The Boyd Group: Understanding the Cash Flow Statement

June 22, 2015

Last week, there was discussion of the Boyd Group Income Fund, specifically the Fiscal Year 2014 Income Statement, and how it's similar and different to the income statements of other industry operators .

Last week we discussed the Boyd Group Income Fund (“Boyd”), specifically the Fiscal Year 2014 Income Statement, and how it is both similar and different to the income statements of o

ther operators in the industry. In 2014 Boyd generated an impressive $844 million in sales but reported a net loss of over $15 million. Many in the industry mistakenly assume that because the company operates at a net loss it is only able to remain in business through the benevolence of Wall Street banks. The reality is that Boyd, while operating at a net loss, generates substantial cash for shareholders. And when adjusting for certain accounting idiosyncrasies unique to the legal structure and location of the firm, the company generates a respectable profit. To understand how this is possible is to understand the difference between cash and accrual accounting*, and more generally, how to use corporate finance to drive systemic growth.

*See the footnote at the end of this article for a further explanation of cash vs. accrual accounting.

While Boyd generated a significant net loss on an annual basis, it also generated substantial cash from collision and glass operations. Due to the rules of accrual versus cash accounting, Boyd recognizes expenses as they occur, rather than when they are paid. As a result, there are a number of non-cash expenses that lower the profitability of the company while having little impact on the cash position of the company.