BYD 10Q 9.30.2013

 
 
 
 
 
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 September 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 October 31, 2013
 
 
Common stock, $0.01 par value
  
107,815,965
 


Table of Contents

BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIODS ENDED SEPTEMBER 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 September 30, 2013 and December 31, 2012
_____________________________________________________________________________________________________
(In thousands, except share data)
September 30,
 
December 31,
(Unaudited)
2013
 
2012
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
165,803

 
$
192,545

Restricted cash
27,191

 
22,900

Accounts receivable, net
57,395

 
61,753

Inventories
18,163

 
18,539

Prepaid expenses and other current assets
50,191

 
48,673

Income taxes receivable
1,636

 
2,875

Deferred income taxes and other current tax assets
4,491

 
7,623

Current assets of discontinued operations
—

 
685

Total current assets
324,870

 
355,593

 
 
 
 
Property and equipment, net
3,525,546

 
3,587,314

Assets held for development
—

 
331,770

Debt financing costs, net
82,241

 
85,468

Restricted investments held by variable interest entity
—

 
21,382

Other assets, net
62,415

 
98,415

Intangible assets, net
1,083,080

 
1,119,638

Goodwill, net
694,929

 
694,929

Assets of discontinued operations
—

 
37,684

Total assets
$
5,773,081

 
$
6,332,193

 
 
 
 

3
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of September 30, 2013 and December 31, 2012
_____________________________________________________________________________________________________
(In thousands, except share data)
September 30,
 
December 31,
(Unaudited)
2013
 
2012
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Current maturities of long-term debt
$
29,759

 
$
61,570

Accounts payable
72,364

 
91,156

Accrued liabilities
362,525

 
363,732

Deferred income taxes and income taxes payable
—

 
8,129

Current deferred tax liability
7,925

 
—

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

 
225,113

Current liabilities of discontinued operations
—

 
864

Total current liabilities
472,573

 
750,564

Long-term debt, net of current maturities
4,312,984

 
4,827,853

Deferred income taxes
153,445

 
139,943

Other long-term tax liabilities
26,630

 
43,457

Other liabilities
96,977

 
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; 107,805,297 and 86,871,977 shares outstanding
1,078

 
869

Additional paid-in capital
894,222

 
655,694

Accumulated deficit
(384,734
)
 
(351,810
)
Accumulated other comprehensive loss
(795
)
 
(962
)
Total Boyd Gaming Corporation stockholders’ equity
509,771

 
303,791

Noncontrolling interest
200,701

 
163,336

Total stockholders’ equity
710,472

 
467,127

Total liabilities and stockholders’ equity
$
5,773,081

 
$
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 nine months ended September 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Three Months Ended
 
Nine Months Ended
(In thousands, except per share data)
September 30,
 
September 30,
(Unaudited)
2013
 
2012
 
2013
 
2012
REVENUES
 
 
 
 
 
 
 
Operating revenues:
 
 
 
 
 
 
 
Gaming
$
633,237

 
$
516,206

 
$
1,893,722

 
$
1,564,760

Food and beverage
114,397

 
106,658

 
338,975

 
317,876

Room
72,299

 
69,964

 
203,308

 
205,589

Other
43,808

 
38,911

 
125,017

 
110,416

Gross revenues
863,741

 
731,739

 
2,561,022

 
2,198,641

Less promotional allowances
125,172

 
119,349

 
348,121

 
340,512

Net revenues
738,569

 
612,390

 
2,212,901

 
1,858,129

COST AND EXPENSES
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
Gaming
302,373

 
252,300

 
887,436

 
739,242

Food and beverage
57,655

 
54,920

 
181,950

 
169,129

Room
12,556

 
13,605

 
41,611

 
43,671

Other
33,056

 
29,947

 
92,429

 
82,643

Selling, general and administrative
122,837

 
112,393

 
373,865

 
330,711

Maintenance and utilities
45,735

 
37,929

 
125,986

 
115,924

Depreciation and amortization
69,002

 
50,424

 
209,358

 
151,059

Corporate expense
12,084

 
10,317

 
42,588

 
36,197

Preopening expense
1,675

 
1,618

 
4,829

 
5,488

Impairments of assets
1,250

 
—

 
6,282

 
—

Asset transactions costs
(1,362
)
 
645

 
2,265

 
6,917

Other operating charges and credits, net
3,386

 
(1,095
)
 
5,181

 
(9,316
)
Total operating costs and expenses
660,247

 
563,003

 
1,973,780

 
1,671,665

Operating income
78,322

 
49,387

 
239,121

 
186,464

Other expense (income):
 
 
 
 
 
 
 
Interest income
(553
)
 
(272
)
 
(1,779
)
 
(684
)
Interest expense, net
83,145

 
74,115

 
266,953

 
202,731

Loss on early extinguishments of debt
27,141

 
—

 
29,513

 
—

Other, net
136

 
—

 
(335
)
 
—

Total other expense, net
109,869

 
73,843

 
294,352

 
202,047

Loss from continuing operations before income taxes
(31,547
)
 
(24,456
)
 
(55,231
)
 
(15,583
)
Income taxes benefit (expense)
(3,048
)
 
8,050

 
3,478

 
6,427

Loss from continuing operations, net of tax
(34,595
)
 
(16,406
)
 
(51,753
)
 
(9,156
)
Income (loss) from discontinued operations, net of tax
—

 
(676
)
 
10,790

 
(2,142
)
Net loss
(34,595
)
 
(17,082
)
 
(40,963
)
 
(11,298
)
Net (income) loss attributable to noncontrolling interest
(2,672
)
 
1,286

 
8,039

 
2,331

Net loss attributable to Boyd Gaming Corporation
$
(37,267
)
 
$
(15,796
)
 
$
(32,924
)
 
$
(8,967
)
 
 
 
 
 
 
 
 

5
Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and nine months ended September 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Three Months Ended
 
Nine Months Ended
(In thousands, except per share data)
September 30,
 
September 30,
(Unaudited)
2013
 
2012
 
2013
 
2012
Basic net loss per common share:
 
 
 
 
 
 
 
Continuing operations
$
(0.37
)
 
$
(0.17
)
 
$
(0.47
)
 
$
(0.08
)
Discontinued operations
—

 
(0.01
)
 
0.12

 
(0.02
)
Basic net loss per common share
$
(0.37
)
 
$
(0.18
)
 
$
(0.35
)
 
$
(0.10
)
Weighted average basic shares outstanding
101,555

 
87,643

 
93,122

 
87,587

 
 
 
 
 
 
 
 
Diluted net loss per common share:
 
 
 
 
 
 
 
Continuing operations
$
(0.37
)
 
$
(0.17
)
 
$
(0.47
)
 
$
(0.08
)
Discontinued operations
—

 
(0.01
)
 
0.12

 
(0.02
)
Diluted net loss per common share
$
(0.37
)
 
$
(0.18
)
 
$
(0.35
)
 
$
(0.10
)
Weighted average diluted shares outstanding
101,555

 
87,643

 
93,122

 
87,587


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 nine months ended September 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Three Months Ended
 
Nine Months Ended
(In thousands)
September 30,
 
September 30,
(Unaudited)
2013
 
2012
 
2013
 
2012
Net loss
$
(34,595
)
 
$
(17,082
)
 
$
(40,963
)
 
$
(11,298
)
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
   Fair value of derivative instruments, net
—

 
1,234

 
—

 
3,701

Fair value of adjustments to available-for-sale securities,
   net of tax of $115
52

 
—

 
167

 
—

Comprehensive loss
(34,543
)
 
(15,848
)
 
(40,796
)
 
(7,597
)
Less: other comprehensive income attributable to noncontrolling
   interest
—

 
1,234

 
—

 
3,701

Less: net (income) loss attributable to noncontrolling interest
2,672

 
(1,286
)
 
(8,039
)
 
(2,331
)
Comprehensive loss attributable to Boyd Gaming
   Corporation
$
(37,215
)
 
$
(15,796
)
 
$
(32,757
)
 
$
(8,967
)

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 nine months ended September 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 loss
—

 
—

 
—

 
(32,924
)
 
—

 
(8,039
)
 
(40,963
)
Unrealized gain on investment
   available for sale
—

 
—

 
—

 
—

 
167

 
—

 
167

Equity offering
18,975,000

 
190

 
216,277

 
—

 
—

 
—

 
216,467

Stock options exercised
1,827,723

 
18

 
13,573

 
—

 
—

 
—

 
13,591

RSU released/settled
130,597

 
1

 
(355
)
 
—

 
—

 
—

 
(354
)
Share-based compensation costs
—

 
—

 
9,033

 
—

 
—

 
—

 
9,033

Deconsolidation of LVE
—

 
—

 
—

 
—

 
—

 
45,404

 
45,404

Balances, September 30, 2013
107,805,297

 
$
1,078

 
$
894,222

 
$
(384,734
)
 
$
(795
)
 
$
200,701

 
$
710,472


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 nine months ended September 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Nine Months Ended
(In thousands)
September 30,
(Unaudited)
2013
 
2012
Cash Flows from Operating Activities
 
 
 
Net income (loss)
$
(40,963
)
 
$
(11,298
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Loss (Gain) on discontinued operations, net of tax
(10,790
)
 
2,142

Depreciation and amortization
209,358

 
151,059

Amortization of debt financing costs
16,726

 
11,116

Amortization of discounts on debt
13,862

 
2,746

Loss on early retirements of debt
29,513

 
—

Share-based compensation expense
9,033

 
7,560

Deferred income taxes
7,027

 
4,572

Noncash asset write-downs
8,198

 
(2
)
Gain on insurance settlement
—

 
(6,323
)
Gain on insurance subrogation settlement
—

 
(3,809
)
Other operating activities
2,455

 
6,827

Changes in operating assets and liabilities:
 
 
 
Restricted cash
(4,291
)
 
(20,051
)
Accounts receivable, net
1,529

 
7,518

Inventories
375

 
782

Prepaid expenses and other current assets
(1,489
)
 
(13,680
)
Current other tax asset
4,062

 
—

Income taxes receivable
584

 
(3,184
)
Other long-term tax assets
—

 
521

Other assets, net
22,519

 
(3,843
)
Accounts payable and accrued liabilities
(19,093
)
 
35,202

Income taxes payable
—

 
(84
)
Other long-term tax liabilities
(19,569
)
 
(17,157
)
Other liabilities
4,737

 
(3,133
)
Net cash provided by operating activities
233,783

 
147,481

Cash Flows from Investing Activities
 
 
 
Capital expenditures
(100,618
)
 
(101,322
)
Proceeds from sale of Echelon, net
343,750

 
—

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

Proceeds from sale of other assets, net
4,875

 
—

Deposit of acquisition financing proceeds into escrow
—

 
(350,000
)
Other investing activities
198

 
4,054

Net cash provided by (used in) investing activities
61,205

 
(447,268
)
Cash Flows from Financing Activities
 
 
 
Borrowings under Boyd Gaming bank credit facility
2,711,375

 
642,600

Payments under Boyd Gaming bank credit facility
(2,738,325
)
 
(836,375
)
Borrowings under Peninsula bank credit facility
268,500

 
—

Payments under Peninsula bank credit facility
(296,688
)
 
—

Borrowings under Borgata bank credit facility
297,100

 
515,300

Payments under Borgata bank credit facility
(300,800
)
 
(541,800
)
Proceeds from issuance of senior notes, net of issuance costs
—

 
338,500

Proceeds from acquisition financing
—

 
350,000

Debt financing costs, net
(36,396
)
 
(2,881
)
Payments on notes payable
(10,818
)
 
—

Payments on early retirements of debt
(500,272
)
 
—

Payments on non-recourse debt of variable interest entity
—

 
(755
)
Proceeds from issuance of non-recourse debt by variable interest entity
—

 
2,668

Proceeds from stock options exercised
13,591

 
—


9
Table of Contents


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2013 and 2012
_____________________________________________________________________________________________________
 
Nine Months Ended
(In thousands)
September 30,
(Unaudited)
2013
 
2012
Restricted stock units released, net
(354
)
 
—

Proceeds from sale of common stock
216,467

 
—

Other financing activities
—

 
(427
)
Net cash (used in) provided by financing activities
(376,620
)
 
466,830

 
 
 
 
Cash Flows from Discontinued Operations
 
 
 
Cash flows from operating activities
(2,144
)
 
(1,636
)
Cash flows from investing activities
56,751

 
(392
)
Cash flows from financing activities
—

 
—

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

 
(2,028
)
Change in cash and cash equivalents
(27,025
)
 
165,015

Cash and cash equivalents, beginning of period
192,545

 
178,091

Change in cash classified as discontinued operations
283

 
373

Cash and cash equivalents, end of period
$
165,803

 
$
343,479

 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
Cash paid for interest
$
248,862

 
$
160,373

Cash received for income taxes, net
(6,424
)
 
(1
)
Supplemental Schedule of Noncash Investing and Financing Activities
 
 
 
Payables incurred for capital expenditures
$
7,849

 
$
8,707

 
 
 
 
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 September 30, 2013 and December 31, 2012 and for the three and nine months ended September 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 nine months ended September 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 September 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 nine months ended September 30, 2013 and 2012, respectively. This reclassification had no effect on our retained earnings or net 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 September 30, 2013 and December 31, 2012 and for the three and nine months ended September 30, 2013 and 2012
______________________________________________________________________________________________________




Asset Transactions Costs
Asset transactions costs are comprised of certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, dispositions, including, but not limited to, the sale of Echelon, and other business development activities.

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 nine months ended September 30, 2013 and 2012 are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
(In thousands)
 
 
 
 
 
 
 
Rooms
$
39,296

 
$
39,737

 
$
109,737

 
$
110,411

Food and beverage
52,708

 
48,975

 
153,361

 
144,094

Other
33,168

 
30,637

 
85,023

 
86,007

Total promotional allowances
$
125,172

 
$
119,349

 
$
348,121

 
$
340,512


The estimated costs of providing such promotional allowances for the three and nine months ended 2013 and 2012 are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
(In thousands)
 
 
 
 
 
 
 
Rooms
$
15,361

 
$
16,980

 
$
44,505

 
$
46,079

Food and beverage
47,252

 
46,364

 
136,435

 
131,871

Other
6,499

 
6,931

 
17,058

 
18,817

Total cost of promotional allowances
$
69,112

 
$
70,275

 
$
197,998

 
$
196,767


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 $99.2 million and $67.8 million for the three months ended September 30, 2013 and 2012, respectively, and $303.3 million and $206.8 million for the nine months ended September 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 September 30, 2013 and December 31, 2012 and for the three and nine months ended September 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 $3.7 million and $28.5 million as of September 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 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, we received a $22.5 million refund and redeemed a portion of Borgata's 9.5% Senior Secured Notes due 2015.

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 nine months ended September 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.

In the third quarter of 2013, the U.S. Treasury Department (“Treasury”) issued final regulations under Sections 162(a) and 263(a) of the Internal Revenue Code of 1986 (Code), regarding the deduction and capitalization of expenditures related to tangible property. The final regulations replace previously issued proposed and temporary regulations that were generally effective for tax years beginning in 2012; and whose effective date was subsequently changed in November 2012, to tax years beginning in 2014. Treasury also released proposed regulations under Section 168 of the Code regarding dispositions of tangible property. Although the final regulations will affect taxpayers that acquire, produce, or improve tangible property, we do not expect them to have a material impact on our consolidated financial statements.
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

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



“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 September 30, 2013 and December 31, 2012 are $22.4 million and $38.4 million, respectively. Included in the $22.4 million balance of unrecognized tax benefits at September 30, 2013, are $16.8 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 have accrued $9.5 million and $12.4 million of interest and penalties in our condensed consolidated balance sheet as of September 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 $3.9 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. During the third quarter of 2013, we received a refund of $4.3 million related to our 2001 through 2004 IRS examination.
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 September 30, 2013, of up to $10.4 million. Approximately $8.4 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 nine months ended September 30, 2013 and 2012, consisted of the following amounts:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
(In thousands)
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
101,555

 
87,643

 
93,122

 
87,587

Potential dilutive effect
—

 
—

 
—

 
—

Diluted
101,555

 
87,643

 
93,122

 
87,587


Due to the net losses for all the periods presented, the effect of all potential common stock equivalents was anti-dilutive, and therefore all such shares were excluded from the computation of diluted weighted average shares outstanding.

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-

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



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.

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.
 
Accounting Standards Update 2013-11 Income Taxes (Topic 740) Presentation of an Unrecognized Tax Benefit ("UTB") When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("Update 2013-11")
In July 2013, the FASB issued ASU 2013-11.

The objective of Update 2013-11 is to provide guidance on financial statement presentation of a UTB when a net operating loss ("NOL") carryforward, a similar tax loss, or a tax credit carryforward exists.

Update 2013-11 is effective for interim and annual periods beginning after December 15, 2013. We have not yet adopted Update 2013-11. Update 2013-11 is not expected to 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, LLC ("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 September 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 nine months ended September 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 will be completed within one year of the closing date of the acquisition. The final fair value determinations may be significantly different than those reflected in the condensed consolidated balance sheets at September 30, 2013 and December 31, 2012.


15
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2013 and December 31, 2012 and for the three and nine months ended September 30, 2013 and 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 September 30, 2012
 
Boyd Gaming
Corporation
(As Reported)
 
Peninsula
Gaming
 
Boyd Gaming
Corporation
(Pro Forma)
(In thousands)
 
 
 
 
 
Condensed Statements of Operations
 
 
 
 
 
Net revenues
$
612,390

 
$
130,154

 
$
742,544

Net income (loss) attributable to Boyd Gaming Corporation
$
(15,796
)
 
$
1,833

 
$
(13,963
)
Basic and diluted loss per share
$
(0.18
)
 
 
 
$
(0.16
)

 
Nine Months Ended September 30, 2012
 
Boyd Gaming
Corporation
(As Reported)
 
Peninsula
Gaming
 
Boyd Gaming
Corporation
(Pro Forma)
(In thousands)
 
 
 
 
 
Condensed Statements of Operations
 
 
 
 
 
Net revenues
$
1,858,129

 
$
397,769

 
$
2,255,898

Net income (loss) attributable to Boyd Gaming Corporation
$
(8,967
)
 
$
5,987

 
$
(2,980
)
Basic and diluted loss per share
$
(0.10
)
 
 
 
$
(0.03
)

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.


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



There were no assets and liabilities of the discontinued operation as of September 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

 
 
 

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
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2012
 
2013
 
2012
(In thousands)
 
Operations
 
 
 
 
 
 
Net revenues
 
$
889

 
$
2,140

 
$
3,455

 
 
 
 
 
 
 
Income (loss) from discontinued operations before income taxes
 
$
(1,039
)
 
$
(2,200
)
 
$
(3,295
)
Income taxes
 
363

 
776

 
1,153

Loss (income) from discontinued operations, net of tax
 
$
(676
)
 
$
(1,424
)
 
$
(2,142
)
 
 
 
 
 
 
 
Disposal
 
 
 
 
 
 
Gain on disposal before income taxes
 
$
—

 
$
18,873

 
$
—

Income tax expense
 
—

 
(6,659
)
 
—

Gain on disposal, net of tax
 
$
—

 
$
12,214

 
$
—

 
 
 
 
 
 
 
(Loss) income from discontinued operations, net of tax
 
$
(676
)
 
$
10,790

 
$
(2,142
)
 
 
 
 
 
 
 
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.


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



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 amended settlement agreement 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.

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


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




 
Three Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Boyd Gaming
 
Boyd Gaming
 
 
 
 
 
Corporation
 
Corporation
 
LVE, LLC
 
Eliminations
 
(as consolidated)
(In thousands)
 
REVENUES
 
 
 
 
 
 
 
Other revenue
$
38,911

 
$
2,724

 
$
(2,724
)
 
$
38,911

 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
 
 
Selling, general and administrative
$
112,389

 
$
4

 
$
—

 
$
112,393

Preopening expenses
$
4,342

 
$
—

 
$
(2,724
)
 
$
1,618

 
 
 
 
 
 
 
 
Operating income
$
46,667

 
$
2,720

 
$
—

 
$
49,387

 
 
 
 
 
 
 
 
Other expense
 
 
 
 
 
 
 
Interest expense, net
$
71,134

 
$
2,981

 
$
—

 
$
74,115

 
 
 
 
 
 
 
 
Loss from continuing operations before
   income taxes
$
(24,195
)
 
$
(261
)
 
$
—

 
$
(24,456
)
Income taxes
8,050

 
—

 
—

 
8,050

Loss from continuing operations, net of tax
(16,145
)
 
(261
)
 
—

 
(16,406
)
Loss from discontinued operations, net of tax
(676
)
 
—

 
—

 
(676
)
Net loss
(16,821
)
 
(261
)
 
—

 
(17,082
)
Net income attributable to noncontrolling
   interest
1,025

 
—

 
261

 
1,286

Net income (loss) attributable to Boyd Gaming
   Corporation
$
(15,796
)
 
$
(261
)
 
$
261

 
$
(15,796
)

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



 
Nine Months Ended September 30, 2013
 
 
 
 
 
 
 
Boyd Gaming
 
Boyd Gaming
 
 
 
 
 
Corporation
 
Corporation
 
LVE, LLC
 
Eliminations
 
(as consolidated)
(In thousands)
 
REVENUES
 
 
 
 
 
 
 
Other revenue
$
125,017

 
$
1,933

 
$
(1,933
)
 
$
125,017

 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
 
 
Selling, general and administrative
$
373,865

 
$
—

 
$
—

 
$
373,865

Preopening expenses
$
6,762

 
$
—

 
$
(1,933
)
 
$
4,829

 
 
 
 
 
 
 
 
Operating income
$
237,188

 
$
1,933

 
$
—

 
$
239,121

 
 
 
 
 
 
 
 
Other expense
 
 
 
 
 
 
 
Interest expense, net
$
264,577

 
$
2,376

 
$
—

 
$
266,953

 
 
 
 
 
 
 
 
Loss from continuing operations before
   income taxes
$
(54,788
)
 
$
(443
)
 
$
—

 
$
(55,231
)
Income taxes
3,478

 
—

 
—

 
3,478

Loss from continuing operations, net of tax
(51,310
)
 
(443
)
 
—

 
(51,753
)
Income from discontinued operations, net
   of tax
10,790

 
—

 
—

 
10,790

Net loss
(40,520
)
 
(443
)
 
—

 
(40,963
)
Net income attributable to noncontrolling
   interest
7,596

 
—

 
443

 
8,039

Net income (loss) attributable to Boyd Gaming
   Corporation
$
(32,924
)
 
$
(443
)
 
$
443

 
$
(32,924
)

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



 
Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
Boyd Gaming
 
Boyd Gaming
 
 
 
 
 
Corporation
 
Corporation
 
LVE, LLC
 
Eliminations
 
(as consolidated)
(In thousands)
 
REVENUES
 
 
 
 
 
 
 
Other revenue
$
110,416

 
$
8,172

 
$
(8,172
)
 
$
110,416

 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 
 
 
 
 
 
 
Selling, general and administrative
$
330,698

 
$
13

 
$
—

 
$
330,711

Maintenance and utilities
$
115,924

 
$
—

 
$
—

 
$
115,924

Preopening expenses
$
13,660

 
$
—

 
$
(8,172
)
 
$
5,488

 
 
 
 
 
 
 
 
Operating income
$
178,305

 
$
8,159

 
$
—

 
$
186,464

 
 
 
 
 
 
 
 
Other expense
 
 
 
 
 
 
 
Interest expense, net
$
193,708

 
$
9,023

 
$
—

 
$
202,731

 
 
 
 
 
 
 
 
Loss from continuing operations before
   income taxes
$
(14,719
)
 
$
(864
)
 
$
—

 
$
(15,583
)
Income taxes
6,427

 
—

 
—

 
6,427

Loss from continuing operations, net of tax
(8,292
)
 
(864
)
 
—

 
(9,156
)
Loss from discontinued operations, net of tax
(2,142
)
 
—

 
—

 
(2,142
)
Net loss
(10,434
)
 
(864
)
 
—

 
(11,298
)
Net income attributable to noncontrolling
   interest
1,467

 
—

 
864

 
2,331

Net income (loss) attributable to Boyd Gaming
   Corporation
$
(8,967
)
 
$
(864
)
 
$
864

 
$
(8,967
)

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.

NOTE 6.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:
 
 
 
 
 
September 30,
 
December 31,
(In thousands)
2013
 
2012
Land
$
336,078

 
$
341,174

Buildings and improvements
3,842,193

 
3,826,880

Furniture and equipment
1,319,385

 
1,305,216

Riverboats and barges
189,139

 
187,620

Construction in progress
74,427

 
27,397

Other
21,751

 
23,013

Total property and equipment
5,782,973

 
5,711,300

Less accumulated depreciation
2,257,427

 
2,123,986

Property and equipment, net
$
3,525,546

 
$
3,587,314


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




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 September 30, 2013 and 2012 was $56.9 million and $48.9 million, respectively. Depreciation expense for the nine months ended September 30, 2013 and 2012 was $173.6 million and $147.3 million, respectively.

NOTE 7.    INTANGIBLE ASSETS

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

 
$
(57,361
)
 
$
—

 
$
96,639

Non-competition agreement
0.2 years
 
3,200

 
(2,755
)
 
—

 
445

Favorable lease rates
34.7 years
 
45,370

 
(9,651
)
 
—

 
35,719

Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
223,943

 
(69,767
)
 
—

 
154,176

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks and other
Indefinite
 
192,405

 
—

 
(5,000
)
 
187,405

Gaming license rights
Indefinite
 
955,457

 
(33,958
)
 
(180,000
)
 
741,499

 
 
 
1,147,862

 
(33,958
)
 
(185,000
)
 
928,904

Balance, September 30, 2013
 
 
$
1,371,805

 
$
(103,725
)
 
$
(185,000
)
 
$
1,083,080



23
Table of Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2013 and December 31, 2012 and for