XML 26 R10.htm IDEA: XBRL DOCUMENT

Note 2 - Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

NOTE 2. ACQUISITIONS AND 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 Kansas City, the owner and operator of Ameristar Casino Hotel Kansas City; Ameristar St. Charles, the owner and operator of Ameristar Casino Resort Spa St. Charles; Belterra Resort, the owner and operator of Belterra Casino Resort located in Florence, Indiana; and 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 Pinnacle Properties as well as certain other assets (and assumed certain other liabilities) of Pinnacle related to the Pinnacle Properties (collectively, the "Pinnacle Acquisition"). Each of the Pinnacle Properties is now a wholly owned subsidiary of Boyd Gaming. The Pinnacle Properties are aggregated into our Midwest & South segment (See Note 14, 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 facilities 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.

On May 6, 2020 we entered into an agreement with Gold Merger Sub, a wholly owned subsidiary of GLPI, for the acquisition of Boyd (Ohio) PropCo, LLC, the entity that owns the real estate of Belterra Park (the "Real Estate"), with the merger consummated and the transaction closed at the time of the execution of the merger agreement. That agreement provided that Gold Merger Sub would acquire Boyd PropCo via a merger (the "Merger"), which would be treated for income tax purposes as a taxable asset acquisition consisting of the exchange of the Real Estate by us in satisfaction of the $57.7 million promissory note (the "Note") and mortgage executed in connection with GLPI’s initial financing of our acquisition of the Real Estate in October 2018.

Prior to the Merger, PNK (Ohio), LLC ("BP OpCo"), which owns the business operations of Belterra Park, leased the Real Estate from Boyd PropCo pursuant to a master lease that is the same in all material respects as the Master Lease between Boyd TCIV, LLC and Gold Merger Sub (the "BP Master Lease" and "GLP Master Lease," respectively). Rent paid under the BP Master Lease to Boyd PropCo by BP OpCo was then paid by Boyd PropCo to Gold Merger Sub as interest on the Note. As a result of the Merger, Gold Merger Sub has become the Landlord under the BP Master Lease and now receives rent payable under the BP Master Lease (equal to, and in lieu of, the interest payments on the Note received prior to consummation of the Merger). As an additional step in connection with the Merger, we expect to add BP OpCo as a subtenant to the GLP Master Lease (in connection with the termination of the BP Master Lease), resulting in a single Master Lease with GLPI, subject to the prior receipt of all required governmental approvals.

Consideration Transferred

The total gross cash consideration paid to acquire the Pinnacle Properties was $615.1 million.

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 was recorded as goodwill. The purchase price allocation below represents the Pinnacle Properties 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 to goodwill. The tax impact related to the measurement period adjustments was considered immaterial to our 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:

(In thousands)		Final Purchase Price Allocation
Current assets		$	64,161
Property and equipment			130,306
Other assets			(28	)
Intangible assets			454,400
Total acquired assets			648,839

Current liabilities			54,434
Other liabilities			57,832
Total liabilities assumed			112,266
Net identifiable assets acquired			536,573
Goodwill			78,560
Net assets acquired		$	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		4			$	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 $0.2 million, $2.4 million and $14.5 million of acquisition related costs that were expensed for the years ended December 31, 2020, 2019 and 2018, respectively. These costs are included in the project development, preopening and writedowns line in the consolidated statements of operations.

Condensed Consolidated Statement of Operations for the years ended December 31, 2020 and 2019 and the period from October 15, 2018 through December 31, 2018

The following supplemental information presents the financial results of the Pinnacle Properties included in the Company's consolidated statement of operations for the years ended December 31, 2020, 2019 and the period from October 15, 2018 through December 31, 2018:

										*Period from*
		*Year Ended*				*Year Ended*				*October 15 to*
*(In thousands)*		*December 31, 2020*				*December 31, 2019*				*December 31, 2018*
Total revenues		$	476,188			$	671,900			$	138,189
Net income (loss)		$	(48,878	)		$	59,740			$	1,641

Valley Forge Convention Center Partners

On September 17, 2018, we completed the acquisition of Valley Forge, the owner and operator of Valley Forge Casino Resort, 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 14, Segment Information). The net purchase price was $264.3 million.

Consideration Transferred

The total gross cash consideration paid to acquire Valley Forge was $289.1 million.

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 a $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 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 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:

(In thousands)		Final Purchase Price Allocation
Current assets		$	29,280
Property and equipment			57,118
Other assets			2,872
Intangible assets			136,600
Total acquired assets			225,870

Current liabilities			12,968
Other liabilities			9,803
Total liabilities assumed			22,771
Net identifiable assets acquired			203,099
Goodwill			85,966
Net assets acquired		$	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, $0.6 million and $3.6 million of acquisition related costs that were expensed for the years ended December 31, 2020, 2019 and 2018, respectively. These costs are included in the project development, preopening and writedowns line in the consolidated statements of operations.

Condensed Consolidated Statement of Operations for the years ended December 31, 2020 and 2019 and the period from September 17, 2018 through December 31, 2018

The following supplemental information presents the financial results of Valley Forge included in the Company's consolidated statement of operations for the years ended December 31, 2020, 2019 and the period from September 17, 2018 through December 31, 2018:

										*Period from*
		*Year Ended*				*Year Ended*				*September 17 to*
*(In thousands)*		*December 31, 2020*				*December 31, 2019*				*December 31, 2018*
Total revenues		$	88,699			$	168,610			$	43,499
Net income		$	3,342			$	31,286			$	4,450

Lattner Entertainment Group Illinois

On June 1, 2018, we completed the acquisition of 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 currently operates approximately 1,100 gaming units in approximately 210 locations across the state of Illinois and is aggregated into our Midwest & South segment (See Note 14, Segment Information). The net purchase price was $100.0 million.

Consideration Transferred

The total gross cash consideration paid to acquire Lattner was $110.5 million.

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 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 $0.2 million increase in property and equipment, a $1.0 million increase in other assets, with a corresponding decrease of $1.2 million to goodwill. The measurement period adjustments and the related tax impact were immaterial to our 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:

(In thousands)		Final Purchase Price Allocation
Current assets		$	10,638
Property and equipment			9,496
Other assets			2,933
Intangible and other assets			58,000
Total acquired assets			81,067

Current liabilities			1,062
Total liabilities assumed			1,062
Net identifiable assets acquired			80,005
Goodwill			30,529
Net assets acquired		$	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 recognized $0.4 million and $0.7 million of acquisition related costs that were expensed for the year ended December 31, 2019 and 2018, respectively. There were no acquisition related costs for the year ended December 31, 2020. These costs are included in the project development, preopening and writedowns line in the 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 years ended December 31, 2020 and 2019 and the period from June 1, 2018 through December 31, 2018.

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, 2017. 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.

		*Year Ended December 31, 2018*
*(In thousands)*		*Boyd Gaming Corporation (As Reported)*				*Acquired Companies*				*Boyd Gaming Corporation (Pro Forma)*
Total revenues		$	2,626,730			$	666,928			$	3,293,658
Net income from continuing operations, net of tax		$	114,701			$	16,589			$	131,290
Basic net income per share		$	1.01							$	1.15
Diluted net income per share		$	1.00							$	1.14

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 along with the Belterra Park Mortgage; (iv) the estimated tax effect of the pro forma adjustments and on the historical taxable income of the Acquired Companies; and (v) miscellaneous adjustments as a result of the preliminary purchase price allocation on the amortization of certain assets and liabilities.

Divestiture of Eldorado

On December 10, 2020, Boyd Gaming completed the sale of the Eldorado Casino in Henderson, Nevada. The gain from the sale of this property is included in the project development, preopening and writedowns line in the consolidated statement of operations.

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, pursuant to the Purchase Agreement entered into on May 31, 2016, as amended on July 19, 2016, by and among Boyd, Boyd Atlantic City, Inc., a wholly-owned subsidiary of Boyd, and MGM. During the year ended December 31, 2018, we recognized $0.3 million in income, net of tax, for the cash received for our share of miscellaneous recoveries realized by Borgata during that period, which are included in discontinued operations in the consolidated financial statements.