SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period ended September 30, 2004
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 1-12882
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
Nevada | 88-0242733 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
2950 Industrial Road, Las Vegas, NV 89109
(Address of principal executive offices) (Zip Code)
(702) 792-7200
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
Shares outstanding of each of the Registrants classes of common stock as of October 29, 2004:
Class |
Outstanding |
|
Common stock, $.01 par value |
87,147,219 |
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS
Page No.
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PART I. FINANCIAL INFORMATION | ||||
Item 1. |
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Condensed Consolidated Balance Sheets at September 30, 2004 and December 31, 2003 |
3 | |||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
9 | ||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
35 | ||
Item 3. |
49 | |||
Item 4. |
50 | |||
PART II. OTHER INFORMATION |
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Item 1. |
50 | |||
Item 2. |
52 | |||
Item 6. |
52 | |||
53 |
Item 1. Unaudited Condensed Consolidated Financial Statements
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
September 30, 2004 |
December 31, 2003 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
$ | 125,179 | $ | 88,213 | ||||
Restricted cash |
22,008 | 18,128 | ||||||
Accounts receivable, net |
22,377 | 14,800 | ||||||
Inventories |
10,782 | 4,432 | ||||||
Prepaid expenses and other |
31,304 | 17,502 | ||||||
Income taxes receivable |
859 | 7,523 | ||||||
Deferred income taxes |
6,765 | 9,033 | ||||||
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Total current assets |
219,274 | 159,631 | ||||||
Property and equipment, net |
2,157,591 | 958,816 | ||||||
Investment in Borgata, net |
300,147 | 265,552 | ||||||
Other assets, net |
104,055 | 39,488 | ||||||
Intangible assets, net |
532,393 | 448,648 | ||||||
Goodwill, net |
403,548 | 862 | ||||||
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Total assets |
$ | 3,717,008 | $ | 1,872,997 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities |
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Current portion of long-term debt |
$ | 5,484 | $ | 1,463 | ||||
Accounts payable |
61,248 | 35,714 | ||||||
Construction payables |
35,538 | 6,877 | ||||||
Accrued liabilities |
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Payroll and related |
68,909 | 40,636 | ||||||
Interest |
35,887 | 14,079 | ||||||
Gaming |
57,569 | 35,678 | ||||||
Accrued expenses and other |
54,874 | 30,354 | ||||||
Borgata contributions payable |
| 35,500 | ||||||
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Total current liabilities |
319,509 | 200,301 | ||||||
Long-term debt, net of current maturities |
2,179,044 | 1,097,589 | ||||||
Deferred income taxes and other liabilities |
326,031 | 133,854 | ||||||
Commitments and contingencies |
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Stockholders equity |
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Preferred stock, $.01 par value, 5,000,000 shares authorized |
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Common stock, $.01 par value, 200,000,000 shares authorized, 86,970,848 and 64,980,970 shares outstanding |
870 | 650 | ||||||
Additional paid-in capital |
563,613 | 162,123 | ||||||
Retained earnings |
330,609 | 283,352 | ||||||
Accumulated other comprehensive losses, net |
(2,668 | ) | (4,872 | ) | ||||
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Total stockholders equity |
892,424 | 441,253 | ||||||
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Total liabilities and stockholders equity |
$ | 3,717,008 | $ | 1,872,997 | ||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
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2004
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2003
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2004
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2003
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Revenues |
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Gaming |
$ | 434,983 | $ | 266,093 | $ | 1,010,513 | $ | 810,874 | ||||||||
Food and beverage |
78,513 | 40,905 | 166,865 | 124,271 | ||||||||||||
Room |
38,971 | 19,180 | 81,779 | 58,149 | ||||||||||||
Other |
31,623 | 19,149 | 70,688 | 58,263 | ||||||||||||
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Gross revenues |
584,090 | 345,327 | 1,329,845 | 1,051,557 | ||||||||||||
Less promotional allowances |
61,597 | 34,799 | 135,419 | 106,670 | ||||||||||||
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Net revenues |
522,493 | 310,528 | 1,194,426 | 944,887 | ||||||||||||
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Costs and expenses |
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Gaming |
204,259 | 135,551 | 489,446 | 402,690 | ||||||||||||
Food and beverage |
50,544 | 23,479 | 100,851 | 71,114 | ||||||||||||
Room |
12,472 | 5,809 | 24,812 | 16,442 | ||||||||||||
Other |
28,692 | 20,502 | 68,816 | 62,029 | ||||||||||||
Selling, general and administrative |
82,719 | 49,157 | 190,736 | 144,714 | ||||||||||||
Maintenance and utilities |
25,074 | 15,628 | 53,296 | 43,219 | ||||||||||||
Deferred rent |
943 | | 943 | | ||||||||||||
Depreciation and amortization |
42,055 | 23,551 | 92,954 | 69,646 | ||||||||||||
Corporate expense |
8,859 | 5,558 | 22,690 | 18,323 | ||||||||||||
Preopening expenses |
615 | | 615 | | ||||||||||||
Merger, acquisition and transition related expenses |
625 | | 6,534 | | ||||||||||||
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Total |
456,857 | 279,235 | 1,051,693 | 828,177 | ||||||||||||
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Operating income (loss) from Borgata |
24,030 | 4,921 | 55,432 | (11,204 | ) | |||||||||||
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Operating income |
89,666 | 36,214 | 198,165 | 105,506 | ||||||||||||
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Other income (expense) |
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Interest income |
48 | 53 | 142 | 269 | ||||||||||||
Interest expense, net of amounts capitalized |
(30,784 | ) | (20,580 | ) | (70,513 | ) | (56,405 | ) | ||||||||
Loss on early retirement of debt |
(4,344 | ) | | (4,344 | ) | | ||||||||||
Gain on sales of undeveloped land |
8,259 | | 9,679 | | ||||||||||||
Other expense from Borgata, net |
(6,419 | ) | (2,830 | ) | (19,569 | ) | (2,830 | ) | ||||||||
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Total |
(33,240 | ) | (23,357 | ) | (84,605 | ) | (58,966 | ) | ||||||||
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Income before provision for income taxes |
56,426 | 12,857 | 113,560 | 46,540 | ||||||||||||
Provision for income taxes |
20,877 | 5,143 | 49,013 | 17,943 | ||||||||||||
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Net income |
$ | 35,549 | $ | 7,714 | $ | 64,547 | $ | 28,597 | ||||||||
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Basic net income per common share: |
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Net income |
$ | 0.41 | $ | 0.12 | $ | 0.88 | $ | 0.45 | ||||||||
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Average basic shares outstanding |
86,805 | 64,158 | 72,988 | 64,148 | ||||||||||||
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Diluted net income per common share: |
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Net income |
$ | 0.40 | $ | 0.12 | $ | 0.87 | $ | 0.43 | ||||||||
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Average diluted shares outstanding |
88,432 | 66,107 | 74,567 | 66,046 | ||||||||||||
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Dividends declared per common share |
$ | 0.085 | $ | 0.075 | $ | 0.235 | $ | 0.075 | ||||||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For the nine month period ended September 30, 2004
(Unaudited)
(In thousands, except share data)
Common Stock
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Additional Paid-In Capital |
Retained Earnings |
Accumulated Other Comprehensive Losses, Net |
Total Stockholders Equity |
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Shares
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Amount
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Balances, January 1, 2004 |
64,980,970 | $ | 650 | $ | 162,123 | $ | 283,352 | $ | (4,872 | ) | $ | 441,253 | ||||||||
Net income |
| | | 64,547 | | 64,547 | ||||||||||||||
Derivative instruments market adjustment, net of taxes of $1,221 |
| | | | 2,204 | 2,204 | ||||||||||||||
Stock issued in connection with merger with Coast Casinos, net of issuance costs of $425 |
19,369,869 | 194 | 368,958 | | | 369,152 | ||||||||||||||
Stock options exercised, including taxes of $15,507 |
2,620,009 | 26 | 32,532 | | | 32,558 | ||||||||||||||
Dividends on common stock |
| | | (17,290 | ) | | (17,290 | ) | ||||||||||||
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BALANCES, SEPTEMBER 30, 2004 |
86,970,848 | $ | 870 | $ | 563,613 | $ | 330,609 | $ | (2,668 | ) | $ | 892,424 | ||||||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
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2004
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2003
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2004
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2003
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Net income |
$ | 35,549 | $ | 7,714 | $ | 64,547 | $ | 28,597 | ||||
Derivative instruments market adjustment, net of tax |
413 | 1,895 | 2,204 | 1,891 | ||||||||
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Comprehensive income |
$ | 35,962 | $ | 9,609 | $ | 66,751 | $ | 30,488 | ||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30, |
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2004
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2003
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
$ | 64,547 | $ | 28,597 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
92,954 | 69,646 | ||||||
Deferred income taxes |
10,941 | 20,622 | ||||||
Operating and non-operating (income) loss from Borgata |
(35,863 | ) | 14,034 | |||||
Gain on sales of undeveloped land and certain other assets |
(10,536 | ) | | |||||
Loss on early retirement of debt |
4,344 | | ||||||
Tax benefit from stock options exercised |
15,507 | 2,743 | ||||||
Changes in operating assets and liabilities: |
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Restricted cash |
(3,880 | ) | (3,905 | ) | ||||
Accounts receivable, net |
(1,565 | ) | 159 | |||||
Inventories |
153 | 479 | ||||||
Prepaid expenses and other |
(2,025 | ) | (637 | ) | ||||
Other assets |
(492 | ) | 748 | |||||
Other current liabilities |
53,626 | 6,005 | ||||||
Other liabilities |
1,813 | 816 | ||||||
Income taxes receivable |
14,255 | (7,134 | ) | |||||
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Net cash provided by operating activities |
203,779 | 132,173 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Acquisition of property, equipment and other assets |
(139,714 | ) | (46,594 | ) | ||||
Net cash paid for Shreveport acquisition |
(187,220 | ) | | |||||
Net cash paid for Coast Casinos acquisition |
(909,245 | ) | | |||||
Investments in and advances to Borgata |
(30,807 | ) | (33,159 | ) | ||||
Net proceeds from sales of undeveloped land and certain other assets |
31,193 | | ||||||
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Net cash used in investing activities |
(1,235,793 | ) | (79,753 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Payments on long-term debt |
(344 | ) | (331 | ) | ||||
Payments under bank credit agreements |
(666,450 | ) | (252,150 | ) | ||||
Borrowings under bank credit agreements |
1,400,400 | 208,000 | ||||||
Net proceeds from issuance of long-term debt |
344,596 | 16,000 | ||||||
Bank credit facility issuance costs |
(8,983 | ) | | |||||
Retirements of long-term debt |
| (127,853 | ) | |||||
Proceeds from issuance of common stock |
17,051 | 3,957 | ||||||
Common stock repurchased and retired |
| (13,389 | ) | |||||
Dividends paid on common stock |
(17,290 | ) | (4,818 | ) | ||||
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Net cash provided by (used in) financing activities |
1,068,980 | (170,584 | ) | |||||
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Net increase (decrease) in cash and cash equivalents |
36,966 | (118,164 | ) | |||||
Cash and cash equivalents, beginning of period |
88,213 | 191,380 | ||||||
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Cash and cash equivalents, end of period |
$ | 125,179 | $ | 73,216 | ||||
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7
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
(In thousands)
Nine Months Ended
September 30, |
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2004
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2003
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
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Cash paid for interest, net of amounts capitalized |
$ | 39,515 | $ | 48,026 | |||
Cash paid for income taxes |
8,311 | 1,709 | |||||
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SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
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Property additions acquired on construction and trade payables which were accrued, but not yet paid |
$ | 38,444 | $ | 1,119 | |||
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Merger with Coast Casinos |
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Fair value of non-cash assets acquired |
$ | 1,525,770 | $ | | |||
Less net cash paid |
(909,245 | ) | | ||||
Less fair value of common stock issued, net |
(369,152 | ) | | ||||
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Liabilities assumed |
$ | 247,373 | $ | | |||
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Acquisition of Sams Town Shreveport |
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Fair value of non-cash assets acquired |
$ | 192,224 | $ | | |||
Net cash paid |
187,220 | | |||||
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Liabilities assumed |
$ | 5,004 | $ | | |||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and our wholly-owned subsidiaries. We own and operate seventeen gaming facilities located in Nevada, Mississippi, Illinois, Louisiana and Indiana. In addition, we own and operate a travel agency in Hawaii. All material intercompany accounts and transactions have been eliminated. We are also a 50% partner in a holding company that owns a limited liability company that operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey, which commenced operations on July 3, 2003. Investments in 50% or less owned subsidiaries over which we have the ability to exercise significant influence, including joint ventures such as Borgata, are accounted for using the equity method.
Basis of Presentation
In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of our operations for the three and nine month periods ended September 30, 2004 and 2003 and our cash flows for the nine month periods ended September 30, 2004 and 2003. We suggest reading this report in conjunction with our audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2003. As permitted by the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles, or GAAP, have been condensed or omitted. The operating results for the three and nine month periods ended September 30, 2004 and 2003 and our cash flows for the nine month periods ended September 30, 2004 and 2003 are not necessarily indicative of the results that will be achieved for the full year or future periods.
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. Significant estimates incorporated into our condensed consolidated financial statements include the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, the estimated valuation allowance for deferred tax assets, estimated cash flows in assessing the recoverability of long-lived assets, estimated liabilities for our self-insured medical plans, slot bonus point programs, and litigation, claims and assessments. Actual results could differ from those estimates.
9
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Capitalized Interest
Interest costs associated with major projects, including our investment in the Borgata project, are capitalized. 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 are substantially complete. We amortize capitalized interest over the estimated useful life of the related asset. Capitalized interest for the three and nine month periods ended September 30, 2004 was $1.9 million and $2.9 million, respectively, and related mainly to our Delta Downs, Blue Chip, and The Orleans expansion projects as well as the construction of South Coast. Capitalized interest for the three and nine month periods ended September 30, 2003 was $0.1 million and $9.1 million, respectively, and related primarily to our investment in the Borgata project that was in its construction and preopening phases during the periods.
Preopening Expenses
We expense certain costs of start-up activities as incurred. There were no preopening expenses during the three and nine month periods ended September 30, 2003. During the three month period ended September 30, 2004, we expensed $0.6 million in preopening costs that primarily relate to casino development opportunities in other jurisdictions and also relate, to a lesser extent, to preopening activities at the South Coast development project.
Derivative Instruments and Other Comprehensive Income (Loss)
GAAP requires all derivative instruments to be recognized on the balance sheet at fair value. Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. If the derivative qualifies and is designated as a hedge, depending on the nature of the hedge, changes in its fair value will either be offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivatives change in fair value will be immediately recognized in earnings. During the three and nine month periods ended September 30, 2004 and 2003, we utilized interest rate swaps, designated as fair value hedges, to manage risk on certain of our fixed-rate borrowings. In addition, Borgata, our joint venture, utilizes derivative financial instruments to comply with the requirements of its bank credit agreement. For further information, see Note 7, Derivative Instruments .
Stock Based Employee Compensation Plans
We account for employee stock options in accordance with Accounting Principle Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income as all options granted under our plans had an exercise price equal to the market value of the common stock on the date of grant. The following table illustrates the effect on net income and net income per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 148, or SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure , to stock-based employee compensation.
10
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
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2004
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2003
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2004
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2003
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(In thousands, except per share data) | ||||||||||||||||
Net income |
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As reported |
$ | 35,549 | $ | 7,714 | $ | 64,547 | $ | 28,597 | ||||||||
Total stock based employee compensation expense determined under fair value method for all awards, net of tax |
(1,899 | ) | (2,828 | ) | (5,094 | ) | (7,505 | ) | ||||||||
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Pro forma |
$ | 33,650 | $ | 4,886 | $ | 59,453 | $ | 21,092 | ||||||||
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Basic net income per share |
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As reported |
$ | 0.41 | $ | 0.12 | $ | 0.88 | $ | 0.45 | ||||||||
Pro forma basic |
0.39 | 0.08 | 0.81 | 0.33 | ||||||||||||
Diluted net income per share |
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As reported |
$ | 0.40 | $ | 0.12 | $ | 0.87 | $ | 0.43 | ||||||||
Pro forma diluted |
0.38 | 0.07 | 0.80 | 0.32 |
Reclassifications
Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the September 30, 2004 presentation. These reclassifications had no effect on our net income as previously reported.
Note 2. Earnings per Share
A reconciliation of net income and shares outstanding for basic and diluted earnings per share is as follows:
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||
2004
|
2003
|
2004
|
2003
|
|||||||||
(In thousands, except per share data) | ||||||||||||
Net income |
$ | 35,549 | $ | 7,714 | $ | 64,547 | $ | 28,597 | ||||
|
|
|
|
|
|
|
|
|||||
Weighted average common shares outstanding |
86,805 | 64,158 | 72,988 | 64,148 | ||||||||
Dilutive effect of stock options outstanding |
1,627 | 1,949 | 1,579 | 1,898 | ||||||||
|
|
|
|
|
|
|
|
|||||
Weighted average common and potential shares outstanding |
88,432 | 66,107 | 74,567 | 66,046 | ||||||||
|
|
|
|
|
|
|
|
|||||
Basic earnings per share |
$ | 0.41 | $ | 0.12 | $ | 0.88 | $ | 0.45 | ||||
|
|
|
|
|
|
|
|
|||||
Diluted earnings per share |
$ | 0.40 | $ | 0.12 | $ | 0.87 | $ | 0.43 | ||||
|
|
|
|
|
|
|
|
Weighted average options to purchase approximately 2.7 million and 2.8 million shares, respectively, were not included in the diluted calculation for the three and nine month periods ended September 30, 2003, since the grant prices of such options were greater than the average price of our common shares during the periods. Nearly all outstanding options were included in the diluted calculation for the three and nine month periods September 30, 2004, since the grant prices of such options were less than the average price of our common shares during the periods.
11
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Note 3. Shreveport Acquisition
On May 19, 2004, we acquired all of the outstanding limited and general partnership interests of the partnership that owns Harrahs Shreveport Hotel and Casino in Shreveport, Louisiana for approximately $197 million. After the acquisition, we renamed the property Sams Town Hotel and Casino and refer to the property as Sams Town Shreveport. Harrahs sold the property as part of an agreement to acquire Horseshoe Gaming Holding Corp. to avoid overexposure in the Shreveport market. The amount of consideration paid to Harrahs was determined in arms-length negotiations and was generally based upon a multiple of expected cash flows from the operations. As the amount paid to Harrahs exceeded the fair value of net assets acquired, we recorded goodwill of approximately $22 million related to the purchase.
We obtained a third party valuation of significant identifiable intangible assets acquired as well as other assets acquired and liabilities assumed. We assigned the following values to the assets acquired and liabilities assumed, based upon our review of the third party valuation:
(in thousands)
|
May 19, 2004
|
||
Current assets, including $9,553 of cash |
$ | 9,858 | |
Property and equipment |
140,597 | ||
Other assets |
3 | ||
Intangible assets |
29,000 | ||
Goodwill |
22,319 | ||
|
|
||
Total assets acquired |
201,777 | ||
|
|
||
Current liabilities |
2,839 | ||
Other long-term liabilities |
2,165 | ||
|
|
||
Total liabilities assumed |
5,004 | ||
|
|
||
Net assets acquired |
$ | 196,773 | |
|
|
The intangible assets that we acquired are comprised of an intangible gaming license right valued at approximately $29 million and a customer list valued at $0.1 million. The intangible gaming license right is not subject to amortization as it has an indefinite useful life. The customer list is being ratably amortized over a five year period. The $22 million goodwill balance arising from the transaction, that is not subject to amortization, and the other intangible assets described above are expected to be fully deductible, over time, for tax purposes.
We also reported $5.9 million of indirect and general expenses related to this business combination, which consist principally of incremental advertising and promotional expenses as well as operating supply expenses incurred prior to the consummation of the acquisition and through our transition period ended June 30, 2004. These expenses are included in merger, acquisition and transition related expenses on the accompanying condensed consolidated statement of operations for the nine month period ended September 30, 2004.
12
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The pro forma consolidated results of operations, as if the Shreveport acquisition had occurred on January 1, 2003, are as follows:
Three Months
September 30, 2003 |
Nine Months Ended
September 30, |
||||||||
(in thousands, except per share data)
|
2004
|
2003
|
|||||||
Pro Forma |
|||||||||
Net revenues |
$ | 353,865 | $ | 1,259,142 | $ | 1,081,350 | |||
Net income |
10,588 | 68,759 | 38,918 | ||||||
Basic net income per common share |
0.17 | 0.94 | 0.61 | ||||||
Diluted net income per common share |
0.16 | 0.92 | 0.59 |
Note 4. Coast Casinos Merger
On July 1, 2004, we consummated a $1.3 billion merger with Coast Casinos, Inc., or Coast, pursuant to which Coast became a wholly-owned subsidiary of Boyd Gaming Corporation. The Coast stockholders received approximately $482 million in cash and the Coast stock and option holders received approximately 19.4 million shares of our common stock valued at $19.08 per share. The $19.08 per share value of the common stock issued was determined in accordance with generally accepted accounting principles under the guidance of Emerging Issues Task Force 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination, and was based upon the closing stock prices of Boyd Gaming for a reasonable period of time (i.e., three days) before and after the merger was agreed to and announced.
In connection with the merger, we refinanced substantially all of Coasts debt, including $325 million principal amount of 9.50% senior subordinated notes due in April 2009. On July 1, 2004, we accepted and paid for approximately $301 million in aggregate principal amount of these notes pursuant to a tender offer and consent solicitation which offered a tender price of $1,031.25 and a consent solicitation fee of $20.00 per $1,000 principal amount of notes accepted for payment by a specified date. We paid approximately $323 million of total consideration, including accrued interest, for these notes. Also on July 1, 2004, we called for the redemption of the remaining $24 million principal amount of notes outstanding at that date. On August 2, 2004, we paid approximately $26 million for the remaining notes based upon a redemption price of $1,047.50 per $1,000 principal amount of notes, plus accrued interest to the date of redemption. In addition to Coasts senior subordinated notes that we refinanced, we also repaid the outstanding balance on Coasts bank credit facility, which totaled $105 million on July 1, 2004. The total amount paid to retire all of Coasts outstanding debt, including premiums and interest, represents a portion of the $1.3 billion total merger consideration.
We financed the cash portion of the consideration in the merger, including merger related costs, and refinanced both Coasts debt and our old bank credit facility with availability under our new bank credit facility that became effective on July 1, 2004. For more information on the new bank credit facility, see Note 6, Debt New Bank Credit Facility. The amount of the consideration we paid in the merger, including the debt refinanced, was determined in arms-length negotiations between the parties to the merger. As the $1.3 billion merger value was generally based upon a multiple of expected cash flows from operations and exceeded the estimated fair value of identifiable net assets acquired, we recorded the difference as goodwill.
13
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The following is a summary of the total consideration in the Coast Casinos merger.
We obtained a preliminary version of a third party valuation of significant identifiable intangible assets acquired as well as other assets acquired and liabilities assumed. The table below lists the estimated fair values of the assets acquired and liabilities assumed, each of which is subject to change based upon our review of the third party valuation. In addition, we recorded an estimate for the deferred tax liability arising from the merger due to the difference between the fair value and the tax basis of the net assets acquired. This deferred tax liability estimate of approximately $142 million increased the estimated amount of goodwill recorded in the merger. As the deferred tax liability is an estimate, it is subject to change as we finalize our tax analyses. Changes to this estimate, if any, will also affect goodwill and will not have an impact on our statement of operations.
(in thousands)
|
July 1, 2004
|
||
Current assets, including $36,949 of cash |
$ | 69,401 | |
Property and equipment |
1,003,976 | ||
Other assets |
54,240 | ||
Intangible assets |
54,750 | ||
Goodwill |
380,352 | ||
|
|
||
Total assets acquired |
1,562,719 | ||
|
|
||
Current liabilities |
66,412 | ||
Long-term deferred taxes |
179,390 | ||
Other long-term liabilities |
1,571 | ||
|
|
||
Total liabilities assumed |
247,373 | ||
|
|
||
Net assets acquired |
$ | 1,315,346 | |
|
|
The intangible assets that we acquired are comprised of trademarks estimated at approximately $54 million and customer lists estimated at $0.4 million. The trademarks are not subject to amortization as they have an indefinite useful life. The customer lists are being ratably amortized over a five year period. The $380 million estimated goodwill balance arising from the transaction, that is not subject to amortization, and the other intangible assets described above are not expected to be amortized for tax purposes. We can provide no assurances that the actual amount of goodwill, other intangible assets or other assets and liabilities that we ultimately record will be more or less than that of our current estimates.
The pro forma consolidated results of operations, as if the merger with Coast Casinos had occurred on January 1, 2003, are as follows:
Three Months
September 30, 2003 |
Nine Months Ended
September 30, |
||||||||
(in thousands, except per share data)
|
2004
|
2003
|
|||||||
Pro Forma |
|||||||||
Net revenues |
$ | 458,541 | $ | 1,521,580 | $ | 1,384,443 | |||
Net income |
18,336 | 87,853 | 64,601 | ||||||
Basic net income per common share |
0.22 | 1.02 | 0.77 | ||||||
Diluted net income per common share |
0.21 | 1.00 | 0.76 |
We reported $0.6 million of indirect, general and incremental expenses related to this business combination. These expenses are included in merger, acquisition and transition related expenses on the accompanying condensed consolidated statements of operations for the three and nine month periods ended September 30, 2004.
14
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Note 5. Borgata
On July 3, 2003, Borgata Hotel Casino and Spa, our $1.1 billion joint venture located at Renaissance Pointe in Atlantic City, New Jersey, commenced operations. We use the equity method to account for our investment in Borgata.
Summarized financial information of Borgata is as follows (in thousands):
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
September 30, 2004 |
December 31, 2003 |
|||||
ASSETS |
||||||
Current assets |
$ | 55,850 | $ | 49,552 | ||
Property and equipment, net |
967,550 | 993,258 | ||||
Other assets, net |
13,072 | 22,127 | ||||
|
|
|
|
|||
Total assets |
$ | 1,036,472 | $ | 1,064,937 | ||
|
|
|
|
|||
LIABILITIES AND MEMBER EQUITY |
||||||
Current maturities of long-term debt |
$ | 79,875 | $ | 50,625 | ||
Other current liabilities |
66,657 | 56,133 | ||||
Long-term debt, net |
379,900 | 555,531 | ||||
Fair value of derivative financial instruments, net |
8,391 | 16,052 | ||||
Other liabilities |
4,104 | 414 | ||||
Member equity |
497,545 | 386,182 | ||||
|
|
|
|
|||
Total liabilities and member equity |
$ | 1,036,472 | $ | 1,064,937 | ||
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS INFORMATION
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2004
|
2003
|
2004
|
2003
|
|||||||||||||
Gross revenues |
$ | 233,834 | $ | 184,256 | $ | 630,994 | $ | 184,256 | ||||||||
Less promotional allowances |
47,691 | 34,662 | 134,021 | 34,662 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net revenues |
186,143 | 149,594 | 496,973 | 149,594 | ||||||||||||
Expenses |
123,081 | 119,082 | 341,509 | 119,082 | ||||||||||||
Depreciation and amortization |
14,359 | 12,797 | 42,430 | 12,797 | ||||||||||||
Preopening expenses |
| 6,936 | | 39,186 | ||||||||||||
(Gain) loss on asset disposal |
(18 | ) | | 189 | | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income (loss) |
48,721 | 10,779 | 112,845 | (21,471 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest and other expenses, net |
(8,208 | ) | (10,855 | ) | (27,577 | ) | (10,855 | ) | ||||||||
(Provision) benefit for income taxes |
(4,630 | ) | 5,194 | (11,562 | ) | 5,194 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total non-operating expenses |
(12,838 | ) | (5,661 | ) | (39,139 | ) | (5,661 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
$ | 35,883 | $ | 5,118 | $ | 73,706 | $ | (27,132 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
15
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Our share of Borgatas results is included in our accompanying condensed consolidated statements of operations for the following periods on the following lines (in thousands):
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2004
|
2003
|
2004
|
2003
|
|||||||||||||
Our share of Borgatas operating income (loss) |
$ | 24,360 | $ | 5,389 | $ | 56,422 | $ | (10,736 | ) | |||||||
Amortization expense related to our capitalized interest and unilateral contribution to Borgata |
(330 | ) | (468 | ) | (990 | ) | (468 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income (loss) from Borgata, as reported |
$ | 24,030 | $ | 4,921 | $ | 55,432 | $ | (11,204 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other expense from Borgata, net |
$ | (6,419 | ) | $ | (2,830 | ) | $ | (19,569 | ) | $ | (2,830 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
Borgata State Tax Credit Contingency. Based on New Jersey state income tax rules, Borgata believes it is eligible for a refundable state tax credit under the New Jersey New Jobs Investment Tax Credit because Borgata made an investment in a new business facility that created new jobs. The total available tax credit is subject to annual limitations based on both income and property tax liabilities. Borgatas estimated total credit is approximately $70 million over a five year period. Borgata has filed a request for a refund for approximately $9.6 million related to the year ended December 31, 2003 and expects to file requests for refunds for each of the four years in the period ending December 31, 2007, ranging from approximately $13 million to $17 million per year. Borgata estimates its allowable state tax credit for the nine months ended September 30, 2004 to be approximately $9.6 million. However, due to various uncertainties regarding the realization of the state tax credits, the $19.2 million cumulative state tax credit has not been recognized on its condensed consolidated statements of operations as of September 30, 2004 and there can be no assurances that Borgata will receive any tax credits.
Contributions to Borgata. At December 31, 2003, we had recorded contributions payable to Borgata in the amount of approximately $36 million, $4.1 million of which related to unfunded contributions pursuant to the total of agreed-upon project costs in the operating agreement, and approximately $31 million of which related to the excess of total estimated project costs over the total agreed-upon project costs. In June 2004, we signed an agreement with MGM MIRAGE that finalized the total amount of Borgatas project costs subject to the resolution of a minor contractor dispute and the potential refund of certain construction fees. Pursuant to this agreement, both we and MGM MIRAGE agreed to waive the remaining capital contributions, that were finalized at $4.0 million each, that would have funded Borgata to the total of agreed-upon project costs. In addition, we agreed to pay a total of approximately $31 million to fulfill our obligation to fund the excess of actual project costs, calculated before any resolution of the minor outstanding issues, above the total of agreed-upon costs. Accordingly, in June 2004, we made a capital contribution to Borgata of approximately $31 million that was charged against the contribution payable recorded at December 31, 2003. We are ratably amortizing $15.4 million (50% of the unilateral contribution which corresponds to our ownership percentage of Borgata) over 40 years.
16
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The following table presents the components of our investment in Borgata:
September 30, 2004 |
December 31, 2003 |
|||||||
(In thousands) | ||||||||
Cash contributions |
$ | 254,157 | $ | 223,350 | ||||
Contributions payable to Borgata |
| 35,500 | ||||||
Accumulated amortization of 50% of our unilateral equity contribution |
(289 | ) | | |||||
Equity earnings (loss) |
14,164 | (22,689 | ) | |||||
Equity comprehensive loss |
(4,146 | ) | (7,571 | ) | ||||
Capitalized interest, net |
36,261 | 36,962 | ||||||
|
|
|
|
|
|
|||
Net investment in Borgata |
$ | 300,147 | $ | 265,552 | ||||
|
|
|
|
|
|
In addition to our cash contributions to Borgata and our share of their results, we capitalized interest, totaling approximately $37 million, on our investment through July 2, 2003, the period during which Borgata was in the development, construction and preopening phases. Due to both the capitalized interest and the unilateral equity contribution discussed above, our net investment in Borgata differs from our share of the underlying equity at Borgata. These amounts are being ratably amortized over 40 years.
Borgata Expansions. In July 2004, we announced that Borgata has commenced planning and design work for an expansion of the property, now referred to as Phase I. Phase I, which requires various government and regulatory approvals, will consist of substantial additions of both gaming and non-gaming amenities, including additional slot machines, table games, restaurants and nightclubs. The expansion is estimated to cost approximately $200 million with construction expected to start in January 2005 and completion expected to occur in the second quarter of 2006. Due to this construction project, Borgata expects to be entitled to an adjusted net profits tax refund once the various government and regulatory approvals, that will enable Borgata to progress with the project, are received. Based on estimates through September 30, 2004, Borgata could be entitled to a refund of approximately $2.4 million. We can provide no assurances that Borgata will actually receive the refund.
In October 2004, we announced we are in the planning phases for a further expansion to Borgata, referred to as Phase II, that involves a new hotel tower, containing approximately 800 rooms, suites and resort condominiums that is scheduled for completion in mid-2007. As Phase II is currently in the planning process and subject to various approvals, we have not yet determined the cost of the project. Borgata expects to finance the expansions from Borgatas cash flow from operations and from Borgatas recently refinanced credit facility, which is capable of being expanded. We do not expect to make further capital contributions to Borgata for these projects.
We can provide no assurances that either Borgata expansion project will be completed within the estimated time frame or budget. Among the factors that could cause actual results to differ materially are the following: increased costs and uncertainties relating to new developments and expansion, changes in laws, regulations and the economy, the availability and price of energy, weather, economic, and the effects of war, terrorist or similar activity.
17
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Note 6. Debt
Old Bank Credit Facility. On February 27, 2004, we issued an aggregate of $100 million in term notes under our old bank credit facility that effectively increased our total credit facility to $600 million. The proceeds from this borrowing were used to pay down $100 million of the outstanding balance of the revolving portion of our old bank credit facility in order to create the availability of funds for the Shreveport acquisition. For more information about the Shreveport acquisition, see Note 3, Shreveport Acquisition . These term notes were prepaid in April 2004 with a portion of the net proceeds from the issuance of our new $350 million principal amount of senior subordinated notes described below.
New Bank Credit Facility . On July 1, 2004, and concurrent with the consummation of the merger with Coast Casinos, Inc., the $1.6 billion bank credit facility (the New Bank Credit Facility) among Boyd Gaming, Bank of America, N.A and certain other financial institutions became effective. The New Bank Credit Facility replaced our old bank credit facility.
The New Bank Credit Facility consists of a $1.1 billion revolving credit facility and a $500 million term loan. The revolving credit facility matures in June 2009 and the term loan matures in June 2011. The term loan is required to be repaid in increments of $1.25 million per quarter from September 30, 2004 through March 31, 2011. Amounts repaid under the term loan may not be reborrowed. The interest rate on the term loan is based upon either the agent banks quoted base rate or the eurodollar rate, plus a fixed margin. The interest rate on the revolving credit facility is based upon either the agent banks quoted base rate or the eurodollar rate, plus an applicable margin that is determined by the level of a predefined financial leverage ratio. In addition, we incur commitment fees on the unused portion of the revolving credit facility that ranges from 0.25% to 0.50% per annum. The New Bank Credit Facility is secured by substantially all of Boyd Gamings real and personal property (other than stock and other equity interests), including each of its wholly-owned casino properties.
The blended interest rates for outstanding borrowings under the bank credit facility at September 30, 2004 and 2003 were 3.8% and 3.3%, respectively. At September 30, 2004, approximately $499 million was outstanding under the term loan, $570 million was outstanding under our revolving credit facility, and $2.4 million was allocated to support various letters of credit, leaving availability under the New Bank Credit Facility of approximately $527 million.
The New Bank Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a fixed charge coverage ratio, (ii) establishing a maximum permitted total leverage ratio and senior leverage ratio, (iii) imposing limitations on the incurrence of additional secured indebtedness, (iv) imposing limitations on the maximum permitted expansion capital expenditures during the term of the New Bank Credit Facility, (v) imposing restrictions on investments, dividends and certain other payments, and (vi) requiring that we maintain a minimum amount of senior unsecured public and/or subordinated indebtedness outstanding. We believe we are in compliance with the New Bank Credit Facility covenants at September 30, 2004.
New Senior Subordinated Notes. On April 15, 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all but $50,000 in aggregate principal amount of these notes was exchanged for substantially similar notes that were registered
18
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
with the Securities and Exchange Commission. The notes require semi-annual interest payments on April 15 and October 15 of each year, beginning in October 2004 and continuing through April 2014, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, (i) our ability and our restricted subsidiaries (as defined in the indentures governing the notes) ability to incur additional indebtedness, (ii) the payment of dividends and other distributions with respect to our capital stock and the purchase, redemption or retirement of our capital stock, (iii) the making of certain investments, (iv) asset sales, (v) the incurrence of liens, (vi) transactions with affiliates, (vii) payment restrictions affecting restricted subsidiaries and (viii) certain consolidations, mergers and transfers of assets. At any time prior to April 15, 2007, we may redeem up to 35% of the aggregate principal amount of the outstanding notes with the net proceeds from equity offerings at a redemption price of 106.75% of the principal amount, plus accrued and unpaid interest, subject to certain conditions. On or after April 15, 2009, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.375% in 2009 to 100% in 2012 and thereafter, plus accrued and unpaid interest.
We repaid our outstanding indebtedness under our old bank credit facility with approximately $296 million of the net proceeds from the offering of the notes issued in April 2004, which indebtedness included outstanding term loans in an aggregate amount of $198 million. The remainder of the net proceeds from the offering of approximately $49 million was held in cash until May 19, 2004, the date on which the consummation of the acquisition of the partnership interests of Harrahs Shreveport Hotel and Casino was completed.
Note 7. Derivative Instruments
During the three and nine month periods ended September 30, 2004 and 2003, we utilized interest rate swaps with members of our bank group to manage risk on certain of our fixed-rate borrowings. The interest rate swaps convert a portion of our fixed-rate debt to a floating rate. At September 30, 2004, the total notional amount of the swaps was $250 million upon which we expect to pay an estimated weighted average floating rate of approximately 7.2% as of September 30, 2004 and we expect to receive a weighted average fixed rate of approximately 9.2% as of September 30, 2004. The variable interest rates on these swaps are set in arrears. As such, we estimate the variable rates based upon the prevailing interest rates and the implied forward rates in the yield curve. These variable rate estimates are used to record the effect of the swaps until the variable rates are set, at which time any further adjustments between our estimates and the actual rates are recorded. The net effect of our interest rate swaps resulted in a reduction of interest expense of $1.1 million and $1.6 million, respectively, for the three months ended September 30, 2004 and 2003, and $4.4 million and $2.8 million, respectively, for the nine months ended September 30, 2004 and 2003.
Our interest rate swaps qualify for the shortcut method allowed under GAAP, which allows for an assumption of no ineffectiveness. As such, there is no income statement impact from changes in the fair value of the hedging instruments. Instead, the fair value of the instrument is recorded as an asset or liability on our consolidated balance sheet with an offsetting adjustment to the carrying value of the related debt. As such, we recorded an asset of $0.1 million at September 30, 2004 and a liability of $1.8 million at December 31, 2003 representing the fair values of the interest rate swaps with the corresponding adjustments to long-term debt, as the interest rate swaps are considered highly effective under the criteria established by GAAP.
19
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
We are exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements. However, we believe that this risk is minimized due to the credit quality of the counterparties and because the counterparties to the swaps are existing lenders under our bank credit facility. If we had terminated our swaps as of September 30, 2004, we would have received a net balance of $0.1 million based on the market values as quoted by the financial institutions holding the swaps.
In addition, Borgata, our joint venture, has entered into derivative financial instruments that are designated as cash flow hedges to either fix or maintain, within a certain range, interest rates on its floating rate debt to comply with the requirements of its bank credit agreement. The following table reports our share of the effects of Borgatas derivative instruments for the periods indicated. Our share of the increase or decrease in fair value of certain hedges deemed to be ineffective is reported on our accompanying consolidated statements of operations. Our share of the increase or decrease in fair value of certain hedges deemed to be effective is reported in other comprehensive income on the accompanying consolidated balance sheets.
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2004
|
2003
|
2004
|
2003
|
|||||||||||||
(In thousands) | ||||||||||||||||
Net gain (loss) on derivative instruments due to ineffectiveness in certain hedges |
||||||||||||||||
Reported during preopening stage and included in operating loss from Borgata |
$ | | $ | | $ | | $ | (309 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Reported during operating stage and included in non-operating expense from Borgata |
$ | (120 | ) | $ | 20 | $ | 67 | $ | 20 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Derivative instruments market adjustment |
$ | 642 | $ | 3,038 | $ | 3,425 | $ | 2,996 | ||||||||
Tax effect of derivative instruments market adjustment |
(229 | ) | (1,143 | ) | (1,221 | ) | (1,105 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net derivative instruments market adjustment |
$ | 413 | $ | 1,895 | $ | 2,204 | $ | 1,891 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Note 8. Provision for Income Taxes
Indiana State Income Tax Assessment. In 2003, we received a proposed assessment from the Indiana Department of Revenue based upon its position that our Indiana gaming revenue tax is not deductible for Indiana state income tax purposes. An unrelated third party had been litigating the issue in the Indiana Tax Court for several years under a similar fact pattern. Due to the uncertainty of the outcome of the Tax Court litigation, we had been accruing a portion of the proposed assessment and our estimate of potential future assessments based on our estimate of the probability of success. On April 19, 2004, the Indiana Tax Court ruled against the third party. On September 28, 2004, the Indiana Supreme Court denied the third partys petition for review, affirming the Tax Courts earlier decision. We have determined that it is probable that we have incurred a liability for the entire assessment and estimated future assessments and have recorded the related remaining amounts. As such, we recorded a $5.7 million charge, net of federal income tax benefit, to our income tax provision during the three months ended March 31, 2004, resulting in an effective tax rate of 43.2% for the nine month period ended September 30, 2004.
20
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Note 9. Commitments and Contingencies
The Pokagon Band of Potawatomi Indians, a federally recognized Native American tribe, announced, in 1994, its intentions to construct a land-based gaming operation in or near the City of New Buffalo, Michigan, which is located less than fifteen miles from our Blue Chip casino. In August 2004, the Pokagons received a favorable ruling from the Michigan Supreme Court regarding the validity of their compact with the State of Michigan; however, the Pokagons have other remaining legal and regulatory issues that must be resolved prior to construction of the proposed gaming facility. If their facility is constructed and begins operations, it could have a material adverse impact on the operations of Blue Chip.
In addition, a consulting agreement signed in connection with Blue Chips purchase agreement provides for a $5.0 million contingent payment to be made by us if, by the end of November 2004, certain tribal gaming facilities have not commenced gaming operations near our Blue Chip casino. This $5.0 million payment, if required, will be charged against our 2004 operations during the fourth quarter.
At Blue Chip, construction is underway for an expansion of gaming operations. We expect to build a new boat, which will allow for more gaming positions and for the casino to be located on one floor instead of the three-story boat now in operation. We also expect to construct a new parking structure and expand the existing pavilion. The project is expected to cost approximately $150 million and be completed near the end of 2005. As of September 30, 2004, we have incurred approximately $30 million in costs related to this project, including related construction payables, since its inception in 2003. All of the necessary permits are in place for the construction of this project. However, three of our permits are being challenged by third parties as described below.
On October 15, 2004, a compliant for declaratory and injunctive relief was filed against the United States Army Corps of Engineers, or Corps, and others in their official capacities on behalf of the Corps, challenging the Corps issuance of a permit to Blue Chip Casino, LLC under Section 404 of the Clean Water Act, 33 U.S.C. § 1344, and Section 10 of the Rivers and Harbors Appropriation Act, 33 U.S.C. § 403, authorizing certain work related to Blue Chips expansion of gaming operations. The plaintiffs are the Pokagon Band of Potawatomi Indians, New Buffalo Township, Michigan, and nine individuals. The litigation was filed in the United States District Court for the District of Columbia and is being transferred to the United States District Court for the Eastern District of Michigan. Blue Chip has moved to intervene in the litigation as a defendant. The plaintiffs generally allege that the Corps acted arbitrarily and capriciously and contrary to law and its own guidance and policies in issuing the permit to Blue Chip. The plaintiffs have moved for a preliminary injunction prohibiting further work under the permit until final resolution of the litigation and a declaratory judgment and a permanent injunction declaring the permit invalid and unenforceable, revoking the permit and requiring the Corps to prepare an environmental impact statement before considering Blue Chips permit application. It is not possible to determine the likely date of a preliminary injunction hearing or briefing on the merits of the litigation at this time. We intend to vigorously defend the litigation along with the Corps. If we are not ultimately successful in defending this litigation, the Blue Chip expansion may be delayed, which may cause a significant increase in project costs, or the expansion may not be completed, all of which would have a significant adverse effect on our business, financial condition and results of operations. Due to the nature of potential losses in this matter, we cannot estimate the amount of any potential loss.
21
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
On May 11, 2004, two individuals who claim to be adversely affected by the Indiana Department of Environmental Managements, or IDEM, issuance of two permits necessary for the Blue Chip expansion, Robert and Michele Nauyokas, filed with the Indiana Office of Environmental Adjudication a petition for administrative review and a petition for stay of effectiveness. Beginning for two days in July and continuing twelve days later, we participated in a stay hearing before Chief Environmental Law Judge Davidsen. Although a decision on the petitioners request for stay has not yet been issued, Judge Davidsen did, on August 4, 2004, issue an order lifting a temporary emergency stay and lifted a temporary partial stay on discharging groundwater which had been in effect for thirteen days. The petitioners generally allege that the IDEM acted contrary to law and arbitrarily and capriciously in issuing the permits to Blue Chip and seek revocation of, and reconsideration of, the permits. It is not possible to determine the likely dates of a hearing on the merits of the petition, if any. We intend to vigorously defend the permit appeal along with IDEM. If we are not ultimately successful in defending this permit appeal, the Blue Chip expansion may be delayed, which may cause a significant increase in project costs, or the expansion may not be completed, all of which would have a significant adverse effect on our business, financial condition, and results of operations. Due to the nature of potential losses in this matter, we cannot estimate the amount of any potential loss.
We can provide no assurances that the Blue Chip project will be completed within the estimated time frame and budget, or at all. In addition to the permit challenges discussed above, other factors that could cause actual results to differ materially are the following: increased costs and uncertainties relating to new developments and expansions, changes in laws, regulations and the economy, the availability and price of energy, weather, credit and capital market conditions and the effects of war, terrorist or similar activity.
Alvin C. Copeland is the sole shareholder of an entity that applied in 1993 for a riverboat license at the location of our Treasure Chest Casino. Copeland was unsuccessful in the application process and has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chests license, an award of the license to him and monetary damages. This suit was dismissed by the trial court citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial courts decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was denied. The court of appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds, which motions are currently pending. It is not possible to determine the likely date of trial, if any, at this time. We intend to vigorously defend the lawsuit. If we are not ultimately successful in dismissing these claims, we may lose our license for Treasure Chest and may possibly be subject to significant monetary damages, which would have a significant adverse effect on our business, financial condition and results of operations. Due to the nature of the potential losses in this matter, we cannot estimate the amount of any potential loss.
We are also parties to various legal proceedings arising in the ordinary course of business. We believe that, except for the Copeland matter and the Blue Chip permit challenges discussed above, all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.
22
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Note 10. Related Party Transactions
William S. Boyd, our Chairman and Chief Executive Officer, together with his immediate family, beneficially owned approximately 37% of our outstanding shares of common stock as of September 30, 2004. As a result, the Boyd family has the ability to significantly influence our affairs, including the election of our 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 the three and nine month periods ended September 30, 2004 and 2003, there were no material related party transactions between us and the Boyd family.
Michael J. Gaughan, the Chief Executive Officer of Coast Casinos, Inc., a subsidiary of Boyd Gaming, beneficially owned approximately 17% of our outstanding shares of common stock as of September 30, 2004. For the three and nine month periods ended September 30, 2004, there were no material related party transactions between us and Mr. Gaughan.
We utilize services from Las Vegas Dissemination Company, Inc., or LVDC, in connection with our Nevada race book operations. LVDC is wholly-owned by John Gaughan, son of Michael J. Gaughan, and as such, became a related party on July 1, 2004, the date of the merger with Coast Casinos. We pay to LVDC a monthly fee for race wire services as well as a percentage of wagers, ranging from 3% to 5%, on wagers we accept for races held at certain racetracks. The terms on which the dissemination services are provided are regulated by the Nevada Gaming Authorities. For the three month period ended September 30, 2004, we paid a total of $1.1 million to LVDC.
In August 2004, we sold an airplane to Borgata, our 50% joint venture, for use in Borgatas business, for the airplanes appraised value of $5.8 million. In connection with this sale, we recorded a gain of $0.9 million that is recorded in corporate expense on the accompanying consolidated statement of operations. Robert L. Boughner, a member of our board of directors, is the Chief Executive Officer of Marina District Development Company, L.L.C., d.b.a. Borgata Hotel Casino and Spa.
Note 11. Segment Information
We have aggregated certain of our wholly-owned properties in order to present five reportable segments: Boulder Strip, Coast Casinos, Stardust, Downtown Properties and Central Region. Prior to the acquisition of Coast Casinos, we presented our reporting segments differently. In order to conform to this new presentation, we have reclassified the results for the three and nine month periods ended September 30, 2003. The table below lists the classification of each of our properties.
23
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Boulder Strip |
||
Sams Town Hotel and Gambling Hall |
Las Vegas, NV | |
Eldorado Casino |
Henderson, NV | |
Jokers Wild Casino |
Henderson, NV | |
Coast Casinos |
||
Barbary Coast Hotel and Casino |
Las Vegas, NV | |
Gold Coast Hotel and Casino |
Las Vegas, NV | |
The Orleans Hotel and Casino |
Las Vegas, NV | |
Suncoast Hotel and Casino |
Las Vegas, NV | |
Stardust Resort and Casino |
Las Vegas, NV | |
Downtown Properties |
||
California Hotel and Casino |
Las Vegas, NV | |
Fremont Hotel and Casino |
Las Vegas, NV | |
Main Street Station Casino, Brewery and Hotel |
Las Vegas, NV | |
Vacations Hawaii |
Honolulu, HI | |
Central Region |
||
Sams Town Hotel and Gambling Hall |
Tunica, MS | |
Par-A-Dice Hotel Casino |
East Peoria, IL | |
Treasure Chest Casino |
Kenner, LA | |
Blue Chip Hotel and Casino |
Michigan City, IN | |
Delta Downs Racetrack and Casino |
Vinton, LA | |
Sams Town Hotel and Casino |
Shreveport, LA |
The following table sets forth, for the periods indicated, certain operating data for our reportable segments. We completed our acquisition of Sams Town Shreveport on May 19, 2004. Also, on July 1, 2004, we completed our merger with Coast Casinos. Borgata, our Atlantic City joint venture that is accounted for using the equity method, commenced operations on July 3, 2003.
24
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2004
|
2003
|
2004
|
2003
|
|||||||||||||
(In thousands) | ||||||||||||||||
Gross Revenues |
||||||||||||||||
Boulder Strip |
$ | 48,102 | $ | 44,279 | $ | 150,147 | $ | 139,660 | ||||||||
Coast Casinos |
179,831 | | 179,831 | | ||||||||||||
Stardust |
41,230 | 37,824 | 129,920 | 117,138 | ||||||||||||
Downtown Properties |
62,133 | 60,456 | 191,754 | 188,242 | ||||||||||||
Central Region |
252,794 | 202,768 | 678,193 | 606,517 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total gross revenues |
$ | 584,090 | $ | 345,327 | $ | 1,329,845 | $ | 1,051,557 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Adjusted EBITDA(1) |
||||||||||||||||
Boulder Strip |
$ | 9,927 | $ | 7,438 | $ | 35,306 | $ | 29,584 | ||||||||
Coast Casinos |
45,005 | | 45,005 | | ||||||||||||
Stardust |
3,140 | (559 | ) | 13,227 | 7,048 | |||||||||||
Downtown Properties |
7,597 | 7,589 | 26,450 | 28,838 | ||||||||||||
Central Region (3) |
53,064 | 45,934 | 146,481 | 139,209 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Wholly-owned property adjusted EBITDA |
118,733 | 60,402 | 266,469 | 204,679 | ||||||||||||
Corporate expense |
(9,716 | ) | (5,558 | ) | (23,547 | ) | (18,323 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Wholly-owned adjusted EBITDA |
109,017 | 54,844 | 242,922 | 186,356 | ||||||||||||
Our share of Borgatas operating income before preopening expenses and amortization expense (4) |
24,360 | 8,857 | 56,422 | 8,857 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total adjusted EBITDA |
133,377 | 63,701 | 299,344 | 195,213 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other operating costs and expenses |
||||||||||||||||
Deferred rent |
943 | | 943 | | ||||||||||||
Gain on sale of airplane |
(857 | ) | | (857 | ) | | ||||||||||
Depreciation and amortization |
42,385 | 24,019 | 93,944 | 70,114 | ||||||||||||
Preopening expenses |
615 | | 615 | | ||||||||||||
Merger, acquisition and transition related expenses (see Note 3 and 4) |
625 | | 6,534 | | ||||||||||||
Our share of Borgatas preopening expenses |
| 3,468 | | 19,593 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total other operating expenses |
43,711 | 27,487 | 101,179 | 89,707 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income |
89,666 | 36,214 | 198,165 | 105,506 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other non-operating costs and expenses |
||||||||||||||||
Interest expense, net (2) |
30,736 | 20,527 | 70,371 | 56,136 | ||||||||||||
Loss on early retirement of debt |
4,344 | | 4,344 | | ||||||||||||
Gain on sales of undeveloped land |
(8,259 | ) | | (9,679 | ) | | ||||||||||
Our share of Borgatas non-operating expenses, net |
6,419 | 2,830 | 19,569 | 2,830 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total other non-operating costs and expenses |
33,240 | 23,357 | 84,605 | 58,966 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before provision for income taxes |
56,426 | 12,857 | 113,560 | 46,540 | ||||||||||||
Provision for income taxes |
20,877 | 5,143 | 49,013 | 17,943 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
$ | 35,549 | $ | 7,714 | $ | 64,547 | $ | 28,597 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, preopening expenses, merger, acquisition and transition related expenses, deferred rent and the gains on sales of certain assets. We believe that adjusted EBITDA is a widely used measure of operating performance in the gaming industry and is a principal basis for valuation of gaming companies. Adjusted EBITDA is presented before preopening and merger, acquisition and transition related expenses as it represents a measure of performance of our existing operational activities. We use property-level adjusted EBITDA (adjusted EBITDA before corporate expense) as the primary measure of operating performance of our properties. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of our operating performance, or as an alternative to cash flow from operating activities, as a measure of liquidity, or as any other measure determined in accordance with accounting principles generally accepted in the United States of America. We have significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments which are not reflected in adjusted EBITDA. Also, other gaming companies that report EBITDA information may calculate EBITDA in a different manner than us. |
25
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(2) | Net of interest income and amounts capitalized. |
(3) | Includes a one-time charge of $3.5 million for a retroactive gaming tax imposed by the State of Indiana for the three and nine month periods ended September 30, 2003. |
(4) | The following table reconciles the presentation of our share of Borgatas operating results in our accompanying condensed consolidated statement of operations to the presentation of our share of Borgatas results in the above table: |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||
2004
|
2003
|
2004
|
2003
|
||||||||||
(In thousands) | |||||||||||||
Our share of Borgatas operating income (loss) |
$ | 24,030 | $ | 4,921 | $ | 55,432 | $ | (11,204 | ) | ||||
Add back our share of Borgatas preopening expenses (a) |
| 3,468 | | 19,593 | |||||||||
Add back amortization expense related to our capitalized interest and unilateral contribution to Borgata |
330 | 468 | 990 | 468 | |||||||||
|
|
|
|
|
|
|
|
|
|||||
Our share of Borgatas operating income before preopening expenses and amortization expense |
$ | 24,360 | $ | 8,857 | $ | 56,422 | $ | 8,857 | |||||
|
|
|
|
|
|
|
|
|
(a) | Borgatas preopening expenses are included in Borgatas operating loss and are deducted for the presentation of total adjusted EBITDA. Adjusted EBITDA is presented before preopening expenses as it represents a measure of performance from existing operational activities. |
26
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Note 12. Guarantor Information for 9.25% Senior Notes Due in 2009
Our 9.25% Senior Notes due in August 2009 are guaranteed by a majority of our significant subsidiaries. These guaranties are full, unconditional, and joint and several. Due to the acquisition of Shreveport on May 19, 2004 and the merger with Coast Casinos on July 1, 2004, significant subsidiaries that do not guarantee these Notes were created. Accordingly, we are only presenting non-guarantor information as of and for the three and nine month periods ended September 30, 2004. The following consolidating schedules present separate condensed financial statement information on a combined basis for the parent only, as well as our guarantor and non-guarantor subsidiaries, as of September 30, 2004 and December 31, 2003 and for the three and nine month periods ended September 30, 2004 and 2003.
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
As of September 30, 2004
Parent
|
Combined Guarantors |
Combined Non- Guarantors |
Elimination
Entries |
Consolidated
|
||||||||||||||
(In thousands) | ||||||||||||||||||
ASSETS |
||||||||||||||||||
Current assets |
$ | 7,027 | $ | 123,648 | $ | 89,045 | $ | (446 | )(1) | $ | 219,274 | |||||||
Property and equipment, net |
36,834 | 925,813 | 1,194,944 | | 2,157,591 | |||||||||||||
Investment in Borgata, net |
| 300,147 | | | 300,147 | |||||||||||||
Other assets, net |
2,746,604 | 67,429 | 54,472 | (2,764,450 | )(2) | 104,055 | ||||||||||||
Intercompany balances |
342,375 | (156,722 | ) | (185,653 | ) | | | |||||||||||
Intangible assets and goodwill, net |
| 449,510 | 486,431 | | 935,941 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total assets |
$ | 3,132,840 | $ | 1,709,825 | $ | 1,639,239 | $ | (2,764,896 | ) | $ | 3,717,008 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||
Current liabilities |
$ | 67,514 | $ | 139,729 | $ | 112,712 | $ | (446 | )(1) | $ | 319,509 | |||||||
Long-term debt, net of current maturities |
2,164,239 | 14,805 | | | 2,179,044 | |||||||||||||
Deferred income taxes and other liabilities |
5,995 | 136,840 | 183,196 | | 326,031 | |||||||||||||
Stockholders equity |
895,092 | 1,418,451 | 1,343,331 | (2,764,450 | )(2) | 892,424 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total liabilities and stockholders equity |
$ | 3,132,840 | $ | 1,709,825 | $ | 1,639,239 | $ | (2,764,896 | ) | $ | 3,717,008 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination Entries
(1) | To eliminate intercompany payables and receivables between the Parent, Combined Guarantors and Combined Non-Guarantor columns. |
(2) | To eliminate investment in subsidiaries and subsidiaries equity between the Parent, Combined Guarantors and Combined Non-Guarantor columns. |
27
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
As of December 31, 2003
Parent
|
Combined Guarantors |
Elimination
Entries |
Consolidated
|
|||||||||||
(In thousands) | ||||||||||||||
ASSETS |
||||||||||||||
Current assets |
$ | 30,990 | $ | 128,910 | $ | (269 | )(1) | $ | 159,631 | |||||
Property and equipment, net |
57,036 | 901,780 | | 958,816 | ||||||||||
Investment in Borgata, net |
| 265,552 | | 265,552 | ||||||||||
Other assets, net |
1,171,129 | 6,306 | (1,137,947 | )(2) | 39,488 | |||||||||
Intercompany balances |
293,275 | (293,275 | ) | | | |||||||||
Intangible assets and goodwill, net |
| 449,510 | | 449,510 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
$ | 1,552,430 | $ | 1,458,783 | $ | (1,138,216 | ) | $ | 1,872,997 | |||||
|
|
|
|
|
|
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||
Current liabilities |
$ | 33,727 | $ | 166,843 | $ | (269 | )(1) | $ | 200,301 | |||||
Long-term debt, net of current maturities |
1,034,981 | 62,608 | | 1,097,589 | ||||||||||
Deferred income taxes and other liabilities |
37,597 | 96,257 | | 133,854 | ||||||||||
Stockholders equity |
446,125 | 1,133,075 | (1,137,947 | )(2) | 441,253 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 1,552,430 | $ | 1,458,783 | $ | (1,138,216 | ) | $ | 1,872,997 | |||||
|
|
|
|
|
|
|
|
|
|
Elimination Entries
(1) | To eliminate intercompany payables and receivables between the Parent and Combined Guarantors columns. |
(2) | To eliminate investment in subsidiaries and subsidiaries equity between the Parent and Combined Guarantors columns. |
28
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
For the Three Months Ended September 30, 2004
Parent
|
Combined Guarantors |
Combined Non- Guarantors |
Elimination
Entries |
Consolidated
|
||||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenues |
||||||||||||||||||||
Gaming |
$ | | $ | 276,075 | $ | 158,908 | $ | | $ | 434,983 | ||||||||||
Food and beverage |
| 42,208 | 36,305 | | 78,513 | |||||||||||||||
Room |
| 20,074 | 18,897 | | 38,971 | |||||||||||||||
Other |
6,029 | 18,484 | 13,488 | (6,378 | )(1) | 31,623 | ||||||||||||||
Management fee and equity income |
65,096 | 2,819 | | (67,915 | )(1) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross revenues |
71,125 | 359,660 | 227,598 | (74,293 | ) | 584,090 | ||||||||||||||
Less promotional allowances |
| 31,114 | 30,483 | | 61,597 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net revenues |
71,125 | 328,546 | 197,115 | (74,293 | ) | 522,493 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Costs and expenses |
||||||||||||||||||||
Gaming |
| 142,161 | 62,098 | | 204,259 | |||||||||||||||
Food and beverage |
| 21,215 | 29,329 | | 50,544 | |||||||||||||||
Room |
| 4,851 | 7,621 | | 12,472 | |||||||||||||||
Other |
| 29,394 | 12,719 | (13,421 | )(1) | 28,692 | ||||||||||||||
Selling, general and administrative |
| 50,657 | 32,062 | | 82,719 | |||||||||||||||
Maintenance and utilities |
| 15,900 | 9,174 | | 25,074 | |||||||||||||||
Deferred rent |
| | 943 | | 943 | |||||||||||||||
Depreciation and amortization |
662 | 23,821 | 17,572 | | 42,055 | |||||||||||||||
Corporate expense |
14,190 | (775 | ) | 1,822 | (6,378 | )(1) | 8,859 | |||||||||||||
Preopening expenses |
| | 615 | | 615 | |||||||||||||||
Merger, acquisition and transition related expenses |
436 | | 189 | | 625 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
15,288 | 287,224 | 174,144 | (19,799 | ) | 456,857 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating income from Borgata |
| 24,030 | | | 24,030 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating income |
55,837 | 65,352 | 22,971 | (54,494 | ) | 89,666 | ||||||||||||||
Other expense, net |
(20,288 | ) | (8,799 | ) | (4,153 | ) | | (33,240 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income before income taxes |
35,549 | 56,553 | 18,818 | (54,494 | ) | 56,426 | ||||||||||||||
Provision for income taxes |
| 20,877 | | | 20,877 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income |
$ | 35,549 | $ | 35,676 | $ | 18,818 | $ | (54,494 | ) | $ | 35,549 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination Entries
(1) | To eliminate intercompany revenues and expenses between the Parent, Combined Guarantors and Combined Non-Guarantor columns. |
29
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
For the Three Months Ended September 30, 2003
Parent
|
Combined Guarantors |
Elimination
Entries |
Consolidated
|
|||||||||||||
(In thousands) | ||||||||||||||||
Revenues |
||||||||||||||||
Gaming |
$ | | $ | 266,093 | $ | | $ | 266,093 | ||||||||
Food and beverage |
| 40,905 | | 40,905 | ||||||||||||
Room |
| 19,180 | | 19,180 | ||||||||||||
Other |
4,355 | 19,613 | (4,819 | )(1) | 19,149 | |||||||||||
Management fee and equity income |
29,406 | | (29,406 | )(1) | | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross revenues |
33,761 | 345,791 | (34,225 | ) | 345,327 | |||||||||||
Less promotional allowances |
| 34,799 | | 34,799 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net revenues |
33,761 | 310,992 | (34,225 | ) | 310,528 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Costs and expenses |
||||||||||||||||
Gaming |
| 135,551 | | 135,551 | ||||||||||||
Food and beverage |
| 23,479 | | 23,479 | ||||||||||||
Room |
| 5,809 | | 5,809 | ||||||||||||
Other |
| 31,399 | (10,897 | )(1) | 20,502 | |||||||||||
Selling, general and administrative |
| 49,157 | | 49,157 | ||||||||||||
Maintenance and utilities |
| 15,628 | | 15,628 | ||||||||||||
Depreciation and amortization |
713 | 22,838 | | 23,551 | ||||||||||||
Corporate expense |
10,302 | 75 | (4,819 | )(1) | 5,558 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
11,015 | 283,936 | (15,716 | ) | 279,235 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income from Borgata |
| 4,921 | | 4,921 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income |
22,746 | 31,977 | (18,509 | ) | 36,214 | |||||||||||
Other expense, net |
(15,032 | ) | (8,325 | ) | | (23,357 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
7,714 | 23,652 | (18,509 | ) | 12,857 | |||||||||||
Provision for income taxes |
| 5,143 | | 5,143 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
$ | 7,714 | $ | 18,509 | $ | (18,509 | ) | $ | 7,714 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
Elimination Entries
(1) | To eliminate intercompany revenues and expenses between the Parent and Combined Guarantors columns. |
30
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
For the Nine Months Ended September 30, 2004
Parent
|
Combined Guarantors |
Combined Non- Guarantors |
Elimination
Entries |
Consolidated
|
||||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenues |
||||||||||||||||||||
Gaming |
$ | | $ | 834,504 | $ | 176,009 | $ | | $ | 1,010,513 | ||||||||||
Food and beverage |
| 128,285 | 38,580 | | 166,865 | |||||||||||||||
Room |
| 61,084 | 20,695 | | 81,779 | |||||||||||||||
Other |
17,086 | 58,126 | 13,763 | (18,287 | )(1) | 70,688 | ||||||||||||||
Management fee and equity income |
135,407 | 2,819 | | (138,226 | )(1) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross revenues |
152,493 | 1,084,818 | 249,047 | (156,513 | ) | 1,329,845 | ||||||||||||||
Less promotional allowances |
| 104,936 | 30,483 | | 135,419 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net revenues |
152,493 | 979,882 | 218,564 | (156,513 | ) | 1,194,426 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Costs and expenses |
||||||||||||||||||||
Gaming |
| 420,582 | 68,864 | | 489,446 | |||||||||||||||
Food and beverage |
| 69,544 | 31,307 | | 100,851 | |||||||||||||||
Room |
| 16,469 | 8,343 | | 24,812 | |||||||||||||||
Other |
| 89,003 | 12,833 | (33,020 | )(1) | 68,816 | ||||||||||||||
Selling, general and administrative |
| 154,912 | 35,824 | | 190,736 | |||||||||||||||
Maintenance and utilities |
| 43,483 | 9,813 | | 53,296 | |||||||||||||||
Deferred rent |
| | 943 | | 943 | |||||||||||||||
Depreciation and amortization |
2,069 | 71,813 | 19,072 | | 92,954 | |||||||||||||||
Corporate expense |
39,753 | (598 | ) | 1,822 | (18,287 | )(1) | 22,690 | |||||||||||||
Preopening expenses |
| | 615 | | 615 | |||||||||||||||
Merger, acquisition and transition related expenses |
436 | | 6,098 | | 6,534 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
42,258 | 865,208 | 195,534 | (51,307 | ) | 1,051,693 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating income from Borgata |
| 55,432 | | | 55,432 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating income |
110,235 | 170,106 | 23,030 | (105,206 | ) | 198,165 | ||||||||||||||
Other expense, net |
(45,688 | ) | (33,372 | ) | (5,545 | ) | | (84,605 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income before income taxes |
64,547 | 136,734 | 17,485 | (105,206 | ) | 113,560 | ||||||||||||||
Provision for income taxes |
| 49,013 | | | 49,013 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income |
$ | 64,547 | $ | 87,721 | $ | 17,485 | $ | (105,206 | ) | $ | 64,547 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination Entries
(1) | To eliminate intercompany revenues and expenses between the Parent, Combined Guarantors and Combined Non-Guarantor columns. |
31
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
For the Nine Months Ended September 30, 2003
Parent
|
Combined Guarantors |
Elimination
Entries |
Consolidated
|
|||||||||||||
(In thousands) | ||||||||||||||||
Revenues |
||||||||||||||||
Gaming |
$ | | $ | 810,874 | $ | | $ | 810,874 | ||||||||
Food and beverage |
| 124,271 | | 124,271 | ||||||||||||
Room |
| 58,149 | | 58,149 | ||||||||||||
Other |
13,066 | 59,825 | (14,628 | )(1) | 58,263 | |||||||||||
Management fee and equity income |
90,071 | | (90,071 | )(1) | | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross revenues |
103,137 | 1,053,119 | (104,699 | ) | 1,051,557 | |||||||||||
Less promotional allowances |
| 106,670 | | 106,670 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net revenues |
103,137 | 946,449 | (104,699 | ) | 944,887 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Costs and expenses |
||||||||||||||||
Gaming |
| 402,690 | | 402,690 | ||||||||||||
Food and beverage |
| 71,114 | | 71,114 | ||||||||||||
Room |
| 16,442 | | 16,442 | ||||||||||||
Other |
| 91,732 | (29,703 | )(1) | 62,029 | |||||||||||
Selling, general and administrative |
| 144,714 | | 144,714 | ||||||||||||
Maintenance and utilities |
| 43,219 | | 43,219 | ||||||||||||
Depreciation and amortization |
2,012 | 67,634 | | 69,646 | ||||||||||||
Corporate expense |
32,525 | 426 | (14,628 | )(1) | 18,323 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
34,537 | 837,971 | (44,331 | ) | 828,177 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating loss from Borgata |
| (11,204 | ) | | (11,204 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income |
68,600 | 97,274 | (60,368 | ) | 105,506 | |||||||||||
Other expense, net |
(40,003 | ) | (18,963 | ) | | (58,966 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
28,597 | 78,311 | (60,368 | ) | 46,540 | |||||||||||
Provision for income taxes |
| 17,943 | | 17,943 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
$ | 28,597 | $ | 60,368 | $ | (60,368 | ) | $ | 28,597 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
Elimination Entries
(1) | To eliminate intercompany revenues and expenses between the Parent and Combined Guarantors columns. |
32
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
For the Nine Months Ended September 30, 2004
Parent
|
Combined Guarantors |
Combined Non- Guarantors |
Consolidated
|
|||||||||||||
(In thousands) | ||||||||||||||||
Net cash flows provided by operating activities |
$ | 58,914 | $ | 69,135 | $ | 75,730 | $ | 203,779 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash flows from investing activities |
||||||||||||||||
Acquisition of property, equipment and other assets |
(11,602 | ) | (58,674 | ) | (69,438 | ) | (139,714 | ) | ||||||||
Net cash paid for Shreveport acquisition |
| | (187,220 | ) | (187,220 | ) | ||||||||||
Net cash paid for Coast Casinos acquisition |
| | (909,245 | ) | (909,245 | ) | ||||||||||
Investment in Borgata |
| (30,807 | ) | | (30,807 | ) | ||||||||||
Net proceeds from sales of undeveloped land and certain assets |
25,443 | 5,750 | | 31,193 | ||||||||||||
Contributions to consolidated subsidiaries |
(1,142,161 | ) | 185,467 | 956,694 | | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
(1,128,320 | ) | 101,736 | (209,209 | ) | (1,235,793 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash flows from financing activities |
||||||||||||||||
Payments on long-term debt |
| (344 | ) | | (344 | ) | ||||||||||
Payments under bank credit agreements |
(666,450 | ) | | | (666,450 | ) | ||||||||||
Borrowings under bank credit agreements |
1,400,400 | | | 1,400,400 | ||||||||||||
Net proceeds from issuance of long-term debt |
344,596 | | | 344,596 | ||||||||||||
Bank credit facility issuance costs |
(8,983 | ) | | | (8,983 | ) | ||||||||||
Loans to consolidated subsidiaries |
| (185,467 | ) | 185,467 | | |||||||||||
Proceeds from issuance of common stock |
17,051 | | | 17,051 | ||||||||||||
Dividends paid on common stock |
(17,276 | ) | | (14 | ) | (17,290 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
1,069,338 | (185,811 | ) | 185,453 | 1,068,980 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
(68 | ) | (14,940 | ) | 51,974 | 36,966 | ||||||||||
Cash and cash equivalents, beginning of period |
200 | 88,013 | | 88,213 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 132 | $ | 73,073 | $ | 51,974 | $ | 125,179 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
33
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
For the Nine Months Ended September 30, 2003
Parent
|
Combined Guarantors |
Consolidated
|
||||||||||
(In thousands) | ||||||||||||
Net cash flows provided by operating activities |
$ | 85,916 | $ | 46,257 | $ | 132,173 | ||||||
|
|
|
|
|
|
|
|
|
||||
Cash flows from investing activities |
||||||||||||
Acquisition of property, equipment and other assets |
(5,604 | ) | (40,990 | ) | (46,594 | ) | ||||||
Investments in and advances to Borgata |
| (33,159 | ) | (33,159 | ) | |||||||
|
|
|
|
|
|
|
|
|
||||
Net cash used in investing activities |
(5,604 | ) | (74,149 | ) | (79,753 | ) | ||||||
|
|
|
|
|
|
|
|
|
||||
Cash flows from financing activities |
||||||||||||
Payments on long-term debt |
| (331 | ) | (331 | ) | |||||||
Payments under bank credit agreement |
(252,150 | ) | | (252,150 | ) | |||||||
Borrowings under bank credit agreement |
208,000 | | 208,000 | |||||||||
Proceeds from issuance of long-term debt |
| 16,000 | 16,000 | |||||||||
Retirements of long-term debt |
(121,722 | ) | (6,131 | ) | (127,853 | ) | ||||||
Dividends paid on common stock |
(4,818 | ) | | (4,818 | ) | |||||||
Proceeds from issuance of common stock |
3,957 | | 3,957 | |||||||||
Common stock repurchased and retired |
(13,389 | ) | | (13,389 | ) | |||||||
|
|
|
|
|
|
|
|
|
||||
Net cash provided by (used in) financing activities |
(180,122 | ) | 9,538 | (170,584 | ) | |||||||
|
|
|
|
|
|
|
|
|
||||
Net decrease in cash and cash equivalents |
(99,810 | ) | (18,354 | ) | (118,164 | ) | ||||||
Cash and cash equivalents, beginning of period |
101,408 | 89,972 | 191,380 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents, end of period |
$ | 1,598 | $ | 71,618 | $ | 73,216 | ||||||
|
|
|
|
|
|
|
|
|
34
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
We have aggregated certain of our wholly-owned properties in order to present five reportable segments: Boulder Strip, Coast Casinos, Stardust, Downtown Properties and Central Region. Prior to the acquisition of Coast Casinos, we presented our reporting segments differently. In order to conform to this new presentation, we have reclassified the results for the three and nine month periods ended September 30, 2003. The table below lists the classification of each of our properties.
Boulder Strip |
||
Sams Town Hotel and Gambling Hall |
Las Vegas, NV | |
Eldorado Casino |
Henderson, NV | |
Jokers Wild Casino |
Henderson, NV | |
Coast Casinos |
||
Barbary Coast Hotel and Casino |
Las Vegas, NV | |
Gold Coast Hotel and Casino |
Las Vegas, NV | |
The Orleans Hotel and Casino |
Las Vegas, NV | |
Suncoast Hotel and Casino |
Las Vegas, NV | |
Stardust Resort and Casino |
Las Vegas, NV | |
Downtown Properties |
||
California Hotel and Casino |
Las Vegas, NV | |
Fremont Hotel and Casino |
Las Vegas, NV | |
Main Street Station Casino, Brewery and Hotel |
Las Vegas, NV | |
Vacations Hawaii |
Honolulu, HI | |
Central Region |
||
Sams Town Hotel and Gambling Hall |
Tunica, MS | |
Par-A-Dice Hotel Casino |
East Peoria, IL | |
Treasure Chest Casino |
Kenner, LA | |
Blue Chip Hotel and Casino |
Michigan City, IN | |
Delta Downs Racetrack and Casino |
Vinton, LA | |
Sams Town Hotel and Casino |
Shreveport, LA |
The following table sets forth, for the periods indicated, certain operating data for our reportable segments. We completed our acquisition of Sams Town Shreveport on May 19, 2004. Also, on July 1, 2004, we completed our merger with Coast Casinos. Borgata, our Atlantic City joint venture that is accounted for using the equity method, commenced operations on July 3, 2003.
35
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2004
|
2003
|
2004
|
2003
|
|||||||||||||
(In thousands) | ||||||||||||||||
Gross Revenues |
||||||||||||||||
Boulder Strip |
$ | 48,102 | $ | 44,279 | $ | 150,147 | $ | 139,660 | ||||||||
Coast Casinos |
179,831 | | 179,831 | | ||||||||||||
Stardust |
41,230 | 37,824 | 129,920 | 117,138 | ||||||||||||
Downtown Properties |
62,133 | 60,456 | 191,754 | 188,242 | ||||||||||||
Central Region |
252,794 | 202,768 | 678,193 | 606,517 | ||||||||||||
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Total gross revenues |
$ | 584,090 | $ | 345,327 | $ | 1,329,845 | $ | 1,051,557 | ||||||||
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Adjusted EBITDA(1) |
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Boulder Strip |
$ | 9,927 | $ | 7,438 | $ | 35,306 | $ | 29,584 | ||||||||
Coast Casinos |
45,005 | | 45,005 | | ||||||||||||
Stardust |
3,140 | (559 | ) | 13,227 | 7,048 | |||||||||||
Downtown Properties |
7,597 | 7,589 | 26,450 | 28,838 | ||||||||||||
Central Region (3) |
53,064 | 45,934 | 146,481 | 139,209 | ||||||||||||
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Wholly-owned property adjusted EBITDA |
118,733 | 60,402 | 266,469 | 204,679 | ||||||||||||
Corporate expense |
(9,716 | ) | (5,558 | ) | (23,547 | ) | (18,323 | ) | ||||||||
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Wholly-owned adjusted EBITDA |
109,017 | 54,844 | 242,922 | 186,356 | ||||||||||||
Our share of Borgatas operating income before preopening expenses and amortization expense (4) |
24,360 | 8,857 | 56,422 | 8,857 | ||||||||||||
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|
|
|
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Total adjusted EBITDA |
133,377 | 63,701 | 299,344 | 195,213 | ||||||||||||
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Other operating costs and expenses |
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Deferred rent |
943 | | 943 | | ||||||||||||
Gain on sale of airplane |
(857 | ) | | (857 | ) | | ||||||||||
Depreciation and amortization |
42,385 | 24,019 | 93,944 | 70,114 | ||||||||||||
Preopening expenses |
615 | | 615 | | ||||||||||||
Merger, acquisition and transition related expenses |
625 | | 6,534 | | ||||||||||||
Our share of Borgatas preopening expenses |
| 3,468 | | 19,593 | ||||||||||||
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Total other operating expenses |
43,711 | 27,487 | 101,179 | 89,707 | ||||||||||||
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Operating income |
89,666 | 36,214 | 198,165 | 105,506 | ||||||||||||
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Other non-operating costs and expenses |
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Interest expense, net (2) |
30,736 | 20,527 | 70,371 | 56,136 | ||||||||||||
Loss on early retirement of debt |
4,344 | | 4,344 | | ||||||||||||
Gain on sales of undeveloped land |
(8,259 | ) | | (9,679 | ) | | ||||||||||
Our share of Borgatas non-operating expenses, net |
6,419 | 2,830 | 19,569 | 2,830 | ||||||||||||
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Total other non-operating costs and expenses |
33,240 | 23,357 | 84,605 | 58,966 | ||||||||||||
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Income before provision for income taxes |
56,426 | 12,857 | 113,560 | 46,540 | ||||||||||||
Provision for income taxes |
20,877 | 5,143 | 49,013 | 17,943 | ||||||||||||
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Net income |
$ | 35,549 | $ | 7,714 | $ | 64,547 | $ | 28,597 | ||||||||
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|
|
(1) | Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, preopening expenses, merger, acquisition and transition related expenses, deferred rent and the gains on sales of certain assets. We believe that adjusted EBITDA is a widely used measure of operating performance in the gaming industry and is a principal basis for valuation of gaming companies. Adjusted EBITDA is presented before preopening and merger, acquisition and transition related expenses as it represents a measure of performance of our existing operational activities. We use property-level adjusted EBITDA (adjusted EBITDA before corporate expense) as the primary measure of operating performance of our properties. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of our operating performance, or as an alternative to cash flow from operating activities, as a measure of liquidity, or as any other measure determined in accordance with accounting principles generally accepted in the United States of America. We have significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments which are not reflected in adjusted EBITDA. Also, other gaming companies that report EBITDA information may calculate EBITDA in a different manner than us. |
36
(2) | Net of interest income and amounts capitalized. |
(3) | Includes a one-time charge of $3.5 million for a retroactive gaming tax imposed by the State of Indiana for the three and nine month periods ended September 30, 2003. |
(4) | The following table reconciles the presentation of our share of Borgatas operating results in our accompanying condensed consolidated statement of operations to the presentation of our share of Borgatas results in the above table: |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
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2004
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2003
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2004
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2003
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(In thousands) | |||||||||||||
Our share of Borgatas operating income (loss) |
$ | 24,030 | $ | 4,921 | $ | 55,432 | $ | (11,204 | ) | ||||
Add back our share of Borgatas preopening expenses (a) |
| 3,468 | | 19,593 | |||||||||
Add back amortization expense related to our capitalized interest and unilateral contribution to Borgata |
330 | 468 | 990 | 468 | |||||||||
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Our share of Borgatas operating income before preopening expenses and amortization expense |
$ | 24,360 | $ | 8,857 | $ | 56,422 | $ | 8,857 | |||||
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(a) | Borgatas preopening expenses are included in Borgatas operating loss and are deducted for the presentation of total adjusted EBITDA. Adjusted EBITDA is presented before preopening expenses as it represents a measure of performance from existing operational activities. |
The following table sets forth, for the periods indicated, certain operating data for Borgata, our 50% joint venture in Atlantic City. Borgata commenced operations on July 3, 2003.
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
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2004
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2003
|
2004
|
2003
|
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(In thousands) | ||||||||||||||||
Gross revenues |
$ | 233,834 | $ | 184,256 | $ | 630,994 | $ | 184,256 | ||||||||
Less promotional allowances |
47,691 | 34,662 | 134,021 | 34,662 | ||||||||||||
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Net revenues |
186,143 | 149,594 | 496,973 | 149,594 | ||||||||||||
Expenses |
123,081 | 119,082 | 341,509 | 119,082 | ||||||||||||
Depreciation and amortization |
14,359 | 12,797 | 42,430 | 12,797 | ||||||||||||
Preopening expenses |
| 6,936 | | 39,186 | ||||||||||||
(Gain) loss on asset disposal |
(18 | ) | | 189 | | |||||||||||
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Operating income (loss) |
48,721 | 10,779 | 112,845 | (21,471 | ) | |||||||||||
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Interest and other expenses, net |
(8,208 | ) | (10,855 | ) | (27,577 | ) | (10,855 | ) | ||||||||
(Provision) benefit for income taxes |
(4,630 | ) | 5,194 | (11,562 | ) | 5,194 | ||||||||||
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Total non-operating expenses |
(12,838 | ) | (5,661 | ) | (39,139 | ) | (5,661 | ) | ||||||||
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Net income (loss) |
$ | 35,883 | $ | 5,118 | $ | 73,706 | $ | (27,132 | ) | |||||||
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37
Our share of Borgatas results is included in our accompanying condensed consolidated statements of operations for the following periods on the following lines (in thousands):
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
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2004
|
2003
|
2004
|
2003
|
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Our share of Borgatas operating income (loss) |
$ | 24,360 | $ | 5,389 | $ | 56,422 | $ | (10,736 | ) | |||||||
Amortization expense related to our capitalized interest and unilateral contribution to Borgata |
(330 | ) | (468 | ) | (990 | ) | (468 | ) | ||||||||
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Operating income (loss) from Borgata, as reported |
$ | 24,030 | $ | 4,921 | $ | 55,432 | $ | (11,204 | ) | |||||||
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Other expense from Borgata, net |
$ | (6,419 | ) | $ | (2,830 | ) | $ | (19,569 | ) | $ | (2,830 | ) | ||||
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Management Overview
With the July 2004 merger with Coast Casinos and the May 2004 acquisition of the Shreveport property, our company has grown significantly. Coast Casinos currently operates four hotel casino properties in Las Vegas that cater mainly to Las Vegas local residents and has started construction on South Coast, a new property in the southern part of the Las Vegas metropolitan area. The merger provides our company with a greater presence in the historically profitable and growing Las Vegas locals market. We are focused on growth opportunities at several of our properties. These development opportunities are described in more detail at Expansion Projects .
Consolidated Gross Revenues
Consolidated gross revenues increased $239 million, or 69%, for the three months ended September 30, 2004 compared to the three months ended September 30, 2003. The primary reason for the increase in consolidated gross revenues was the addition of Coast Casinos and Sams Town Shreveport. Excluding the results of Coast Casinos and Sams Town Shreveport, gross revenues increased 3.2% for the three months ended September 30, 2004 compared to the same period in the prior year due mainly to increased slot and table game wagering at Stardust and increased slot revenue at the Boulder Strip properties, where gross revenues increased by 9.0% and 8.6%, respectively.
Construction disruption at Delta Downs related to its casino remodeling and reconfiguration caused a 7.7% decline in the propertys gross revenues during the three months ended September 30, 2004 as compared to the same period in the prior year. The Delta Downs project is nearing completion and is further described at Expansion Projects Delta Downs .
For the nine month period ended September 30, 2004, consolidated gross revenues increased $278 million or 26%, as compared to the nine month period ended September 30, 2003. Excluding the results of the recently acquired Coast Casinos and Sams Town Shreveport, gross revenues increased 2.8% for the nine month period ended September 30, 2004 as compared to the same period in the prior year. The increase is due mainly to increased slot and table game wagering at Stardust and increased slot revenue at the Boulder Strip properties, where gross revenue increased by 10.9% and 7.5%, respectively.
38
Total Adjusted EBITDA
Total adjusted EBITDA increased $70 million, or 109%, for the three months ended September 30, 2004 as compared to the three months ended September 30, 2003. The primary reason for the increase in total adjusted EBITDA is the addition of Coast Casinos and Sams Town Shreveport. Excluding their results, total adjusted EBITDA increased 30% during the three months ended September 30, 2004 as compared to the three months ended September 30, 2003 due mainly to the increase in our share of Borgatas operating income. Our share of Borgatas operating income before preopening expenses and amortization expense increased by $15.5 million for the three months ended September 30, 2004 as compared to the same period in the prior year, when Borgata incurred unusually high expenses related to the opening and introduction of the property.
Contributing to the increase in total adjusted EBITDA was an increase in adjusted EBITDA derived from our wholly-owned properties. Excluding Coasts and Shreveports results, wholly-owned property adjusted EBITDA increased 12.6% during the three months ended September 30, 2004 as compared to the three months ended September 30, 2003. The primary reasons for the increase in wholly-owned adjusted EBITDA for the quarter were increases in EBITDA from Stardust and the Boulder Strip properties. At Stardust, the increase in gross revenues described above coupled with lower marketing expenses resulted in a $3.7 million increase in EBITDA. The increase in adjusted EBITDA at the Boulder Strip properties of $2.5 million was primarily caused by the increase in gross revenues.
Adjusted EBITDA from the Downtown properties for the three months ended September 30, 2004 remained essentially flat when compared to the three months ended September 30, 2003 despite a rooms remodeling project at the California which resulted in the property having 4,800 fewer occupied rooms during the quarter. Significantly higher fuel costs in our Hawaiian air charter operations continue to negatively affect adjusted EBITDA from the Downtown properties.
Total adjusted EBITDA increased $104 million, or 53%, for the nine months ended September 30, 2004 as compared to the nine months ended September 30, 2003. The primary reason for the increase in total adjusted EBITDA is the addition of Coast Casinos and Sams Town Shreveport as well as a $48 million increase in operating income from Borgata, before amortization and preopening expenses, which operated for only three months during the nine month period ended September 30, 2003. Prior to Borgatas July 2003 opening, our share of its results was characterized as preopening expenses, which is excluded from our adjusted EBITDA presentation.
Consolidated Operating Income
Consolidated operating income increased 148% to $90 million for the three months ended September 30, 2004 from $36 million for the three months ended September 30, 2003. For the nine months ended September 30, 2004, consolidated operating income increased 88% to $198 million from $106 million for the nine months ended September 30, 2003. The primary reason for the increase in consolidated operating income was the addition of Coast Casinos and Sams Town Shreveport as well as the increase in our share of Borgatas operating income, discussed above. Additionally, we recorded our share of preopening expenses from Borgata of $3.5 million and $19.6 million, respectively, during the three and nine months ended September 30, 2003, thereby reducing our operating income during the 2003 periods. Included in operating income for the three and nine months ended September 30, 2004 is $0.6 million and $6.5 million, respectively, of merger, acquisition and transition related expenses that relate to the merger with Coast Casinos and the Shreveport acquisition.
39
Sams Town Tunica reported an operating loss of $0.3 million for the nine months ended September 30, 2004. Due to a history of operating losses at Sams Town Tunica, we have recently tested the assets of Sams Town Tunica for recoverability pursuant to Statement of Financial Accounting Standards No. 144, or SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The asset recoverability test requires estimating Sams Town Tunicas undiscounted future cash flows and comparing that aggregate total to the propertys carrying value. As the propertys estimated undiscounted future cash flows exceed its carrying value, we do not believe Sams Town Tunicas assets to be impaired at this time. However, we will continue to monitor the performance of Sams Town Tunica and, if necessary, continue to update our asset recoverability test under SFAS No. 144. If future asset recoverability tests indicate that the assets of Sams Town Tunica are impaired, we will be subject to a non-cash writedown of its assets which would likely have a material impact on our consolidated financial statements.
A consulting agreement signed in connection with Blue Chips purchase agreement provides for a $5.0 million contingent payment to be made by us if, by the end of November 2004, certain tribal gaming facilities have not commenced gaming operations near our Blue Chip casino. This $5.0 million payment, if required, will be charged against our 2004 operations during the fourth quarter.
Other Non-Operating Costs and Expenses
Other non-operating costs and expenses are primarily comprised of interest expense. For the three months ended September 30, 2004 and 2003, interest expense, net of interest income and capitalized interest, was approximately $31 million and $21 million, respectively. Capitalized interest for the three months ended September 30, 2004 and 2003 was $1.9 million and $0.1 million, respectively. As a result of our interest rate swaps outstanding during the periods, our interest expense during the three months ended September 30, 2004 and 2003 was $1.1 million and $1.6 million, respectively, less than the contractual rate of the hedged debt. The primary reason for the increase in interest expense during the three months ended September 30, 2004 was higher outstanding debt during the current period due to acquisitions of both Coast Casinos and Sams Town Shreveport.
For the nine months ended September 30, 2004 and 2003, interest expense, net of interest income and capitalized interest, was $70 million and $56 million, respectively. Capitalized interest for the nine months ended September 30, 2004 and 2003 was $2.9 million and $9.1 million, respectively. As a result of our interest rate swaps outstanding during the periods, our interest expense during the nine months ended September 30, 2004 and 2003 was $4.4 million and $2.8 million, respectively, less than the contractual rate of the hedged debt. The primary reason for the increase in interest expense during the nine months ended September 30, 2004 was higher outstanding debt during the current period due to the acquisitions of Coast Casinos and Sams Town Shreveport.
Other non-operating costs and expenses for the three and nine month periods ended September 30, 2004 include a $4.3 million non-cash loss on early retirement of debt related to the write-off of unamortized debt fees associated with our old bank credit facility that was refinanced on July 1, 2004 in connection with the merger with Coast Casinos. During the three months ended September 30, 2004, we sold certain parcels of undeveloped land and recorded an aggregate gain on the sales of $8.3 million. Since we also sold a parcel of undeveloped land during the three months ended June 30, 2004 on which we recorded a gain of $1.4 million, our gain on sales of undeveloped land for the nine month period ended September 30, 2004 totaled $9.7 million. There were no such material transactions during the three or nine month periods ended September 30, 2003.
40
In addition, other non-operating costs and expenses include our share of Borgatas non-operating expenses that are comprised primarily of interest expense and the provision for state income taxes. For the three and nine month periods ended September 30, 2004, our share of these costs was $6.4 million and $19.6 million, respectively. For both the three and nine months periods ended September 30, 2003, our share of these costs was $2.8 million.
Based on New Jersey state income tax rules, Borgata believes it is eligible for a refundable state tax credit under the New Jersey New Jobs Investment Tax Credit because Borgata made an investment in a new business facility that created new jobs. The total available tax credit is subject to annual limitations based on both income and property tax liabilities. Borgatas estimated total credit is approximately $70 million over a five year period. Borgata has filed a request for a refund for approximately $9.6 million related to the year ended December 31, 2003 and expects to file requests for refunds for each of the four years in the period ending December 31, 2007, ranging from approximately $13 million to $17 million per year. Borgata estimates its allowable state tax credit for the nine months ended September 30, 2004 to be approximately $9.6 million. However, due to various uncertainties regarding the realization of the state tax credits, the $19.2 million cumulative state tax credit has not been recognized on its condensed consolidated statements of operations as of September 30, 2004 and there can be no assurances that Borgata will receive any tax credits.
Provision for Income Taxes
The effective tax rate for the three months ended September 30, 2004 was 37% as compared to 40% for the three months ended September 30, 2003. The principal cause of the decline in the tax rate is the addition of the earnings of Coast Casinos which operates in a state that does not assess state income taxes. For the nine month period ended September 30, 2004, the effective tax rate was 43.2% as compared to 38.6% for the same period in the prior year. Included in the provision for the nine months ended September 30, 2004 was a $5.7 million charge, net of federal benefit, related to an adverse tax ruling in Indiana. In 2003, we received a proposed assessment from the Indiana Department of Revenue based upon its position that our Indiana gaming revenue tax is not deductible for Indiana state income tax purposes. An unrelated third party had been litigating the issue in the Indiana Tax Court for several years under a similar fact pattern. Due to the uncertainty of the outcome of the Tax Court litigation, we had been accruing a portion of the proposed assessment and our estimate of potential future assessments based on our estimate of the probability of success. On April 19, 2004, the Indiana Tax Court ruled against the third party. On September 28, 2004, the Indiana Supreme Court denied the third partys petition for review, affirming the Tax Courts earlier decision. We have determined that it is probable that we have incurred a liability for the entire assessment and estimated future assessments and have recorded the related remaining amounts. As such, we recorded a $5.7 million charge, net of federal income tax benefit, to our income tax provision during the three months ended March 31, 2004. We intend to compute our future Indiana state tax expense consistent with the Indiana Tax Court ruling.
41
Net Income
As a result of these factors, we reported net income of $36 million and $7.7 million, respectively, for the three month periods ended September 30, 2004 and 2003 and $65 million and $29 million, respectively, for the nine months ended September 30, 2004 and 2003.
Liquidity and Capital Resources
Cash Flow from Operating Activities and Working Capital
For the nine month period ended September 30, 2004, we generated operating cash flow of $204 million compared to $132 million for the nine month period ended September 30, 2003. The primary reason for the increase in operating cash flow is the addition of the earnings from Coast Casinos and Sams Town Shreveport, which we acquired in July and May 2004, respectively. As of September 30, 2004 and 2003, we had balances of cash and cash equivalents of $125 million and $73 million, respectively, and working capital deficits of $100 million and $17.8 million, respectively.
Historically, we have operated with minimal or negative levels of working capital in order to minimize borrowings and related interest costs under our bank credit facility. The revolving credit facility generally provides any necessary funds for our day-to-day operations, interest and tax payments as well as capital expenditures. On a daily basis, we evaluate our cash position and adjust our revolver balance as necessary by either paying it down with the excess cash or borrowing under the revolver. We also plan the timing and the amounts of our capital expenditures. We believe that our new bank credit facility and cash flows from operating activities will be sufficient to meet our projected operating and maintenance capital expenditures for the next twelve months and the costs associated with the expansions at Delta Downs and Blue Chip and the development of South Coast.
Cash Flows from Investing Activities
We are committed to continually maintaining and enhancing our facilities, most notably by upgrading and remodeling our casinos, hotel rooms, restaurants, other public spaces, and computer systems and by providing the latest slot machines for our customers. Our capital expenditures primarily related to these purposes were approximately $61 million and $44 million, respectively, for the nine month periods ended September 30, 2004 and 2003.
During the nine month period ended September 30, 2004, we paid $20 million for the expansion of Delta Downs casino, $25 million for the expansion of Blue Chip, $9.4 million for The Orleans hotel tower project and $24 million for the South Coast project. During the nine month period ended September 30, 2003, we paid $1.5 million for the Delta Downs project and $1.0 million for the expansion of Blue Chip. For more information about these projects, see Expansion Projects.
During the nine month period ended September 30, 2004, we paid net cash of $187 million for the acquisition of the partnership interests of Harrahs Shreveport Hotel and Casino. We funded this acquisition with approximately $49 million of the net proceeds from the issuance of $350 million principal amount of 6.75% senior subordinated notes issued in April 2004, with the remainder of the cash payment provided by availability under our old bank credit facility.
42
Also during the nine month period ended September 30, 2004, we paid net cash of $909 million for the acquisition of Coast Casinos. We funded this acquisition with availability under our new bank credit facility that became effective on July 1, 2004. For more information on this acquisition, see Coast Casinos Merger .
For the nine month period ended September 30, 2004, we invested $31 million in Borgata, our Atlantic City joint venture which represented our final capital contribution to Borgata pursuant to an agreement of final project costs with MGM MIRAGE. For the nine month period ended September 30, 2003, we invested in or advanced funds to Borgata that, together with capitalized interest, totaled approximately $33 million.
During the nine months ended September 30, 2004, we sold several parcels of undeveloped land as well as an airplane and received a total of approximately $31 million from the net proceeds. There were no such material transactions during the nine months ended September 30, 2003.
Coast Casinos Merger. On July 1, 2004, we consummated a $1.3 billion merger with Coast, pursuant to which Coast became a wholly-owned subsidiary of Boyd Gaming Corporation. The Coast stockholders received approximately $482 million in cash and the Coast stock and option holders received 19.4 million shares of our common stock valued at $19.08 per share. The recorded value of the common stock issued was based upon the average of the closing stock prices of Boyd Gaming three days before and three days after the merger was agreed to and announced.
In connection with the merger, we refinanced substantially all of Coasts debt, including $105 million outstanding balance on Coasts bank credit facility and $325 million principal amount of 9.50% senior subordinated notes due in April 2009. On July 1, 2004, we accepted and paid for approximately $301 million in aggregate principal amount of these notes pursuant to a tender offer and consent solicitation which offered a tender price of $1,031.25 and a consent solicitation fee of $20.00 per $1,000 principal amount of notes accepted for payment by a specified date. We paid approximately $323 million of total consideration, including accrued interest, for these notes. Also on July 1, 2004, we called for the redemption of the remaining $24 million principal amount of notes outstanding at that date. On August 2, 2004, we paid approximately $26 million for the remaining notes based upon a redemption price of $1,047.50 per $1,000 principal amount of notes, plus accrued interest to the date of redemption. The total amount paid to retire all of Coasts outstanding debt, including premiums and interest, represents a portion of the $1.3 billion total merger consideration.
We financed the cash portion of the consideration in the merger, including merger related costs, and refinanced both Coasts debt and our old bank credit facility with availability under our new bank credit facility that became effective on July 1, 2004. For more information on the new bank credit facility, see - Indebtedness New Bank Credit Facility.
In July 2004, we entered into an agreement to acquire real estate for total consideration of approximately $43 million, consisting of approximately $27 million in cash and the assumption of approximately $16 million of debt. We currently expect the transaction to close during the quarter ending December 31, 2004, subject to customary closing conditions.
43
Cash Flows from Financing Activities
Substantially all of the funding for our acquisitions and our renovation and expansion projects comes from cash flows from existing operations as well as debt financing and equity issuances. In February 2004, we issued an aggregate of $100 million in term notes under our old bank credit facility that effectively increased our total credit facility to $600 million. The proceeds from this borrowing were used to pay down $100 million of the outstanding balance of the revolving portion of our bank credit facility in order to create the availability of funds for the Shreveport acquisition. For more information, see Indebtedness Old Bank Credit Facility.
In April 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. Our net proceeds from the issuance of these notes were approximately $345 million, from which we repaid approximately $296 million of outstanding indebtedness under our old bank credit facility, which included outstanding term loans in an aggregate amount of $198 million. We used approximately $49 million of the net proceeds from this issuance to pay for a portion of the Shreveport acquisition.
During the nine month period ended September 30, 2004, we had a net borrowing of $734 million on our bank credit facility due primarily to the acquisitions of Coast Casinos and Sams Town Shreveport as compared to a net repayment of $44 million during the nine months ended September 30, 2003. Due to the refinancing of our new credit facility that became effective on July 1, 2004, we paid $9.0 million in refinancing cost during the nine months ended September 30, 2004. Also during the nine months ended September 30, 2004, we received $17.1 million from the issuance of common stock through the exercise of employee stock options as compared to $4.0 million during the same period of the prior year.
In January 2003, we redeemed our outstanding $116 million principal amount of our 9.50% senior subordinated notes due 2007, pursuant to a redemption notice given on December 30, 2002. The redemption price for these notes was 104.75% and as such, we paid approximately $122 million for these notes. In February 2003, we issued a $16 million note to finance an equipment purchase. In March 2003, we repaid and retired approximately $6.1 million of our other indebtedness.
In November 2002, our Board of Directors authorized the repurchase of up to 2,000,000 shares of our common stock. Depending upon market conditions, shares may be repurchased from time to time at prevailing market prices through open market or negotiated transactions. We began repurchasing shares in February 2003. Through September 30, 2003, we repurchased 1,066,100 shares of our common stock for a total cost of $13.4 million. These shares were retired and are classified as authorized but unissued shares. There were no shares repurchased during the nine months ended September 30, 2004.
Pursuant to a program instituted in 2003, our Board of Directors declared, in January and April 2004, quarterly dividends of $.075 per share, and in July 2004, a quarterly dividend of $.085 per share for a total of $17.3 million that was paid during the nine month period ended September 30, 2004. Also, in October 2004, our Board of Directors declared a dividend of $.085 per share, payable on December 1, 2004 to shareholders of record on November 12, 2004. During the nine month period ended September 30, 2003, our Board of Directors declared a dividend in July 2003 of $.075 per share that totaled $4.8 million. Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility.
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Expansion Projects
Delta Downs. In July 2003, we announced development plans for our Delta Downs property and subsequently began an expansion project at Delta Downs that is expected to cost approximately $55 million. The first two phases, which were completed in October 2004, involved expanding the size of the casino building to provide customers with a more open and comfortable environment, including wider aisles on the slot floor. The final phase of the project includes the development of a 206-room hotel at the property, the addition of food and beverage amenities and an events center. Construction of the final phase began in early 2004 and is expected to be completed in the first quarter of 2005. As of September 30, 2004, we have paid approximately $28 million related to this project since its inception in 2003. We intend to position ourselves better in the market by improving Delta Downs casino environment and offering our customers more amenities. In addition, the expansion is intended to help us compete with the casino that Pinnacle Entertainment is expected to open in 2005 in Lake Charles, Louisiana.
Blue Chip. Construction is underway for an expansion of gaming operations at our Blue Chip Casino. We are building a new boat, which will allow for more gaming positions and for the casino to be located on one floor instead of the three-story boat now in operation. We are also constructing a new parking structure and reconfiguring and refurbishing the existing pavilion. With this project, we intend to position ourselves better in the current market environment with an improved facility and to be prepared to compete more effectively if a land-based casino operation is developed in our area in the future. The project is expected to cost approximately $150 million and be completed near the end of 2005. As of September 30, 2004, we have paid approximately $27 million related to this project since its inception in 2003. All of the necessary permits are in place for the construction of this project. However, three of our permits are being challenged by third parties. These challenges may cause a delay in the expansion project, which may cause a significant increase in project costs or the expansion may not be completed, all of which would have a significant adverse effect on our business, financial condition and results of operations.
The Pokagon Band of Potawatomi Indians, a federally recognized Native American tribe, announced, in 1994, its intentions to construct a land-based gaming operation in or near the City of New Buffalo, Michigan, which is located less than fifteen miles from Blue Chip. In August 2004, the Pokagons received a favorable ruling from the Michigan Supreme Court regarding the validity of their compact with the State of Michigan; however, the Pokagons have other remaining legal and regulatory issues that must be resolved prior to construction of the proposed gaming facility. If their facility is constructed and begins operations, it could have a material adverse impact on the operations of Blue Chip.
South Coast. In April 2004, Coast Casinos broke ground for a new hotel-casino named South Coast that is located on approximately 55 acres of land on Las Vegas Boulevard South, adjacent to Interstate 15 and approximately 5 miles south of Mandalay Bay Resort and Casino. South Coast is expected to include 662 rooms and suites, approximately 2,400 slot machines, 60 table games, 7 restaurants, 16 movie theaters, race and sports books, bingo, bowling, an equestrian events center and 150,000 square feet of convention, exhibit and banquet space. Based upon the current construction plans, we expect to spend approximately $470 million, from the date of the merger, to complete the project that is expected to open near the end of 2005. From July 1, 2004 through September 30, 2004, we have paid approximately $24 million related to this project.
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The Orleans. Construction of a new hotel tower at The Orleans, containing 460 hotel rooms, began in the fall of 2003 and was completed in October 2004. We expect to spend approximately $23 million, from the date of the merger, to complete the project. From July 1, 2004 through September 30, 2004, we have paid approximately $9.4 million related to this project.
The source of funds for these projects is expected to come from cash flows from operations and availability under our new bank credit facility, to the extent availability exists after we meet our working capital needs. We could also fund these projects with incremental bank financing, additional debt or equity offerings. Additional financing may not be available to us, or, if available, may not be on terms favorable to us.
Borgata. In July 2004, we announced that Borgata has commenced planning and design work for an expansion of the property, now referred to as Phase I. Phase I, which requires various government and regulatory approvals, will consist of substantial additions of both gaming and non-gaming amenities, including additional slot machines, table games, restaurants and nightclubs. The expansion is estimated to cost approximately $200 million with construction expected to start in January 2005 and completion expected to occur in the second quarter of 2006. Due to this construction project, Borgata expects to be entitled to an adjusted net profits tax refund once the various government and regulatory approvals, that will enable Borgata to progress with the project, are received. Based on estimates through September 30, 2004, Borgata could be entitled to a refund of approximately $2.4 million. We can provide no assurances that Borgata will actually receive the refund.
In October 2004, we announced we are in the planning phases for a further expansion to Borgata, referred to as Phase II, that involves a new hotel tower, containing approximately 800 rooms, suites and resort condominiums that is scheduled for completion in mid-2007. As Phase II is currently in the planning process and subject to various approvals, we have not yet determined the cost of the project. Borgata expects to finance the expansions from Borgatas cash flow from operations and from Borgatas recently refinanced credit facility, which is capable of being expanded. We do not expect to make further capital contributions to Borgata for these projects.
We can provide no assurances that our expansion and development projects will be completed within our current estimates, commence operations as expected, include all of the anticipated amenities, features or facilities or achieve market acceptance. Each of our expansion projects at Blue Chip and Delta Downs and the expansion of Borgata, are subject to the many risks inherent in expansion projects, including potential unanticipated design, construction, regulatory and environmental problems, increased project costs and timing delays. In addition, the South Coast development project is subject to all of the same risks discussed above, as well as those additional risks inherent in the development and operation of a new or expanded business enterprise, including potential unanticipated operating problems. If any of our expansion or development projects do not become operational within the time frame and project costs currently contemplated or do not successfully compete in their markets, it could have a material adverse effect on our business, financial condition, and results of operations. Once our projects become operational, they will face many of the same risks that our current properties face including, but not limited to increases in taxes due to changes in legislation. In addition, the expansion projects relating to existing properties may not help us compete with new or increased competition.
Indebtedness
Old Bank Credit Facility. In June 2002, we entered into a $500 million Second Amended and Restated bank credit facility, consisting of a $400 million revolving credit facility and a $100 million term loan, which
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replaced our prior bank credit facility. In February 2004, we issued an aggregate of $100 million in term notes under our old bank credit facility that effectively increased our total credit facility to $600 million. The proceeds from this borrowing were used to pay down $100 million of the outstanding balance of the revolving portion of our old bank credit facility in order to create the availability of funds for the Shreveport acquisition. In April 2004, we issued $350 million principal amount of senior subordinated notes that are further discussed below under New Senior Subordinated Notes . We repaid our outstanding indebtedness under our old bank credit facility with approximately $296 million of the net proceeds from the offering, which included outstanding term loans in an aggregate amount of $198 million. At July 1, 2004, our old bank credit facility was repaid in full and terminated.
New Bank Credit Facility . On July 1, 2004 and concurrent with the consummation of the merger with Coast Casinos, Inc., the $1.6 billion bank credit facility (the New Bank Credit Facility) among Boyd Gaming, Bank of America, N.A and certain other financial institutions became effective. The New Bank Credit Facility replaced our old bank credit facility discussed above.
The New Bank Credit Facility consists of a $1.1 billion revolving credit facility and a $500 million term loan. The revolving credit facility matures in June 2009 and the term loan matures in June 2011. The term loan is required to be repaid in increments of $1.25 million per quarter from September 30, 2004 through March 31, 2011. Amounts repaid under the term loan may not be reborrowed. The interest rate on the term loan is based upon either the agent banks quoted base rate or the eurodollar rate, plus a fixed margin. The interest rate on the revolving credit facility is based upon either the agent banks quoted base rate or the eurodollar rate, plus an applicable margin that is determined by the level of a predefined financial leverage ratio. In addition, we incur commitment fees on the unused portion of the revolving credit facility that ranges from 0.25% to 0.50% per annum. The New Bank Credit Facility is secured by substantially all of Boyd Gamings real and personal property (other than stock and other equity interests), including each of its wholly-owned casino properties.
The blended interest rates for outstanding borrowings under the bank credit facility at September 30, 2004 and 2003 were 3.8% and 3.3%, respectively. At September 30, 2004, approximately $499 million was outstanding under the term loan, $570 million was outstanding under our revolving credit facility, and $2.4 million was allocated to support various letters of credit, leaving availability under the New Bank Credit Facility of approximately $527 million.
The New Bank Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a fixed charge coverage ratio, (ii) establishing a maximum permitted total leverage ratio and senior leverage ratio, (iii) imposing limitations on the incurrence of additional secured indebtedness, (iv) imposing limitations on the maximum permitted expansion capital expenditures during the term of the New Bank Credit Facility, (v) imposing restrictions on investments, dividends and certain other payments, and (vi) requiring that we maintain a minimum amount of senior unsecured public and/or subordinated indebtedness outstanding. We believe we are in compliance with the New Bank Credit Facility covenants at September 30, 2004.
New Senior Subordinated Notes. On April 15, 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all but $50,000 in aggregate principal amount of these notes were exchanged for substantially similar notes that were registered with the Securities and Exchange Commission. The notes require semi-annual interest payments on April 15 and October 15 of each year, beginning in October 2004 and continuing through April 2014, at which time the
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entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, (i) our ability and our restricted subsidiaries (as defined in the indentures governing the notes) ability to incur additional indebtedness, (ii) the payment of dividends and other distributions with respect to our capital stock and the purchase, redemption or retirement of our capital stock, (iii) the making of certain investments, (iv) asset sales, (v) the incurrence of liens, (vi) transactions with affiliates, (vii) payment restrictions affecting restricted subsidiaries and (viii) certain consolidations, mergers and transfers of assets. At any time prior to April 15, 2007, we may redeem up to 35% of the aggregate principal amount of the outstanding notes with the net proceeds from equity offerings at a redemption price of 106.75% of the principal amount, plus accrued and unpaid interest, subject to certain conditions. On or after April 15, 2009, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.375% in 2009 to 100% in 2012 and thereafter, plus accrued and unpaid interest. The use of proceeds from this offering were discussed above under Bank Credit Facility .
Notes. Our $200 million principal amount of senior notes due in 2009, $250 million principal amount of senior subordinated notes due 2012, $300 million principal amount of senior subordinated notes due 2012 and $350 million principal amount of senior subordinated notes due 2014 contain limitations on, among other things, (i) our ability and our restricted subsidiaries (as defined in the indentures governing the notes) ability to incur additional indebtedness, (ii) the payment of dividends and other distributions with respect to our capital stock and of our restricted subsidiaries and the purchase, redemption or retirement of our capital stock and our restricted subsidiaries, (iii) the making of certain investments, (iv) asset sales, (v) the incurrence of liens, (vi) transactions with affiliates, (vii) payment restrictions affecting restricted subsidiaries and (viii) certain consolidations, mergers and transfers of assets. We believe we are in compliance with the covenants related to the notes at September 30, 2004. The $200 million principal amount of our 9.25% senior notes due August 2009 is guaranteed by a majority of our significant subsidiaries; however, the acquisitions of Coast Casinos and Sams Town Shreveport created significant subsidiaries that do not guarantee these notes. The guarantees are full, unconditional and joint and several.
Coast Notes Refinanced. In connection with the refinancing of Coasts debt, on July 1, 2004, we called for the redemption of the remaining $24 million principal amount of 9.50% senior subordinated notes outstanding at that date. On August 2, 2004, we paid approximately $26 million for the remaining notes based upon a redemption price of $1,047.50 per $1,000 principal amount of notes, plus accrued interest to the date of redemption. For more information, see Cash Flows from Investing Activities.
Our ability to service our debt will be dependent on future performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, certain of which are beyond our control. It is unlikely that our business will generate sufficient cash flow from operations to enable us to pay our indebtedness as it matures and to fund our other liquidity needs. We believe that we will need to refinance all or a portion of our indebtedness at maturity. However, we may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all. We could have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint venture partners. These financing strategies may not be effected on satisfactory terms, if at all. In addition, certain states laws contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Some restrictions may prevent us from obtaining necessary capital.
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Private Securities Litigation Reform Act
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include information regarding our expectations, hopes or intentions regarding the future, including but not limited to statements regarding our strategy, competition, expenses (including the estimated goodwill related to the Shreveport acquisition and Coast merger), indebtedness, financing, revenue, adjusted EBITDA, operations, regulations, compliance with applicable laws, estimated asset and liability values, the ability to control costs and reduce debt, the closing of the real estate acquisition, our ability to meet projected operating and maintenance capital expenditures, the effects of increased costs and tax rates, the availability and realization of certain tax credits and refunds, accruals related to taxes, our ability to build market share at certain properties, our ability to achieve success with our new acquisitions, the expansion plans at Borgata, Blue Chip, Delta Downs and The Orleans, including the estimates regarding the timing and cost of such expansions, the development plans for the South Coast including estimates regarding the timing and cost for the development of South Coast. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in such statement. In particular, we can provide no assurances that the various expansion projects, including the development plans for the South Coast, will be completed within the estimated time frame and budget, or at all. Among the factors that could cause actual results to differ materially are the following: competition, increased costs (including marketing costs) and uncertainties relating to new developments and expansion (including enhancements to improve property performance), changes in laws and regulations, including increased taxes, post closing accounting adjustments, the availability and price of energy, weather, regulation, economic, and the effects of war, terrorist or similar activity or disasters in, at, or around our properties.
Additional factors that could cause actual results to differ are discussed under the heading Investment Considerations and in other sections of our Form 10-K for the fiscal year ended December 31, 2003 on file with the Securities and Exchange Commission, and in our other current and periodic reports filed from time to time with the Commission. In addition, factors that could cause actual results to differ are discussed under the heading Risk Factors and in other sections of our registration statement on Form S-4 filed with the Commission on June 25, 2004. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
In 2004, we issued debt and refinanced certain of our debt. In April 2004, we issued $350 million principal amount of 6.75% senior subordinated notes due 2014. We repaid our outstanding indebtedness under our old bank credit facility with approximately $296 million of the net proceeds from the offering of the notes issued in April 2004, which included outstanding term loans in an aggregate amount of $198 million. The remainder of the net proceeds from the offering of approximately $49 million was held in cash until May 19, 2004, the date on which the consummation of the acquisition of the partnership interests of Harrahs Shreveport Hotel and Casino was completed.
On July 1, 2004, and concurrent with the consummation of the merger with Coast Casinos, Inc., the New Bank Credit Facility became effective. The New Bank Credit Facility replaced our old bank credit facility and the Coast bank credit facility. The New Bank Credit Facility consists of commitments for up to $1.1 billion of revolving loans and a $500 million term loan. The revolving loans mature in June 2009 and the term loan
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matures in June 2011. The term loan is required to be repaid in increments of $1.25 million per quarter from September 30, 2004 through March 31, 2011. Amounts repaid on the term loan may not be reborrowed. The interest rate on the New Bank Credit Facility is based upon either the agent banks quoted base rate or the eurodollar rate, plus an applicable margin that is determined by the level of a predefined financial leverage ratio. In addition, we incur commitment fees on the unused portion of the revolving loan commitment that ranges from 0.25% to 0.50% per annum.
The blended interest rates for outstanding borrowings under the bank credit facility at September 30, 2004 was 3.8%. At September 30, 2004, approximately $499 million was outstanding under the term loan, $570 million was outstanding under our revolving credit facility, and $2.4 million was allocated to support various letters of credit, leaving availability under the New Bank Credit Facility of approximately $527 million.
Item 4. Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures, including those disclosure controls and procedures applicable to the recently acquired Coast Casinos. While our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions regardless of how remote. However, based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings at the reasonable assurance level.
Internal controls that existed at Coast Casinos at the time of the acquisition were incorporated into our internal controls over financial reporting. There have been no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Alvin C. Copeland is the sole shareholder of an entity that applied in 1993 for a riverboat license at the location of our Treasure Chest Casino. Copeland was unsuccessful in the application process and has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chests license, an award of the license to him and monetary damages. This suit was dismissed by the trial court citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial courts decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was denied. The court of appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds, which motions are currently pending. It is not possible to determine the likely date of trial, if any, at this time. We
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intend to vigorously defend the lawsuit. If we are not ultimately successful in dismissing these claims, we may lose our license for Treasure Chest and may possibly be subject to significant monetary damages, which would have a significant adverse effect on our business, financial condition and results of operations. Due to the nature of the potential losses in this matter, we cannot estimate the amount of any potential loss.
On October 15, 2004, a compliant for declaratory and injunctive relief was filed against the United States Army Corps of Engineers, or Corps, and others in their official capacities on behalf of the Corps, challenging the Corps issuance of a permit to Blue Chip Casino, LLC under Section 404 of the Clean Water Act, 33 U.S.C. § 1344, and Section 10 of the Rivers and Harbors Appropriation Act, 33 U.S.C. § 403, authorizing certain work related to Blue Chips expansion of gaming operations. The plaintiffs are the Pokagon Band of Potawatomi Indians, New Buffalo Township, Michigan, and nine individuals. The litigation was filed in the United States District Court for the District of Columbia and is being transferred to the United States District Court for the Eastern District of Michigan. Blue Chip has moved to intervene in the litigation as a defendant. The plaintiffs generally allege that the Corps acted arbitrarily and capriciously and contrary to law and its own guidance and policies in issuing the permit to Blue Chip. The plaintiffs have moved for a preliminary injunction prohibiting further work under the permit until final resolution of the litigation and a declaratory judgment and a permanent injunction declaring the permit invalid and unenforceable, revoking the permit and requiring the Corps to prepare an environmental impact statement before considering Blue Chips permit application. It is not possible to determine the likely date of a preliminary injunction hearing or briefing on the merits of the litigation at this time. We intend to vigorously defend the litigation along with the Corps. If we are not ultimately successful in defending this litigation, the Blue Chip expansion may be delayed, which may cause a significant increase in project costs, or the expansion may not be completed, all of which would have a significant adverse effect on our business, financial condition and results of operations. Due to the nature of potential losses in this matter, we cannot estimate the amount of any potential loss.
On May 11, 2004, two individuals who claim to be adversely affected by the Indiana Department of Environmental Managements, or IDEM, issuance of two permits necessary for the Blue Chip expansion, Robert and Michele Nauyokas, filed with the Indiana Office of Environmental Adjudication a petition for administrative review and a petition for stay of effectiveness. Beginning for two days in July and continuing twelve days later, we participated in a stay hearing before Chief Environmental Law Judge Davidsen. Although a decision on the petitioners request for stay has not yet been issued, Judge Davidsen did, on August 4, 2004, issue an order lifting a temporary emergency stay and lifted a temporary partial stay on discharging groundwater which had been in effect for thirteen days. The petitioners generally allege that the IDEM acted contrary to law and arbitrarily and capriciously in issuing the permits to Blue Chip and seek revocation of, and reconsideration of, the permits. It is not possible to determine the likely dates of a hearing on the merits of the petition, if any. We intend to vigorously defend the permit appeal along with IDEM. If we are not ultimately successful in defending this permit appeal, the Blue Chip expansion may be delayed, which may cause a significant increase in project costs, or the expansion may not be completed, all of which would have a significant adverse effect on our business, financial condition, and results of operations. Due to the nature of potential losses in this matter, we cannot estimate the amount of any potential loss.
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Refer to Note 9 to our condensed consolidated financial statements as well as our periodic SEC filings (in particular our reports on Form 10-K for the year ended December 31, 2003) for a discussion of matters that have previously been disclosed pursuant to this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) | No repurchases were made pursuant to our share repurchase program during the three or nine month periods ended September 30, 2004. |
(a) | Exhibits |
10.37 | Form of stock option award agreement under our 1996 Stock Incentive Plan. | |
10.38 | Form of stock option award agreement under our 2002 Stock Incentive Plan. | |
10.39 | The Boyd Gaming Corporation Amended and Restated Deferred Compensation Plan for the Board of Directors and Key Employees. | |
10.40 | Amendment Number 1 to the Amended and Restated Deferred Compensation Plan. | |
10.41 | Amendment Number 2 to the Amended and Restated Deferred Compensation Plan. | |
10.42 | Amendment Number 3 to the Amended and Restated Deferred Compensation Plan. | |
10.43 | Amendment Number 4 to the Amended and Restated Deferred Compensation Plan. | |
31.1 | Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a). | |
31.2 | Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a). | |
32.1 | Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a 14(b) and 18 U.S.C. § 1350. | |
32.2 | Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a- 14(b) and 18 U.S.C. § 1350. |
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 8, 2004.
BOYD GAMING CORPORATION | ||
By: |
/s/ JEFFREY G. SANTORO |
|
Jeffrey G. Santoro | ||
Vice President and Controller | ||
(Principal Accounting Officer) |
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Exhibit 10.37
BOYD GAMING CORPORATION 1996 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
Grant Number «Number»
This Agreement is made as of September 23, 1998 (the Grant Date), between BOYD GAMING CORPORATION (the Company) and «First_Name» «Last_Name» (Optionee).
WITNESSETH:
WHEREAS, the Company has adopted the Boyd Gaming Corporation 1996 Stock Incentive Plan (the Plan), which Plan is incorporated in this Agreement by reference and made a part of it; and
WHEREAS, the Company regards Optionee as a valuable employee of the Company, and has determined that it would be to the advantage and in the interest of the Company and its stockholders to grant the options provided for in this Agreement to Optionee as an inducement to remain in the service of the Company and its Affiliates (as defined in the Plan) and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties to this Agreement hereby agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee an option (the Option) to purchase «Shares_Granted» shares of Common Stock (the Shares) at the exercise price of $4.5625 per share (the Exercise Price) subject to the terms, definitions and provisions of the Companys 1996 Stock Incentive Plan (the Plan) adopted by the Company, which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.
2. Exercise of Option .
(a) Right to Exercise . This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the attached Statement of Option Activity and with the applicable provisions of the Plan and this Option Agreement. In the event of termination of Optionees Continuous Status as an Employee, Director or Consultant, this Option shall be exercisable in accordance with the applicable provisions of the Plan and this Option Agreement. This Option shall be subject to the provisions of Section 11 of the Plan relating to the exercisability or termination of the Option in the event of a Corporate Transaction, Change in Control or Subsidiary Disposition.
(b) Vesting Schedule Subject to other limitations contained in this Agreement, the option shall vest and become exercisable by the Optionee at the rate of one-third per year on the first day of each successive twelve-month period for a three-year period beginning one year from the Grant Date.
1
(c) Termination Period: This Option may be exercised for three (3) months after termination of the Optionees employment or consulting relationship, or such longer period as may be applicable upon death or disability of Optionee as provided in the Agreement. In the event of the Optionees change in status from Employee to Consultant or Consultant to Employee, this Option Agreement shall remain in effect. In no event shall this Option be exercisable later than the Term/Expiration Date set forth above.
(d) Method of Exercise . This Option shall be exercisable only by delivery of an Exercise Notice (attached as Exhibit A) which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, such other representations and agreements as to the holders investment intent with respect to such Shares and such other provisions as may be required by the Administrator. Such Exercise Notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Vice President Tax and Financial Administration or other designated representative at the Companys office located at 2950 S. Industrial Road, Las Vegas, NV 89109, accompanied by payment of the Exercise Price. The Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of the Option unless such issuance and such exercise shall comply with all Applicable Laws. Assuming such compliance, for income tax purposes, the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.
(e) Taxes . No Shares will be issued to the Optionee or other person pursuant to the exercise of the Option until the Optionee or other person has made arrangements acceptable to the Administrator for the satisfaction of foreign, federal, state and local income and employment tax withholding obligations.
3. Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee; provided, however, that such exercise method does not then violate an Applicable Law:
(a) cash;
(b) check
(c) surrender of shares of Common Stock of the Company (including withholding of Shares otherwise deliverable upon exercise of this Option) which have a Fair Market Value on the date of surrender equal to the Exercise Price of the Shares as to which the Option is being exercised (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the shares used to pay the exercise price unless otherwise determined by the Administrator); or
(d) delivery of a properly executed Exercise Notice together with such other
2
documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the Exercise Price.
4. Restrictions on Exercise . This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company. In addition, this Option may not be exercised if the issuance of the Shares, subject to the Option upon such exercise, would constitute a violation of any Applicable Laws.
5. Termination of Relationship . In the event the Optionees Continuous Status as an Employee or Consultant terminates, the Optionee may, to the extent otherwise so entitled at the date of such termination (the Termination Date), exercise this Option during the Termination Period set out in the Notice of Stock Option Grant. Except as provided in Sections 6 and 7 below, to the extent that the Optionee was not entitled to exercise this Option on the Termination Date, or if the Optionee does not exercise this Option within the Termination Period, the Option shall terminate.
6. Disability of Optionee. In the Optionees Continuous Status as an Employee or Consultant terminates as a result of his or her disability, the Optionee may, but only within twelve (12) months from the Termination Date (and in no event later than the Term/Expiration Date), exercise the Option to the extent otherwise entitled to exercise it on the Termination Date. To the extent that the Optionee was not entitled to exercise the Option on the Termination Date, or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.
7. Death of Optionee . In the event of the Optionees death, the Option may be exercised at any time within twelve (12) months following the date of death (and in no event later than the Term/Expiration Date), by the Optionees estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee could exercise the Option at the date of death.
8. Transferability of Option . This Option may be transferred by the Optionee in a manner and to the extent acceptable to the Administrator as evidenced by a written statement signed by the Company and the Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs and successors of the Optionee.
9. Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement. The Option Period shall commence on the Grant Date and except as provided in paragraphs 6 and 7 above, shall terminate ten (10) years from the date of grant (the Termination Date).
10. Tax Consequences . Set forth below is a brief summary as of the date of this Option Agreement of some of the federal tax consequences of exercise of this Option and
3
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Non-Qualified Stock Option. There may be a regular federal income tax liability upon the exercise of a Non-Qualified Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Optionee is an Employee or a former Employee, the Company will be required to withhold from Optionees compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
(b) Disposition of Shares. In the case of a Non-Qualified Stock Option, if Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an Incentive Stock Option, if Shares transferred pursuant to the Option are held for at least one year after receipt of the Shares and are disposed of at least two years after the Date of Grant, any gain realized on disposition of the Shares also will be treated as long-term capital gain for federal income tax purposes.
11. Entire Agreement: Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes, in their entirety, all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a written statement signed by the Company and Optionee. This agreement is governed by Nevada law except for that body of law pertaining to conflicts of laws.
12. Headings. The captions used in this Option are inserted for convenience and shall not be deemed a part of this Option for construction or interpretation.
13. Interpretation . Any dispute regarding the interpretation of this Option Agreement shall be submitted by the Optionee or by the Company forthwith to the Companys Board of Directors or the Administrator that administers the Plan, which shall review such dispute at its next regular meeting. The resolution of such dispute by the Board or the Administrator shall be final and binding on all persons.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANYS 1996
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STOCK INCENTIVE PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEES RIGHT OR THE COMPANYS RIGHT TO TERMINATE OPTIONEES EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option Agreement subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address.
IN WITNESS WHEREOF, the Company has caused these presents to be executed on its behalf, and Optionee has hereunto set his hand as of the day and year first written above.
BOYD GAMING CORPORATION | ||
By: |
William S. Boyd |
|
Its: |
Chairman of the Board and Chief Executive Officer |
|
OPTIONEE: | ||
(Signature) |
||
«First_Name» «Last_Name» |
||
(Printed Name) | ||
«Address_Line_1» |
||
(Address) | ||
«City» «State» «Zip_Code» |
5
EXHIBIT A
BOYD GAMING CORPORATION 1996 STOCK INCENTIVE PLAN
EXERCISE NOTICE
Boyd Gaming Corporation
2950 S. Industrial Road
Las Vegas, Nevada 89109-1100
Attention: Rick Darnold - Vice President
1. Exercise of Option. Effective as of today, , , the undersigned (Optionee) hereby elects to exercise Optionees option to purchase shares of the Common Stock (the Shares) of Boyd Gaming Corporation (the Company) under and pursuant to the Companys 1996 Stock Incentive Plan (the Plan) and the Non-Qualified Stock Option Agreement dated September 23, 1998, (the Option Agreement).
2. Representations of Optionee . Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
3. Rights as Stockholder . Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, not withstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan.
4. Delivery of Payment. Optionee herewith delivers to the Company the full Exercise Price for the Shares.
5. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionees purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice
6. Taxes. Optionee agrees to satisfy all applicable federal, state and local income and employment tax withholding obligations and has made arrangements acceptable to the Company to satisfy such obligations.
7. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. This Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.
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8. Headings . The captions used in this Agreement are inserted for convenience and shall not be deemed a part of this Agreement for construction or interpretation.
9. Interpretation . Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Companys Board of Directors or the Administrator that administers the Plan, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Board or Administrator shall be final and binding on all persons.
10. Governing Law Severibility . This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.
11. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.
12. Further Instruments . The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purpose and intent of this agreement.
13. Entire Agreement . The Plan and the Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan and the Option Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes, in their entirety, all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionees interest except by means of a written statement signed by the Company and Optionee.
Submitted by: |
Accepted by: |
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OPTIONEE: |
BOYD GAMING CORPORATION | |||
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By: |
|
||
(Signature) |
Its: |
|
||
Address: |
Address: |
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2950 South Industrial Road Las Vegas, Nevada 89109-1100 |
Revised 7/3/97
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Exhibit 10.38
BOYD GAMING CORPORATION
2002 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION AWARD
Grantees Name:
You have been granted an option to purchase shares of Common Stock, subject to the terms and conditions of this Notice of Stock Option Award (the Notice), the Boyd Gaming Corporation 2002 Stock Incentive Plan, as amended from time to time (the Plan) and the Stock Option Award Agreement (the Option Agreement) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.
Award Number |
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Date of Award |
||||
Vesting Commencement Date |
||||
Exercise Price per Share |
||||
Total Number of Shares Subject to the Option (the Shares) |
||||
Type of Option: |
Non-Qualified Stock Option | |||
Expiration Date: |
||||
Post-Termination Exercise Period: |
Three (3) Months |
Vesting Schedule :
Subject to Grantees Continuous Service and other limitations set forth in this Notice, the Plan and the Option Agreement, the Option may be exercised, in whole or in part, in accordance with the following schedule:
Subject to other limitations contained in this Agreement, 1/3 of the Shares subject to the Option Award shall vest twelve (12) months after the Vesting Commencement Date, 1/3 of the Shares subject to the Option Award shall vest twenty-four (24) months after the Vesting Commencement Date, and 1/3 of the Shares subject to the Option Award shall vest thirty-six (36) months after the Vesting Commencement Date.
During any authorized leave of absence, the vesting of the Option as provided in this schedule shall be suspended after the leave of absence exceeds a period of ninety (90) days. Vesting of the Option shall resume upon the Grantees termination of the leave of absence and return to service to the Company or a Related Entity. The Vesting Schedule of the Option shall be extended by the length of the suspension.
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In the event of the Grantees change in status from Employee to Consultant or from an Employee whose customary employment is 20 hours or more per week to an Employee whose customary employment is fewer than 20 hours per week, vesting of the Option shall continue only to the extent determined by the Administrator as of such change in status.
IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Option is to be governed by the terms and conditions of this Notice, the Plan, and the Option Agreement.
Boyd Gaming Corporation | ||
a Nevada corporation |
||
By: |
|
|
Title: |
|
THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEES CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE OPTION AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEES CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEES RIGHT OR THE RIGHT OF THE GRANTEES EMPLOYER TO TERMINATE GRANTEES CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, GRANTEES STATUS IS AT WILL .
The Grantee acknowledges receipt of a copy of the Plan and the Option Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Option subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Plan, and the Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice, the Plan and the Option Agreement. The Grantee hereby agrees that all disputes arising out of or relating to this Notice, the Plan and the Option Agreement shall be resolved in accordance with Section 13 of the Option Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.
Dated: |
Signed: |
|
||
Grantee | ||||
Award Number: |
2
BOYD GAMING CORPORATION
2002 STOCK INCENTIVE PLAN
STOCK OPTION AWARD AGREEMENT
1. Grant of Option . Boyd Gaming Corporation, a Nevada corporation (the Company), hereby grants to the Grantee (the Grantee) named in the Notice of Stock Option Award (the Notice), an option (the Option) to purchase the Total Number of Shares of Common Stock subject to the Option (the Shares) set forth in the Notice, at the Exercise Price per Share set forth in the Notice (the Exercise Price) subject to the terms and provisions of the Notice, this Stock Option Award Agreement (the Option Agreement) and the Companys 2002 Stock Incentive Plan, as amended from time to time (the Plan), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.
If designated in the Notice as an Incentive Stock Option, the Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by the Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date the Option with respect to such Shares is awarded.
2. Exercise of Option .
(a) Right to Exercise . The Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of the Plan and this Option Agreement. The Option shall be subject to the provisions of Section 11 of the Plan relating to the exercisability or termination of the Option in the event of a Corporate Transaction or Change in Control. The Grantee shall be subject to reasonable limitations on the number of requested exercises during any monthly or weekly period as determined by the Administrator. In no event shall the Company issue fractional Shares.
(b) Method of Exercise . The Option shall be exercisable only by delivery of an Exercise Notice (attached as Exhibit A) which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, and such other provisions as may be required by the Administrator. The Exercise Notice shall be signed by the Grantee and shall be delivered in person, by certified mail, or by such other method as determined from time to time by the Administrator to the Company accompanied by payment of the Exercise Price. The Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d), below.
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(c) Taxes . No Shares will be delivered to the Grantee or other person pursuant to the exercise of the Option until the Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income tax and employment tax withholding obligations, including, without limitation, such other tax obligations of the Grantee incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of the Option, the Company or the Grantees employer may offset or withhold (from any amount owed by the Company or the Grantees employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax obligations and/or the employers withholding obligations.
3. Method of Payment . Payment of the Exercise Price shall be made by any of the following, or a combination thereof, at the election of the Grantee; provided, however, that such exercise method does not then violate any Applicable Law:
(a) cash;
(b) check;
(c) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Option) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which the Option is being exercised (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price); or
(d) payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company-designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction.
4. Restrictions on Exercise . The Option may not be exercised if the issuance of the Shares subject to the Option upon such exercise would constitute a violation of any Applicable Laws. In addition, the Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company.
5. Termination or Change of Continuous Service . In the event the Grantees Continuous Service terminates, the Grantee may, but only during the Post-Termination Exercise Period, exercise the portion of the Option that was vested at the date of such termination (the Termination Date). In no event shall the Option be exercised later than the Expiration Date set forth in the Notice. In the event of the Grantees change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the Option shall remain in effect and, except to the extent otherwise determined by the Administrator, continue to vest; provided, however, that with respect to any Incentive Stock Option that shall remain in effect after a change in status from Employee to Director or Consultant, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified
4
Stock Option on the day that is three (3) months and one (1) day following such change in status. Except as provided in Sections 6 and 7 below, to the extent that the Option was unvested on the Termination Date, or if the Grantee does not exercise the vested portion of the Option within the Post-Termination Exercise Period, the Option shall terminate.
6. Disability of Grantee . In the event the Grantees Continuous Service terminates as a result of his or her Disability, the Grantee may, but only within twelve (12) months from the Termination Date (and in no event later than the Expiration Date), exercise the portion of the Option that was vested on the Termination Date; provided, however, that if such Disability is not a disability as such term is defined in Section 22(e)(3) of the Code and the Option is an Incentive Stock Option, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the Termination Date. To the extent that the Option was unvested on the Termination Date, or if the Grantee does not exercise the vested portion of the Option within the time specified herein, the Option shall terminate.
7. Death of Grantee . In the event of the termination of the Grantees Continuous Service as a result of his or her death, or in the event of the Grantees death during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantees termination of Continuous Service as a result of his or her Disability, the Grantees estate, or a person who acquired the right to exercise the Option by bequest or inheritance, may exercise the portion of the Option that was vested at the date of termination within twelve (12) months from the date of death (but in no event later than the Expiration Date). To the extent that the Option was unvested on the date of death, or if the vested portion of the Option is not exercised within the time specified herein, the Option shall terminate.
8. Transferability of Option . The Option, if an Incentive Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Grantee only by the Grantee; provided, however, that the Grantee may designate a beneficiary of the Grantees Incentive Stock Option in the event of the Grantees death on a beneficiary designation form provided by the Administrator. The Option, if a Non-Qualified Stock Option, may be transferred to any person by will and by the laws of descent and distribution. Non-Qualified Stock Options also may be transferred during the lifetime of the Grantee by gift and pursuant to a domestic relations order to members of the Grantees Immediate Family to the extent and in the manner determined by the Administrator. The terms of the Option shall be binding upon the executors, administrators, heirs, successors and transferees of the Grantee.
9. Term of Option . The Option may be exercised no later than the Expiration Date set forth in the Notice or such earlier date as otherwise provided herein.
10. Tax Consequences . Set forth below is a brief summary as of the date of this Option Agreement of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
5
(a) Exercise of Incentive Stock Option . If the Option qualifies as an Incentive Stock Option, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as income for purposes of the alternative minimum tax for federal tax purposes and may subject the Grantee to the alternative minimum tax in the year of exercise. However, the Internal Revenue Service issued proposed regulations which would subject the Grantee to withholding at the time the Grantee exercises an Incentive Stock Option for Social Security, Medicare and other payroll taxes (not including income tax) based upon the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. These proposed regulations are subject to further modification by the Internal Revenue Service and, if adopted, would be effective only for the exercise of Incentive Stock Options on or after January 1, 2003.
(b) Exercise of Incentive Stock Option Following Disability . If the Grantees Continuous Service terminates as a result of Disability that is not total and permanent disability as defined in Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Grantee must exercise an Incentive Stock Option within three (3) months of such termination for the Incentive Stock Option to be qualified as an Incentive Stock Option.
(c) Exercise of Non-Qualified Stock Option . On exercise of a Non-Qualified Stock Option, the Grantee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If the Grantee is an Employee or a former Employee, the Company will be required to withhold from the Grantees compensation or collect from the Grantee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
(d) Disposition of Shares . In the case of a Non-Qualified Stock Option, if Shares are held for more than one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes and subject to tax at a maximum rate of 20%. In the case of an Incentive Stock Option, if Shares transferred pursuant to the Option are held for more than one year after receipt of the Shares and are disposed more than two years after the Date of Award, any gain realized on disposition of the Shares also will be treated as capital gain for federal income tax purposes and subject to the same tax rates and holding periods that apply to Shares acquired upon exercise of a Non-Qualified Stock Option. If Shares purchased under an Incentive Stock Option are disposed of prior to the expiration of such one-year or two-year periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the sale price of the Shares.
11. Entire Agreement; Governing Law . The Notice, the Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantees interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan and this Option Agreement (except as expressly provided
6
therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of Nevada without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Nevada to the rights and duties of the parties. Should any provision of the Notice, the Plan or this Option Agreement be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
12. Headings . The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation.
13. Dispute Resolution The provisions of this Section 13 shall be the exclusive means of resolving disputes arising out of or relating to the Notice, the Plan and this Option Agreement. The Company, the Grantee, and the Grantees assignees (the parties) shall attempt in good faith to resolve any disputes arising out of or relating to the Notice, the Plan and this Option Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the partys position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Option Agreement shall be brought in the United States District Court for the District of Nevada in which the Company is located (or should such court lack jurisdiction to hear such action, suit or proceeding, in a Nevada state court in the County in which the Company is located) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 13 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
14. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in the Notice, or to such other address as such party may designate in writing from time to time to the other party.
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EXHIBIT A
BOYD GAMING CORPORATION
2002 STOCK INCENTIVE PLAN
EXERCISE NOTICE
To: | Boyd Gaming Corporation | |
Attn: | Rick Darnold, Stock Option Administrator, 2950 Industrial Road, LV, NV 89109 702-792-7237, Fax 702-792-7377 | |
Subject: | Notice of Intention to Exercise Stock Option |
1. Exercise of Option . Effective as of today, , the undersigned (the Grantee) hereby elects to exercise the Grantees option to purchase shares of the Common Stock (the Shares) of Boyd Gaming Corporation (the Company) under and pursuant to the Companys 2002 Stock Incentive Plan, as amended from time to time (the Plan) and the Non-Qualified Stock Option Award Agreement (the Option Agreement) and Notice of Stock Option Award (the Notice) dated, , unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Exercise Notice. Share Price: Grant Number:
2. Representations of the Grantee . The Grantee acknowledges that the Grantee has received, read and understood the Notice, the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
3. Rights as Stockholder . Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan.
4. Delivery of Payment . The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d) of the Option Agreement.
5. Tax Consultation . The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the Grantees purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the purchase or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice.
6. Taxes . The Grantee agrees to satisfy all applicable foreign, federal, state and local income and employment tax withholding obligations and herewith delivers to the Company the
1
full amount of such obligations or has made arrangements acceptable to the Company to satisfy such obligations. In the case of an Incentive Stock Option, the Grantee also agrees, as partial consideration for the designation of the Option as an Incentive Stock Option, to notify the Company in writing within thirty (30) days of any disposition of any shares acquired by exercise of the Option if such disposition occurs within two (2) years from the Date of Award or within one (1) year from the date the Shares were transferred to the Grantee. If the Company is required to satisfy any foreign, federal, state or local income or employment tax withholding obligations as a result of such an early disposition, the Grantee agrees to satisfy the amount of such withholding in a manner that the Administrator prescribes.
7. Successors and Assigns . The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. This Exercise Notice shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.
8. Headings . The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of this agreement for construction or interpretation.
9. Dispute Resolution . The provisions of Section 13 of the Option Agreement shall be the exclusive means of resolving disputes arising out of or relating to this Exercise Notice.
10. Governing Law; Severability . This Exercise Notice is to be construed in accordance with and governed by the internal laws of the State of Nevada without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Nevada to the rights and duties of the parties. Should any provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
11. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.
12. Further Instruments . The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this agreement.
13. Entire Agreement . The Notice, the Plan and the Option Agreement are incorporated herein by reference and together with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantees interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan, the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties.
2
(a) |
Cashiers check, certified check, bank draft or postal or express money order | |||
(b) |
I hereby authorize the Company to cancel my option to the extent of the number of shares listed above and issue to me shares having a fair market value equal to the difference between the fair market value and option price of such number of shares | |||
(c) |
Cashless exercise through stockbroker |
The shares should be issued as follows (If method A or B is selected):
Name:
Address:
BROKERAGE INFORMATION
Do you currently have a brokerage account? |
YES
|
NO
|
If yes, please complete the following:
Name on Account: Account #:
Brokerage Firm & Contact:
Brokerage Address: DTC:
City State: Zip Phone: Fax:
I am not /I am an insider. I am subject to blackout period from to .
Signed: Dated:
Authorized By: Dated:
Approval Expires:
Federal Withholding: (minimum is 25%)
3
EXHIBIT 10.39
BOYD GAMING CORPORATION
DEFERRED COMPENSATION PLAN
FOR THE
BOARD OF DIRECTORS AND KEY EMPLOYEES
1
TABLE OF CONTENTS
Article 1. | Introduction | |
Article 2. | Definitions | |
Article 3. | Plan Specifications | |
Article 4. | Distributions and Loans | |
Article 5. | Plan Investment | |
Article 6. | Beneficiary | |
Article 7. | Vesting and Forfeitures | |
Article 8. | Benefits | |
Article 9. | Administration | |
Article 10. | Miscellaneous |
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ARTICLE 1. - INTRODUCTION
Whereas, the Employer established a supplementary employee retirement plan to provide deferred compensation for a select group of management or highly compensated employees as chosen by the Employer effective June 1, 1998, and
Whereas, the Employer, who has determined pursuant to the laws of the Employers state, may establish such a Plan;
Whereas, the Plan, as heretofore adopted, provides, among other things, that the Employer may amend or terminate the Plan at any time;
Whereas, the Employer wishes to amend the Plan into the to form set forth in this Agreement;
Whereas, the Employer intends to maintain two nonqualified plans of deferred compensation, one of which is for a select group of management and highly compensated employees, and the other for non-employee Directors, both of which are described in this document, and which shall together be called the Boyd Gaming Corporation Deferred Compensation Plan for the Board of Directors and Key Employees and
Whereas, the Employer wishes to provide under the Plan for the payment of vested accrued benefits to the Participants and their beneficiary or beneficiaries, and
Whereas, the Employer wishes to provide under the Plan that the Employer shall pay the entire cost of vested accrued benefits from its general assets and set aside contributions by the Employer to meet its obligations under the Plan, and
Whereas, the Employer intends that the assets of the Plan and Trust shall at all times be subject to the claims of the general creditors of the Employer,
Now therefore, the Employer does amend and restate the existing Plan to provide as follows, and does also hereby agree that the Plan shall be structured, held and disposed of as follows:
ARTICLE 2. - DEFINITIONS
Age means age at nearest birthday.
Beneficiary means the beneficiary or beneficiaries designated by the Participant in the Enrollment Agreement who are to receive any distributions payable upon the death of the Participant.
Board means the Employers Board of Directors of Boyd Gaming Corporation.
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Change of Control means the occurrence of any of the following:
a) | the purchase or other acquisition by any person, entity or group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 (Act), or any comparable successor provisions, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of more than 50 percent of either the outstanding shares of common stock or the combined voting power of the, Employers then outstanding voting securities entitled to vote generally, other than through a transaction arranged by, or consummated with the prior approval of, the Board of Directors of the Employer; or |
b) | the end of a two-consecutive year period in which the individuals who at the beginning of such period constituted the Board of Directors (and any new Director whose election by the Board or whose nomination for election by the stockholders of the Employer was approved by a vote of at least two-thirds (2/3) of the Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority thereof; or |
c) | approval by the stockholders of the Employer of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of the Employer immediately prior to such reorganization, merger, or consolidation do not, immediately thereafter, own more than 50 percent of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Employers then outstanding securities, or a liquidation or dissolution of the Employer or of the sale of all or substantially all of the Employers assets; or |
d) | approval by stockholders of the Employer of a plan of complete liquidation of the Employer or an agreement for the sale or disposition by the Employer of all or substantially all of the Employers assets. |
Compensation means the amount payable to an Eligible Employee or director, for services rendered to the Employer, such as Board fees, base salary or annual incentive compensation that is reportable to the Federal Government for the purpose of withholding Federal income taxes, or which would be reportable if it were not deferred by the Eligible Employee under this Plan.
Deferred Compensation means the amount of Compensation that the Participant elects to defer under the Enrollment Agreement and that the Participant and the Employer mutually agree shall be deferred in accordance with the Plan and/or the amount of any contributions made by the Employer on behalf of the Participant.
Disability means a Participants total and permanent disability as a result of disease or bodily injury so as to render the Participant incapable of engaging in any substantial gainful activity by reason of any medically determinable physical or mental impairment or impairments that can be expected to result in death or that have lasted or can be expected to last for a continuous period of not less than twelve (12) months, provided that the Participant is eligible for and receives disability benefits under the Social Security Act. The Plan Administrator shall have the exclusive right of determining, with the assistance of a competent physician whether a Participant has suffered a Disability. A certificate to that effect, executed by the Plan Administrator and supported by the affidavit of an examining physician, shall be sufficient evidence of such fact and may be so accepted by the Plan Administrator without further inquiry, provided that all Participants under similar circumstances shall be treated alike.
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Effective Date means, as to the Plan, June 1, 1998, and as to this amendment and restatement, January 1, 2002.
Eligible Employee means, in the case of the Directors Plan, a member of the Employers board of directors who is not also an employee of the Employer, and in the case of the Key Employee Plan, part of a select group of management or highly compensated individuals in grade 22 or its equivalent and higher who performs services for the Employer as an employee and who has been chosen by the Employer each year, in its sole discretion, to be eligible to participate in the Plan. Eligible Employee also includes those employees of Employers subsidiaries and affiliates who satisfy the foregoing criteria.
Employer means Boyd Gaming Corporation, its subsidiaries and affiliates, and any succeeding or continuing corporation.
Employment or Re-employment Commencement Date means the date on which the Eligible Employee first performs an Hour of Service for the Employer.
Enrollment Agreement means the agreement entered into by a Participant which specifies the amount of Deferred Compensation, the Participants Beneficiary and the Participant election of form of payment on Termination of Service.
401(k) Plan shall mean the Boyd Gaming Corporation 401(k) plan and the Marina District Development Company 401(k) plan.
Hardship Withdrawal A withdrawal is on account of hardship if it is due to an unforeseen emergency which creates a hardship and which occurs during employment and prior to the Participants retirement and commencement of benefits. An unforeseen emergency is defined as (1) payment of uninsured medical care expenses previously incurred by the Participant or the Participants spouse or dependents, or (2) uninsured loss of the Participants or Beneficiarys property due to casualty, or (3) payment of tuition, related educational fees from an accredited university including room and board expenses for the next 12 month of post-secondary education for the Participant or the Participants spouse, children or dependents, or (4) payments necessary to prevent eviction from or foreclosure on a mortgage on the participants principal resident, or (5) costs related to the purchase of a Participants principal residence (not including mortgage payments).
Payment may not be made to the extent that such hardship is or may be relieved (1) through reimbursement or compensation by insurance or otherwise, (2) by liquidation of the Participants assets to the extent the liquidation of these assets would not itself cause severe financial hardship or (3) cessation of deferrals under the Plan.
Normal Retirement Age means Age 59 1 / 2 years.
Participant shall mean any Eligible Employee selected by the Employer who has elected to participate in the Plan by entering into an Enrollment Agreement.
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Participants Account means an account established and maintained by the Employer for a Participant that is used to measure the benefits to be paid under the Plan.
Plan means the Boyd Gaming Corporation Deferred Compensation Plan for the Board of Directors (the Directors Plan), or the Boyd Gaming Corporation Deferred Compensation Plan for Key Employees (the Key Employees Plan), as amended and restated as of January 1, 2002 in this document. Each of such plans is a separate plan, and both together are included in this document and are referred to by the singular term Plan.
Plan Administrator means Boyd Gaming Corporation, acting through the Plan Administrative Committee appointed from time to time by its Board of Directors; provided, that if at any time no such committee has been appointed and is serving, then the entire Board of Directors shall be deemed to be serving as the Plan Administrative Committee.
Plan Year means the 12 consecutive month period beginning on each January 1 st and ending on the next following December 31st.
Service means employment with the Employer including leaves of absence authorized by the Employer (such as a temporary absence authorized by the Employer because of vacation, sickness, injury, disability, layoff, or jury duty) and service in the armed forces of the United States, commencing while he is an employee, provided that he returns to the employment of the Employer as an employee at the end of such authorized absence, or within the applicable period specified in the Military Selective Service Act of 1967, and amendments thereto, after release from such service with the armed forces. Moreover, in calculating the number of a Participants Years of Credited Service and length of participation in this Plan for all purposes hereunder, such period of absence or service with the armed forces subsequent to becoming a Participant hereunder, will be counted. However, no Contributions will be made to the Plan during such periods of absence or service with the armed forces.
Termination of Service shall mean severance of the Participants services for the Employer for any reason, including retirement.
Top Hat Plan means a non-qualified deferred compensation plan for a select group of management or highly compensated employees, within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974.
Trust shall mean the Trust Agreement between the Employer. and the Trustee.
Trustee means the Trustee named in the Trust and their duly appointed and acting successor Trustee which shall be appointed by the corporation, and may consist of one or more persons.
6
ARTICLE 3. - PLAN SPECIFICATIONS
|
||
3.1 | Each Eligible Employee shall be eligible to participate in the Plan on the Effective Date. Thereafter, each Eligible Employee shall be eligible to participate in the Plan as of the first day of the calendar year following the calendar year in which he is hired or promoted into a position making him an Eligible Employee. | |
3.2 | An Eligible Employee may enroll and become a Participant by executing an Enrollment Agreement in each calendar year preceding the calendar year in which deferral of compensation is to commence. | |
3.3 | The Participant shall specify in his Enrollment Agreement the amount of Compensation to be deferred under the Plan. The maximum permitted to be deferred by an employee under the Plan is (1) 15% of base salary, and (2) 50% of incentive compensation paid. The maximum permitted to be deferred by a non-employee director under the Plan is 100% of Board of Directors fees. Additional deferrals by employees will be allowed in anticipation of the funding of the Participants account under the 401(k) Plan as provided in Section 3.11, below. The Plan Administrator may establish minimum deferral amount requirements and maximum limits. | |
3.4 | Any salary deferrals made by an Eligible Employee under this Plan shall be held as an asset of the Employer, and the Employer intends to deposit amounts equal to the aggregate amounts deferred by all Participants into the Trust. | |
3.5 | The Participant may terminate his Enrollment Agreement, and be restored to full Compensation, at any time by giving written notice to the Plan Administrator. The termination shall be effective as soon as practicable, and in no event later than the second payroll date following receipt of the notice by the Plan Administrator. The Participant may change his Enrollment Agreement by giving written notice of such change to the Plan Administrator, prior to the calendar year in which such change is to be effective. An election to defer Compensation under this Plan, or to change the amount of Deferred Compensation, shall apply only to Compensation earned after such election. | |
3.6 | If a Participant suffers a hardship and receives a hardship withdrawal as defined in Article 2, the Participant shall be deemed to revoke his deferral election for the remainder of the calendar year in which the hardship withdrawal has occurred. | |
3.7 | The Plan Administrator has the power to establish rules and from time to time to modify or change such rules governing the manner and method by which salary deferral contributions may be changed or discontinued temporarily or permanently. | |
3.8 | A Participants Enrollment Agreement shall remain in effect unless previously modified or terminated as herein permitted until the Participants Termination of Service. | |
3.9 | All salary deferrals shall be authorized by the Participant in writing, made by payroll |
7
deduction, and deducted from the Participants compensation without reduction for any taxes or withholding (except to the extent required by law or the regulations). Equivalent amounts shall be added to the Participants Account as of a date within 30 days after the date of each salary deferral, and concurrently, contributions in amounts equal to the salary deferrals shall be paid over to the Trust by the Employer. | ||
3.10 | The Employer may make a discretionary matching or additions to the Participants Account, in an amount determined by the Employer in its sole discretion, and shall concurrently contribute that amount to the Trust. | |
3.11 | Each Participant who is eligible to participate in the 401(k) Plan and who elects the maximum permitted deferral under the 401(k) Plan for a year (the determination year) may, by so electing, cause all or a portion of the compensation deferred under this Plan to be transferred to the 401(k) Plan (up to the maximum amount permitted by Section 402(g) of the Internal Revenue Code), pending completion of the annual nondiscrimination testing under the 401(k) Plan Employer shall, not later than March 15 of the year following the determination year, transfer (or cause the Trustee to transfer) funds to the trustee of the 401(k) Plan for deposit in the account of the Participant under the 401(k) Plan. Concurrently, the Participants Account under this Plan shall be reduced by the amount so transferred. Any portion of the deferrals in anticipation of the 401(k) Plan funding that are not so transferred shall remain in the Participants Account under this Plan. Such election must be made not later than December 31 of the calendar year preceding the calendar year for which the election is made, and such election may not be revoked after that date. The Employers determination of the maximum amount that may be contributed to the 401(k) Plan on behalf of each Participant shall be conclusive. | |
ARTICLE 4. - DISTRIBUTIONS AND LOANS | ||
4.1 | All distributions to or for the benefits of a Participant shall be made in accordance with Article 8. Except for distributions described below, no benefits shall be distributed prior to the Participants termination of employment with the Employer. | |
4.2 | There are no loans available under this Plan; however, a Participant may make a Hardship Withdrawal, as defined in Article 2, under the Plan. Any Eligible Employee who is a Participant in both this Plan and the 401(k) Plan must draw down all funds available to him under this Plan before he can request a hardship withdrawal from the 401(k) Plan, but only to the extent that such 401(k) Plan allows for Hardship Withdrawals. | |
4.3 | Scheduled In-Service Withdrawal - No Penalty. A Participant may request from the Employer, at least 2 years prior to the distribution date, an irrevocable scheduled in-service withdrawal from the Participants Account. The withdrawal will not be paid until the Participant has had at least 5 years of Plan participation. The maximum withdrawal cannot exceed 20% of the current market value of the vested portion of the Participants Account. Only one withdrawal can be paid in any year. At the time the withdrawal is requested, the amount to be distributed must be stated as either (a) a specific dollar |
8
amount (no greater than the value of the Participants Account at the time the distribution is made), or (b) a specific percentage of the Participants Account balance at the time the distribution is made. | ||
4.4 | Unscheduled In-Service WithdrawalPenalty. A Participant may request from the Employer an unscheduled in-service withdrawal from the Participants Account, subject to a penalty, equal to 10% of the amount requested. The amount requested, plus the 10% penalty, may not exceed the vested portion of the Participants Account. The 10% penalty amount will be forfeited. At the time the withdrawal is requested, the amount to be distributed must be stated as either (a) a specific dollar amount (no greater than the value of the Account at the time the distribution is made), or (b) a specific percentage of the Participants Account balance at the time the distribution is made. | |
4.5 | An in-service withdrawal election stated above shall automatically be revoked if the in-service withdrawal date is on or after the Participants termination date. | |
4.6 | In addition to withdrawals for distribution, as provided in Sections 4.1 through 4.6, to the extent contemplated in Section 3.11, amounts may be withdrawn from the Participants Account and contributed to the 401(k) Plan. | |
ARTICLE 5. - PLAN INVESTMENT | ||
5.1 | All contributions will be invested by the Trustee under the Diversified Investors Funds Group, and Diversified Investors Strategic Allocation Funds (Mutual Funds under which accounts will be established for each Participant). Each Participant shall elect which of such funds shall be used for that Participants Account, and, if more than one fund is elected, in what proportions. The Participant may change the election of funds and proportions no more frequently than twice in any year. | |
5.2 | Each Participants Account shall be credited with earnings and charged with losses of the funds elected by him, in the proportions elected by him. | |
5.3 | All amounts in the Trust, including all investments purchased with such amounts and all income attributable thereto, shall remain (until made available to the Participant or Beneficiary) solely the property of the Employer (without being restricted to the provision of benefits under the Plan) subject to the claims of the Employers general creditors. No Participant or Beneficiary shall have any secured or beneficial interest in any property, rights or investments held by the Employer in connection with the Plan. | |
ARTICLE 6. - BENEFICIARY | ||
6.1 | The Participants Enrollment Agreement shall designate the Beneficiary or Beneficiaries who are to receive distributions in the event of the Participants death. If the Participant has not properly designated a Beneficiary, or if for any reason such designation shall not be legally effective, or if said designated Beneficiary or Beneficiaries shall predecease the |
9
Participant, then the Participants estate shall be treated as the Beneficiary. A Participant may change his Beneficiary designation at any time by amending his Enrollment Agreement. | ||
ARTICLE 7. - VESTING AND FORFEITURES | ||
7.1 | The portion of a Participants Account attributable to salary deferrals, including 401(k) excess amounts, as adjusted for earnings and losses of the investment funds elected by the Participant pursuant to Article 5, shall be fully vested at all times. Except for death payments which are 100% vested immediately upon death, the Employer matching and discretionary nonelective contributions shall be determined in accordance with a vesting schedule selected by the Employer in its discretion, with the terms of such vesting schedule to be communicated to the Participants. However, all contributions, even those that are 100% vested are subject to the reach of the Employers creditors in the event of insolvency | |
7.2 | When employment is terminating and payment is not deferred, the amount of the payment shall be based on the value of the Participants Account plus any contributions subsequently credited to such Account, the amount of which shall immediately be distributed. | |
ARTICLE 8. - BENEFITS | ||
8.1 | Termination, Death or Disability. The Participant shall elect the payment option described in 8.3 below under which distribution will be made following his retirement. Such election shall be designated by the Participant in the Enrollment Agreement. However, if the Participants Termination, Death or Disability is prior to his Normal Retirement Age (or, in the case of a Participant who became a Participant prior to the Effective Date of this amendment and restatement of the Plan, prior to reaching the age of 55), the distribution will be in the form of a lump sum cash payment. Payment of benefits will begin as soon as administratively feasible after his Termination of Service provided that in no case will payment of benefits begin later than 60 days after the close of the Plan Year in which the Participant terminates service. | |
8.2 | Change of Control. Benefits under this Plan are immediately payable in a lump sum upon a Change of Control as described in Article 2. | |
8.3 | Retirement Distributions. Distributions shall be made as elected by the Participant in his Enrollment Agreement, subject to 8.4 below, under one or more of the following payment options. | |
(a) in a lump sum cash payment; or |
||
(b) if the account balance is at least $5,000, substantially equal monthly, quarterly or annual payments over a period of 5, 10 or 15 years. |
||
If periodic payments are elected, the Participants Account shall be reduced by each such |
10
payment, and the remaining portion of the Participants Account shall continue to be credited with earnings and losses in the manner stated in Article 5. | ||
Note: Default payment is a lump sum payment. | ||
8.4 | Distribution Election Changes. Subject to the approval of the Employer, a Participant may request to change his or her form of distribution payment, or to further defer to a later date certain a previously elected in-service withdrawal, at any time prior to 60 days before the beginning of the year of commencement of distributions, by providing a written request to the Plan Administrator. If a Participant is receiving installment payments as described in (b) above, and such Participant meets the requirements to make a Hardship Withdrawal, such Participant may elect to change his form of payment to (a) above without 10% penalty. If a hardship has not occurred, a lump sum may be elected, subject to a 10% penalty. | |
ARTICLE 9. - ADMINISTRATION | ||
9.1 | Plan Administrator. The Plan Administrator shall administer the Plan. | |
9.2 | Power and Authority. The Plan Administrator shall have full power and authority to adopt rules and regulations (including without limitation a reasonable claims procedure) for the administration of the Plan, and to interpret, alter, amend, or revoke any rules and regulations so adopted. The Plan Administrator shall have full power and authority to interpret the terms and provisions of this Plan and any instrument filed hereunder. | |
9.3 | Presumption of Fairness. Every action taken by the Plan Administrator shall be presumed to be a fair and reasonable exercise of the authority vested in, or the duties imposed upon, the Plan Administrator. The Plan Administrator shall be deemed to have acted impartially as to all persons interested, unless the contrary be proven by affirmative evidence. The Plan Administrator shall not be liable for amounts of Deferred Compensation by a Participant or for other amounts payable under the Plan. | |
9.4 | Other Parties. Any person or entity which issues policies, contracts, or investment media to the Employer or in respect of a Participant is not a party to this Plan and such person or entity shall have no responsibility, accountability or liability to the Employer, the Plan Administrator, any Participant, or any Beneficiary with regard to the operation or adequacy of this Plan, including any future amendments made thereto. | |
9.5 | Information Requests. Any party entitled to payment under this Plan shall comply with all written requests of the Plan Administrator or its designee to furnish the Plan Administrator with any information known or available to such party and necessary to the administration of the Plan. | |
9.6 | Expenses. If not paid by the Employer, all reasonable expenses incurred in the administration of the Plan, including without limitation those of the Trustees and the Plan Administrator, shall be paid from Participants Accounts to which such expenses are allocable. |
11
12
10.7 | Benefits under the Plan shall be paid from the Trust only to the extent the Employer is not at the time of payment insolvent. Any vested accrued benefits under the Plan represent an un-funded, unsecured promise by the Employer to pay these benefits to the Participants when due. A Participant has no greater right to Trust assets than the general creditors of the Employer in the event that the Employer shall become insolvent. Trust assets can be used to pay only vested accrued benefits under the Plan or the claims of the Employers general creditors. | |
10.8 | This Plan and the Enrollment Agreement, and any subsequently adopted amendment thereof, shall constitute the total agreement or contract between the Employer and the Participant regarding the Plan. No oral statement regarding the Plan may be relied upon by the Participant. | |
10.9 | Change of Law. If, because of a change in law, the Trust should be determined to no longer be considered a rabbi trust as currently permitted by IRS Private Letter Ruling 8113107, then the Plan and Trust shall be deemed to have terminated as of the effective date of the change in law which nullified its status as a rabbi trust. | |
10.10 | This Plan shall be construed under the laws of Nevada. |
IN WITNESS WHEREOF, Boyd Gaming Corporation has caused this Plan to be executed by its duly authorized officers this 6 th Day of December, 2001
IN PRESENCE OF:
/s/ W ILLIAM S. B OYD |
/s/ D ONALD D. S NYDER |
|
William S. Boyd | Donald D. Snyder | |
Chairman of the Board and Chief Executive Officer | President |
13
EXHIBIT 10.40
BOYD GAMING CORPORATION
DEFERRED COMPENSATION PLAN
Amendment No. One to Amended and Restated Plan
WHEREAS, Boyd Gaming Corporation (Employer) maintains the Boyd Gaming Corporation Deferred Compensation Plan for the Board of Directors and Key Employees (Plan); and
WHEREAS, the Employer desires to amend the Plan to change the Normal Retirement Date.
NOW, THEREFORE, the Plan is hereby amended, effective as of January 1, 2002, as follows:
1. | The definition of Normal Retirement Age in Article II is amended to read as follows: |
Normal Retirement Age means Age 55 years.
2. | Section 8.1 is amended to read as follows: |
Termination, Death or Disability. The Participant shall elect the payment option described in 8.3 below under which distribution will be made following his retirement. Such election shall be designated by the Participant in the Enrollment Agreement. However, if the Participants Termination, Death or Disability is prior to his Normal Retirement Age, the distribution will be in the form of a lump sum cash payment. Payment of benefits will begin as soon as administratively feasible after his Termination of Service provided that in no case will payment of benefits begin later than 60 days after the close of the Plan Year in which the Participant terminates service.
BOYD GAMING CORPORATION, a Nevada Corporation | ||
By: |
/s/ D ONALD D. S NYDER |
|
Name: | Donald D. Snyder | |
Its: | President |
EXHIBIT 10.41
BOYD GAMING CORPORATION
DEFERRED COMPENSATION PLAN
Amendment Number 2 to Amended and Restated Plan
WHEREAS, Boyd Gaming Corporation (Employer) maintains the Boyd Gaming Corporation Deferred Compensation Plan for the Board of Directors and Key Employees (Plan); and
WHEREAS, the Employer has reserved to itself the right to amend the Plan at any time it deems necessary or desirable; and
WHEREAS, the Employer desires to amend the Plan to liberalize certain of the requirements relating to deferral elections made by newly-hired employees who desire to become Plan participants.
NOW, THEREFORE, the Plan is hereby amended, effective as of January 1, 2003, as follows:
1. | Section 3.2 of the Plan is restated in its entirety to read as follows: |
3.2 An Eligible Employee may enroll and become a Participant by executing an Enrollment Agreement in each calendar year preceding the calendar year in which deferral of compensation is to commence. Notwithstanding the foregoing, a newly-hired Eligible Employee who is otherwise eligible to participate in the Plan shall be permitted to complete an initial Enrollment Agreement within thirty (30) days after his date of hire; provided, however, that any such initial Enrollment Agreement shall only be effective with respect to Compensation earned after the thirtieth (30 th ) day following his date of hire.
Except as otherwise provided in this Amendment Number 2 to the Amended and Restated Plan, the Plan is hereby ratified and confirmed in all respects.
EXECUTED this 20th day of November, 2003.
BOYD GAMING CORPORATION, a Nevada Corporation | ||
By: |
/s/ D ONALD D. S NYDER |
|
Name: | Donald D. Snyder | |
Its: | President |
EXHIBIT 10.42
BOYD GAMING CORPORATION
DEFERRED COMPENSATION PLAN
Amendment Number 3 to Amended and Restated Plan
WHEREAS, Boyd Gaming Corporation (Employer) maintains the Boyd Gaming Corporation Deferred Compensation Plan for the Board of Directors and Key Employees (Plan); and
WHEREAS, the Employer has reserved to itself the right to amend the Plan at any time it deems necessary or desirable; and
WHEREAS, the Employer desires to amend the Plan to incorporate certain provisions relating to transfers between the Plan and the Borgata deferred compensation plan.
NOW, THEREFORE, the Plan is hereby amended, effective as of January 1, 2003, as follows:
1. | The definition of Termination of Service appearing in Article 2 of the Plan is restated in its entirety to read as follows: |
Termination of Service shall mean severance of the Participants services for the Employer for any reason, including retirement; provided, however, that a Participants transfer of employment to the Borgata or to an affiliated company covered by the Borgata Plan shall not constitute a Termination of Service for purposes of the Plan.
2. | Article 2 of the Plan is amended by the addition of the following two definitions: |
Borgata Plan means the Marina District Development Company, LLC Deferred Compensation Plan for Key Employees.
Transferred Eligible Employee means a participant in the Borgata Plan whose employment is transferred to the Employer and who is an Eligible Employee for purposes of the Plan.
3. | Article 3 of the Plan is amended by the addition of the following Section 3.12: |
3.12 Notwithstanding any contrary provision herein, if a Transferred Eligible Employee is selected to participate in the Plan, (1) his aggregate account balance in the Borgata Plan shall automatically be transferred to the Plan; (2) his deferral and distribution elections under the Borgata Plan shall continue in effect under the Plan, except as may otherwise be permitted by the terms of the Plan; and (3) any such transferred amounts shall thereafter be subject to all of the terms and conditions of the Plan.
4. | Article 4 of the Plan is amended by the addition of the following Section 4.7: |
4.7 In the event a Participants employment is transferred from the Employer to the Borgata (or to an affiliated company covered by the Borgata Plan), his aggregate account balance in the Plan shall automatically be transferred to the Borgata Plan and shall thereafter be subject to its terms and conditions. Following any such transfer, no additional amounts shall be credited to such Participant under the Plan unless he shall subsequently return to covered employment as an Eligible Employee.
Except as otherwise provided in this Amendment Number 4 to the Amended and Restated Plan, the Plan is hereby ratified and confirmed in all respects.
EXECUTED this 20 day of November, 2003.
BOYD GAMING CORPORATION, a Nevada Corporation | ||
By: |
/s/ D ONALD D. S NYDER |
|
Name: | Donald D. Snyder | |
Its: | President |
EXHIBIT 10.43
BOYD GAMING CORPORATION
DEFERRED COMPENSATION PLAN
Amendment Number 4 to Amended and Restated Plan
WHEREAS, Boyd Gaming Corporation (Employer) maintains the Boyd Gaming Corporation Deferred Compensation Plan for the Board of Directors and Key Employees (Plan); and
WHEREAS, the Employer has reserved to itself the right to amend the Plan at any time it deems necessary or desirable; and
WHEREAS, the Employer desires to amend the Plan to incorporate certain provisions relating to discretionary transfers of assets into the Plan made in connection with corporate acquisitions.
NOW, THEREFORE, the Plan is hereby amended, effective as of April 8, 2004, as follows:
1. | Article 2 of the Plan is amended by the addition of the following new definitions: |
Rollover Amount means the liability for deferred compensation benefits, together with any associated assets, assumed by or transferred to the Plan from time to time from Rollover Plans pursuant to Section 3.13.
Rollover Participant means an individual whose interest in a Rollover Plan has been assumed by the Plan pursuant to Section 3.13.
Rollover Plan means a nonqualified deferred compensation plan covering employees acquired by the Company in the course of an acquisition or other corporate transaction and from which Rollover Amounts are assumed by the Plan.
2. | Article 3 of the Plan is amended by the addition of the following Section 3.13: |
3.13 Transfers Relating to Corporate Transactions and Acquisitions . Notwithstanding any contrary provision herein, the Plan Administrator shall have complete and sole authority and discretion, but no obligation, to allow the Plan to assume Rollover Amounts relating to Rollover Participants. The Plan Administrator shall also have complete authority and discretion to specify the form in which any assets associated with any Rollover Amounts shall be transferred to the Company or to a trust designated by the Company shall be made. Any liability to pay deferred compensation benefits that is assumed with respect to any Rollover Amounts shall be subject to the terms of the Plan in all respects, including the form and timing of benefit payments and the crediting of any interest, income or losses with respect to such amounts. For purposes of clarification, any prior deferral or distribution elections relating to Rollover Amounts made pursuant to a Rollover Plan shall be void, and Rollover Participants shall be required to submit new elections under the Plan in connection with the transfer of their Rollover Amounts. A Rollover Participant
who is not otherwise eligible to participate in the Plan at the time of the transfer, shall not be entitled to make any additional deferrals under the Plan unless and until he or she becomes a Participant under the terms of the Plan. Reference in the Plan to such a crediting as a rollover or transfer of assets from a Rollover Plan is nominal in nature, and confers no additional rights upon a Rollover Participant other than those specifically set forth in the Plan.
For purposes of Section 4.3 (relating to scheduled in-service withdrawals) and Section 7.1 (relating to vesting of discretionary Company contributions), the Plan Administrator shall have complete authority and discretion to credit Rollover Participants with years of service completed with the sponsor of the Rollover Plan in which they participated.
3. | Article 3 of the Plan is amended by the addition of the following Section 3.14: |
3.14 Spin-Off Transactions. Notwithstanding any contrary provision herein, in the event any business unit or property of the Company or its subsidiaries is sold or otherwise disposed of and a Participant becomes an employee of an entity acquiring any such business unit or property (the Spin-Off Company) which adopts or maintains a non-qualified deferred compensation plan, the Plan Administrator shall have complete authority and discretion, but no obligation, to implement the following provisions:
(a) A Participants transfer of employment to the Spin-Off Company in connection with the spin-off will not be considered to be a Termination or a Change of Control for purposes of Article 8 of the Plan;
(b) A transferred Participants aggregate interest in the Plan as of the effective date of the spin-off and all liabilities and obligations of the Company and the Plan related thereto will be transferred to the designated plan of the Spin-Off Company; and
(c) Following any transfer made pursuant to this Section 3.14, the terms of the Spin-Off Companys plan shall be applicable in all respects to the transferred amounts, and the Plan and the Company shall be relieved from any further liability or obligation to any transferred Participants.
Except as otherwise provided in this Amendment Number 4 to the Amended and Restated Plan, the Plan is hereby ratified and confirmed in all respects.
[Signature Page Follows]
2
EXECUTED this 8th day of April, 2004].
BOYD GAMING CORPORATION, a Nevada Corporation | ||
By: |
/s/ D ONALD D. S NYDER |
|
Name: | Donald D. Snyder | |
Its: | President |
3
EXHIBIT 31.1
BOYD GAMING CORPORATION
CERTIFICATION
I, William S. Boyd, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Boyd Gaming Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 8, 2004 |
/s/ WILLIAM S. BOYD |
|
William S. Boyd | ||
Chairman of the Board and | ||
Chief Executive Officer |
54
EXHIBIT 31.2
BOYD GAMING CORPORATION
CERTIFICATION
I, Ellis Landau, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Boyd Gaming Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 8, 2004 |
/s/ ELLIS LANDAU |
|
Ellis Landau | ||
Executive Vice President and Chief Financial Officer |
55
EXHIBIT 32.1
BOYD GAMING CORPORATION
CERTIFICATION
In connection with the periodic report of Boyd Gaming Corporation (the Company) on Form 10-Q for the period ended September 30, 2004 as filed with the Securities and Exchange Commission (the Report), I, William S. Boyd, Chairman of the Board and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Boyd Gaming Corporation and will be retained by Boyd Gaming Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
This Certification has not been, and shall not be deemed, filed with the Securities and Exchange Commission.
Date: November 8, 2004 |
/s/ WILLIAM S. BOYD |
|
William S. Boyd | ||
Chairman of the Board and | ||
Chief Executive Officer |
56
EXHIBIT 32.2
BOYD GAMING CORPORATION
CERTIFICATION
In connection with the periodic report of Boyd Gaming Corporation (the Company) on Form 10-Q for the period ended September 30, 2004 as filed with the Securities and Exchange Commission (the Report), I, Ellis Landau, Executive Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Boyd Gaming Corporation and will be retained by Boyd Gaming Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
This Certification has not been, and shall not be deemed, filed with the Securities and Exchange Commission.
Date: November 8, 2004 |
/s/ ELLIS LANDAU |
|
Ellis Landau | ||
Executive Vice President and | ||
Chief Financial Officer |
57