August 11, 2000
BOYD GAMING CORP (BYD)
Quarterly Report (SEC form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating data for the Company's properties. As used herein, "Boulder Strip Properties" consist of Sam's Town Hotel and Gambling Hall ("Sam's Town Las Vegas"), the Eldorado Casino (the "Eldorado") and Jokers Wild Casino ("Jokers Wild"); "Downtown Properties" consist of the California Hotel and Casino (the "California"), the Fremont Hotel and Casino (the "Fremont"), Main Street Station, Casino, Brewery and Hotel ("Main Street Station") and Vacations Hawaii, the Company's wholly-owned travel agency which operates for the benefit of the Downtown casino properties; and "Central Region Properties" consist of Sam's Town Hotel and Gambling Hall in Tunica, Mississippi ("Sam's Town Tunica"), Par-A-Dice Hotel and Casino ("Par-A-Dice"), Treasure Chest Casino ("Treasure Chest"), Blue Chip Casino ("Blue Chip") (acquired in November 1999), and management fee income from Silver Star Resort and Casino (through January 31, 2000). Net revenues displayed in this table and discussed in this section are net of promotional allowances; as such, references to room revenue and food and beverage revenue do not agree to the amounts on the Condensed Consolidated Statements of Operations. Operating income from properties for the purpose of this table excludes corporate expense, including related depreciation and amortization, preopening expense and the termination fee.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2000 1999 2000 1999
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(IN THOUSANDS)
Net revenues
Stardust ................ $ 37,883 $ 35,831 $ 77,224 $ 77,121
Boulder Strip Properties 41,291 47,968 88,489 96,547
Downtown Properties (a) . 57,632 55,610 112,671 109,603
Central Region Properties 132,913 102,527 273,054 201,923
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Total properties . $269,719 $241,936 $551,438 $485,194
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Operating income
Stardust ................ $ 205 $ 1,073 $ 1,273 $ 4,368
Boulder Strip Properties 3,290 6,280 10,428 12,670
Downtown Properties ..... 7,392 5,649 13,387 11,146
Central Region Properties 26,630 27,710 62,887 55,318
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Total properties . $ 37,517 $ 40,712 $ 87,975 $ 83,502
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(a) Includes revenues related to Vacations Hawaii, a Honolulu Travel Agency, of $11,029 and $10,401, respectively, for the three month periods ended June 30, 2000 and 1999 and revenues of $20,680 and $18,873, respectively, for the six month periods ended June 30, 2000 and 1999.
REVENUES
Consolidated net revenues increased 11.5% during the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999. Company-wide casino revenue increased 21%, food and beverage revenue decreased 3.9% and room revenue increased 8.3%. The increase in net revenues is due primarily to the acquisition of
Blue Chip in November 1999. Blue Chip contributed $47 million in revenue during the quarter ended June 30, 2000. Partially offsetting the increase related to Blue Chip were declines in net revenues at Sam's Town Las Vegas, Sam's Town Tunica and Treasure Chest of 15.9%, 21% and 17.8%, respectively. The declines in net revenues at both Sam's Town operations are primarily due to significant construction disruption as well as the competitive environment in their respective gaming markets. The decline in net revenues at Treasure Chest is due primarily to intense promotional competition from its land-based competitor. Also offsetting the increase in net revenues from Blue Chip is the January 2000 termination of the management contract for Silver Star which contributed $10.0 million of revenue during the quarter ended June 30, 1999.
Consolidated net revenues before the termination fee increased 13.7% during the six month period ended June 30, 2000 compared to the same period in the prior year. Company-wide casino revenue increased 23%, food and beverage revenue decreased 3.0% and room revenue remained virtually unchanged. The increase in net revenues is due primarily to the acquisition of Blue Chip in November 1999. Blue Chip contributed $95 million in revenue during the six month period ended June 30, 2000. Partially offsetting the increase related to Blue Chip were declines in net revenues at Sam's Town Las Vegas, Sam's Town Tunica and Treasure Chest of 9.7%, 16.2% and 14.8%, respectively. The declines in net revenues at both Sam's Town operations are primarily due to significant construction disruption as well as the competitive environment in their respective gaming markets. The decline in net revenues at Treasure Chest is due primarily to intense promotional competition from its land-based competitor. Also offsetting the increase in net revenues from Blue Chip is the January 2000 termination of the management contract for Silver Star which contributed $3.8 million in revenue during the six month period ended June 30, 2000 compared to $21 million during the same period in the prior year.
OPERATING INCOME
Consolidated operating income before preopening expense decreased 5.1% to $32 million during the quarter ended June 30, 2000 from $33 million during the quarter ended June 30, 1999. The acquisition of Blue Chip contributed $15.5 million of operating income during the quarter ended June 30, 2000. Operating income for the quarter ended June 30, 1999 includes $9.6 million from the management contract from Silver Star which terminated in January 2000. After the effects of Blue Chip and Silver Star, the decline in operating income is due primarily to the declines in net revenue at Sam's Town Las Vegas, Sam's Town Tunica and Treasure Chest.
For the six month period ended June 30, 2000, consolidated operating income before preopening expense and termination fee increased 6.5% to $74 million from $69 million during the same period in the prior year. The acquisition of Blue Chip contributed $33 million of operating income during the six month period ended June 30, 2000 and Silver Star (which terminated in January 2000) contributed $3.8 million in operating income during the six month period ended June 30, 2000 compared to $20 million during the same period in the prior year. Offsetting the effects of Blue Chip were declines in operating income at Sam's Town Las Vegas, Sam's Town Tunica and Treasure Chest mainly related to their decline in revenues.
STARDUST
For the quarter ended June 30, 2000, net revenues at the Stardust increased 5.7% versus the same period in the prior year. Casino revenue increased 4.9% due primarily to an increase in slot wagering. Room revenue
increased 6.0% mainly due to an increase in occupied rooms. Operating income at the Stardust declined $0.9 million or 81% and operating income margin declined to 0.5% during the quarter ended June 30, 2000 as compared to 3.0% during the quarter ended June 30, 1999. These declines in operating income and operating income margin are due to the competitive environment on the Las Vegas Strip causing an increase in higher marketing and showroom expenses.
For the six month period ended June 30, 2000, net revenues at the Stardust remained virtually unchanged versus the comparable period in the prior year. Casino revenue declined 1.4% as an increase in slot wagering did not offset a decline in table game wagering. Room revenue declined 7.1% due mainly to an 11% decline in available rooms as a result of the closure of the motor inn rooms in 1999. Operating income declined 71% to $1.3 million during the six month period ended June 30, 2000 compared to $4.4 million during the same period of the prior year due to the competitive environment on the Las Vegas Strip as well as an increase in showroom expenses.
BOULDER STRIP PROPERTIES
Net revenues at the Boulder Strip Properties declined 13.9% during the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999 due primarily to construction disruption related to the ongoing $86 million renovation and expansion project at Sam's Town Las Vegas, which began during the last half of 1999, as well as increased competition. Casino revenue at the Boulder Strip Properties declined 11.6% due to declines in slot and table game wagering. Non-gaming revenue at the Boulder Strip Properties declined 23% primarily due to the permanent closure of Sam's Town's Western Emporium retail store in September 1999 as part of the property's renovation and expansion project. For the quarter ended June 30, 2000, operating income declined 48% to $3.3 million from $6.3 million during the quarter ended June 30, 1999. Operating income margin declined to 8.0% for the quarter ended June 30, 2000 from 13.1% during the quarter ended June 30, 1999. The declines in operating income and operating income margin are due primarily to the decline in net revenues.
During the six month period ended June 30, 2000, net revenues at the Boulder Strip Properties declined 8.3% compared to the same period in the prior year. The decline is mainly attributable to construction disruption related to Sam's Town Las Vegas' renovation and expansion project as well as increased competition. Casino revenue declined 4.4% due to declines in slot and table game wagering and non-gaming revenue declined 23% due mainly to the permanent closure of Sam's Town Las Vegas' Western Emporium. Operating income at the Boulder Strip Properties declined 17.7% during the six month period ended June 30, 2000 and operating income margin declined from 13.1% during the six month period ended June 30, 1999 to 11.8% for the six month period ended June 30, 2000. The declines in operating income and operating income margin are primarily attributable to the decline in net revenues partially offset by a decline in marketing expenses.
DOWNTOWN PROPERTIES
Net revenues at the Downtown Properties increased 3.6% during the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999 due primarily to a 3.9% increase in casino revenues that is attributable to an increase in slot and table game wagering. Non-gaming revenue increased 3.2% due mainly to a 6.0% increase in net revenues at Vacations Hawaii, the Company's Honolulu travel agency. Operating income at
the Downtown Properties increased 31% to $7.4 million during the quarter ended June 30, 2000 from $5.6 million during the quarter ended June 30, 1999 as a result of the increase in revenues as well as cost consolidation efforts and more effective marketing at the Downtown casino properties.
Net revenues at the Downtown Properties increased 2.8% during the six month period ended June 30, 2000 compared to the same period in the prior year. The increase is attributable to a 9.6% increase in net revenues at Vacations Hawaii as well as a 2.3% increase in casino revenue due to increased slot and table game wagering. Operating income at the Downtown Properties increased $2.2 million or 20% during the six month period ended June 30, 2000 compared to the same period in the prior year. Operating income margin increased to 11.9% during the six month period ended June 30, 2000 versus 10.2% in the comparable period of the prior year. The increase in operating income and operating income margin is primarily attributable to the increase in net revenues as well as cost consolidation efforts and more effective marketing at the Downtown casino properties.
CENTRAL REGION
Net revenues from the Central Region increased $30 million or 30% during the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999. The majority of the increase is due to the November 1999 acquisition of Blue Chip, which earned $47 million in net revenues during the quarter ended June 30, 2000. Also contributing to the increase in net revenues was a 17.6% increase at Par-A-Dice due mainly to the change to dockside operations in June 1999. Sam's Town Tunica and Treasure Chest experienced declines in net revenues of 21% and 17.8%, respectively, due to their highly competitive environments as well as significant construction disruption at Sam's Town Tunica involving its main entry, casino and restaurant operations. Management fees from Silver Star declined $10.0 million as the management contract was terminated on January 31, 2000. Operating income in the Central Region declined 3.9% to $27 million during the quarter ended June 30, 2000 from $28 million during the quarter ended June 30, 1999 as Blue Chip and Par-A-Dice's increases in operating income did not offset Treasure Chest and Silver Star's declines in operating income or the operating loss of $1.4 million experienced at Sam's Town Tunica.
During the six month period ended June 30, 2000, net revenues from the Central Region increased 35% compared to the same period in the prior year. The majority of the increase is due to the November 1999 acquisition of Blue Chip, which earned $95 million in net revenues during the six month period ended June 30, 2000. Also contributing to the increase in net revenues was a 22% increase at Par-A-Dice due mainly to the change to dockside operations in June 1999. Sam's Town Tunica and Treasure Chest experienced declines in net revenues of 16.2% and 14.8%, respectively, due to their highly competitive environments as well as significant construction disruption at Sam's Town Tunica involving its main entry, casino and restaurant operations. Management fees from Silver Star declined $17.0 million as the management contract was terminated on January 31, 2000. Operating income in the Central Region increased 13.7% to $63 million during the six month period ended June 30, 2000 from $55 million during the same period in the prior year. The increase in operating income is due mainly to the acquisition of Blue Chip as well as the increase in net revenues at Par-A-Dice, partially offset by declines in operating income related to the reduction in net revenues from Treasure Chest and management fee income from Silver Star and the operating loss of $0.8 million experienced at Sam's Town Tunica.
TERMINATION FEE
On October 20, 1999, the Company agreed to terminate its management contract with the Mississippi Band of Choctaw Indians (the "Tribe") prior to the contract's expiration date in June 2001 in exchange for a one-time payment of $72 million. Pursuant to that agreement, the Company continued to manage Silver Star under the terms of the management contract through January 31, 2000, at which time the Tribe made the one-time termination payment and the Company recorded the termination fee, net of certain expenses.
OTHER EXPENSES
Depreciation and amortization expense increased 19.4% during the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999 and 17.2% during the six month period ended June 30, 2000 compared to the same period in the prior year primarily as a result of depreciation and amortization expense related to the fixed assets, intangible license rights and acquisition costs of Blue Chip (acquired in November 1999).
Preopening expense increased $1.6 million during the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999 due primarily to $1.5 million incurred as the result of unsuccessful efforts to assist in the development and operation of a Rhode Island Indian casino with the Narragansett Indian Tribe. Preopening expense increased $1.4 million during the six month period ended June 30, 2000 compared to the same period in the prior year as a result of the Rhode Island preopening expense. |
