BYD 10Q 6.30.2013

 
 
 
 
 
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 June 30, 2013
OR
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.
Large accelerated filer
 
o
  
Accelerated filer
 
x
 
 
 
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
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 August 7, 2013
 
 
Common stock, $0.01 par value
  
107,766,479
 


Table of Contents

BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIODS ENDED JUNE 30, 2013
TABLE OF CONTENTS
 
 
 
Page
No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I. Financial Information

Item 1.    Financial Statements (Unaudited)

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 30, 2013 and December 31, 2012
_____________________________________________________________________________________________________
(In thousands, except share data)
June 30,
 
December 31,
(Unaudited)
2013
 
2012
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
182,612

 
$
192,545

Restricted cash
23,576

 
22,900

Accounts receivable, net
59,426

 
61,753

Inventories
19,567

 
18,539

Prepaid expenses and other current assets
48,451

 
48,673

Income taxes receivable
1,643

 
2,875

Deferred income taxes and other current tax assets
7,796

 
7,623

Current assets of discontinued operations
—

 
685

Total current assets
343,071

 
355,593

 
 
 
 
Property and equipment, net
3,550,178

 
3,587,314

Assets held for development
—

 
331,770

Debt financing costs, net
82,451

 
85,468

Restricted investments held by variable interest entity
—

 
21,382

Other assets, net
82,954

 
98,415

Intangible assets, net
1,095,494

 
1,119,638

Goodwill, net
694,929

 
694,929

Assets of discontinued operations
—

 
37,684

Total assets
$
5,849,077

 
$
6,332,193

 
 
 
 

3
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 30, 2013 and December 31, 2012
_____________________________________________________________________________________________________
(In thousands, except share data)
June 30,
 
December 31,
(Unaudited)
2013
 
2012
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Current maturities of long-term debt
$
50,759

 
$
61,570

Accounts payable
102,063

 
91,156

Accrued liabilities
370,776

 
363,732

Deferred income taxes and income taxes payable
—

 
8,129

Current deferred tax liability
7,433

 
—

Current maturities of non-recourse obligations of variable interest entity
—

 
225,113

Current liabilities of discontinued operations
—

 
864

Total current liabilities
531,031

 
750,564

Long-term debt, net of current maturities
4,519,481

 
4,827,853

Deferred income taxes
150,754

 
139,943

Other long-term tax liabilities
26,260

 
43,457

Other liabilities
95,493

 
103,249

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; 88,767,611 and 86,871,977 shares outstanding
888

 
869

Additional paid-in capital
675,454

 
655,694

Accumulated deficit
(347,467
)
 
(351,810
)
Accumulated other comprehensive loss
(846
)
 
(962
)
Total Boyd Gaming Corporation stockholders’ equity
328,029

 
303,791

Noncontrolling interest
198,029

 
163,336

Total stockholders’ equity
526,058

 
467,127

Total liabilities and stockholders’ equity
$
5,849,077

 
$
6,332,193


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

4
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six months ended June 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Three Months Ended
 
Six Months Ended
(In thousands, except per share data)
June 30,
 
June 30,
(Unaudited)
2013
 
2012
 
2013
 
2012
REVENUES
 
 
 
 
 
 
 
Operating revenues:
 
 
 
 
 
 
 
Gaming
$
627,926

 
$
514,018

 
$
1,260,485

 
$
1,048,554

Food and beverage
112,804

 
105,187

 
224,578

 
211,218

Room
67,154

 
69,628

 
131,009

 
135,625

Other
41,898

 
35,784

 
81,209

 
71,505

Gross revenues
849,782

 
724,617

 
1,697,281

 
1,466,902

Less promotional allowances
111,034

 
110,547

 
222,949

 
221,163

Net revenues
738,748

 
614,070

 
1,474,332

 
1,245,739

COST AND EXPENSES
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
Gaming
287,801

 
239,170

 
585,063

 
486,942

Food and beverage
64,242

 
60,250

 
124,295

 
114,209

Room
15,955

 
15,931

 
29,055

 
30,066

Other
31,199

 
26,680

 
59,373

 
52,696

Selling, general and administrative
127,000

 
109,671

 
251,028

 
218,318

Maintenance and utilities
41,042

 
39,387

 
80,251

 
77,995

Depreciation and amortization
70,318

 
50,661

 
140,356

 
100,635

Corporate expense
15,148

 
13,009

 
30,504

 
25,880

Preopening expense
789

 
2,210

 
3,154

 
3,870

Impairments of assets
5,032

 
—

 
5,032

 
—

Asset transactions costs
614

 
6,242

 
3,627

 
6,272

Other operating charges and credits, net
229

 
(8,438
)
 
1,795

 
(8,221
)
Total operating costs and expenses
659,369

 
554,773

 
1,313,533

 
1,108,662

Operating income
79,379

 
59,297

 
160,799

 
137,077

Other expense (income):
 
 
 
 
 
 
 
Interest income
(570
)
 
(408
)
 
(1,226
)
 
(412
)
Interest expense, net
88,126

 
64,788

 
183,808

 
128,616

Other, net
2,419

 
—

 
1,901

 
—

Total other expense, net
89,975

 
64,380

 
184,483

 
128,204

Income (loss) from continuing operations before income taxes
(10,596
)
 
(5,083
)
 
(23,684
)
 
8,873

Income taxes benefit (expense)
4,102

 
5,080

 
6,526

 
(1,623
)
Income (loss) from continuing operations, net of tax
(6,494
)
 
(3
)
 
(17,158
)
 
7,250

Income (loss) from discontinued operations, net of tax
11,753

 
(688
)
 
10,790

 
(1,466
)
Net income (loss)
5,259

 
(691
)
 
(6,368
)
 
5,784

Net loss attributable to noncontrolling interest
6,368

 
1,668

 
10,711

 
1,045

Net income (loss) attributable to Boyd Gaming Corporation
$
11,627

 
$
977

 
$
4,343

 
$
6,829

 
 
 
 
 
 
 
 

5
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six months ended June 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Three Months Ended
 
Six Months Ended
(In thousands, except per share data)
June 30,
 
June 30,
(Unaudited)
2013
 
2012
 
2013
 
2012
Basic net income (loss) per common share:
 
 
 
 
 
 
 
Continuing operations
$
—

 
$
0.02

 
$
(0.07
)
 
$
0.09

Discontinued operations
0.13

 
(0.01
)
 
0.12

 
(0.01
)
Basic net income (loss) per common share
$
0.13

 
$
0.01

 
$
0.05

 
$
0.08

Weighted average basic shares outstanding
89,230

 
87,588

 
88,606

 
87,559

 
 
 
 
 
 
 
 
Diluted net income (loss) per common share:
 
 
 
 
 
 
 
Continuing operations
$
—

 
$
0.02

 
$
(0.07
)
 
$
0.09

Discontinued operations
0.13

 
(0.01
)
 
0.12

 
(0.01
)
Diluted net income (loss) per common share
$
0.13

 
$
0.01

 
$
0.05

 
$
0.08

Weighted average diluted shares outstanding
90,265

 
87,829

 
89,447

 
87,978


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

6
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
for the three and six months ended June 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Three Months Ended
 
Six Months Ended
(In thousands)
June 30,
 
June 30,
(Unaudited)
2013
 
2012
 
2013
 
2012
Net income (loss)
$
5,259

 
$
(691
)
 
$
(6,368
)
 
$
5,784

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
   Fair value of derivative instruments, net
—

 
27

 
—

 
2,467

Fair value of adjustments to available-for-sale securities,
   net of tax of $0
(179
)
 
—

 
116

 
—

Comprehensive income (loss)
5,080

 
(664
)
 
(6,252
)
 
8,251

Less: other comprehensive income attributable to noncontrolling
   interest
—

 
27

 
—

 
2,467

Less: net loss attributable to noncontrolling interest
(6,368
)
 
(1,668
)
 
(10,711
)
 
(1,045
)
Comprehensive income attributable to Boyd Gaming
   Corporation
$
11,448

 
$
977

 
$
4,459

 
$
6,829


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

7
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
for the six months ended June 30, 2013
_____________________________________________________________________________________________________
 
Boyd Gaming Corporation Stockholders’ Equity
 
 
 
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Noncontrolling
Interest
 
Total
 
 
 
 
 
 
(In thousands, except share data)
 
 
 
 
 
(Unaudited)
Shares
 
Amount
 
 
 
 
 
Balances, January 1, 2013
86,871,977

 
$
869

 
$
655,694

 
$
(351,810
)
 
$
(962
)
 
$
163,336

 
$
467,127

Net income (loss)
—

 
—

 
—

 
4,343

 
—

 
(10,711
)
 
(6,368
)
Unrealized gain on investment
   available for sale
—

 
—

 
—

 
—

 
116

 
—

 
116

Stock options exercised
1,765,037

 
18

 
13,127

 
—

 
—

 
—

 
13,145

RSU released/settled
130,597

 
1

 
(351
)
 
—

 
—

 
—

 
(350
)
Share-based compensation costs
—

 
—

 
6,984

 
—

 
—

 
—

 
6,984

Deconsolidation of LVE
—

 
—

 
—

 
—

 
—

 
45,404

 
45,404

Balances, June 30, 2013
88,767,611

 
$
888

 
$
675,454

 
$
(347,467
)
 
$
(846
)
 
$
198,029

 
$
526,058


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


8
Table of Contents


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Six Months Ended
(In thousands)
June 30,
(Unaudited)
2013
 
2012
Cash Flows from Operating Activities
 
 
 
Net income (loss)
$
(6,368
)
 
$
5,784

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Loss (Gain) on discontinued operations, net of tax
(10,790
)
 
1,466

Depreciation and amortization
140,356

 
100,635

Amortization of debt financing costs
11,425

 
6,256

Amortization of discounts on debt
9,156

 
1,811

Loss on early retirements of debt
2,372

 
—

Share-based compensation expense
6,984

 
5,953

Deferred income taxes
4,732

 
10,064

Noncash asset write-downs
5,089

 
15

Gain on insurance settlement
—

 
(6,323
)
Gain on insurance subrogation settlement
—

 
(2,203
)
Other operating activities
1,535

 
4,548

Changes in operating assets and liabilities:
 
 
 
Restricted cash
(675
)
 
(1,417
)
Accounts receivable, net
23

 
5,131

Inventories
(1,030
)
 
(1,087
)
Prepaid expenses and other current assets
249

 
(4,618
)
Current other tax asset
(17
)
 
—

Income taxes receivable
577

 
(51
)
Other long-term tax assets
—

 
1,168

Other assets, net
3,818

 
(989
)
Accounts payable and accrued liabilities
14,970

 
3,847

Income taxes payable
—

 
267

Other long-term tax liabilities
(19,939
)
 
(18,786
)
Other liabilities
3,303

 
(1,673
)
Net cash provided by operating activities
165,770

 
109,798

Cash Flows from Investing Activities
 
 
 
Capital expenditures
(58,456
)
 
(70,063
)
Proceeds from sale of Echelon, net
343,750

 
—

Cash paid for exercise of LVE option
(187,000
)
 
—

Other investing activities
214

 
2,334

Net cash provided by (used in) investing activities
98,508

 
(67,729
)
Cash Flows from Financing Activities
 
 
 
Borrowings under Boyd Gaming bank credit facility
490,400

 
488,500

Payments under Boyd Gaming bank credit facility
(557,250
)
 
(672,450
)
Borrowings under Peninsula bank credit facility
161,100

 
—

Payments under Peninsula bank credit facility
(182,725
)
 
—

Borrowings under Borgata bank credit facility
200,000

 
354,500

Payments under Borgata bank credit facility
(215,600
)
 
(370,500
)
Proceeds from issuance of senior notes
—

 
350,000

Debt financing costs, net
(11,333
)
 
(10,246
)
Proceeds from issuance of non-recourse debt by variable interest entity
—

 
1,935

Proceeds from stock options exercised
13,145

 
117

Restricted stock units released, net
(350
)
 
—

Payments on notes payable
(10,816
)
 
—

Payments on early retirements of debt
(215,668
)
 
—

Payments on non-recourse debt of variable interest entity
—

 
(501
)
Other financing activities
(4
)
 
(360
)
Net cash (used in) provided by financing activities
(329,101
)
 
140,995


9
Table of Contents


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Six Months Ended
(In thousands)
June 30,
(Unaudited)
2013
 
2012
 
 
 
 
Cash Flows from Discontinued Operations
 
 
 
Cash flows from operating activities
(2,144
)
 
(1,025
)
Cash flows from investing activities
56,751

 
(340
)
Cash flows from financing activities
—

 
—

Net cash provided by (used in) discontinued operations
54,607

 
(1,365
)
Change in cash and cash equivalents
(10,216
)
 
181,699

Cash and cash equivalents, beginning of period
192,545

 
178,091

Change in cash classified as discontinued operations
283

 
(1,077
)
Cash and cash equivalents, end of period
$
182,612

 
$
358,713

 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
Cash paid for interest
$
164,551

 
$
115,177

Cash received for income taxes, net
(2,136
)
 
(1
)
Supplemental Schedule of Noncash Investing and Financing Activities
 
 
 
Payables incurred for capital expenditures
$
12,600

 
$
13,194

 
 
 
 
Assets and Liabilities Deconsolidated of Variable Interest Entity
 
 
 
Current assets
$
184,013

 
$
—

Long-term assets
2,429

 
—

Total assets deconsolidated
$
186,442

 
$
—

 
 
 
 
Current liabilities
$
48,366

 
$
—

Noncontrolling interests
(48,924
)
 
—

Total liabilities and noncontrolling interests deconsolidated
$
(558
)
 
$
—


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


10
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________

NOTE 1.    ORGANIZATION AND BASIS OF PRESENTATION

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 21 wholly owned gaming entertainment properties and one controlling interest in a limited liability company. Headquartered in Las Vegas, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, and New Jersey.

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on 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.

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming and its subsidiaries. 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. All significant intercompany accounts and transactions have been eliminated in consolidation.

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, 2012, as filed with the SEC on March 18, 2013.

Revisions and Reclassifications
The financial information for the three and six months ended June 30, 2012 is derived from our condensed consolidated financial statements and footnotes included in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 and has been revised to reflect the results of operations and cash flows of our Dania Jai-Alai property as discontinued operations. See Note 3, Acquisitions and Dispositions, for further discussion.

Certain prior period amounts presented in our condensed consolidated financial statements have been reclassified to conform to the current presentation. These reclassifications related to other assets of discontinued operations that were previously accumulated in property and equipment, current assets, and current liabilities for the year ended December 31, 2012. This reclassification had no effect on our total assets as previously reported in our condensed consolidated balance sheet. In addition, asset transactions costs that were previously accumulated in other operating charges were disaggregated in our condensed consolidated statements of operations for the three and six months ended June 30, 2013 and 2012, respectively. This reclassification had no effect on our retained earnings or net income (loss) as previously reported.

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

11
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



Asset Transactions Costs
Asset transactions costs are comprised of certain costs incurred related to the activities associated with various acquisition opportunities and other business development activities, as well as, transaction costs incurred to dispose of assets, including, but not limited to, the sale of Echelon.

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 a promotional allowance. Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms, 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 play, 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 a promotional allowance.
The amounts included in promotional allowances for the three and six months ended June 30, 2013 and 2012 are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2013
 
2012
 
2013
 
2012
(In thousands)
 
 
 
 
 
 
 
Rooms
$
35,321

 
$
35,991

 
$
70,441

 
$
70,673

Food and beverage
49,875

 
46,815

 
100,653

 
95,103

Other
25,838

 
27,741

 
51,855

 
55,387

Total promotional allowances
$
111,034

 
$
110,547

 
$
222,949

 
$
221,163


The estimated costs of providing such promotional allowances for the three and six months ended June 30, 2013 and 2012 are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2013
 
2012
 
2013
 
2012
(In thousands)
 
 
 
 
 
 
 
Rooms
$
14,432

 
$
15,352

 
$
29,143

 
$
29,099

Food and beverage
44,123

 
45,279

 
89,182

 
85,507

Other
5,404

 
6,462

 
10,559

 
11,886

Total cost of promotional allowances
$
63,959

 
$
67,093

 
$
128,884

 
$
126,492


Gaming Taxes
We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the condensed consolidated statements of operations. These taxes totaled approximately $101.8 million and $67.8 million for the three months ended June 30, 2013 and 2012, respectively, and $204.1 million and $139.1 million for the six months ended June 30, 2013 and 2012, respectively.

CRDA Investments
Pursuant to the New Jersey Casino Control Act ("Casino Control Act"), we are assessed as a casino licensee 1.25% of our gross gaming revenues to fund qualified investments. This assessment is made in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues. Once our funds are deposited with the New Jersey Casino Reinvestment Development Authority ("CRDA"), qualified investments may be satisfied by: (i) purchase of bonds issued by the CRDA at below market rates of interest; (ii) direct investment in CRDA approved projects; or (iii) donation of funds to projects as determined by the CRDA. According to the Casino Control Act, funds on deposit with the CRDA are invested by the CRDA and the resulting income is shared two-thirds to the casino licensee and one-third to the CRDA. Further, the Casino Control Act requires that CRDA bonds be issued at statutory rates established at two-thirds of market value.


12
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



We are required to make quarterly deposits with the CRDA to satisfy our investment obligations. At the date the obligation arises, we record charges to expense (i) pursuant to the respective underlying agreements for obligations with identified qualified investments and (ii) by applying a one-third valuation reserve to our obligations that are available to fund qualified investment to reflect the anticipated below market return on investment. The one-third valuation reserve is adjusted accordingly when a qualified investment is identified. Our deposits with the CRDA, net of valuation reserves held by Borgata, were $25.1 million and $28.5 million as of June 30, 2013 and December 31, 2012, respectively, and are included in other assets, net, on our condensed consolidated balance sheets.

On May 8, 2013, we entered into an agreement with the CRDA that included a 50% donation and a 50% refund of $45.1 million of our available deposits. As a result, the carrying values of our CRDA-related accounts at June 30, 2013 were reviewed and adjusted to their net realizable values resulting in a charge of $5.0 million, which is included in impairments of assets on our condensed consolidated statements of operations. On July 17, 2013, the CRDA disbursed $45.1 million from our funds on deposit with the CRDA of which we received a $22.5 million refund.

Income Taxes
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration, and tax planning alternatives.
For the three months and six months ended June 30, 2013, in accordance with GAAP, we have computed our provision for income taxes by applying the actual effective tax rate, under the discrete method, to year-to-date income. Our current rate is impacted by adjustments that are largely independent of our operating results before taxes. Such adjustments relate primarily to the accrual of non-cash tax expense in connection with the tax amortization of indefinite-lived intangible assets that are not available to offset existing deferred tax assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets in determining our valuation allowance. As such, we believe this method provides the most reliable estimate of year-to-date income tax expense.
Other Long Term Tax Liabilities
The Company's income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.
Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. Recognition occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement is only addressed if the position is deemed to be more likely than not to be sustained. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement. Use of the term “more likely than not” indicates the likelihood of occurrence is greater than 50%.
Tax positions, failing to qualify for initial recognition, are recognized in the first subsequent interim period that they meet the “more likely than not” standard. If it is subsequently determined that a previously recognized tax position no longer meets the “more likely than not” standard, it is required that the tax position be derecognized. Accounting standards for uncertain tax positions specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes.
Unrecognized tax benefits at June 30, 2013 and December 31, 2012 are $22.2 million and $38.4 million, respectively. Included in the $22.2 million balance of unrecognized tax benefits at June 30, 2013, are $20.0 million of benefits that, if recognized, would impact the effective tax rate. We recognize accrued interest related to unrecognized tax benefits in our income tax provision. We

13
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



have accrued $9.4 million and $12.4 million of interest and penalties in our condensed consolidated balance sheet as of June 30, 2013 and December 31, 2012, respectively.
In 2013, we reached agreement on certain proposed adjustments in connection with our IRS examination for tax years ended 2005 through 2009. As a result of the agreed adjustments, we reduced our unrecognized tax benefits by $16.7 million, of which $0.9 million impacted our effective tax rate. Such agreements also resulted in a reduction to the interest accrued on our unrecognized tax benefits and a corresponding benefit to our tax provision of $3.8 million. During 2012, we reached an agreement with the Appeals Division in our IRS examination for tax years ended 2001 through 2004. We reduced our federal unrecognized tax benefits, primarily related to the settlement, by approximately $20.8 million on a net basis, of which $0.1 million impacted our effective tax rate. Additionally, we reduced the interest accrued on our federal unrecognized tax benefits by approximately $4.9 million and recorded a $3.2 million benefit to our tax provision.
We are in various stages of the examination and appeals process in connection with many of our audits and it is difficult to determine when these examinations will be closed; however, it is reasonably possible over the next twelve-month period, that we may experience a decrease in our unrecognized tax benefits, as of June 30, 2013, of up to $10.1 million. Approximately $8.0 million of the total reduction would impact our effective tax rate.
Earnings per Share
Basic earnings per share is computed by dividing net income applicable to Boyd Gaming Corporation's stockholders 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 equivalent shares used in the calculations of basic and diluted earnings per share calculations for the three and six months ended June 30, 2013 and 2012, consisted of the following amounts:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2013
 
2012
 
2013
 
2012
(In thousands)
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
89,230

 
87,588

 
88,606

 
87,559

Potential dilutive effect
1,035

 
241

 
841

 
419

Diluted
90,265

 
87,829

 
89,447

 
87,978


Anti-dilutive options totaling 5.8 million and 6.0 million for the three and six months ended June 30, 2013, respectively, and totaling 9.4 million and 8.1 million for the three and six months ended June 30, 2012, respectively, have been excluded from the computation of diluted earnings per share due to the exercise prices for these shares being in excess of the weighted-average market price of the Company's common stock during these periods.

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 valuations of acquired assets and assumed 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, accruals for slot bonus point programs, estimates of certain tax liabilities and uncertain tax positions, determination of self-insured liability reserves, computation of share-based payment valuation assumptions, estimates of fair values of assets and liabilities measured at fair value, estimates of fair values of assets and liabilities disclosed at fair value, fair values of derivative instruments and assessments of contingencies and litigation and claims. Actual results could differ from these estimates.


14
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



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 2013-02 Comprehensive Income (Topic 220) Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("Update 2013-02")
In February 2013, the Financial Accounting Standards Board ("FASB") issued Update 2013-02 which is an amendment to Topic 220-10 of the Accounting Standards Codification ("ASC").

The objective of Update 2013-02 is to amend ASC 220-10 to require entities to provide information about amounts reclassified out of other comprehensive income by component. The Company is required to present, either on the face of the financial statements or in the notes, the amounts reclassified from other comprehensive income to the respective line items in the condensed consolidated statements of comprehensive income (loss).

Update 2013-02 is effective for interim and annual periods beginning after December 15, 2012. In February 2013, the Company adopted Update 2013-02. Update 2013-02 did not have a material impact on our consolidated financial statements.

NOTE 3.    ACQUISITIONS AND DIVESTITURES

Acquisition of Peninsula Gaming
Overview
On November 20, 2012, we completed the acquisition of Peninsula Gaming pursuant to an Agreement and Plan of Merger (the "Merger Agreement") entered into on May 16, 2012. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012 and the results of its operations and cash flows are reported in our condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 2013.

Status of Purchase Price Allocation
The Company has recognized the assets acquired and liabilities assumed in the Merger based on preliminary fair value estimates as of the date of the Merger. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. The fair values of certain tangible assets, intangible assets, the note payable to seller, certain contingent liabilities and residual goodwill are the most significant areas not yet finalized and therefore are subject to change. The final fair value determinations are expected to be completed no later than the third quarter of 2013. The final fair value determinations may be significantly different than those reflected in the condensed consolidated balance sheets at June 30, 2013 and December 31, 2012.

Supplemental Unaudited Pro Forma Information
The following table presents pro forma results of the Company, as though Peninsula Gaming had been acquired as of January 1, 2012. The pro forma results do not necessarily represent the results that may occur in the future. The pro forma amounts include the historical operating results of the Company and Peninsula Gaming prior to the acquisition, with adjustments directly attributable to the acquisition.
 
Three Months Ended June 30, 2012
 
Boyd Gaming
Corporation
(As Reported)
 
Peninsula
Gaming
 
Boyd Gaming
Corporation
(Pro Forma)
(In thousands)
 
 
 
 
 
Condensed Statements of Operations
 
 
 
 
 
Net revenues
$
614,070

 
$
132,957

 
$
747,027

Net income (loss) attributable to Boyd Gaming Corporation
$
977

 
$
457

 
$
1,434

Basic and diluted earnings per share
$
0.01

 
 
 
$
0.02



15
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



 
Six Months Ended June 30, 2012
 
Boyd Gaming
Corporation
(As Reported)
 
Peninsula
Gaming
 
Boyd Gaming
Corporation
(Pro Forma)
(In thousands)
 
 
 
 
 
Condensed Statements of Operations
 
 
 
 
 
Net revenues
$
1,245,739

 
$
267,616

 
$
1,513,355

Net income (loss) attributable to Boyd Gaming Corporation
$
6,829

 
$
4,156

 
$
10,985

Basic earnings per share
$
0.08

 
 
 
$
0.13

Diluted earnings per share
$
0.08

 
 
 
$
0.12


Disposition of Echelon
On March 1, 2013, we entered into a definitive agreement to sell the Echelon site for $350 million in cash. The sale agreement included the 87-acre land parcel, as well as site improvements. The transaction was completed on March 4, 2013, and we realized approximately $157.0 million in net proceeds from the sale after consideration of direct transaction costs and after payment of a portion of the proceeds to a third party to fulfill our obligations to LVE Energy Partners, LLC (see Note 5, Deconsolidation of LVE Energy Partners, LLC.)

Discontinued Operations - Disposition of Dania Jai-Alai
On May 22, 2013, we consummated the sale of certain assets and liabilities of the Dania pari-mutuel facility ("Dania Jai-Alia"), with approximately 47 acres of related land located in Dania Beach, Broward County, Florida, for a sales price of $65.5 million. The sale was pursuant to an asset agreement (the "New Dania Agreement") that we entered into with Dania Entertainment Center, LLC ("Dania Entertainment"). As part of the New Dania Agreement, the $5 million non-refundable deposit and $2 million fees paid to us in 2011 by Dania Entertainment were applied to the sales price, and we received $58.5 million in cash and recorded a pre-tax gain of $18.9 million. We have presented the results of Dania Jai-Alai Business as discontinued operations for all periods presented in these condensed consolidated financial statements.

There were no assets and liabilities of the discontinued operation as of June 30, 2013, and the assets and liabilities of the discontinued operation as of December 31, 2012 were as follows:

 
 
December 31,
 
 
2012
(In thousands)
 
 
Assets
 
 
Cash and cash equivalents
 
$
283

Other current assets
 
402

Current assets of discontinued operations
 
$
685

 
 
 
Property and equipment, net
 
$
37,674

Other assets
 
10

Noncurrent assets of discontinued operations
 
$
37,684

 
 
 
Liabilities
 
 
Accounts payable and accrued expenses
 
$
864

Liabilities of discontinued operations
 
$
864

 
 
 


16
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



Net revenues, pre-tax income (loss) from operations, and income (loss), net of income taxes presented as discontinued operations are as follows:

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2013
 
2012
 
2013
 
2012
(In thousands)
 
Operations
 
 
 
 
 
 
 
Net revenues
$
740

 
$
1,152

 
$
2,140

 
$
2,566

 
 
 
 
 
 
 
 
Loss from discontinued operations before income taxes
$
(1,237
)
 
$
(1,058
)
 
$
(2,200
)
 
$
(2,256
)
Income tax benefit
776

 
370

 
776

 
790

Loss from discontinued operations, net of tax
$
(461
)
 
$
(688
)
 
$
(1,424
)
 
$
(1,466
)
 
 
 
 
 
 
 
 
Disposal
 
 
 
 
 
 
 
Gain on disposal before income taxes
$
18,873

 
$
—

 
$
18,873

 
$
—

Income tax expense
(6,659
)
 
—

 
(6,659
)
 
—

Gain on disposal, net of tax
$
12,214

 
$
—

 
$
12,214

 
$
—

 
 
 
 
 
 
 
 
Income (loss) from discontinued operations, net of tax
$
11,753

 
$
(688
)
 
$
10,790

 
$
(1,466
)
 
 
 
 
 
 
 
 

NOTE 4.    BORGATA HOTEL CASINO AND SPA

The Company and MGM Resorts International ("MGM") each originally held a 50% interest in Marina District Development Holding Co., LLC (“Holding Company”). Holding Company owns all the equity interests in Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa. We are the managing member of Holding Company, and we are responsible for the day-to-day operations of Borgata, including the improvement of the facility and business. As a result, we consolidate the Borgata into our financial statements.

On March 24, 2010, MGM transferred its interest in Holding Company ("MGM Interest") to a divestiture trust (“Divestiture Trust”) established for the purpose of selling the MGM Interest to a third party as a part of a settlement agreement between MGM and the New Jersey Department of Gaming Enforcement (the “NJDGE”).

On February 20, 2013, MGM announced that it had entered into an amendment with the NJDGE, effective February 13, 2013, pursuant to which MGM was allowed to reapply to the New Jersey Casino Control Commission for licensure in New Jersey with the March 24, 2013 deadline to sell the MGM Interest deferred pending the outcome of the licensure process.

NOTE 5.    DECONSOLIDATION OF LVE ENERGY PARTNERS, LLC

In connection with the disposition of Echelon on March 4, 2013 (see Note 3, Acquisitions and Divestitures), we exercised an option to acquire the central energy center assets from LVE Energy Partners, LLC (“LVE”), a joint venture between Marina Energy LLC and DCO ECH Energy, LLC, for $187 million. We immediately sold these assets to the buyer of Echelon, and our agreements with LVE were terminated.

Prior to these transactions, we had determined that we were the primary beneficiary of the contract with LVE, which required us to consolidate LVE for financial statement purposes. As a result of the March 4, 2013 transactions, we ceased consolidation of LVE as of that date.

17
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



The effects of the consolidation of LVE on our financial position as of December 31, 2012, and its impact on our results of operations for the six months ended June 30, 2013 and for the three and six months ended June 30, 2012 are reconciled by respective line items to amounts as reported in our condensed consolidated balance sheets and condensed consolidated statements of operations
as follows:
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Boyd Gaming
 
Boyd Gaming
 
 
 
 
 
Corporation
 
Corporation
 
LVE, LLC
 
Eliminations
 
(as consolidated)
(In thousands)
 
ASSETS
 
 
 
 
 
 
 
Current assets
$
354,140

 
$
1,453

 
$
—

 
$
355,593

Property and equipment, net
3,587,314

 
—

 
—

 
3,587,314

Assets held for development
168,251

 
163,519

 
—

 
331,770

Debt financing costs, net
83,020

 
2,448

 
—

 
85,468

Restricted investments
—

 
21,382

 
—

 
21,382

Other assets
98,415

 
—

 
—

 
98,415

Intangible assets, net
1,119,638

 
—

 
—

 
1,119,638

Goodwill, net
694,929

 
—

 
—

 
694,929

Assets of discontinued operation
37,684

 
—

 
—

 
37,684

Total Assets
$
6,143,391

 
$
188,802

 
$
—

 
$
6,332,193

 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Current maturities of long-term debt
$
61,570

 
$
—

 
$
—

 
$
61,570

Accounts payable
90,992

 
164

 
—

 
91,156

Accrued and other liabilities
355,246

 
8,486

 
—

 
363,732

Income taxes payable
8,129

 
—

 
—

 
8,129

Non-recourse obligations of variable interest entity
—

 
225,113

 
—

 
225,113

Long-term debt, net of current maturities
4,827,853

 
—

 
—

 
4,827,853

Deferred income taxes
139,943

 
—

 
—

 
139,943

Long-term tax and other liabilities
146,706

 
—

 
—

 
146,706

Liabilities of discontinued operation
864

 
—

 
—

 
864

 
 
 
 
 
 
 
 
STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Common stock
869

 
—

 
—

 
869

Additional paid-in capital
655,694

 
—

 
—

 
655,694

Retained earnings
(351,810
)
 
—

 
—

 
(351,810
)
Accumulated other comprehensive income (loss)
(962
)
 
—

 
—

 
(962
)
Noncontrolling interest
208,297

 
(44,961
)
 
—

 
163,336

Total Liabilities and Stockholders' Equity
$
6,143,391

 
$
188,802

 
$
—

 
$
6,332,193





18
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________




 
Three Months Ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Boyd Gaming
 
Boyd Gaming
 
 
 
 
 
Corporation
 
Corporation
 
LVE, LLC
 
Eliminations
 
(as consolidated)
(In thousands)
 
REVENUES
 
 
 
 
 
 
 
Other revenue
$
35,784

 
$
2,724

 
$
(2,724
)
 
$
35,784

 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
 
 
Selling, general and administrative
$
109,665

 
$
6

 
$
—

 
$
109,671

Preopening expenses
$
4,934

 
$
—

 
$
(2,724
)
 
$
2,210

 
 
 
 
 
 
 
 
Operating income
$
56,579

 
$
2,718

 
$
—

 
$
59,297

 
 
 
 
 
 
 
 
Other expense
 
 
 
 
 
 
 
Interest expense, net
$
62,139

 
$
2,649

 
$
—

 
$
64,788

 
 
 
 
 
 
 
 
Income (loss) from continuing operations before
   income taxes
$
(5,152
)
 
$
69

 
$
—

 
$
(5,083
)
Income taxes
5,080

 
—

 
—

 
5,080

Income (loss) from continuing operations, net
   of tax
(72
)
 
69

 
—

 
(3
)
Income (loss) from discontinued operations, net
   of tax
(688
)
 
—

 
—

 
(688
)
Net income (loss)
(760
)
 
69

 
—

 
(691
)
Net (income) loss attributable to noncontrolling
   interest
1,737

 
—

 
(69
)
 
1,668

Net income (loss) attributable to Boyd Gaming
   Corporation
$
977

 
$
69

 
$
(69
)
 
$
977





19
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



 
Six Months Ended June 30, 2013
 
 
 
 
 
 
 
Boyd Gaming
 
Boyd Gaming
 
 
 
 
 
Corporation
 
Corporation
 
LVE, LLC
 
Eliminations
 
(as consolidated)
(In thousands)
 
REVENUES
 
 
 
 
 
 
 
Other revenue
$
81,209

 
$
1,933

 
$
(1,933
)
 
$
81,209

 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
 
 
Selling, general and administrative
$
251,028

 
$
—

 
$
—

 
$
251,028

Preopening expenses
$
5,087

 
$
—

 
$
(1,933
)
 
$
3,154

 
 
 
 
 
 
 
 
Operating income
$
158,866

 
$
1,933

 
$
—

 
$
160,799

 
 
 
 
 
 
 
 
Other expense
 
 
 
 
 
 
 
Interest expense, net
$
181,432

 
$
2,376

 
$
—

 
$
183,808

 
 
 
 
 
 
 
 
Income (loss) from continuing operations before
   income taxes
$
(23,241
)
 
$
(443
)
 
$
—

 
$
(23,684
)
Income taxes
6,526

 
—

 
—

 
6,526

Income (loss) from continuing operations, net
   of tax
(16,715
)
 
(443
)
 
—

 
(17,158
)
Income (loss) from discontinued operations, net
   of tax
10,790

 
—

 
—

 
10,790

Net income (loss)
(5,925
)
 
(443
)
 
—

 
(6,368
)
Net (income) loss attributable to noncontrolling
   interest
10,268

 
—

 
443

 
10,711

Net income (loss) attributable to Boyd Gaming
   Corporation
$
4,343

 
$
(443
)
 
$
443

 
$
4,343

























20
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



 
Six Months Ended June 30, 2012
 
 
 
 
 
 
 
Boyd Gaming
 
Boyd Gaming
 
 
 
 
 
Corporation
 
Corporation
 
LVE, LLC
 
Eliminations
 
(as consolidated)
(In thousands)
 
REVENUES
 
 
 
 
 
 
 
Other revenue
$
71,505

 
$
5,448

 
$
(5,448
)
 
$
71,505

 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
 
 
Selling, general and administrative
$
218,309

 
$
9

 
$
—

 
$
218,318

Maintenance and utilities
$
77,995

 
$
—

 
$
—

 
$
77,995

Preopening expenses
$
9,318

 
$
—

 
$
(5,448
)
 
$
3,870

 
 
 
 
 
 
 
 
Operating income
$
131,638

 
$
5,439

 
$
—

 
$
137,077

 
 
 
 
 
 
 
 
Other expense
 
 
 
 
 
 
 
Interest expense, net
$
122,574

 
$
6,042

 
$
—

 
$
128,616

 
 
 
 
 
 
 
 
Income (loss) from continuing operations before
   income taxes
$
9,476

 
$
(603
)
 
$
—

 
$
8,873

Income taxes
(1,623
)
 
—

 
—

 
(1,623
)
Income (loss) from continuing operations, net
   of tax
7,853

 
(603
)
 
—

 
7,250

Income (loss) from discontinued operations, net
   of tax
(1,466
)
 
—

 
—

 
(1,466
)
Net income (loss)
6,387

 
(603
)
 
—

 
5,784

Net (income) loss attributable to noncontrolling
   interest
442

 
—

 
603

 
1,045

Net income (loss) attributable to Boyd Gaming
   Corporation
$
6,829

 
$
(603
)
 
$
603

 
$
6,829


The reduction in other revenue and preopening expenses reflects the elimination of the Periodic Fee paid by Boyd Gaming to LVE. Such fee was 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 consolidation, it was actually paid to LVE directly on a monthly basis through March 4, 2013, the date we completed the Echelon transaction.




21
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________



NOTE 6.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:
 
 
 
 
 
June 30,
 
December 31,
(In thousands)
2013
 
2012
Land
$
340,778

 
$
341,174

Buildings and improvements
3,836,072

 
3,826,880

Furniture and equipment
1,310,744

 
1,305,216

Riverboats and barges
188,780

 
187,620

Construction in progress
64,977

 
27,397

Other
23,002

 
23,013

Total property and equipment
5,764,353

 
5,711,300

Less accumulated depreciation
2,214,175

 
2,123,986

Property and equipment, net
$
3,550,178

 
$
3,587,314


Other property and equipment presented in the table above relates to the net realizable value of construction materials inventory that was previously included in assets held for development at December 31, 2012, and that was not disposed of with the sale of the Echelon project. Such assets are not in service and are not currently being depreciated.

On May 22, 2013, we completed the sale of certain assets and liabilities of Dania Jai-Alai in Dania Beach, Broward County, Florida, to Dania Entertainment. The property and equipment table above excludes the assets related to these discontinued operations.

Depreciation expense for the three months ended June 30, 2013 and 2012 was $58.5 million and $49.5 million, respectively. Depreciation expense for the six months ended June 30, 2013 and 2012 was $116.7 million and $98.4 million, respectively.


NOTE 7.    INTANGIBLE ASSETS

Intangible assets consist of the following:
 
June 30, 2013
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
 
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
(In thousands)
 
 
 
Amortizing intangibles:
 
 
 
 
 
 
 
 
 
Customer relationships
4.0 years
 
$
154,000

 
$
(45,880
)
 
$
—

 
$
108,120

Non-competition agreement
0.4 years
 
3,200

 
(1,955
)
 
—

 
1,245

Favorable lease rates
34.9 years
 
45,370

 
(9,390
)
 
—

 
35,980

Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
223,943

 
(57,225
)
 
—

 
166,718

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks and other
Indefinite
 
192,381

 
—

 
(5,000
)
 
187,381

Gaming license rights
Indefinite
 
955,355

 
(33,960
)
 
(180,000
)
 
741,395

 
 
 
1,147,736

 
(33,960
)
 
(185,000
)
 
928,776

Balance, June 30, 2013
 
 
$
1,371,679

 
$
(91,185
)
 
$
(185,000
)
 
$
1,095,494


22
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012
______________________________________________________________________________________________________




 
December 31, 2012
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
 
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
(In thousands)
 
 
 
Amortizing intangibles:
 
 
 
 
 
 
 
 
 
Customer relationships
4.5 years
 
$
154,000

 
$
(23,059
)
 
$
—

 
$
130,941

Non-competition agreement
0.9 years
 
3,200

 
(354