Edgar Filing: BOYD GAMING CORP

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Smaller reporting company

BYD 10Q 9.30.11

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 September 30, 2011



o	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: 1-12882

____________________________________________________

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________________________



Nevada		88-0242733
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3883 Howard Hughes Parkway, Ninth Floor, Las Vegas, NV 89169

(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 such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



	Class		Outstanding as of October 31, 2011
	Common stock, $0.01 par value		86,317,735

Table of Contents

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2011

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010	4

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010	5

	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2011 and 2010	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	59

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	89

Item 4.	Controls and Procedures	89

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	90

Item 1A.	Risk Factors	90

Item 6.	Exhibits	106

Signature Page		107

Table of Contents

PART I. Financial Information

Item 1. Financial Statements

The accompanying unaudited condensed consolidated financial statements of Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” “we” or “us”) have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”).

The results for the periods indicated are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods.

When we filed our Annual Report on Form 10-K for the year ended December 31, 2010 with the Securities and Exchange Commission ("SEC") on March 15, 2011, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 with the SEC on October 27, 2010 (the “Provisional Form 10-K” or “Provisional Form 10-Q”, respectively, or collectively, the “Provisional Forms”), the initial acquisition method accounting for the effective change in control of Borgata Hotel Casino and Spa ("Borgata") was incomplete. The application of acquisition method accounting, required in accordance with the authoritative accounting guidance for business combinations, initially had the following effects on our unaudited condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the provisional fair value of the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the provisional fair value of the noncontrolling interest held in trust as a separate component of our stockholders' equity.

Since the filing of the Provisional Forms, we have made adjustments to the provisional fair value amounts recognized at the date of effective change in control, or March 24, 2010, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. These adjustments, referred to herein as “measurement period adjustments” materially shifted the value of certain tangible and intangible assets. We have applied the measurement period adjustments retrospectively to the condensed consolidated balance sheet reported as of December 31, 2010, as previously reported in the Provisional Form 10-K; however, the impact on the accompanying condensed consolidated statement of operations for the three and nine months ended September 30, 2010, as retrospectively adjusted to the statement as reported in the Provisional Form 10-Q was not material, and was therefore not adjusted for any measurement period adjustments.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. The Provisional Form 10-K, as originally filed with the SEC on March 15, 2011, was subsequently revised on a Form 8-K filed on September 2, 2011 (the "Retrospective Form 8-K"). This Retrospective Form 8-K updated the audited consolidated financial statements and certain other items of the Provisional Form 10-K, specifically and primarily related to the recasting of the consolidated balance sheet as of December 31, 2010, and related notes thereto. The updated historical financial statements, and other conforming changes to the Provisional Form 10-K are filed as Exhibit 99.1 to the Retrospective Form 8-K and have been updated, solely to include the retrospective measurement period adjustments and new footnote disclosure. All other information provided in the Provisional Form 10-K, unless otherwise provided, remain unchanged and the Retrospective Form 8-K does not modify or update such other disclosures in the Provisional Form 10-K in any other way.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share data)



	September 30, 2011		December 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	187,118	$	145,623
Restricted cash	22,692		19,494
Accounts receivable, net	47,145		47,942
Inventories	14,321		16,029
Prepaid expenses and other current assets	53,151		37,153
Income taxes receivable	—		5,249
Deferred income taxes	9,113		8,149
Total current assets	333,540		279,639
Property and equipment, net	3,296,396		3,383,371
Assets held for development	1,119,845		1,119,403
Debt financing costs, net	30,322		34,993
Restricted investments	20,984		48,168
Other assets, net	77,084		70,425
Intangible assets, net	547,075		539,714
Goodwill, net	213,576		213,576
Total assets	$	5,638,822	$	5,689,289
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	363,598	$	25,690
Non-recourse obligations of variable interest entity	221,912		243,059
Accounts payable	55,227		57,183
Income taxes payable	3,122		6,504
Accrued liabilities	305,450		278,469
Total current liabilities	949,309		610,905
Long-term debt, net of current maturities	2,802,075		3,193,065
Deferred income taxes	364,295		362,174
Other long-term tax liabilities	46,882		44,813
Other liabilities	72,369		83,589
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,290,986 and 86,244,978 shares outstanding	863		862
Additional paid-in capital	642,243		635,028
Retained earnings	557,546		560,909
Accumulated other comprehensive loss, net	—		(7,594		)
Total Boyd Gaming Corporation stockholders’ equity	1,200,652		1,189,205
Noncontrolling interest	203,240		205,538
Total stockholders’ equity	1,403,892		1,394,743
Total liabilities and stockholders’ equity	$	5,638,822	$	5,689,289

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
REVENUES
Operating revenues:
Gaming	$	500,824		$	503,746		$	1,469,316		$	1,344,283
Food and beverage	99,221			101,164			285,883			255,166
Room	64,831			64,142			181,881			154,247
Other	34,105			33,960			100,412			91,595
Gross revenues	698,981			703,012			2,037,492			1,845,291
Less promotional allowances	108,766			107,634			307,928			256,332
Net revenues	590,215			595,378			1,729,564			1,588,959
COST AND EXPENSES
Operating costs and expenses:
Gaming	230,675			237,601			680,457			635,461
Food and beverage	50,868			50,690			148,516			132,481
Room	13,586			13,661			39,921			36,767
Other	28,617			28,089			82,191			74,333
Selling, general and administrative	96,301			100,697			288,872			270,641
Maintenance and utilities	40,925			42,661			115,113			104,770
Depreciation and amortization	46,034			52,451			145,106			147,905
Corporate expense	11,025			11,021			36,569			36,636
Preopening expenses	1,720			2,684			5,292			4,990
Write-downs and other items, net	2,300			1,340			9,269			4,932
Total operating costs and expenses	522,051			540,895			1,551,306			1,448,916
Operating income from Borgata	—			—			—			8,146
Operating income	68,164			54,483			178,258			148,189
Other expense (income):
Interest income	(15		)	—			(40		)	(4		)
Interest expense	60,083			45,781			184,068			109,438
Fair value adjustment of derivative instruments	—			—			265			—
Gain on early retirements of debt	(54		)	—			(34		)	(3,949		)
Gain on distribution from Borgata	—			(2,535		)	—			(2,535		)
Other income	(1,000		)	(10,000		)	(1,000		)	(10,000		)
Other non-operating expenses from Borgata, net	—			—			—			3,133
Total other expense, net	59,014			33,246			183,259			96,083
Income (loss) before income taxes	9,150			21,237			(5,001		)	52,106
Income tax (expense) benefit	(2,170		)	(6,371		)	28			(15,532		)
Net income (loss)	6,980			14,866			(4,973		)	36,574
Net (income) loss attributable to noncontrolling interest	(3,871		)	(9,275		)	1,610			(19,166		)
Net income (loss) attributable to Boyd Gaming Corporation	$	3,109		$	5,591		$	(3,363	)	$	17,408
Basic net income (loss) per common share:	$	0.04		$	0.06		$	(0.04	)	$	0.20
Weighted average basic shares outstanding	87,256			86,582			87,206			86,508
Diluted net income (loss) per common share:	$	0.04		$	0.06		$	(0.04	)	$	0.20
Weighted average diluted shares outstanding	87,432			86,684			87,206			86,724

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2011

(Unaudited and in thousands)



				Boyd Gaming Corporation Stockholders’ Equity
													Accumulated
	Other						Additional						Other						Total
	Comprehensive			Common Stock			Paid-in			Retained			Comprehensive			Noncontrolling			Stockholders'
	Income (loss)			Shares	Amount		Capital			Earnings			Loss, Net			Interest			Equity
Balances, January 1, 2011				86,244,978	$	862	$	635,028		$	560,909		$	(7,594	)	$	205,538		$	1,394,743
Net loss	$	(3,363	)		—		—			(3,363		)	—			—			(3,363		)
Derivative instruments fair value adjustment, net of taxes of $4,230	7,594				—		—			—			7,594			—			7,594
Comprehensive income	4,231
Comprehensive loss attributable to noncontrolling interest	(688		)	—	—		—			—			—			(688		)	(688		)
Comprehensive income attributable to Boyd Gaming Corporation	$	3,543
Stock options exercised				46,008	1		275			—			—			—			276
Tax effect from share-based compensation arrangements				—	—		(800		)	—			—			—			(800		)
Share-based compensation costs				—	—		7,740			—			—			—			7,740
Change in noncontrolling interest in Borgata and LVE				—	—		—			—			—			(1,610		)	(1,610		)
Balances, September 30, 2011				86,290,986	$	863	$	642,243		$	557,546		$	—		$	203,240		$	1,403,892

Nine Months Ended September 30, 2010

(Unaudited and in thousands)



			Boyd Gaming Corporation Stockholders’ Equity
											Accumulated
	Other					Additional					Other					Total
	Comprehensive		Common Stock			Paid-in			Retained		Comprehensive			Noncontrolling		Stockholders'
	Income (loss)		Shares	Amount		Capital			Earnings		Loss, Net			Interest		Equity
Balances, January 1, 2010			86,130,454	$	861	$	623,035		$	550,599	$	(18,126	)	$	—	$	1,156,369
Net income	$	17,408	—	—		—			17,408		—			—		17,408
Derivative instruments fair value adjustment, net of taxes of $3,756	6,842		—	—		—			—		6,842			—		6,842
Comprehensive income attributable to Boyd Gaming Corporation	$	24,250	—	—		—			—		—			—		—
Stock options exercised			100,186	1		622			—		—			—		623
Tax effect from share-based compensation arrangements			—	—		(22		)	—		—			—		(22		)
Share-based compensation costs			—	—		8,124			—		—			—		8,124
Change in noncontrolling interest in Borgata			—	—		—			—		—			236,080		236,080
Balances, September 30, 2010			86,230,640	$	862	$	631,759		$	568,007	$	(11,284	)	$	236,080	$	1,425,424

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)



	Nine Months Ended
	September 30,
	2011			2010
Cash Flows from Operating Activities
Net income (loss)	$	(4,973	)	$	36,574
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	145,106			147,905
Amortization of debt financing costs	6,673			6,149
Amortization of discounts on senior secured notes	2,507			484
Share-based compensation expense	7,740			8,124
Deferred income taxes	(3,074		)	14,814
Operating and non-operating income from Borgata	—			(5,013		)
Distributions of earnings received from Borgata	—			1,910
Gain on equity distributions	—			(2,535		)
Noncash asset write-downs	6,052			—
Gain on early retirements of debt	(34		)	(3,949		)
Other operating activities	2,575			1,983
Changes in operating assets and liabilities:
Restricted cash	(3,198		)	(4,734		)
Accounts receivable, net	(4,375		)	1,382
Inventories	1,710			439
Prepaid expenses and other current assets	(5,997		)	(7,250		)
Income taxes receivable	5,264			9,961
Other assets, net	430			236
Accounts payable and accrued liabilities	28,770			30,697
Income taxes payable	(3,382		)	—
Other long-term tax liabilities	2,069			1,519
Other liabilities	(947		)	2,265
Net cash provided by operating activities	182,916			240,961
Cash Flows from Investing Activities
Capital expenditures	(55,491		)	(64,069		)
Acquisition of assets	(34,495		)	—
Decrease in restricted investments	27,184			—
Net cash effect upon change in controlling interest of Borgata	—			26,025
Other investing activities	—			(731		)
Net cash used in investing activities	(62,802		)	(38,775		)
Cash Flows from Financing Activities
Payments on retirements of long-term debt	(8,198		)	(28,861		)
Borrowings under bank credit facility	109,650			525,700
Payments under bank credit facility	(111,503		)	(714,800		)
Borrowings under Borgata bank credit facility	574,700			369,773
Payments under Borgata bank credit facility	(620,600		)	(954,962		)
Proceeds from issuance of Borgata senior secured notes	—			773,176
Debt financing costs, net	(1,283		)	—
Payments under note payable	—			(46,875		)
Payments on obligations of variable interest entity	(27,000		)	—
Distributions to noncontrolling interests in Borgata	—			(120,176		)
Other financing activities	5,615			(5,688		)
Net cash used in financing activities	(78,619		)	(202,713		)
Increase in cash and cash equivalents	41,495			(527		)
Cash and cash equivalents, beginning of period	145,623			93,202
Cash and cash equivalents, end of period	$	187,118		$	92,675

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BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited and in thousands)



	Nine Months Ended
	September 30,
	2011		2010
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	220,971	$	97,366
Cash paid (received) for income taxes, net	1,221		(9,143		)
Supplemental Schedule of Noncash Investing and Financing Activities
Payables incurred for capital expenditures	$	4,871	$	4,409
Fair value adjustment on derivative instruments	11,931		11,777
Extinguishment of previous Borgata credit facility with advance from new Borgata credit facility	—		73,010
Assets and Liabilities Recorded at Fair Value (net of Cash Received) Due to Change in Controlling Interest of Borgata
Accounts receivable, net	$	—	$	29,099
Inventories	—		4,118
Prepaid expenses and other current assets	—		9,437
Deferred income taxes	—		1,290
Property and equipment, net	—		1,352,321
Investments in and advances to unconsolidated subsidiaries, net	—		5,135
Intangibles	—		—
Indefinite lived intangibles	—		—
Other assets, net	—		34,964
Fair value of assets	$	—	$	1,436,364
Current maturities of long-term debt	$	—	$	632,289
Accounts payable	—		6,822
Income taxes payable	—		5,699
Accrued liabilities	—		71,949
Deferred income taxes	—		13,982
Other long-term tax liabilities	—		10,242
Other long-term liabilities	—		16,418
Fair value of liabilities	$	—	$	757,401

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” "Boyd Gaming," “we” or “us”) was incorporated in the state of Nevada in 1988 and has been operating since 1973. The Company's common stock is traded on the New York Stock Exchange under the symbol “BYD”.

We are a diversified operator of 15 wholly-owned gaming entertainment properties and one controlling interest in a limited liability company. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana and New Jersey, which we aggregate in order to present the following four reportable segments:



Las Vegas Locals
Gold Coast Hotel and Casino	Las Vegas, Nevada
The Orleans Hotel and Casino	Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall	Las Vegas, Nevada
Suncoast Hotel and Casino	Las Vegas, Nevada
Eldorado Casino	Henderson, Nevada
Jokers Wild Casino	Henderson, Nevada

Downtown Las Vegas
California Hotel and Casino	Las Vegas, Nevada
Fremont Hotel and Casino	Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel	Las Vegas, Nevada

Midwest and South
Sam's Town Hotel and Gambling Hall	Tunica, Mississippi
Par-A-Dice Hotel Casino	East Peoria, Illinois
Blue Chip Casino, Hotel & Spa	Michigan City, Indiana
Treasure Chest Casino	Kenner, Louisiana
Delta Downs Racetrack Casino & Hotel	Vinton, Louisiana
Sam's Town Hotel and Casino	Shreveport, Louisiana

Atlantic City
Borgata Hotel Casino & Spa	Atlantic City, New Jersey

Hawaiian Operations

In addition to these properties, we own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance. Results for our travel agency and our captive insurance company are included in our Downtown Las Vegas segment, as our Downtown Las Vegas properties concentrate their marketing efforts on gaming customers from Hawaii.

Dania Jai-Alai

We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility with approximately 47 acres of related land located in Dania Beach, Florida. On April 29, 2011, we and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) for the sale of certain assets and liabilities of the Dania Jai-Alai Business (as defined below).

Pursuant to the terms of the Agreement, we agreed to sell and transfer, and the Buyer agreed to purchase and assume, certain assets and liabilities (“Assets and Liabilities”) related to our Dania Jai-Alai pari-mutuel facility, located in Dania Beach, Broward County, Florida at which jai-alai and related gaming operations are conducted, including poker and inter-track wagering (the “Dania Jai-Alai Business”), for a purchase price of $80.0 million (the “Purchase Price”).

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The closing of the transactions contemplated by the Agreement is subject to certain closing conditions.

On September 15, 2011, the Buyer elected to extend the closing date of the pending acquisition of Dania Jai-Alai Business. The terms of the extension provide that sale will close on or before November 28, 2011; however, we have no assurance that the Buyer can or will be in a position to close on such date. As permitted under the terms of the definitive sale agreement, the Buyer made an additional, non-refundable payment of $2 million to us in exchange for the extension of the closing date. Of the $2 million payment, $1 million will be applied to the $80 million purchase price. We previously received a $5 million non-refundable deposit upon execution of the definitive agreement.

Echelon Development

Additionally, we own 85 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project (“Echelon”) is located. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of Echelon. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.

IP Casino Resort Spa

On October 4, 2011, we completed our previously announced acquisition of the assets of the IP Casino Resort Spa in Biloxi, Mississippi, for a purchase price of $278 million in cash. Following the closing of the transaction, we also made a charitable contribution to the Engelstad Family Foundation equal to an aggregate of $10 million, which funds are intended to be distributed on behalf of, and in the name of, Boyd Gaming over five years to charitable organizations to be designated by Boyd Gaming. In addition, following the closing, we intend to perform certain capital improvement projects with respect to the IP Casino Resort Spa with costs estimated to be $44 million.

We will apply acquisition method accounting to this business combination at the transaction date, which requires acquired assets and assumed liabilities to be recorded at their respective fair values. Due to the limited time since the acquisition date, the initial accounting for the business combination is incomplete at this time. Prospectively, however, the acquired assets and liabilities will be recorded in our consolidated balance sheet at fair value as of the closing date; the results of operations of the IP will be included in our consolidated statements of operations and cash flows beginning in the fourth quarter of 2011; and all other disclosures pursuant to the guidance for business combinations will be provided in our Annual Report on Form 10-K for the year ended December 31, 2011. The IP Casino Resport Spa will be reported in our Midwest and South business segment.

Basis of Presentation

Interim Condensed Consolidated Financial Statements

As permitted by the rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information reliable. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. Our Form 10-K, as originally filed with the SEC on March 15, 2011, (the "Provisional Form 10-K")was subsequently revised on a Form 8-K filed on September 2, 2011 (the "Retrospective Form 8-K"). This Retrospective Form 8-K updated the audited consolidated financial statements and certain other items of the Provisional Form 10-K, specifically and primarily related to the recasting of the consolidated balance sheet as of December 31, 2010, and related notes thereto. The updated historical financial statements, and other conforming changes to the Provisional Form 10-K are filed as Exhibit 99.1 to the Retrospective Form 8-K and have been updated, solely to include the retrospective measurement period adjustments and new footnote disclosure. All other information provided in the Provisional Form 10-K, unless otherwise provided, remain unchanged and the Retrospective Form 8-K does not modify or update such other disclosures in the Provisional Form 10-K in any other way.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present our financial position as of September 30, 2011 and December 31, 2010, the results of our operations for the three and nine months ended September 30, 2011 and 2010, and the results of our cash flows for the nine months ended September 30, 2011 and 2010. The condensed consolidated balance sheet as of September 30, 2011 is unaudited; however the condensed consolidated balance sheet presented as of December 31, 2011 has been derived from our audited financial statements as of such date. Our operating results for the three and nine months ended September 30, 2011 and 2010, and our cash flows for the nine months ended September 30, 2011 and 2010, are unaudited, and are not necessarily indicative of the results that would be achieved for the full year or future periods.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Effective Control of Borgata

On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (“MGM”) (our original 50% partner in Borgata), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. The amendment to the operating agreement was related to MGM's divestiture of its interest pursuant to a regulatory settlement, as discussed further in Note 2, Consolidation of Certain Interests. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations. As a result, we measured our previously held equity interest at a provisional fair value as of March 24, 2010, the date we effectively obtained control.

The financial position of Borgata is presented in our condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010; its results of operations for the three months ended September 30, 2011 and 2010 are included in our condensed consolidated statement of operations for the three months ended September 30, 2011 and 2010; its results of operations for the nine months ended September 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the nine months ended September 30, 2011; and its results of operations for the period from March 24 through September 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the nine months ended September 30, 2010.

Consolidation of Variable Interest Entity

LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. In April 2007, we entered into an ESA with LVE to provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties.

LVE began construction of the facility in 2007 and expected to provide full energy services to Echelon in 2010, when we originally expected to open. However, LVE suspended construction in January 2009, after our announcement of the delay of Echelon. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommenced and proceeded with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). LVE has agreed not to initiate any litigation with respect to its April 3, 2009 claim of an alleged breach of the ESA and both Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. Under the Periodic Fee Agreement, Echelon Resorts has agreed to pay LVE, beginning March 4, 2011, a monthly periodic fee (the “Periodic Fee”) and an operation and maintenance fee until Echelon Resorts either (i) resumes construction of the project or (ii) exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval.

Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and the related distribution system for a price of $195.1 million, subject to certain possible adjustments. The ESA will be terminated concurrent with the purchase of the LVE assets.

New consolidation guidance regarding the variable interest model became effective on January 1, 2010. Under this new qualitative model, the primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the variable interest entity that most significantly impacts the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Upon adoption, this guidance required us to consolidate LVE for financial statement purposes, as we determined that we are presently the primary beneficiary of the executory contract, the ESA, giving rise to the variable interest.

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(Unaudited)

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and its subsidiaries.

In addition, as discussed above, the financial position of Borgata is consolidated in our condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010; its results of operations for the three and nine months ended September 30, 2011 are included in our condensed consolidated statements of operations for the three and nine months ended September 30, 2011; its results of operations for the period from July 1 through September 30, 2010 are included in our condensed consolidated statements of operations for the three months ended September 30, 2010; and its results of operations for the period from March 24 through September 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the nine months ended September 30, 2010. At September 30, 2011 and December 31, 2010, approximately $1.42 billion and $1.45 billion, respectively, of our consolidated total assets are related to Borgata.

Additionally, the financial position of LVE is consolidated in our condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010, and its results of operations for the three and nine months ended September 30, 2011 are included in our condensed consolidated statements of operations and cash flows during such periods. At September 30, 2011, approximately $220.4 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $196.1 million, are pledged as security on LVE's outstanding construction loan advances, and an additional $21.0 million of such assets are held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing. At December 31, 2010, approximately $249.7 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $196.4 million, were pledged as security on LVE's outstanding construction loan advances, and an additional $48.2 million of such assets were held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing.

All material intercompany accounts and transactions have been eliminated in consolidation.

Investments in unconsolidated affiliates, which are less than 50% owned and do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. See Note 2, Consolidation of Certain Interests.

Property and Equipment, Net

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, over the shorter of the asset's useful life or term of the lease.

The estimated useful lives of our major components of property and equipment are:



Building and improvements	10 through 40 years
Riverboats and barges	10 through 40 years
Furniture and equipment	3 through 10 years

Gains or losses on disposals of assets are recognized as incurred, using the specific identification method. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

Assets Held for Development

The costs incurred relative to projects under development are carried at cost. Development costs clearly associated with the acquisition, development, and construction of a project are capitalized as a cost of that project, during the periods in which activities necessary to get the property ready for its intended use are in progress. Certain pre-acquisition costs, not qualifying for capitalization, are charged to preopening or other operating expense as incurred.

Debt Financing Costs

Debt financing costs, which include legal, and other direct costs related to the issuance of our outstanding debt, are deferred and amortized to interest expense over the contractual term of the underlying long-term debt using the effective interest method. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt financing costs.

Restricted Investments

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(Unaudited)

In accordance with the terms of the tax-exempt loan agreements, which are the obligations of LVE, unused proceeds are required to be held in escrow pending approval of construction expenditures. These investments are held in an interest-bearing account.

Intangible Assets

Intangible assets include customer relationships, favorable lease rates, gaming license rights and trademarks.

Amortizing intangible assets: Customer relationships represent the value of repeat business associated with our customer loyalty programs. These intangible assets are being amortized on an accelerated method over their approximate useful life. Favorable lease rates represent the amount by which acquired lease rental rates are favorable to market terms. These favorable lease values are amortized over the remaining lease term, primarily on leasehold land interests, ranging in remaining duration from 41 to 52 years. Development agreements are contracts between two parties establishing an agreement for development of a product or service. These agreements are amortized over the respective cash flow period of the related agreement.

Indefinite lived intangible assets: Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, performed in the second quarter of each year, and between annual test dates in certain circumstances. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method.

Long-Term Debt, Net

Long-term debt is reported at amortized cost. The discount on the senior secured notes and the transaction costs paid to the initial purchasers upon issuance of the senior and senior secured notes are recorded as an adjustment to the face amount of our outstanding debt. This resulting difference between the net proceeds upon issuance of the senior and senior secured notes and the face amount of the senior and senior secured notes is accreted to interest expense using the effective interest method.

Noncontrolling Interest

Noncontrolling interest is the portion of the ownership in Borgata not directly attributable to Boyd Gaming Corporation, as well as the ownership of LVE, none of which is attributable to Boyd Gaming Corporation, and is reported as a separate component of our stockholders' equity in our condensed consolidated financial statements. Our consolidated net income is reported at amounts that include the amounts attributable to both us and the noncontrolling interest. At September 30, 2011 and December 31, 2010, there was a noncontrolling interest of $220.9 million and $219.3 million, respectively, associated with the portion of ownership in Borgata that is not attributable to the stockholders of Boyd Gaming Corporation. As discussed above, we effectively obtained control of Borgata on March 24, 2010 and began consolidating its financial statements at that date. At September 30, 2011 and December 31, 2010, there was a deficit in the noncontrolling interest of LVE of $17.7 million and $13.7 million, respectively, associated with the entire ownership in LVE that is not attributable to the stockholders of Boyd Gaming Corporation.

Revenue Recognition

Gaming revenue represents the net win from gaming activities, which is the aggregate difference between gaming wins and losses. The majority of our gaming revenue is counted in the form of cash and chips and therefore is not subject to any significant or complex estimation procedures. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gross gaming revenues.

Room revenue recognition criteria are met at the time of occupancy.

Food and beverage revenue recognition criteria are met at the time of service.

Promotional Allowances

The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms and food and beverages) earned in our slot bonus point program. We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time, principally for cash, and to a lesser extent for goods or services, depending upon the property. We record the estimated retail value of these goods and services as revenue and then deduct them as promotional allowances

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The amounts included in promotional allowances for the three and nine months ended September 30, 2011 and 2010 are as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	33,989	$	35,775	$	94,811	$	82,387
Food and beverage	44,464		45,477		128,028		118,191
Other	30,313		26,382		85,089		55,754
Total promotional allowances	$	108,766	$	107,634	$	307,928	$	256,332

The estimated costs of providing such promotional allowances for the three and nine months ended September 30, 2011 and 2010 are as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	14,192	$	14,287	$	40,309	$	40,483
Food and beverage	40,591		41,852		116,828		119,915
Other	4,870		4,807		12,856		12,792
Total cost of promotional allowances	$	59,653	$	60,946	$	169,993	$	173,190

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are an assessment of our gaming revenues and are recorded as a gaming expense on the condensed consolidated statements of operations. These taxes totaled approximately $65.3 million and $66.2 million for the three months ended September 30, 2011 and 2010, respectively, and totaled approximately $192.6 million and $195.9 million for the nine months ended September 30, 2011 and 2010, respectively.

Earnings per Share

Basic earnings per share is computed by dividing net income applicable to Boyd Gaming Corporation stockholders, excluding net income attributable to noncontrolling interests, by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially-dilutive securities, such as stock options.

The weighted average number of common and common share equivalent shares used in the calculations of basic and diluted earnings per share for the three and nine months ended September 30, 2011 and 2010, consisted of the following amounts:



	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2011	2010	2011	2010
	(In thousands)
Earnings per share:
Basic weighted average shares outstanding	87,256	86,582	87,206	86,508
Potential dilutive effect	176	102	—	216
Diluted weighted average shares outstanding	87,432	86,684	87,206	86,724

Due to the net loss for the nine months ended September 30, 2011, the effect of all potential common shares was anti-dilutive, and therefore was not included in the computation of diluted earnings per share. Anti-dilutive options totaling 9.0 million and 8.1 million have been excluded from the computation of diluted earnings per share for the three months ended September 30, 2011, and 2010, respectively. Anti-dilutive options totaling 7.8 million and 8.1 million have been excluded from the computation of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

diluted earnings per share for the nine months ended September 30, 2011 and 2010, respectively.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated into our condensed consolidated financial statements include the estimated allowance for doubtful accounts receivable, the estimated useful lives for depreciable and amortizable assets, recoverability of assets held for development, measurement of the fair value of our controlling interest and the noncontrolling interest in Borgata, fair values of acquired assets and liabilities, estimated cash flows in assessing the recoverability of long-lived assets and assumptions relative to the valuation and impairment of goodwill and intangible assets, estimated valuation allowances for deferred tax assets, slot bonus point programs, certain tax liabilities and uncertain tax positions, self-insured liability reserves, share-based payment valuation assumptions, fair values of assets and liabilities measured at fair value, fair values of assets and liabilities disclosed at fair value, fair values of derivative instruments, contingencies and litigation, claims and assessments. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

Accounting Standards Update 2011-08 Intangibles, Goodwill and Other ("Update 2011-08")

In September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2011-08 Intangible, Goodwill and Other, which is an amendment to Topic 350 of the Accounting Standards Codification ("ASC").

The objective of Update 2011-08 is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update 2011-08 permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic ASC 350. (the more-likely-than-not threshold is defined as having a likelihood of more than 50 percent). Previous guidance under Topic ASC 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in Update 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

The amendment will be effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012, although early adoption is permitted. Update 2011-08 will not have a material impact on the computation of the impairment of goodwill or other intangibles.

Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")

In June 2011, the FASB issued Accounting Standards Update 2011-05 Presentation of Comprehensive Income, which is an amendment to Topic ASC 220.

The objective of Update 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.

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(Unaudited)

Update 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does Update 2011-05 affect how earnings per share is calculated or presented. Update 2011-05 should be applied retrospectively and will be effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.

Accounting Standards Update 2011-04 Fair Value Measurement ("Update 2011-04")

In May 2011, the FASB issued Accounting Standards Update 2011-04 Fair Value Measurement, which is an amendment to Topic ASC 820.

The objective of Update 2011-04 is to more clearly explain how to measure fair value to allow for better comparability between GAAP and International Financial Reporting Standards ("IFRS"). It is not intended to result in a change in the application of the requirements in Topic ASC 820, but instead is intended to amend a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.

Update 2011-04 does not change the items that must be reported as fair value measurements under Topic ASC 820 but simply how to measure these items and how they should be disclosed. Update 2011-04 should be applied prospectively. Early adoption is not permitted. Update 2011-04 will be effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-04 will not have a material impact on our financial statements.

NOTE 2. CONSOLIDATION OF CERTAIN INTERESTS

Controlling Interest

Borgata Hotel Casino and Spa

Overview

The Company and MGM each originally held a 50% interest in Marina District Development Holding Co., LLC (“Holding Company”). The Holding Company owns all the equity interests in Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa.

In February 2010, we entered into an agreement with MGM to amend the operating agreement to, among other things, facilitate the transfer of MGM's interest in the Holding Company ("MGM Interest") to a divestiture trust (“Divestiture Trust”) established for the purpose of selling the MGM Interest to a third party. The proposed sale of the MGM Interest through the Divestiture Trust was a part of a then-proposed settlement agreement between MGM and the New Jersey Department of Gaming Enforcement (the “NJDGE”). Pursuant to the terms of the amended operating agreement, in connection with the refinancing of the Borgata bank credit facility on August 6, 2010, the Holding Company made a $135.4 million one-time distribution to us, of which $30.8 million was a priority distribution equal to the excess prior capital contributions made by us.

On March 17, 2010, MGM announced that its settlement agreement with the NJDGE had been approved by the New Jersey Casino Control Commission ("NJCCC"). Under the terms of the settlement agreement, MGM agreed to transfer the MGM Interest into the Divestiture Trust and further agreed to sell such interest within a 30-month period. During the first 18 months of such period, MGM has the power to direct the trustee to sell the MGM Interest, subject to the approval of the NJCCC. If the sale has not occurred by such time, the trustee will be solely responsible for the sale of the MGM Interest. The MGM Interest was transferred to the Divestiture Trust on March 24, 2010.

MGM has subsequently announced that it has entered into an amendment with respect to its settlement agreement with the NJDGE, as approved by the NJCCC. The amendment provides that the mandated sale of the MGM Interest be increased by an additional 18 months to a total of 48 months. During the first 36 months (or until March 24, 2013), MGM has the right to direct the Divestiture Trust to sell the MGM Interest. If a sale is not concluded by that time, the Divestiture Trust will be responsible for selling MGM's Interest during the following 12-month period.

Effective Change in Control

In connection with the amendments to the operating agreements MGM relinquished all of its specific participating rights under the operating agreement, and we retained all authority to manage the day-to-day operations of Borgata. MGM's relinquishment of its participating rights effectively provided us with direct control of Borgata. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Acquisition Method Accounting

The application of the acquisition method accounting guidance had the following effects on our condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity. The provisional fair value measurements and estimates of these items were estimated as of the date we effectively obtained control.

The provisional fair value measurements and estimates of these items have been subsequently refined. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, we had not completed our procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. Our subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement adjustments were identified and retrospectively recorded in the condensed consolidated balance sheet as of December 31, 2010, and certain disclosures were updated to reflect the measurement period adjustments, as reflected herein.

Retrospective Adjustment to Condensed Consolidated Balance Sheet

We have retrospectively adjusted the provisional values to reflect the fair valuation, and therefore, the condensed consolidated balance sheet as of December 31, 2010 presented herein reflects the adjustments above.



			December 31, 2010
	As Originally Reported		Acquisition Method Accounting Adjustments			As Retrospectively Adjusted
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	145,623	$	—		$	145,623
Restricted cash	19,494		—			19,494
Accounts receivable, net	47,942		—			47,942
Inventories	16,029		—			16,029
Prepaid expenses and other current assets	37,390		(237		)	37,153
Income taxes receivable	5,249		—			5,249
Deferred income taxes	8,149		—			8,149
Total current assets	279,876		(237		)	279,639
Property and equipment, net	3,471,933		(88,562		)	3,383,371
Assets held for development	1,119,403		—			1,119,403
Debt financing costs, net	38,451		(3,458		)	34,993
Restricted investments	48,168		—			48,168
Other assets, net	70,425		—			70,425
Intangible assets, net	460,714		79,000			539,714
Goodwill, net	213,576		—			213,576
Total assets	$	5,702,546	$	(13,257	)	$	5,689,289
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	25,690	$	—		$	25,690
Non-recourse obligations of variable interest entity	243,059		—			243,059
Accounts payable	57,183		—			57,183
Income taxes payable	6,504		—			6,504

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)



Accrued liabilities	279,779			(1,310		)	278,469
Total current liabilities	612,215			(1,310		)	610,905
Long-term debt, net of current maturities	3,193,065			—			3,193,065
Deferred income taxes	360,342			1,832			362,174
Other long-term tax liabilities	44,813			—			44,813
Other liabilities	85,859			(2,270		)	83,589
Stockholders' equity
Preferred stock	—			—			—
Common stock	862			—			862
Additional paid-in-capital	635,028			—			635,028
Retained earnings	560,909			—			560,909
Accumulated other comprehensive loss, net	(7,594		)	—			(7,594		)
Total Boyd Gaming Corporation stockholders' equity	1,189,205			—			1,189,205
Noncontrolling interest	217,047			(11,509		)	205,538
Total stockholders' equity	1,406,252			(11,509		)	1,394,743
Total liabilities and stockholders' equity	$	5,702,546		$	(13,257	)	$	5,689,289

Bargain Purchase Gain

The fair valuation resulted in the recording of a bargain purchase gain, due to the excess fair value of Borgata over the historical basis of our equity interest in Borgata. Recorded in write-downs and other items, net on the condensed consolidated statement of operations, this gain was recorded as a cumulative adjustment during the nine months ended September 30, 2011.

The gain was computed as follows:



	Bargain Purchase Gain
	(In thousands)
Fair value of controlling equity interest	$	397,931
Carrying value of equity investment in Borgata	397,622
Bargain purchase gain	$	309

The fair value of our controlling interest included a $72.4 million control premium, which is reflected in the fair value of the enterprise, and included in the calculation of the bargain purchase gain. A control premium of 10% was applied to the enterprise value members' equity, excluding interest bearing debt, to calculate an indicated value of equity on a controlling basis. While the value of control is somewhat below prevailing market rates, we believe the control premium reflects the value of our influence, mitigated by only a 50% interest and return.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Results of Operations of Borgata

(for the period from March 24, 2010 through September 30, 2010)

reflecting amounts included on a consolidated basis

The results of Borgata, as included in the accompanying condensed consolidated statements of operations from the date we effectively obtained control, March 24, 2010, (specifically, for the period from March 24 through September 30, 2010) for the nine months ended September 30, 2010) are presented below. These results of operations do not reflect the retrospective impact from the measurement period adjustments discussed above, as such amounts were not material to either the three and nine months ended September 30, 2010.



	Nine Months Ended September 30, 2010
	(In thousands)
REVENUES
Operating revenues:
Gaming	$	357,314
Food and beverage	82,372
Room	64,042
Other	24,047
Gross revenues	527,775
Less promotional allowances	116,420
Net revenues	411,355

COSTS AND EXPENSES
Operating costs and expenses:
Gaming	141,649
Food and beverage	39,593
Room	8,593
Other	19,528
Selling, general and administrative	64,473
Maintenance and utilities	35,337
Depreciation and amortization	36,313
Write-downs and other items, net	8
Total operating costs and expenses	345,494
Operating income	65,861
Other expense
Interest expense	23,347
Total other expense, net	23,347
Income before income taxes	42,514
Income taxes	(4,183		)
Net income	$	38,331

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Supplemental Pro Forma Information

Pro Forma Condensed Consolidated Statement of Operations

for the nine months ended September 30, 2010

The following supplemental pro forma information presents the financial results as if the effective control of Borgata had occurred as of the beginning of the earliest period presented herein, or on January 1, 2010. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what the actual results for the nine months ended September 30, 2010 would have been had the consolidation of Borgata been completed as of the earlier date, nor are they indicative of any future results.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)



	Nine Months Ended September 30, 2010
	Boyd Gaming Corp			Borgata						Boyd Gaming Corp
	As Reported			Stub Period			Adjustments			Pro Forma
	(In thousands)
Revenues
Gaming	$	1,344,283		$	137,831		$	—		$	1,482,114
Food and beverage	255,166			31,217			—			286,383
Room	154,247			24,154			—			178,401
Other	91,595			9,179			—			100,774
Gross revenues	1,845,291			202,381			—			2,047,672
Less promotional allowances	256,332			44,091			—			300,423
Net revenues	1,588,959			158,290			—			1,747,249
Costs and expenses
Gaming	635,461			59,861			—			695,322
Food and beverage	132,481			13,500			—			145,981
Room	36,767			2,185			—			38,952
Other	74,333			7,127			—			81,460
Selling, general and administrative	270,641			28,981			—			299,622
Maintenance and utilities	104,770			13,522			—			118,292
Depreciation and amortization	147,905			16,754			—			164,659
Corporate expense	36,636			—			—			36,636
Preopening expenses	4,990			—			—			4,990
Write-downs and other items, net	4,932			68			—			5,000
Total costs and expenses	1,448,916			141,998			—			1,590,914
Operating income from Borgata	8,146			—			(8,146		)	—
Operating income	148,189			16,292			(8,146		)	156,335
Other expense (income)
Interest income	(4		)	—			—			(4		)
Interest expense, net	109,438			5,060			—			114,498
Other income	(10,000		)	—						(10,000		)
Gain on early retirements of debt	(3,949		)	—			—			(3,949		)
Gain on equity distribution	(2,535		)	—			—			(2,535		)
Other non-operating expenses from Borgata, net	3,133			—			(3,133		)	—
Total other expense, net	96,083			5,060			(3,133		)	98,010

Income (loss) before income taxes	52,106			11,232			(5,013		)	58,325
Income taxes	(15,532		)	(1,207		)	—			(16,739		)
Net income (loss)	36,574			10,025			(5,013		)	41,586
Net loss attributable to noncontrolling interest	(19,166		)	—			(5,012		)	(24,178		)
Net income attributable to Boyd Gaming Corporation	$	17,408		$	10,025		$	(10,025	)	$	17,408

The pro forma adjustments reflect the differences resulting from the conversion of the equity method of accounting to a fully consolidated presentation. There were no significant intercompany transactions affecting the statement of operations between the Boyd wholly-owned entities and Borgata which would require elimination during the nine months ended September 30, 2010.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Variable Interest

LVE Energy Partners, LLC

The effects of the consolidation of LVE on our financial position as of September 30, 2011 and December 31, 2010, and its impact on our results of operations for the three and nine months ended September 30, 2011 are reconciled by respective line items to amounts as reported in our condensed consolidated balance sheets and condensed consolidated statements of operations are presented below.

The primary impact on our condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010 was as follows:



	September 30, 2011
	Boyd Gaming Corporation (as historically presented)		LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Current assets	$	334,501	$	1,185		$	(2,146	)	$	333,540
Property and equipment, net	3,296,396		—			—			3,296,396
Assets held for development	923,793		196,052			—			1,119,845
Debt financing costs, net	30,322		—			—			30,322
Restricted investments	—		20,984			—			20,984
Other assets	72,733		4,351			—			77,084
Intangible assets, net	547,075		—			—			547,075
Goodwill, net	213,576		—			—			213,576
Total Assets	$	5,418,396	$	222,572		$	(2,146	)	$	5,638,822

LIABILITIES
Current maturities of long-term debt	$	363,598	$	—		$	—		$	363,598
Non-recourse obligations of variable interest entity	—		221,912			—			221,912
Accounts payable	55,192		35			—			55,227
Accrued and other liabilities	304,579		871			—			305,450
Long-term debt, net of current maturities	2,802,075		—			—			2,802,075
Deferred income taxes	364,295		—			—			364,295
Other liabilities	107,096		17,423			(2,146		)	122,373

STOCKHOLDERS' EQUITY
Common stock	$	863	$	—		$	—		$	863
Additional paid-in capital	642,243		—			—			642,243
Retained earnings	557,546		—			—			557,546
Noncontrolling interest	220,909		(17,669		)	—			203,240
Total Liabilities and Stockholders' Equity	$	5,418,396	$	222,572		$	(2,146	)	$	5,638,822

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)



	December 31, 2010
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations		Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Current assets	$	278,902		$	737		$	—	$	279,639
Property and equipment, net	3,383,371			—			—		3,383,371
Assets held for development	923,038			196,365			—		1,119,403
Debt financing costs, net	34,993			—			—		34,993
Restricted investments	—			48,168			—		48,168
Other assets	65,963			4,462			—		70,425
Intangible assets, net	539,714			—			—		539,714
Goodwill, net	213,576			—			—		213,576
Total Assets	$	5,439,557		$	249,732		$	—	$	5,689,289

LIABILITIES
Current maturities of long-term debt	$	25,690		$	—		$	—	$	25,690
Non-recourse obligations of variable interest entity	—			243,059			—		243,059
Accounts payable	56,790			393			—		57,183
Accrued and other liabilities	277,429			1,040			—		278,469
Long-term debt, net of current maturities	3,193,065			—			—		3,193,065
Deferred income taxes	362,174			—			—		362,174
Other liabilities	115,948			18,958			—		134,906

STOCKHOLDERS' EQUITY
Common stock	862			—			—		862
Additional paid-in capital	635,028			—			—		635,028
Retained earnings	560,909			—			—		560,909
Accumulated other comprehensive loss, net	(7,594		)	—			—		(7,594		)
Noncontrolling interest	219,256			(13,718		)	—		205,538
Total Liabilities and Stockholders' Equity	$	5,439,557		$	249,732		$	—	$	5,689,289

The reduction in accounts receivable, net and other liabilities reflects the elimination of the Periodic Fee booked as a receivable by LVE, which mirrors the payable recorded on Boyd's general ledger. Both the receivable and payable are eliminated in consolidation completely, thereby having no impact on our consolidated balance sheet.

The impact on our condensed consolidated statement of operations for the three months ended September 30, 2011 was as follows:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)



	Three Months Ended September 30, 2011
	Boyd Gaming Corporation (as historically presented)		LVE, LLC		Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
REVENUES
Other revenue	$	34,105	$	2,724	$	(2,724	)	$	34,105

COSTS AND EXPENSES
Maintenance and utilities	$	40,906	$	19	$	—		$	40,925
Preopening expenses	4,444		—		(2,724		)	1,720

Operating income	$	65,459	$	2,705	$	—		$	68,164

Other expense
Interest expense, net	$	55,081