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Note 9 - Fair Value Measurements
 6 Months Ended
Jun. 30, 2023
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

NOTE 9.     FAIR VALUE MEASUREMENTS

We have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions.

 

These inputs create the following fair value hierarchy:

 

Level 1: Quoted prices for identical instruments in active markets.

 

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

Balances Measured at Fair Value

The following tables show the fair values of certain of our financial instruments:

 

  

June 30, 2023

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $260,787  $260,787  $—  $— 

Restricted cash

  11,615   11,615   —   — 

Investment available for sale

  13,215   —   —   13,215 

 

  

December 31, 2022

 

(In thousands)

 

Balance

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Cash and cash equivalents

 $283,472  $283,472  $—  $— 

Restricted cash

  11,593   11,593   —   — 

Investment available for sale

  13,670   —   —   13,670 

 

Cash and Cash Equivalents and Restricted Cash

The fair values of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks as of  June 30, 2023 and December 31, 2022.

 

Investment Available for Sale

We have an investment in a single municipal bond issuance of $17.1 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale with a maturity date of June 1, 2037. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities and degrees of risk and a discounted cash flows analysis as of  June 30, 2023 and December 31, 2022. The fair value of the instrument is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation at  June 30, 2023 and  December 31, 2022 is a discount rate of 12.3% and 12.4%, respectively. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the condensed consolidated balance sheets and in the condensed consolidated statement of other comprehensive income (loss). At both  June 30, 2023 and December 31, 2022, $0.7 million of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at  June 30, 2023 and December 31, 2022, $12.5 million and $13.0 million, respectively, is included in other assets, net on the condensed consolidated balance sheets. The discount associated with this investment of $2.1 million and $2.2 million as of  June 30, 2023 and December 31, 2022, respectively, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.

 

The following table summarizes the changes in fair value of the Company's Level 3 investment available for sale asset:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

(In thousands)

 

2023

  

2022

  

2023

  

2022

 

Balance at beginning of reporting period

 $14,348  $15,612  $13,670  $15,822 

Total gains (losses) (realized or unrealized):

                

Included in interest income

  44   42   87   84 

Included in other comprehensive income (loss)

  (497)  (903)  138   (1,155)

Purchases, sales, issuances and settlements:

                

Settlements

  (680)  (635)  (680)  (635)

Balance at end of reporting period

 $13,215  $14,116  $13,215  $14,116 

 

 

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

as of  June 30, 2023 and  December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

______________________________________________________________________________________________________

 

We are exposed to valuation risk on our Level 3 financial instruments. We estimate our risk exposure using a sensitivity analysis of potential changes in the significant unobservable inputs of our fair value measurements. Our Level 3 financial instruments are most susceptible to valuation risk caused by changes in the discount rate. If the discount rate in our fair value measurements increased or decreased by 100 basis points, the change would not cause the value of our fair value measurements to change significantly.

 

The fair value of indefinite-lived intangible assets, classified in the fair value hierarchy as Level 3, is utilized in performing the Company's impairment analyses.

 

Balances Disclosed at Fair Value

The following tables provide the fair value measurement information about our note receivable and obligation under assessment agreements:

 

  

June 30, 2023

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Asset

             

Note receivable

 $66,335  $66,335  $65,893 

Level 3

Liabilities

             

Obligation under assessment arrangements

  21,261   18,546   24,739 

Level 3

   

  

December 31, 2022

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Asset

             

Note receivable

 $118,162  $83,791  $82,338 

Level 3

Liabilities

             

Obligation under assessment arrangements

  22,293   19,304   25,738 

Level 3

 

The following tables provide the fair value measurement information about our long-term debt:

 

  

June 30, 2023

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Credit facility

 $1,078,500  $1,062,928  $1,072,313 

Level 2

4.750% senior notes due 2027

  1,000,000   991,234   945,000 

Level 1

4.750% senior notes due 2031

  900,000   889,215   802,125 

Level 1

Other

  589   589   589 

Level 3

Total debt

 $2,979,089  $2,943,966  $2,820,027  

 

  

December 31, 2022

  Outstanding  Carrying  Estimated 

Fair Value

(In thousands)

 

Face Amount

  

Value

  

Fair Value

 

Hierarchy

Credit facility

 $1,187,800  $1,169,935  $1,183,565 

Level 2

4.750% senior notes due 2027

  1,000,000   990,260   928,750 

Level 1

4.750% senior notes due 2031

  900,000   888,540   784,125 

Level 1

Other

  674   674   674 

Level 3

Total debt

 $3,088,474  $3,049,409  $2,897,114  

 

The estimated fair values of our note receivable and our obligation under assessment arrangements are based on a discounted cash flow approach after giving consideration to the changes in market rates of interest, creditworthiness of both parties and credit spread. The estimated fair value of our Credit Facility is based on a relative value analysis performed on or about  June 30, 2023 and December 31, 2022. The estimated fair values of our senior notes are based on quoted market prices as of  June 30, 2023 and December 31, 2022. The other debt is fixed-rate debt consisting of finance leases with various maturity dates from 2024 to 2025. The other debt is not traded and does not have an observable market input; therefore, we have estimated fair value to be equal to the carrying value for these obligations.

 

Other than the retirement of the 8.625% Senior Notes (Level 1) during the six months ended June 30, 2022, that was funded through a combination of cash on hand and borrowings under the Credit Facility (Level 2), there were no transfers between Level 1, Level 2 and Level 3 measurements during the six months ended June 30, 2023 and 2022.