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Note 2 - Acquisitions & Divestitures | 9 Months Ended
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Sep. 30, 2019
Notes to Financial Statements |
Mergers, Acquisitions and Dispositions Disclosures [Text Block] | NOTE 2. ACQUISITIONS & DIVESTITURES Ameristar Casino Hotel Kansas City; Ameristar Casino Resort Spa St. Charles; Belterra Casino Resort; Belterra Park On October 15, 2018, we completed the acquisition of Ameristar Casino Kansas City, LLC ("Ameristar Kansas City"), the owner and operator of Ameristar Casino Hotel Kansas City; Ameristar Casino St. Charles, LLC ("Ameristar St. Charles"), the owner and operator of Ameristar Casino Resort Spa St. Charles; Belterra Resort Indiana LLC ("Belterra Resort"), the owner and operator of Belterra Casino Resort located in Florence, Indiana; and PNK (Ohio) LLC ("Belterra Park"), the owner and operator of Belterra Park, located in Cincinnati, Ohio (collectively, the "Pinnacle Properties"), pursuant to a Membership Interest Purchase Agreement (as amended, the "Pinnacle Purchase Agreement"), dated as of December 17, 2017, as amended as of January 29, 2018 ("Amendment No. 1") and October 15, 2018 ("Amendment No. 2"), in each case by and among Boyd Gaming, Boyd TCIV, LLC, a wholly owned subsidiary of Boyd Gaming ("Boyd TCIV"), Penn National Gaming, Inc. ("Penn"), and, solely following the execution and delivery of a joinder to the Pinnacle Purchase Agreement, Pinnacle Entertainment, Inc. ("Pinnacle Entertainment") and its wholly owned subsidiary, Pinnacle MLS, LLC (collectively with Pinnacle Entertainment, "Pinnacle"). Pursuant to the Pinnacle Purchase Agreement, Boyd Gaming acquired from Pinnacle all of the issued and outstanding membership interests of the Acquired Companies as well as certain other assets (and assumed certain other liabilities) of Pinnacle related to the Acquired Companies (collectively, the "Pinnacle Acquisition"). Each of the Acquired Companies is now a wholly owned subsidiary of Boyd Gaming. The acquired companies are aggregated into our Midwest & South segment (See Note 11, Segment Information). The net purchase price was $576.1 million. Pursuant to the Pinnacle Purchase Agreement, Boyd TCIV entered into a Master Lease, dated October 15, 2018 (the "Master Lease"), with Gold Merger Sub, LLC ("Gold Merger Sub"), as landlord, and Boyd TCIV, as tenant, pursuant to which the landlord agreed to lease to Boyd TCIV the real estate associated with Ameristar Kansas City, Ameristar St. Charles, Belterra Resort and Ogle Haus, LLC, a wholly owned subsidiary of Belterra Resort ("Ogle Haus"), commencing on October 15, 2018 and ending on April 30, 2026 as the initial term, with options for renewal. The Pinnacle Acquisition occurred substantially concurrently with the acquisition of Pinnacle Entertainment by Penn pursuant to the Merger Agreement, dated December 17, 2017, by and among Pinnacle Entertainment, Penn and Franchise Merger Sub, Inc., a wholly owned subsidiary of Penn. Concurrently with the Pinnacle Acquisition, Boyd (Ohio) PropCo, LLC, a wholly owned subsidiary of Boyd TCIV ("Boyd PropCo"), acquired the real estate associated with Belterra Park in Cincinnati, Ohio (the "Belterra Park Real Property Sale") utilizing mortgage financing from a subsidiary of Gaming and Leisure Properties, Inc. ("GLPI"), pursuant to a purchase agreement, dated December 17, 2017 ("Belterra Park Purchase Agreement"), by and among Penn, Gold Merger Sub, a wholly owned subsidiary of GLPI, Belterra Park and Pinnacle Entertainment, and a Novation and Amendment Agreement, dated October 15, 2018 (the "Novation Agreement"), by and among Penn, Gold Merger Sub, Boyd PropCo, Belterra Park and Pinnacle Entertainment. Pursuant to the Novation Agreement, Gold Merger Sub, the original purchaser under the Belterra Park Purchase Agreement, assigned, transferred and conveyed to Boyd PropCo and Boyd PropCo accepted Gold Merger Sub’s rights, title and interest in the Belterra Park Purchase Agreement. Consideration Transferred The fair value of the consideration transferred pursuant to the Pinnacle Purchase Agreement represented the purchase price of the net assets acquired. The total gross cash consideration was $615.1 million. Status of Purchase Price Allocation The Company followed the acquisition method of accounting per FASB Accounting Standards Codification Topic 805 ("ASC 805") guidance. In accordance with ASC 805, we have allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as determined by management with the assistance from third-party specialists. The excess of the purchase price over those fair values has been recorded as goodwill. The preliminary purchase price allocation below represents the opening balance sheet on October 15, 2018, which was reported in our Form 10-K for the annual period ended December 31, 2018. During the measurement period, which ended on September 30, 2019, opening balance sheet adjustments were made to finalize the preliminary fair value estimates, resulting in a $0.4 million decrease in current assets, a $36.7 million decrease in property and equipment, a $39.0 million increase in intangible assets, and a $0.2 million decrease in current liabilities, with a corresponding increase of $5.8 million in goodwill. The tax impact related to the measurement period adjustments was considered immaterial to our condensed consolidated financial statements. The following table presents the components of the allocation of the purchase price as of the acquisition date, including the measurement period adjustments:
|  | Preliminary |  |  |  |  |  |  |  |  |
|  | Allocation as of |  |  |  |  |  |  | Final Purchase |
(In thousands) |  | December 31, 2018 |  |  | Adjustments |  |  | Price Allocation |
Current assets |  | $ | 64,604 |  |  | $ | (443 | ) |  | $ | 64,161 |
Property and equipment |  |  | 167,000 |  |  |  | (36,694 | ) |  |  | 130,306 |
Other assets |  |  | (28 | ) |  |  | — |  |  |  | (28 | )
Intangible assets |  |  | 415,400 |  |  |  | 39,000 |  |  |  | 454,400 |
Total acquired assets |  |  | 646,976 |  |  |  | 1,863 |  |  |  | 648,839 |
Current liabilities |  |  | 54,585 |  |  |  | (151 | ) |  |  | 54,434 |
Other liabilities |  |  | 57,832 |  |  |  | — |  |  |  | 57,832 |
Total liabilities assumed |  |  | 112,417 |  |  |  | (151 | ) |  |  | 112,266 |
Net identifiable assets acquired |  |  | 534,559 |  |  |  | 2,014 |  |  |  | 536,573 |
Goodwill |  |  | 72,740 |  |  |  | 5,820 |  |  |  | 78,560 |
Net assets acquired |  | $ | 607,299 |  |  | $ | 7,834 |  |  | $ | 615,133 |
The following table summarizes the final values assigned to acquired property and equipment and estimated useful lives:
(In thousands) |  | Useful Lives (in years) |  |  | As Recorded |
Land |  |  |  |  |  | $ | 4,395 |
Buildings and improvements |  |  | 15 - 40 |  |  |  | 56,054 |
Furniture and equipment |  |  | 2 - 10 |  |  |  | 69,857 |
Property and equipment acquired |  |  |  |  |  | $ | 130,306 |
The following table summarizes the acquired intangible assets and weighted average useful lives of definite-lived intangible assets.
(In thousands) |  | Useful Lives (in years) |  |  | As Recorded |
Customer relationship |  | 5 |  |  | $ | 42,600 |
Trademark |  | Indefinite |  |  |  | 42,300 |
Gaming license right |  | Indefinite |  |  |  | 369,500 |
Total intangible assets acquired |  |  |  |  | $ | 454,400 |
The goodwill recognized is the excess of the purchase price over the final values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to the Midwest & South reportable segment and is expected to be deductible for income tax purposes. The Company recognized $0.7 million and $2.8 million of acquisition related costs that were expensed for the three months ended September 30, 2019 and 2018, respectively, and $2.2 million and $4.2 million for the nine months ended September 30, 2019 and 2018. These costs are included in the Project development, preopening and writedowns line in the condensed consolidated statements of operations. Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2019 The following supplemental information presents the financial results of the Pinnacle Properties included in the Company's condensed consolidated statement of operations for the three and nine months ended September 30, 2019:
|  | Three Months Ended |  |  | Nine Months Ended |
(In thousands) |  | September 30, 2019 |  |  | September 30, 2019 |
Total revenues |  | $ | 171,301 |  |  | $ | 506,158 |
Net income |  | $ | 18,426 |  |  | $ | 49,721 |
Valley Forge Convention Center Partners On September 17, 2018, we completed the acquisition of Valley Forge Convention Center Partners, L.P., the owner and operator of Valley Forge Casino Resort ("Valley Forge"), pursuant to an Agreement and Plan of Merger (as amended, the "Valley Forge Merger Agreement"), dated as of December 20, 2017, as amended as of September 17, 2018, in each case by and among Boyd, Boyd TCV, LP, a Pennsylvania limited partnership and a wholly owned subsidiary of Boyd (“Boyd TCV”), Valley Forge, and VFCCP SR LLC, a Pennsylvania limited liability company, solely in its capacity as the representative of Valley Forge’s limited partners. Pursuant to the Valley Forge Merger Agreement, Boyd TCV merged with and into Valley Forge (the "Valley Forge Merger"), with Valley Forge surviving the merger. Valley Forge is now a wholly owned subsidiary of Boyd. Valley Forge is a modern casino and hotel in King of Prussia, Pennsylvania that offers premium accommodations, gaming, dining, entertainment and retail services, and is aggregated into our Midwest & South segment (See Note 11, Segment Information). The net purchase price was $264.3 million. Consideration Transferred The fair value of the consideration transferred pursuant to the Valley Forge Merger Agreement represented the purchase price of the net assets acquired. The total gross consideration was $289.1 million. Status of Purchase Price Allocation The Company followed the acquisition method of accounting per ASC 805 guidance. In accordance with ASC 805, we have allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as determined by management with the assistance from third-party specialists. The excess of the purchase price over those fair values was recorded as goodwill. The purchase price allocation below represents Valley Forge's opening balance sheet on September 17, 2018, which was reported in our Form 10-K for the annual period ended December 31, 2018. During the measurement period, which concluded on September 1, 2019, opening balance sheet adjustments were made to finalize the preliminary fair value estimates, resulting in $0.6 million decrease in current assets, a $0.6 million increase in property and equipment, a $2.4 million increase in other assets, a $12.0 million decrease in intangible assets and a $9.2 million increase in other liabilities, with a corresponding increase of $16.5 million to goodwill. The measurement period adjustments and the related tax impact were immaterial to our condensed consolidated financial statements. The following table presents the components of the allocation of the purchase price as of the acquisition date, including the measurement period adjustments:
|  | Preliminary |  |  |  |  |  |  |  |
|  | Allocation as of |  |  |  |  |  |  | Final Purchase |
(In thousands) |  | December 31, 2018 |  |  | Adjustments |  |  | Price Allocation |
Current assets |  | $ | 29,909 |  |  | $ | (629 | ) |  | $ | 29,280 |
Property and equipment |  |  | 56,500 |  |  |  | 618 |  |  |  | 57,118 |
Other assets |  |  | 483 |  |  |  | 2,389 |  |  |  | 2,872 |
Intangible assets |  |  | 148,600 |  |  |  | (12,000 | ) |  |  | 136,600 |
Total acquired assets |  |  | 235,492 |  |  |  | (9,622 | ) |  |  | 225,870 |
Current liabilities |  |  | 12,968 |  |  |  | — |  |  |  | 12,968 |
Other liabilities |  |  | 606 |  |  |  | 9,197 |  |  |  | 9,803 |
Total liabilities assumed |  |  | 13,574 |  |  |  | 9,197 |  |  |  | 22,771 |
Net identifiable assets acquired |  |  | 221,918 |  |  |  | (18,819 | ) |  |  | 203,099 |
Goodwill |  |  | 69,446 |  |  |  | 16,520 |  |  |  | 85,966 |
Net assets acquired |  | $ | 291,364 |  |  | $ | (2,299 | ) |  | $ | 289,065 |
The following table summarizes the final values assigned to acquired property and equipment and estimated useful lives:
(In thousands) |  | Useful Lives (in years) |  |  | As Recorded |
Land |  |  |  |  | $ | 15,150 |
Buildings and improvements |  | 15 - 40 |  |  |  | 32,908 |
Furniture and equipment |  | 2 - 6 |  |  |  | 9,060 |
Property and equipment acquired |  |  |  |  | $ | 57,118 |
The following table summarizes the acquired intangible assets and weighted average useful lives of definite-lived intangible assets.
(In thousands) |  | Useful Lives (in years) |  |  | As Recorded |
Customer relationship |  | 5 |  |  | $ | 16,100 |
Trademark |  | Indefinite |  |  |  | 12,500 |
Gaming license right |  | Indefinite |  |  |  | 108,000 |
Total intangible assets acquired |  |  |  |  | $ | 136,600 |
The goodwill recognized is the excess of the purchase price over the final values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to the Midwest & South reportable segment and is expected to be deductible for income tax purposes. The Company recognized $0.2 million and $2.9 million of acquisition related costs that were expensed for the three months ended September 30, 2019 and 2018 and $0.7 million and $3.4 million for the nine months ended September 30, 2019 and 2018, respectively. These costs are included in the Project development, preopening and writedowns line in the condensed consolidated statements of operations. Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2019 The following supplemental information presents the financial results of Valley Forge included in the Company's condensed consolidated statement of operations for the three and nine months ended September 30, 2019:
|  | Three Months Ended |  |  | Nine Months Ended |
(In thousands) |  | September 30, 2019 |  |  | September 30, 2019 |
Total revenues |  | $ | 41,599 |  |  | $ | 125,020 |
Net income |  | $ | 7,793 |  |  | $ | 22,198 |
Lattner Entertainment Group Illinois On June 1, 2018, we completed the acquisition of Lattner Entertainment Group Illinois, LLC ("Lattner"), a distributed gaming operator headquartered in Ottawa, Illinois, pursuant to an Agreement and Plan of Merger (the "Lattner Merger Agreement") dated as of May 1, 2018, by and among Boyd, Boyd TCVI Acquisition, LLC, a wholly owned subsidiary of Boyd ("Boyd TCVI"), Lattner, and Lattner Capital, LLC, solely in its capacity as the representative of the equity holders of Lattner. Pursuant to the Lattner Merger Agreement, Boyd TCVI merged with and into Lattner (the "Lattner Merger"), with Lattner surviving the Lattner Merger and becoming a wholly owned subsidiary of Boyd. Lattner operates nearly 1,000 gaming units in approximately 220 locations across the state of Illinois and is aggregated into our Midwest & South segment (See Note 11, Segment Information). The net purchase price was $100.0 million. Consideration Transferred The fair value of the consideration transferred pursuant to the Lattner Merger Agreement represented the purchase price of the net assets acquired. The total gross consideration was $110.5 million. Status of Purchase Price Allocation The Company followed the acquisition method of accounting per ASC 805 guidance. In accordance with ASC 805, we allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as determined by management with assistance from third-party appraisals. The excess of the purchase price over those fair values was recorded as goodwill. The purchase price allocation below represents Lattner's opening balance sheet on June 1, 2018, which was reported in our Form 10-K for the annual period ended December 31, 2018. During the measurement period, which concluded on March 31, 2019, opening balance sheet adjustments were made to finalize the preliminary fair value estimates, resulting in a $1.0 million increase in other assets and a $0.2 million increase in property and equipment, with a corresponding decrease of $1.2 million to goodwill. The measurement period adjustments and the related tax impact were immaterial to our condensed consolidated financial statements. The following table presents the components of the allocation of the purchase price as of the acquisition date, including the measurement period adjustments:
|  | Preliminary |  |  |  |  |  |  |  |  |
|  | Allocation as of |  |  |  |  |  |  | Final Purchase |
(In thousands) |  | December 31, 2018 |  |  | Adjustments |  |  | Price Allocation |
Current assets |  | $ | 10,638 |  |  | $ | — |  |  | $ | 10,638 |
Property and equipment |  |  | 9,307 |  |  |  | 189 |  |  |  | 9,496 |
Other assets |  |  | 1,963 |  |  |  | 970 |  |  |  | 2,933 |
Intangible assets |  |  | 58,000 |  |  |  | — |  |  |  | 58,000 |
Total acquired assets |  |  | 79,908 |  |  |  | 1,159 |  |  |  | 81,067 |
Current liabilities |  |  | 1,062 |  |  |  | — |  |  |  | 1,062 |
Total liabilities assumed |  |  | 1,062 |  |  |  | — |  |  |  | 1,062 |
Net identifiable assets acquired |  |  | 78,846 |  |  |  | 1,159 |  |  |  | 80,005 |
Goodwill |  |  | 31,692 |  |  |  | (1,163 | ) |  |  | 30,529 |
Net assets acquired |  | $ | 110,538 |  |  | $ | (4 | ) |  | $ | 110,534 |
The following table summarizes the final values assigned to acquired property and equipment and estimated useful lives:
(In thousands) |  | Useful Lives (in years) |  |  | As Recorded |
Buildings and improvements |  | 10 - 45 |  |  | $ | 66 |
Furniture and equipment |  | 3 - 7 |  |  |  | 9,430 |
Property and equipment acquired |  |  |  |  | $ | 9,496 |
The following table summarizes the acquired intangible asset and weighted average useful lives of the definite-lived intangible asset.
(In thousands) |  | Useful Lives (in years) |  |  | As Recorded |
Host agreements |  | 15 |  |  | $ | 58,000 |
Total intangible assets acquired |  |  |  |  | $ | 58,000 |
The goodwill recognized is the excess of the purchase price over the final values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to the Midwest & South reportable segment and is expected to be deductible for income tax purposes. The Company did not incur any acquisition related costs for the three months ended September 30, 2019. The Company recognized $0.1 million of acquisition related costs that were expensed for the three months ended September 30, 2018, and $0.4 million and $0.6 million for the nine months ended September 30, 2019 and 2018, respectively. These costs are included in the Project development, preopening and writedowns line in the condensed consolidated statements of operations. We have not provided the amount of revenue and earnings included in our consolidated financial results from the Lattner acquisition for the period subsequent to its acquisition as such amounts are not material for the three and nine months ended September 30, 2019. Supplemental Unaudited Pro Forma Information The following table presents pro forma results of the Company, as though Lattner, Valley Forge and the Pinnacle Properties (the "Acquired Companies") had been acquired as of January 1, 2018. The pro forma results do not necessarily represent the results that may occur in the future. The pro forma amounts include the historical operating results of the Company, Lattner, Valley Forge and the Pinnacle Properties, prior to the acquisition, with adjustments directly attributable to the acquisitions.
|  | Nine Months Ended September 30, 2018 |
(In thousands) |  | Boyd Gaming Corporation (As Reported) |  |  | Acquired Companies |  |  | Boyd Gaming Corporation (Pro Forma) |
Total revenues |  | $ | 1,835,107 |  |  | $ | 641,112 |  |  | $ | 2,476,219 |
Net income from continuing operations, net of tax |  | $ | 91,834 |  |  | $ | 7,503 |  |  | $ | 99,337 |
Basic net income per share |  | $ | 0.81 |  |  |  |  |  |  | $ | 0.87 |
Diluted net income per share |  | $ | 0.80 |  |  |  |  |  |  | $ | 0.86 |
Pro Forma and Other Adjustments The unaudited pro forma results, as presented above, include adjustments to record: (i) rent expense under the Master Lease; (ii) the net incremental depreciation expense for the adjustment of property and equipment to fair value and the allocation of a portion of the purchase price to amortizing intangible assets; (iii) the increase in interest expense incurred on the incremental borrowings incurred by Boyd to fund the acquisition, including the Belterra Park Mortgage; (iv) the estimated tax effect of the pro forma adjustments on the historical taxable income of the Acquired Companies; and (v) miscellaneous adjustments as a result of the purchase price allocations on the amortization of certain assets and liabilities. Divestiture of Borgata On August 1, 2016, Boyd Gaming completed the sale of its 50% equity interest in the parent company of Borgata in Atlantic City, New Jersey, to MGM Resorts International ("MGM") pursuant to the Purchase Agreement entered into on May 31, 2016, as amended on July 19, 2016, by and among the Company, Boyd Atlantic City, Inc., a wholly owned subsidiary of the Company, and MGM. During the nine months ended September 30, 2018, we recognized $0.3 million in income, net of tax, for the cash we received for our share of miscellaneous recoveries realized by Borgata during that period. This payment is included in discontinued operations in the condensed consolidated financial statements.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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