding debt amount net of amortized cost. Any unamortized debt issuance costs, which include legal and other direct costs related to the issuance of our outstanding debt, or discount granted to the initial purchasers or lenders upon issuance of our debt instruments is recorded as a direct reduction to the face amount of our outstanding debt. The debt issuance costs and discount are accreted to interest expense using the effective interest method over the contractual term of the underlying debt. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt issuance costs and discount and record a loss on extinguishment of debt.
Income Taxes
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.
In performing our valuation allowance analysis in 2016, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilize a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters during 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during the year ended December 31, 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from our deferred tax assets would be realized. As a result, in 2016, we released
$201.5 million
of valuation allowance on our federal and state income tax net operating loss carryforwards and other deferred tax assets.
Our current tax rate is impacted by adjustments that are largely independent of our operating results before taxes. In the current year, such adjustments relate primarily to the release of the valuation allowance on a significant portion of our deferred tax assets. In the prior year, the adjustments relate primarily to changes in our valuation allowance, the realization of certain unrecognized tax benefits inclusive of the reversal of related accrued interest and impairment charges to indefinite lived intangible assets which resulted in a reduction in our recognized deferred tax liability.
Other Long Term Tax Liabilities
The Company's income tax returns are subject to examination by the Internal Revenue Service ("IRS") and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.
Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. Recognition occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement is only addressed if the position is deemed to be more likely than not to be sustained. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.
Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the "more likely than not" standard. If it is subsequently determined that a previously recognized tax position no longer meets the "more likely than not" standard, it is required that the tax position is derecognized. Accounting standards for uncertain tax positions specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. Accrued interest and penalties are included in other long-term tax liabilities on the balance sheet.
Self-Insurance Reserves
We are self-insured for various insurance coverages such as property, general liability, employee health and workers' compensation costs with the appropriate levels of deductibles and retentions. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. Management believes the estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. Certain of these claims represent obligations to make future payments; and therefore we discount such reserves to an amount representing the present value of the
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
claims which will be paid in the future using a blended rate, which represents the inherent risk and the average payout duration. Self-insurance reserves are included in other liabilities on our consolidated balance sheets.
The activity comprising our self-insurance reserves is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Beginning balance
|
$
|
30,068
|
|
|
$
|
33,004
|
|
|
$
|
32,507
|
|
|
Additions
|
|
|
|
|
|
|
Charged to costs and expenses
|
79,685
|
|
|
80,311
|
|
|
80,734
|
|
|
Due to acquisitions
|
14
|
|
|
—
|
|
|
—
|
|
|
Payments made
|
(78,745
|
)
|
|
(83,247
|
)
|
|
(80,237
|
)
|
|
Ending balance
|
$
|
31,022
|
|
|
$
|
30,068
|
|
|
$
|
33,004
|
|
Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss). Components of the Company's comprehensive income (loss) are reported in the accompanying consolidated statements of changes in stockholders' equity and consolidated statements of comprehensive income (loss). The accumulated other comprehensive income (loss) at
December 31, 2016
, consists of unrealized gains and losses on the investment available for sale resulting from changes in fair value.
Noncontrolling Interest
Noncontrolling interest represents the ownership interest in one of our subsidiaries that is held by a third party.
Revenue Recognition
Gaming revenue represents the net win from gaming activities, which is the aggregate difference between gaming wins and losses. The majority of our gaming revenue is counted in the form of cash and chips and therefore is not subject to any significant or complex estimation procedures. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gross gaming revenues.
Race revenue recognition criteria are met at the time the results of the event are official.
Room revenue recognition criteria are met at the time of occupancy.
Food and beverage revenue recognition criteria are met at the time of service.
Promotional Allowances
The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as a promotional allowance. Promotional allowances also include incentives earned in our slot bonus program such as cash and the estimated retail value of goods and services (such as complimentary rooms and food and beverages). We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food and beverage, and to a lesser extent for other goods or services, depending upon the property.
The amounts included in promotional allowances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Rooms
|
$
|
74,937
|
|
|
$
|
77,177
|
|
|
$
|
77,751
|
|
|
Food and beverage
|
146,946
|
|
|
150,598
|
|
|
151,677
|
|
|
Other
|
13,694
|
|
|
14,870
|
|
|
11,109
|
|
|
Total promotional allowances
|
$
|
235,577
|
|
|
$
|
242,645
|
|
|
$
|
240,537
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The estimated costs of providing such promotional allowances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Rooms
|
$
|
33,514
|
|
|
$
|
35,605
|
|
|
$
|
36,837
|
|
|
Food and beverage
|
130,941
|
|
|
133,717
|
|
|
138,040
|
|
|
Other
|
12,417
|
|
|
12,290
|
|
|
11,407
|
|
|
Total cost of promotional allowances
|
$
|
176,872
|
|
|
$
|
181,612
|
|
|
$
|
186,284
|
|
Gaming Taxes
We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the consolidated statements of operations. These taxes totaled approximately
$321.7 million
,
$332.1 million
and
$330.8 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Advertising Expense
Direct advertising costs are expensed the first time such advertising appears. Advertising costs are included in selling, general and administrative expenses on the consolidated statements of operations and totaled
$32.3 million
,
$33.4 million
and
$32.2 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Corporate Expense
Corporate expense represents unallocated payroll, professional fees, aircraft costs and various other expenses that are not directly related to our casino hotel operations.
Project Development, Preopening and Writedowns
Project development, preopening and writedowns represent: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred and do not qualify as capital costs; and (iii) asset write-downs.
Share-Based Compensation
Share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period. Compensation costs related to stock option awards are calculated based on the fair value of each major option grant on the date of the grant using the Black-Scholes option pricing model, which requires the following assumptions: expected stock price volatility, risk-free interest rates, expected option lives and dividend yields. We formed our assumptions using historical experience and observable market conditions.
The following table discloses the weighted-average assumptions used in estimating the fair value of our significant stock option grants and awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
|
Expected stock price volatility
|
46.62
|
%
|
|
49.06
|
%
|
|
54.14
|
%
|
|
Risk-free interest rate
|
1.39
|
%
|
|
1.59
|
%
|
|
1.64
|
%
|
|
Expected option life (in years)
|
5.4
|
|
|
5.3
|
|
|
5.4
|
|
|
Estimated fair value per share
|
$
|
7.67
|
|
|
$
|
9.06
|
|
|
$
|
5.70
|
|
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net income (loss) applicable to Boyd Gaming Corporation stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially-dilutive securities, such as stock options.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Due to the net loss for the year ended December 31,
2014
, the effect of all potential common share equivalents was anti-dilutive, and therefore all such shares were excluded from the computation of diluted weighted average shares outstanding for this period. The amount of potential common share equivalents were
913,900
for year ended December 31, 2014.
Concentration of Credit Risk
Financial instruments that subject us to credit risk consist of cash equivalents and accounts receivable.
Our policy is to limit the amount of credit exposure to any one financial institution, and place investments with financial institutions evaluated as being creditworthy, or in short-term money market and tax-free bond funds which are exposed to minimal interest rate and credit risk. We have bank deposits that may at times exceed federally-insured limits.
Concentration of credit risk, with respect to gaming receivables, is limited through our credit evaluation process. We issue markers to approved gaming customers only following credit checks and investigations of creditworthiness.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 these estimates.
Recently Issued Accounting Pronouncements
Accounting Standards Update 2017-04, Intangibles-Goodwill and Other ("Update 2017-04")
In January 2017, the Financial Accounting Standards Board ("FASB") issued Update 2017-04, which addresses goodwill impairment testing. Instead of determining goodwill impairment by calculating the implied fair value of goodwill, an entity should perform goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2017-04 to the financial statements.
Accounting Standards Update 2016-18, Statement of Cash Flows ("Update 2016-18")
In November 2016, the FASB issued Update 2016-18, which amends Accounting Standards Codification ("ASC") 230 to add or clarify the guidance on the classification and presentation of restricted cash in the statement of cash flows. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-18 to the financial statements.
Accounting Standards Update 2016-17, Consolidation ("Update 2016-17")
In October 2016, the FASB issued Update 2016-17, which amends the guidance on related parties that are under common control.
The ASU provides guidance on a single decision maker does not consider indirect interest held through related parties as equivalent to direct interests in determining whether it meets the economics criterion to be a primary beneficiary. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2017, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-17 to the financial statements.
Accounting Standards Update 2016-16, Income Taxes ("Update 2016-16")
In October 2016, the FASB issued Update 2016-16, which addresses the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the impact of the new standard on its consolidated financial statements.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Accounting Standards Update 2016-15, Statement of Cash Flows ("Update 2016-15")
In August 2016, the FASB issued Update 2016-15, which amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows. The Accounting Standards Update ("ASU") is intended to reduce the lack of consistent principles on certain classifications such as debt prepayment, debt extinguishment costs, distributions, insurance claims and beneficial interest in securitization transactions. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2017, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-15 to the financial statements.
Accounting Standards Update 2016-13, Financial Instruments-Credit Losses ("Update 2016-13")
In June 2016, the FASB issued Update 2016-13, which amends the guidance on the impairment of financial instruments. Update 2016-13 adds to GAAP an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-13 to the financial statements.
Accounting Standards Update 2016-12, Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients ("Update 2016-12"); Accounting Standards Update 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting ("Update 2016-11"); Accounting Standards Update 2016-10, Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing ("Update 2016-10"); and Accounting Standards Update 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("Update 2016-08")
In March 2016 through May 2016, the FASB issued Update 2016-08, Update 2016-10, Update 2016-11 and Update 2016-12, which amend and further clarify the new revenue standard, Accounting Standards Update 2014-09,
Revenue from Contracts with Customers ("Update 2014-09"),
which was subsequently amended and deferred in Accounting Standards Update 2015-14,
Revenue from Contracts with Customers - Deferral of the Effective Date ("Update 2015-14",
and collectively with the original standard, Update 2014-09, and subsequent amendments, Update 2016-08, Update 2016-10, Update 2016-11 and Update 2016-12, the "Revenue Standard"). The Revenue Standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Earlier application is permitted only for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is evaluating the impact of the new guidance and has neither determined the full impact this standard may have on our financial statements nor decided upon the planned method of adoption. Interpretations of the new guidance are on-going and could have a significant impact on our implementation. Currently, we expect decreases in departmental revenues, since the historical presentation that reflects revenues gross for goods and services given to our customers as an inducement to play with us, with an offsetting reduction for promotional allowances to derive net revenues, will no longer be allowed. We also expect the accounting for our frequent player programs to be impacted, with possible changes to the timing and/or classification of certain transactions within revenues and between revenues and operating expenses. We will continue to update our assessment of the effects of the new guidance on our financial statements, and we will disclose further those effects when known.
Accounting Standards Update 2016-09, Compensation - Stock Compensation ("Update 2016-09")
In March 2016, the FASB issued Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Update 2016-09 requires excess tax benefits and deficiencies to be recorded in income tax expense instead of equity which we anticipate will cause volatility in our future effective tax rate. The Company will adopt this standard in the first quarter 2017. The cumulative effect of this change in accounting method will be recorded as an increase in retained earnings by approximately
$15.8 million
.
Accounting Standards Update 2016-07, Investments - Equity Method and Joint Ventures ("Update 2016-07")
In March 2016, the FASB issued Update 2016-07 which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2016, and early adoption is permitted. The Company determined that the impact of the new standard on its consolidated financial statements will not be material.
Accounting Standards Update 2016-02, Leases ("Update 2016-02")
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
In February 2016, the FASB issued Update 2016-02 which requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-02 to the financial statements.
Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("Update 2016-01")
In January 2016, the FASB issued Update 2016-01, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted only if explicit early adoption guidance is applied. The Company is evaluating the impact of the new standard on its consolidated financial statements.
A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.
NOTE 2. ACQUISITIONS AND DIVESTITURES
Acquisition - Cannery Casino Hotel and Nevada Palace, LLC
Overview
On December 20, 2016, Boyd Gaming completed its previously announced acquisitions of Cannery, the owner and operator of Cannery Casino Hotel, and Eastside Cannery, the owner and operator of Eastside Cannery Casino and Hotel, pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of April 25, 2016, as amended on October 28, 2016, by and among Boyd, Cannery Casino Resorts, LLC (“Seller”), Cannery and Eastside Cannery.
Pursuant to the terms of the Purchase Agreement, Boyd acquired from Seller all of the issued and outstanding membership interests of Cannery and Eastside Cannery (the “Acquisitions”). With the closing of the Acquisitions, each of Cannery and Eastside Cannery became wholly-owned subsidiaries of Boyd. The Cannery and Eastside Cannery are modern casinos and hotels in the Las Vegas Valley that offer premium accommodations, gaming, dining, entertainment and retail, and are aggregated into our Las Vegas Locals segment (See Note 1,
Summary of Significant Accounting Policies.)
The net purchase price was
$228.2 million
.
Consideration Transferred
The fair value of the consideration transferred on the acquisition date included the purchase price of the net assets transferred. The total gross consideration was
$238.6 million
.
Status of Purchase Price Allocation
The Company is following the acquisition method of accounting per ASC 805 guidance. For purposes of these financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on preliminary estimates of fair value as determined by management based on its judgment with assistant from preliminary third party appraisals. The excess of the purchase price over the net book value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company will recognize the assets acquired and liabilities assumed in the Acquisitions based on fair value estimates as of the date of the Acquisitions. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) is currently in process. This determination requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to finalize the determination of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. The final fair value determinations are expected to be completed no later than third quarter of 2017. The final fair value determinations may be significantly different than those reflected in the consolidated financial statements at December 31, 2016.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The following table summarizes the preliminary allocation of the purchase price:
|
|
|
|
|
|
|
|
(In thousands)
|
As Recorded
|
|
Current assets
|
$
|
29,929
|
|
|
Property and equipment
|
181,757
|
|
|
Intangible assets
|
16,330
|
|
|
Total acquired assets
|
228,016
|
|
|
Current liabilities
|
15,850
|
|
|
Total liabilities assumed
|
15,850
|
|
|
Net identifiable assets acquired
|
212,166
|
|
|
Goodwill
|
26,401
|
|
|
Net assets acquired
|
$
|
238,567
|
|
The following table summarizes the preliminary values assigned to acquired property and equipment and estimated useful lives:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Useful Lives
|
|
As Recorded
|
|
Land
|
|
|
$
|
6,650
|
|
|
Buildings and improvements
|
10 - 40 years
|
|
167,208
|
|
|
Furniture and equipment
|
3 - 7 years
|
|
7,264
|
|
|
Construction in progress
|
|
|
635
|
|
|
Property and equipment acquired
|
|
|
$
|
181,757
|
|
The goodwill was assigned to the Las Vegas Locals reportable segment. All of the goodwill is expected to be deductible for income tax purposes.
The Company recognized
$10.5 million
of acquisition related costs that were expensed for the year ended December 31, 2016. These costs are included in the consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".
Acquisition - Aliante Casino + Hotel + Spa
Overview
On September 27, 2016, Boyd Gaming completed the acquisition of ALST, the holding company of Aliante, the owner and operator of the Aliante Casino + Hotel + Spa. Pursuant to the Merger Agreement, Merger Sub merged (the "Merger") with and into ALST, with ALST surviving the Merger. ALST and Aliante are now wholly-owned subsidiaries of Boyd Gaming. Aliante is an upscale, resort-style casino and hotel situated in North Las Vegas offering premium accommodations, gaming, dining, entertainment and retail, and is aggregated into our Las Vegas Locals segment (See Note 1,
Summary of Significant Accounting Policies.)
The net purchase price was
$372.3 million
.
Consideration Transferred
The fair value of the consideration transferred on the acquisition date included the purchase price of the net assets transferred. The total gross consideration was
$399.1 million
.
Status of Purchase Price Allocation
The Company is following the acquisition method of accounting per ASC 805 guidance. In accordance with ASC 805, the Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, which was determined primarily by management with assistance from third-party appraisals. The excess of the purchase price over those fair values has been recorded as goodwill.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The following table summarizes the preliminary allocation of the purchase price:
|
|
|
|
|
|
|
|
(In thousands)
|
As Recorded
|
|
Current assets
|
$
|
31,886
|
|
|
Property and equipment
|
226,309
|
|
|
Intangible and other assets
|
20,791
|
|
|
Total acquired assets
|
278,986
|
|
|
Current liabilities
|
5,693
|
|
|
Other liabilities
|
636
|
|
|
Total liabilities assumed
|
6,329
|
|
|
Net identifiable assets acquired
|
272,657
|
|
|
Goodwill
|
126,489
|
|
|
Net assets acquired
|
$
|
399,146
|
|
The following table summarizes the preliminary values assigned to acquired property and equipment and estimated useful lives:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Useful Lives
|
|
As Recorded
|
|
Land
|
|
|
$
|
16,680
|
|
|
Buildings and improvements
|
10 - 45 years
|
|
200,770
|
|
|
Furniture and equipment
|
3 - 7 years
|
|
8,217
|
|
|
Construction in progress
|
|
|
642
|
|
|
Property and equipment acquired
|
|
|
$
|
226,309
|
|
All of the goodwill was assigned to the Las Vegas Locals reportable segment. All of the goodwill is expected to be deductible for income tax purposes.
The Company recognized
$2.2 million
of acquisition related costs that were expensed for the year ended December 31, 2016, respectively. These costs are included in the consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".
We have not provided the amount of revenue and earnings included in our consolidated financial results from the Aliante or Cannery acquisitions for the period subsequent to their respective acquisitions as such amounts are not material for the twelve months ended December 31, 2016.
Investment in and Divestiture of Borgata
On August 1, 2016, Boyd Gaming completed the sale of its
50%
equity interest in Marina District Development Holding Company, LLC ("MDDHC"), the parent company of Borgata, to MGM, pursuant to an Equity Purchase Agreement ("Purchase Agreement") entered into on May 31, 2016, as amended on July 19, 2016, by and among Boyd, Boyd Atlantic City, Inc., a wholly-owned subsidiary of Boyd ("Seller"), and MGM. Pursuant to the Purchase Agreement, MGM acquired from Boyd Gaming
49%
of its
50%
membership interest in MDDHC and, immediately thereafter, MDDHC redeemed Boyd Gaming’s remaining
1%
membership interest in MDDHC (collectively, the "Transaction"). Following the Transaction, MDDHC became a wholly-owned subsidiary of MGM.
In consideration for the Transaction, MGM paid Boyd Gaming
$900 million
. The initial net cash proceeds were approximately
$589 million
, net of certain expenses and adjustments on the closing date, including outstanding indebtedness, cash and working capital. The after-tax gain on the sale of Borgata was
$181.7 million
and is included in discontinued operations in the year ended December 31, 2016. The initial proceeds do not include our
50%
share of any future property tax settlement benefits, from the time period during which we held a
50%
ownership in MDDHC, to which Boyd Gaming retains the right to receive upon payment. During 2016, we recognized
$9.1 million
in income, which is included in discontinued operations, for the cash we received for our share of property tax benefits realized by Borgata subsequent to the closing of the sale. On February 15, 2017, Borgata announced that it had entered into a settlement agreement under which it will receive payments totaling
$72 million
to resolve the property tax issues. We will receive
50%
of those payments once Borgata receives the payments from the city.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Prior to the sale of our equity interest, the Company and MGM each held a
50%
interest in MDDHC, which owns all the equity interests in Borgata. Until the closing of the sale, we were the managing member of MDDHC, and we were responsible for the day-to-day operations of Borgata. On September 30, 2014, MGM reacquired its ownership interest in and its substantive participation rights in the management of Borgata. As a result, we deconsolidated Borgata as of the close of business on September 30, 2014, eliminating the assets, liabilities and non-controlling interests from our balance sheet.
As a result of the deconsolidation, we adjusted the book value of our investment to equal fair value. We determined the fair value of our investment in Borgata as of the date of deconsolidation using a weighted average allocation of both the income and market approach models. Using these models, we determined that the fair value of our investment in Borgata at September 30, 2014, was
$221.4 million
and recognized a loss due to the deconsolidation of
$12.1 million
in our third quarter 2014 results, which was recorded in impairments of assets on our consolidated statement of operations. We accounted for our investment in Borgata applying the equity method for periods subsequent to the deconsolidation, through the date of the sale, and, as a result of the sale, we reported the results as discontinued operations for all periods presented in these consolidated financial statements.
The table below summarizes the results of operations information for periods subsequent to the September 30, 2014 deconsolidation of Borgata through the date of divestiture:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seven Months Ended
|
|
Twelve Months Ended
|
|
Three Months Ended
|
|
(In thousands)
|
July 31, 2016
|
|
December 31, 2015
|
|
December 31, 2014
|
|
Net revenues
|
$
|
485,510
|
|
|
$
|
804,166
|
|
|
$
|
179,147
|
|
|
Operating expenses
|
366,812
|
|
|
657,324
|
|
|
157,896
|
|
|
Operating income
|
118,698
|
|
|
146,842
|
|
|
21,251
|
|
|
Interest expense
|
26,378
|
|
|
59,681
|
|
|
17,431
|
|
|
Loss on early extinguishments of debt
|
1,628
|
|
|
18,895
|
|
|
740
|
|
|
State income tax expense (benefit)
|
8,274
|
|
|
(3,731
|
)
|
|
446
|
|
|
Net income
|
$
|
82,418
|
|
|
$
|
71,997
|
|
|
$
|
2,634
|
|
NOTE 3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
Land
|
$
|
251,316
|
|
|
$
|
229,857
|
|
|
Buildings and improvements
|
2,915,664
|
|
|
2,539,578
|
|
|
Furniture and equipment
|
1,243,724
|
|
|
1,152,277
|
|
|
Riverboats and barges
|
239,264
|
|
|
238,743
|
|
|
Construction in progress
|
86,226
|
|
|
42,497
|
|
|
Other
|
726
|
|
|
7,404
|
|
|
Total property and equipment
|
4,736,920
|
|
|
4,210,356
|
|
|
Less accumulated depreciation
|
2,131,751
|
|
|
1,985,014
|
|
|
Property and equipment, net
|
$
|
2,605,169
|
|
|
$
|
2,225,342
|
|
Construction in progress primarily relates to costs capitalized in conjunction with major improvements that have not yet been placed into service, and accordingly, such costs are not currently being depreciated. Other property and equipment relates to the estimated net realizable value of construction materials inventory that was not disposed of with the sale of the Echelon project in 2013. Such assets are not in service and are not currently being depreciated.
Depreciation expense for the years ended
December 31, 2016
,
2015
and
2014
was
$179.6 million
,
$179.9 million
and
$174.8 million
, respectively.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
NOTE 4. INTANGIBLE ASSETS
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
Weighted
|
|
Gross
|
|
|
|
Cumulative
|
|
|
|
|
Average Life
|
|
Carrying
|
|
Cumulative
|
|
Impairment
|
|
Intangible
|
|
(In thousands)
|
Remaining
|
|
Value
|
|
Amortization
|
|
Losses
|
|
Assets, Net
|
|
Amortizing intangibles:
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
1.1 years
|
|
$
|
144,780
|
|
|
$
|
(125,318
|
)
|
|
$
|
—
|
|
|
$
|
19,462
|
|
|
Favorable lease rates
|
31.4 years
|
|
45,370
|
|
|
(13,039
|
)
|
|
—
|
|
|
32,331
|
|
|
Development agreement
|
—
|
|
21,373
|
|
|
—
|
|
|
—
|
|
|
21,373
|
|
|
|
|
|
211,523
|
|
|
(138,357
|
)
|
|
—
|
|
|
73,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
Indefinite
|
|
153,687
|
|
|
—
|
|
|
(4,300
|
)
|
|
149,387
|
|
|
Gaming license rights
|
Indefinite
|
|
873,335
|
|
|
(33,960
|
)
|
|
(179,974
|
)
|
|
659,401
|
|
|
|
|
|
1,027,022
|
|
|
(33,960
|
)
|
|
(184,274
|
)
|
|
808,788
|
|
|
Balance, December 31, 2016
|
|
|
$
|
1,238,545
|
|
|
$
|
(172,317
|
)
|
|
$
|
(184,274
|
)
|
|
$
|
881,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
Weighted
|
|
Gross
|
|
|
|
Cumulative
|
|
|
|
|
Average Life
|
|
Carrying
|
|
Cumulative
|
|
Impairment
|
|
Intangible
|
|
(In thousands)
|
Remaining
|
|
Value
|
|
Amortization
|
|
Losses
|
|
Assets, Net
|
|
Amortizing intangibles:
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
1.9 years
|
|
$
|
136,300
|
|
|
$
|
(109,994
|
)
|
|
$
|
—
|
|
|
$
|
26,306
|
|
|
Favorable lease rates
|
32.4 years
|
|
45,370
|
|
|
(11,997
|
)
|
|
—
|
|
|
33,373
|
|
|
Development agreement
|
—
|
|
21,373
|
|
|
—
|
|
|
—
|
|
|
21,373
|
|
|
|
|
|
203,043
|
|
|
(121,991
|
)
|
|
—
|
|
|
81,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
Indefinite
|
|
129,501
|
|
|
—
|
|
|
(3,500
|
)
|
|
126,001
|
|
|
Gaming license rights
|
Indefinite
|
|
873,335
|
|
|
(33,960
|
)
|
|
(156,374
|
)
|
|
683,001
|
|
|
|
|
|
1,002,836
|
|
|
(33,960
|
)
|
|
(159,874
|
)
|
|
809,002
|
|
|
Balance, December 31, 2015
|
|
|
$
|
1,205,879
|
|
|
$
|
(155,951
|
)
|
|
$
|
(159,874
|
)
|
|
$
|
890,054
|
|
Amortizing Intangible Assets
Customer Relationships
Customer relationships represent the value of repeat business associated with our customer loyalty programs. The value of customer relationships is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these customers, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: revenue of our rated customers, based on expected level of play; promotional allowances provided to these existing customers; attrition rate related to these customers; operating expenses; general and administrative expenses; trademark expense; discount rate; and the present value of tax benefit.
Favorable Lease Rates
Favorable lease rates represent the rental rates for assumed land leases that are favorable to comparable market rates. The fair value is determined on a technique whereby the difference between the lease rate and the then current market rate for the remaining contractual term is discounted to present value. The assumptions underlying this computation include the actual lease rates, the
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
expected remaining lease term, including renewal options, based on the existing lease; current rates of rent for leases on comparable properties with similar terms obtained from market data and analysis; and an assumed discount rate. The estimates underlying the result covered a term of
41
to
52 years
.
Development Agreement
Development agreement is an acquired contract with a Native American tribe (the "Tribe") under which the Company has the right to assist the Tribe in the development and management of a gaming facility on the Tribe's land. This asset although amortizable, is not amortized until development is completed, which at December 31, 2016 remains indeterminate. In the interim, this asset is subject to periodic impairment reviews.
Indefinite Lived Intangible Assets
Trademarks
Trademarks are based on the value of our brands, which reflect the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the trade name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; tax expense; terminal growth rate; discount rate; and the present value of tax benefit.
Gaming License Rights
Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. In the majority of cases, the value of our gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. In two instances, we determine the value of our gaming licenses by applying a cost approach. Our primary consideration in the application of this methodology is the initial statutory fee associated with acquiring a gaming license in the jurisdiction.
Activity for the Years Ended December 31, 2016, 2015 and 2014
The following table sets forth the changes in these intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Customer Relationships
|
|
Favorable Lease Rates
|
|
Development Agreements
|
|
Trademarks
|
|
Gaming License Rights
|
|
Intangible Assets, Net
|
|
Balance, January 1, 2014
|
$
|
85,267
|
|
|
$
|
35,458
|
|
|
$
|
21,373
|
|
|
$
|
128,287
|
|
|
$
|
740,275
|
|
|
$
|
1,010,660
|
|
|
Additions
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|
Impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
|
(39,772
|
)
|
|
(40,072
|
)
|
|
Amortization
|
(33,309
|
)
|
|
(1,044
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,353
|
)
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,000
|
)
|
|
—
|
|
|
(2,000
|
)
|
|
Balance, December 31, 2014
|
51,958
|
|
|
34,414
|
|
|
21,373
|
|
|
126,001
|
|
|
700,503
|
|
|
934,249
|
|
|
Additions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,502
|
)
|
|
(17,502
|
)
|
|
Amortization
|
(25,652
|
)
|
|
(1,041
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,693
|
)
|
|
Balance, December 31, 2015
|
26,306
|
|
|
33,373
|
|
|
21,373
|
|
|
126,001
|
|
|
683,001
|
|
|
890,054
|
|
|
Additions
|
8,480
|
|
|
—
|
|
|
—
|
|
|
24,200
|
|
|
—
|
|
|
32,680
|
|
|
Impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
(800
|
)
|
|
(23,600
|
)
|
|
(24,400
|
)
|
|
Amortization
|
(15,324
|
)
|
|
(1,042
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,366
|
)
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
(14
|
)
|
|
Balance, December 31, 2016
|
$
|
19,462
|
|
|
$
|
32,331
|
|
|
$
|
21,373
|
|
|
$
|
149,387
|
|
|
$
|
659,401
|
|
|
$
|
881,954
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Other activity during 2014 in the table above is primarily due to the effects of the deconsolidation of Borgata (see Note 2,
Acquisitions and Divestitures
).
Future Amortization
Customer relationships are being amortized on an accelerated basis over an estimated life of
five
years. Favorable lease rates are being amortized on a straight-line basis over a weighted-average original useful life of
43.9 years
. Future amortization is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Customer Relationships
|
|
Favorable Lease Rates
|
|
Total
|
|
For the year ending December 31,
|
|
|
|
|
|
|
|
2017
|
|
$
|
14,599
|
|
|
$
|
1,043
|
|
|
$
|
15,642
|
|
|
2018
|
|
2,308
|
|
|
1,043
|
|
|
3,351
|
|
|
2019
|
|
1,529
|
|
|
1,043
|
|
|
2,572
|
|
|
2020
|
|
828
|
|
|
1,043
|
|
|
1,871
|
|
|
2021
|
|
198
|
|
|
1,043
|
|
|
1,241
|
|
|
Thereafter
|
|
—
|
|
|
27,116
|
|
|
27,116
|
|
|
Total future amortization
|
|
$
|
19,462
|
|
|
$
|
32,331
|
|
|
$
|
51,793
|
|
Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life; however, these assets are subject to an annual impairment test each year and between annual test dates in certain circumstances.
Impairment Considerations
As a result of our annual impairment testing in the fourth quarter of 2016, we recognized non-cash impairment charges of
$23.6 million
of gaming licenses and
$0.8 million
of trademarks in our Midwest and South segment. These amounts are included in impairments of assets in the consolidated statements of operations for the year ended December 31, 2016.
During the year ended 2015, we recognized non-cash impairment charges of
$17.5 million
of a gaming license in our Midwest and South segment. During the year ended 2014, we recognized non-cash impairment charges of
$39.8 million
of gaming licenses and
$0.3 million
of trademarks in our Midwest and South segment.
NOTE 5. GOODWILL
Goodwill consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Gross Carrying Value
|
|
Cumulative Amortization
|
|
Cumulative Impairment Losses
|
|
Goodwill, Net
|
|
Goodwill, net by Reportable Segment:
|
|
|
|
|
|
|
|
|
Las Vegas Locals
|
$
|
531,819
|
|
|
$
|
—
|
|
|
$
|
(165,479
|
)
|
|
$
|
366,340
|
|
|
Downtown Las Vegas
|
6,997
|
|
|
(6,134
|
)
|
|
—
|
|
|
863
|
|
|
Midwest and South
|
471,735
|
|
|
—
|
|
|
(12,462
|
)
|
|
459,273
|
|
|
Balance, December 31, 2016
|
$
|
1,010,551
|
|
|
$
|
(6,134
|
)
|
|
$
|
(177,941
|
)
|
|
$
|
826,476
|
|
Changes in Goodwill
During the year ended December 31, 2016, we recorded
$153.6 million
of goodwill due to our acquisitions of Aliante on September 27, 2016 and Cannery and Eastside Cannery on December 20, 2016 (see Note 2,
Acquisitions and Divestitures
).
Goodwill decreased approximately
$12.5 million
during 2016 due to an impairment in the Midwest and South segment.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The following table sets forth the changes in our goodwill, net, during the years ended December 31, 2016, 2015 and 2014.
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Goodwill, Net
|
|
Balance, January 1, 2014
|
|
$
|
685,310
|
|
|
Additions
|
|
—
|
|
|
Impairments
|
|
—
|
|
|
Balance, December 31, 2014
|
|
685,310
|
|
|
Additions
|
|
—
|
|
|
Impairments
|
|
—
|
|
|
Balance, December 31, 2015
|
|
685,310
|
|
|
Additions
|
|
153,628
|
|
|
Impairments
|
|
(12,462
|
)
|
|
Balance, December 31, 2016
|
|
$
|
826,476
|
|
NOTE 6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
Payroll and related expenses
|
$
|
68,102
|
|
|
$
|
71,815
|
|
|
Interest
|
33,407
|
|
|
35,337
|
|
|
Gaming liabilities
|
41,942
|
|
|
37,496
|
|
|
Player loyalty program liabilities
|
19,076
|
|
|
18,491
|
|
|
Other accrued liabilities
|
88,555
|
|
|
86,379
|
|
|
Total accrued liabilities
|
$
|
251,082
|
|
|
$
|
249,518
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
NOTE 7. LONG-TERM DEBT
Long-term debt, net of current maturities and debt issuance costs consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
Interest
|
|
|
|
|
|
Unamortized
|
|
|
|
|
Rates at
|
|
Outstanding
|
|
Unamortized
|
|
Origination
|
|
Long-Term
|
|
(In thousands)
|
Dec. 31, 2016
|
|
Principal
|
|
Discount
|
|
Fees and Costs
|
|
Debt, Net
|
|
Bank credit facility
|
3.44
|
%
|
|
$
|
1,782,538
|
|
|
$
|
(1,888
|
)
|
|
$
|
(28,503
|
)
|
|
$
|
1,752,147
|
|
|
6.875% senior notes due 2023
|
6.88
|
%
|
|
750,000
|
|
|
—
|
|
|
(11,209
|
)
|
|
738,791
|
|
|
6.375% senior notes due 2026
|
6.38
|
%
|
|
750,000
|
|
|
—
|
|
|
(12,074
|
)
|
|
737,926
|
|
|
Other
|
5.80
|
%
|
|
591
|
|
|
—
|
|
|
—
|
|
|
591
|
|
|
Total long-term debt
|
|
|
3,283,129
|
|
|
(1,888
|
)
|
|
(51,786
|
)
|
|
3,229,455
|
|
|
Less current maturities
|
|
|
30,336
|
|
|
—
|
|
|
—
|
|
|
30,336
|
|
|
Long-term debt, net
|
|
|
$
|
3,252,793
|
|
|
$
|
(1,888
|
)
|
|
$
|
(51,786
|
)
|
|
$
|
3,199,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
Interest
|
|
|
|
|
|
Unamortized
|
|
|
|
|
Rates at
|
|
Outstanding
|
|
Unamortized
|
|
Origination
|
|
Long-Term
|
|
(In thousands)
|
Dec. 31, 2015
|
|
Principal
|
|
Discount
|
|
Fees and Costs
|
|
Debt, Net
|
|
Boyd Gaming Corporation Debt:
|
|
|
|
|
|
|
|
|
|
|
Bank credit facility
|
3.75
|
%
|
|
$
|
1,209,725
|
|
|
$
|
(2,702
|
)
|
|
$
|
(9,746
|
)
|
|
$
|
1,197,277
|
|
|
9.00% senior notes due 2020
|
9.00
|
%
|
|
350,000
|
|
|
—
|
|
|
(7,044
|
)
|
|
342,956
|
|
|
6.875% senior notes due 2023
|
6.88
|
%
|
|
750,000
|
|
|
—
|
|
|
(12,934
|
)
|
|
737,066
|
|
|
|
|
|
2,309,725
|
|
|
(2,702
|
)
|
|
(29,724
|
)
|
|
2,277,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peninsula Gaming Debt:
|
|
|
|
|
|
|
|
|
|
|
Bank credit facility
|
4.25
|
%
|
|
662,750
|
|
|
—
|
|
|
(14,143
|
)
|
|
648,607
|
|
|
8.375% senior notes due 2018
|
8.38
|
%
|
|
350,000
|
|
|
—
|
|
|
(6,357
|
)
|
|
343,643
|
|
|
|
|
|
1,012,750
|
|
|
—
|
|
|
(20,500
|
)
|
|
992,250
|
|
|
Total long-term debt
|
|
|
3,322,475
|
|
|
(2,702
|
)
|
|
(50,224
|
)
|
|
3,269,549
|
|
|
Less current maturities
|
|
|
29,750
|
|
|
—
|
|
|
—
|
|
|
29,750
|
|
|
Long-term debt, net
|
|
|
$
|
3,292,725
|
|
|
$
|
(2,702
|
)
|
|
$
|
(50,224
|
)
|
|
$
|
3,239,799
|
|
Boyd Gaming Corporation Debt
Bank Credit Facility
Credit Agreement
On September 15, 2016, the Company entered into an Amendment No. 1 and Joinder Agreement (the "Amendment") among the Company, certain financial institutions, Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as swing line lender. The Amendment modified the Third Amended and Restated Credit Agreement dated August 14, 2013 (the "Prior Credit Facility" together with the Amendment referred to as the "Credit Facility" or the "Credit Agreement").
As modified by the Amendment, the Credit Facility provides for: (i) increased commitments under the existing senior secured revolving credit facility (the "Revolving Credit Facility") to an amount equal to
$775.0 million
, (ii) commitments under the existing senior secured term A loan (the "Term A Loan") in an amount equal to
$225.0 million
, and (iii) a new
$1.0 billion
senior secured term B-2 loan (the "Term B-2 Loan"). The maturity dates of the Revolving Credit Facility and the Term A Loan have been extended to September 15, 2021 (or earlier upon the occurrence or non-occurrence of certain events); the Term B-2 Loan matures on September 15, 2023 (or earlier upon the occurrence or non-occurrence of certain events); the maturity date of the existing senior secured term B-1 loan (the "Term B-1 Loan") remains August 14, 2020. The increase to the Term A Loan and the new Term B-2 Loan were fully funded on the effective date of the Amendment. Proceeds from the Credit Facility were used to refinance all outstanding obligations under the Prior Credit Facility, to fund transaction costs in connection with the Credit Facility, and for working capital and other general corporate purposes.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The Credit Facility includes an accordion feature which permits an increase in the Revolving Credit Facility and the issuance and increase of senior secured term loans in an amount up to (i)
$550.0 million
, plus (ii) certain voluntary permanent reductions of the Revolving Credit Facility and certain voluntary prepayments of the senior secured term loans, plus (iii) certain reductions in the outstanding principal amounts under the term loans or the Revolving Credit Facility, plus (iv) any additional amount if, after giving effect thereto, the First Lien Leverage Ratio (as defined in the Credit Agreement) would not exceed
4.25
to
1.00
on a pro forma basis, less (v) any Incremental Equivalent Debt (as defined in the Credit Agreement), in each case, subject to the satisfaction of certain conditions.
Pursuant to the terms of the Credit Facility (i) the loans under the Term A Loan amortize in an annual amount equal to
5.00%
of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, (ii) the loans under the Term B-1 Loan amortize in an annual amount equal to
1.00%
of the original principal amount thereof, commencing December 31, 2013, payable on a quarterly basis, (iii) the loans under the Term B-2 Loan amortize in an annual amount equal to
1.00%
of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, and (iv) beginning with the fiscal year ending December 31, 2016, the Company is required to use a portion of its annual Excess Cash Flow, as defined in the Credit Agreement, to prepay loans outstanding under the Credit Facility.
Amounts Outstanding
The outstanding principal amounts at December 31, 2016 under the Credit Facility and at December 31, 2015 under the Prior Credit Facility are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
Revolving Credit Facility
|
$
|
245,000
|
|
|
$
|
240,000
|
|
|
Term A Loan
|
222,188
|
|
|
183,275
|
|
|
Term B-1 Loan
|
271,750
|
|
|
730,750
|
|
|
Term B-2 Loan
|
997,500
|
|
|
—
|
|
|
Swing Loan
|
46,100
|
|
|
55,700
|
|
|
Total outstanding principal amounts
|
$
|
1,782,538
|
|
|
$
|
1,209,725
|
|
At
December 31, 2016
approximately
$1.8 billion
was outstanding under the Credit Facility and
$12.0 million
was allocated to support various letters of credit, leaving remaining contractual availability of
$471.9 million
.
Interest and Fees
The interest rate on the outstanding balance from time to time of the Revolving Credit Facility and the Term A Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio and ranges from
1.75%
to
2.75%
(if using the Eurodollar rate) and from
0.75%
to
1.75%
(if using the base rate). A fee of a percentage per annum (which ranges from
0.25%
to
0.50%
determined in accordance with a specified pricing grid based on the total leverage ratio) will be payable on the unused portions of the Revolving Credit Facility.
The interest rate on the outstanding balance from time to time of the Term B-1 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a
1.00%
minimum) plus
3.00%
; or (ii) the base rate plus
2.00%
. The interest rate on the outstanding balance from time to time of the Term B-2 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a
0.00%
minimum) plus
3.00%
, or (ii) the base rate plus
2.00%
.
The "base rate" under the Credit Agreement remains the highest of (x) Bank of America’s publicly-announced prime rate, (y) the federal funds rate plus
0.50%
, or (z) the Eurodollar rate for a one-month period plus
1.00%
.
Optional and Mandatory Prepayments
Pursuant to the terms of the Credit Facility (i) the loans under the Term A Loan amortize in an annual amount equal to
5.00%
of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, (ii) the loans under the Term B-2 Loan amortize in an annual amount equal to
1.00%
of the original principal amount thereof, commencing December 31, 2016,
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
payable on a quarterly basis, and (iii) beginning with the fiscal year ending December 31, 2016, the Company is required to use a portion of its annual Excess Cash Flow, as defined in the Credit Agreement, to prepay loans outstanding under the Credit Facility.
Amounts outstanding under the Credit Agreement may be prepaid without premium or penalty, and the unutilized portion of the commitments may be terminated without penalty, subject to certain exceptions, including a
1.00%
prepayment premium for any prepayment of the Term B-2 Loan prior to March 15, 2017 that is accompanied by a repricing of the Term B-2 Loan.
Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.
Guarantees and Collateral
The Company's obligations under the Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors will grant the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Credit Facility.
Financial and Other Covenants
The Credit Facility contains certain financial and other covenants, including, without limitation, various covenants: (i) requiring the maintenance of a minimum consolidated interest coverage ratio
1.75
to
1.00
; (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below); (iii) establishing a maximum permitted secured leverage ratio (discussed below); (iv) imposing limitations on the incurrence of indebtedness; (v) imposing limitations on transfers, sales and other dispositions; and (vi) imposing restrictions on investments, dividends and certain other payments.
The maximum permitted consolidated Total Leverage Ratio is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA, as defined by the Agreement. The following table provides our maximum Total Leverage Ratio during the remaining term of the Credit Facility:
|
|
|
|
|
|
|
|
|
Maximum Total
|
|
For the Trailing Four Quarters Ending
|
Leverage Ratio
|
|
September 30, 2016 through December 31, 2016
|
7.75
|
to
|
1.00
|
|
March 31, 2017 through December 31, 2017
|
7.00
|
to
|
1.00
|
|
March 31, 2018 through December 31, 2018
|
6.25
|
to
|
1.00
|
|
March 31, 2019 through December 31, 2019
|
6.00
|
to
|
1.00
|
|
March 31, 2020 through December 31, 2020
|
5.75
|
to
|
1.00
|
|
March 31, 2021 and thereafter
|
5.50
|
to
|
1.00
|
The maximum permitted Secured Leverage Ratio is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA, as defined by the Agreement. The following table provides our maximum Secured Leverage Ratio during the remaining term of the Credit Facility:
|
|
|
|
|
|
|
|
|
Maximum Secured
|
|
For the Trailing Four Quarters Ending
|
Leverage Ratio
|
|
September 30, 2016 through December 31, 2017
|
4.50
|
to
|
1.00
|
|
March 31, 2018 through December 31, 2018
|
4.00
|
to
|
1.00
|
|
March 31, 2019 through December 31, 2019
|
3.75
|
to
|
1.00
|
|
March 31, 2020 and thereafter
|
3.50
|
to
|
1.00
|
Current Maturities of Our Indebtedness
We classified certain non-extending balances under our Credit Facility as a current maturity, as such amounts come due within the next twelve months.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Senior Notes
6.875%
Senior Notes due May 2023
Significant Terms
On May 21, 2015, we issued
$750 million
aggregate principal amount of
6.875%
senior notes due May 2023 (the "
6.875%
Notes"). The
6.875%
Notes require semi-annual interest payments on May 15 and November 15 of each year, commencing on November 15, 2015. The
6.875%
Notes will mature on May 15, 2023 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are
100%
owned by us.
The
6.875%
Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the
6.875%
Notes, together, the "
6.875%
Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the 6.875% Indenture), we will be required, unless certain conditions are met, to offer to repurchase the
6.875%
Notes at a price equal to
101%
of the principal amount of the
6.875%
Notes, plus accrued and unpaid interest and Additional Interest (as defined in the
6.875%
Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the
6.875%
Notes.
At any time prior to May 15, 2018, we may redeem the
6.875%
Notes, in whole or in part, at a redemption price equal to
100%
of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to May 15, 2018, we may redeem all or a portion of the
6.875%
Notes at redemption prices (expressed as percentages of the principal amount) ranging from
105.156%
in 2018 to
100%
in 2021 and thereafter, plus accrued and unpaid interest and Additional Interest.
Debt Financing Costs
In conjunction with the issuance of the
6.875%
Notes, we incurred approximately
$14.0 million
in debt financing costs that have been deferred and are being amortized over the term of the
6.875%
Notes using the effective interest method.
Senior Notes
6.375%
Senior Notes due April 2026
Significant Terms
On March 28, 2016, we issued
$750 million
aggregate principal amount of
6.375%
senior notes due April 2026 (the "
6.375%
Notes"). The
6.375%
Notes require semi-annual interest payments on April 1 and October 1 of each year, commencing on October 1, 2016. The
6.375%
Notes will mature on April 1, 2026 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are
100%
owned by us. Net proceeds from the
6.375%
Notes were used to pay down the outstanding amount under the Revolving Credit Facility and the balance was deposited in money market funds and classified as cash equivalents on the consolidated balance sheets.
In conjunction with the issuance of the
6.375%
Notes, we incurred approximately
$13.0 million
in debt financing costs that have been deferred and are being amortized over the term of the
6.375%
Notes using the effective interest method.
The
6.375%
Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the
6.375%
Notes, together, the "
6.375%
Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the 6.375% Indenture), we will be required, unless certain conditions are met, to offer to repurchase the
6.375%
Notes at a price equal to
101%
of the principal amount of the
6.375%
Notes, plus accrued and unpaid interest and Additional Interest (as defined in the
6.375%
Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the
6.375%
Notes.
At any time prior to April 1, 2021, we may redeem the
6.375%
Notes, in whole or in part, at a redemption price equal to
100%
of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. After April 1, 2021, we may redeem all or a portion of the
6.375%
Notes at redemption prices (expressed as percentages of the principal amount) ranging from
103.188%
in 2021 to
100%
in 2024 and thereafter, plus accrued and unpaid interest and Additional Interest.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
In connection with the private placement of the
6.375%
Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the
6.375%
Notes. We filed the required registration statement and commenced the exchange offer during December 2016. The exchange offer was completed on February 10, 2017 and our obligations under the registration rights agreement have been fulfilled.
Senior Notes
9.00%
Senior Notes due July 2020
On September 6, 2016 we redeemed all of our
9.00%
senior notes due July 2020 (the "
9.00%
Notes") at a redemption price of
104.50%
plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand.
As a result of this redemption, the
9.00%
Notes have been fully extinguished.
Peninsula Gaming Debt
Peninsula Credit Facility
On September 2, 2016, Peninsula repaid all of the outstanding amounts, including all principal and accrued interest amounts, under the Peninsula senior secured credit facility (the "Peninsula Credit Facility") pursuant to the Peninsula Credit Agreement. In connection with the repayment in full of the Peninsula Credit Facility (the "Repayment"), the Peninsula Credit Agreement was terminated.
Amounts Outstanding
At December 31, 2015, the outstanding principal amount under the Peninsula Credit Facility was comprised of the following:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Term Loan
|
$
|
647,750
|
|
|
Revolving Credit Facility
|
9,000
|
|
|
Swing Loan
|
6,000
|
|
|
Total outstanding principal amounts under the Peninsula Credit Facility
|
$
|
662,750
|
|
Peninsula Senior Notes
8.375%
Senior Notes due February 2018
On September 2, 2016 we redeemed all of our
8.375%
senior notes due February 2018 (the "
8.375%
Notes") at a redemption price of
100.0%
plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand.
As a result of this redemption, the 8.375% Notes have been fully extinguished.
Loss on Early Extinguishments and Modifications of Debt
The components of the loss on early extinguishments and modifications of debt, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
9.00% Senior Notes premium and consent fees
|
$
|
15,750
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
9.00% Senior Notes deferred finance charges
|
5,976
|
|
|
—
|
|
|
—
|
|
|
8.375% Senior Notes deferred finance charges
|
4,497
|
|
|
—
|
|
|
—
|
|
|
9.125% Senior Notes premium and consent fees
|
—
|
|
|
23,962
|
|
|
—
|
|
|
9.125% Senior Notes deferred finance charges
|
—
|
|
|
4,888
|
|
|
—
|
|
|
HoldCo Note
|
—
|
|
|
7,819
|
|
|
—
|
|
|
Boyd Gaming Credit Facility deferred finance charges
|
6,629
|
|
|
1,978
|
|
|
—
|
|
|
Peninsula Credit Facility deferred finance charges
|
9,512
|
|
|
2,086
|
|
|
1,536
|
|
|
Total loss on early extinguishments and modifications of debt
|
$
|
42,364
|
|
|
$
|
40,733
|
|
|
$
|
1,536
|
|
Covenant Compliance
As of
December 31, 2016
, we believe that we were in compliance with the financial and other covenants of our debt instruments.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The indentures governing the notes issued by the Company contain provisions that allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, the coverage ratio (as defined in the respective indentures, essentially a ratio of the Company's consolidated EBITDA to fixed charges, including interest) for the Company's trailing four quarter period on a pro forma basis would be at least
2.0
to
1.0
. Should this provision prohibit the incurrence of additional debt, the Company may still borrow under its existing credit facility. At
December 31, 2016
, the available borrowing capacity under our Credit Facility was
$471.9 million
.
Scheduled Maturities of Long-Term Debt
The scheduled maturities of long-term debt, as discussed above, are as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
Total
|
|
For the year ending December 31,
|
|
|
2017
|
$
|
30,336
|
|
|
2018
|
76,441
|
|
|
2019
|
30,346
|
|
|
2020
|
266,102
|
|
|
2021
|
432,295
|
|
|
Thereafter
|
2,447,609
|
|
|
Total outstanding principal of long-term debt
|
$
|
3,283,129
|
|
NOTE 8. INCOME TAXES
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are provided to record the effects of temporary differences between the tax basis of an asset or liability and its amount as reported in our consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.
The components comprising our deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
Deferred tax assets
|
|
|
|
|
Federal net operating loss carryforwards
|
$
|
201,978
|
|
|
$
|
308,738
|
|
|
State net operating loss carryforwards
|
38,715
|
|
|
47,711
|
|
|
Share-based compensation
|
26,344
|
|
|
32,524
|
|
|
Other
|
61,289
|
|
|
43,936
|
|
|
Gross deferred tax assets
|
328,326
|
|
|
432,909
|
|
|
Valuation allowance
|
(28,402
|
)
|
|
(247,761
|
)
|
|
Deferred tax assets, net of valuation allowance
|
299,924
|
|
|
185,148
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
Difference between book and tax basis of property and intangible assets
|
337,654
|
|
|
322,387
|
|
|
State tax liability
|
31,443
|
|
|
13,428
|
|
|
Other
|
14,807
|
|
|
11,522
|
|
|
Gross deferred tax liabilities
|
383,904
|
|
|
347,337
|
|
|
Deferred tax liabilities, net
|
$
|
83,980
|
|
|
$
|
162,189
|
|
At
December 31, 2016
, we have unused federal general business tax credits of approximately
$8.8 million
which may be carried forward or used until expiration beginning in 2035 and alternative minimum tax credits of
$7.1 million
which may be carried forward indefinitely. We have a federal income tax net operating loss of approximately
$621.8 million
, which may be carried forward or used until expiration beginning in 2031. We also have state income tax net operating loss carryforwards of approximately
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
$708.9 million
, which may be used to reduce future state income taxes. The state net operating loss carryforwards will expire in various years ranging from 2017 to 2035, if not fully utilized.
As a result of certain realization requirements of
ASC 718, Compensation - Stock Compensation
, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation that are greater than the compensation recognized for financial reporting. In March 2016, the FASB issued Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences. Update 2016-09 requires excess tax benefits and deficiencies to be recorded in income tax expense instead of equity which we anticipate will cause volatility in our future effective tax rate. The Company will adopt this standard in the first quarter 2017. The cumulative effect of this change in accounting method will be recorded as an increase in retained earnings by approximately
$15.8 million
.
Valuation Allowance on Deferred Tax Assets
Management assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. In evaluating our ability to recover deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations.
As part of our review in determining the need for a valuation allowance, we assess the potential release of existing valuation allowances. In performing our analysis in 2016, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilize a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters during 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from these deferred tax assets would be realized. As a result, during the year ended December 31, 2016, we released
$201.5 million
of valuation allowance on our federal and state income tax net operating loss carryforwards and other deferred tax assets.
We have maintained a valuation allowance of
$28.4 million
against certain federal and state deferred tax assets as of December 31, 2016 due to uncertainties related to our ability to realize the tax benefits associated with these assets. In assessing the need to establish a valuation allowance, we consider, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Provision (Benefit) for Income Taxes
A summary of the provision (benefit) for income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Current
|
|
|
|
|
|
|
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
442
|
|
|
State
|
1,242
|
|
|
2,052
|
|
|
(289
|
)
|
|
Total current taxes provision (benefit)
|
1,242
|
|
|
2,052
|
|
|
153
|
|
|
Deferred
|
|
|
|
|
|
|
Federal
|
(190,207
|
)
|
|
(9,493
|
)
|
|
(6,336
|
)
|
|
State
|
(8,521
|
)
|
|
807
|
|
|
775
|
|
|
Total deferred taxes provision (benefit)
|
(198,728
|
)
|
|
(8,686
|
)
|
|
(5,561
|
)
|
|
Provision (benefit) for income taxes from continuing operations
|
$
|
(197,486
|
)
|
|
$
|
(6,634
|
)
|
|
$
|
(5,408
|
)
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes included on the consolidated statement of operations
|
|
|
|
|
|
|
Provision (benefit) for income taxes from continuing operations
|
$
|
(197,486
|
)
|
|
$
|
(6,634
|
)
|
|
$
|
(5,408
|
)
|
|
Provision (benefit) for income taxes from discontinued operations
|
146,379
|
|
|
(540
|
)
|
|
6,161
|
|
|
Provision (benefit) for income taxes from continuing and discontinued operations
|
$
|
(51,107
|
)
|
|
$
|
(7,174
|
)
|
|
$
|
753
|
|
Our tax benefit for the year ended
December 31, 2016
resulted from the release of a valuation allowance on our federal and state net operating loss carryforwards and other deferred tax assets.
Our tax benefit for the year ended December 31, 2015 was favorably impacted by the partial release of the valuation allowance on our federal and state net operating losses, impairment charges to indefinite lived intangible assets which resulted in a reduction in our recognized deferred tax liability on these assets, federal and state audit settlements in connection with our IRS and New Jersey income tax examinations and, the realization of certain unrecognized tax benefits, inclusive of the reversal of related accrued interest.
Our tax provision for the year ended December 31, 2014 was adversely impacted by a valuation allowance on our federal and state income tax net operating losses and certain other deferred tax assets. The tax provision was favorably impacted by impairment charges to indefinite lived intangible assets which resulted in a reduction in our recognized deferred tax liability on these assets, tax adjustments related to the deconsolidation of Borgata and, as a result of statute expirations, the realization of certain unrecognized tax benefits, inclusive of the reversal of related accrued interest.
Additionally, the tax provision or benefit in 2015 and 2014 was adversely impacted by an accrual of non-cash tax expense in connection with the tax amortization of indefinite lived intangible assets that was not available to offset existing deferred tax assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets in determining our valuation allowance.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The following table provides a reconciliation between the federal statutory rate and the effective income tax rate, expressed as a percentage of income from continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
|
Tax at federal statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
Valuation allowance for deferred tax assets
|
(2,448.1
|
)%
|
|
200.9
|
%
|
|
(20.9
|
)%
|
|
State income taxes, net of federal benefit
|
(59.2
|
)%
|
|
69.2
|
%
|
|
(0.9
|
)%
|
|
Compensation-based credits
|
(21.7
|
)%
|
|
(60.8
|
)%
|
|
2.3
|
%
|
|
Company provided benefits
|
14.8
|
%
|
|
152.9
|
%
|
|
(3.0
|
)%
|
|
Nondeductible expenses
|
10.3
|
%
|
|
19.0
|
%
|
|
(1.9
|
)%
|
|
Tax exempt interest
|
(6.9
|
)%
|
|
(13.8
|
)%
|
|
1.0
|
%
|
|
Accrued interest on uncertain tax benefits
|
2.1
|
%
|
|
(139.7
|
)%
|
|
(2.0
|
)%
|
|
Uncertain tax benefits
|
—
|
%
|
|
(421.6
|
)%
|
|
—
|
%
|
|
Other, net
|
1.5
|
%
|
|
(4.5
|
)%
|
|
0.1
|
%
|
|
Effective tax rate
|
(2,472.2
|
)%
|
|
(163.4
|
)%
|
|
9.7
|
%
|
Status of Examinations
In January 2015, we received Joint Committee on Taxation ("Joint Committee") approval of the 2005-2009 IRS appeals settlement reached in August 2013. We received a refund of
$2.4 million
in connection with the appeals settlement. Additionally, in 2015, we received a final audit determination in connection with our New Jersey examination, effectively settling years 2003 through 2009. We received a refund of
$1.1 million
as a result of the New Jersey examination.
We generated net operating losses on our federal income tax returns for years 2011 - 2013. These returns remain subject to federal examination until the statute of limitations expires for the year in which the net operating losses are utilized.
We are also currently under examination for various state income and franchise tax matters. As it relates to our material state returns, we are subject to examination for tax years ended on or after December 31, 2001, and the statute of limitations will expire over the period September 2017 through October 2020.
We believe that we have adequately reserved for any tax liability; however, the ultimate resolution of these examinations may result in an outcome that is different than our current expectation. We do not believe the ultimate resolution of these examinations will have a material impact on our consolidated financial statements.
Other Long-Term Tax Liabilities
The impact of an uncertain income tax position taken in our income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained. Our liability for uncertain tax positions is recorded as other long-term tax liabilities in our consolidated balance sheets.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Unrecognized tax benefit, beginning of year
|
$
|
2,482
|
|
|
$
|
30,198
|
|
|
$
|
37,059
|
|
|
Additions:
|
|
|
|
|
|
|
Tax positions related to current year
|
—
|
|
|
—
|
|
|
487
|
|
|
Reductions:
|
|
|
|
|
|
|
Tax positions related to the Deconsolidation of Borgata
|
—
|
|
|
—
|
|
|
(6,221
|
)
|
|
Lapse of applicable statute of limitations
|
—
|
|
|
—
|
|
|
(1,097
|
)
|
|
Tax position related to prior years
|
—
|
|
|
(27,716
|
)
|
|
(30
|
)
|
|
Unrecognized tax benefits, end of year
|
$
|
2,482
|
|
|
$
|
2,482
|
|
|
$
|
30,198
|
|
Included in the
$2.5 million
balance of unrecognized tax benefits at
December 31, 2016
, are
$1.6 million
of federally tax effected benefits that, if recognized, would impact the effective tax rate. We recognize interest related to unrecognized tax benefits in our income tax provision. During the year ended
December 31, 2016
, we recognized interest and penalties of approximately
$0.1 million
in our tax provision. During the years ended December 31, 2015 and 2014 we recognized interest related benefits, due to favorable settlements, of
$6.2 million
and
$1.2 million
, respectively, in our income tax provision. We have accrued
$0.8 million
and
$0.7 million
of interest and penalties as of
December 31, 2016
and
2015
, respectively, in our consolidated balance sheets.
During the first quarter of 2015, we received Joint Committee approval on our IRS appeals agreement, effectively settling our 2005 through 2009 examination. During the third quarter of 2015, we received a final audit determination in connection with our New Jersey examination, effectively settling years 2003 through 2009. As a result of the resolution of these audits, we reduced our unrecognized tax benefits by
$27.7 million
, of which
$19.5 million
impacted our effective tax rate. Due to the utilization of tax loss carryforwards in certain states, the statute of limitations remain open with respect to years in which the tax losses are utilized. When these years close, unrecognized tax benefits may be realized. We do not anticipate any material changes to our unrecognized tax benefits over the next twelve-month period.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Commitments
Capital Spending and Development
We continually perform on-going refurbishment and maintenance at our facilities to maintain our standards of quality. Certain of these maintenance costs are capitalized, if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. We must also comply with covenants and restrictions set forth in our debt agreements.
Kansas Management Contract
As part of the Kansas Management Contract approved by the Kansas Racing and gaming Commission on January 11, 2011, Kansas Star committed to donate
$1.5 million
each year to support education in the local area in which Kansas Star operates for the duration of the Kansas Management Contract. We have made all distributions under this commitment as scheduled and such related expenses are recorded in Selling, general and administrative expenses on the consolidated statements of operations.
Mulvane Development Agreement
On March 7, 2011, Kansas Star entered into a Development Agreement with the City of Mulvane ("Mulvane Development Agreement") related to the provision of water, sewer, and electrical utilities to the Kansas Star site. This agreement sets forth certain parameters governing the use of public financing for the provision of such utilities, through the issuance of general obligation bonds by the City of Mulvane, paid for through the imposition of a special tax assessment on the Kansas Star site payable over
15 years
in an amount equal to the City’s full obligations under the general obligation bonds.
As of
December 31, 2016
, all infrastructure improvements to the Kansas Star site under the Mulvane Development Agreement are complete and the City of Mulvane issued
$19.7 million
in general obligation bonds related to these infrastructure improvements.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
In connection with the acquisition of Peninsula Gaming, LLC ("PGL Merger"), the Company's obligation under this agreement was revalued to fair value as of the PGL Merger date. As of
December 31, 2016
and 2015, under the Mulvane Development Agreement, Kansas Star recorded
$1.7 million
at each date, which is included in accrued liabilities on the consolidated balance sheets and
$8.9 million
, net of a
$4.0 million
discount, and
$9.6 million
, net of a
$4.6 million
discount, respectively, which is recorded as a long-term obligation in other liabilities on the consolidated balance sheets. Interest costs are expensed as incurred and the discount will be amortized to interest expense over the term of the special tax assessment ending in 2028. Kansas Star's special tax assessment related to these bonds is approximately
$1.7 million
annually. Payments under the special tax assessment are secured by irrevocable letters of credit of
$5.0 million
issued by the Company in favor of the City of Mulvane, representing an amount equal to three times the annual special assessment tax imposed on Kansas Star.
Contingent Payments
In connection with securing the Kansas Management Contract, Kansas Star agreed to pay a former casino project promoter
1%
of Kansas Star’s earnings before interest expense, taxes, depreciation and amortization ("EBITDA") each month for a period of
10
years commencing December 20, 2011.
Minimum Assessment Agreement
In 2007, Diamond Jo Dubuque ("DJL") entered a Minimum Assessment Agreement with the City of Dubuque. Under the Minimum Assessment Agreement, DJL and the City agreed to a minimum taxable value related to the new casino of
$57.9 million
. DJL agreed to pay property taxes to the City based on the actual taxable value of the casino, but not less than the minimum taxable value. Scheduled payments of principal and interest on the City Bonds will be funded through DJL's payment obligations under the Minimum Assessment Agreement. DJL is also obligated to pay any shortfall should property taxes be insufficient to fund the principal and interest payments on the City Bonds.
As a result of purchase accounting the Minimum Assessment Agreement obligation was revalued to fair value. Interest costs under the Minimum Assessment Agreement obligation are expensed as incurred. As of
December 31, 2016
and 2015, the remaining obligation under the Minimum Assessment Agreement was
$1.9 million
at each date, which was recorded in accrued liabilities on the consolidated balance sheets and
$14.1 million
, net of a
$2.8 million
discount, and
$14.4 million
, net of a
$2.9 million
discount, respectively, which was recorded as a long-term obligation in other liabilities on the consolidated balance sheets. The discount will be amortized to interest expense over the life of the Minimum Assessment Agreement. Total minimum payments by DJL under the Minimum Assessment Agreement are approximately
$1.9 million
per year through 2036.
Public Parking Facility Agreement
DJL has an agreement with the City for use of the public parking facility adjacent to DJL's casino and owned and operated by the City (the "Parking Facility Agreement"). The Parking Facility Agreement calls for: (i) the payment by the Company for the reasonable and necessary actual operating costs incurred by the City for the operation, security, repair and maintenance of the public parking facility; and (ii) the payment by the Company to the City of
$65
per parking space in the public parking facility per year, subject to annual increases based on any increase in the Consumer Price Index, which funds will be deposited into a special sinking fund and used by the City for capital expenditures necessary to maintain the public parking facility. Operating costs of the parking facility incurred by DJL are expensed as incurred. Deposits to the sinking fund are recorded as other assets. When the sinking fund is used for capital improvements, such amounts are capitalized and amortized over their remaining useful life.
Iowa Qualified Sponsoring Organization Agreements
DJL and Diamond Jo Worth ("DJW") are required to pay their respective qualified sponsoring organization, who hold a joint gaming license with DJL and DJW,
4.50%
and
5.76%
, respectively, of the casino’s adjusted gross receipts on an ongoing basis. DJL expensed
$3.0 million
, during the years ended December 31, 2016 and 2015, respectively, and
$2.8 million
, in the year ending 2014, related to its agreement. DJW expensed
$4.9 million
,
$5.0 million
, and
$4.8 million
during the years ended December 31, 2016, 2015, and 2014, respectively, related to its agreement. The DJL agreement expires on December 31, 2018. The DJW agreement was amended during 2014 and expires on March 31, 2025, and is subject to automatic ten-year renewal periods.
Development Agreement
In September 2011, the Company acquired the membership interests of a limited liability company (the "LLC") for a purchase price of
$24.5 million
. The primary asset of the LLC was a previously executed development agreement (the "Development Agreement") with Wilton Rancheria (the "Tribe"). The purchase price was allocated primarily to an intangible asset associated with the Company's rights under the agreement to assist the Tribe in the development and management of a gaming facility on the Tribe's land.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
In July 2012, the Company and the Tribe amended and replaced the agreement with a new development agreement and a management agreement (the "Agreements"). The Agreements obligate us to fund certain pre-development costs, which are estimated to be approximately
$1 million
to
$2 million
annually, for the next several years and to assist the Tribe in its development and oversight of the gaming facility construction. Upon opening, we will manage the gaming facility. The pre-development costs funded by us are reimbursable to us with future cash flows from the operations of the gaming facility under terms of a note receivable from the Tribe.
In January 2017, the Company funded the acquisition of land that is the intended site of the Wilton Rancheria casino and, in February 2017, the land was placed into
trust by the U.S. Bureau of Indian Affairs for the benefit of the Tribe. The cost of the land will be recorded as a receivable on our consolidated balance sheet, and we expect to be reimbursed for this cost when project financing is in place. Should the project be abandoned, ownership of the land would revert to the Company.
The Agreements provide that the Company will receive future revenue for its services to the Tribe contingent upon successful development of the gaming facility and based on future net revenues at the gaming facility. In addition to the need for land to be taken into trust, the Tribe must agree to a compact with the State of California, and receive approval of the management contract between the tribe and our Company, prior to proceeding. Development is in the preliminary stages and no time schedule has been established as to when the Tribe will be able to formalize plans and begin construction.
Future Minimum Lease Payments and Rental Income
Future minimum lease payments required under noncancelable operating leases, which are primarily related to land leases are as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
Lease Obligations
|
|
For the year ending December 31,
|
|
|
2017
|
$
|
45,970
|
|
|
2018
|
18,517
|
|
|
2019
|
16,326
|
|
|
2020
|
14,083
|
|
|
2021
|
13,665
|
|
|
Thereafter
|
322,243
|
|
|
Total
|
$
|
430,804
|
|
Rent expense included in selling, general and administrative expenses on the accompanying consolidated statements of operations for the years ended
December 31, 2016
,
2015
and
2014
was
$31.0 million
,
$29.0 million
, and
$29.4 million
, respectively, and primarily relates to land leases and advertising-related expenses.
Future minimum rental income, which is primarily related to retail and restaurant facilities located within our properties are as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
Minimum Rental Income
|
|
For the year ending December 31,
|
|
|
2017
|
$
|
2,111
|
|
|
2018
|
1,624
|
|
|
2019
|
1,061
|
|
|
2020
|
462
|
|
|
2021
|
358
|
|
|
Thereafter
|
576
|
|
|
Total
|
$
|
6,192
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Contingencies
Legal Matters
We are parties to various legal proceedings arising in the ordinary course of business. We believe that
all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.
NOTE 10. STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
Share Repurchase Program
We have in the past, and may in the future, acquire our equity securities through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine from time to time. In July 2008, our Board of Directors authorized an amendment to an existing share repurchase program to increase the amount of common stock that can be repurchased to
$100 million
, and
$92.1 million
of this authorization remains available at
December 31, 2016
. We are not obligated to repurchase any shares under this program, and no shares were repurchased during the years ended
December 31, 2016
,
2015
or
2014
.
Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Repurchases can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our Credit Facility. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our Credit Facility.
Dividends
Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our Credit Facility. No dividends were declared during the years ended
December 31, 2016
,
2015
or
2014
.
Stock Incentive Plan
In May 2012, the Company's stockholders approved the 2012 Stock Incentive Plan (the "2012 Plan"), which amended and restated the Company's 2002 Stock Incentive Plan (the "2002 Plan") to (a) provide for a term ending
ten years
from the date of stockholder approval at the Annual Meeting, (b) increase the maximum number of shares of the Company's common stock authorized for issuance over the term of the 2012 Plan by
4 million
shares from
17 million
to
21 million
shares, (c) permit the future grant of certain equity-based awards, including awards designed to constitute performance-based compensation under Section 162(m) of the Internal Revenue Code, and (d) make certain other changes. Under our 2012 Plan, approximately
2.9 million
shares remain available for grant at
December 31, 2016
. The number of authorized but unissued shares of common stock under this 2012 Plan as of
December 31, 2016
was approximately
9.0 million
shares.
Grants made under the 2012 Plan include provisions that entitle the grantee to automatic vesting acceleration in the event of a grantee’s separation from service (including as a result of retirement, death or disability), other than for cause (as defined), after reaching the defined age and years of service thresholds. These provisions result in the accelerated recognition of the stock compensation expense for those grants issued to employees who have met the stipulated thresholds.
Stock Options
Options granted under the 2012 Plan generally become exercisable ratably over a
three
-year period from the date of grant. Options that have been granted under the 2012 Plan had an exercise price equal to the market price of our common stock on the date of grant and will expire no later than ten years after the date of grant.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Summarized stock option plan activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted Average Option Price
|
|
Weighted Average Remaining Term
|
|
Aggregate Intrinsic Value
|
|
|
|
|
|
|
(In years)
|
|
(In thousands)
|
|
Outstanding at January 1, 2014
|
9,143,910
|
|
|
$
|
26.62
|
|
|
|
|
|
|
Granted
|
244,351
|
|
|
11.57
|
|
|
|
|
|
|
Canceled
|
(1,656,359
|
)
|
|
34.79
|
|
|
|
|
|
|
Exercised
|
(562,234
|
)
|
|
7.39
|
|
|
|
|
|
|
Outstanding at December 31, 2014
|
7,169,668
|
|
|
25.73
|
|
|
|
|
|
|
Granted
|
200,673
|
|
|
19.98
|
|
|
|
|
|
|
Canceled
|
(1,463,497
|
)
|
|
39.82
|
|
|
|
|
|
|
Exercised
|
(1,301,789
|
)
|
|
7.53
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
4,605,055
|
|
|
26.14
|
|
|
|
|
|
|
Granted
|
216,509
|
|
|
17.50
|
|
|
|
|
|
|
Canceled
|
(1,260,750
|
)
|
|
38.63
|
|
|
|
|
|
|
Exercised
|
(452,898
|
)
|
|
6.49
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
3,107,916
|
|
|
$
|
23.36
|
|
|
3.9
|
|
$
|
15,739
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2015
|
4,085,555
|
|
|
$
|
27.65
|
|
|
3.1
|
|
$
|
18,145
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2016
|
2,696,315
|
|
|
$
|
24.27
|
|
|
3.1
|
|
$
|
14,587
|
|
Share-based compensation costs related to stock option awards are calculated based on the fair value of each option grant on the date of the grant using the Black-Scholes option pricing model.
The following table summarizes the information about stock options outstanding and exercisable at
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number Outstanding
|
|
Weighted-Average Remaining Contractual Life (Years)
|
|
Weighted-Average Exercise Price
|
|
Number Exercisable
|
|
Weighted-Average Exercise Price
|
|
$5.22-$7.55
|
|
411,659
|
|
|
4.2
|
|
$
|
6.74
|
|
|
411,659
|
|
|
$
|
6.74
|
|
|
8.34
|
|
310,546
|
|
|
3.8
|
|
8.34
|
|
|
310,546
|
|
|
8.34
|
|
|
9.86
|
|
375,678
|
|
|
6.6
|
|
9.86
|
|
|
375,678
|
|
|
9.86
|
|
|
11.57
|
|
244,351
|
|
|
7.2
|
|
11.57
|
|
|
174,061
|
|
|
11.57
|
|
|
17.75
|
|
216,509
|
|
|
9.9
|
|
17.75
|
|
|
—
|
|
|
—
|
|
|
19.98
|
|
200,673
|
|
|
8.4
|
|
19.98
|
|
|
75,871
|
|
|
19.98
|
|
|
33.31
|
|
25,000
|
|
|
1.0
|
|
33.31
|
|
|
25,000
|
|
|
33.31
|
|
|
38.11
|
|
380,000
|
|
|
0.9
|
|
38.11
|
|
|
380,000
|
|
|
38.11
|
|
|
39.78
|
|
943,500
|
|
|
0.8
|
|
39.78
|
|
|
943,500
|
|
|
39.78
|
|
|
$5.22-$39.78
|
|
3,107,916
|
|
|
3.9
|
|
$
|
23.36
|
|
|
2,696,315
|
|
|
$
|
24.27
|
|
The total intrinsic value of in-the-money options exercised during the years ended
December 31, 2016
,
2015
and
2014
was
$5.9 million
,
$11.1 million
, and
$2.5 million
, respectively. The total fair value of options vested during the years ended
December 31, 2016
,
2015
and
2014
was approximately
$2.0 million
,
$1.9 million
, and
$2.3 million
, respectively. As of
December 31, 2016
, there
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
was approximately
$1.4 million
of total unrecognized share-based compensation costs related to unvested stock options, which is expected to be recognized over approximately
0.9 years
, the weighted-average remaining requisite service period.
Restricted Stock Units
Our 2012 Plan provides for the grant of Restricted Stock Units ("RSUs"). An RSU is an award that may be earned in whole, or in part, upon the passage of time, and that may be settled for cash, shares, other securities or a combination thereof. The RSUs do not contain voting rights and are not entitled to dividends. The RSUs are subject to the terms and conditions contained in the applicable award agreement and the 2012 Plan. Share-based compensation costs related to RSU awards are calculated based on the market price on the date of the grant.
We annually award RSUs to certain members of our Board of Directors. Each RSU is to be paid in shares of common stock upon the member’s cessation of service to the Company. These RSUs were issued for past service; therefore, they are expensed on the date of issuance.
We also grant RSUs to members of management of the Company, which represents a contingent right to receive one share of our common stock upon vesting. An RSU generally vests on the third anniversary of its issuance and the share-based compensation expense is amortized to expense over the requisite service period.
Summarized RSU activity is as follows:
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units
|
|
Weighted Average Grant Date Fair Value
|
|
Outstanding at January 1, 2014
|
2,755,799
|
|
|
|
|
Granted
|
696,249
|
|
|
$11.63
|
|
Canceled
|
(201,660
|
)
|
|
|
|
Awarded
|
(715,892
|
)
|
|
|
|
Outstanding at December 31, 2014
|
2,534,496
|
|
|
|
|
Granted
|
541,016
|
|
|
$19.05
|
|
Canceled
|
(40,800
|
)
|
|
|
|
Awarded
|
(713,886
|
)
|
|
|
|
Outstanding at December 31, 2015
|
2,320,826
|
|
|
|
|
Granted
|
542,220
|
|
|
$18.06
|
|
Canceled
|
(30,400
|
)
|
|
|
|
Awarded
|
(871,528
|
)
|
|
|
|
Outstanding at December 31, 2016
|
1,961,118
|
|
|
|
As of
December 31, 2016
, there was approximately
$7.9
million of total unrecognized share-based compensation costs related to unvested RSUs, which is expected to be recognized over approximately
2.3
years.
Performance Stock Units
Our 2012 Plan provides for the grant of Performance Stock Units ("PSUs"). A PSU is an award which may be earned in whole, or in part, upon the passage of time, and the attainment of performance criteria, and which may be settled for cash, shares, other securities or a combination thereof. The PSUs do not contain voting rights and are not entitled to dividends. The PSUs are subject to the terms and conditions contained in the applicable award agreement and our 2012 Plan.
Each PSU represents a contingent right to receive a share of Boyd Gaming Corporation common stock; however, the actual number of common shares awarded is dependent upon the occurrence of: (i) a requisite service period; and (ii) an evaluation of specific performance conditions. The performance conditions are based on Company metrics for net revenue growth, EBITDA growth and customer service scores, all of which are determined on a comprehensive annual
three
-year growth rate. Based upon actual and combined achievement, the number of shares awarded could range from
zero
, if no conditions are met, a
50%
payout if only threshold performance is achieved, a payout of
100%
for target performance, or a payout of up to
200%
of the original award for achievement of maximum performance. Each condition weighs equally and separately in determining the payout, and based upon
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
management's estimates at the service inception date, the Company is expected to meet the target for each performance condition. Therefore, the related compensation cost of these PSUs assumes all units granted will be awarded
. Share-based compensation costs related to PSU awards are calculated based on the market price on the date of the grant.
These PSUs will vest
three years
from the service inception date,
during which time achievement of the related performance conditions is periodically evaluated, and the number of shares expected to be awarded, and resulting compensation expense, is adjusted accordingly.
Performance Shares Vesting
The PSU grant awarded in December 2012 vested during first quarter 2016. A total of
213,365
common shares, representing approximately
0.59
shares per PSU, were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, EBITDA growth and customer service scores for the
three
-year performance period of the grant. The actual achievement level under these award metrics equaled the estimated performance as of year-end 2015; therefore, the vesting of the PSUs did not impact compensation costs in our 2016 consolidated statement of operations.
The PSU grant awarded in December 2011 vested during first quarter 2015. A total of
654,478
common shares, representing approximately
1.67
shares per PSU, were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, EBITDA growth and customer service scores for the
three
-year performance period of the grant. The actual achievement level under these award metrics equaled the estimated performance as of year-end 2014; therefore, the vesting of the PSUs did not impact compensation costs in our 2015 consolidated statement of operations.
As provided under the provisions of our Stock Incentive Plan, certain of the participants elected to surrender a portion of the shares to be received to pay the withholding and other payroll taxes payable on the compensation resulting from the vesting of the PSUs. Of the
213,365
shares issued, a total of
54,338
shares were surrendered by the participants for this purpose, resulting in a net issuance of
159,027
shares due to the vesting of the 2012 grant.
Summarized PSU activity is as follows:
|
|
|
|
|
|
|
|
|
|
Performance Stock Units
|
|
Weighted Average Grant Date Fair Value
|
|
Outstanding at January 1, 2014
|
821,633
|
|
|
|
|
Granted
|
694,294
|
|
|
$11.01
|
|
Canceled
|
(104,287
|
)
|
|
|
|
Awarded
|
—
|
|
|
|
|
Outstanding at December 31, 2014
|
1,411,640
|
|
|
|
|
Granted
|
240,156
|
|
|
$16.75
|
|
Performance Adjustment
|
264,306
|
|
|
|
|
Canceled
|
(2,677
|
)
|
|
|
|
Awarded
|
(663,945
|
)
|
|
|
|
Outstanding at December 31, 2015
|
1,249,480
|
|
|
|
|
Granted
|
241,235
|
|
|
$17.75
|
|
Performance Adjustment
|
(148,272
|
)
|
|
|
|
Canceled
|
—
|
|
|
|
|
Awarded
|
(213,365
|
)
|
|
|
|
Outstanding at December 31, 2016
|
1,129,078
|
|
|
|
The Company approved the issuance of approximately
380,000
PSUs to participating employees during fourth quarter 2013. The performance criteria for these PSUs were set subsequent to year-end 2013, so these PSUs were not considered granted for accounting purposes as of December 31, 2013, and are included in the shares granted during 2014 in the table above. As of
December 31, 2016
, there was approximately
$2.2 million
of total unrecognized share-based compensation costs related to unvested PSUs, which
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
is expected to be recognized over approximately
1.6 years
. Based on the current estimates of performance compared to the targets set for the respective PSU grants, the Company estimates that approximately
1.1 million
shares will be issued to settle the PSUs outstanding at
December 31, 2016
.
Career Shares
Our Career Shares Program is a stock incentive award program for certain executive officers to provide for additional capital accumulation opportunities for retirement. The program incentivizes and rewards executives for their period of service. Our Career Shares Program was adopted in December 2006, and modified in October 2010, as part of the overall update of our compensation programs. The Career Shares Program rewards eligible executives with annual grants of Boyd Gaming Corporation stock units, to be paid out at retirement. The payout at retirement is dependent upon the executive's age at such retirement and the number of years of service with the Company. Executives must be at least
55 years
old and have at least
10 years
of service to receive any payout at retirement. Career Shares do not contain voting rights and are not entitled to dividends. Career Shares are subject to the terms and conditions contained in the applicable award agreement and our 2012 Plan. The Career Share awards are tranched by specific term, in the following periods:
10 years
,
15 years
and
20 years
of service. These grants vest over the remaining period of service required to fulfill the requisite years in each of these tranches, and compensation expense is recorded in accordance with the specific vesting provisions. Share-based compensation costs related to Career Shares awards are calculated based on the market price on the date of the grant.
Summarized Career Shares activity is as follows:
|
|
|
|
|
|
|
|
|
|
Career Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Outstanding at January 1, 2014
|
894,307
|
|
|
|
|
Granted
|
122,015
|
|
|
$11.31
|
|
Canceled
|
(85,765
|
)
|
|
|
|
Awarded
|
(33,972
|
)
|
|
|
|
Outstanding at December 31, 2014
|
896,585
|
|
|
|
|
Granted
|
103,018
|
|
|
$12.51
|
|
Canceled
|
—
|
|
|
|
|
Awarded
|
(31,028
|
)
|
|
|
|
Outstanding at December 31, 2015
|
968,575
|
|
|
|
|
Granted
|
73,064
|
|
|
$19.01
|
|
Canceled
|
—
|
|
|
|
|
Awarded
|
—
|
|
|
|
|
Outstanding at December 31, 2016
|
1,041,639
|
|
|
|
As of
December 31, 2016
, there was approximately
$1.2 million
of total unrecognized share-based compensation costs related to unvested Career Shares.
Share-Based Compensation
We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The following table summarizes our share-based compensation costs by award type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Stock Options
|
$
|
1,974
|
|
|
$
|
2,821
|
|
|
$
|
2,733
|
|
|
Restricted Stock Units
|
8,883
|
|
|
9,909
|
|
|
8,010
|
|
|
Performance Stock Units
|
3,353
|
|
|
5,135
|
|
|
6,537
|
|
|
Career Shares
|
1,308
|
|
|
1,399
|
|
|
1,196
|
|
|
Total share-based compensation costs
|
$
|
15,518
|
|
|
$
|
19,264
|
|
|
$
|
18,476
|
|
The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Gaming
|
$
|
428
|
|
|
$
|
393
|
|
|
$
|
387
|
|
|
Food and beverage
|
82
|
|
|
75
|
|
|
74
|
|
|
Room
|
39
|
|
|
36
|
|
|
35
|
|
|
Selling, general and administrative
|
2,176
|
|
|
1,996
|
|
|
1,965
|
|
|
Corporate expense
|
12,793
|
|
|
16,764
|
|
|
16,207
|
|
|
Other operating items, net
|
—
|
|
|
—
|
|
|
(192
|
)
|
|
Total share-based compensation expense
|
$
|
15,518
|
|
|
$
|
19,264
|
|
|
$
|
18,476
|
|
NOTE 11. NONCONTROLLING INTEREST
Noncontrolling interest primarily represents, until the deconsolidation of Borgata on September 30, 2014, the
50%
interest in Holding Company held by the Divestiture Trust for the economic benefit of MGM, which was initially recorded at fair value at the March 24, 2010 date of the effective change in control.
Changes in the noncontrolling interest are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Holding Company
|
|
Other
|
|
Total
|
|
Beginning balance, January 1, 2014
|
$
|
180,430
|
|
|
$
|
20
|
|
|
$
|
180,450
|
|
|
Capital contributions
|
—
|
|
|
30
|
|
|
30
|
|
|
Attributable net loss
|
11,403
|
|
|
—
|
|
|
11,403
|
|
|
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
Deconsolidation of Borgata on September 30, 2014
|
(191,833
|
)
|
|
—
|
|
|
(191,833
|
)
|
|
Balance, December 31, 2014
|
—
|
|
|
50
|
|
|
50
|
|
|
Capital contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
Attributable net income
|
—
|
|
|
—
|
|
|
—
|
|
|
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance, December 31, 2015
|
—
|
|
|
50
|
|
|
50
|
|
|
Capital contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
Attributable net income
|
—
|
|
|
—
|
|
|
—
|
|
|
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance, December 31, 2016
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
50
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
NOTE 12. FAIR VALUE MEASUREMENTS
We have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions.
These inputs create the following fair value hierarchy:
Level 1
: Quoted prices for identical instruments in active markets.
Level 2
: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3
: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.
Balances Measured at Fair Value
The following tables show the fair values of certain of our financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(In thousands)
|
Balance
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
193,862
|
|
|
$
|
193,862
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Restricted cash
|
16,488
|
|
|
16,488
|
|
|
—
|
|
|
—
|
|
|
Investment available for sale
|
17,259
|
|
|
—
|
|
|
—
|
|
|
17,259
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Contingent payments
|
$
|
3,038
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
(In thousands)
|
Balance
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
158,821
|
|
|
$
|
158,821
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Restricted cash
|
19,030
|
|
|
19,030
|
|
|
—
|
|
|
—
|
|
|
Investment available for sale
|
17,839
|
|
|
—
|
|
|
—
|
|
|
17,839
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Contingent payments
|
$
|
3,632
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,632
|
|
Cash and Restricted Cash
The fair value of our cash and cash equivalents, classified in the fair value hierarchy as Level 1, is based on statements received from our banks at
December 31, 2016
and
2015
.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Investment Available for Sale
We have an investment in a single municipal bond issuance of
$21.0 million
aggregate principal amount of
7.5%
Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities, and degrees of risk and a discounted cash flows analysis as of
December 31, 2016
and
2015
. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the consolidated balance sheets. At both
December 31, 2016
and
2015
,
$0.4 million
of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at
December 31, 2016
and
2015
,
$16.8 million
and
$17.4 million
, respectively, is included in investment on the consolidated balance sheets. The discount associated with this investment of
$3.1 million
and
$3.2 million
as of
December 31, 2016
and
2015
, respectively, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the consolidated statements of operations.
Contingent Payments
In connection with securing the Kansas Management Contract, Kansas Star agreed to pay a former casino project promoter
1%
of Kansas Star’s EBITDA each month for a period of ten years commencing December 20, 2011. The liability was initially recorded upon consummation of the PGL Merger, at the estimated fair value of the contingent land purchase price using a discounted cash flows approach. At both
December 31, 2016
and
December 31, 2015
, there was a current liability of
$0.9 million
related to this agreement, which was recorded in accrued liabilities on the respective consolidated balance sheets, and long-term obligations of
$2.2 million
and
$2.7 million
, respectively, which were included in other liabilities on the respective consolidated balance sheets.
The following tables summarize the changes in fair value of the Company’s Level 3 assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
Assets
|
|
Liabilities
|
|
(In thousands)
|
Investment
Available for
Sale
|
|
Contingent
Payments
|
|
Balance at January 1, 2016
|
$
|
17,839
|
|
|
$
|
(3,632
|
)
|
|
Total gains (losses) (realized or unrealized):
|
|
|
|
|
Included in interest income (expense)
|
130
|
|
|
(600
|
)
|
|
Included in other comprehensive income (loss)
|
(299
|
)
|
|
—
|
|
|
Included in other items, net
|
—
|
|
|
346
|
|
|
Purchases, sales, issuances and settlements:
|
|
|
|
|
Settlements
|
(411
|
)
|
|
848
|
|
|
Balance at December 31, 2016
|
$
|
17,259
|
|
|
$
|
(3,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
Assets
|
|
Liabilities
|
|
(In thousands)
|
Investment
Available for
Sale
|
|
Merger
Earnout
|
|
Contingent
Payments
|
|
Balance at January 1, 2015
|
$
|
18,357
|
|
|
$
|
(75
|
)
|
|
$
|
(3,792
|
)
|
|
Total gains (losses) (realized or unrealized):
|
|
|
|
|
|
|
Included in interest income (expense)
|
125
|
|
|
75
|
|
|
(627
|
)
|
|
Included in other comprehensive income (loss)
|
(263
|
)
|
|
—
|
|
|
—
|
|
|
Included in other items, net
|
—
|
|
|
—
|
|
|
(96
|
)
|
|
Purchases, sales, issuances and settlements:
|
|
|
|
|
|
|
Settlements
|
(380
|
)
|
|
—
|
|
|
883
|
|
|
Balance at December 31, 2015
|
$
|
17,839
|
|
|
$
|
—
|
|
|
$
|
(3,632
|
)
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The table below summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
Technique
|
|
Unobservable
Input
|
|
Rate
|
|
Investment available for sale
|
Discounted cash flow
|
|
Discount rate
|
|
10.3
|
%
|
The fair value of intangible assets, classified in the fair value hierarchy as Level 3, is utilized in performing its impairment analyses (see Note 4,
Intangible Assets
).
Balances Disclosed at Fair Value
The following tables provide the fair value measurement information about our obligation under minimum assessment agreements and other financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(In thousands)
|
Outstanding Face Amount
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Fair Value Hierarchy
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Obligation under assessment arrangements
|
$
|
33,456
|
|
|
$
|
26,660
|
|
|
$
|
27,054
|
|
|
Level 3
|
|
Other financial instruments
|
100
|
|
|
97
|
|
|
97
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
(In thousands)
|
Outstanding Face Amount
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Fair Value Hierarchy
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Obligation under assessment arrangements
|
$
|
35,126
|
|
|
$
|
27,660
|
|
|
$
|
28,381
|
|
|
Level 3
|
|
Other financial instruments
|
200
|
|
|
186
|
|
|
186
|
|
|
Level 3
|
The following table provides the fair value measurement information about our long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(In thousands)
|
Outstanding Face Amount
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Fair Value Hierarchy
|
|
Credit Facility
|
$
|
1,782,538
|
|
|
$
|
1,752,147
|
|
|
$
|
1,791,853
|
|
|
Level 2
|
|
6.875% Senior Notes due 2023
|
750,000
|
|
|
738,791
|
|
|
806,250
|
|
|
Level 1
|
|
6.375% Senior Notes due 2026
|
750,000
|
|
|
737,926
|
|
|
804,375
|
|
|
Level 1
|
|
Other
|
591
|
|
|
591
|
|
|
591
|
|
|
Level 3
|
|
Total debt
|
$
|
3,283,129
|
|
|
$
|
3,229,455
|
|
|
$
|
3,403,069
|
|
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
(In thousands)
|
Outstanding Face Amount
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Fair Value Hierarchy
|
|
Boyd Gaming Debt:
|
|
|
|
|
|
|
|
|
Credit Facility
|
$
|
1,209,725
|
|
|
$
|
1,197,277
|
|
|
$
|
1,202,870
|
|
|
Level 2
|
|
9.125% Senior Notes due 2018
|
350,000
|
|
|
342,956
|
|
|
372,750
|
|
|
Level 1
|
|
6.875% Senior Notes due 2023
|
750,000
|
|
|
737,066
|
|
|
772,500
|
|
|
Level 1
|
|
|
2,309,725
|
|
|
2,277,299
|
|
|
2,348,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peninsula Gaming Debt:
|
|
|
|
|
|
|
|
|
Bank credit facility
|
662,750
|
|
|
648,607
|
|
|
661,131
|
|
|
Level 2
|
|
8.375% Senior Notes due 2018
|
350,000
|
|
|
343,643
|
|
|
357,000
|
|
|
Level 2
|
|
|
1,012,750
|
|
|
992,250
|
|
|
1,018,131
|
|
|
|
|
Total debt
|
$
|
3,322,475
|
|
|
$
|
3,269,549
|
|
|
$
|
3,366,251
|
|
|
|
The estimated fair value of the Credit Facility is based on a relative value analysis performed on or about
December 31, 2016
and
December 31, 2015
. The estimated fair value of the Peninsula Credit Facility is based on a relative value analysis performed on or about
December 31, 2015
. The estimated fair values of our senior notes are based on quoted market prices as of
December 31, 2016
and
December 31, 2015
. The other debt is a fixed-rate debt that is payable in 32 semi-annual installments, beginning in 2008. It is not traded and does not have an observable market input; therefore, we have estimated its fair value to be equal to the carrying value.
There were no transfers between Level 1, Level 2 and Level 3 measurements during the years ended
December 31, 2016
and
2015
.
NOTE 13. EMPLOYEE BENEFIT PLANS
We contribute to multiemployer pension defined benefit plans under terms of collective-bargaining agreements that cover our union-represented employees. Contributions, based on wages paid to covered employees, totaled approximately
$1.5 million
,
$1.4 million
and
$1.4 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. These aggregate contributions were not individually significant to any of the respective plans. Our share of the unfunded vested liability related to multi-employer plans, if any, is not determinable and our participation is not individually significant on an individual multiemployer plan basis.
We have retirement savings plans under Section 401(k) of the Internal Revenue Code covering our non-union employees. The plans allow employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plans. We expensed our voluntary contributions to the 401(k) profit-sharing plans and trusts of
$3.9 million
,
$3.3 million
and
$4.1 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
NOTE 14. SEGMENT INFORMATION
We have aggregated certain of our properties in order to present
three
Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest and South. The table in Note 1,
Summary of Significant Accounting Policies,
lists the classification of each of our properties.
Results of Operations - Total Reportable Segment Net Revenues and Adjusted EBITDA
We evaluate each of our wholly owned property's profitability based upon Property EBITDA, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, project development, preopening and writedown expenses, other operating charges, net, share-based compensation expense, deferred rent, change in value of derivative instruments, and gain/loss on early retirements of debt, as applicable. Total Reportable Segment Adjusted EBITDA is the aggregate sum of the Property EBITDA for each of the properties included in our Las Vegas Locals, Downtown Las Vegas and Midwest and South. Results for Downtown Las Vegas include the results of our Hawaii-based travel agency and captive insurance company.
We reclassify the reporting of corporate expense on the accompanying table in order to exclude it from our subtotal for Total Reportable Segment Adjusted EBITDA. Furthermore, corporate expense excludes its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Adjusted EBITDA to operating income, as reported in our accompanying consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Net Revenues
|
|
|
|
|
|
|
Las Vegas Locals
|
$
|
647,867
|
|
|
$
|
610,107
|
|
|
$
|
592,652
|
|
|
Downtown Las Vegas
|
236,385
|
|
|
234,191
|
|
|
224,275
|
|
|
Midwest and South
|
1,299,724
|
|
|
1,355,134
|
|
|
1,325,328
|
|
|
Total Reportable Segment Net Revenues
|
$
|
2,183,976
|
|
|
$
|
2,199,432
|
|
|
$
|
2,142,255
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
Las Vegas Locals
|
$
|
176,420
|
|
|
$
|
157,312
|
|
|
$
|
144,397
|
|
|
Downtown Las Vegas
|
52,420
|
|
|
49,314
|
|
|
37,309
|
|
|
Midwest and South
|
367,365
|
|
|
380,942
|
|
|
345,058
|
|
|
Total Reportable Segment Adjusted EBITDA
|
596,205
|
|
|
587,568
|
|
|
526,764
|
|
|
Corporate expense
|
(59,875
|
)
|
|
(60,177
|
)
|
|
(59,420
|
)
|
|
Adjusted EBITDA
|
536,330
|
|
|
527,391
|
|
|
467,344
|
|
|
|
|
|
|
|
|
|
Other operating costs and expenses
|
|
|
|
|
|
|
Deferred rent
|
3,266
|
|
|
3,428
|
|
|
3,616
|
|
|
Depreciation and amortization
|
196,226
|
|
|
207,118
|
|
|
208,915
|
|
|
Project development, preopening and writedowns
|
22,107
|
|
|
6,907
|
|
|
13,747
|
|
|
Share-based compensation expense
|
15,518
|
|
|
19,264
|
|
|
18,666
|
|
|
Impairments of assets
|
38,302
|
|
|
18,565
|
|
|
48,681
|
|
|
Other operating charges, net
|
284
|
|
|
907
|
|
|
(13
|
)
|
|
Total other operating costs and expenses
|
275,703
|
|
|
256,189
|
|
|
293,612
|
|
|
Operating income
|
$
|
260,627
|
|
|
$
|
271,202
|
|
|
$
|
173,732
|
|
Total Assets
The Company's total assets, by Reportable Segment, consisted of the following amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
Assets
|
|
|
|
|
Las Vegas Locals
|
$
|
1,785,858
|
|
|
$
|
1,155,224
|
|
|
Downtown Las Vegas
|
157,319
|
|
|
138,159
|
|
|
Midwest and South
|
2,556,307
|
|
|
2,634,742
|
|
|
Total Reportable Segment assets
|
4,499,484
|
|
|
3,928,125
|
|
|
Corporate
|
171,267
|
|
|
422,775
|
|
|
Total assets
|
$
|
4,670,751
|
|
|
$
|
4,350,900
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Capital Expenditures
The Company's capital expenditures by Reportable Segment, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
|
Capital Expenditures:
|
|
|
|
|
|
|
Las Vegas Locals
|
$
|
42,069
|
|
|
$
|
41,772
|
|
|
$
|
31,653
|
|
|
Downtown Las Vegas
|
28,431
|
|
|
13,000
|
|
|
9,917
|
|
|
Midwest and South
|
73,255
|
|
|
60,887
|
|
|
89,029
|
|
|
Total Reportable Segment Capital Expenditures
|
143,755
|
|
|
115,659
|
|
|
130,599
|
|
|
Corporate
|
16,672
|
|
|
12,646
|
|
|
(8,786
|
)
|
|
Total Capital Expenditures
|
160,427
|
|
|
128,305
|
|
|
121,813
|
|
|
Change in Accrued Property Additions
|
(69
|
)
|
|
2,865
|
|
|
15,938
|
|
|
Cash-Based Capital Expenditures
|
$
|
160,358
|
|
|
$
|
131,170
|
|
|
$
|
137,751
|
|
The Company utilizes the Corporate entities to centralize the development of major renovation and other capital development projects that are included as construction in progress. After the project is complete, the corporate entities transfer the projects to the segment subsidiaries.
NOTE 15. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents selected quarterly financial information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
(In thousands, except per share data)
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Year
|
|
Summary Operating Results:
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
552,378
|
|
|
$
|
544,874
|
|
|
$
|
531,901
|
|
|
$
|
554,823
|
|
|
$
|
2,183,976
|
|
|
Operating income
|
82,250
|
|
|
80,490
|
|
|
67,916
|
|
|
29,971
|
|
|
260,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
$
|
21,560
|
|
|
$
|
11,307
|
|
|
$
|
161,864
|
|
|
$
|
10,742
|
|
|
$
|
205,473
|
|
|
Income from discontinued operations, net of tax
|
11,630
|
|
|
18,715
|
|
|
180,707
|
|
|
1,478
|
|
|
212,530
|
|
|
Net income attributable to Boyd Gaming Corporation
|
$
|
33,190
|
|
|
$
|
30,022
|
|
|
$
|
342,571
|
|
|
$
|
12,220
|
|
|
$
|
418,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share:
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.19
|
|
|
$
|
0.10
|
|
|
$
|
1.41
|
|
|
$
|
0.10
|
|
|
$
|
1.79
|
|
|
Discontinued operations
|
0.10
|
|
|
0.16
|
|
|
1.58
|
|
|
0.01
|
|
|
1.86
|
|
|
Basic net income per common share
|
$
|
0.29
|
|
|
$
|
0.26
|
|
|
$
|
2.99
|
|
|
$
|
0.11
|
|
|
$
|
3.65
|
|
|
Diluted net income per common share:
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.19
|
|
|
$
|
0.10
|
|
|
$
|
1.40
|
|
|
$
|
0.10
|
|
|
$
|
1.78
|
|
|
Discontinued operations
|
0.10
|
|
|
0.16
|
|
|
1.57
|
|
|
0.01
|
|
|
1.85
|
|
|
Diluted net income per common share
|
$
|
0.29
|
|
|
$
|
0.26
|
|
|
$
|
2.97
|
|
|
$
|
0.11
|
|
|
$
|
3.63
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
(In thousands, except per share data)
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Year
|
|
Summary Operating Results:
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
550,578
|
|
|
$
|
559,867
|
|
|
$
|
546,313
|
|
|
$
|
542,674
|
|
|
$
|
2,199,432
|
|
|
Operating income
|
71,883
|
|
|
83,094
|
|
|
69,423
|
|
|
46,802
|
|
|
271,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax
|
$
|
30,504
|
|
|
$
|
(12,390
|
)
|
|
$
|
7,015
|
|
|
$
|
(14,434
|
)
|
|
$
|
10,695
|
|
|
Income from discontinued operations, net of tax
|
4,599
|
|
|
5,965
|
|
|
18,410
|
|
|
7,565
|
|
|
36,539
|
|
|
Net income (loss) attributable to Boyd Gaming Corporation
|
$
|
35,103
|
|
|
$
|
(6,425
|
)
|
|
$
|
25,425
|
|
|
$
|
(6,869
|
)
|
|
$
|
47,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.27
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.10
|
|
|
Discontinued operations
|
0.04
|
|
|
0.05
|
|
|
0.17
|
|
|
0.07
|
|
|
0.32
|
|
|
Basic net income (loss) per common share
|
$
|
0.31
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.23
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.42
|
|
|
Diluted net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.27
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.10
|
|
|
Discontinued operations
|
0.04
|
|
|
0.05
|
|
|
0.16
|
|
|
0.07
|
|
|
0.32
|
|
|
Diluted net income (loss) per common share
|
$
|
0.31
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.22
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.42
|
|
NOTE 16. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of our
6.875%
Senior Notes and our
6.375%
Notes is presented below. Each of these notes is fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are
100%
owned by us. The non-guarantors primarily represent our Aliante, Cannery and Eastside Cannery properties, special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly owned subsidiaries.
The tables below present the condensed consolidating balance sheets as of December 31, 2016, and 2015, the condensed consolidating statements of operations for the years ended December 31, 2016, 2015 and 2014 and the condensed consolidating statements of cash flows for the years ended December 31, 2016, 2015 and 2014.
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,212
|
|
|
$
|
168,898
|
|
|
$
|
23,752
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
193,862
|
|
|
Other current assets
|
78,915
|
|
|
9,644
|
|
|
25,979
|
|
|
—
|
|
|
(453
|
)
|
|
114,085
|
|
|
Property and equipment, net
|
73,180
|
|
|
2,096,764
|
|
|
435,225
|
|
|
—
|
|
|
—
|
|
|
2,605,169
|
|
|
Investments in subsidiaries
|
4,505,897
|
|
|
139,465
|
|
|
—
|
|
|
—
|
|
|
(4,645,362
|
)
|
|
—
|
|
|
Intercompany receivable
|
—
|
|
|
1,464,361
|
|
|
—
|
|
|
—
|
|
|
(1,464,361
|
)
|
|
—
|
|
|
Other assets, net
|
13,598
|
|
|
27,551
|
|
|
8,056
|
|
|
—
|
|
|
—
|
|
|
49,205
|
|
|
Intangible assets, net
|
—
|
|
|
825,667
|
|
|
56,287
|
|
|
—
|
|
|
—
|
|
|
881,954
|
|
|
Goodwill, net
|
—
|
|
|
672,067
|
|
|
154,409
|
|
|
—
|
|
|
—
|
|
|
826,476
|
|
|
Total assets
|
$
|
4,672,802
|
|
|
$
|
5,404,417
|
|
|
$
|
703,708
|
|
|
$
|
—
|
|
|
$
|
(6,110,176
|
)
|
|
$
|
4,670,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
$
|
30,250
|
|
|
$
|
—
|
|
|
$
|
86
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,336
|
|
|
Other current liabilities
|
93,762
|
|
|
179,624
|
|
|
63,211
|
|
|
—
|
|
|
(1,429
|
)
|
|
335,168
|
|
|
Accumulated losses of subsidiaries in excess of investment
|
—
|
|
|
—
|
|
|
8,257
|
|
|
—
|
|
|
(8,257
|
)
|
|
—
|
|
|
Intercompany payable
|
521,002
|
|
|
—
|
|
|
942,155
|
|
|
254
|
|
|
(1,463,411
|
)
|
|
—
|
|
|
Long-term debt, net of current maturities and debt issuance costs
|
3,198,613
|
|
|
—
|
|
|
506
|
|
|
—
|
|
|
—
|
|
|
3,199,119
|
|
|
Other long-term liabilities
|
(104,901
|
)
|
|
298,624
|
|
|
(21,721
|
)
|
|
—
|
|
|
—
|
|
|
172,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boyd Gaming Corporation stockholders' equity (deficit)
|
934,076
|
|
|
4,926,169
|
|
|
(288,786
|
)
|
|
(254
|
)
|
|
(4,637,129
|
)
|
|
934,076
|
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
50
|
|
|
Total stockholders' equity (deficit)
|
934,076
|
|
|
4,926,169
|
|
|
(288,786
|
)
|
|
(254
|
)
|
|
(4,637,079
|
)
|
|
934,126
|
|
|
Total liabilities and stockholders' equity
|
$
|
4,672,802
|
|
|
$
|
5,404,417
|
|
|
$
|
703,708
|
|
|
$
|
—
|
|
|
$
|
(6,110,176
|
)
|
|
$
|
4,670,751
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Condensed Consolidating Balance Sheets - continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
2
|
|
|
$
|
156,116
|
|
|
$
|
2,482
|
|
|
$
|
221
|
|
|
$
|
—
|
|
|
$
|
158,821
|
|
|
Other current assets
|
14,602
|
|
|
73,902
|
|
|
10,415
|
|
|
—
|
|
|
(508
|
)
|
|
98,411
|
|
|
Property and equipment, net
|
68,515
|
|
|
2,120,455
|
|
|
36,372
|
|
|
—
|
|
|
—
|
|
|
2,225,342
|
|
|
Investments in subsidiaries
|
3,547,690
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,547,690
|
)
|
|
—
|
|
|
Intercompany receivable
|
—
|
|
|
1,702,317
|
|
|
—
|
|
|
—
|
|
|
(1,702,317
|
)
|
|
—
|
|
|
Other assets, net
|
12,521
|
|
|
17,527
|
|
|
18,293
|
|
|
—
|
|
|
—
|
|
|
48,341
|
|
|
Intangible assets, net
|
—
|
|
|
865,995
|
|
|
24,059
|
|
|
—
|
|
|
—
|
|
|
890,054
|
|
|
Goodwill, net
|
—
|
|
|
684,529
|
|
|
781
|
|
|
—
|
|
|
—
|
|
|
685,310
|
|
|
Investment in unconsolidated subsidiary held for sale
|
—
|
|
|
244,621
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
244,621
|
|
|
Total assets
|
$
|
3,643,330
|
|
|
$
|
5,865,462
|
|
|
$
|
92,402
|
|
|
$
|
221
|
|
|
$
|
(5,250,515
|
)
|
|
$
|
4,350,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
$
|
21,500
|
|
|
$
|
8,250
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29,750
|
|
|
Other current liabilities
|
102,946
|
|
|
198,590
|
|
|
24,071
|
|
|
—
|
|
|
(286
|
)
|
|
325,321
|
|
|
Accumulated losses of subsidiaries in excess of investment
|
—
|
|
|
4,507
|
|
|
302
|
|
|
—
|
|
|
(4,809
|
)
|
|
—
|
|
|
Intercompany payable
|
720,400
|
|
|
—
|
|
|
981,688
|
|
|
475
|
|
|
(1,702,563
|
)
|
|
—
|
|
|
Long-term debt, net of current maturities and debt issuance costs
|
2,255,800
|
|
|
983,999
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,239,799
|
|
|
Other long-term liabilities
|
34,723
|
|
|
213,296
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
248,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boyd Gaming Corporation stockholders' equity (deficit)
|
507,961
|
|
|
4,456,820
|
|
|
(913,659
|
)
|
|
(254
|
)
|
|
(3,542,907
|
)
|
|
507,961
|
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
50
|
|
|
Total stockholders' equity (deficit)
|
507,961
|
|
|
4,456,820
|
|
|
(913,659
|
)
|
|
(254
|
)
|
|
(3,542,857
|
)
|
|
508,011
|
|
|
Total liabilities and stockholders' equity
|
$
|
3,643,330
|
|
|
$
|
5,865,462
|
|
|
$
|
92,402
|
|
|
$
|
221
|
|
|
$
|
(5,250,515
|
)
|
|
$
|
4,350,900
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Condensed Consolidating Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Net revenues
|
$
|
121,939
|
|
|
$
|
2,127,064
|
|
|
$
|
78,308
|
|
|
$
|
—
|
|
|
$
|
(143,335
|
)
|
|
$
|
2,183,976
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
1,200
|
|
|
1,112,717
|
|
|
57,816
|
|
|
—
|
|
|
—
|
|
|
1,171,733
|
|
|
Selling, general and administrative
|
49,938
|
|
|
260,014
|
|
|
12,055
|
|
|
—
|
|
|
2
|
|
|
322,009
|
|
|
Maintenance and utilities
|
—
|
|
|
98,741
|
|
|
1,279
|
|
|
—
|
|
|
—
|
|
|
100,020
|
|
|
Depreciation and amortization
|
8,767
|
|
|
180,463
|
|
|
6,996
|
|
|
—
|
|
|
—
|
|
|
196,226
|
|
|
Corporate expense
|
66,703
|
|
|
1,738
|
|
|
4,227
|
|
|
—
|
|
|
—
|
|
|
72,668
|
|
|
Project development, preopening and writedowns
|
18,079
|
|
|
(3,297
|
)
|
|
7,325
|
|
|
—
|
|
|
—
|
|
|
22,107
|
|
|
Impairments of assets
|
1,440
|
|
|
36,862
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38,302
|
|
|
Other operating items, net
|
181
|
|
|
103
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
284
|
|
|
Intercompany expenses
|
1,205
|
|
|
140,671
|
|
|
1,461
|
|
|
—
|
|
|
(143,337
|
)
|
|
—
|
|
|
Total operating costs and expenses
|
147,513
|
|
|
1,828,012
|
|
|
91,159
|
|
|
—
|
|
|
(143,335
|
)
|
|
1,923,349
|
|
|
Equity in earnings of subsidiaries
|
442,902
|
|
|
(2,039
|
)
|
|
—
|
|
|
—
|
|
|
(440,863
|
)
|
|
—
|
|
|
Operating income (loss)
|
417,328
|
|
|
297,013
|
|
|
(12,851
|
)
|
|
—
|
|
|
(440,863
|
)
|
|
260,627
|
|
|
Other expense (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
157,923
|
|
|
51,773
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
209,731
|
|
|
Loss on early extinguishments and modifications of debt
|
28,356
|
|
|
14,008
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,364
|
|
|
Other, net
|
1
|
|
|
617
|
|
|
(73
|
)
|
|
—
|
|
|
—
|
|
|
545
|
|
|
Total other expense, net
|
186,280
|
|
|
66,398
|
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
252,640
|
|
|
Income (loss) from continuing operations before income taxes
|
231,048
|
|
|
230,615
|
|
|
(12,813
|
)
|
|
—
|
|
|
(440,863
|
)
|
|
7,987
|
|
|
Income taxes benefit
|
186,955
|
|
|
10,405
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
197,486
|
|
|
Income (loss) from continuing operations, net of tax
|
418,003
|
|
|
241,020
|
|
|
(12,687
|
)
|
|
—
|
|
|
(440,863
|
)
|
|
205,473
|
|
|
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
212,530
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
212,530
|
|
|
Net income (loss)
|
$
|
418,003
|
|
|
$
|
453,550
|
|
|
$
|
(12,687
|
)
|
|
$
|
—
|
|
|
$
|
(440,863
|
)
|
|
$
|
418,003
|
|
|
Comprehensive income (loss)
|
$
|
417,704
|
|
|
$
|
453,251
|
|
|
$
|
(12,687
|
)
|
|
$
|
—
|
|
|
$
|
(440,564
|
)
|
|
$
|
417,704
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Condensed Consolidating Statements of Operations - continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Net revenues
|
$
|
121,541
|
|
|
$
|
2,173,147
|
|
|
$
|
48,353
|
|
|
$
|
—
|
|
|
$
|
(143,609
|
)
|
|
$
|
2,199,432
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
1,800
|
|
|
1,145,181
|
|
|
43,843
|
|
|
—
|
|
|
—
|
|
|
1,190,824
|
|
|
Selling, general and administrative
|
48,173
|
|
|
267,661
|
|
|
6,604
|
|
|
—
|
|
|
(18
|
)
|
|
322,420
|
|
|
Maintenance and utilities
|
—
|
|
|
103,086
|
|
|
1,462
|
|
|
—
|
|
|
—
|
|
|
104,548
|
|
|
Depreciation and amortization
|
6,179
|
|
|
196,865
|
|
|
4,074
|
|
|
—
|
|
|
—
|
|
|
207,118
|
|
|
Corporate expense
|
71,700
|
|
|
1,781
|
|
|
3,460
|
|
|
—
|
|
|
—
|
|
|
76,941
|
|
|
Project development, preopening and writedowns
|
884
|
|
|
2,351
|
|
|
3,596
|
|
|
76
|
|
|
—
|
|
|
6,907
|
|
|
Impairments of assets
|
—
|
|
|
17,500
|
|
|
1,065
|
|
|
—
|
|
|
—
|
|
|
18,565
|
|
|
Other operating items, net
|
599
|
|
|
308
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
907
|
|
|
Intercompany expenses
|
1,204
|
|
|
140,971
|
|
|
1,416
|
|
|
—
|
|
|
(143,591
|
)
|
|
—
|
|
|
Total operating costs and expenses
|
130,539
|
|
|
1,875,704
|
|
|
65,520
|
|
|
76
|
|
|
(143,609
|
)
|
|
1,928,230
|
|
|
Equity in earnings of subsidiaries
|
190,570
|
|
|
(2,204
|
)
|
|
(76
|
)
|
|
—
|
|
|
(188,290
|
)
|
|
—
|
|
|
Operating income (loss)
|
181,572
|
|
|
295,239
|
|
|
(17,243
|
)
|
|
(76
|
)
|
|
(188,290
|
)
|
|
271,202
|
|
|
Other expense (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
125,890
|
|
|
96,818
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
222,732
|
|
|
Loss on early extinguishments of debt
|
30,829
|
|
|
9,904
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,733
|
|
|
Other, net
|
396
|
|
|
2,959
|
|
|
321
|
|
|
—
|
|
|
—
|
|
|
3,676
|
|
|
Total other expense, net
|
157,115
|
|
|
109,681
|
|
|
345
|
|
|
—
|
|
|
—
|
|
|
267,141
|
|
|
Income (loss) from continuing operations before income taxes
|
24,457
|
|
|
185,558
|
|
|
(17,588
|
)
|
|
(76
|
)
|
|
(188,290
|
)
|
|
4,061
|
|
|
Income taxes benefit (provision)
|
22,777
|
|
|
(16,089
|
)
|
|
(54
|
)
|
|
—
|
|
|
—
|
|
|
6,634
|
|
|
Income (loss) from continuing operations, net of tax
|
47,234
|
|
|
169,469
|
|
|
(17,642
|
)
|
|
(76
|
)
|
|
(188,290
|
)
|
|
10,695
|
|
|
Income from discontinued operations, net of tax
|
—
|
|
|
36,539
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36,539
|
|
|
Net income (loss)
|
$
|
47,234
|
|
|
$
|
206,008
|
|
|
$
|
(17,642
|
)
|
|
$
|
(76
|
)
|
|
$
|
(188,290
|
)
|
|
$
|
47,234
|
|
|
Comprehensive income (loss)
|
$
|
46,971
|
|
|
$
|
205,745
|
|
|
$
|
(17,642
|
)
|
|
$
|
(76
|
)
|
|
$
|
(188,027
|
)
|
|
$
|
46,971
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Consolidating Statements of Operations - continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Net revenues
|
$
|
117,159
|
|
|
$
|
2,114,021
|
|
|
$
|
48,687
|
|
|
$
|
—
|
|
|
$
|
(137,612
|
)
|
|
$
|
2,142,255
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
1,800
|
|
|
1,134,312
|
|
|
48,330
|
|
|
—
|
|
|
—
|
|
|
1,184,442
|
|
|
Selling, general and administrative
|
46,708
|
|
|
273,924
|
|
|
7,187
|
|
|
—
|
|
|
(220
|
)
|
|
327,599
|
|
|
Maintenance and utilities
|
—
|
|
|
108,002
|
|
|
1,523
|
|
|
1
|
|
|
—
|
|
|
109,526
|
|
|
Depreciation and amortization
|
5,667
|
|
|
200,356
|
|
|
2,892
|
|
|
—
|
|
|
—
|
|
|
208,915
|
|
|
Corporate expense
|
71,951
|
|
|
1,849
|
|
|
1,826
|
|
|
—
|
|
|
—
|
|
|
75,626
|
|
|
Project development, preopening and writedowns
|
105
|
|
|
8,894
|
|
|
4,586
|
|
|
162
|
|
|
—
|
|
|
13,747
|
|
|
Impairments of assets
|
320
|
|
|
41,090
|
|
|
7,271
|
|
|
—
|
|
|
—
|
|
|
48,681
|
|
|
Other operating items, net
|
164
|
|
|
(177
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
Intercompany expenses
|
1,204
|
|
|
134,710
|
|
|
1,478
|
|
|
—
|
|
|
(137,392
|
)
|
|
—
|
|
|
Total operating costs and expenses
|
127,919
|
|
|
1,902,960
|
|
|
75,093
|
|
|
163
|
|
|
(137,612
|
)
|
|
1,968,523
|
|
|
Equity in earnings of subsidiaries
|
85,268
|
|
|
(2,764
|
)
|
|
(162
|
)
|
|
—
|
|
|
(82,342
|
)
|
|
—
|
|
|
Operating income (loss)
|
74,508
|
|
|
208,297
|
|
|
(26,568
|
)
|
|
(163
|
)
|
|
(82,342
|
)
|
|
173,732
|
|
|
Other expense (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
132,204
|
|
|
95,953
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
228,181
|
|
|
Loss on early extinguishments of debt
|
—
|
|
|
1,536
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,536
|
|
|
Other, net
|
(793
|
)
|
|
(683
|
)
|
|
1,524
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|
Total other expense, net
|
131,411
|
|
|
96,806
|
|
|
1,548
|
|
|
—
|
|
|
—
|
|
|
229,765
|
|
|
Income (loss) from continuing operations before income taxes
|
(56,903
|
)
|
|
111,491
|
|
|
(28,116
|
)
|
|
(163
|
)
|
|
(82,342
|
)
|
|
(56,033
|
)
|
|
Income taxes benefit (provision)
|
3,862
|
|
|
1,644
|
|
|
(98
|
)
|
|
—
|
|
|
—
|
|
|
5,408
|
|
|
Income (loss) from continuing operations, net of tax
|
(53,041
|
)
|
|
113,135
|
|
|
(28,214
|
)
|
|
(163
|
)
|
|
(82,342
|
)
|
|
(50,625
|
)
|
|
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
(13,819
|
)
|
|
—
|
|
|
22,806
|
|
|
—
|
|
|
8,987
|
|
|
Income from discontinued operations attributable to noncontrolling interest, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,403
|
)
|
|
(11,403
|
)
|
|
Net income (loss) attributable to controlling interest
|
$
|
(53,041
|
)
|
|
$
|
99,316
|
|
|
$
|
(28,214
|
)
|
|
$
|
22,643
|
|
|
$
|
(93,745
|
)
|
|
$
|
(53,041
|
)
|
|
Comprehensive income
|
$
|
(51,577
|
)
|
|
$
|
100,780
|
|
|
$
|
(28,214
|
)
|
|
$
|
22,643
|
|
|
$
|
(95,209
|
)
|
|
$
|
(51,577
|
)
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
$
|
(86,502
|
)
|
|
$
|
334,764
|
|
|
$
|
55,815
|
|
|
$
|
—
|
|
|
$
|
(1,196
|
)
|
|
$
|
302,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(42,840
|
)
|
|
(115,978
|
)
|
|
(1,540
|
)
|
|
—
|
|
|
—
|
|
|
(160,358
|
)
|
|
Cash paid for acquisitions, net of cash received
|
(592,703
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(592,703
|
)
|
|
Net activity with affiliates
|
—
|
|
|
237,956
|
|
|
—
|
|
|
—
|
|
|
(237,956
|
)
|
|
—
|
|
|
Distributions from subsidiary
|
9,150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,150
|
)
|
|
—
|
|
|
Other investing activities
|
—
|
|
|
7,529
|
|
|
6,678
|
|
|
—
|
|
|
—
|
|
|
14,207
|
|
|
Net cash from investing activities
|
(626,393
|
)
|
|
129,507
|
|
|
5,138
|
|
|
—
|
|
|
(247,106
|
)
|
|
(738,854
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under bank credit facility
|
2,039,175
|
|
|
237,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,276,175
|
|
|
Payments under bank credit facility
|
(1,466,362
|
)
|
|
(899,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,366,112
|
)
|
|
Proceeds from issuance of senior notes
|
750,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750,000
|
|
|
Debt financing costs, net
|
(42,220
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,220
|
)
|
|
Retirements of senior notes
|
(350,000
|
)
|
|
(350,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(700,000
|
)
|
|
Premium and consent fees paid
|
(15,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,750
|
)
|
|
Net activity with affiliates
|
(199,398
|
)
|
|
—
|
|
|
(39,533
|
)
|
|
(221
|
)
|
|
239,152
|
|
|
—
|
|
|
Distributions to parent
|
—
|
|
|
(9,000
|
)
|
|
(150
|
)
|
|
—
|
|
|
9,150
|
|
|
—
|
|
|
Share-based compensation activities, net
|
(1,295
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,295
|
)
|
|
Other financing activities
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
|
Net cash from financing activities
|
714,105
|
|
|
(1,021,750
|
)
|
|
(39,683
|
)
|
|
(221
|
)
|
|
248,302
|
|
|
(99,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
—
|
|
|
(27,796
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,796
|
)
|
|
Cash flows from investing activities
|
—
|
|
|
598,057
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
598,057
|
|
|
Cash flows from financing activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net cash from discontinued operations
|
—
|
|
|
570,261
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
570,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
1,210
|
|
|
12,782
|
|
|
21,270
|
|
|
(221
|
)
|
|
—
|
|
|
35,041
|
|
|
Cash and cash equivalents, beginning of period
|
2
|
|
|
156,116
|
|
|
2,482
|
|
|
221
|
|
|
—
|
|
|
158,821
|
|
|
Cash and cash equivalents, end of period
|
$
|
1,212
|
|
|
$
|
168,898
|
|
|
$
|
23,752
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
193,862
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Condensed Consolidating Statements of Cash Flows - continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
$
|
102,080
|
|
|
$
|
237,041
|
|
|
$
|
(13,085
|
)
|
|
$
|
(76
|
)
|
|
$
|
(209
|
)
|
|
$
|
325,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(48,591
|
)
|
|
(82,392
|
)
|
|
(187
|
)
|
|
—
|
|
|
—
|
|
|
(131,170
|
)
|
|
Net activity with affiliates
|
—
|
|
|
(66,691
|
)
|
|
—
|
|
|
—
|
|
|
66,691
|
|
|
—
|
|
|
Distributions from subsidiary
|
11,200
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,200
|
)
|
|
—
|
|
|
Other investing activities
|
3,292
|
|
|
1,236
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,528
|
|
|
Net cash from investing activities
|
(34,099
|
)
|
|
(147,847
|
)
|
|
(187
|
)
|
|
—
|
|
|
55,491
|
|
|
(126,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under bank credit facility
|
1,033,500
|
|
|
345,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,379,000
|
|
|
Payments under bank credit facility
|
(1,211,200
|
)
|
|
(425,150
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,636,350
|
)
|
|
Proceeds from issuance of senior notes
|
750,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750,000
|
|
|
Debt financing costs, net
|
(14,004
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,004
|
)
|
|
Payments on retirements of long-term debt
|
(500,000
|
)
|
|
(3
|
)
|
|
(157,810
|
)
|
|
—
|
|
|
—
|
|
|
(657,813
|
)
|
|
Premium and consent fees paid
|
(24,246
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,246
|
)
|
|
Net activity with affiliates
|
(105,720
|
)
|
|
—
|
|
|
172,124
|
|
|
78
|
|
|
(66,482
|
)
|
|
—
|
|
|
Distributions to parent
|
—
|
|
|
(11,100
|
)
|
|
(100
|
)
|
|
—
|
|
|
11,200
|
|
|
—
|
|
|
Share-based compensation activities, net
|
3,689
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,689
|
|
|
Net cash from financing activities
|
(67,981
|
)
|
|
(90,753
|
)
|
|
14,214
|
|
|
78
|
|
|
(55,282
|
)
|
|
(199,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
—
|
|
|
14,095
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,095
|
|
|
Cash flows from investing activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Cash flows from financing activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net cash from discontinued operations
|
—
|
|
|
14,095
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
—
|
|
|
12,536
|
|
|
942
|
|
|
2
|
|
|
—
|
|
|
13,480
|
|
|
Cash and cash equivalents, beginning of period
|
2
|
|
|
143,580
|
|
|
1,540
|
|
|
219
|
|
|
—
|
|
|
145,341
|
|
|
Cash and cash equivalents, end of period
|
$
|
2
|
|
|
$
|
156,116
|
|
|
$
|
2,482
|
|
|
$
|
221
|
|
|
$
|
—
|
|
|
$
|
158,821
|
|
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014
______________________________________________________________________________________________________
Condensed Consolidating Statements of Cash Flows - continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
|
|
|
|
|
|
Non-
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
Guarantor
|
|
(100%
|
|
(Not 100%
|
|
|
|
|
|
(In thousands)
|
Parent
|
|
Subsidiaries
|
|
Owned)
|
|
Owned)
|
|
Eliminations
|
|
Consolidated
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
$
|
(39,524
|
)
|
|
$
|
323,402
|
|
|
$
|
1,847
|
|
|
$
|
4,290
|
|
|
$
|
(117
|
)
|
|
$
|
289,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(43,164
|
)
|
|
(94,442
|
)
|
|
(145
|
)
|
|
—
|
|
|
—
|
|
|
(137,751
|
)
|
|
Investments in and advances to unconsolidated subsidiaries, net
|
|
|
—
|
|
|
—
|
|
|
153
|
|
|
|
|
153
|
|
|
Net activity with affiliates
|
—
|
|
|
(158,791
|
)
|
|
—
|
|
|
—
|
|
|
158,791
|
|
|
—
|
|
|
Distribution from subsidiary
|
5,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,300
|
)
|
|
—
|
|
|
Other investing activities
|
—
|
|
|
(670
|
)
|
|
(5,242
|
)
|
|
—
|
|
|
—
|
|
|
(5,912
|
)
|
|
Net cash from investing activities
|
(37,864
|
)
|
|
(253,903
|
)
|
|
(5,387
|
)
|
|
153
|
|
|
153,491
|
|
|
(143,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under bank credit facility
|
830,400
|
|
|
317,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,147,800
|
|
|
Payments under bank credit facility
|
(910,700
|
)
|
|
(377,150
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,287,850
|
)
|
|
Debt financing costs, net
|
(83
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(83
|
)
|
|
Payments under note payable
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
Net activity with affiliates
|
155,952
|
|
|
—
|
|
|
2,590
|
|
|
132
|
|
|
(158,674
|
)
|
|
—
|
|
|
Distributions to parent
|
—
|
|
|
(5,200
|
)
|
|
(100
|
)
|
|
—
|
|
|
5,300
|
|
|
—
|
|
|
Share-based compensation activities, net
|
1,791
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,791
|
|
|
Other financing activities
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
Net cash from financing activities
|
77,390
|
|
|
(64,959
|
)
|
|
2,490
|
|
|
132
|
|
|
(153,374
|
)
|
|
(138,321
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
—
|
|
|
1,419
|
|
|
—
|
|
|
31,542
|
|
|
—
|
|
|
32,961
|
|
|
Cash flows from investing activities
|
—
|
|
|
—
|
|
|
—
|
|
|
(36,470
|
)
|
|
—
|
|
|
(36,470
|
)
|
|
Cash flows from financing activities
|
—
|
|
|
—
|
|
|
—
|
|
|
(37,055
|
)
|
|
—
|
|
|
(37,055
|
)
|
|
Net cash from discontinued operations
|
—
|
|
|
1,419
|
|
|
—
|
|
|
(41,983
|
)
|
|
—
|
|
|
(40,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
2
|
|
|
5,959
|
|
|
(1,050
|
)
|
|
(37,408
|
)
|
|
—
|
|
|
(32,497
|
)
|
|
Cash and cash equivalents, beginning of period
|
—
|
|
|
137,621
|
|
|
2,590
|
|
|
100
|
|
|
—
|
|
|
140,311
|
|
|
Change in cash classified as discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
37,527
|
|
|
—
|
|
|
37,527
|
|
|
Cash and cash equivalents, end of period
|
$
|
2
|
|
|
$
|
143,580
|
|
|
$
|
1,540
|
|
|
$
|
219
|
|
|
$
|
—
|
|
|
$
|
145,341
|
|
NOTE 17. RELATED PARTY TRANSACTIONS
Boyd Percentage Ownership
William S. Boyd, our Executive Chairman of the Board of Directors, together with his immediate family, beneficially owned approximately
27%
of our outstanding shares of common stock as of
December 31, 2016
. As such, the Boyd family has the ability to significantly influence our affairs, including the election of members of our Board of Directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation or sale of assets. For each of the years ended
December 31, 2016
,
2015
and
2014
, there were no related party transactions between the Company and the Boyd family other than compensation, including salary and equity incentives.
NOTE 18. SUBSEQUENT EVENTS
In February 2017, we invested
$43.0 million
to exercise a purchase option to acquire leased land underlying The Orleans.
We have evaluated all events or transactions that occurred after
December 31, 2016
. During this period, up to the filing date, we did not identify any subsequent events, other than the exercise of a purchase option mentioned above and the acquisition of land that is the intended site of the Wilton Rancheria casino (see Note 9,
Commitments and Contingencies
), the effects of which would require disclosure or adjustment to our financial position or results of operations.