BYD 10Q 03 31 2015

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________
FORM 10-Q
 ____________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
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
 
x
  
Accelerated filer
 
o
 
 
 
 
 
 
 
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 April 30, 2015
 
 
Common stock, $0.01 par value
  
110,366,136
 





BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2015
TABLE OF CONTENTS
 
 
 
Page
No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I. Financial Information
Item 1.    Financial Statements (Unaudited)

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,
 
December 31,
(Unaudited)
2015
 
2014
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
130,797

 
$
145,341

Restricted cash
21,465

 
18,107

Accounts receivable, net
30,655

 
27,235

Inventories
14,192

 
15,161

Prepaid expenses and other current assets
33,561

 
32,944

Income taxes receivable
1,247

 
1,243

Deferred income taxes and current tax assets
117

 
1,919

Total current assets
232,034

 
241,950

Property and equipment, net
2,250,796

 
2,286,108

Investment in unconsolidated subsidiary
226,732

 
222,717

Debt financing costs, net
52,303

 
56,540

Other assets, net
52,033

 
52,050

Intangible assets, net
927,576

 
934,249

Goodwill, net
685,310

 
685,310

Total assets
$
4,426,784

 
$
4,478,924

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities
 
 
 
Current maturities of long-term debt
$
27,688

 
$
29,753

Accounts payable
56,471

 
85,089

Accrued liabilities
246,899

 
239,266

Deferred income taxes and other current tax payable
3,007

 
3,087

Total current liabilities
334,065

 
357,195

Long-term debt, net of current maturities
3,376,097

 
3,431,638

Deferred income taxes
148,387

 
142,263

Other long-term tax liabilities
5,649

 
28,651

Other liabilities
83,711

 
81,090

Commitments and contingencies (Note 8)
 
 
 
Stockholders' equity
 
 
 
Preferred stock, $0.01 par value, 5,000,000 shares authorized
—

 
—

Common stock, $0.01 par value, 200,000,000 shares authorized; 110,364,538 and 109,277,060 shares outstanding
1,104

 
1,093

Additional paid-in capital
927,515

 
922,112

Accumulated deficit
(450,012
)
 
(485,115
)
Accumulated other comprehensive income (loss)
218

 
(53
)
Total Boyd Gaming Corporation stockholders' equity
478,825

 
438,037

Noncontrolling interest
50

 
50

Total stockholders' equity
478,875

 
438,087

Total liabilities and stockholders' equity
$
4,426,784

 
$
4,478,924


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


3



BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended
(In thousands, except per share data)
March 31,
(Unaudited)
2015
 
2014
Revenues
 
 
 
Gaming
$
464,757

 
$
608,757

Food and beverage
76,296

 
106,643

Room
39,353

 
64,380

Other
29,685

 
38,960

Gross revenues
610,091

 
818,740

Less promotional allowances
59,513

 
110,391

Net revenues
550,578

 
708,349

Operating costs and expenses
 
 
 
Gaming
226,697

 
285,174

Food and beverage
41,567

 
57,269

Room
10,047

 
13,170

Other
19,646

 
27,792

Selling, general and administrative
81,689

 
124,679

Maintenance and utilities
25,319

 
43,264

Depreciation and amortization
51,942

 
66,179

Corporate expense
19,652

 
19,920

Preopening expenses
505

 
784

Impairments of assets
1,065

 
1,633

Asset transactions costs
450

 
155

Other operating items, net
116

 
(186
)
Total operating costs and expenses
478,695

 
639,833

Boyd's share of Borgata's operating income
11,675

 
—

Operating income
83,558

 
68,516

Other expense (income)
 
 
 
Interest income
(471
)
 
(476
)
Interest expense, net of amounts capitalized
56,935

 
75,503

Loss on early extinguishments of debt
508

 
154

Other, net
618

 
(288
)
Boyd's share of Borgata's non-operating items, net
7,661

 
—

Total other expense, net
65,251

 
74,893

Income (loss) before income taxes
18,307

 
(6,377
)
Income taxes benefit (provision)
16,796

 
(4,848
)
Net income (loss)
35,103

 
(11,225
)
Net loss attributable to noncontrolling interest
—

 
5,043

Net income (loss) attributable to Boyd Gaming Corporation
$
35,103

 
$
(6,182
)
 
 
 
 
Basic net income (loss) per common share
$
0.31

 
$
(0.06
)
Weighted average basic shares outstanding
111,446

 
109,753

 
 
 
 
Diluted net income (loss) per common share
$
0.31

 
$
(0.06
)
Weighted average diluted shares outstanding
112,358

 
109,753


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

4



BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 
Three Months Ended
(In thousands)
March 31,
(Unaudited)
2015
 
2014
Net income (loss)
$
35,103

 
$
(11,225
)
Other comprehensive income (loss), net of tax:
 
 
 
Fair value of adjustments to available-for-sale securities, net of tax
271

 
539

Comprehensive income (loss)
35,374

 
(10,686
)
Less: net loss attributable to noncontrolling interest
—

 
(5,043
)
Comprehensive income (loss) attributable to Boyd Gaming
   Corporation
$
35,374

 
$
(5,643
)

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

5



BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

 
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, 2015
109,277,060

 
$
1,093

 
$
922,112

 
$
(485,115
)
 
$
(53
)
 
$
50

 
$
438,087

Net income
—

 
—

 
—

 
35,103

 
—

 
—

 
35,103

Comprehensive income attributable to Boyd
—

 
—

 
—

 
—

 
271

 
—

 
271

Stock options exercised
610,274

 
6

 
4,413

 
—

 
—

 
—

 
4,419

Release of performance stock units, net of tax
477,204

 
5

 
(2,451
)
 
—

 
—

 
—

 
(2,446
)
Share-based compensation costs
—

 
—

 
3,441

 
—

 
—

 
—

 
3,441

Balances, March 31, 2015
110,364,538

 
$
1,104

 
$
927,515

 
$
(450,012
)
 
$
218

 
$
50

 
$
478,875

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, January 1, 2014
108,155,002

 
$
1,082

 
$
902,496

 
$
(432,074
)
 
$
(1,517
)
 
$
180,450

 
$
650,437

Net loss
—

 
—

 
—

 
(6,182
)
 
—

 
(5,043
)
 
(11,225
)
Comprehensive income attributable to Boyd
—

 
—

 
—

 
—

 
539

 
—

 
539

Stock options exercised
102,663

 
1

 
756

 
—

 
—

 
—

 
757

Release of restricted stock units, net of tax
39,503

 
—

 
(200
)
 
—

 
—

 
—

 
(200
)
Share-based compensation costs
—

 
—

 
6,481

 
—

 
—

 
—

 
6,481

Noncontrolling interests contribution
—

 
—

 
—

 
—

 
—

 
30

 
30

Balances, March 31, 2014
108,297,168

 
$
1,083

 
$
909,533

 
$
(438,256
)
 
$
(978
)
 
$
175,437

 
$
646,819


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


6
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Three Months Ended
(In thousands)
March 31,
(Unaudited)
2015
 
2014
Cash Flows from Operating Activities
 
 
 
Net income (loss)
$
35,103

 
$
(11,225
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
51,942

 
66,179

Amortization of debt financing costs
4,199

 
4,829

Amortization of discounts on debt
1,127

 
1,257

Loss on early extinguishments of debt
508

 
154

Share-based compensation expense
3,441

 
6,481

Deferred income taxes
5,394

 
4,143

Operating and non-operating income from Borgata
(4,014
)
 
—

Impairments of assets
1,065

 
1,633

Other operating activities
(1,559
)
 
(199
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash
(3,358
)
 
(10,267
)
Accounts receivable, net
1,440

 
3,830

Inventories
968

 
1,223

Prepaid expenses and other current assets
(615
)
 
(1,891
)
Current other tax asset
1,802

 
50

Income taxes receivable
(4
)
 
(33
)
Other assets, net
1,581

 
(1,504
)
Accounts payable and accrued liabilities
(19,725
)
 
(9,695
)
Other long-term tax liabilities
(23,002
)
 
605

Other liabilities
3,345

 
1,599

Net cash provided by operating activities
59,638

 
57,169

Cash Flows from Investing Activities
 
 
 
Capital expenditures
(19,269
)
 
(18,306
)
Other investing activities
2,316

 
1,112

Net cash used in investing activities
(16,953
)
 
(17,194
)
Cash Flows from Financing Activities
 
 
 
Borrowings under Boyd Gaming bank credit facility
203,700

 
188,500

Payments under Boyd Gaming bank credit facility
(245,675
)
 
(224,275
)
Borrowings under Peninsula bank credit facility
91,400

 
75,000

Payments under Peninsula bank credit facility
(108,625
)
 
(90,525
)
Borrowings under Borgata bank credit facility
—

 
116,200

Payments under Borgata bank credit facility
—

 
(119,400
)
Debt financing costs
—

 
(71
)
Payments on long-term debt
(2
)
 
(952
)
Stock options exercised
4,419

 
757

Restricted stock units released, net
—

 
(200
)
Performance stock units released, net
(2,446
)
 
—

Other financing activities
—

 
31

Net cash used in financing activities
(57,229
)
 
(54,935
)
Change in cash and cash equivalents
(14,544
)
 
(14,960
)
Cash and cash equivalents, beginning of period
145,341

 
177,838

Cash and cash equivalents, end of period
$
130,797

 
$
162,878

Supplemental Disclosure of Cash Flow Information
 
 
 
Cash paid for interest, net of amounts capitalized
$
52,239

 
$
80,541

Cash paid (received) for income taxes, net of refunds
(1,656
)
 
84

Supplemental Schedule of Noncash Investing and Financing Activities
 
 
 
Payables incurred for capital expenditures
$
7,333

 
$
12,478

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

7



BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________
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 1975. 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 property, Borgata Hotel Casino & Spa ("Borgata"), in which we hold a non-controlling 50% equity interest in the limited liability company. Headquartered in Las Vegas, 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 of America ("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 wholly owned subsidiaries. Investments in unconsolidated affiliates, which 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.

On September 30, 2014, our Atlantic City partner reacquired its ownership interest in and its substantive participation rights in the management of Borgata. As a result, we deconsolidated Borgata as of the close of business on September 30, 2014, eliminating the assets, liabilities and non-controlling interests from our balance sheet. We are accounting for our investment in Borgata applying the equity method for periods subsequent to the deconsolidation. (See Note 3, Deconsolidation of Borgata.)

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, 2014, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 27, 2015.

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 earned in our slot bonus program such as cash and the estimated retail value of goods and services (such as complimentary rooms and food and beverages). 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 for complimentary slot play, food and beverage, and to a lesser extent for other goods or services, depending upon the property.

8
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________




The amounts included in promotional allowances are as follows:
 
Three Months Ended
 
March 31,
(In thousands)
2015
 
2014
Rooms
$
18,744

 
$
35,424

Food and beverage
37,714

 
49,872

Other
3,055

 
25,095

Total promotional allowances
$
59,513

 
$
110,391


The estimated costs of providing such promotional allowances are as follows:
 
Three Months Ended
 
March 31,
(In thousands)
2015
 
2014
Rooms
$
8,782

 
$
14,134

Food and beverage
33,552

 
43,561

Other
2,787

 
5,014

Total estimated cost of promotional allowances
$
45,121

 
$
62,709


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 $83.4 million and $100.4 million for the three months ended March 31, 2015 and 2014, respectively.

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 continually assessed 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 strategies.

In accordance with GAAP, we have computed our provision for income taxes by applying the actual effective tax rate, under the discrete method, to quarter-to-date income. The discrete method was used to calculate the income tax expense or benefit as the annual effective tax rate was not considered a reliable estimate of year-to-date income tax expense or benefit. We believe this method provides the most reliable estimate of year-to-date income tax expense.

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 when determining our valuation allowance. Our current rate is also impacted by the resolution of federal and state income tax examinations and changes in accruals established for potentially unfavorable outcomes in connection with these examinations.

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

9
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



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 is 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. Accrued interest and penalties are included in other long-term tax liabilities on the balance sheet.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
Three Months Ended
 
March 31,
(In thousands)
2015
Unrecognized tax benefit as of January 1, 2015
$
30,198

Additions:
 
Tax positions related to current year
—

Tax positions related to prior years
—

Reductions:
 
Tax positions related to the deconsolidation of Borgata
—

Lapse of applicable statute of limitations
—

Tax positions related to prior years
(25,671
)
Settlement with taxing authorities
—

Unrecognized tax benefit as of March 31, 2015
$
4,527


The entire $4.5 million balance of unrecognized tax benefits at March 31, 2015, if recognized, would impact the effective tax rate. We recognize accrued interest related to unrecognized tax benefits in our income tax provision. During the quarter ended March 31, 2015 we recognized an interest related benefit of $5.8 million in our tax provision, as further described below. We have accrued interest and penalties of $1.2 million as of March 31, 2015, in our consolidated balance sheets.

During the quarter, we received Joint Committee approval on our IRS appeals agreement, effectively settling our 2005 through 2009 examination. As a result of the settlement, we received an approximate $2.4 million refund and reduced our unrecognized tax benefits by $25.7 million, of which $17.6 million impacted our effective tax rate. Additionally, as a result of the settlement, we reduced the interest accrued on our unrecognized tax benefits by $5.8 million and recorded a benefit to our tax provision.

We are in various stages of the examination 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 that over the next twelve-month period our unrecognized tax benefits as of March 31, 2015, will decrease in an amount up to $2.0 million, all of which would impact our effective tax rate. Such reduction is due to the resolution of certain issues, primarily related to the realization of tax attributes, in connection with our state examinations.

10
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________




Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net income (loss) applicable to Boyd Gaming Corporation 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.

Due to the net loss for the three months ended March 31, 2014, the effect of all potential common share equivalents was anti-dilutive, and therefore all such shares were excluded from the computation of diluted weighted average shares outstanding for this period. The amount of potential common share equivalents were as follows:
 
Three Months Ended
 
March 31,
(In thousands)
2014
Potential dilutive effect
942.1


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. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements
Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs ("Update 2015-03")
In April 2015, the Financial Accounting Standards Board ("FASB") issued Update 2015-03, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, for interim periods within those fiscal years, and early adoption is permitted. The Company determined that the impact of the new standard on its financial reporting will not be material.

Accounting Standards Update 2015-02, Amendments to the Consolidation Analysis ("Update 2015-02")
Update 2015-02, issued by the FASB in February 2015, amends the consolidation requirements in ASC 810 and changes the consolidation analysis required under GAAP. The standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, with early adoption permitted. The Company is evaluating the potential impacts of the new standard on its consolidation methodology.

Accounting Standards Update 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items ("Update 2015-01")
In January 2015, the FASB issued Update 2015-01 eliminating from GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in nature and (2) infrequently occurring. Under Update 2015-01, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The standard is effective for annual periods beginning after December 15, 2015 with early adoption permitted. The Company determined that the impact of the new standard on its financial reporting will not be material.

A variety of proposed or otherwise potential accounting standards are currently being studied 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.

NOTE 3.    DECONSOLIDATION OF BORGATA
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 ("Borgata"). We are the managing member of Holding Company, and we are responsible for the day-to-day operations of Borgata.

11
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________




In February 2010, we entered into an agreement with MGM to amend the operating agreement to, among other things, facilitate the transfer of MGM's interest in Holding Company ("MGM Interest") to a divestiture trust (the "Divestiture Trust") established for the purpose of selling the MGM Interest to a third party. The proposed sale of the MGM Interest through the Divestiture Trust was part of a then-proposed settlement agreement between MGM and the New Jersey Department of Gaming Enforcement (the "NJDGE").

On March 17, 2010, MGM announced that its settlement agreement with the NJDGE had been approved by the New Jersey Casino Control Commission ("NJCCC"). Upon the transfer of MGM's ownership interest into the Divestiture Trust on March 24, 2010, we determined that we had control, as defined in the relevant accounting literature, of Holding Company and commenced consolidating the business as of that date.  Subsequent to a Joint Petition of MGM, the Company and Holding Company, on February 13, 2013, the NJCCC approved amendments to the settlement agreement which permitted MGM to file an application for a statement of compliance, which, if approved, would permit MGM to reacquire its interest in Holding Company.

The NJCCC approved MGM’s application for licensure on September 10, 2014. On September 30, 2014, the Divestiture Trust was dissolved and MGM reacquired its Borgata interest and its substantive participation rights in the management of Holding Company. As a result, we deconsolidated Borgata as of the close of business on September 30, 2014, eliminating the assets, liabilities and non-controlling interests recorded for Holding Company from our balance sheet, and are accounting for our investment in Borgata applying the equity method for periods subsequent to the deconsolidation. As a result of the deconsolidation, we adjusted the book value of our investment to equal fair value and recognized a loss due to deconsolidation of $12.1 million in our third quarter 2014 results.

NOTE 4.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
 
 
 
 
 
March 31,
 
December 31,
(In thousands)
2015
 
2014
Land
$
229,684

 
$
229,684

Buildings and improvements
2,528,526

 
2,534,618

Furniture and equipment
1,109,614

 
1,079,878

Riverboats and barges
238,723

 
239,669

Construction in progress
24,034

 
35,675

Other
8,372

 
11,502

Total property and equipment
4,138,953

 
4,131,026

Less accumulated depreciation
1,888,157

 
1,844,918

Property and equipment, net
$
2,250,796

 
$
2,286,108


Other property and equipment presented in the table above relates to the estimated net realizable value of construction materials inventory that was not disposed of with the sale of the Echelon project. Such assets are not in service and are not currently being depreciated.

Depreciation expense for the three months ended March 31, 2015 and 2014 was $45.1 million and $57.7 million, respectively.


12
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



NOTE 5.    INTANGIBLE ASSETS
Intangible assets consist of the following:
 
March 31, 2015
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles:
 
 
 
 
 
 
 
 
 
Customer relationships
2.7 years
 
$
139,600

 
$
(94,056
)
 
$
—

 
$
45,544

Favorable lease rates
33.2 years
 
45,370

 
(11,215
)
 
—

 
34,155

Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
206,343

 
(105,271
)
 
—

 
101,072

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks and other
Indefinite
 
129,501

 
—

 
(3,500
)
 
126,001

Gaming license rights
Indefinite
 
873,335

 
(33,960
)
 
(138,872
)
 
700,503

 
 
 
1,002,836

 
(33,960
)
 
(142,372
)
 
826,504

Balance, March 31, 2015
 
 
$
1,209,179

 
$
(139,231
)
 
$
(142,372
)
 
$
927,576


 
December 31, 2014
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles:
 
 
 
 
 
 
 
 
 
Customer relationships
2.9 years
 
$
139,600

 
$
(87,642
)
 
$
—

 
$
51,958

Favorable lease rates
33.4 years
 
45,370

 
(10,956
)
 
—

 
34,414

     Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
206,343

 
(98,598
)
 
—

 
107,745

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks
Indefinite
 
129,501

 
—

 
(3,500
)
 
126,001

Gaming license rights
Indefinite
 
873,335

 
(33,960
)
 
(138,872
)
 
700,503

 
 
 
1,002,836

 
(33,960
)
 
(142,372
)
 
826,504

Balance, December 31, 2014
 
 
$
1,209,179

 
$
(132,558
)
 
$
(142,372
)
 
$
934,249


NOTE 6.    ACCRUED LIABILITIES
Accrued liabilities consist of the following:
 
March 31,
 
December 31,
(In thousands)
2015
 
2014
Payroll and related expenses
$
66,577

 
$
69,672

Interest
32,724

 
33,985

Gaming liabilities
32,460

 
35,698

Player loyalty program liabilities
18,857

 
19,058

Accrued liabilities
96,281

 
80,853

Total accrued liabilities
$
246,899

 
$
239,266



13
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



NOTE 7.    LONG-TERM DEBT
Long-term debt, net of current maturities consists of the following:
 
 
 
March 31, 2015
 
Interest
 
 
 
 
 
Unamortized
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Origination
 
Long-Term
(In thousands)
March 31, 2015
 
Principal
 
Discount
 
Fees
 
Debt, Net
Boyd Gaming Corporation Debt:
 
 
 
 
 
 
 
 
 
Bank credit facility
3.68
%
 
$
1,345,450

 
$
(3,429
)
 
$
—

 
$
1,342,021

9.125% senior notes due 2018
9.13
%
 
500,000

 
—

 
(4,536
)
 
495,464

9.00% senior notes due 2020
9.00
%
 
350,000

 
—

 
—

 
350,000

HoldCo Note
8.00
%
 
151,740

 
(10,616
)
 
—

 
141,124

 
 
 
2,347,190

 
(14,045
)
 
(4,536
)
 
2,328,609

 
 
 
 
 
 
 
 
 
 
Peninsula Segment Debt:
 
 
 
 
 
 
 
 
 
Bank credit facility
4.25
%
 
725,175

 
—

 
—

 
725,175

8.375% senior notes due 2018
8.38
%
 
350,000

 
—

 
—

 
350,000

Other
various

 
1

 
—

 
—

 
1

 
 
 
1,075,176

 
—

 
—

 
1,075,176

Total long-term debt
 
 
3,422,366

 
(14,045
)
 
(4,536
)
 
3,403,785

Less current maturities
 
 
27,688

 
—

 
—

 
27,688

Long-term debt, net
 
 
$
3,394,678

 
$
(14,045
)
 
$
(4,536
)
 
$
3,376,097


 
 
 
December 31, 2014
 
Interest
 
 
 
 
 
Unamortized
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Origination
 
Long-Term
(In thousands)
Dec. 31, 2014
 
Principal
 
Discount
 
Fees
 
Debt, Net
Boyd Gaming Corporation Debt:
 
 
 
 
 
 
 
 
 
Bank credit facility
3.66
%
 
$
1,387,425

 
$
(3,589
)
 
$
—

 
$
1,383,836

9.125% senior notes due 2018
9.13
%
 
500,000

 
—

 
(4,845
)
 
495,155

9.00% senior notes due 2020
9.00
%
 
350,000

 
—

 
—

 
350,000

HoldCo Note
8.00
%
 
151,740

 
(11,743
)
 
—

 
139,997

 
 
 
2,389,165

 
(15,332
)
 
(4,845
)
 
2,368,988

 
 
 
 
 
 
 
 
 
 
Peninsula Segment Debt:
 
 
 
 
 
 
 
 
 
Bank credit facility
4.25
%
 
742,400

 
—

 
—

 
742,400

8.375% senior notes due 2018
8.38
%
 
350,000

 
—

 
—

 
350,000

Other
various

 
3

 
—

 
—

 
3

 
 
 
1,092,403

 
—

 
—

 
1,092,403

Total long-term debt
 
 
3,481,568

 
(15,332
)
 
(4,845
)
 
3,461,391

Less current maturities
 
 
29,753

 
—

 
—

 
29,753

Long-term debt, net
 
 
$
3,451,815

 
$
(15,332
)
 
$
(4,845
)
 
$
3,431,638



14
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



Boyd Gaming Debt
Boyd Bank Credit Facility
The outstanding principal amounts under the Third Amended and Restated Credit Agreement (the "Boyd Gaming Credit Facility") are comprised of the following:
(In thousands)
March 31, 2015
 
December 31, 2014
Revolving Credit Facility
$
280,000

 
$
300,000

Term A Loan
218,250

 
221,375

Term B Loan
838,500

 
840,750

Swing Loan
8,700

 
25,300

Total outstanding principal amounts under the Boyd Gaming Credit Facility
$
1,345,450

 
$
1,387,425


At March 31, 2015, approximately $1.3 billion was outstanding under the Boyd Gaming Credit Facility and $6.8 million was allocated to support various letters of credit, leaving remaining contractual availability of $304.5 million.

Peninsula Segment Debt
Bank Credit Facility
The outstanding principal amounts under the Peninsula senior secured credit facility (the "Peninsula Credit Facility") are comprised of the following:
(In thousands)
March 31, 2015
 
December 31, 2014
Term Loan
$
712,875

 
$
734,000

Revolving Facility
5,000

 
2,000

Swing Loan
7,300

 
6,400

Total outstanding principal amounts under the Peninsula Credit Facility
$
725,175

 
$
742,400


At March 31, 2015, approximately $725.2 million was outstanding under the Peninsula Credit Facility and $5.6 million was allocated to support various letters of credit, leaving remaining contractual availability of $32.1 million.

Covenant Compliance
As of March 31, 2015, we believe that Boyd Gaming and Peninsula were in compliance with the financial and other covenants of their respective debt instruments.

NOTE 8.    COMMITMENTS AND CONTINGENCIES
Commitments
There have been no material changes to our commitments described under Note 10, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 27, 2015.

Contingencies
Legal Matters
We are parties to various legal proceedings arising in the ordinary course of business. In our opinion, all pending legal matters are either adequately covered by insurance, or, if not insured, will not have a material adverse impact on our financial position, results of operations or cash flows.

NOTE 9.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
Share-Based Compensation
We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.


15
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated statements of operations.
 
Three Months Ended
 
March 31,
(In thousands)
2015
 
2014
Gaming
$
68

 
$
115

Food and beverage
13

 
22

Room
6

 
10

Selling, general and administrative
344

 
584

Corporate expense
3,010

 
5,750

Total share-based compensation expense
$
3,441

 
$
6,481


Performance Shares Vesting
The Performance Share Unit ("PSU") grant awarded in December 2011 vested during first quarter 2015. A total of 654,478 common shares, representing approximately 1.67 shares per PSU, were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, EBITDA growth and customer service scores for the three-year performance period of the grant. The actual achievement level under these award metrics equaled the estimated performance as of year-end 2014; therefore, the vesting of the PSUs did not impact compensation costs in our first quarter 2015 condensed consolidated statement of operations.

As provided under the provisions of our Stock Incentive Plan, certain of the participants elected to surrender a portion of the shares to be received to pay the withholding and other payroll taxes payable on the compensation resulting from the vesting of the PSUs. A total of 177,274 shares were surrendered by the participants for this purpose, resulting in a net issuance of 477,204 shares due to the vesting of the 2011 grant.

NOTE 10.    NONCONTROLLING INTEREST
Noncontrolling interest primarily represents, until the deconsolidation of Borgata on September 30, 2014, the 50% interest in Holding Company held by the Divestiture Trust for the economic benefit of MGM, which was initially recorded at fair value at the March 24, 2010 date of the effective change in control.

There were no changes in the noncontrolling interest during the three months ended March 31, 2015. Changes in the noncontrolling interest for the three months ended March 31, 2014, are as follows:
 
Three Months Ended March 31, 2014
(In thousands)
Holding Company
 
Other
 
Total
Balance, January 1, 2014
$
180,430

 
$
20

 
$
180,450

     Attributable net loss
(5,043
)
 
—

 
(5,043
)
Capital contributions
—

 
30

 
30

Balance, March 31, 2014
$
175,387

 
$
50

 
$
175,437


NOTE 11.     FAIR VALUE MEASUREMENTS
The authoritative accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These inputs create the following fair value hierarchy:

Level 1: Quoted prices for identical instruments in active markets.


16
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Balances Measured at Fair Value
The following tables show the fair values of certain of our financial instruments.
 
March 31, 2015
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
130,797

 
$
130,797

 
$
—

 
$
—

Restricted cash
21,465

 
21,465

 
—

 
—

Investment available for sale
18,658

 
—

 
—

 
18,658

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent payments
3,721

 
—

 
—

 
3,721


 
December 31, 2014
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
145,341

 
$
145,341

 
$
—

 
$
—

Restricted cash
18,107

 
18,107

 
—

 
—

Investment available for sale
18,357

 
—

 
—

 
18,357

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Merger earnout
$
75

 
$
—

 
$
—

 
$
75

Contingent payments
3,792

 
—

 
—

 
3,792


Cash and Cash Equivalents and Restricted Cash
The fair value of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks at March 31, 2015 and December 31, 2014.

Investment Available for Sale
We have an investment in a single municipal bond issuance of $21.7 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities, and degrees of risk and a discounted cash flows analysis as of March 31, 2015 and December 31, 2014. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the condensed consolidated balance sheets. At both March 31, 2015 and December 31, 2014, $0.4 million of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current

17
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



assets, and at March 31, 2015 and December 31, 2014, $18.3 million and $18.0 million, respectively, is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $3.3 million as of both March 31, 2015 and December 31, 2014, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.

Merger Earnout
Under the terms of the Merger Agreement, Boyd Acquisition II, LLC, an indirect wholly owned subsidiary of Boyd Gaming, is obligated to make an additional payment to Peninsula Gaming Partners, LLC, in 2016 if Kansas Star Casino's ("KSC") EBITDA, as defined in the Merger Agreement, for 2015 exceeds $105.0 million. The additional payment would be equal to 7.5 times the amount by which KSC's 2015 EBITDA exceeds $105.0 million. The actual payout will be determined based on actual EBITDA of KSC for calendar year 2015, and payments are not limited by a maximum value. If the actual 2015 EBITDA of KSC is less than the target, the Company is not required to make any additional consideration payment. The value of this contingency was calculated using a probability-based model. This model requires estimates of forecasted 2015 EBITDA and of probability of exceeding the threshold at which a payment would be made. We formed our valuation assumptions using historical experience in the gaming industry and observable market conditions. The assumptions will be reviewed periodically and any change in the value of the obligation will be included in the consolidated statements of operations. At December 31, 2014, there were outstanding liabilities of $0.1 million, related to the merger earnout which are included in other liabilities on the condensed consolidated balance sheets. There was no outstanding liability at March 31, 2015.

Contingent Payments
In connection with the development of the Kansas Star Casino, KSC agreed to pay a former casino project developer and option holder 1% of KSC's EBITDA each month for a period of ten years commencing December 20, 2011. The liability was initially recorded upon consummation of the Merger at the estimated fair value of the contingent payments using a discounted cash flows approach. At both March 31, 2015 and December 31, 2014, there was a current liability of $0.9 million related to this agreement, which was recorded in accrued liabilities on the respective condensed consolidated balance sheets, and long-term obligations of $2.9 million, which were included in other liabilities on the respective condensed consolidated balance sheets.

The following table summarizes the changes in fair value of the Company's Level 3 assets and liabilities:
 
Three Months Ended March 31, 2015
 
Assets
 
Liabilities
(In thousands)
Investment
Available for
Sale
 
Merger
Earnout
 
Contingent
Payments
Balance at January 1, 2015
$
18,357

 
$
(75
)
 
$
(3,792
)
Deposits
—

 
—

 
—

Total gains (losses) (realized or unrealized):
 
 
 
 
 
Included in earnings
31

 
75

 
(159
)
Included in other comprehensive income (loss)
270

 
—

 
—

Transfers in or out of Level 3
—

 
—

 
—

Purchases, sales, issuances and settlements:
 
 
 
 
 
Settlements
—

 
—

 
230

Balance at March 31, 2015
$
18,658

 
$
—

 
$
(3,721
)
 
 
 
 
 
 
Gains (losses) included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date:
 
 
 
 
 
Included in interest income
$
31

 
$
—

 
$
—

Included in interest expense
—

 
—

 
(159
)

18
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



 
Three Months Ended March 31, 2014
 
Assets
 
Liabilities
(In thousands)
Investment
Available for
Sale
 
CRDA
Deposits
 
Merger
Earnout
 
Contingent
Payments
Balance at January 1, 2014
$
17,128

 
$
4,613

 
$
(1,125
)
 
$
(4,343
)
Deposits
—

 
1,747

 
—

 
—

Total gains (losses) (realized or unrealized):
 
 
 
 
 
 
 
Included in earnings
30

 
(554
)
 
375

 
(185
)
Included in other comprehensive income (loss)
909

 
—

 
—

 
—

Transfers in or out of Level 3
—

 
—

 
—

 
—

Purchases, sales, issuances and settlements:
 
 
 
 
 
 
 
Settlements
—

 
(259
)
 
—

 
198

Balance at March 31, 2014
$
18,067

 
$
5,547

 
$
(750
)
 
$
(4,330
)
 
 
 
 
 
 
 
 
Gains (losses) included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date:
 
 
 
 
 
 
 
Included in interest income
$
30

 
$
—

 
$
—

 
$
—

Included in interest expense
—

 
—

 
—

 
(185
)

The table below summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities:
 
Valuation
Technique
 
Unobservable
Input
 
Rate
Investment available for sale
Discounted cash flow
 
Discount rate
 
9.9
%
Contingent payments
Discounted cash flow
 
Discount rate
 
18.5
%

Balances Disclosed at Fair Value
The following tables provide the fair value measurement information about our obligation under minimum assessment agreements and other financial instruments:
 
March 31, 2015
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
36,292

 
$
28,323

 
$
29,110

 
Level 3
Other financial instruments
300

 
273

 
273

 
Level 3

 
December 31, 2014
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
36,749

 
$
28,612

 
$
29,529

 
Level 3
Other financial instruments
300

 
268

 
268

 
Level 3

19
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________




The following tables provide the fair value measurement information about our long-term debt:
 
March 31, 2015
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Boyd Debt:
 
 
 
 
 
 
 
Boyd Gaming Debt:
 
 
 
 
 
 
 
Bank credit facility
$
1,345,450

 
$
1,342,021

 
$
1,344,236

 
Level 2
9.125% Senior Notes due 2018
500,000

 
495,464

 
525,000

 
Level 1
9.00% Senior Notes due 2020
350,000

 
350,000

 
378,875

 
Level 1
HoldCo Note
151,740

 
141,124

 
144,153

 
Level 3
 
2,347,190

 
2,328,609

 
2,392,264

 
 
 
 
 
 
 
 
 
 
Peninsula Segment Debt:
 
 
 
 
 
 
 
Bank credit facility
725,175

 
725,175

 
726,529

 
Level 2
8.375% Senior Notes due 2018
350,000

 
350,000

 
369,250

 
Level 2
Other
1

 
1

 
1

 
Level 3
 
1,075,176

 
1,075,176

 
1,095,780

 
 
Total debt
$
3,422,366

 
$
3,403,785

 
$
3,488,044

 
 
 
 
 
 
 
 
 
 

 
December 31, 2014
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Boyd Gaming Corporation Debt:
 
 
 
 
 
 
 
Bank credit facility
$
1,387,425

 
$
1,383,836

 
$
1,395,595

 
Level 2
9.125% senior notes due 2018
500,000

 
495,155

 
517,500

 
Level 1
9.00% senior notes due 2020
350,000

 
350,000

 
359,625

 
Level 1
HoldCo Note
151,740

 
139,997

 
144,153

 
Level 3
 
2,389,165

 
2,368,988

 
2,416,873

 
 
 
 
 
 
 
 
 
 
Peninsula Segment Debt:
 
 
 
 
 
 
 
Bank credit facility
742,400

 
742,400

 
754,364

 
Level 2
8.375% senior notes due 2018
350,000

 
350,000

 
363,125

 
Level 2
Other
3

 
3

 
3

 
Level 3
 
1,092,403

 
1,092,403

 
1,117,492

 

Total debt
$
3,481,568

 
$
3,461,391

 
$
3,534,365

 


The estimated fair value of the Boyd Gaming Credit Facility is based on a relative value analysis performed on or about March 31, 2015 and December 31, 2014. The estimated fair value of the Peninsula Credit Facility is based on a relative value analysis performed on or about March 31, 2015 and December 31, 2014. The estimated fair values of our senior notes and Peninsula's senior notes are based on quoted market prices as of March 31, 2015 and December 31, 2014. Debt included in the "Other" category is fixed-rate debt that is not traded and does not have an observable market input; therefore, we have estimated its fair value based on a discounted cash flow approach, after giving consideration to the changes in market rates of interest, creditworthiness of both parties, and credit spreads.

There were no transfers between Level 1, Level 2 and Level 3 measurements during the three months ended March 31, 2015 or 2014.


20
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



NOTE 12.    SEGMENT INFORMATION
We have aggregated certain of our properties in order to present five Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest and South; (iv) Peninsula; and (v) Borgata. The table below lists the classification of each of our properties.
Las Vegas Locals
 
Gold Coast Hotel and Casino
Las Vegas, Nevada
The Orleans Hotel and Casino
Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall
Las Vegas, Nevada
Suncoast Hotel and Casino
Las Vegas, Nevada
Eldorado Casino
Henderson, Nevada
Jokers Wild Casino
Henderson, Nevada
Downtown Las Vegas
 
California Hotel and Casino
Las Vegas, Nevada
Fremont Hotel and Casino
Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel
Las Vegas, Nevada
Midwest and South        
 
Sam's Town Hotel and Gambling Hall
Tunica, Mississippi
IP Casino Resort Spa
Biloxi, Mississippi
Par-A-Dice Hotel Casino
East Peoria, Illinois
Blue Chip Casino, Hotel & Spa
Michigan City, Indiana
Treasure Chest Casino
Kenner, Louisiana
Delta Downs Racetrack Casino & Hotel
Vinton, Louisiana
Sam's Town Hotel and Casino
Shreveport, Louisiana
Peninsula
 
Diamond Jo Dubuque
Dubuque, Iowa
Diamond Jo Worth
Northwood, Iowa
Evangeline Downs Racetrack and Casino
Opelousas, Louisiana
Amelia Belle Casino
Amelia, Louisiana
Kansas Star Casino
Mulvane, Kansas
Borgata
 
Borgata Hotel Casino & Spa
Atlantic City, New Jersey

Results of Operations - Total Reportable Segment Net Revenues and Adjusted EBITDA
We evaluate each of our wholly owned property's profitability based upon Property EBITDA, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, preopening expenses, other operating charges, net, share-based compensation expense, deferred rent, change in value of derivative instruments, and gain/loss on early retirements of debt, as applicable. Total Reportable Segment Adjusted EBITDA is the aggregate sum of the Property EBITDA for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest and South, and Peninsula segments, and also includes Borgata's operating income before net amortization, preopening and other items. Results for Downtown Las Vegas include the results of our Hawaii-based travel agency and captive insurance company. EBITDA is a commonly used measure of performance in our industry that we believe, when considered with measures calculated in accordance with GAAP, provides our investors a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Management has historically adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide the most accurate measure of our core operating results and as a means to evaluate period-to-period results.

We reclassify the reporting of corporate expense on the accompanying table in order to exclude it from our subtotal for Total Reportable Segment Adjusted EBITDA and include it as part of total other operating costs and expenses. Furthermore, corporate

21
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



expense excludes its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations.

The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Total Reportable Segment Adjusted EBITDA to operating income, as reported in our accompanying condensed consolidated statements of operations:
 
Three Months Ended
 
March 31,
(In thousands)
2015
 
2014
Net Revenues
 
 
 
Las Vegas Locals
$
150,302

 
$
151,443

Downtown Las Vegas
56,603

 
55,733

Midwest and South
217,764

 
211,636

Peninsula
125,909

 
122,273

Borgata (1)
—

 
167,264

Total Reportable Segment Net Revenues
$
550,578

 
$
708,349

 
 
 
 
Reportable Segment Adjusted EBITDA
 
 
 
Las Vegas Locals
$
38,877

 
$
40,007

Downtown Las Vegas
10,677

 
9,327

Midwest and South
50,984

 
44,098

Peninsula
46,363

 
44,761

Borgata (1)
18,913

 
20,446

Total Reportable Segment Adjusted EBITDA (2)
165,814

 
158,639

 
 
 
 
Other operating costs and expenses
 
 
 
Corporate expense
16,642

 
14,171

Deferred rent
857

 
906

Depreciation and amortization
51,942

 
66,179

Preopening expense
505

 
784

Share-based compensation expense
3,441

 
6,481

Impairments of assets
1,065

 
1,633

Asset transaction costs
450

 
155

Other operating charges and credits, net
116

 
(186
)
Our share of Borgata's other operating costs and expenses
7,238

 
—

Total other operating costs and expenses
82,256

 
90,123

Operating income
$
83,558

 
$
68,516


(1) Due to the deconsolidation of Borgata on September 30, 2014, our condensed consolidated statement of operations for the three months ended March 31, 2015 reflects our accounting for our 50% ownership interest in Borgata by applying the equity method. For the three months ended March 31, 2014, Borgata's financial results are reflected on a full consolidation basis.
(2)
Total Reportable Segment Adjusted EBITDA excludes corporate expense.

22
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



Total Reportable Segment Assets
The Company's assets by Reportable Segment consisted of the following amounts:
 
March 31,
 
December 31,
(In thousands)
2015
 
2014
Assets
 
 
 
Las Vegas Locals
$
1,153,323

 
$
1,164,115

Downtown Las Vegas
129,986

 
128,682

Midwest and South
1,279,751

 
1,302,002

Peninsula
1,446,827

 
1,459,529

Total Reportable Segment Assets
4,009,887

 
4,054,328

Corporate
416,897

 
424,596

Total Assets
$
4,426,784

 
$
4,478,924


NOTE 13.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of our 9.125% Senior Notes due December 2018 and 9.00% Senior Notes due July 2020 is presented below. The notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The non-guarantors primarily represent those entities comprising our Peninsula segment, special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly owned subsidiaries.




23
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014
______________________________________________________________________________________________________



Condensed Consolidating Balance Sheets

 
March 31, 2015
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Assets