Edgar Filing: BOYD GAMING CORP

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Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company

10-Q

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, 2016



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-12882

___________________________________________________

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________________________



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

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

(Address of principal executive offices) (Zip Code)

(702) 792-7200

(Registrant's telephone number, including area code)

____________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

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

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

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



	Class		Outstanding as of May 2, 2016
	Common stock, $0.01 par value		112,084,786

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED MARCH 31, 2016

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	3

	Condensed Consolidated Statements of Income for the three months ended March 31, 2016 and 2015	4

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015	5

	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2016 and 2015	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45

Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 6.	Exhibits	47

Signature Page		48

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)	2016			2015
ASSETS
Current assets
Cash and cash equivalents	$	616,201		$	158,821
Restricted cash	22,375			19,030
Accounts receivable, net	24,056			25,289
Inventories	15,137			15,462
Prepaid expenses and other current assets	34,359			37,250
Income taxes receivable	556			1,380
Total current assets	712,684			257,232
Property and equipment, net	2,210,482			2,225,342
Investment in unconsolidated subsidiary	253,598			244,621
Other assets, net	48,947			48,341
Intangible assets, net	886,062			890,054
Goodwill, net	685,310			685,310
Total assets	$	4,797,083		$	4,350,900
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	27,688		$	29,750
Accounts payable	67,177			75,803
Accrued liabilities	243,117			249,518
Total current liabilities	337,982			355,071
Long-term debt, net of current maturities and debt issuance costs	3,657,911			3,239,799
Deferred income taxes	168,708			162,189
Other long-term tax liabilities	3,149			3,085
Other liabilities	85,734			82,745
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; 111,990,303 and 111,614,420 shares outstanding	1,120			1,117
Additional paid-in capital	946,914			945,041
Accumulated deficit	(404,691		)	(437,881		)
Accumulated other comprehensive income (loss)	206			(316		)
Total Boyd Gaming Corporation stockholders' equity	543,549			507,961
Noncontrolling interest	50			50
Total stockholders' equity	543,599			508,011
Total liabilities and stockholders' equity	$	4,797,083		$	4,350,900

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



	Three Months Ended
(In thousands, except per share data)	March 31,
(Unaudited)	2016			2015
Revenues
Gaming	$	462,551		$	464,757
Food and beverage	76,800			76,296
Room	41,875			39,353
Other	31,466			29,685
Gross revenues	612,692			610,091
Less promotional allowances	60,314			59,513
Net revenues	552,378			550,578
Operating costs and expenses
Gaming	223,525			226,697
Food and beverage	41,803			41,567
Room	10,499			10,047
Other	19,332			19,646
Selling, general and administrative	81,851			81,689
Maintenance and utilities	23,848			25,319
Depreciation and amortization	47,653			51,942
Corporate expense	17,907			19,652
Project development, preopening and writedowns	1,841			955
Impairments of assets	1,440			1,065
Other operating items, net	429			116
Total operating costs and expenses	470,128			478,695
Boyd's share of Borgata's operating income	18,836			11,675
Operating income	101,086			83,558
Other expense (income)
Interest income	(497		)	(471		)
Interest expense, net of amounts capitalized	53,065			56,935
Loss on early extinguishments of debt	427			508
Other, net	77			618
Boyd's share of Borgata's non-operating items, net	7,206			7,661
Total other expense, net	60,278			65,251
Income before income taxes	40,808			18,307
Income taxes benefit (provision)	(7,618		)	16,796
Net income	$	33,190		$	35,103

Basic net income per common share	$	0.29		$	0.31
Weighted average basic shares outstanding	114,109			111,446

Diluted net income per common share	$	0.29		$	0.31
Weighted average diluted shares outstanding	114,868			112,358

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended
(In thousands)	March 31,
(Unaudited)	2016		2015
Net income	$	33,190	$	35,103
Other comprehensive income, net of tax:
Fair value of adjustments to available-for-sale securities, net of tax	522		271
Comprehensive income attributable to Boyd Gaming Corporation	$	33,712	$	35,374

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

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, 2016	111,614,420	$	1,117	$	945,041		$	(437,881	)	$	(316	)	$	50	$	508,011
Net income	—	—		—			33,190			—			—		33,190
Comprehensive income attributable to Boyd	—	—		—			—			522			—		522
Stock options exercised	53,013	—		321			—			—			—		321
Release of restricted stock units, net of tax	163,843	2		(842		)	—			—			—		(840		)
Release of performance stock units, net of tax	159,027	1		(869		)	—			—			—		(868		)
Share-based compensation costs	—	—		3,263			—			—			—		3,263
Other	—	—		—			—			—			—		—
Balances, March 31, 2016	111,990,303	$	1,120	$	946,914		$	(404,691	)	$	206		$	50	$	543,599

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

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Three Months Ended
(In thousands)	March 31,
(Unaudited)	2016			2015
Cash Flows from Operating Activities
Net income	$	33,190		$	35,103
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	47,653			51,942
Amortization of debt financing costs and discounts on debt	4,594			5,326
Share-based compensation expense	3,263			3,441
Deferred income taxes	6,519			5,394
Non-cash impairment of assets	1,440			1,065
Distribution from unconsolidated subsidiary	2,654			—
Loss on early extinguishments of debt	427			508
Boyd's share of Borgata's net income	(11,631		)	(4,014		)
Other operating activities	486			(1,559		)
Changes in operating assets and liabilities:
Restricted cash	(3,345		)	(3,358		)
Accounts receivable, net	1,330			1,440
Inventories	326			968
Prepaid expenses and other current assets	2,890			(615		)
Current other tax asset	—			1,802
Income taxes receivable	824			(4		)
Other assets, net	(654		)	1,581
Accounts payable and accrued liabilities	(9,990		)	(19,725		)
Other long-term tax liabilities	64			(23,002		)
Other liabilities	2,990			3,345
Net cash provided by operating activities	83,030			59,638
Cash Flows from Investing Activities
Capital expenditures	(35,297		)	(19,269		)
Other investing activities	5			2,316
Net cash used in investing activities	(35,292		)	(16,953		)
Cash Flows from Financing Activities
Borrowings under Boyd Gaming bank credit facility	223,900			203,700
Payments under Boyd Gaming bank credit facility	(530,350		)	(245,675		)
Borrowings under Peninsula bank credit facility	95,200			91,400
Payments under Peninsula bank credit facility	(114,725		)	(108,625		)
Proceeds from issuance of senior notes	750,000			—
Debt financing costs	(12,996		)	—
Payments on retirements of long-term debt	—			(2		)
Share-based compensation activities, net	(1,387		)	1,973
Net cash provided by (used in) financing activities	409,642			(57,229		)
Change in cash and cash equivalents	457,380			(14,544		)
Cash and cash equivalents, beginning of period	158,821			145,341
Cash and cash equivalents, end of period	$	616,201		$	130,797
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized	$	50,600		$	52,239
Cash paid (received) for income taxes, net of refunds	204			(1,656		)
Supplemental Schedule of Noncash Investing and Financing Activities
Payables incurred for capital expenditures	$	6,610		$	7,333

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

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"). 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, 2015, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 25, 2016.

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. (See Note 3, Investment in Borgata.) All significant intercompany accounts and transactions have been eliminated in consolidation.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, which include cash on hand and in banks, interest-bearing deposits and money market funds with maturities of three months or less at their date of purchase. The instruments are not restricted as to withdrawal or use and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.

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.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

The amounts included in promotional allowances are as follows:



	Three Months Ended
	March 31,
(In thousands)	2016		2015
Rooms	$	18,945	$	18,744
Food and beverage	37,452		37,714
Other	3,917		3,055
Total promotional allowances	$	60,314	$	59,513

The estimated costs of providing such promotional allowances are as follows:



	Three Months Ended
	March 31,
(In thousands)	2016		2015
Rooms	$	8,569	$	8,782
Food and beverage	33,271		33,552
Other	2,981		2,787
Total estimated cost of promotional allowances	$	44,821	$	45,121

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 income. These taxes totaled approximately $82.6 million and $83.4 million for the three months ended March 31, 2016 and 2015, 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. 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 profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies.

As of March 31, 2016, we concluded that it was not more likely than not that the benefit from our deferred tax assets would be realized. As a result of our analysis, a valuation allowance of $240.4 million has been recorded on our federal and state income tax net operating loss carryforwards and other deferred tax assets. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above. Based on recent earnings, there is a reasonable possibility that, within the next year, sufficient positive evidence may become available to reach a conclusion that all or a portion of the valuation allowance will no longer be needed. As such, the Company may release a significant portion of its valuation allowance against its deferred tax assets within the next 12 months. However, the exact timing will be dependent on the levels of income achieved and management's visibility into future period results. The release of our valuation allowance would result in the recognition of certain deferred tax assets and a non-cash income tax benefit in the period in which the release is recorded.

For the three months ended March 31, 2016 and 2015, we have computed our provision for income taxes by applying the actual effective tax rate, under the discrete method, to year-to-date income. The discrete method was used to calculate 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 tax rate is impacted by adjustments that are largely independent of our operating results before taxes. Such adjustments relate primarily to changes in our valuation allowance and the accrual of non-cash tax expense in connection with the tax amortization

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

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.

Other Long Term Tax Liabilities

The Company's income tax returns are subject to examination by the Internal Revenue Service ("IRS") and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. Recognition occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement is only addressed if the position is deemed to be more likely than not to be sustained. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%.

Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the "more likely than not" standard. If it is subsequently determined that a previously recognized tax position no longer meets the "more likely than not" standard, it is required that the tax position 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.

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.

Reclassifications

Asset transaction costs that were previously disaggregated in our condensed consolidated statement of income for the three months ended March 31, 2015 were accumulated with preopening expenses. This reclassification had no effect on our retained earnings or net income as previously reported.

Amortization of debt financing costs and amortization of discounts on debt, which were previously disaggregated in our condensed consolidated statement of cash flows for the three months ended March 31, 2015, were combined. This reclassification had no effect on our cash provided by operating activities as previously reported.

Recently Issued Accounting Pronouncements

Accounting Standards Update 2016-09, Compensation - Stock Compensation ("Update 2016-09")

In March 2016, the Financial Accounting Standards Board ("FASB") issued Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-09 to the financial statements.

Accounting Standards Update 2016-08, Revenue from Contracts with Customers ("Update 2016-08")

In March 2016, the FASB issued Update 2016-08 which amends the principal-versus agent implementation guidance and illustrations in Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("Update 2014-09"). The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2017, and early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of the adoption of Updates 2016-08 and 2014-09 to the financial statements.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

Accounting Standards Update 2016-07, Investments - Equity Method and Joint Ventures ("Update 2016-07")

In March 2016, the FASB issued Update 2016-07 which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-07 to the financial statements.

Accounting Standards Update 2016-02, Leases ("Update 2016-02")

In February 2016, the FASB issued Update 2016-02 which requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-02 to the financial statements.

Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("Update 2016-01")

In January 2016, the FASB issued Update 2016-01, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted only if explicit early adoption guidance is applied. The Company is evaluating the impact of the new standard on its consolidated financial statements.

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. INVESTMENT IN BORGATA

The Company and MGM Resorts International each hold 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. We are the managing member of Holding Company, and we are responsible for the day-to-day operations of Borgata. We account for our investment in Borgata by applying the equity method of accounting.

Select balance sheet information for Borgata is as follows:



	March 31,		December 31,
(In thousands)	2016		2015
Cash and cash equivalents	$	29,838	$	44,134

Outstanding Principal Balance of Long-term Debt
Bank Credit Facility	$	11,600	$	37,700
2018 Term Loan	223,000		240,900
2023 Term Loan	416,850		418,950
	$	651,450	$	697,550

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

Summarized income statement information for Borgata is as follows:



	Three Months Ended
	March 31,
(In thousands)	2016		2015
Net revenues	$	190,293	$	182,589
Operating expenses	152,620		159,239
Operating income	37,673		23,350
Non-operating expenses	14,412		15,322
Net income	$	23,261	$	8,028

NOTE 4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:



	March 31,		December 31,
(In thousands)	2016		2015
Land	$	228,417	$	229,857
Buildings and improvements	2,553,426		2,539,578
Furniture and equipment	1,173,338		1,152,277
Riverboats and barges	238,730		238,743
Construction in progress	36,668		42,497
Other	7,404		7,404
Total property and equipment	4,237,983		4,210,356
Less accumulated depreciation	2,027,501		1,985,014
Property and equipment, net	$	2,210,482	$	2,225,342

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 2013 sale of the Echelon development project. Such assets are not in service and are not currently being depreciated.

Depreciation expense is as follows:



	Three Months Ended
	March 31,
(In thousands)	2016		2015
Depreciation expense	$	43,556	$	45,102

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

NOTE 5. INTANGIBLE ASSETS

Intangible assets consist of the following:



	March 31, 2016
	Weighted	Gross					Cumulative
	Average Life	Carrying		Cumulative			Impairment			Intangible
(In thousands)	Remaining	Value		Amortization			Losses			Assets, Net
Amortizing intangibles
Customer relationships	1.6 years	$	136,300	$	(113,711	)	$	—		$	22,589
Favorable lease rates	32.2 years	45,370		(12,272		)	—			33,098
Development agreement	—	21,373		—			—			21,373
		203,043		(125,983		)	—			77,060

Indefinite lived intangible assets
Trademarks and other	Indefinite	129,501		—			(3,500		)	126,001
Gaming license rights	Indefinite	873,335		(33,960		)	(156,374		)	683,001
		1,002,836		(33,960		)	(159,874		)	809,002
Balance, March 31, 2016		$	1,205,879	$	(159,943	)	$	(159,874	)	$	886,062



	December 31, 2015
	Weighted	Gross					Cumulative
	Average Life	Carrying		Cumulative			Impairment			Intangible
(In thousands)	Remaining	Value		Amortization			Losses			Assets, Net
Amortizing intangibles
Customer relationships	1.9 years	$	136,300	$	(109,994	)	$	—		$	26,306
Favorable lease rates	32.4 years	45,370		(11,997		)	—			33,373
Development agreement	—	21,373		—			—			21,373
		203,043		(121,991		)	—			81,052

Indefinite lived intangible assets
Trademarks	Indefinite	129,501		—			(3,500		)	126,001
Gaming license rights	Indefinite	873,335		(33,960		)	(156,374		)	683,001
		1,002,836		(33,960		)	(159,874		)	809,002
Balance, December 31, 2015		$	1,205,879	$	(155,951	)	$	(159,874	)	$	890,054

NOTE 6. ACCRUED LIABILITIES

Accrued liabilities consist of the following:



	March 31,		December 31,
(In thousands)	2016		2015
Payroll and related expenses	$	61,815	$	71,815
Interest	32,546		35,337
Gaming liabilities	33,104		37,496
Player loyalty program liabilities	18,464		18,491
Accrued liabilities	97,188		86,379
Total accrued liabilities	$	243,117	$	249,518

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

NOTE 7. LONG-TERM DEBT

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



			March 31, 2016
	Interest							Unamortized
	Rates at		Outstanding		Unamortized			Origination			Long-Term
(In thousands)	Mar. 31, 2016		Principal		Discount			Fees and Costs			Debt, Net
Boyd Gaming Corporation Debt
Bank credit facility	3.88	%	$	903,275	$	(2,288	)	$	(8,894	)	$	892,093
9.00% senior notes due 2020	9.00	%	350,000		—			(6,647		)	343,353
6.875% senior notes due 2023	6.88	%	750,000		—			(12,525		)	737,475
6.375% senior notes due 2026	6.38	%	750,000		—			(12,935		)	737,065
			2,753,275		(2,288		)	(41,001		)	2,709,986

Peninsula Segment Debt
Bank credit facility	4.25	%	643,225		—			(11,939		)	631,286
8.375% senior notes due 2018	8.38	%	350,000		—			(5,673		)	344,327
			993,225		—			(17,612		)	975,613
Total long-term debt			3,746,500		(2,288		)	(58,613		)	3,685,599
Less current maturities			27,688		—			—			27,688
Long-term debt, net			$	3,718,812	$	(2,288	)	$	(58,613	)	$	3,657,911



			December 31, 2015
	Interest							Unamortized
	Rates at		Outstanding		Unamortized			Origination			Long-Term
(In thousands)	Dec. 31, 2015		Principal		Discount			Fees and Costs			Debt, Net
Boyd Gaming Corporation Debt
Bank credit facility	3.75	%	$	1,209,725	$	(2,702	)	$	(9,746	)	$	1,197,277
9.00% senior notes due 2020	9.00	%	350,000		—			(7,044		)	342,956
6.875% senior notes due 2023	6.88	%	750,000		—			(12,934		)	737,066
			2,309,725		(2,702		)	(29,724		)	2,277,299

Peninsula Segment Debt
Bank credit facility	4.25	%	662,750		—			(14,143		)	648,607
8.375% senior notes due 2018	8.38	%	350,000		—			(6,357		)	343,643
			1,012,750		—			(20,500		)	992,250
Total long-term debt			3,322,475		(2,702		)	(50,224		)	3,269,549
Less current maturities			29,750		—			—			29,750
Long-term debt, net			$	3,292,725	$	(2,702	)	$	(50,224	)	$	3,239,799

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

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:



	March 31,		December 31,
(In thousands)	2016		2015
Revolving Credit Facility	$	—	$	240,000
Term A Loan	177,025		183,275
Term B Loan	726,250		730,750
Swing Loan	—		55,700
Total outstanding principal amounts under the Boyd Gaming Credit Facility	$	903,275	$	1,209,725

At March 31, 2016, approximately $0.9 billion was outstanding under the Boyd Gaming Credit Facility and $7.1 million was allocated to support various letters of credit, leaving remaining contractual availability of $592.9 million.

Senior Notes

6.375% Senior Notes due April 2026

Significant Terms

On March 28, 2016, we issued $750 million aggregate principal amount of 6.375% senior notes due April 2026 (the "6.375% Notes"). The 6.375% Notes require semi-annual interest payments on April 1 and October 1 of each year, commencing on October 1, 2016. The 6.375% Notes will mature on April 1, 2026 and 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. Net proceeds from the 6.375% Notes were used to pay down the outstanding amount under the Boyd Gaming Revolving Credit Facility and the balance was retained in money market funds and classified as cash equivalents on the condensed consolidated balance sheets.

In conjunction with the issuance of the 6.375% Notes, we incurred approximately $13.0 million in debt financing costs that have been deferred and are being amortized over the term of the 6.375% Notes using the effective interest method.

The 6.375% Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the 6.375% Notes, together, the "Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the Indenture), we will be required, unless certain conditions are met, to offer to repurchase the 6.375% Notes at a price equal to 101% of the principal amount of the 6.375% Notes, plus accrued and unpaid interest and Additional Interest (as defined in the Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the 6.375% Notes.

At any time prior to April 1, 2021, we may redeem the 6.375% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. After April 1, 2021, we may redeem all or a portion of the 6.375% Notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.188% in 2021 to 100% in 2024 and thereafter, plus accrued and unpaid interest and Additional Interest.

In connection with the private placement of the 6.375% Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the 6.375% Notes. We must use commercially reasonable efforts to file a registration statement and to consummate an exchange offer within 365 days after the issuance of the 6.375% Notes, subject to certain suspension and other rights set forth in the registration rights agreement. Under certain circumstances, including our determination that we cannot complete an exchange offer, we are required to file a shelf registration statement for the resale of the 6.375% Notes and to cause such shelf registration statement to be declared effective as soon as reasonably practicable (but in no event later than the 365th day following the issuance of the 6.375% Notes) after the occurrence of such circumstances. Subject to certain suspension and other rights, in the event that the registration statement is not filed or declared effective within the time periods specified in the registration rights agreement, the exchange offer is not consummated within 365 days after the issuance of the 6.375% Notes, or the registration statement is filed and declared effective

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

but thereafter ceases to be effective or is unusable for its intended purpose for a period in excess of 30 days without being succeeded immediately by a post-effective amendment that cures such failure, the agreement provides that additional interest will accrue on the principal amount of the 6.375% Notes at a rate of 0.25% per annum during the 90-day period immediately following any of these events and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event will the penalty rate exceed 1.00% per annum, until the default is cured. There are no other alternative settlement methods and, other than the 1.00% per annum maximum penalty rate, the agreement contains no limit on the maximum potential amount of consideration that could be transferred in the event we do not meet the registration statement filing requirements. We currently intend to file a registration statement, have it declared effective and consummate any exchange offer within these time periods. Accordingly, we do not believe that payment of additional interest under the registration payment arrangement is probable and, therefore, no related liability has been recorded in the consolidated financial statements.

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:



	March 31,		December 31,
(In thousands)	2016		2015
Term Loan	$	621,625	$	647,750
Revolving Facility	14,000		9,000
Swing Loan	7,600		6,000
Total outstanding principal amounts under the Peninsula Credit Facility	$	643,225	$	662,750

At March 31, 2016, approximately $643.2 million was outstanding under the Peninsula Credit Facility and $5.0 million was allocated to support various letters of credit, leaving remaining contractual availability of $23.4 million.

Early Extinguishments of Debt

We incurred non-cash charges of $0.4 million and $0.5 million during the three months ended March 31, 2016 and 2015, respectively, for deferred debt financing costs written off related to the Peninsula Credit Facility, which represents the ratable reduction in borrowing capacity due to optional prepayments made during these periods.

Covenant Compliance

As of March 31, 2016, 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, 2015 filed with the SEC on February 25, 2016, except for the pending acquisitions of ALST Casino Holdco, LLC, and the Las Vegas assets of Cannery Casino Resorts, LLC, as discussed in Note 13, Subsequent Events.

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.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

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 income.



	Three Months Ended
	March 31,
(In thousands)	2016		2015
Gaming	$	85	$	68
Food and beverage	16		13
Room	8		6
Selling, general and administrative	432		344
Corporate expense	2,722		3,010
Total share-based compensation expense	$	3,263	$	3,441

Performance Shares Vesting

The Performance Share Unit ("PSU") grants awarded in December 2012 and 2011 vested during first quarters of 2016 and 2015, respectively. Common shares were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") growth and customer service scores for the three-year performance period of the grant. 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.

The PSU grant awarded in December 2012 resulted in a total of 213,365 shares issued, representing approximately 0.59 shares per PSU. Of the 213,365 shares issued, a total of 54,338 were surrendered by the participants for payroll taxes, resulting a net issuance of 159,027 shares due to the vesting of the 2012 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2015; therefore, the vesting of the PSUs did not impact compensation costs in our 2016 condensed consolidated statement of income.

The PSU grant awarded in December 2011 resulted in a total of 654,478 shares issued, representing approximately 1.67 shares per PSU. Of the 654,478 shares issued, a total of 177,274 were surrendered by the participants for payroll taxes, resulting a net issuance of 477,204 shares due to the vesting of the 2011 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2014; therefore, the vesting of the PSUs did not impact compensation costs in our 2015 condensed consolidated statement of income.

NOTE 10. 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.

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.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

Balances Measured at Fair Value

The following tables show the fair values of certain of our financial instruments:



	March 31, 2016
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	616,201	$	616,201	$	—	$	—
Restricted cash	22,375		22,375		—		—
Investment available for sale	18,394		—		—		18,394

Liabilities
Contingent payments	$	3,560	$	—	$	—	$	3,560



	December 31, 2015
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	158,821	$	158,821	$	—	$	—
Restricted cash	19,030		19,030		—		—
Investment available for sale	17,839		—		—		17,839

Liabilities
Contingent payments	$	3,632	$	—	$	—	$	3,632

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, 2016 and December 31, 2015.

Investment Available for Sale

We have an investment in a single municipal bond issuance of $21.4 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, 2016 and December 31, 2015. 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 in the stockholders' equity section of the condensed consolidated balance sheets. At both March 31, 2016 and December 31, 2015, $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 assets, and at March 31, 2016 and December 31, 2015, $18.0 million and $17.4 million, respectively, is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $3.2 million at both March 31, 2016 and December 31, 2015, 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 income.

Contingent Payments

In connection with the development of the Kansas Star Casino ("KSC"), 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 on December 20, 2011. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at both March 31, 2016 and December 31, 2015, is a discount rate of 18.5%. At both March 31, 2016 and December 31, 2015, there was a current liability of $0.9 million related to this agreement, which is recorded in accrued liabilities on the respective condensed consolidated balance sheets, and long-term obligation at both March 31, 2016 and December 31, 2015, of $2.7 million, which is included in other liabilities on the respective condensed consolidated balance sheets.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

The following table summarizes the changes in fair value of the Company's Level 3 assets and liabilities:



	Three Months Ended
	March 31, 2016
	Assets		Liability
(In thousands)	Investment Available for Sale		Contingent Payments
Balance at January 1, 2016	$	17,839	$	(3,632	)
Total gains (losses) (realized or unrealized):
Included in earnings	33		(154		)
Included in other comprehensive income	522		—
Transfers in or out of Level 3	—		—
Purchases, sales, issuances and settlements:
Settlements	—		226
Balance at March 31, 2016	$	18,394	$	(3,560	)

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	$	33	$	—
Included in interest expense	—		(154		)



	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	)
Total gains (losses) (realized or unrealized):
Included in earnings	31		75			(159		)
Included in other comprehensive income	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		)

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	%

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

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, 2016
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Liabilities
Obligation under assessment arrangements	$	34,655	$	27,357	$	28,282	Level 3
Other financial instruments	200		189		189		Level 3



	December 31, 2015
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Liabilities
Obligation under assessment arrangements	$	35,126	$	27,660	$	28,381	Level 3
Other financial instruments	200		186		186		Level 3

The following tables provide the fair value measurement information about our long-term debt:



	March 31, 2016
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Boyd Gaming Corporation Debt
Bank credit facility	$	903,275	$	892,093	$	901,204	Level 2
9.00% senior notes due 2020	350,000		343,353		370,125		Level 1
6.875% senior notes due 2023	750,000		737,475		798,750		Level 1
6.375% senior notes due 2026	750,000		737,065		778,125		Level 1
	2,753,275		2,709,986		2,848,204

Peninsula Segment Debt
Bank credit facility	643,225		631,286		642,479		Level 2
8.375% Senior Notes due 2018	350,000		344,327		357,000		Level 2
	993,225		975,613		999,479
Total debt	$	3,746,500	$	3,685,599	$	3,847,683

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________



	December 31, 2015
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Boyd Gaming Corporation Debt
Bank credit facility	$	1,209,725	$	1,197,277	$	1,202,870	Level 2
9.00% senior notes due 2020	350,000		342,956		372,750		Level 1
6.875% senior notes due 2023	750,000		737,066		772,500		Level 1
	2,309,725		2,277,299		2,348,120

Peninsula Segment Debt
Bank credit facility	662,750		648,607		661,131		Level 2
8.375% senior notes due 2018	350,000		343,643		357,000		Level 2
	1,012,750		992,250		1,018,131
Total debt	$	3,322,475	$	3,269,549	$	3,366,251

The estimated fair values of the Boyd Gaming Credit Facility and the Peninsula Credit Facility are based on a relative value analysis performed on or about March 31, 2016 and December 31, 2015. The estimated fair values of Boyd Gaming's senior notes and Peninsula's senior notes are based on quoted market prices as of March 31, 2016 and December 31, 2015. 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, 2016 or 2015.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

______________________________________________________________________________________________________

NOTE 11. 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, deferred rent, share-based compensation expense, project development, preopening and writedowns expenses, impairments of assets, other operating items, net, and gain or 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 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.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

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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 income:



	Three Months Ended
	March 31,
(In thousands)	2016			2015
Net Revenues
Las Vegas Locals	$	158,398		$	150,302
Downtown Las Vegas	58,605			56,603
Midwest and South	209,185			217,764
Peninsula	126,190			125,909
Total Reportable Segment Net Revenues	$	552,378		$	550,578

Adjusted EBITDA
Las Vegas Locals	$	44,271		$	38,877
Downtown Las Vegas	12,681			10,677
Midwest and South	48,813			50,984
Peninsula	47,112			46,363
Borgata	22,668			18,913
Total Reportable Segment Adjusted EBITDA	175,545			165,814
Corporate expense	(15,185		)	(16,642		)
Adjusted EBITDA	160,360			149,172

Other operating costs and expenses
Deferred rent	817			857
Depreciation and amortization	47,653			51,942
Share-based compensation expense	3,263			3,441
Project development, preopening and writedowns	1,841			955
Impairments of assets	1,440			1,065
Other operating items, net	429			116
Our share of Borgata's other operating costs and expenses	3,831			7,238
Total other operating costs and expenses	59,274			65,614
Operating income	$	101,086		$	83,558

Total Reportable Segment Assets

The Company's assets by Reportable Segment consisted of the following amounts:



	March 31,		December 31,
(In thousands)	2016		2015
Assets
Las Vegas Locals	$	1,139,016	$	1,155,224
Downtown Las Vegas	134,937		138,159
Midwest and South	1,238,370		1,263,751
Peninsula	1,361,437		1,370,991
Total Reportable Segment Assets	3,873,760		3,928,125
Corporate	923,323		422,775
Total Assets	$	4,797,083	$	4,350,900

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

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NOTE 12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of our 9.00% Senior Notes due July 2020, our 6.875% Senior Notes due May 2023 and our 6.375% Senior Notes due April 2026 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.

Condensed Consolidating Balance Sheets



	March 31, 2016
					Non-		Non-
					Guarantor		Guarantor
					Subsidiaries		Subsidiaries
			Guarantor		(100%		(Not 100%
(In thousands)	Parent		Subsidiaries		Owned)		Owned)		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	502,247	$	84,304	$	29,429	$	221	$	—		$	616,201
Other current assets	12,635		56,330		28,564		—		(1,046		)	96,483
Property and equipment, net	64,989		1,740,847		404,646		—		—			2,210,482
Investments in subsidiaries	3,616,657		174,761		—		—		(3,537,820		)	253,598
Intercompany receivable	—		1,974,486		—		—		(1,974,486		)	—
Other assets, net	13,033		9,180		26,734		—		—			48,947
Intangible assets, net	—		406,265		479,797		—		—			886,062
Goodwill, net	—		212,794		472,516		—		—			685,310
Total assets	$	4,209,561	$	4,658,967	$	1,441,686	$	221	$	(5,513,352	)	$	4,797,083

Liabilities and Stockholders' Equity