-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VenwMWxA/NoK+WzARWls2C6jbyJgES8pbnxuM9veYeIHmV6jnAoW0nMNOXa4BV0B B8fBtFArzRTV/cU2U7GaDQ== 0000892569-97-001436.txt : 19970520 0000892569-97-001436.hdr.sgml : 19970520 ACCESSION NUMBER: 0000892569-97-001436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOYD GAMING CORP CENTRAL INDEX KEY: 0000906553 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880242733 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12168 FILM NUMBER: 97609680 BUSINESS ADDRESS: STREET 1: 2950 S INDUSTRIAL RD CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7027927200 MAIL ADDRESS: STREET 1: 2950 SOUTH INDUSTRIAL ROAD CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: BOYD GROUP DATE OF NAME CHANGE: 19941130 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 03/31/1997 1 UNITED STATES 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 quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission file number 1-12168 BOYD GAMING CORPORATION (Exact name of registrant as specified in its charter) NEVADA 88-0242733 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2950 SOUTH INDUSTRIAL ROAD LAS VEGAS, NEVADA 89109 (Address of principal executive offices) (Zip Code) (702) 792-7200 (Registrant's 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 that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No ----- ----- Shares outstanding of each of the Registrant's classes of common stock as of April 30, 1997
Class Outstanding ----- ----------- Common stock, $.01 par value 61,363,015
2 BOYD GAMING CORPORATION FORM 10-Q QUARTER ENDED MARCH 31, 1997 INDEX
Page No. -------- Part I. Financial Information Item 1. Unaudited Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets at March 31, 1997 and June 30, 1996 3 Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 1997 and 1996 5 Condensed Consolidated Statements of Changes in Stockholders' Equity for the nine months ended March 31, 1997 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 19 Signature Page 20
-2- 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) MARCH 31, JUNE 30, (IN THOUSANDS, EXCEPT SHARE DATA) 1997 1996 - -------------------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 61,276 $ 48,980 Accounts receivable, net 20,827 16,040 Inventories 7,988 6,531 Prepaid expenses 17,628 15,265 Income taxes receivable 5,271 -- ---------- -------- Total current assets 112,990 86,816 Property, equipment and leasehold interests, net 756,796 797,593 Other assets and deferred charges 57,858 58,489 Deferred income taxes 6,818 -- Goodwill and other intangible assets, net 125,058 10,527 ---------- -------- Total assets $1,059,520 $953,425 ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 1,739 $ 4,031 Accounts payable 51,127 47,193 Accrued liabilities Payroll and related 27,062 22,956 Interest and other 39,359 20,956 Income taxes payable -- 678 ---------- -------- Total current liabilities 119,287 95,814 Long-term debt, net of current maturities 753,141 590,808 Deferred income taxes -- 33,546 Commitments Stockholders' equity Preferred stock, $.01 par value; 5,000,000 shares authorized -- -- Common stock, $.01 par value; 200,000,000 shares authorized; 61,363,015 and 57,213,720 shares outstanding 614 572 Additional paid-in capital 137,305 102,583 Retained earnings 49,173 130,102 ---------- -------- Total stockholders' equity 187,092 233,257 ---------- -------- Total liabilities and stockholders' equity $1,059,520 $953,425 ========== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. -3- 4 BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, (UNAUDITED) ------------------------ ------------------------ (IN THOUSANDS, EXCEPT SHARE DATA) 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------ ------------------------ Revenues Casino $ 153,965 $ 143,689 $ 422,173 $ 413,097 Food and beverage 39,992 37,616 113,379 105,703 Rooms 19,360 17,978 54,809 52,308 Other 15,903 12,288 44,478 35,300 Management fees and joint venture 11,253 10,683 31,659 30,893 --------- --------- --------- --------- Gross revenues 240,473 222,254 666,498 637,301 Less promotional allowances 20,473 20,094 60,648 55,792 --------- --------- --------- --------- Net revenues 220,000 202,160 605,850 581,509 --------- --------- --------- --------- Costs and expenses Casino 78,065 72,344 223,993 203,769 Food and beverage 27,916 23,561 78,801 74,337 Rooms 6,473 5,611 18,517 17,910 Other 15,180 9,800 38,446 25,653 Selling, general and administrative 33,336 30,620 92,196 83,179 Maintenance and utilities 9,150 7,106 27,477 22,620 Depreciation and amortization 17,920 15,468 48,754 45,868 Corporate expense 5,002 5,907 15,746 16,417 Preopening expense -- -- 3,481 10,004 Impairment loss 125,698 -- 125,698 -- --------- --------- --------- --------- Total 318,740 170,417 673,109 499,757 --------- --------- --------- --------- Operating income (loss) (98,740) 31,743 (67,259) 81,752 --------- --------- --------- --------- Other income (expense) Interest income 151 200 493 987 Interest expense, net of amounts capitalized (17,352) (12,707) (44,421) (39,322) --------- --------- --------- --------- Total (17,201) (12,507) (43,928) (38,335) --------- --------- --------- --------- Income (loss) before provision (benefit) for income taxes and extraordinary item (115,941) 19,236 (111,187) 43,417 Provision (benefit) for income taxes (38,229) 7,885 (36,327) 17,315 --------- --------- --------- --------- Income (loss) before extraordinary item (77,712) 11,351 (74,860) 26,102 Extraordinary loss on early extinguishment of debt, net of tax benefit of $3,268 -- -- 6,069 -- --------- --------- --------- --------- Net income (loss) ($ 77,712) $ 11,351 ($ 80,929) $ 26,102 ========= ========= ========= ========= NET INCOME (LOSS) PER COMMON SHARE Net income (loss) before extraordinary item ($ 1.27) $ 0.20 ($ 1.25) $ 0.46 Extraordinary item -- -- (0.10) -- --------- --------- --------- --------- Net income (loss) ($ 1.27) $ 0.20 ($ 1.35) $ 0.46 ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. -4- 5 BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED MARCH 31, ----------------------- (IN THOUSANDS) 1997 1996 - ---------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (80,929) $ 26,102 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 48,754 45,868 Deferred income taxes (40,364) 2,884 Extraordinary loss on early retirement of debt 6,069 -- Impairment loss 125,698 -- Other -- (31) Changes in assets and liabilities: Increase in accounts receivable, net (4,787) (1,223) (Increase) decrease in inventories (1,457) 193 Increase in prepaid expenses (2,363) (3,574) Decrease (increase) in other assets (512) (5,547) Increase in income taxes receivable (5,271) -- Increase in other current liabilities 22,368 16,870 Decrease (increase) in income taxes payable (678) 3,286 --------- -------- Net cash provided by operating activities 66,528 84,828 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Net cash paid for acquisition of Par-A-Dice Hotel and Casino (170,725) -- Acquisition of property, equipment and other assets (88,784) (81,616) Proceeds from sale of riverboat 20,000 -- --------- -------- Net cash used in investing activities (239,509) (81,616) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Early retirement of long-term debt (157,500) -- Proceeds from issuance of long-term debt 200,000 1,074 Net borrowings under credit agreements 129,000 (10,000) Payments on long-term debt (20,802) (26,687) Proceeds from issuance of common stock 34,579 1,150 --------- -------- Net cash provided by (used in) financing activities 185,277 (34,463) --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,296 (31,251) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 48,980 83,169 --------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 61,276 $ 51,918 ========= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest, net of amounts capitalized $ 44,928 $ 40,320 ========= ======== Cash paid for income taxes $ 7,317 $ 10,991 ========= ======== Acquisition of Par-A-Dice Hotel and Casino Fair value of assets acquired $ 174,800 $ -- Cash paid to seller 170,725 -- ========= ======== Liabilities assumed $ 4,075 $ -- ========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements. -5- 6 BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA) - --------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL ------------------------- PAID-IN RETAINED STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS EQUITY ----------------------------------------------------------------- BALANCES, JULY 1, 1996 57,213,720 $ 572 $102,583 $130,102 $233,257 NET LOSS FOR THE NINE MONTHS ENDED MARCH 31, 1997 (80,929) (80,929) ISSUANCE OF COMMON STOCK 4,000,000 40 33,493 33,533 STOCK ISSUED IN CONNECTION WITH EMPLOYEE STOCK PURCHASE PLAN 149,295 2 1,229 1,231 ----------- -------- -------- -------- -------- BALANCES, MARCH 31, 1997 61,363,015 $ 614 $137,305 $ 49,173 $187,092 =========== ======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. -6- 7 BOYD GAMING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and its wholly-owned subsidiaries, collectively referred to herein as the "Company". The Company owns and operates seven casino entertainment facilities in Las Vegas, Nevada, one in Tunica, Mississippi, one in Kansas City, Missouri which opened in September 1995 and one in East Peoria, Illinois which was acquired in December 1996. The Company manages a casino entertainment facility in Philadelphia, Mississippi, for which it has a seven year management contract that expires in July 2001. The Company is also part owner of and manages a riverboat gaming operation in Kenner, Louisiana which opened in September 1994. The Company has recently entered into an agreement to sell its interest in the entity which owns the Kenner gaming operation (see Note 3). All material intercompany accounts and transactions have been eliminated. Basis of Presentation In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of its operations for the three and nine month periods ended March 31, 1997 and 1996 and its cash flows for the nine month period ended March 31, 1997 and 1996. It is suggested that this report be read in conjunction with the Company's audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 1996. The operating results for the three and nine month periods ended March 31, 1997 and cash flows for the nine month period ended March 31, 1997 are not necessarily indicative of the results that will be achieved for the full fiscal year or for future periods. Net Income (Loss) Per Common Share Net income (loss) per common share is based upon the weighted average number of common stock and common stock equivalents outstanding during the period, which were 61,363,015 and 57,115,365 for the three month periods ended March 31, 1997 and 1996, respectively, and 59,876,442 and 57,037,941 for the nine month periods ended March 31, 1997 and 1996, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Goodwill and Other Intangible Assets The excess of total acquisition costs over the fair value of assets acquired is amortized using the straight-line method over 40 years. -7- 8 Recently Adopted Accounting Standards On July 1, 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed Of. SFAS No. 121 requires that long-lived assets be reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the quarter ended March 31, 1997, the Company recorded an impairment loss of approximately $126 million in accordance with SFAS No. 121. (See Note 2). On July 1, 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires certain disclosures about the impact on results of operations of the fair value of stock based employee compensation arrangements. Management intends to continue to account for stock based employee compensation arrangements in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and accordingly believes that adoption of SFAS No. 123 will not have a significant effect on the financial position or results of operations of the Company. The Company will include the pro forma effects of this statement in its consolidated notes to financial statements for the fiscal year ending June 30, 1997. Recently Issued Accounting Standards The Financial Accounting Standards Board recently issued SFAS No. 128 "Earnings per Share". This statement establishes standards for computing and presenting earnings per share and is effective for financial statements issued for periods ending after December 15, 1997. Earlier application of this statement is not permitted and upon adoption requires restatement (as applicable) of all prior-period earnings per share data presented. Management believes that the implementation of this standard will not have a significant impact on earnings per share. 2. IMPAIRMENT LOSS During the quarter ended March 31, 1997, the Company wrote-down the carrying value of its fixed and intangible assets in the Missouri gaming market to fair value, which resulted in a $126 million impairment loss. The impairment loss was recorded due to a significant change in the competitive environment with the January 1997 addition of a significantly larger competitor in the Kansas City gaming market and a history of operating losses at the Company's Sam's Town Kansas City gaming establishment. The fair value of the impaired assets was primarily determined through a discounted cash flow analysis of the operations of Sam's Town Kansas City. -8- 9 3. ADDITIONAL INFORMATION Debt and Equity Offerings On October 4, 1996, the Company issued $200 million of 9.25% Senior Notes and sold 4.0 million shares of the Company's common stock in two registered public offerings. The net proceeds of these offerings of approximately $230 million were used to reduce outstanding indebtedness under the Company's bank credit facility. The $200 million in Senior Notes are guaranteed by all existing significant subsidiaries of the Company. The guaranties are full, unconditional, and joint and several. All of the Company's significant subsidiaries are wholly-owned. Assets, equity, income and cash flows of all other subsidiaries of the Company that do not guaranty the Senior Notes are less than 3% of the respective consolidated amounts and are inconsequential, individually and in the aggregate, to the Company. The Company has not included separate financial information of the guarantors, since the Company believes that such information is not material to investors. On November 4, 1996, the Company redeemed its $150 million, 10.75% Notes with borrowings under its bank credit facility. As a result, the Company recognized an extraordinary loss of $6.1 million, net of tax benefit of $3.3 million, related to the early extinguishment of the debt. The Company, through its wholly-owned subsidiary, California Hotel Finance Company, has $185 million principal amount of 11% senior subordinated notes due December 2002. The notes contain certain covenants regarding incurrence of debt, sales and disposition of assets, mergers or consolidations and limitations on restricted payments (as defined in the indenture to the notes). As a result of these restrictions, at March 31, 1997 California Hotel and Casino (a wholly-owned subsidiary of the Company) had a portion of its retained earnings and its net assets in the amounts of $32.7 million and $87.8 million, respectively, that were not available for distribution as dividends to the Company. Amendment to Bank Credit Facility The Company's bank credit facility was amended as of March 28, 1997. This amendment included, among other things, modifications to its financial covenants as well as the pricing structure of the debt, which is based upon a specified financial ratio. As such, this amended pricing structure results in slightly higher interest costs to the Company, the duration of which depends upon the Company's future operating results and financial condition. Management believes the Company is in compliance with the modified covenants, as well as other debt covenants, at March 31, 1997. Treasure Chest Casino The Company has agreed to sell its 15% interest in Treasure Chest Casino L.L.C., owner of the Treasure Chest Casino in Kenner, Louisiana. The interest is being purchased by both Treasure Chest Casino L.L.C. and its majority owner for a purchase price of $15.2 million. The sale, which is pending various governmental and regulatory approvals, is not expected to result in a material gain or loss to the Company. At this time, the Company is unable to determine an expected closing date for this transaction. The Company, through its wholly-owned subsidiary, Boyd Kenner, Inc., expects to manage Treasure Chest Casino until approximately October 1997. -9- 10 Par-A-Dice Acquisition On December 5, 1996, the Company completed the acquisition of Par-A-Dice Gaming Corporation, owner and operator of the Par-A-Dice riverboat casino in East Peoria, Illinois, and East Peoria Hotel, Inc., the general partner of a partnership which recently opened a 204-room hotel adjacent to the Par-A-Dice casino. The purchase price for the acquisition was approximately $175 million, subject to certain adjustments as set forth in the stock purchase agreement. The purchase price exceeded the fair value of the net assets by approximately $116 million. The Company's pro-forma consolidated results of operations, as if the acquisition had occurred on July 1, 1995, are as follows:
Nine Months Ended March 31, 1997 1996 ---- ---- Proforma (In thousands, except share data) Net revenues $ 648,998 $608,141 Income (loss) before extraordinary item (71,852) 30,424 Net income (loss) (77,921) 30,424 ----------------------- Net income (loss) per common share Net income (loss) before extraordinary item $ (1.20) $ 0.53 Net income (loss) (1.30) 0.53 -----------------------
-10- 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, ----------------------- --------------------- 1997 1996 1997 1996 --------- -------- -------- -------- (IN THOUSANDS) (In thousands) NET REVENUES Stardust $ 45,959 $ 49,930 $137,249 $146,336 Boulder Strip Properties 48,892 49,629 145,649 143,033 Downtown Properties 44,817 37,245 123,188 106,795 Central Region 80,332 65,356 199,764 185,345 --------- -------- -------- -------- TOTAL PROPERTIES $ 220,000 $202,160 $605,850 $581,509 ========= ======== ======== ======== OPERATING INCOME (LOSS) Stardust $ 5,495 $ 9,247 $ 13,887 $ 22,164 Boulder Strip Properties 8,126 7,816 19,544 17,382 Downtown Properties (114) 3,731 5,508(a) 12,605 Central Region 19,133 (b) 17,745 40,916(b) 58,632(a) --------- -------- -------- -------- TOTAL PROPERTIES $ 32,640 $ 38,539 $ 79,855 $110,783 ========= ======== ======== ========
------------------- (a) Before preopening expense. (b) Before impairment loss. The above table sets forth, for the periods indicated, certain operating data for the Company's properties. As used herein, "Boulder Strip Properties" consist of Sam's Town Las Vegas, the Eldorado and Jokers Wild; "Downtown Properties" consist of the California, the Fremont, Main Street Station (opened November 1996) and Vacations Hawaii, the Company's wholly-owned travel agency which operates for the benefit of the Downtown casino properties; and "Central Region" consists of Sam's Town Tunica, Sam's Town Kansas City (opened September 1995), Par-A-Dice (acquired December 1996), management fee income from Silver Star Hotel and Casino, and management fee and joint venture income from Treasure Chest Casino. Net revenues displayed in this table and discussed in this section are net of promotional allowances; as such, references to rooms revenue and food and beverage revenue do not agree to the amounts on the Statement of Operations. Operating income from properties for the purposes of this table exclude corporate expense, including related depreciation and amortization, preopening expense and the impairment loss. Revenues Consolidated net revenues increased 8.8% during the quarter ended March 31, 1997 compared to the same quarter in the prior fiscal year. Company-wide casino revenue increased 7.2%, food and beverage revenue increased 9.3% and room revenue increased 9.7%. The increase in net revenues is primarily attributable to the first full quarter of operations for both Main Street Station Casino, Brewery and Hotel ("Main Street Station") which opened in November 1996 and Par-A-Dice Hotel and Casino (acquired in December 1996), partially offset by declines in net revenues experienced principally at Sam's Town Kansas City (43.8%) and the California and Fremont (16.2%). Revenues at the Stardust and Sam's Town Tunica for the three months ended March 31, 1997 also declined, 8.0% and 10.8%, respectively, while management fee and joint venture income increased 5.3%. The current quarter's decline in net revenues at the Company's properties which have been open for more than one year is attributable, in each case, to increased competition including, in the -11- 12 case at the Downtown properties, competition from Main Street Station. Consolidated net revenues increased 4.2% during the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. Company-wide casino revenue increased 2.2%, food and beverage revenue increased 7.6% and room revenue increased .6%. The increase in consolidated net revenues for the nine months ended March 31, 1997 is primarily attributable to the November 1996 opening of Main Street Station, the December 1996 acquisition of Par-A-Dice Hotel and Casino and the revenues associated with Vacations Hawaii. These increases in revenues were partially offset by declines in revenues which occurred primarily at the Stardust (6.2%), California (13.8%) and Sam's Town Tunica (20%). The declines in revenues at both the Stardust and Sam's Town Tunica for the nine months ended March 31, 1997 were primarily the result of increased competition and in the case of Sam's Town Tunica, construction disruption related to the construction of a new 350 room hotel tower which opened in December 1996. OPERATING INCOME (LOSS) Consolidated operating loss for the quarter ended March 31, 1997 was $98.7 million compared to consolidated operating income of $31.7 million from the same quarter in the prior fiscal year. Consolidated operating loss for the nine months ended March 31, 1997 was $67.3 million compared to operating income of $81.8 million for the comparable period in the prior year. The majority of the decline in consolidated operating income for both the three and nine month periods was the result of a $126 million impairment loss recorded in accordance with SFAS No. 121 to write-down the carrying value of the Company's fixed and intangible assets in the Missouri gaming market to fair value. See further discussion under Impairment Loss later in this section. Consolidated operating income before impairment loss declined by 15.1% from $31.7 million to $27.0 million during the quarter ended March 31, 1997 compared to the same quarter in the prior fiscal year, while consolidated operating margins declined from 15.7% to 12.3% during the same time periods. Operating income in the Nevada Region declined 35.0% as a result of declines in operating income at the Stardust and Downtown Properties partially offset by increased operating income at the Boulder Strip Properties. Main Street Station posted an operating loss of $1.1 million in its first full quarter of operation. In the Company's Central Region, operating income increased 7.8% primarily as a result of the acquisition of Par-A-Dice partially offset by declines in operating income at Sam's Town Tunica and Sam's Town Kansas City. For the nine months ended March 31, 1997, consolidated operating income before impairment loss and preopening expense declined by 32.5% from $91.8 million to $61.9 million compared to the same period in the prior fiscal year, while consolidated operating margins declined from 15.8% to 10.2% during the same time periods. Operating income in the Nevada Region declined 25.4% with an operating income increase at the Boulder Strip properties offset by declines in operating income at the Stardust and Downtown Properties. In the Central Region, operating income declined 30.2% with operating income from Par-A-Dice offset by declines in operating income at Sam's Town Kansas City and Sam's Town Tunica. Management fee and joint venture income from Silver Star and Treasure Chest increased slightly for the nine month period ended March 31, 1997 versus the comparable period in the prior year. -12- 13 STARDUST Net revenues at the Stardust declined by 8.0% during the quarter ended March 31, 1997 versus the comparable quarter in the prior fiscal year. Casino revenues declined by 8.8% primarily due to a decline in slot wagering combined with flat table game wagering offset by lower net winnings. Revenues from rooms, food and beverage also declined by approximately 7.6% during the period. Operating income for the three months ended March 31, 1997 declined 40.6% to $5.5 million, and operating income margin declined from 18.5% to 12.0% during the comparable quarters ended March 31, 1996 and 1997, respectively. These declines in operating income and operating income margin are a primary result of the declines in revenues. For the nine months ended March 31, 1997, net revenues at the Stardust declined by 6.2% versus the comparable period in the prior fiscal year. The majority of the decline is attributable to a 7.0% reduction in casino revenues, as a result of a lower win percentage in the sports book and a decline in slot wagering. Revenues from rooms, food and beverage also declined by approximately 6.7% during the period. Operating income declined by 37.6% to $13.8 million, and operating income margin declined from 15.1% to 10.1% during the comparable nine-month periods ended March 31, 1996 and 1997, respectively. These declines in operating income and operating income margin are primarily the result of the decline in revenues. BOULDER STRIP PROPERTIES Net revenues at the Boulder Strip Properties declined by 1.5% during the quarter ended March 31, 1997 versus the comparable quarter in the prior fiscal year. Casino revenue declined by 1.6% primarily as a result of lower win percentages from table games and race and sports book. Rooms revenue increased 6.3% and food and beverage revenues decreased 1.3% for the quarter ended March 31, 1997 versus the comparable quarter in the prior fiscal year. Operating income margin increased to 16.6% during the quarter ended March 31, 1997, primarily as a result of improved operating margins in the rooms and food and beverage departments at Sam's Town Las Vegas. Net revenues at the Boulder Strip Properties increased 1.8% during the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. The increase is primarily attributable to a 2.3% increase in casino revenue as a result of increased wagering volume in table games and slots at Sam's Town Las Vegas. Rooms revenues and food and beverage revenue increased 8.4% and .9%, respectively, for the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. Operating income margin increased from 12.2% to 13.4% during the comparable nine-month periods ended March 31, 1996 and 1997, respectively, due to the increase in net revenues as well as improved operating margins in the rooms and food and beverage departments at Sam's Town Las Vegas. DOWNTOWN PROPERTIES Net revenues at the Downtown Properties increased 20.3% during the quarter ended March 31, 1997 compared to the same quarter in the prior fiscal year. The increase is attributable to the first full quarter of operations for Main Street Station (opened November 1996) as well as increased revenues from the Company's Honolulu travel agency, Vacations Hawaii. These increases were partially offset by declines in net revenues of 19.8% and 12.6%, respectively, at the California and Fremont. These two properties have been adversely affected by the opening of Main Street Station, which has attracted patrons from their customer -13- 14 bases. Operating income margin for the Downtown Properties decreased from 10.0% to (.3%) during the quarters ended March 31, 1996 and 1997, respectively. The decline in margin is attributable to the decline in net revenues at the California and Fremont, in addition to the $1.1 million operating loss generated by Main Street Station. In response to the recent operating results of the Downtown Properties, management has implemented various programs to improve performance. These programs include both the consolidation of certain functions and improved management structure, including the appointment of a senior manager to oversee all Downtown operations; increased use of direct marketing programs in the Hawaiian market; increased utilization of Vacations Hawaii charter operations to improve occupancies; aggressive pursuit of Fremont Street Experience customers through enhanced marketing programs; and consolidation of both front and back of the house operations to improve efficiency and decrease overall operating costs. Net revenues at the Downtown Properties increased 15.3% during the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. The increase is attributable to the November 1996 opening of Main Street Station as well as increased revenues from Vacations Hawaii. These increases in net revenues were partially offset by declines of 13.8% and 1.9%, respectively, at the California and Fremont. These two properties have been adversely affected by the opening of Main Street Station, which has attracted patrons from their customer bases. In addition, each component of the California's net revenues was adversely impacted by a rooms remodel project which reduced its room availability by approximately 15% during the first fiscal quarter of 1997. Aggregate operating income margin decreased from 11.8% to 4.5% during the nine-month periods ended March 31, 1997 and 1996, respectively. The decline is a result of the reduction in net revenues at the California and Fremont, as well as a $1.5 million operating loss before preopening expense generated by Main Street Station since its opening in November 1996. CENTRAL REGION Net revenues from the Central Region increased 22.9% during the quarter ended March 31, 1997 compared to the same quarter in the prior fiscal year. The majority of the increase is due to the first full quarter of operations of Par-A-Dice Hotel and Casino, which was acquired on December 5, 1996. In addition, management fees and joint venture income from Silver Star and Treasure Chest increased by 5.3%. These increases in net revenues for the three months ended March 31, 1997 were partially offset by declines in net revenues at Sam's Town Tunica and Sam's Town Kansas City of 10.8% and 43.8%, respectively. The Central Region results include the full revenues and income from Sam's Town Tunica, Sam's Town Kansas City (opened September 1995), Par-A-Dice Hotel and Casino (acquired December 5, 1996), management fee income from Silver Star Hotel and Casino and management fee and joint venture income from Treasure Chest Casino. Operating income and operating income margin in the Central Region, before the impairment loss, were $19.1 million and 23.8%, respectively, for the third quarter of fiscal 1997 versus $17.7 million and 27.2% in the comparable period in the prior fiscal year. The increase in operating income is attributable to the first full quarter of Par-A-Dice offset by a continuing operating loss at Sam's Town Kansas City. Sam's Town Kansas City posted a $3.4 million operating loss (before impairment loss) for the current quarter versus a $1.1 million operating loss in the comparable quarter in the prior year. The increase in operating losses is attributable to increased market competition, including the recent opening of a significantly larger casino. For this reason, the Company recorded an impairment loss of approximately $126 million related to its investment in the Missouri gaming market. See further discussion below regarding this write-down under Impairment Loss. The Company has agreed to sell its 15% interest in Treasure Chest Casino, L.L.C., owner of the Treasure Chest Casino, for a purchase price of $15.2 million. The sale, which was originally expected to close during the quarter ended March 31, 1997, is still awaiting various governmental and regulatory approvals. Accordingly, at this point in time management can not predict the timing of the closing of this transaction. However, management does not expect to incur a material gain or loss at the time the sale is -14- 15 consummated. The Company, through its wholly-owned subsidiary Boyd Kenner, Inc., expects to manage the Treasure Chest until approximately October 1997. Net revenues from the Central Region increased 7.8% during the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. The majority of the increase is attributable to Par-A-Dice Hotel and Casino which generated net revenues of $34.9 million since it was acquired on December 5, 1996. This increase was partially offset by a 20.0% decline in net revenues at Sam's Town Tunica. Operating income and operating income margin, before preopening expense and impairment loss, were $40.9 million and 20.5%, respectively, for the nine-month period ended March 31, 1997 versus $58.6 million and 31.6% in the comparable period in the prior fiscal year. The decrease in operating income is due to the decline in net revenues at Sam's Town Tunica and the continued operating losses at Sam's Town Kansas City, offset by the positive impact from the operating results at Par-A-Dice Hotel and Casino. Sam's Town Tunica's operating margin declined from 26.2% to 13.7% during the comparable periods as a result of increased competition in that market as well as the construction disruption from the 350-room hotel tower and the additional 1,000 space parking garage which were completed in December 1996. Sam's Town Kansas City posted a $10.0 million operating loss (before impairment loss) during the nine-month period ended March 31, 1997 compared to a $.8 million operating loss in the comparable period from the prior fiscal year. Depreciation and amortization expense increased by $2.5 million and $2.9 million, respectively, during the three and nine-month periods ended March 31, 1997 compared to the comparable periods in the prior fiscal year. The increase is primarily attributable to the opening of Main Street Station in November 1996 and the acquisition of Par-A-Dice Hotel and Casino in December 1996. As discussed below under Impairment Loss, the write-down of the fixed and intangible assets related to Sam's Town Kansas City is expected to reduce future depreciation and amortization expense by approximately $7 million on an annual basis. Corporate expenses decreased by $.9 million and $.7 million, respectively, during the three and nine-month periods ended March 31, 1997 compared to the same periods from the prior fiscal year. The reduction is primarily due to a decline in development related expenses. During the nine-month periods ended March 31, 1997 and 1996, the Company recorded a preopening charge of $3.5 million and $10.0 million, respectively, upon the opening of Main Street Station in November 1996 and Sam's Town Kansas City in September 1995. IMPAIRMENT LOSS During the quarter ended March 31, 1997, the Company, in accordance with SFAS No. 121, wrote-down the carrying value of its fixed and intangible assets in the Missouri gaming market to fair value, which resulted in a $126 million impairment loss. The impairment loss was recorded due to a significant change in the competitive environment with the January 1997 addition of a significantly larger competitor in the Kansas City gaming market and a history of operating losses at the Company's Sam's Town Kansas City gaming establishment. In addition, the -15- 16 restrictive nature of the Missouri gaming regulations with respect to wagering limits and simulated cruise requirements has not been conducive to profitable operations, and based upon currently available information, management does not believe that any significant regulatory relief is forthcoming. However, management currently intends to continue operating Sam's Town Kansas City while continuing to focus on cost control measures and pursue future legislative and regulatory relief. OTHER INCOME (EXPENSE) Other income and expense is primarily comprised of interest expense, which increased by $4.6 million and $5.1 million, respectively, during the three and nine-month periods ended March 31, 1997 compared to the same periods from the prior fiscal year. The increase is attributable to higher levels of average debt outstanding due primarily to the December 1996 acquisition of Par-A-Dice Hotel and Casino for approximately $175 million. PROVISION (BENEFIT) FOR INCOME TAXES The Company's tax rate was (33.0%) and (32.7%), respectively, for the three and nine-month period ended March 31, 1997, compared to 40.1% and 39.9%, respectively, for the same periods from the prior fiscal year. The fluctuation in the rates during fiscal 1997 versus fiscal 1996 is primarily attributable to the impairment loss recorded during the quarter ended March 31, 1997. EXTRAORDINARY ITEM In connection with the redemption of the Company's $150 million, 10.75% Notes, the Company recognized an extraordinary loss of $6.1 million, net of tax, during the second fiscal quarter of 1997. LIQUIDITY AND CAPITAL RESOURCES For the nine months ended March 31, 1997, the Company's principal source of funds was net cash provided by operating activities and financing activities. Net cash provided by operating activities was $69 million versus $85 million during the comparable period in the prior fiscal year. This decline is primarily attributable to the reduction in income before the effect of the impairment loss. Net cash provided by financing activities for the nine months ended March 31, 1997 was $185 million which is primarily attributed to the issuance of $200 million, 9.25% Senior Notes offset by the redemption of the $150 million, 10.75% Notes, as well as proceeds received from the issuance of 4.0 million shares of common stock, offset by the retirement and paydown of other debt. As of March 31, 1997, the Company had balances of cash and cash equivalents of approximately $61 million, a working capital deficit of $2.8 million, and approximately $136 million available under its $500 million revolving bank credit facility (the "Bank Credit Facility"). The Company has historically operated with negative working capital in order to minimize borrowings (and related interest costs) under its long-term Bank Credit Facility. The working capital deficits are funded through cash generated from operations as well as fluctuating borrowings under the Bank Credit Facility. -16- 17 The Company's principal use of cash during the nine months ended March 31, 1997 was for investing activities of $242 million. This amount primarily consists of the $171 million acquisition of Par-A-Dice Hotel and Casino, as well as capital expenditures. Included in capital expenditures are $32 million related to the Main Street Station project, and $32 million related to a new 350-room hotel tower and a 1,000 space parking garage project at Sam's Town Tunica. On December 5, 1996 the Company completed the acquisition of Par-A-Dice Gaming Corporation, owner and operator of the Par-A-Dice riverboat casino in East Peoria, Illinois, and East Peoria Hotel, Inc., the general partner of a partnership which recently opened a 208-room hotel adjacent to the Par-A-Dice casino. The purchase price was approximately $175 million. The acquisition was funded with borrowings under the Company's Bank Credit Facility. The Company, as part of its ongoing strategic planning process, has recently completed a review of its current growth opportunities. Based on this review, the Company expects to be focusing its growth efforts in two areas. In Nevada, the Company has decided to refocus its efforts on the Stardust Resort & Casino. The Company is considering implementing the next phase of its master plan for the Stardust, which calls for, among other things, as many as two additional hotel towers. In addition, the Company has determined that the 61-acre Stardust site is capable of accommodating the development of an entirely new casino entertainment facility adjacent to the existing Stardust and is continuing to explore the feasibility of such a project. Outside Nevada, the Company is focusing its efforts on its joint venture with Mirage Resorts, Inc. On May 29, 1996, the Company, through a wholly-owned subsidiary, executed a joint venture agreement with Mirage Resorts, Inc., (the "Mirage Joint Venture") to jointly develop and own a casino hotel entertainment facility in the Marina district of Atlantic City, New Jersey (the "Atlantic City Project"). In that regard, the Company recently submitted its application for a gaming license with the New Jersey Casino Control Commission. The Atlantic City Project is expected to include a hotel of at least 1,000 rooms and is expected to be adjacent and connected to Mirage's planned wholly-owned resort. The Company believes that certain highway improvements to permit greater access to the Marina District of Atlantic City will be necessary to support the multi-facility casino entertainment development master-planned by Mirage. On January 10, 1997 Mirage and the State of New Jersey and South Jersey Transportation Authority entered into a definitive agreement by which the highway improvements can be funded and built. The Company's joint venture agreement with Mirage provides for $100 million in capital contributions by the Company during the course of the construction of the Atlantic City Project. The Company plans to fund its capital contributions primarily from cash flow from operations and availability under its bank credit facility. During the first quarter of fiscal 1997, the Company purchased a casino hotel site in Reno, Nevada with plans to develop Sam's Town Reno on the site. The Company has determined that further development of the Stardust site and the Atlantic City Project should take priority over the Sam's Town Reno project at this time. There can be no assurance that any of the above mentioned projects will go forward and ultimately become operational. The sources of funds required to meet the Company's working capital needs (including maintenance capital expenditures) and those required to complete the above mentioned projects are expected to be cash on hand, cash flow from operations, availability under its bank credit facility, new borrowings to the extent permitted under existing debt agreements, the issuance of additional equity and vendor and other financing. No assurance can be given that required financing strategies can be effected on satisfactory terms. -17- 18 The Bank Credit Facility was amended as of March 28, 1997 to provide the Company with greater flexibility. This amendment included, among other things, modifications to its financial covenants as well as the pricing structure of the debt, which is based upon a specified financial ratio. As such, this amended pricing structure results in slightly higher interest costs to the Company, the duration of which depends upon the Company's future operating results and financial condition. Management believes the Company is in compliance with the modified covenants, as well as other debt covenants, at March 31, 1997. The Company, through its wholly-owned subsidiary, California Hotel Finance Company, has $185 million principal amount of 11% Senior Subordinated Notes due December 2002. The Notes contain certain covenants, including but not limited to limitations on restricted payments (as defined in the indenture related to the notes). As a result of these restrictions, at March 31, 1997 California Hotel and Casino (a wholly-owned subsidiary of the Company) had a portion of its retained earnings and net assets, in the amounts of $32.7 million and $87.8 million, respectively, that were not available for distribution as dividends to the Company. On October 4, 1996, the Company issued $200 million of 9.25% Senior Notes and sold 4.0 million shares of the Company's common stock. The net proceeds of these offerings of approximately $230 million were used to reduce outstanding indebtedness under the Company's Bank Credit Facility. On November 4, 1996, the Company redeemed its $150 million, 10.75% Notes with borrowings under its Bank Credit Facility. Also, on August 23, 1996, the Company sold its riverboat Mary's Prize for $20 million and retired debt of $17.6 million in connection therewith. PRIVATE SECURITIES LITIGATION REFORM ACT The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contains statements that are forward looking, such as statements relating to plans for future expansion and other business development activities as well as other capital spending, financing sources, and the effects of regulation (including gaming and tax regulation) and competition. Such forward looking statements involve important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, actual results may differ materially from those expressed in any forward looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those related to construction and development activities, economic conditions, changes in tax laws, changes in laws or regulations affecting gaming licenses, changes in competition, and factors affecting leverage and debt service including sensitivity to fluctuation in interest rates, and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended June 30, 1996 and its Registration Statements (File Nos. 333- 05555 and 333-05521) related to its recent offerings of 9.25% Senior Notes and common stock. Any forward looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. -18- 19 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 10.59 First Amendment to Credit Agreement, dated as of March 28, 1997, among Boyd Gaming Corporation and California Hotel and Casino, and Wells Fargo Bank, N.A., as Swing line Lender, Canadian Imperial Bank of Commerce, ("CIBC") as letter of credit issuer, Bank of America National Trust and Saving Association and Wells Fargo Bank, N.A., as co-managing agents, Bankers Trust Company, Credit Lyonnais Los Angeles Branch and Societe Generale as co-agents, and CIBC as administrative agent and collateral agent. 27. Financial Data Schedule (b) Reports on Form 8-K: (i) The Company filed a current report on Form 8-K dated April 24, 1997 related to a change in fiscal year. -19- 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOYD GAMING CORPORATION (Registrant) Date: May 15, 1997 By Keith Smith -------------------------------------- Keith Smith Senior Vice President and Controller (Chief Accounting Officer) -20- EX-10.59 2 FIRST AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10.59 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and dated as of the 28th day of March, 1997, by and among BOYD GAMING CORPORATION, a Nevada corporation ("Boyd Gaming") and CALIFORNIA HOTEL AND CASINO, a Nevada corporation ("CH&C"; CH&C and Boyd Gaming being referred to collectively as the "Borrowers" and each individually as a "Borrower"), the commercial lending institutions listed on the signature pages hereof (collectively, the "Lenders"), WELLS FARGO BANK, N.A., as Swingline Lender, CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), as letter of credit issuer, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and WELLS FARGO BANK, N.A., as co-managing agents (herein, in such capacity, the "Co-Managing Agents"), BANKERS TRUST COMPANY, CREDIT LYONNAIS LOS ANGELES BRANCH and SOCIETE GENERALE, as co-administrative agent and collateral agent for the Lenders (herein, in such capacity, called the "Agent"). RECITALS A. The Borrowers and the Lenders entered into that certain $500,000,000 Credit Agreement dated as of June 19, 1996 (the "Credit Agreement"), pursuant to which the Lenders agreed to extend credit to the Borrowers on the terms and subject to the conditions set forth therein. B. The Borrowers and the Lenders desire to amend certain terms and conditions of the Credit Agreement pursuant to this Amendment. NOW, THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree to amend the Credit Agreement as follows: AGREEMENT 1. The Credit Agreement is hereby amended as follows: (a) The chart appearing in the definition of the term "Applicable Margin" in Section 1.1 of the Credit Agreement is hereby amended to read in its entirety as follows:
Funded Debt Applicable Base Applicable Eurodollar Unused to EBITDA Ratio Rate Margin Rate Margin Fee - --------------- --------------- --------------------- -------- Less than 2.0 0.000% +1.00 % 0.3750% Greater than or 0.000% +1.250% 0.3750% equal to 2.0,
2 but less than 2.50 Greater than or +0.250% +1.500% 0.3750% equal to 2.50, but less than 3.00 Greater than or +0.500% +1.750% 0.4375% equal to 3.00, but less than 3.50 Greater than or +0.750% +2.000% 0.500% equal to 3.50, but less than 4.00 4.00 or greater +1.00% +2.250% 0.500% for Fiscal Quarters ending on or before March 31, 1997 Greater than or +1.00% +2.250% 0.500% equal to 4.00, but less than 4.50, for Fiscal Quarters ending on or after June 30, 1997 4.50 or greater +1.25% +2.500% 0.500% for Fiscal Quarters ending on or after June 30, 1997
(b) The definition of the term "Fiscal Year" appearing in Section 1.1 of the Credit Agreement is hereby amended to read in its entirety as follows: "Fiscal Year" means any period of twelve consecutive calendar months (i) ending on June 30 for years through and including 1996, (ii) ending on June 30 and December 31 for 1997, and (iii) ending on December 31 for 1998 and years thereafter; for Fiscal Years commencing on and after January 1, 1998, references to a Fiscal Year with a number corresponding to any calendar year (e.g. the "1998 Fiscal Year") refers to the Fiscal Year ending on the December 31 occurring during such calendar year. In 1997 only, the Borrowers will have two Fiscal Year ends, and each covenant that refers to a Fiscal Year of the Borrowers shall refer to each of such Fiscal Years ending in 1997 and shall be tested as of each of such dates. (c) The definition of the term "Permitted Disposition" appearing in Section 1.1 of the Credit Agreement is hereby amended by adding the following clause immediately prior to the end thereof: "or (h) the sale by Boyd Kenner of its interest in Treasure Chest Casino, L.L.C." -2- 3 (d) Clause (v) of Section 7.2.2 of the Credit Agreement is hereby amended by deleting the figure "$50,000,000" and replacing it with the figure "$25,000,000". (e) Section 7.2.4 of the Credit Agreement is hereby amended to read in its entirety as follows: SECTION 7.2.4 Financial Condition. The Borrowers will not permit: (a) Tangible Net Worth to be less than the sum of (i) $210,000,000, plus (ii) 50% of Boyd Gaming's consolidated net income (without giving effect to any losses) for each Fiscal Quarter ending on or after September 30, 1996, plus (iii) an amount equal to the increase in Boyd Gaming's stockholders equity following the Effective Date by reason of sales and issuances of Boyd Gaming's capital stock, minus (iv) the amount of goodwill, not to exceed $130,000,000, associated with the Proposed Acquisition and minus (v) the amount of noncash write-downs taken by Boyd Kansas City in connection with its Venture in Kansas City, Missouri (net of any associated tax benefits); (b) the Funded Debt to EBITDA Ratio for any period of four consecutive Fiscal Quarters ending during a period set forth below, to be greater than the ratio set forth below opposite such period:
Period Ratio ------ ----- January 1, 1997 - March 31, 1997 4.90 to 1.0 April 1, 1997 - June 30, 1997 4.80 to 1.0 July 1, 1997- September 30, 1997 4.70 to 1.0 October 1, 1997 - December 31, 1997 4.60 to 1.0 January 1, 1998 - June 30, 1998 4.40 to 1.0 July 1, 1998 - December 31, 1998 4.30 to 1.0 January 1, 1999 - June 30, 1999 4.25 to 1.0 July 1, 1999 - September 30, 1999 4.00 to 1.0 October 1, 1999 - December 31, 1999 3.80 to 1.0 January 1, 2000 - March 31, 2000 3.60 to 1.0 April 1, 2000 - June 30, 2000 3.40 to 1.0 July 1, 2000 - September 30, 2000 3.30 to 1.0 October 1, 2000 - December 31, 2000 3.20 to 1.0 January 1, 2001 and Thereafter 3.00 to 1.0;
-3- 4 (c) the Fixed Charge Coverage Ratio at the end of any Fiscal Quarter, for the period of four consecutive Fiscal Quarters ending on such date, to be less than the ratio set forth below opposite such period:
Period Ratio ------ ----- Effective Date - March 31, 1998 2.00 to 1.0 April 1, 1998 - December 31, 1999 2.10 to 1.0 January 1, 2000 - June 30, 2000 2.15 to 1.0 July 1, 2000 and thereafter 2.25 to 1.0
(f) Clause (ii) of Section 7.2.5 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(ii) New Venture Investments in the Atlantic City Entity not exceeding $100,000,000 in the aggregate (or such greater amount as may be approved by the Majority Lenders) on a cumulative basis during the term of this Agreement," (g) Clause (a) of the Section 7.2.7 of the Credit Agreement is hereby amended (i) by deleting the figure "$300,000,000" and replacing it with the figure "250,000,000" and (ii) by deleting the figure "$100,000,000" and replacing it with the figure "$50,000,000". (h) The chart appearing in clause (b) of Section 7.2.7 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
Fiscal Year Amount 1997 $60,000,000 1998 $60,000,000 1999 $60,000,000 2000 $60,000,000 2001 (first half) $30,000,000;
(i) There shall be added to the Credit Agreement, immediately following Section 7.1.13, a new Section 7.1.14, reading in its entirety as follows: SECTION 7.1.14. Additional Pledges. On or before July 31, 1997, the Borrowers shall cause one or more Guarantors to execute and deliver to the Agent, for the benefit of the Lenders, (i) Deeds of Trust and Security Agreements, substantially in the form required by Sections 5.1.4 and 5.1.5 hereof, together with all other documentation required thereunder, encumbering such Ventures as may be required to cause the Borrowers to be in compliance with Section 7.1.11 hereof as of July 31, 1997, (ii) legal opinions in form and substance satisfactory to the Agent and -4- 5 (iii) the documentation required by Section 5.1.1, 5.1.6, 5.1.7 and 5.1.8 in respect of such Ventures. Upon the Agent's receipt of all documentation required by the preceding sentence, such Guarantor shall, if not already a Pledgor, become a Pledgor and the Ventures subject to such Deeds of Trust shall become Pledged Casinos for all purpose hereof; and (j) Exhibit L of the Credit Agreement is hereby amended to read in its entirety as set forth in Exhibit B hereto. 2. Waivers. Upon satisfaction of the conditions set forth in Section 3 of this Amendment, the Lenders (i) hereby waive any provisions of the Credit Agreement, including, without limitation, the provisions of Sections 7.1.3, 7.1.8 and 8.1.11 of the Credit Agreement to the extent that any of such provisions would be violated by the Borrowers' closure of the casino owned and operated by Boyd Kansas City and located in Kansas City, Missouri and (ii) hereby waive the requirements of Section 7.2.14 of the Credit Agreement to the extent that such Section would be violated by the change of the Borrowers' fiscal year end from June 30 to December 31. 3. Effective Date. This Amendment shall be effective on the date first written above, provided that prior thereto each of the following shall have been satisfied: (a) This Amendment shall have been executed by the Borrowers and the Required Lenders; (b) The Agent shall have received executed acknowledgement and reaffirmations, substantially in the form set forth in Exhibit A hereto, duly executed by each of the Guarantors; and (c) The Borrowers shall have paid to the Agent, for distribution to each Lender that shall have executed this Amendment on or before March 28, 1997, a fee in the amount of .125% of the aggregate amount of the Commitments held by such Lender. 4. Representations and Warranties. The Borrowers hereby represent and warrant to the Agent and the Lenders as follows: (a) Each Borrower has the power and authority and the legal right to execute, deliver and perform this Amendment and has taken all necessary action to authorize the execution, delivery and performance of this Amendment. This Amendment has been duly executed and delivered by each Borrower. The Credit Agreement (as amended by this Amendment) and the other Loan Documents constitute legal, valid, and binding obligations of each Borrower, enforceable against such Borrower in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws now or -5- 6 hereafter in effect relating to creditors' rights generally, and general principles of equity. (b) At and as of the date of execution hereof and at and as of the effective date of this Amendment and after giving effect to this Amendment: (1) the representations and warranties of each Borrower contained in the Credit Agreement are true and correct in all respects, and (2) no Default or Event of Default has occurred and is continuing under the Credit Agreement. 5. Reaffirmation of Credit Agreement. This Amendment shall be deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as amended hereby, is hereby ratified, approved and confirmed in each and every respect. All references to the Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Credit Agreement as amended hereby. 6. Reaffirmation of Loan Documents. The Borrowers hereby further affirm and agree that (a) the execution and delivery by the Borrowers of and the performance of their obligations under the Credit Agreement, as amended by this Amendment, shall not in any way amend, impair, invalidate or otherwise affect any of the obligations of the Borrowers or the rights of the Agent or the Lenders under any of the Loan Documents or any other document or instrument made or given by the Borrowers in connection therewith, and (b) the term "Obligations" as used in the Loan Documents includes, without limitation, the Obligations of the Borrowers under the Credit Agreement as amended by this Amendment. 7. Miscellaneous Provisions. (a) Survival. The provisions of this Amendment shall survive to the extent provided in Section 10.5 of the Credit Agreement. (b) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF NEVADA. (c) Counterparts. This Amendment may be executed in any number of counterparts, all of which together shall constituted one agreement. (d) No Other Amendment. Except as expressly amended herein, the Credit Agreement, the other Loan Documents and all documents, instruments and agreements relating thereto or executed in connection therewith shall remain in full force and effect as currently written. -6- 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. BOYD GAMING CORPORATION By: /s/ Ellis Landau ---------------------------------------- Title: Executive Vice President CALIFORNIA HOTEL AND CASINO By: /s/ Ellis Landau ---------------------------------------- Title: Senior Vice President CIBC By: /s/ illegible ---------------------------------------- Title: Managing Director CIBC Wood Gundy Securities Corp. AS AGENT BANK OF AMERICA NT&SA By: /s/ illegible ---------------------------------------- Title: Vice President WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Kathleen Stone ---------------------------------------- Title: Vice President BANKERS TRUST COMPANY By: /s/ illegible ---------------------------------------- Title: V.P. CREDIT LYONNAIS LOS ANGELES BRANCH By: /s/ illegible ---------------------------------------- Title: Vice President and Branch Manager SOCIETE GENERALE By: /s/ Donald L. Schubert ---------------------------------------- Title: Vice President -7- 8 ABN AMRO BANK N.V. SAN FRANCISCO INTERNATIONAL BRANCH By: /s/ Jeffrey A. French ---------------------------------------- Title: Jeffrey A. French Group Vice President & Director By: /s/ Joseph A. Vitale ---------------------------------------- Title: Joseph A. Vitale Portfolio Officer THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY By: /s/ illegible ---------------------------------------- Title: Deputy General Manager THE SANWA BANK, LIMITED By: /s/ illegible ---------------------------------------- Title: Vice President COMMERZBANK AG, LOS ANGELES BRANCH By: ---------------------------------------- Title: By: ---------------------------------------- Title: FIRST SECURITY BANK OF UTAH, N.A. By: /s/ David P. Williams ---------------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ illegible ---------------------------------------- Title: Vice President By: /s/ illegible ---------------------------------------- Title: Vice President -8- 9 THE FIRST NATIONAL BANK OF BOSTON By: /s/ illegible ----------------------------------- Title: Director BANK OF HAWAII By: /s/ Joseph T. Donalson ----------------------------------- Title: Vice President THE BANK OF NEW YORK By: /s/ illegible ------------------------------------ Title: VP BANQUE NATIONALE DE PARIS By: /s/ illegible ------------------------------------ Title: S.V.P. By: /s/ illegible ------------------------------------ Title: V.P. THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY By: /s/ Vicente L. Timiraos ------------------------------------ Title: Senior Vice President and Senior Manager NBD BANK By: /s/ Gary S. Gage ------------------------------------ Title: Senior Vice President THE NIPPON CREDIT BANK, LTD., LOS ANGELES AGENCY By: /s/ Bernardo E. Correa-Henschke ------------------------------------ Title: Vice President and Senior Manager US BANK OF NEVADA By: /s/ illegible ------------------------------------ Title: Vice President -9- 10 WHITNEY NATIONAL BANK By: /s/ illegible ------------------------------------ Title: Assistant Vice President DEPOSIT GUARANTY NATIONAL BANK By: /s/ illegible ------------------------------------ Title: Senior Vice President FIRST HAWAIIAN BANK By: /s/ illegible ------------------------------------ Title: Vice President GIROCREDIT BANK, AG DER SPARKASSEN, GRAND CAYMAN ISLANDS BRANCH By: /s/ illegible ------------------------------------ Title: By: /s/ illegible ------------------------------------ Title: IMPERIAL BANK By: /s/ Steven K. Johnson ------------------------------------ Title: Senior Vice President TRUSTMARK NATIONAL BANK By: /s/ illegible ------------------------------------ Title: Vice President -10- 11 EXHIBIT A to First Amendment to Credit Agreement March 28, 1997 Mare-Bear, Inc. Sam-Will, Inc. Boyd Tunica, Inc. Boyd Kansas City, Inc. Eldorado, Inc. Boyd Mississippi, Inc. Boyd Kenner, Inc. MSW, Inc. East Peoria Hotel, Inc. Par-A-Dice Gaming Corporation c/o California Hotel and Casino 2950 South Industrial Road Las Vegas, Nevada 89109 Attention: Chief Financial Officer Re: Boyd Gaming Corporation and California Hotel and Casino Gentlemen: Please refer to (1) the $500,000,000 Credit Agreement, dated as of June 19, 1996, by and among Boyd Gaming Corporation and California Hotel and Casino, as the Borrowers, the commercial lending institutions party thereto (collectively, the "Lenders"), Wells Fargo Bank N.A., as Swingline Lender, Canadian Imperial Bank Of Commerce ("CIBC"), as letter of credit issuer, Bank Of America National Trust and Savings Association and Wells Fargo Bank N.A., as co-managing agents (herein, in such capacity, the "Co-Managing Agents"), Bankers Trust Company, Credit Lyonnais Los Angeles Branch and Societe Generale, as co-agents (herein, in such capacity, the "Co-Agents"), and CIBC, as administrative agent and collateral agent for the Lenders (herein, in such capacity, called the "Agent") (the Lenders, the Co-Managing Agents, the Co-Agents and the Agent herein are collectively called the "Beneficiaries") and (2) the General Continuing Guaranties, dated as of June 19, 1996 of Mare-Bear, Inc., Sam-Will, Inc., Boyd Tunica, Inc., Boyd Kansas City, Inc., Eldorado, Inc., Boyd Mississippi, Inc., Boyd Kenner, Inc. and MSW, Inc. and the General Continuing Guaranties dated as of December 13, 1996 of East Peoria Hotel, Inc. and Par-A-Dice Gaming Corporation, executed in favor of the Beneficiaries (each such Guaranty is 12 herein called a "Guaranty"). Pursuant to an amendment dated of even date herewith, certain terms of the Credit Agreement were amended. We hereby request that you (i) acknowledge and reaffirm all of your obligations and undertakings under your Guaranty and (ii) acknowledge and agree that your Guaranty is and shall remain in full force and effect in accordance with the terms thereof. Please indicate your agreement to the foregoing by signing in the space provided below, and returning the executed copy to the undersigned. CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent By: _______________________________ Title: Managing Director CIBC Wood Gundy Securities Corp., AS AGENT Acknowledged and Agreed to MARE-BEAR, INC. By: ___________________________ Its: ____________________ SAM-WILL, INC. By: ___________________________ Its: ____________________ BOYD TUNICA, INC. By: ___________________________ Its: ____________________ BOYD KANSAS CITY, INC By: ___________________________ Its: ____________________ ELDORADO, INC. By: ___________________________ Its: ____________________ -2- 13 BOYD MISSISSIPPI, INC. By: ---------------------------------- Its: --------------------------- BOYD KENNER, INC. By: ---------------------------------- Its: --------------------------- MSW, INC. By: ---------------------------------- Its: --------------------------- EAST PEORIA HOTEL, INC. By: ---------------------------------- Its: --------------------------- PAR-A-DICE GAMING CORPORATION By: ---------------------------------- Its: --------------------------- -3- 14 EXHIBIT B to First Amendment to Credit Agreement Form of Certificate of the Borrowers of Compliance with the Provisions of Section 7.2 Schedule of Compliance with the Credit Agreement dated as of June 19, 1996, as amended as of ________________, 19 ___ The undersigned, _______________________________ of Boyd Gaming Corporation and California Hotel and Casino (the "Borrowers"), pursuant to Section 7.1.1(c) and (d) of the Credit Agreement, dated as of June 19, 1996, as amended (the "Credit Agreement"), among the Borrowers, Canadian Imperial Bank of Commerce, as Agent, and the various financial institutions as are, or may become, parties thereto, hereby certifies that as of the date hereof (defined terms in the Credit Agreement being used herein with the same meanings as in the Credit Agreement), the following computations were true and correct: I. Calculation of EBITDA for four consecutive Fiscal Quarters ending on the date set forth above: a. Consolidated earnings of Boyd Gaming $ ____________ before: depreciation $_____________ amortization $_____________ interest expense $_____________ pre-opening expenses $_____________ extraordinary items $_____________ taxes $_____________ plus (if applicable without duplication) b. Earnings of any New Venture which became a direct or indirect Subsidiary of Boyd Gaming during such period: $______________ 15 before depreciation $__________ amortization $__________ interest expense $__________ pre-opening expense $__________ extraordinary items $__________ taxes $__________ plus (or minus) c. any non-cash loss (or gain arising from change in GAAP $___________ EBITDA $___________ II. Additional Indebtedness Test, Section 7.2.2 a. Aggregate notional principal amount of secured Hedging Obligations under (iii): [description] Aggregate notional principal amount of such secured Hedging Obligations shall not exceed $300,000,000. b. Indebtedness outstanding under (v): [description] Total Indebtedness described above shall not exceed $25,000,000. III. Tangible Net Worth Test, Section 7.2.4(a) a. Actual Tangible Net Worth (i) consolidated net worth $___________ less (ii) intangible assets $___________ TOTAL $___________ b. Required Tangible Net Worth (i) $210,000,000 $210,000,000 plus (ii) 50% of Consolidated net income (without giving effect to any losses) for each Fiscal Quarter ending on or after September 30, 1996 $___________ plus (iii) Amount of increased equity due to stock issuances $___________ minus (iv) Amount of goodwill from acquisition of Par-A-Dice Gaming Corporation (not to exceed $130,000,000) $___________ -2- 16 minus (v) Noncash writedowns taken by Boyd Kansas City in connection with its Venture in Kansas City, Missouri $____________ TOTAL $____________ c. Actual Tangible Net Worth shown in (a) above must exceed (b) $____________ IV. Funded Debt to EBITDA Ratio, Section 7.2.4(b) a. Funded Debt of Boyd Gaming and its Subsidiaries (i) obligations for borrowed money $____________ plus (ii) letter of credit and bankers acceptances $____________ plus (iii) capitalized lease obligations $____________ plus (iv) deferred purchase price indebtedness and secured indebtedness $____________ plus (v) contingent liabilities $____________ TOTAL $____________ b. Twelve month trailing EBITDA (from Section I above) $____________ c. Ratio of line (a) to line (b) _____ to _____ d. The ration on line (c) must not exceed _____ to _____ V. Fixed Charge Coverage Test, Section 7.2.4(c) a. Twelve-month trailing EBITDA (from Section I above) plus rental payments ($____________) b. Fixed charges (i) Twelve-month consolidated net interest expense $____________ plus (ii) mandatory principal payments (other than payment of Indebtedness pursuant to Section 5.1.16 and mandatory prepayments of Loans upon Commitment reductions) $____________ plus (iii) provision for tax payments $____________ plus (iv) dividends and distributions $____________ plus (v) share redemptions and repurchases $____________ plus (vi) rental payments $____________ c. Ratio of line (a) to line (b) _____ to _____ -3- 17 d. The ratio on line (c) at the end of any Fiscal Quarter must exceed ________ to ________ VI. Expansion Capital Expenditures, Section 7.2.7 (a) a. Aggregate Expansion Capital Expenditures during term of Agreement $___________ [List Expenditures by Venture] b. Line (a) must not exceed $250,000,000 plus net cash proceeds from the issuance or sale of Boyd Gaming capital stock ($_______) $___________ VII. Maintenance Capital Expenditures, Section 7.2.7(b) a. Aggregate Maintenance Capital Expenditures for current Fiscal Year $___________ b. Line (a) must not exceed $__,000,000. VIII. New Venture Investments, Section 7.2.5 a. Aggregate New Venture Investments during term of Agreement $___________ [List Investments by New Venture] IX. Pledgor EBITDA (Fiscal Year test) a. Consolidated earnings of all Pledgors attributable to the Pledged Casinos $_____________ before: depreciation $___________ amortization $___________ interest expense $___________ pre-opening expenses $___________ extraordinary items $___________ taxes $___________ plus b. Consolidated earnings of any Venture that becomes a Pledged Casino pursuant to Section 7.1.11 $_____________ before: depreciation $___________ amortization $___________ interest expense $___________ pre-opening expenses $___________ extraordinary items $___________ taxes $___________ -4- 18 plus (or minus) c. Any non-cash loss (or gain) arising from a change in GAAP $ ------------- Pledgor EBITDA $ ------------- I hereby further certify that no event has occurred or is continuing on the date hereof which constitutes an Event of Default or a Default. IN WITNESS WHEREOF, I have hereunto set my hand as of the date first above written. BOYD GAMING CORPORATION By -------------------------------- Its: CALIFORNIA HOTEL AND CASINO By -------------------------------- Its: -5- EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 1,000 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 61,276 0 20,827 0 7,988 112,990 1,132,332 375,536 1,059,520 119,287 0 0 0 614 186,478 1,059,520 605,850 605,850 0 673,109 0 0 44,421 (111,187) (36,327) (74,860) 0 6,069 0 (80,929) (1.35) (1.35)
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