Edgar Filing: BOYD GAMING CORP

Large accelerated filer

Accelerated filer

Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company

BYD 10Q 3.31.2012

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 March 31, 2012



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 April 30, 2012
	Common stock, $0.01 par value		86,588,933

Table of Contents

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED MARCH 31, 2012

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011	5

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and 2011	6

	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2012	7

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	77

Item 4.	Controls and Procedures	77

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	78

Item 1A.	Risk Factors	78

Item 6.	Exhibits	94

Signature Page		96

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.

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, 2011, as filed with the SEC on March 7, 2012.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

as of March 31, 2012 and December 31, 2011

______________________________________________________________________________________________________



	March 31,		December 31,
	2012		2011
	(In thousands except per share data)
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	156,714	$	178,756
Restricted cash	14,047		15,753
Accounts receivable, net	57,086		58,589
Inventories	16,924		17,493
Prepaid expenses and other current assets	47,560		47,465
Income taxes receivable	2,361		3,268
Deferred income taxes	18,545		21,570
Total current assets	313,237		342,894
Property and equipment, net	3,525,904		3,542,108
Assets held for development	1,090,028		1,089,819
Debt financing costs, net	30,047		32,099
Restricted investments held by variable interest entity	21,367		21,367
Other assets, net	66,545		67,173
Intangible assets, net	572,712		574,018
Goodwill, net	213,576		213,576
Total assets	$	5,833,416	$	5,883,054
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	53,393	$	43,230
Accounts payable	78,890		98,015
Accrued liabilities	314,748		295,459
Income taxes payable	5,877		5,630
Non-recourse obligations of variable interest entity	30,605		29,686
Total current liabilities	483,513		472,020
Long-term debt, net of current maturities	3,271,502		3,347,226
Deferred income taxes	385,611		379,958
Other long-term tax liabilities	42,379		45,598
Other liabilities	71,724		71,193
Non-recourse obligations of variable interest entity	192,730		192,980
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,588,933 and 86,572,098 shares outstanding	863		863
Additional paid-in capital	647,137		644,174
Retained earnings	562,907		557,055
Total Boyd Gaming Corporation stockholders’ equity	1,210,907		1,202,092
Noncontrolling interest	175,050		171,987
Total stockholders’ equity	1,385,957		1,374,079
Total liabilities and stockholders’ equity	$	5,833,416	$	5,883,054

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

for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	Three Months Ended
	March 31,
	2012			2011
	(In thousands, except per share data)
	(Unaudited)
REVENUES
Operating revenues:
Gaming	$	535,748		$	481,935
Food and beverage	106,132			92,077
Room	65,997			56,591
Other	35,832			33,031
Gross revenues	743,709			663,634
Less promotional allowances	110,626			98,688
Net revenues	633,083			564,946
COST AND EXPENSES
Operating costs and expenses:
Gaming	248,955			226,609
Food and beverage	54,078			47,568
Room	14,135			12,821
Other	26,061			26,239
Selling, general and administrative	109,717			95,788
Maintenance and utilities	38,763			37,415
Depreciation and amortization	50,014			50,584
Corporate expense	12,871			13,280
Preopening expenses	1,660			1,831
Other operating charges, net	247			4,707
Total operating costs and expenses	556,501			516,842
Operating income	76,582			48,104
Other expense (income):
Interest income	(4		)	(5		)
Interest expense, net	63,828			57,291
Fair value adjustment of derivative instruments	—			217
Gain on early retirements of debt	—			20
Total other expense, net	63,824			57,523
Income (loss) before income taxes	12,758			(9,419		)
Income taxes	(6,283		)	3,108
Net income (loss)	6,475			(6,311		)
Net (income) loss attributable to noncontrolling interest	(623		)	2,790
Net income (loss) attributable to Boyd Gaming Corporation	$	5,852		$	(3,521	)
Basic net income (loss) per common share:	$	0.07		$	(0.04	)
Weighted average basic shares outstanding	87,530			87,157
Diluted net income (loss) per common share:	$	0.07		$	(0.04	)
Weighted average diluted shares outstanding	87,987			87,157

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 COMPREHENSIVE INCOME (LOSS)

for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	Three Months Ended
	March 31,
	2012		2011
	(In thousands)
	(Unaudited)
Net income (loss)	$	6,475	$	(6,311	)
Other comprehensive income, net of tax:
Fair value of derivative instruments	2,440		4,973
Other comprehensive income	2,440		4,973
Comprehensive income (loss)	8,915		(1,338		)
Less: comprehensive income attributable to noncontrolling interest	2,440		1,265
Comprehensive income (loss) attributable to Boyd Gaming Corporation	$	6,475	$	(2,603	)

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

for the three months ended March 31, 2012

______________________________________________________________________________________________________



	Boyd Gaming Corporation Stockholders’ Equity
				Additional							Total
	Common Stock			Paid-in			Retained		Noncontrolling		Stockholders'
	Shares	Amount		Capital			Earnings		Interest		Equity
	(In thousands, except per share data)
	(Unaudited)
Balances, January 1, 2012	86,572,098	$	863	$	644,174		$	557,055	$	171,987	$	1,374,079
Net income	—	—		—			5,852		623		6,475
Comprehensive income attributable to noncontrolling interest	—	—		—			—		2,440		2,440
Stock options exercised	16,835	—		117			—		—		117
Tax effect from share-based compensation arrangements	—	—		(270		)	—		—		(270		)
Share-based compensation costs	—	—		3,116			—		—		3,116
Balances, March 31, 2012	86,588,933	$	863	$	647,137		$	562,907	$	175,050	$	1,385,957

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

for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	Three Months Ended
	March 31,
	2012			2011
	(In thousands)
	(Unaudited)
Cash Flows from Operating Activities
Net income (loss)	$	6,475		$	(6,311	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	50,014			50,584
Amortization of debt financing costs	3,150			2,031
Amortization of discounts on senior secured notes	889			786
Share-based compensation expense	3,116			3,813
Deferred income taxes	8,679			(4,214		)
Noncash asset write-downs	42			4,707
Gain on early retirements of debt	—			20
Other operating activities	3,486			2,808
Changes in operating assets and liabilities:
Restricted cash	1,706			2,759
Accounts receivable, net	779			2,882
Inventories	570			1,459
Prepaid expenses and other current assets	(94		)	5,500
Income taxes receivable	908			220
Other long-term tax assets	57			122
Other assets, net	208			(1,088		)
Accounts payable and accrued liabilities	(11		)	12,692
Income taxes	248			(61		)
Other long-term tax liabilities	(3,219		)	927
Other liabilities	485			(2,291		)
Net cash provided by operating activities	77,488			77,345
Cash Flows from Investing Activities
Capital expenditures	(32,796		)	(20,858		)
Decrease in restricted investments	—			88
Other investing activities	28			—
Net cash used in investing activities	(32,768		)	(20,770		)
Cash Flows from Financing Activities
Borrowings under bank credit facility	134,800			35,900
Payments under bank credit facility	(184,425		)	(35,900		)
Borrowings under Borgata bank credit facility	182,900			51,500
Payments under Borgata bank credit facility	(200,600		)	(83,700		)
Debt financing costs, net	(44		)	(511		)
Proceeds from issuance of non-recourse debt	919			4,428
Payments on loans to variable interest entity's members	(250		)	(79		)
Other financing activities	(62		)	12
Net cash used in financing activities	(66,762		)	(28,350		)
Change in cash and cash equivalents	(22,042		)	28,225
Cash and cash equivalents, beginning of period	178,756			145,623
Cash and cash equivalents, end of period	$	156,714		$	173,848

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	Three Months Ended
	March 31,
	2012			2011
	(In thousands)
	(Unaudited)
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	49,173		$	49,889
Cash paid (received) for income taxes, net	(137		)	35
Supplemental Schedule of Noncash Investing and Financing Activities
Payables incurred for capital expenditures	$	6,311		$	3,983
Fair value adjustment on derivative instruments	—			5,965

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

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

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 16 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
IP Casino Resort Spa	Biloxi, 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, that operates our Hawaiian charter 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 significant 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.

Echelon Development

Additionally, we own 87 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

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

us, we do not expect to resume construction of Echelon for three to five years.

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, 2011.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments of normal recurring nature necessary to fairly present our financial position as of March 31, 2012, the results of our operations for the three months ended March 31, 2012 and 2011, and our cash flows for the three months ended March 31, 2012 and 2011. The condensed consolidated balance sheet as of March 31, 2012 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 months ended March 31, 2012 and 2011, and our cash flows for the three months ended March 31, 2012 and 2011, are unaudited, and are not necessarily indicative of the results that would be achieved for the full year or future periods.

Principles of Consolidation

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

Acquisition of IP

On October 4, 2011, we consummated the acquisition of IP Casino Resort Spa ("IP") in Biloxi, Mississippi pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP, on an as-is basis. The net purchase price, after adjustment for working capital and other items, was approximately $280.6 million.

In addition, as discussed above, the financial position of Borgata is consolidated in our condensed consolidated balance sheets as of March 31, 2012 and December 31, 2011; its results of operations and cash flows are consolidated in our statements of operations and cash flows for the three months ended March 31, 2012 and 2011. At March 31, 2012 and December 31, 2011, approximately $1.42 billion and $1.44 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 March 31, 2012 and December 31, 2011, and its results of operations and cash flow are included in our condensed consolidated statements of operations and cash flows for the three months ended March 31, 2012 and 2011. At March 31, 2012, and December 31, 2011, approximately $190.6 million and $189.9 million, respectively, of our consolidated total assets related to LVE, however, certain of these assets, approximating $163.8 million at both respective dates are pledged as security on LVE's outstanding construction loan advances, and an additional $21.4 million of such assets are held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing.

Consolidation of Borgata

The financial position of Borgata is included in our condensed consolidated balance sheets as of March 31, 2012 and December 31, 2011; its results of operations and cash flows are included in our condensed consolidated statements of operations and cash flows for the three months ended March 31, 2012 and 2011.

Consolidation of LVE

We presently believe that substantially all activities of our variable interest in an energy and sales agreement ("ESA") with Las Vegas Energy Partners, LLC ("LVE") are presently performed for our benefit. Pursuant to the terms of the ESA, we are obligated to purchase substantially all of its thermal output at a fixed and variable pricing arrangement that protects LVE from commodity risk. This agreement is long-term in duration, terming for 25 years from the commencement of the commercial operations of Echelon. Additionally, during the period of suspension, we are obligated to pay fees to LVE to subsidize the holding costs of the facility. We have a fixed price put option to purchase the assets of LVE, but have no future obligation to absorb any operating losses or otherwise provide financial support, except as contractually provided as described above. We do not hold any equity interest in LVE and have not guaranteed any of its outstanding debt obligations, nor would such debt have recourse to any of our

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

lenders, note holders or general creditors. However, accounting guidance requires us to consolidate LVE for financial statement purposes. Thus, the financial position of LVE is consolidated in our condensed consolidated balance sheets as of March 31, 2012 and December 31, 2011, and its results of operations and cash flow are included in our condensed consolidated statements of operations and cash flows for the three months ended March 31, 2012 and 2011.

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.

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.

Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. Interest capitalized during the three months ended March 31, 2012 was $0.4 million. There was no interest capitalized during the three months ended March 31, 2011.

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

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, development agreements, 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

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

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, originally ranging in 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.

Goodwill

Goodwill is an asset representing the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognized. Goodwill is not subject to amortization, but it is subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances.

Goodwill for relevant reporting units is tested for impairment using a weighted discounted cash flow analysis and an earnings multiple valuation technique based on the estimated future results of our reporting units discounted using our weighted-average cost of capital and market indicators of terminal year capitalization rates. The implied fair value of a reporting unit's goodwill is compared to the carrying value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to its assets and liabilities and the amount remaining, if any, is the implied fair value of goodwill. If the implied fair value of the goodwill is less than its carrying value then it must be written down to its implied fair value.

In January 2012, the Company adopted accounting guidance simplifying how entities test goodwill for impairment. The guidance permits 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 second step of the goodwill impairment test. If it is determined the fair value of a reporting unit is less than its carrying amount, then the entity must perform the test to measure the amount of the impairment loss, if any. An entity is no longer 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.

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 over the related time of the senior or senior subordinated notes.

Noncontrolling Interest

Noncontrolling interests includes 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 March 31, 2012 and December 31, 2011, noncontrolling interests are comprised of: (i) the 50% interest in Borgata, held by the Divestiture Trust for the economic benefit of MGM; and (ii) all 100% of the members' equity interest in LVE, the variable interest entity, which is consolidated in our condensed financial statements, but in which we hold no equity interest.

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. Race revenue recognition criteria are met at the time the results of the event are official.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

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.

The amounts included in promotional allowances for the three months ended March 31, 2012 and 2011 are as follows:



	Three Months Ended
	March 31,
	2012		2011
	(In thousands)
Rooms	$	34,682	$	30,104
Food and beverage	48,298		42,494
Other	27,646		26,090
Total promotional allowances	$	110,626	$	98,688

The estimated costs of providing such promotional allowances for the three months ended March 31, 2012 and 2011 are as follows:



	Three Months Ended
	March 31,
	2012		2011
	(In thousands)
Rooms	$	14,827	$	13,073
Food and beverage	44,851		38,485
Other	5,806		3,797
Total cost of promotional allowances	$	65,484	$	55,355

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 $71.3 million and $63.8 million for the three months ended March 31, 2012 and 2011, 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 months ended March 31, 2012 and 2011, consisted of the following amounts:

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	Three Months Ended
	March 31,
	2012	2011
	(In thousands)
Earnings per share:
Basic weighted average shares outstanding	87,530	87,157
Potential dilutive effect	457	—
Diluted weighted average shares outstanding	87,987	87,157

Due to the net loss for the three months ended March 31, 2011, the effect of all potential common share equivalents was anti-dilutive, and therefore all such shares were excluded from the computation of diluted earnings per share. Anti-dilutive options totaling 8.1 million have been excluded from the computation of diluted earnings per share as these shares were out of the money during the three months ended March 31, 2012.

Comprehensive Income

In January 2012, the Company adopted guidance requiring the presentation 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. Comprehensive income includes net income and all other non-stockholder changes in equity, or other comprehensive income. Components of the Company's comprehensive income are reported in the accompanying condensed consolidated statements of comprehensive income. The cumulative balance of other comprehensive income consists solely of fair value adjustments related to hedged derivative instruments.

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.

NOTE 2. ASSET ACQUISITIONS

IP Casino Resort Spa

Overview

On October 4, 2011, we consummated the acquisition of the IP in Biloxi, Mississippi pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP, on an as-is basis. The net purchase price, after adjustment for working capital and other items, was approximately $280.6 million. The business combination resulted in the recording of a bargain purchase gain of approximately $4.6 million, due to the excess fair value of net identifiable assets over the total consideration. The bargain purchase gain was reported in other income in our consolidated statement of operations during the year ended December 31, 2011.

The IP is one of the premier resorts on the Mississippi Gulf Coast. Completely remodeled in 2005, the property features nearly 1,100 hotel rooms and suites; a 70,000-square-foot casino with 1,900 slot machines and 62 table games; 73,000 square feet of convention and meeting space; a spa and salon; a 1,400-seat theater offering regular headline entertainment; six lounges and bars; and eight restaurants, including Thirty-Two, a steak and seafood restaurant, and Tien, an upscale Asian restaurant, both AAA Four Diamond-recognized.

In addition to this total consideration, the Company is in the process of performing certain capital improvement projects with

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

respect to the property at an estimated cost of $44 million. Pursuant to the terms of the agreement, to the extent that the costs of the capital improvements exceed the original cost estimate, the Company will be solely responsible for the additional costs; however, to the extent that costs are less than the original cost estimate, the Company is obligated to pay the seller an amount equal to one-half of the difference between the actual costs and the original estimated costs. The Company has not recorded any contingent consideration as a result; however, as it is presently likely that these capital improvements will require the entire $44 million spend. As of March 31, 2012, the Company has incurred $3.3 million in capital improvement expenditures related to these projects.

Condensed Statement of Operations

The following supplemental information presents the financial results of IP included in the Company's consolidated statement of operations for the three months ended March 31, 2012.



	Three Months Ended
	March 31, 2012
	(In thousands)
Condensed Statement of Operations
Net revenues	$	49,011

Operating income	$	7,839

Other Acquisitions

Development Agreement

In September 2011, the Company acquired the membership interests of a limited liability company (the "LLC") for a purchase price of $24.5 million. The primary asset of the LLC is a previously executed development agreement (the "Development Agreement") with a Native American Tribe (the "Tribe"). The Development Agreement establishes the terms between the LLC and the Tribe under which a gaming facility will be developed on the Tribe's land. The Development Agreement provides a fee of 5% of gross revenues of the gaming operations, (subject to a maximum percentage capped by Indian Gaming Regulation), upon completion of development, and for a subsequent period of seven years.

The fair value of the assets of the LLC was allocated in our consolidated financial statements as follows:



		March 31, 2012
		(In thousands)
Assets acquired:
Intangible value of Development Agreement		$	21,373
Note receivable from Tribe (at present value)	3,077
Purchase price		$	24,450

Other than the obligation under the Development Agreement to develop the gaming facility, there were no liabilities assumed in connection with the acquisition of the LLC. In addition to approximately $4.5 million expended by the prior owners of the LLC related to pre-development efforts, we are obligated to fund certain pre-development costs, which are estimated to be approximately $1 million to $2 million annually, for the next several years. These costs are reimbursable to us with future cash flows from the operations of the gaming facility and are evidenced by a note receivable from the Tribe. As of March 31, 2012, we have not funded any pre-development costs.

NOTE 3. CONSOLIDATION OF CERTAIN INTERESTS

Controlling Interest

Borgata Hotel Casino and Spa

Overview

The Company and MGM Resorts International ("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

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

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. Accordingly, on March 24, 2010, as a result of the amendment to our operating agreement with MGM, which provided, among other things, for the termination of MGM's participating rights in the operation of Borgata, we effectively obtained control of Borgata.

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.

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 other operating charges, net on the condensed consolidated statement of operations, this gain was recorded as a cumulative adjustment during the three months ended March 31, 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 was 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.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

Variable Interest

LVE Energy Partners, LLC

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.

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 impact 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. The primary beneficiary is required to consolidate the variable interest entity unless specific exceptions or exclusions are met. The authoritative literature on consolidations provides guidance related to variable interest entities.


•	a qualitative approach for identifying the primary beneficiary of a variable interest entity based on (i) the power to direct activities that most significantly impact the economic performance of the entity, and (ii) the obligation to absorb losses or right to receive benefits that could be significant to the entity;


•	ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; and separate disclosure by the primary beneficiary on the face of the balance sheet to identify (i) assets that can only be used to settle obligations of the variable interest entity, and (ii) liabilities for which creditors do not have recourse to the primary beneficiary.

For the following quantitative and qualitative reasons, we presently believe that substantially all of LVE's activities are presently performed for our benefit. Pursuant to the terms of the ESA, we are obligated to purchase substantially all of its thermal output at a fixed and variable pricing arrangement that protects LVE from commodity risk. This agreement is long-term in duration, terming for 25 years from the commencement of the commercial operations of Echelon. Additionally, during the period of suspension, we are obligated to pay fees to LVE to subsidize the holding costs of the facility. We have a fixed price put option to purchase the assets of LVE, but have no future obligation to absorb any operating losses or otherwise provide financial support, except as contractually provided as described above. We do not hold any equity interest in LVE and have not guaranteed any of its outstanding debt obligations, nor would such debt have recourse to any of our lenders, note holders or general creditors.

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.

The effects of the consolidation of LVE on our financial position as of March 31, 2012 and December 31, 2011, and its impact on our results of operations for the three months ended March 31, 2012 and 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 March 31, 2012 and December 31, 2011 was as follows:

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	March 31, 2012
	Boyd Gaming
	Corporation							Boyd Gaming
	(as historically							Corporation
	presented)		LVE, LLC			Eliminations		(as consolidated)
	(In thousands)
ASSETS
Current assets	$	310,305	$	2,932		$	—	$	313,237
Property and equipment, net	3,525,904		—			—		3,525,904
Assets held for development	926,222		163,806			—		1,090,028
Debt financing costs, net	27,519		2,528			—		30,047
Restricted investments	—		21,367			—		21,367
Other assets	66,545		—			—		66,545
Intangible assets, net	572,712		—			—		572,712
Goodwill, net	213,576		—			—		213,576
Total Assets	$	5,642,783	$	190,633		$	—	$	5,833,416

LIABILITIES
Current maturities of long-term debt	$	53,393	$	—		$	—	$	53,393
Accounts payable	78,824		66			—		78,890
Accrued and other liabilities	313,883		865			—		314,748
Non-recourse obligations of variable interest entity	—		30,605			—		30,605
Long-term debt, net of current maturities	3,271,502		—			—		3,271,502
Deferred income taxes	385,611		—			—		385,611
Long-term tax and other liabilities	106,361		13,619			—		119,980
Non-recourse obligations of variable interest entity	—		192,730			—		192,730

STOCKHOLDERS' EQUITY
Common stock	863		—			—		863
Additional paid-in capital	647,137		—			—		647,137
Retained earnings	562,907		—			—		562,907
Noncontrolling interest	222,302		(47,252		)	—		175,050
Total Liabilities and Stockholders' Equity	$	5,642,783	$	190,633		$	—	$	5,833,416

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	December 31, 2011
	Boyd Gaming
	Corporation							Boyd Gaming
	(as historically							Corporation
	presented)		LVE, LLC			Eliminations		(as consolidated)
	(In thousands)
ASSETS
Current assets	$	340,762	$	2,132		$	—	$	342,894
Property and equipment, net	3,542,108		—			—		3,542,108
Assets held for development	926,013		163,806			—		1,089,819
Debt financing costs, net	29,544		2,555			—		32,099
Restricted investments	—		21,367			—		21,367
Other assets	67,173		—			—		67,173
Intangible assets, net	574,018		—			—		574,018
Goodwill, net	213,576		—			—		213,576
Total Assets	$	5,693,194	$	189,860		$	—	$	5,883,054

LIABILITIES
Current maturities of long-term debt	$	43,230	$	—		$	—	$	43,230
Accounts payable	97,727		288			—		98,015
Accrued and other liabilities	294,578		881			—		295,459
Non-recourse obligations of variable interest entity	—		29,686			—		29,686
Long-term debt, net of current maturities	3,347,226		—			—		3,347,226
Deferred income taxes	379,958		—			—		379,958
Long-term tax and other liabilities	107,377		15,044			—		122,421
Non-recourse obligations of variable interest entity	—		192,980			—		192,980

STOCKHOLDERS' EQUITY
Common stock	863		—			—		863
Additional paid-in capital	644,174		—			—		644,174
Retained earnings	557,055		—			—		557,055
Noncontrolling interest	221,006		(49,019		)	—		171,987
Total Liabilities and Stockholders' Equity	$	5,693,194	$	189,860		$	—	$	5,883,054

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

The impact on our condensed consolidated statement of operations for the three months ended March 31, 2012 was as follows:



	Three Months Ended March 31, 2012
	Boyd Gaming
	Corporation									Boyd Gaming
	(as historically									Corporation
	presented)			LVE, LLC			Eliminations			(as consolidated)
	(In thousands)
REVENUES
Other revenue	$	35,832		$	2,724		$	(2,724	)	$	35,832

COSTS AND EXPENSES
Preopening expenses	4,384			—			(2,724		)	1,660

Operating income	$	73,861		$	2,721		$	—		$	76,582

Other expense
Interest expenses, net	$	60,431		$	3,393		$	—		$	63,824

Income (loss) before income taxes	$	13,430		$	(672	)	$	—		$	12,758
Income taxes	(6,283		)	—			—			(6,283		)
Net income (loss)	7,147			(672		)	—			6,475
Net (income) loss attributable to noncontrolling interest	(1,295		)	672			—			(623		)
Net income (loss) attributable to Boyd Gaming Corporation	$	5,852		$	—		$	—		$	5,852

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	Three Months Ended March 31, 2011
	Boyd Gaming
	Corporation									Boyd Gaming
	(as historically									Corporation
	presented)			LVE, LLC			Eliminations			(as consolidated)
	(In thousands)
REVENUES
Other revenue	$	33,031		$	2,641		$	(2,641	)	$	33,031

COSTS AND EXPENSES
Maintenance and utilities	36,518			897			—			37,415
Preopening expenses	4,472			—			(2,641		)	1,831

Operating income	$	46,360		$	1,744		$	—		$	48,104

Other expense
Interest expense, net	$	57,159		$	127		$	—		$	57,286

Income (loss) before income taxes	$	(11,036	)	$	1,617		$	—		$	(9,419	)
Income taxes	3,108			—			—			3,108
Net income (loss)	(7,928		)	1,617			—			(6,311		)
Net (income) loss attributable to noncontrolling interest	4,407			(1,617		)	—			2,790
Net loss attributable to Boyd Gaming Corporation	$	(3,521	)	$	—		$	—		$	(3,521	)

The reduction in other revenue and preopening expenses reflects the elimination of the Periodic Fee paid by Boyd Gaming to LVE. Such fee is recognized as revenue by LVE, but eliminated in consolidation completely, thereby having no impact on our consolidated other revenues. Although this Periodic Fee is eliminated in this consolidation, it is actually paid to LVE directly on a monthly basis.

NOTE 4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:



	March 31,		December 31,
	2012		2011
	(In thousands)
Land	$	614,697	$	614,697
Buildings and improvements	3,520,660		3,513,230
Furniture and equipment	1,204,550		1,185,737
Riverboats and barges	168,273		168,204
Other	43,103		37,368
Total property and equipment	5,551,283		5,519,236
Less accumulated depreciation	2,025,379		1,977,128
Property and equipment, net	$	3,525,904	$	3,542,108

Depreciation expense for the three months ended March 31, 2012 and 2011 was $48.9 million and $45.8 million, respectively.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

Other property and equipment presented in the table above primarily relates to costs capitalized in conjunction with major improvements, including construction in process, that have not yet been placed into service, and accordingly, such costs are not currently being depreciated.

We test certain of these property and equipment assets for recoverability if a recent operating or cash flow loss, combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses, is associated with the use of a long-lived asset. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

NOTE 5. ASSETS HELD FOR DEVELOPMENT

Assets held for development, which is comprised of assets associated with our Echelon development project, consists of the following:



	March 31,		December 31,
	2012		2011
	(In thousands)
Echelon Project Infrastructure
Land	$	215,969	$	215,969
Construction and development costs	500,996		500,787
Project management and other costs	115,712		115,712
Professional and design fees	93,545		93,545

Central Energy Facility
Construction and development costs	163,806		163,806
Total assets held for development	$	1,090,028	$	1,089,819

Echelon Project Infrastructure

At March 31, 2012, the capitalized costs related to the Echelon project included land and construction in progress. The construction and development costs consist primarily of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees.

We expect to capitalize certain costs of $4.2 million, principally related to site beautification during the year ending December 31, 2012. Additionally we expect to incur recurring costs ranging from $0.3 million to $1.0 million annually, principally related to such items as site preparation work, underground utility installation, infrastructure and consulting.

In addition, we expect recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, ranging from $15.5 million to $17.0 million per annum that will be charged to preopening or other expense as incurred during the project's suspension period.

As referenced in Note 11, Commitments and Contingencies, these capitalized costs and recurring project costs are in addition to other contingencies with respect to our various commitments, including commitments and contingencies with respect to the ESA entered into between Echelon and LVE.

We evaluate our investment in assets held for development in accordance with the authoritative accounting guidance on impairment or disposal of long lived assets. For a long-lived asset to be held and used, such as these assets under development, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows,

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. For these assets under development, future cash flows include remaining construction costs.

The further delay of the suspension of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time, we performed an impairment test of these assets. These impairment tests were comprised of an appraisal of the development and an analysis of its future undiscounted cash flow, and contemplated several viable alternative plans for the future development of Echelon. The cash inflows related to the revenue projections for the individual components associated with each planned construction scenario, offset by outflows for estimated costs to complete the development and ongoing maintenance and operating costs. Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood.

We initially performed this evaluation during the year ended December 31, 2009, when the continued suspension was announced, and have reconsidered our assumptions on a regular basis since such date. However, due to the degradation in economic conditions in the intervening period, we re-performed these analyses during the year ended December 31, 2011 to evaluate any further depression in real estate or land values as well as any deterioration in our initial cash flow assumptions. The outcome of this evaluation did not result in an impairment of Echelon's assets, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets of approximately $1.0 billion at December 31, 2011. As we further develop and explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.

Our analysis is predicated on the most viable options for the conversion of this development. One such scenario includes the outright sale of the project as is, which is primarily based upon land value. We considered the land value by analyzing recent sales transactions of sites with similar characteristics such as location, zoning, access, and visibility, to establish a general understanding of the potential comparable sales. The recoverability under this option represented any excess sales price, net of estimated selling costs, from the land over the carrying value of the assets, including land, held for development.

Another scenario is the full development of the project, as designed, at a later date. The cash inflows related to this option represent the revenue projections for the individual components associated with each planned construction element (casino, hotel, food and beverage, retail, convention and other), based upon the estimated respective dates of completion and particular graduated absorption rates. These projections are offset by outflows for incurred and estimated costs to complete the development. For costs already incurred, and to compensate for potential losses due to the delay, we adjusted for (i) physical deterioration; (ii) functional obsolescence; and (iii) economic obsolescence. Physical deterioration is impairment to the condition of the asset brought about by “wear and tear,” disintegration, and/or the action of the elements. Functional obsolescence is the impairment in the efficiency of the asset brought about by such factors as inadequacy or change in technology that affect the asset. Economic obsolescence is the impairment in the desirability of the asset arising from external economic forces, building code enhancements or changes in supply and demand relationships. For estimated costs to complete, we applied selected construction expense growth rates to our present cost analysis. In addition to these hard and soft construction costs, we estimated outflows for preservation costs that are intended and required to maintain the development site and the existing structures as well as development materials for future use. These net outflows were incrementally added to our estimated operating and ongoing maintenance costs, to establish the undiscounted net cash flow of the project.

Our final scenario is a scaled-down version of the full project, whereby only certain components would be developed. This cash flow projection considered the inflows and outflows discussed above, with relevant curtailment for revenue from, and costs related to, the amenities not completed.

Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood. The outcome of this evaluation resulted in the determination that there was no impairment of the assets held for development, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets held for development. As we further explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.

Central Energy Facility

The capitalized construction costs of the central energy facility include labor, materials, construction overhead and capitalized interest, all of which has been directly incurred by LVE. Depreciation is generally recorded on a straight line basis over useful lives of property ranging from 5 to 50 years, but has not commenced on the components of the facility, as it has not been placed into service. The costs of repairs, maintenance, including planned major maintenance activities and minor replacements of property are charged to maintenance expense as incurred.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

These assets are tested for recoverability whenever events or changes in circumstances indicate that such amounts may be recoverable. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. There was no identified impairment of these assets during the years ended December 31, 2011.

The assets of the central energy facility are pledged as collateral to the outstanding debt obligations of LVE, as further discussed in Note 8, Non-recourse Obligations of Variable Interest Entity.

NOTE 6. INTANGIBLE ASSETS

Intangible assets consist of the following:



	March 31, 2012
	Weighted	Gross					Cumulative
	Average	Carrying		Cumulative			Impairment			Intangible
	Life	Value		Amortization			Losses			Assets, Net
		(In thousands)
Amortizing intangibles:
Customer relationships	3.9 years	$	17,700	$	(11,071	)	$	—		$	6,629
Favorable lease rates	43.8 years	45,370		(8,086		)	—			37,284
Development agreement	10.0 years	21,373		—			—			21,373
		84,443		(19,157		)	—			65,286

Indefinite lived intangible assets:
Trademarks	Indefinite	141,000		—			(5,000		)	136,000
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		708,886		(33,960		)	(167,500		)	507,426
March 31, 2012		$	793,329	$	(53,117	)	$	(167,500	)	$	572,712

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________



	December 31, 2011
	Weighted	Gross					Cumulative
	Average	Carrying		Cumulative			Impairment			Intangible
	Life	Value		Amortization			Losses			Assets, Net
		(In thousands)
Amortizing intangibles:
Customer relationships	3.7 years	$	17,700	$	(10,026	)	$	—		$	7,674
Favorable lease rates	43.8 years	45,370		(7,825		)	—			37,545
Development agreement	10 years	21,373		—			—			21,373
		84,443		(17,851		)	—			66,592

Indefinite lived intangible assets:
Trademarks	Indefinite	141,000		—			(5,000		)	136,000
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		708,886		(33,960		)	(167,500		)	507,426
December 31, 2011		$	793,329	$	(51,811	)	$	(167,500	)	$	574,018

Amortizing Intangible Assets

Customer Relationships

Customer relationships represent the value of repeat business associated with our customer loyalty programs. The value of customer relationships is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these customers, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: revenue of our rated customers, based on expected level of play; promotional allowances provided to these existing customers; attrition rate related to these customers; operating expenses; general and administrative expenses; trademark expense; discount rate; and the present value of tax benefit.

Favorable Lease Rates

Favorable lease rates represent the rental rates for assumed land leases that are favorable to comparable market rates. The fair value is determined on a technique whereby the difference between the lease rate and the then current market rate for the remaining contractual term is discounted to present value. The assumptions underlying this computation include the actual lease rates, the expected remaining lease term, including renewal options, based on the existing lease; current rates of rent for leases on comparable properties with similar terms obtained from market data and analysis; and an assumed discount rate. The estimates underlying the result covered a term of 41 to 52 years.

Development Agreements

Development agreements are contracts between two parties establishing an agreement for development of a product or service. The value of development agreements are determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The fair value of the development agreement is determined at an amount equal to the present value of the incremental cash flows attributable only to future development revenue, discounted to the present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant assumptions: future development revenues; general and administrative expenses; and discount rate. The projections are modeled for a ten year period, representing the cash flow earnings period pursuant to the development agreement.

Indefinite Lived Intangible Assets

Trademarks

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. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the Borgata name. We used the following significant projections and assumptions to determine value under the relief from royalty method:

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years.

Gaming License Rights

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 therein. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year period.

Activity For the Three Months Ended March 31, 2012 and 2011

The following table sets forth the changes in these intangible assets during the three months ended March 31, 2012 and 2011:



	Customer Relationships				Favorable Lease Rates			Development Agreements		Trademarks			Gaming License Rights		Intangible Assets, Net
	(In thousands)
Three Months Ended March 31, 2012
Balance, December 31, 2011	$	7,674			$	37,545		$	21,373	$	136,000		$	371,426	$	574,018
Additions	—				—			—		—			—		—
Impairments	—				—			—		—			—		—
Amortization	(1,045		)		(261		)	—		—			—		(1,306		)
Balance, March 31, 2012	$	6,629			$	37,284		$	21,373	$	136,000		$	371,426	$	572,712

Three Months Ended March 31, 2011
Balance, December 31, 2010	$	14,000			$	38,588		$	—	$	115,700		$	371,426	$	539,714
Additions	—				—			—		—			—		—
Impairments	—				—			—		(5,000		)	—		(5,000		)
Amortization	(5,698		)	—	(261		)	—		—			—		(5,959		)
Balance, March 31, 2011	$	8,302			$	38,327		$	—	$	110,700		$	371,426	$	528,755

Future Amortization

Customer relationships are being amortized on an accelerated basis over an approximate remaining two-year period. Favorable lease rates are being amortized on a straight-line basis over a weighted-average original useful life of 43.8 years. Future amortization is as follows:



	Customer Relationships		Favorable Lease Rates		Development Agreement	Total
	(In thousands)
For the year ending December 31,
2012 (remainder)	$	4,038	$	782	—	$	4,820
2013	2,591		1,043		—	3,634
2014	—		1,043		1,053	2,096
2015	—		1,043		2,401	3,444
2016	—		1,043		2,689	3,732
Thereafter	—		32,330		15,230	47,560
	$	6,629	$	37,284	21,373	$	65,286

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life; however, these assets are subject to an annual impairment test.

Impairment Testing

Intangible assets include gaming license rights, trademarks and customer lists. Indefinite lived intangible assets are not subject to amortization, but they are subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances.

Interim Testing

During the first quarter of 2011, we performed an interim impairment test over the trademark we recorded in connection with the valuation of Borgata due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, our projected future results will be further impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test. Having performed an initial interim impairment test related to the Borgata trademark during the first quarter of 2011, we have established the first quarter as its prospective annual impairment test date as well, and we performed an interim impairment test over the Borgata trademark at January 1, 2012.

Our analyses consisted of a valuation of the Borgata trademark, using the relief from royalty method, as discussed above. The only significant change in our assumptions from the initial fair valuation were revised revenue and profitability projections, reflecting the impact of the changed present and forecasted circumstances. The impairment test consisted of a comparison of the fair value of trademark with its carrying amount. As a result of the impairment test, we did not record any impairment in the first quarter of 2012 and recorded a $5.0 million impairment in the first quarter of 2011, representing the amount by which the carrying amount exceeded its fair value.

Gaming license rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. 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. If our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. As a result of such test, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The results of our annual scheduled impairment test of indefinite-lived intangible assets, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

NOTE 7. ACCRUED LIABILITIES

Accrued liabilities consist of the following:



	March 31,		December 31,
	2012		2011
	(In thousands)
Payroll and related expenses	$	84,098	$	80,720
Interest	48,645		41,344
Gaming liabilities	76,940		76,591
Accrued expenses and other liabilities	105,065		96,804
Total accrued liabilities	$	314,748	$	295,459

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

NOTE 8. NON-RECOURSE OBLIGATIONS OF VARIABLE INTEREST ENTITY

The non-recourse obligations of variable interest entity represent the outstanding debt of LVE and is comprised of the following:



	March 31		December 31,
	2012		2011
	(In thousands)
Non-recourse obligations of variable interest entity, current:
Notes payable to members	$	30,605	$	29,686

Non-recourse obligations of variable interest entity, long-term:
Construction and term loan facility	$	119,730	$	119,980
Tax-exempt variable rate bonds	73,000		73,000
	192,730		192,980
	$	223,335	$	222,666

Assets serving as collateral for these debt obligations, primarily consist of certain assets held for development, with a carrying value of $163.8 million at both March 31, 2012 and December 31, 2011, and restricted investments of $21.4 million at both March 31, 2012 and December 31, 2011. The condensed consolidated statements of operations for the three months ended March 31, 2012 and 2011 include losses of $0.7 million and income of $1.6 million, respectively, and the condensed consolidated statements of cash flows for the three months ended March 31, 2012 and 2011 reflect $0.5 million and $2.4 million of net operating cash outflows, respectively, related to this consolidated variable interest entity; however, none of the offsetting consolidated income or operating cash inflows are available to service this debt, which is non-recourse and non-guaranteed by Boyd.

Construction and Term Loan Facility

In December 2007, LVE entered into a construction and term loan facility with two commercial banks with a committed amount of up to $143.5 million, of which $119.7 million and $120.0 million were outstanding at March 31, 2012 and December 31, 2011, respectively. Proceeds from the construction loan were used to finance the construction of the central energy center and district energy system. The loan is secured by the assets of LVE and does not contain financial covenants. The original loan maturities were as follows: $4.2 million in 2011; $83.1 million in 2012 and the remainder in 2013.

The construction loan bears interest at a variable rate based on the London InterBank Offered Rate ("LIBOR"). LVE entered into an interest rate swap with scheduled increases in the notional amount designed to fix the LIBOR portion of the interest rate on this debt until its maturity in November 2013, which was hedged against the outstanding debt. However, due to the construction delays, the outstanding amount of debt did not increase as fast as the contractual increases in notional amount of the swap, which rendered a portion of the swap ineffective, and as a result the swap was de-designated in July 2011.

Tax-exempt Variable Rate Bonds

In December 2007, LVE issued $100.0 million of tax-exempt variable rate bonds through the State of Nevada Department of Business and Industry, which mature in October 2035. Unused proceeds from the tax-exempt, variable rate bonds are required to be escrowed pending approved construction expenditures. Such unused funds are reported as restricted investments on our consolidated balance sheet.

The tax-exempt variable rate bonds bear interest at rates that are determined by a remarketing agent on a weekly basis. LVE entered into an interest rate swap with a total notional amount of $100.0 million that effectively fixes the underlying interest rate index on these bonds until November 2013. Investors in these bonds receive liquidity and credit support provided by a letter of credit from a commercial bank. This letter of credit expires in November 2013, but can be accelerated by the bank in the event of a default under the construction and term loan facility.

In July 2011, LVE retired $27.0 million of these tax-exempt bonds, using funds in its restricted investment account, which is held in escrow.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011

______________________________________________________________________________________________________

Events of Default

The central energy center and district energy system are being financed by LVE with debt that is non-recourse to us. The outstanding balance of LVE's bank debt is $192.7 million and $193.0 million consisting of borrowing under the construction and term loan facility of $119.7 million and $120.0 million, and outstanding tax-exempt bonds of $73.0 million and $73.0 million, as of March 31, 2012 and December 31, 2011, respectively.

The construction loan was to be converted to a term loan in the fourth quarter of 2010 assuming the district energy system and central energy center were completed. The district energy system and central energy center were not completed by the fourth quarter of 2010 and consequently, the full amount of the construction loan became due and payable in December 2010. However, in March 2011, the banks that are financing the energy facilities agreed not to exercise their rights under the financing agreements resulting from the event of default discussed above through December 2013, provided that no additional events of default occur. The members of LVE have provided a total of $10 million in letters of credit to the banks to support LVE’s obligations. Under the March 2011 agreement, LVE is obligated to use any excess funds, after paying fees and interest on the tax-exempt bonds and the construction loan, to reduce the outstanding balance of the construction loan. The banks have waived all existing defaults under the financing agreements and were relieved of their commitment to provide additional funding.

LVE intends to seek additional financing to complete the facility once construction of the resort resumes.

NOTE 9. LONG-TERM DEBT

Long-term debt, net of current maturities consists of the following:



	March 31, 2012
							Unamortized
	Outstanding			Unamortized			Origination			Long-Term
	Principal			Discount			Fees			Debt, Net
	(In thousands)
Boyd Gaming Long-Term Debt:
Bank credit facility	$	1,583,125		$	(6,264	)	$	(4,027	)	$	1,572,834
9.125% senior notes due 2018	500,000			—			(8,247		)	491,753
6.75% senior subordinated notes due 2014	215,668			—			—			215,668
7.125% senior subordinated notes due 2016	240,750			—			—			240,750
Other	10,893			—			—			10,893
	$	2,550,436		$	(6,264	)	$	(12,274	)	$	2,531,898

Borgata Debt:
Bank credit facility	$	22,500	<