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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________________________ 

FORM 10-K
____________________________________________________________________  ____________________________________________________
(Mark One)
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
For the fiscal year ended December 31, 2012
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-12882

BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
 ____________________________________________________
Nevada88-0242733
(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'sRegistrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registered
Common Stock, par value of $0.01 per shareNew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o  No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o  No  x
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 Website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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.



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Large accelerated filer oAccelerated filer x
Non-accelerated filer 
o (Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
As of June 30, 2011,2012, the aggregate market value of the voting common stock held by non-affiliates of the registrant, based on the closing price on the New York Stock Exchange for such date, was approximately $457.9$383.2 million.
Indicate the number of shares outstanding of each of the issuer'sissuer’s classes of common stock, as of the latest practicable date.
Class  Outstanding as of February 29, 201228, 2013
Common stock, $0.01 par value  86,588,933 Shares86,871,977
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the registrant's 20122013 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days after the registrant's fiscal year end of December 31, 20112012 are incorporated by reference into Part III of this Form 10-K.



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BOYD GAMING CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
TABLE OF CONTENTS
  Page No.
 PART I 
ITEM 1.
   
ITEM 1A.
   
ITEM 1B.
   
ITEM 2.
   
ITEM 3.
   
ITEM 4.
   
ITEM 4A.
   
 PART II 
   
ITEM 5.
   
ITEM 6.
   
ITEM 7.
   
ITEM 7A.
   
ITEM 8.
   
ITEM 9.
   
ITEM 9A.
   
ITEM 9B.
   
 PART III 
   
ITEM 10.
   
ITEM 11.
   
ITEM 12.
   
ITEM 13.
   
ITEM 14.
   
 PART IV 
   
ITEM 15.
   
 


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PART I


ITEM 1.    Business
ITEM 1.Business.
Overview
Boyd Gaming Corporation (the “Company,” the “Registrant,” “Boyd Gaming,” “we” or “us”) is a multi-jurisdictional gaming company that has been operating for approximately 3637 years.
We are a diversified operator of 1621 wholly-owned gaming entertainment properties and one controlling interest in a limited liability company. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana, Kansas, Iowa and New Jersey, which we aggregate in order to present the following fourfive reportable segments:
Las Vegas Locals 
     Gold Coast Hotel and CasinoLas Vegas, Nevada
     The Orleans Hotel and CasinoLas Vegas, Nevada
     Sam's Town Hotel and Gambling HallLas Vegas, Nevada
     Suncoast Hotel and CasinoLas Vegas, Nevada
     Eldorado CasinoHenderson, Nevada
     Jokers Wild CasinoHenderson, Nevada
  
Downtown Las Vegas 
     California Hotel and CasinoLas Vegas, Nevada
     Fremont Hotel and CasinoLas Vegas, Nevada
     Main Street Station Casino, Brewery and HotelLas Vegas, Nevada
  
Midwest and South 
     Sam's Town Hotel and Gambling HallTunica, Mississippi
     IP Casino Resort SpaBiloxi, Mississippi
     Par-A-Dice Hotel and CasinoEast Peoria, Illinois
     Blue Chip Casino, Hotel & SpaMichigan City, Indiana
     Treasure Chest CasinoKenner, Louisiana
     Delta Downs Racetrack Casino & HotelVinton, Louisiana
     Sam's Town Hotel and CasinoShreveport, Louisiana
  
Peninsula Gaming
Diamond Jo DubuqueDubuque, Iowa
Diamond Jo WorthNorthwood, Iowa
Evangeline Downs Racetrack and CasinoOpelousas, Louisiana
Amelia Belle CasinoAmelia, Louisiana
Kansas Star CasinoMulvane, Kansas
 
Atlantic City 
     Borgata Hotel Casino & SpaAtlantic City, New Jersey

Hawaiian Operations
In addition to these properties, we own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.
Dania Jai-Alai
We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility located onwith approximately 47 acres of related land located in Dania Beach, Broward County, Florida. The results of Dania Jai-Alai are included as part of the “Other” category in our segment information. As discussed in Note 24, Subsequent Events, on February 22, 2013, we and Dania Entertainment Center, LLC ("Dania

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Entertainment") entered into an Asset Purchase Agreement (the "New Dania Agreement") for the sale of certain assets and liabilities of the Dania Jai-Alai Business, for a purchase price of $65.5 million. The closing of the transactions contemplated by the New Dania Agreement is expected to occur on or prior to May 24, 2013, subject to certain closing conditions.
Echelon Development
Additionally, we own approximatelyWe owned 87 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project ("Echelon"(“Echelon”) iswas to be located. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of Echelon. AsWe originally expected to resume development in the project in three to five years. However, as discussed in Note 5, Assets Held for Development and Note 24, Subsequent Events, in December 2012, we do not believe that a significant levelreconsidered our options for the development of economic recovery has occurred alongEchelon. After considering our current business strategy, the current and future direction of business on the Las Vegas Strip, oranticipated return on investment, and our overall financial position, we concluded that financing fordeveloping a developmentlarge-scale project like Echelon is currently available on terms satisfactory to us,the Strip from the ground up was not consistent with our current strategy. As a result, we do not expect to resume constructiondispose of the Echelon site and strengthen our financial position.

On March 1, 2013, we entered into a definitive agreement with Genting to sell the Echelon site for three$350.0 million in cash. The sale agreement included the 87-acre land parcel as well as site improvements, including the district energy system and central energy center that was to five years. We also do not believe that financing forbe built by LVE. The transaction was completed on March 4, 2013, and we received $157.0 million of net proceeds after payment of a development project like Echelon is currently available on terms satisfactoryportion of the proceeds to us.a third party to fulfill our obligations to LVE Energy Partners, LLC.

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Our Emphasis
Our main business emphasis is on slot revenues, which are highly dependent upon the volume and spending levels of customers at our properties. Gross and net revenues are one of the main performance indicators of our properties. Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. Our industry is capital intensive; we rely heavily on the ability of our properties to generate operating cash flow in order to fund maintenance capital expenditures, repay debt financing and associated interest costs, purchase our debt or equity securities, pay income taxes, fund acquisitions, provide excess cash for future development and pay dividends.

Economic Influence
Throughout the current recession, global economic issues affecting both consumer wealth and consumer confidence have resulted in a meaningful decrease in expenditures on gaming and leisure activities. As a result, over the past several years, we have undertaken several programs aimed at reducing our cost structure in an effort to manage our properties' operations under tightened revenue trends. In addition, we have established a more efficient business model that we believe will help enable us to realize improved results when normalized business volumes return. Our present objective is to manage our cost and expense structure to address the current deterioration in business volumes and generate strong and stable cash flows.

Positioning
We continually work to position our Company for greater success by strengthening our existing operations and growing through capital investment and other strategic initiatives. For instance, in November 2012, we completed our acquisition (the “Peninsula Acquisition”) of Peninsula Gaming, LLC ("Peninsula Gaming") and added five properties to our portfolio; the Kansas Star Casino, Hotel and Event Center (the “Kansas Star”) in Mulvane, Kansas, Diamond Jo Casino in Dubuque, Iowa, Diamond Jo Casino in Northwood, Iowa, Evangeline Downs Racetrack and Casino in Opelousas, Louisiana, and Amelia Belle Casino in Amelia, Louisiana. In October 2011, we purchased the IP Casino Resort Spa (the "IP") which is a premier casino resort on the Mississippi gulf coast and includes 1,100 guest rooms and suites, a 70,000 square-foot casino, a 1,400-seat theater offering regular headline entertainment, a spa and salon, 73,000 square feet of meeting and convention space, as well as eight restaurants. Additionally, in January 2009, we opened our 22-story hotel at Blue Chip Casino, Hotel and Spa in Michigan City, Indiana ("Blue Chip"), which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues.

Boyd Brand Awareness
We have also established a nationwide branding initiative and loyalty program. Previously, players were able to use their “Club Coast” or “B Connected” cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming properties in Nevada, Illinois, Indiana, Louisiana and Mississippi. In June 2010, we launched an enhanced, multi-property player loyalty program under the “B Connected” brand, which replaced the “Club Coast” program. Customers under the “Club Coast” program were able to keep all earned benefits and club points they had previously earned under the program. The new “B Connected” club, among other benefits, extends the time period over which players may qualify for promotion from player level to level and increases the credits awarded to reel slot and table games players.

In addition to the “B Connected” player loyalty program, we launched the “B Connected Mobile” program in July 2010. “B Connected Mobile,” the first multi-property, loyalty program based iPhone application of its kind in the gaming industry, is a personalized mobile application that delivers customized offers and information directly to a customer's iPhone, iPad, or Android device, making "B Connected Mobile" the first application of its kind available on multiple platforms. The application further

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expands the benefits of the “B Connected” program. “B Connected Mobile” provides real-time personalized information when a customer visits a Boyd property, including hotel, dining and gaming offers, such as “Best Rates Available” on hotel rooms for “B Connected” members, instant access to event information, schedules and special offers at all Boyd Gaming properties using a search engine which allows customers to find Boyd Gaming casinos that have their favorite machines and displays the games' locations on a casino floor map, the ability to track “B Connected” point balances in real time, and the ability to make immediate hotel or restaurant reservations. These tools help customers get the greatest value out of their B Connected membership, and ensure that our marketing is as effective as possible.

Borgata Brand Awareness
The Borgata Hotel Casino and Spa ("Borgata") sponsors its own program to expand its brand awareness and leverage its strong loyalty card program, predicated on efforts to use marketing and promotional programs to serve an important role: to retain existing customers, maintain trip frequency and acquire new customers. Borgata offeroffers its guests comprehensive, competitive and targeted marketing and promotion programs. The “My Borgata Rewards” program, for example, offers players a hassle-free way of earning slot dollars, comp dollars and other rewards and benefits based on game play, with convenient on-line access of account balances and other program information. In addition, Borgata strives to differentiate its casino with high-quality guest services to further enhance overall brand and customer experience to position Borgata as the must visit property in Atlantic City. Borgata maintains a database of nearly 3.1 million customers enrolled in “My Borgata Rewards,” which is used to support its marketing efforts.

Other Promotional Activities

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From time to time, we offer other promotional offers and discounts targeted towards new customers, frequent customers, inactive customers, customers of various levels of play, and prospective customers who have not yet visited our properties, and mid-week and other promotional activities that seek to generate visits to our properties during slower periods. Unlike some of our competitors, our promotional slot dollarsComplementaries are restricted and can only be redeemed for slot play and may not be cashed out. Comp dollars, generallyusually in the form of monetary discounts, and other rewards generally can only be redeemed at our restaurants, retail and spa facilities.

General Business Developments
Significant developments affecting our business duringfor the past five years ended December 31, 2012 are as follows:

On December 27, 2012, we entered into the First Amendment to the Second Amended and Restated Credit Agreement (the "First Credit Facility Amendment"), among the Company, certain financial institutions as lenders (the “Credit Facility Lenders”) and Bank of America, N.A., as administrative agent and letter of credit issuer, that (i) decreases the minimum Interest Coverage Ratio (as defined therein) for the fiscal quarters ending June 30, 2013 and September 30, 2013, (ii) increases the maximum Total Leverage Ratio (as defined therein) for fiscal quarters ending December 31, 2012 and thereafter, (iii) increases the maximum Secured Leverage Ratio (as defined therein) for fiscal quarters ending December 31, 2012 and thereafter, (iv) during the first four calendar quarters after the execution of any management agreement pursuant to which management fees are payable to the Company or a restricted subsidiary of the Company, adjusts the calculation of Consolidated EBITDA (as defined therein) to reflect the annualized pro forma management fees paid in cash or to be paid in cash pursuant to such agreement, (v) modifies the definition of Consolidated EBITDA to exclude any non-cash income or gain and any non-cash loss, costs, and expenses resulting from earn out obligations and other contingent consideration, (vi) adjusts the calculation of Borgata EBIT (as defined therein) such that for the fiscal quarter ending December 31, 2012 through the fiscal quarter ending September 30, 2013, Borgata EBIT will be computed by including the four fiscal quarters with the highest Borgata EBIT out of the most recently ended five fiscal quarters, and (vii) modifies the definition of Interest Coverage Ratio to exclude any non-cash interest expense resulting from earn out obligations and other contingent consideration.

On December 27, 2012, Marina District Finance Company, Inc. (the “MDFC”) entered into the Second Amendment to Credit Agreement (the “Second Borgata Credit Facility Amendment”), among MDFC, MDFC's parent company, Marina District Development Company ("MDDC"), certain financial institutions as lenders (each a "Borgata Lender", and collectively the "Borgata Lenders") and Wells Fargo, National Association ("Wells Fargo"), as administrative agent, that (i) decreases the minimum Consolidated EBITDA (as defined therein) to $110.0 million for fiscal quarters ending December 31, 2012 and thereafter, (ii) modifies the definition of Consolidated EBITDA to exclude certain losses, charges, and expenses, (iii) adjusts the calculation of Consolidated EBITDA such that for the fiscal quarter ending December 31, 2012 through the fiscal quarter ending September 30, 2013, Consolidated EBITDA will be computed by including the four fiscal quarters with the highest Consolidated EBITDA out of the most recently ended five fiscal quarters, (iv) reduces the Aggregate Commitments (as defined therein) to $60.0 million, (v) modifies the Use of Proceeds covenant to provide that the proceeds of revolving loans can only be used to repurchase or redeem MDFC's senior secured notes if, after giving affect thereto, the aggregate amount of outstanding loans and letters of credit under the Borgata bank credit facility does not exceed $50.0 million, and (vi) adds a covenant prohibiting MDFC and MDDC from repurchasing or redeeming MDFC's senior secured notes at any time unless Consolidated EBITDA was at least $125.0 million for the most recently ended period of four consecutive fiscal quarters prior thereto.

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On December 12, 2012, Kansas Star opened its new and permanent casino floor and all five restaurants to the public, including the Woodfire Grille Steakhouse, The Kitchen Buffet, An Pho, Shark Bar and Panini Jo's. The full casino floor has 1,829 slot machines, 45 table games, 10 table poker room, and gift shop. Construction is in process to transform the former temporary casino into a multi-purpose arena.

On November 20, 2012, we completed the Peninsula Acquisition pursuant to an Agreement and Plan of Merger, under which an indirect wholly-owned subsidiary of the Company acquired the assets and assumed the liabilities. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012. The Peninsula Acquisition added five properties to our portfolio: the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Casino in Northwood, Iowa; Evangeline Downs Racetrack and Casino in Opelousas, Louisiana; and Amelia Belle Casino in Amelia, Louisiana.
On July 24, 2012, we announced that we had entered into a development agreement with Sunrise Sports Entertainment, LLP, the operator of the BB&T Center, a major entertainment venue in South Florida and home to the NHL's Florida Panthers, for a new project in Broward County, Florida. The agreement provides the Company the opportunity to take advantage of the potential to expand gaming in South Florida at the site of the BB&T Center.
On July 24, 2012, we announced a development agreement and management agreement with Wilton Rancheria, a federally-recognized tribe located about 30 miles southeast of Sacramento, California, to develop and manage a gaming entertainment complex.
On October 4, 2011, we consummatedcompleted the acquisition of IP pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities related to the IP, on an as-is basis. The net purchase price was $280.6 million. Accordingly, the acquired assets and assumed liabilities of IP are included in our consolidated balance sheet as of December 31, 2011 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from October 4, 2011 through December 31, 2011, reported in our consolidated statements of operations and cash flows, respectively, during the year ended December 31, 2011.
On October 31, 2011, we announced that we had entered into an agreement with bwin.party digital entertainment plc, the world's largest publicly traded online gaming company. Should Congress legalize online poker in the United States, and subject to regulatory approvals, we would acquire a 10% stake in a new company that would offer online poker to U.S.-based players under bwin.party's brands, including PartyPoker. Separately, we entered into a 15-year agreement to use bwin.party's technology platform and associated services, at favorable rates and costs to us, to offer online poker to U.S. players under a brand we develop.
On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (the successor in interest to MGM MIRAGE) ("MGM"), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. As a result, we have included Borgata in our consolidated balance sheet as of December 31, 2011 and 2010, and its results of operations and cash flows from March 24, 2010 through December 31, 2010 and for the full year ended December 31, 2011 in our consolidated statements of operations and cash flows for the years ended December 31, 2011 and 2010, respectively. Prior period amounts were not restated or recasted as a result of this change.
Blue Chip opened on January 22, 2009, following completion of an expansion project that added a 22-story hotel, which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues to the existing property structures.
In 2008, we established our nationwide branding initiative and loyalty program. Players are able to use their “B Connected” (or, formerly, "Club Coast") cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming properties in Nevada, Illinois, Indiana, Louisiana and Mississippi.
The Water Club, a 798-room boutique hotel expansion project at Borgata, opened in June 2008. The expansion includes five swimming pools, a state-of-the-art spa, additional meeting and retail space, and a separate porte-cochere and front desk.
We began construction on Echelon, our multibillion dollar Las Vegas Strip development project, in the second quarter of 2007. Echelon is located on the former Stardust site, which we closed in November 2006 and demolished in March 2007. In August 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.
In February 2007, we completed our exchange of the Barbary Coast Hotel and Casino and its related 4.2 acres of land for approximately 24 acres located north of and contiguous to our Echelon development project on the Las Vegas Strip in a nonmonetary, tax-free transaction.

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Business Strategy
Our properties generally operate in highly competitive environments. We compete against other gaming companies as well as

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other hospitality, entertainment and leisure companies. We believe that the following factors have contributed to our success in the past and are central to our success in the future:
we emphasize slot revenues, the most consistently profitable segment of the gaming industry;
we have comprehensive marketing and promotion programs;
six of our Las Vegas properties are well-positioned to capitalize on the Las Vegas locals market;
our downtown Las Vegas properties focus their marketing programs on, and derive a majority of their revenues from, a unique niche - Hawaiian customers;
our operations are geographically diversified within the United States;
we have the ability to expand certain existing properties and make opportunistic and strategic acquisitions; and
we have an experienced management team.
Properties
As of December 31, 2011,2012, we own or operate 1,042,7871,255,576 square feet of casino space, containing approximately 25,97331,577 slot machines, 655758 table games and 11,41811,416 hotel rooms. We derive the majority of our gross revenues from our gaming operations, which generated approximately 72%, of gross revenues for each of the years ended December 31, 2012, and 2011 and 73% and 75% of gross revenues for the years ended December 31, 2011, 2010 and 2009 respectively. Food and beverage gross revenues, which generated approximately 14% of gross revenues for each of the years ended December 31, 2012, 2011 and 2010, and 13% during the year ended December 31, 2009, represent the next most significant revenue source, followed by room and other, both of which separately contributed less than 10% of gross revenues during all of these respective years.
The following table sets forth certain information regarding our properties (listed by the segment in which each such property is reported), as of and for the year ended December 31, 2011 (except with respect to the hotel occupancy and average daily rate statistics for IP, which data is presented for the period from October 4, 2011 through December 31, 2011; however, all other statistics presented with respect to IP are as of December 31, 2011).2012.

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Year Opened or Acquired Casino Space (Sq. ft.) Slot Machines Table Games Hotel Rooms Hotel Occupancy Average Daily RateYear Opened or Acquired Casino Space (Sq. ft.) Slot Machines Table Games Hotel Rooms Hotel Occupancy Average Daily Rate
Las Vegas Locals                        
Gold Coast Hotel and Casino2004 85,500
 1,920
 49
 711
 85% $47
2004 85,500
 1,880
 49
 711
 85% $46
The Orleans Hotel and Casino2004 133,800
 2,623
 60
 1,885
 89% $52
2004 133,800
 2,593
 60
 1,885
 88% $51
Sam's Town Hotel and Gambling Hall1979 126,700
 2,115
 26
 646
 91% $44
1979 126,700
 2,053
 26
 646
 87% $44
Suncoast Hotel and Casino2004 95,000
 2,035
 34
 426
 86% $63
2004 95,000
 2,016
 34
 426
 83% $64
Eldorado Casino1993 24,200
 426
 4
 
 % $
1993 24,200
 406
 4
 N/A
 N/A
 N/A
Jokers Wild Casino1993 28,100
 446
 7
 
 % $
1993 28,100
 433
 8
 N/A
 N/A
 N/A
                        
Downtown Las Vegas                        
California Hotel and Casino1975 36,000
 1,059
 28
 781
 89% $33
1975 36,000
 1,047
 28
 781
 87% $34
Fremont Hotel and Casino1985 30,200
 1,054
 24
 447
 87% $37
1985 30,200
 1,047
 24
 447
 85% $37
Main Street Station Casino, Brewery and Hotel1993 27,000
 859
 19
 406
 91% $37
1993 27,000
 867
 19
 406
 88% $38
                        
Midwest and South                        
Mississippi                        
Sam's Town Hotel and Gambling Hall1994 66,000
 1,286
 30
 842
 77% $46
1994 66,000
 1,277
 30
 842
 62% $47
IP Casino Resort Spa2011 70,000
 1,900
 62
 1,100
 81% $82
2011 70,000
 1,783
 63
 1,100
 90% $83
Illinois                        
Par-A-Dice Hotel Casino1996 26,000
 1,167
 21
 202
 91% $66
1996 26,000
 1,176
 20
 202
 92% $66
Indiana                        
Blue Chip Casino, Hotel & Spa1999 65,000
 1,965
 42
 486
 77% $72
1999 65,000
 1,954
 42
 486
 76% $72
Louisiana                        
Treasure Chest Casino1997 24,000
 980
 36
 
 % $
1997 24,000
 982
 36
 N/A
 N/A
 N/A
Delta Downs Racetrack Casino & Hotel2001 15,000
 1,620
 
 203
 92% $55
2001 15,000
 1,639
 
 203
 92% $56
Sam's Town Hotel and Casino2004 30,000
 1,043
 29
 514
 87% $82
2004 30,000
 1,048
 29
 514
 85% $84
            
Peninsula Gaming            
Iowa            
Diamond Jo Dubuque2012 37,291
 992
 19
 N/A
 N/A
 N/A
Diamond Jo Worth2012 37,957
 988
 22
 N/A
 N/A
 N/A
Louisiana            
Evangeline Downs Racetrack and Casino2012 41,235
 1,424
 
 N/A
 N/A
 N/A
Amelia Belle Casino2012 24,452
 838
 17
 N/A
 N/A
 N/A
Kansas            
Kansas Star Casino2012 71,854
 1,829
 45
 N/A
 N/A
 N/A
Total of wholly-owned properties 882,500
 22,498
 471
 8,649
     1,095,289
 28,272
 575
 8,649
    
                        
Atlantic City, New Jersey                        
Borgata Hotel Casino & Spa2003 160,287
 3,475
 184
 2,769
 86% $134
2003 160,287
 3,305
 183
 2,767
 85% $133
Total all properties 1,042,787
 25,973
 655
 11,418
     1,255,576
 31,577
 758
 11,416
    
N/A = Not Applicable            

Hawaiian Operations
In addition to these properties, we own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.
 
Dania Jai-Alai

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We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility located onwith approximately 47 acres of related land located in Dania Beach, Broward County, Florida.

Echelon Development
Additionally, The results of Dania Jai-Alai are included as part of the “Other” category in our segment information. As discussed in Note 24, Subsequent Events, on February 22, 2013, we own approximately 87 acresand Dania Entertainment entered into the Dania Agreement for the sale of land oncertain assets and liabilities of the Las Vegas Strip, where our multibillion dollar Echelon development project ("Echelon") is located. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of Echelon. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financingDania Jai-Alai Business, for a development project like Echelonpurchase price of $65.5 million. The closing of the transactions contemplated by the Dania Agreement is currently availableexpected to occur on terms satisfactoryor prior to us, we do not expectMay 24, 2013, subject to resume construction of Echelon for three to five years. We also do not believe that financing for a development project like Echelon is currently available on terms satisfactory to us.certain closing conditions.
Las Vegas Locals Segment
Our Las Vegas Locals segment consists of six casinos that serve the resident population of the Las Vegas metropolitan area, which had been one of the fastest growing areas in the United States prior to the economic downturn beginning in late 2007. Las Vegas has historically been characterized by a vibrant economy and strong demographics that include a large population of retirees and

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other active gaming customers. Although we are seeing signs of stabilization, the current recession has had an adverse impact on the growth and economy of Las Vegas, resulting in significant declines in the local housing market and unstable unemployment in the Las Vegas valley, which has negatively affected consumer spending. Our Las Vegas Locals segment competes directly with other locals' casinos and gaming companies, some of which operate larger casinos and offer different promotions than ours.
Gold Coast Hotel and Casino
Gold Coast Hotel and Casino (“Gold Coast”) is located on Flamingo Road, approximately one mile west of the Las Vegas Strip and one-quarter mile west of Interstate 15, the major highway linking Las Vegas and southern California. Its location offers easy access from all four directions in the Las Vegas valley. The primary target market for Gold Coast consists of local middle-market customers who actively gamble. Gold Coast's amenities include 711 hotel rooms and suites along with meeting facilities, multiple restaurant options, a 70-lane bowling center and gaming, including slots, table games, a race and sports book and a bingo center.
The Orleans Hotel and Casino
The Orleans Hotel and Casino (“The Orleans”) is located on Tropicana Avenue, a short distance from the Las Vegas Strip. The target markets for The Orleans are both local residents and visitors to the Las Vegas area. The Orleans provides an exciting New Orleans French Quarter-themed environment. Amenities at The Orleans include 1,885 hotel rooms, a variety of restaurants and bars, a spa and fitness center, 18 stadium-seating movie theaters, a 70-lane bowling center, banquet and meeting space, and a special events arena that seats up to 9,500 patrons.
Sam's Town Hotel and Gambling Hall
Sam's Town Hotel and Gambling Hall (“Sam's Town Las Vegas”) is located on the Boulder Strip, approximately six miles east of the Las Vegas Strip, and features a contemporary western theme. Its informal, friendly atmosphere appeals to both local residents and visitors alike. Amenities at Sam's Town Las Vegas include 646 hotel rooms, a variety of restaurants and bars, 18 stadium-seating movie theaters, and a 56-lane bowling center. Gaming, bowling and live entertainment create a social center that has attracted many Las Vegas residents to Sam's Town Las Vegas.
Suncoast Hotel and Casino
Suncoast Hotel and Casino (“Suncoast”) is located in Peccole Ranch, a master-planned community adjacent to Summerlin, and is readily accessible from most major points in Las Vegas, including downtown and the Las Vegas Strip. The primary target market for Suncoast consists of local middle-market customers who gamble frequently. Suncoast is a Mediterranean-themed facility that features 426 hotel rooms, multiple restaurant options, 25,000 square feet of banquet and meeting facilities, 16 stadium-seating movie theatres, and a 64-lane bowling center.

Eldorado Casino and Jokers Wild Casino
Located in downtown Henderson, the Eldorado Casino (“Eldorado”) is approximately 14 miles from the Las Vegas Strip. Jokers Wild Casino (“Jokers Wild”) is also located in Henderson. The amenities at each of these properties include slots, table games, a sports book, and dining options. The principal customers of these properties are Henderson residents.
Downtown Las Vegas Segment
We directly compete with 11 casinos that operate in downtown Las Vegas; however, we have developed a distinct niche for our downtown properties by focusing on customers from Hawaii. Our downtown properties focus their marketing on gaming enthusiasts from Hawaii and tour and travel agents in Hawaii with whom we have cultivated relationships since we opened our California Hotel and Casino (“California”) in 1975. Through our Hawaiian travel agency, Vacations Hawaii, we operate as many as fivefour charter flights from Honolulu to Las Vegas each week, helping to ensure a stable supply of air transportation. We also have strong, informal relationships with other Hawaiian travel agencies and offer affordable all-inclusive packages. These relationships, combined with our Hawaiian promotions, have allowed California, Fremont Hotel and Casino (“Fremont”) and Main Street Station Casino, Brewery and Hotel (“Main Street Station”) to capture a significant share of the Hawaiian tourist trade in Las Vegas. During the year ended December 31, 2011,2012, patrons from Hawaii comprised approximately 68%66% of the occupied room nights at California, 53%48% of the occupied room nights at Fremont, and 55%52% of the occupied room nights at Main Street Station.

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California Hotel and Casino
California's amenities include 781 hotel rooms, multiple dining options, a sports book, and meeting space. California and Main Street Station are connected by an indoor pedestrian bridge.
Fremont Hotel and Casino
Fremont is adjacent to the principal pedestrian thoroughfare in downtown Las Vegas known as the Fremont Street Experience. The property's amenities include 447 hotel rooms, a race and sports book, and meeting space.
Main Street Station Casino, Brewery and Hotel
Main Street Station's amenities include 406 hotel rooms and three restaurants, one of which includes a brewery. In addition, Main

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Street Station features a 96-space recreational vehicle park, the only such facility in the downtown area.
Midwest and South Segment
Our Midwest and South properties consist of four dockside riverboat casinos, one racino and two barge-based casinos that operate in four states in the Midwest and southern United States. Generally, these states allow casino gaming on a limited basis through the issuance of a limited number of gaming licenses. Our Midwest and South properties generally serve customers within a 100-mile radius and compete directly with other casino facilities operating in their respective immediate and surrounding market areas, as well as with gaming operations in surrounding jurisdictions.
Sam's Town Hotel and Gambling Hall
Sam's Town Hotel and Gambling Hall (“Sam's Town Tunica”) is a barge-based casino located in Tunica County, Mississippi. The property has extensive amenities, including 842 hotel rooms, an entertainment lounge, four dining venues, and the 1,600-seat River Palace Arena. Tunica is the closest gaming market to Memphis, Tennessee and is located approximately 30 miles south of Memphis. The adult population within a 250-mile radius is over nine million people, which also includes the cities of Nashville in Tennessee, Jackson, Mississippi and Little Rock, Arkansas.

IP Casino Resort Spa
IP overlooks the scenic back bay of Biloxi and is one of the premier resorts on the Mississippi Gulf Coast, and a recipient of aan AAA Four Diamond Award. Completely remodeled in 2005, theThe property features nearly 1,100 hotel rooms and suites; a 70,000-square-foot70,000-square-foot casino with 1,9001,783 slot machines and 6263 table games; 73,000 square feet of convention and meeting space; a spa and salon; a 1,400-seat theater offering regular headline entertainment; six lounges and bars; and eight restaurants, including a steak and seafood restaurant, and an upscale Asian restaurant.
Par-A-Dice Hotel Casino
Par-A-Dice Hotel Casino (“Par-A-Dice”) is a dockside riverboat casino located on the Illinois River in East Peoria, Illinois that features a 202-room202-room hotel. Located adjacent to the Par-A-Dice riverboat is a land-based pavilion, which includes three restaurants, a cocktail lounge, and a gift shop. Par-A-Dice is strategically located near Interstate 74, a major east-west interstate highway. Par-A-Dice is the only gaming facility located within approximately 90 miles of Peoria, Illinois.
Blue Chip Casino, Hotel & Spa
Blue Chip is a dockside riverboat casino located in Michigan City, Indiana, which is 40 miles west of South Bend, Indiana and 60 miles east of Chicago, Illinois. The property competes primarily with five casinos in northern Indiana and southern Michigan and, to a lesser extent, with casinos in the Chicago area and racinos located near Indianapolis. In 2006, we began operations on our newly constructed single-level dockside riverboat at Blue Chip. The new boat allowed us to expand our casino and, in connection with the construction of our new boat, add a new parking structure and enhance the land-based pavilion. On January 22, 2009, we completed an expansion project at Blue Chip that added a 22-story hotel, which included 300 additional guest rooms and increased total guest rooms to 486, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues to the existing property structure.
Treasure Chest Casino
Treasure Chest Casino (“Treasure Chest”) is a dockside riverboat casino located on Lake Pontchartrain in the western suburbs of New Orleans, Louisiana. The property is designed as a classic 18th century Victorian style paddlewheel riverboat, with a total capacity for 1,750 people. The entertainment complex located adjacent to the riverboat houses a 140-seat Caribbean showroom and two restaurants. Located approximately five miles from the New Orleans International Airport, Treasure Chest primarily serves residents of suburban New Orleans.
Delta Downs Racetrack Casino & Hotel
Delta Downs is located in Vinton, Louisiana and has historically conducted horse races on a seasonal basis and operated year-round simulcast facilities for customers to wager on races held at other tracks. In 2002, we began slot operations in connection with a renovation project that expanded the facility. We completed an expansion of the casino in 2004 and opened a 203-room203-room hotel at the property in 2005. Delta Downs is approximately 25 miles closer to Houston than the next closest gaming property, located in Lake Charles, Louisiana. Customers traveling from Houston, Beaumont and other parts of southeastern Texas will

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generally drive past Delta Downs to reach Lake Charles.
Sam's Town Hotel and Casino
Sam's Town Hotel and Casino (“Sam's Town Shreveport”) is a dockside riverboat casino located along the Red River in Shreveport, Louisiana. Amenities at the property include 514 hotel rooms, a spa, four restaurants, a live entertainment venue, and convention and meeting space. Feeder markets include east Texas (including Dallas), Texarkana, Arkansas and surrounding Louisiana cities, including Bossier City, Minden, Ruston and Monroe. The continued expansion of Native American gaming in Oklahoma could have a material adverse impact on the operations of Sam's Town Shreveport.
Peninsula Gaming Segment
Our Peninsula Gaming properties consist of three casinos, one racino and one riverboat casino that operate in three states including Louisiana, Iowa and Kansas. Generally, these states allow casino gaming on a limited basis through the issuance of a limited number of gaming licenses. Our Peninsula Gaming properties generally compete directly with other casino facilities operating in their respective immediate and surrounding market areas, as well as with gaming operations in surrounding jurisdictions.

Diamond Jo Dubuque
Diamond Jo is a land-based casino located in the Port of Dubuque, a waterfront development on the Mississippi River in downtown Dubuque, Iowa. The Diamond Jo is a two-story, approximately 188,000 square foot property that includes 992 slot machines and 19 table games. Additional amenities include a 30-lane bowling center, a 33,000 square foot event center, and two banquet rooms. The property also features five dining outlets, including the Kitchen Buffet, a 184-seat live action buffet, Woodfire Grille, the casino's 133-seat high-end restaurant, Mojo's, a 124-seat sports bar, a deli and a snack shop, as well as three full service bars.

Diamond Jo Worth
The Diamond Jo Worth is a land-based casino situated on a 36-acre site in Northwood, Iowa, which is located in north-central Iowa, near the Minnesota border and approximately 30 miles north of Mason City. The casino currently has 988 slot machines, 22 table games and 7 poker tables in operation, as well as a 5,200 square foot event center and several dining options, including the Kitchen Buffet, a 190-seat buffet restaurant, and Woodfire Grille, a 114-seat high-end restaurant. There is a 100-room hotel adjacent to the casino, which is owned and operated by a third party. Under an agreement with the third party operator, the Diamond Jo Worth has the option to purchase the hotel from the third party operator. Diamond Jo Worth also operates a convenience store and gas station as the site. In March 2011, an additional 60-room hotel opened, which is owned and operated by a third party and provides additional hotel room capacity for the casino guests.

Evangeline Downs
The Evangeline Downs is a land-based racino located in Louisiana. The racino currently includes a casino with 1,424 slot machines and approximately 23,000 square foot convention center. The racino features a 353-seat Cajun buffet, 60-seat Gumbo bar, a 90-seat Cafe and Blackberry, a 140-seat fine dining restaurant. In the clubhouse, Silk's Fine Dining offers a varied menu and the grandstand area contains a concession and bar. The racino includes a one-mile dirt track, a 7/8-mile turf track, stables for 980 horses, a grandstand and clubhouse seating for 1,295 patrons, an apron and patio space for an additional 3,000 patrons. In addition, an affiliate of Evangeline Downs opened a 117-room hotel adjacent to the racino in November 2010 that includes 41 suites, two meeting rooms and an indoor pool.

Evangeline Downs currently operates four Off Track Betting ("OTB") locations in Louisiana in each of Port Allen, Henderson, Eunice and St. Martinville. Each of the OTB's offers simulcast pari-mutuel wagering and video poker. Under Louisiana's racing and off-track betting laws, we have a right of prior approval with respect to any applicant seeking a permit to operate an OTB within a 55-mile radius of our Evangeline Downs racetrack, which effectively gives us the exclusive right, at our option, to operate additional OTB's within such a radius, provided that such OTB is not also within a 55-mile radius of another horse racetrack.

Amelia Belle Casino
The Amelia Belle Casino is located in south-central Louisiana, and is a three-level riverboat with gaming located on the first two decks and includes 838 slot machines, and 17 table games. The third deck of the riverboat includes a 119-seat buffet and banquet room.

Kansas Star Casino
The Kansas Star Casino serves as Lottery Gaming Facility Manager for the South Central Gaming Zone on behalf of the Kansas Lottery pursuant to a Management Agreement that became effective on January 14, 2011 ("Kansas Management Contract"). We began construction of the Kansas Star in March 2011. In December 2011, we completed construction of our 162,000 square foot indoor event center, and on December 20, 2011, we began casino operations, utilizing this space in the interim, while the remaining casino facilities were being constructed. On December 12, 2012, we opened our permanent casino which includes additional gaming space, 1,829 slot machines, 45 table games, 10 poker tables and a number of amenities including a buffet, steakhouse,

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deli, noodle bar, a casino bar as well as a poker themed bar. In addition, a 150 room hotel adjacent to the Kansas Star opened to the public in October 2012. We are currently in the process of renovating the 162,000 square foot indoor event center which housed our interim casino operations during much of 2012. When completed, the event center will be able to host a number of events including concerts, trade shows and equestrian events.

Atlantic City, New Jersey
Borgata Hotel Casino & Spa
Borgata opened in Atlantic City, New Jersey in July 2003. Atlantic City is predominantly a regional day-trip and overnight-trip market. Borgata directly competes with ten other Atlantic City casinos as well as with gaming operations in surrounding jurisdictions. Borgata is an upscale destination resort that features a 160,000160,287 square-foot casino with 3,305 slot machines and 183 table games. The property has a total of 2,7692,767 guest rooms and suites comprised of 1,971 guest rooms and suites at the Borgata hotel and 798 guest rooms and suites at The Water Club. Marina District Development Company, LLC ("MDDC") developed, owns and operates Borgata. Borgata features six fine-dining restaurants with acclaimed chefs including Bobby Flay, Michael Mina, Wolfgang Puck, Michael Schulson and Stephen Kalt, six casual dining restaurants, eight quick dining options, 17 retail boutiques, two European-style spas, two nightclubs and over 8,200 parking spaces. In addition, the property contains approximately 88,000 square feet of meeting and event space, as well as two entertainment venues.
We own a 50% interest in Marina District Development Holding Co., LLC (“Holding Company”), which owns all the equity interests in MDDC, d.b.a. Borgata Hotel Casino and Spa. As the managing member, we are responsible for the day-to-day operations of Borgata, including the operation and maintenance of the facility. Borgata employs a management team and full staff to perform these services for the property. We maintain the oversight and responsibility for the operations, but do not receive a management fee from Borgata. As discussed further in Other Events below, we amended our operating agreement with MGM (our original 50% partner in Borgata), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata.
Segments
For further information related to our segment information for revenues and operating income as of and for the three years in the period ended December 31, 2011,2012, see Note 20, Segment Information to our consolidated financial statements presented in Part IV, Item 15, Exhibits and Financial Statement Schedules.

Development Project
Echelon
In August 2008, due toWe owned 87 acres of land on the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay ofLas Vegas Strip, where our multibillion dollar Echelon development project onwas to be located. On August 1, 2008, we announced the Las Vegas Strip. At that time, we did not anticipate the long-term effectsdelay of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularlyEchelon. We originally expected to resume development in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon forin three to five years. However, as discussed in Note 5, Assets Held for Development and Note 24, Subsequent Events, during the three months ended December 31, 2012, we reconsidered our commitment to complete the Echelon project and concluded that we would not resume development.
Nonetheless,
On March 1, 2013, we remain committedentered into a definitive agreement with Genting to havingsell the Echelon site for $350.0 million in cash. The sale agreement included the 87-acre land parcel as well as site improvements, including the district energy system and central energy center that was to be built by LVE. The transaction was completed on March 4, 2013, and we received $157.0 million of net proceeds after payment of a significant presence onportion of the Las Vegas Strip. During the suspension period, we continueproceeds to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures, scope modifications, or additional strategic partnerships, among others. We can provide no assurances asa third party to when, or if, construction will resume on Echelon, or if we will be ablefulfill our obligations to obtain alternative sources of financing for the project.LVE Energy Partners, LLC.

Central Energy Facility
LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we haveWe had entered into an Energy Sales Agreement ("ESA"(the “ESA”) with LVE to design, build, own (other than the underlying real property which is leased from Echelon Resorts)Echelon) and operate a district energy system and central energy center and related distribution system for our planned Echelon resort development. Pursuantdevelopment to the ESA, LVE will provide electricity, emergency electricity generation, and chilled and hot water electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. However, since we are obligated to purchase substantially all of the output of the central energy center, we are the primary beneficiary under the terms of the ESA.

LVE has suspendedbegan construction of the central energy center while the Echelon project is delayed. On April 3, 2009, LVE notified us that,facility in its view, Echelon Resorts would be in breach of the ESA unless it recommenced and proceeded with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.2007.

On March 7, 2011,1, 2013, as part of the sale of the Echelon Resorts and LVEsite, we entered into both a purchase optiondefinitive agreement (the "Purchase Option Agreement")with LVE to permit Genting to acquire LVE's power plant improvements on the Echelon site. The transaction was completed on March 4, 2013 and a periodic fee agreement (the "Periodic Fee Agreement"). UnderGenting paid LVE $187.0 million at the Periodic Feeclosing.

Other Events
Acquisition of Peninsula Gaming
On November 20, 2012, we completed the Peninsula Acquisition pursuant to an Agreement Echelon Resorts and LVE havePlan of Merger, under which an indirect wholly-owned subsidiary of the Company acquired the assets and assumed the liabilities of Peninsula Gaming. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012

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mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. The prohibition on the initiation of litigation and the tollingresults of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012. The Peninsula Acquisition added five properties to our portfolio: the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Casino in Northwood, Iowa; Evangeline Downs Racetrack and Casino in Opelousas, Louisiana; and Amelia Belle Casino in Amelia, Louisiana.

Development agreement with Sunrise Sports, LLP
On July 24, 2012, we announced that we had entered into a development agreement with Sunrise Sports Entertainment, LLP, the operator of the statute of limitations providedBB&T Center, a major entertainment venue in South Florida and home to the NHL's Florida Panthers, for a new project in Broward County, Florida. The agreement provides the Periodic Fee Agreement should be applicableCompany the opportunity to any litigation with respect to LVE's April 3, 2009 claim of an alleged breachtake advantage of the ESA. Underpotential to expand gaming in South Florida at the Periodic Fee Agreement, Echelon Resorts agreed to pay LVE, beginning on March 4, 2011, a monthly Periodic Fee and an operation and maintenance fee until either (i) Echelon Resorts notifies LVE that it has resumed construction of a portionsite of the EchelonBB&T Center.

Development agreement with Wilton Rancheria
On July 24, 2012, we announced a development project that it owns in fee simpleagreement and Echelon Resortsmanagement agreement with Wilton Rancheria, a federally-recognized tribe located about 30 miles southeast of Sacramento, California, to develop and LVE have mutually agreed to changes to the dates in their respective construction milestones under the ESA, or (ii) Echelon Resorts exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon's prior approval. We have postedmanage a letter of credit in the amount of $6 million to secure Echelon's Resorts obligation to pay the Periodic Fee and the operation and maintenance fee.gaming entertainment complex.
Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and related distribution system for a price of $195.1 million, subject to certain possible adjustments. Both the ESA and the Periodic Fee Agreement would be terminated concurrent with the purchase of the LVE assets pursuant to the Purchase Option Agreement.
Other Events
Terminated agreementAgreement to sell Dania Jai-Alai
On April 29, 2011, the Aragon Group and Summersport Enterprises, LLC, two of our indirect wholly-owned subsidiaries (the “Sellers”“Dania Sellers”), and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”“Original Dania Agreement”) for the sale of certain assets and liabilities of Dania Jai-Alai. Pursuant to the terms of the Original Dania Agreement, the Dania Sellers agreed to sell and transfer, and the BuyerDania Entertainment agreed to purchase and assume, certain assets and liabilities related to Dania Jai-Alai, for a purchase price of $80 million. On September 15, 2011, the BuyerDania Entertainment elected to extend the closing date of its pending acquisition of Dania Jai-Alai in Dania Beach, Fla. The sale was then expected to close on or before November 28, 2011. As permitted under the terms of the definitive sale agreement, the BuyerDania Entertainment had made an additional, non-refundable payment of $2 million to Boyd Gaming in exchange for the extension of the closing date. Boyd Gaming previously received a $5 million non-refundable deposit upon execution of the definitive agreement. The Original Dania Agreement provided that the closing of the transactions contemplated by the Original Dania Agreement was to occur on or prior to November 28, 2011; however, on November 28, 2011, we announced the termination of the Original Dania Agreement after receiving notice from the BuyerDania Entertainment that the BuyerDania Entertainment would be unable to close on such date. Accordingly, all non-refundable deposits madeOn February 22, 2013, we and Dania Entertainment entered into the New Dania Agreement for the sale of certain assets and liabilities for a purchase price of $65.5 million as part of a settlement agreement pursuant to which Dania Entertainment dismissed, with prejudice, its lawsuit filed in November 2011 against the Dania Sellers. The closing of the transactions contemplated by the Buyer were forfeited at such date. We remain the owner ofNew Dania Jai-Alai and will continueAgreement is expected to operate the property for the foreseeable future.occur on or prior to May 24, 2013, subject to certain closing conditions.

Agreement with bwin.party
On October 31, 2011, we announced that we had entered into an agreement with bwin.party digital entertainment plc, the world's largest publicly traded online gaming company. Should Congress legalize online poker in the United States, and subject to regulatory approvals, we would acquire a 10% stake in a new company that would offer online poker to United States-based players under bwin.party's brands, including PartyPoker. Separately, we entered into a 15-year agreement to use bwin.party's technology platform and associated services to offer online poker to United States players under a brand we develop, assuming Congress passes enabling legislation.

Acquisition of IP Casino Resort Spa ("IP")
On October 4, 2011, we consummatedcompleted the acquisition of IP Casino Resort Spa ("IP") in Biloxi, Mississippi pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP, on an as-is basis. The net purchase price was approximately $280.6 million. In addition to the net purchase price, the Company intends to perform certain capital improvement projects with respect to the property at an estimated cost of $44 million. The financial position of IP is presented in our consolidated balance sheets as of December 31, 2011;2011 and 2012; and its results of operations are included in our 2011 consolidated statementstatements of operations and cash flows for the period from October 4, 2011 through December 31, 2011.

Consolidation of Borgata
On March 24, 2010, as a result of the amendment to our operating agreement with MGM, which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. As a result, we have consolidated the financial position and results of operations of Borgata from March 24, 2010 through December 31, 2010. Prior period amounts were not restated or recasted as a result of this change. The financial position of Borgata is presented in our consolidated balance sheets as of December 31, 20112012 and 2010;2011; its results of operations for the full year are included in our consolidated statements of operations and cash flows for the years ended December 31, 2012 and 2011; its results of operations

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31, 2011 are included in our consolidated statement of operations and cash flows for the year ended December 31, 2011; its results of operations for the period from March 24, 2010 through December 31, 2010 are included in our consolidated statementstatements of operations and cash flows for the year ended December 31, 2010.

Seasonality
Our cash flows from operating activities are seasonal in nature. Operating results are usually stronger in spring and summer, or during the second and third quarter of our calendar fiscal year, and are traditionally the peak seasons for our business, with autumn and winter being non-peak seasons. Any excess cash flow achieved from operations during peak seasons is used to subsidize non-peak seasons. Performance in non-peak seasons is usually dependent on favorable weather and a long-weekend holiday calendar. In the event that we are unable to generate excess cash flows in one or more peak seasons, we may not be able to subsidize non-peak seasons.
Competition
We face significant competition in each of the jurisdictions in which we operate. Such competition may intensify in some of these jurisdictions if new gaming operations open in these markets or existing competitors expand their operations. Our properties compete directly with other gaming properties in each state in which we operate, as well as in adjacent states. We also compete for customers with other casino operators in other markets, including casinos located on Native American reservations, and other forms of gaming, such as lotteries and internet gaming. Many of our competitors are larger and have substantially greater name recognition and marketing and financial resources. In some instances, particularly with Native American casinos, our competitors pay substantially lower taxes or no taxes at all. We believe that increased legalized gaming in other states, particularly in areas close to our existing gaming properties such as Texas, Ohio, Illinois, Indiana, Kentucky or Oklahoma and the development or expansion of Native American gaming in or near the states in which we operate, could create additional competition for us and could adversely affect our operations or future development projects. There is also current legislation pending in certain states, such as Nevada, California and Iowa, to legalize internet gaming in their states. Internet gaming could create additional competition for us and could adversely affect our operations.
Government Regulation
We are subject to extensive regulation under laws, rules and supervisory procedures primarily in the jurisdictions where our facilities are located or docked. If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals have been introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and us. We do not know whether or not such legislation will be enacted. The federal government has also previously considered a federal tax on casino revenues and the elimination of betting on NCAA events and may consider such a tax or eliminations on betting in the future. In addition, gaming companies are currently subject to significant state and local taxes and fees in addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any time. Any material increase in these taxes or fees could adversely affect us.
Some jurisdictions, including Nevada, Illinois, Indiana, Louisiana, Mississippi and New Jersey, empower their regulators to investigate participation by licensees in gaming outside their jurisdiction and require access to periodic reports respecting those gaming activities. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions.
For a more detailed description of the regulations to which we are subject, please see Exhibit 99.1, “Government Gaming Regulations” which is electronically filed herewith.
Employees and Labor Relations
At December 31, 2011,2012, we employed approximately 22,96025,247 persons, of which 16,76419,390 were employed by Boyd Gaming Corporation and 6,1965,857 were employed by Borgata. On such date, Boyd had collective bargaining agreements with fourthree unions covering 1,5781,528 employees and Borgata had collective bargaining agreements with four unions covering 2,3982,276 employees. Other agreements are in various stages of negotiation. Employees covered by expired agreements have continued to work during the negotiations, in two cases under the terms of the expired agreements.
Corporate Information
We were incorporated in Nevada in June 1988. Our principal executive offices are currently located at 3883 Howard Hughes Parkway, Ninth Floor, Las Vegas, NV 89169, and our main telephone number is (702) 792-7200. Our website is www.boydgaming.com.
Available Information

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We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). You may read and copy, at prescribed rates, any document we have filed at the SEC's public reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 (1-800-732-0330) for further information on the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC (http://www.sec.gov). You also may read and copy reports and other information filed by us at the office of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

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We make our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and all amendments to these reports, available free of charge on our corporate website as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. In addition, our Code of Business Conduct, Corporate Governance Guidelines, and charters of the Audit Committee, Compensation and Stock Option Committee, and the Corporate Governance and Nominating Committee are available on our website. We will provide reasonable quantities of electronic or paper copies of filings free of charge upon request. In addition, we will provide a copy of the above referenced charters to stockholders upon request.
Important Information Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements contain words such as “may,” “will,” “might,” “expect,” “believe,” “anticipate,” “outlook,” “could,” “would,” “estimate,” “continue,” “pursue,” “target,” “project,” “intend,” “plan,” “seek,” “estimate,” “should,” “may,” “assume,” and “continue,” or the negative thereof or comparable terminology, and may include statements regarding (all capitalized terms have the meaning ascribed to such terms throughout this Annual Report on Form 10-K):
the factors that contribute to our ongoing success and our ability to be successful in the future;
our business model, areareas of focus and strategy for realizing improved results when normalized business volumes return;
competition, including expansion of gaming into additional markets, the impact of competition on our operations, our ability to respond to such competition, and our expectations regarding continued competition in the markets in which we compete;
expenses;our estimated effective income tax rates; estimated tax benefits; and merits of our tax positions;
the general effect, and expectation, of the national and global economy on our business, as well as the economies where each of our properties are located;
our commitmentbelief as to having a significant presence on the Las Vegas Strip;resiliency of certain of the local economies where certain of our properties are located;
our expenses;
indebtedness, including Boyd Gaming's and Borgata's ability to refinance or pay amounts outstanding under our respective bank credit facilities and notes when they become due and our compliance with related covenants, and our expectation that we and Borgata will need to refinance all or a portion of our respective indebtedness at or before maturity;
our expectations with respect to Borgata, including our responsibility and control over day-to-day operations and the managerial resources we expect to devote to effectuate the sale of the MGM Interest;
our statements with respect to our B Connected loyalty program, including its ability to drive profitable business to our properties;
our belief that Borgata's future results will be negatively impacted the opening of a new property in Atlantic City;
our expectation regarding the trends that will affect the gaming industry over the next few years and the impact of these trends on merger and acquisition activity in general;
our belief that consumer confidence will strengthen as the job market recovers and expands;
our expectations with respect to the valuation of Borgata's tangible and intangible assets;
the type of covenants that will be included in any future debt instruments;
our expectations with respect to continued disruptions in the global capital markets, the effect of such disruptions on consumer confidence and reduced levels of consumer spending and the impact of these trends on our financial results;
our ability to meet our projected operating and maintenance capital expenditures and the costs associated with our expansion, renovations and development of new projects;
our ability to pay dividends or to pay any specific rate of dividends, and our expectations with respect to the receipt of dividends from Borgata;

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our commitment to finding opportunities to strengthen our balance sheet and to operate more efficiently;
our intention to pursue acquisition opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price;
our intention to fund purchases made under our share repurchase program, if any, with existing cash resources and availability under our Second Amended and Restated Credit Facility;Agreement (as amended, the “Credit Facility”);
our assumptions and expectations regarding our critical accounting estimates;
Adjusted EBITDA, Adjusted Earnings (Loss) and Adjusted Earnings Per Share and their usefulness as measures of operating performance or valuation;
our expectations for capital improvement projects with respect to IP;IP and Peninsula;
the impact of new accounting pronouncements on our consolidated financial statements;
that our Amended Credit Facility, and Borgata'sthe MDFC $150 million payment priority secured revolving credit facility (the "Borgata bank credit facility") and the Peninsula Gaming $875.0 million senior secured credit facility (the “Peninsula

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Credit Facility”) and our respective cash flows from operating activities will be sufficient to meet our respective projected operating and maintenance capital expenditures for the next twelve months;
our ability to fund any expansion projects using cash flows from operations and availability under the Credit Facility;
our market risk exposure and efforts to minimize risk;
the timing of the delay of construction at Echelon, when, or if, construction will recommence, the effect that such delay will have on our business, operations or financial condition, our expectations as to the costs associated with wind-down procedures and delays related to the project as well as the value of capitalized costs and recurring costs we expect to incur in the future, and our belief that financing for a development project like Echelon continues to be unavailable;
expansion, development, investment and renovation plans, including the scope of such plans, expected costs, financing (including sources thereof and our expectation that long-term debt will substantially increase in connection with such projects), timing and the ability to achieve market acceptance;
our belief that, except for the Copeland matter (as discussed below),herein, all pending claims, if adversely decided, will not have a material adverse effect on our business, financial position or results of operations;
that margin improvements will remain a driver of profit growth for us going-forward;
our belief that the risks to our business associated with USCGthe United States Coast Guard, ("USCG") inspection should not change by reason of inspection by American Bureau of Shipping Consulting, ABSC.("ABSC").
development opportunities in existing or new jurisdictions and our ability to successfully take advantage of such opportunities;
regulations, including anticipated taxes, tax credits or tax refunds expected, and the ability to receive and maintain necessary approvals for our projects;
our expectation that Congress legalizes online gaming in the United States;
our asset impairment analyses and our intangible asset and goodwill impairment tests;
the resolution of our pending litigation, including the litigation involving Treasure Chest casino;
our relationship with LVE including, without limitation, our mutual agreement to not initiate litigation, the monthly periodic fee and our option to purchase LVE's assets;
the likelihood of interruptions to our rights in the land we lease under long-term leases for certain of our hotel and casinos;
the outcome of various tax audits and assessments, including our appeals thereof, timing of resolution of such audits, our estimates as to the amount of taxes that will ultimately be owed and the impact of these audits on our consolidated financial statements;
the impact of our Nevada use tax refund claims;
our overall outlook, including all statements under the heading Overall Outlook in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations;

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our ability to receive insurance reimbursement and our estimates of self-insurance accruals and future liability;
that operating results for previous periods are not necessarily indicative of future performance;
that estimates and assumptions made in the preparation of financial statements in conformity with U.S. GAAP may differ from actual results;
our expectations regarding our cost containment efforts;
the benefits of the Peninsula Acquisition, the effect of the Peninsula Acquisition on Boyd Gaming's future financial results and profile, the impact for customers and employees, future capital expenditures, expenses, revenues, earnings, economic performance, financial condition, losses and future prospects;
the impact of the financing we entered into in connection with the Peninsula Acquisition;
the anticipated benefits of geographical diversity resulting from the Peninsula Acquisition;
the future results of Peninsula Gaming's gaming properties, including without limitation, Kansas Star;
our belief that recently issued accounting pronouncements discussed in this Annual Report on Form 10-K will not have a material impact on our financial statements.
our expectations with respect to qualification of the Echelon development project for LEED Silver Standard (or equivalent) certification;statements;
our estimates as to the effect of any changes in our Consolidated EBITDA on our ability to remain in compliance with certain Amended Credit Facility covenants;
the anticipated closing of the sale of Dania Jai-Alai to Dania Entertainment pursuant to the New Dania Agreement;
the anticipated new development project with Sunrise Sports Entertainment, and the passage of enabling legislation;
the anticipated new development project with Wilton Rancheria, and the passage of enabling legislation;
expectations, plans, beliefs, hopes or intentions regarding the future.future, and:
assumptions underlying any of the foregoing statements.
Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include:
The effects of intense competition that exists in the gaming industry.
The economic downturn and its effect on consumer spending.
The fact that our expansion, development and renovation projects (including enhancements to improve property performance) are subject to many risks inherent in expansion, development or construction of a new or existing project, including:
design, construction, regulatory, environmental and operating problems and lack of demand for our projects;

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delays and significant cost increases, shortages of materials, shortages of skilled labor or work stoppages;
poor performance or nonperformance of any of our partners or other third parties upon whom we are relying in connection with any of our projects;
construction scheduling, engineering, environmental, permitting, construction or geological problems, weather interference, floods, fires or other casualty losses;
failure by us, our partners, or Borgata to obtain financing on acceptable terms, or at all; and
failure to obtain necessary government or other approvals on time, or at all.
The risk that our ongoing suspension of construction at Echelon may result in adverse effects on our business, results of operations or financial condition or other resulting liabilities.
The risk that USCG may not continue to allow in-place underwater inspections of our riverboats.
The risk that any of our projects may not be completed, if at all, on time or within established budgets, or that any project will result in increased earnings to us.
The risk that significant delays, cost overruns, or failures of any of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.
The risk that our projects may not help us compete with new or increased competition in our markets.
The risk that new gaming licenses or jurisdictions become available (or offer different gaming regulations or taxes) that results in increased competition to us.
The risk associated with owning real property, including environmental regulation and uncertainties with respect to environmental expenditures and liabilities;
The risk associated with challenges to legalized gaming in existing or current markets;

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The risk that the actual fair value for assets acquired and liabilities assumed from any of our acquisitions differ materially from our preliminary estimates.
The risk that negative industry or economic trends, including the market price of our common stock trading below its book value, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business, may result in significant write-downs or impairments in future periods.
The risks associated with growth and acquisitions, including our ability to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems.
The risk that we may not receive gaming or other necessary licenses for new projects or that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other adverse actions against any of our casino operations.
Our inability to select the new joint venture partner for Borgata and the possibility that a new operating agreement will be entered into with the new venture partner, which could result in changes to Borgata's ongoing operations.
The risk that we may be unable to finance our expansion, development, investment and renovation projects, including cost overruns on any particular project, as well as other capital expenditures through cash flow, borrowings under our Amended Credit Facility or the Borgata's bank credit facility,Credit Facility, as amended, and additional financings, which could jeopardize our expansion, development, investment and renovation efforts.
The risk that we or Borgata may be unable to refinance our respective outstanding indebtedness as it comes due, or that if we or Borgata do refinance, the terms are not favorable to us or them.
Risks associated with our ability to comply with the Total Leverage, Secured Leverage and Interest Coverage ratios as defined in our Amended Credit Facility, and the risks associated with Borgata's ability to comply with the minimum consolidated EBITDA and minimum liquidity covenants in its Borgata bank credit facility, as amended;facility;
The risk that we ultimately may not be successful in dismissing the action filed against Treasure Chest and may lose our ability to operate that property, which result could adversely affect our business, financial condition and results of operations.
The effects of the extensive governmental gaming regulation and taxation policies that we are subject to, as well as any changes in laws and regulations, including increased taxes, which could harm our business.
The effects of federal, state and local laws affecting our business such as the regulation of smoking, the regulation of directors, officers, key employees and partners and regulations affecting business in general.
The effects of extreme weather conditions or natural disasters on our facilities and the geographic areas from which we draw our customers, and our ability to recover insurance proceeds (if any).
The risks relating to mechanical failure and regulatory compliance at any of our facilities.
The risk that the instability in the financial condition of our lenders could have a negative impact on our Amended Credit Facility and Borgata'sthe Borgata bank credit facility, as amended.
The effects of events adversely impacting the economy or the regions from which we draw a significant percentage of our customers, including the effects of the current economic recession, war, terrorist or similar activity or disasters in, at, or around our properties.
The effects of energy price increases on our cost of operations and our revenues.
Financial community and rating agency perceptions of us, and the effect of economic, credit and capital market conditions on the economy and the gaming and hotel industry.

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The effect of the expansion of legalized gaming in the mid-Atlantic region.
Borgata's expected liabilities under the multiemployer pensions in which it operates.
Additional factors that could cause actual results to differ are discussed in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K for the year ended December 31, 20112012 and in other current and periodic reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.


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ITEM 1A. Risk Factors
ITEM 1A.Risk Factors
The material risks and uncertainties that management believes affect us are described below. This report is qualified in its entirety
by these risk factors.
If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our securities, including our common stock, senior notes and senior subordinated notes, as well as Borgata's senior secured notes, could decline significantly, and investors could lose all or part of their investment. We encourage investors to also review the risks and uncertainties relating to our business contained in Part I, Item 1, Business - Important Information Regarding Forward-Looking Statements.
 
Risks Related to our Business
Our business is particularly sensitive to reductions in discretionary consumer spending as a result of downturns in the economy.
Consumer demand for entertainment and other amenities at casino hotel properties, such as ours, are particularly sensitive to downturns in the economy and the corresponding impact on discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions, effects of the current decline in consumer confidence in the economy, including the current housing, employment and credit crisis, the impact of high energy and food costs, the increased cost of travel, the potential for continued bank failures, decreased disposable consumer income and wealth, or fears of war and future acts of terrorism could further reduce customer demand for the amenities that we offer, thus imposing practical limits on pricing and negatively impacting our results of operations and financial condition.
For example, the year ended December 31, 2009 waswe have recently experienced one of the toughest economic periods in Las Vegas Locals history. The current housing crisis and economic slowdown in the United States has resulted in a significant decline in the amount of tourism and spending in Las Vegas. Similarly, weak economic conditions have also adversely affected tourism and spending in Atlantic City, where Borgata is located. Since our business model relies on consumer expenditures on entertainment, luxury and other discretionary items, continuation or deepening of the economic downturn will further adversely affect our results of operations and financial condition.
Intense competition exists in the gaming industry, and we expect competition to continue to intensify.
The gaming industry is highly competitive for both customers and employees, including those at the management level. We compete with numerous casinos and hotel casinos of varying quality and size in market areas where our properties are located. We also compete with other non-gaming resorts and vacation destinations, and with various other casino and other entertainment businesses, and could compete with any new forms of gaming that may be legalized in the future. The casino entertainment business is characterized by competitors that vary considerably in their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent and geographic diversity. In most markets, we compete directly with other casino facilities operating in the immediate and surrounding market areas. In some markets, we face competition from nearby markets in addition to direct competition within our market areas.

For example, the Kansas Star is located approximately 33 miles north of the Kansas/Oklahoma border and faces competition from established gaming facilities in Kansas and Oklahoma, including First Council Casino, Native Lights Casino, and Kaw Southwind Casino, which are located in Newkirk Oklahoma approximately 60 miles south of the Kansas Star, in addition to potential expansion of gaming facilities in Oklahoma. The Kansas Star may face additional competition in the Wichita, Kansas metropolitan area. The Wyandotte Nation of Oklahoma has filed an application with the U.S. Department of Interior to have certain land located in Park City, Kansas (in the Wichita metro area) taken into trust by the U.S. Government and to permit gaming. If successful, the Wyandotte Nation would be permitted to open a Class II gaming facility, and upon successful negotiation of a compact with the State of Kansas would be permitted to open a Class III gaming facility. In July 2011, the Wyandotte Nation brought suit against the Secretary of the U.S. Department of Interior to compel the Secretary to take the Park City land into trust. This litigation is ongoing.

In recent years, with fewer new markets opening for development, competition in existing markets has intensified. We have invested in expanding existing facilities, developing new facilities, and acquiring established facilities in existing markets. In addition, our competitors have also invested in expanding their existing facilities and developing new facilities. This expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies of many of our

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competitors have increased competition in many markets in which we compete, and this intense competition can be expected to continue. For example, on May 25, 2012, a new property was opened in Atlantic City which will compete with Borgata for gaming customers. In addition, competition may intensify if our competitors commit additional resources to aggressive pricing and promotional activities in order to attract customers.
If our competitors operate more successfully than we do, if they attract customers away from us as a result of aggressive pricing and promotion, if they are more successful than us in attracting and retaining employees, if their properties are enhanced or expanded, if they operate in jurisdictions that give them operating advantages due to differences or changes in gaming regulations or taxes, or if additional hotels and casinos are established in and around the locations in which we conduct business, we may lose market share or the ability to attract or retain employees. In particular, the expansion of casino gaming in or near any geographic area from which we attract or expect to attract a significant number of our customers could have a significant adverse effect on our business, financial condition and results of operations.
Also, our business may be adversely impacted by the additional gaming and room capacity in states which may be competitive in the other markets where we operate or intend to operate. Several states are also considering enabling the development and operation of casinos or casino-like operations in their jurisdictions.
For example, the expansion of casino gaming in or near the mid-Atlantic region from which Borgata attracts and expects to attract most of its customers has had an adverse effect on its business, results of operations and financial condition. In January 2010,

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table game legislation was signed into Pennsylvania law which allows up to 250 table games at each of the twelve largest authorized casinos and up to 50 table games at each of the remaining two smaller authorized casinos. Table games became operational at the existing casinos in the Philadelphia region in mid-July 2010. In addition, other states near New Jersey, including New York and Delaware, either have or are currently contemplating gaming legislation. In January 2010, Delaware legalized table games, which became operational in June 2010 at all three Delaware casinos. Convenience may be a more important factor than amenities for some customers, especially mid-week and repeat customers. These customers may prefer the convenience of a closer drive to a nearby casino rather than dealing with a longer drive to enjoy the amenities that Borgata has to offer. Expansion of gaming facilities in Pennsylvania and other nearby states therefore has resulted in fewer customer visits to Borgata, which has adversely impacted Borgata's business, results of operations and financial condition.
We alsoIn addition, we compete with legalized gaming from casinos located on Native American tribal lands. Expansion of Native American gaming in areas located near our properties, or in areas in or near those from which we draw our customers, could have an adverse effect on our operating results. For example, increased competition from federally recognized Native American tribes near Blue Chip and Sam's Town Shreveport has had a negative impact on our results. Native American gaming facilities typically have a significant operating advantage over our properties due to lower gaming taxes, allowing those facilities to market more aggressively and to expand or update their facilities at an accelerated rate. Although we have expanded our facility at Blue Chip in an effort to be more competitive in this market, competing Native American properties could continue to have an adverse impact on the operations of both Blue Chip and Sam's Town Shreveport.
We also compete to some extent with other forms of gaming on both a local and national level, including state-sponsored lotteries, charitable gaming, on-and off-track wagering, Internet gaming, and other forms of entertainment, including motion pictures, sporting events and other recreational activities. It is possible that these secondary competitors could reduce the number of visitors to our facilities or the amount they are willing to wager, which could have a material adverse effect on our ability to generate revenue or maintain our profitability and cash flows.

Increased competition may require us to make substantial capital expenditures to maintain and enhance the competitive positions of our properties, including updating slot machines to reflect changing technology, refurbishing public service areas periodically, replacing obsolete equipment on an ongoing basis and making other expenditures to increase the attractiveness and add to the appeal of our facilities. Because we are highly leveraged, after satisfying our obligations under our outstanding indebtedness, there can be no assurance that we will have sufficient funds to undertake these expenditures or that we will be able to obtain sufficient financing to fund such expenditures. If we are unable to make such expenditures, our competitive position could be materially adversely affected.
The global financial crisis and decline in consumer spending may have an effect on our business and financial condition in ways that we currently cannot accurately predict.
The significant economic distress affecting financial institutions has had, and may continue to have, far-reaching adverse consequences across many industries, including the gaming industry. Volatility in the financial markets and the weakened global economy, together with the recent downgrade of the United States credit rating and ongoing European debt crisis, havehas contributed to the current uncertain economic climate. The ongoing credit and liquidity crisis has greatly restricted the availability of capital and has caused the cost of capital (if available) to be much higher than it has traditionally been. Therefore, we have no assurance

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that we will have further access to credit or capital markets at desirable times or at rates that we would consider acceptable, and the lack of such funding could have a material adverse effect on our business, results of operations and financial condition, including our ability to refinance our or Borgata's indebtedness, our flexibility to react to changing economic and business conditions and our ability or willingness to fund new development projects.
 
We are not able to predict the duration or severity of economic downturns or the resulting impact on the solvency or liquidity of our lenders. If a large percentage of our lenders were to file for bankruptcy or otherwise default on their obligations to us, we may not have the liquidity under our Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”)Facility to fund our current projects. There is no certainty that our lenders will continue to remain solvent or fund their respective obligations under our Amended Credit Facility. If we were otherwise required to renegotiate or replace our Amended Credit Facility, there is no assurance that we would be able to secure terms that are as favorable to us, if at all.
We may incur impairments to goodwill, indefinite-lived intangible assets, or long-lived assets.
In accordance with the authoritative accounting guidance for goodwill and other intangible assets, we test our goodwill and indefinite-lived intangible assets for impairment annually or if a triggering event occurs. We performDuring the fourth quarter of 2012, the Company changed the date of its annual goodwill intangible assets impairment test dates to October 1. Prior to the fourth quarter of 2012, the Company performed annual impairment tests on its goodwill on April 1 and October 1. The change in the impairment test dates for all reporting units to October 1 did not delay, accelerate or avoid an impairment charge, as the January 1 and April 1 tests were performed on their respective test dates during 2012, and did not result in any impairment. Management believes that the new impairment test date is preferable because it is more closely aligned with the Company's annual financial planning process. These financial plans are a key component utilized in the annual impairment testing for goodwill and indefinite-lived intangible assetsprocess. The change in the second quarterimpairment test dates constitutes a change in accounting principle under ASC 250, “Accounting for Changes and Error Corrections,” and had no impact on the Company's consolidated balance sheet, statement of operations or cash flows. The Company determined it was impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each fiscal year. October 1 for periods prior to October 1, 2012 without the use of hindsight.  As such, the Company has prospectively applied the change in annual goodwill impairment testing date from October 1, 2012.

The results of our annual scheduled impairment test of goodwill and indefinite-lived intangible assets did not require us to record an impairment charge during the yearnine months ended September 30, 2012; however, in December 31, 2011. However, as discussed below, if2012, we reconsidered our estimatescommitment to complete the Echelon project and concluded that we would not resume development. On March 4, 2013, we sold the Echelon site and related improvements on the site and received net proceeds of projected cash flows related to these assets are not achieved, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements. $157.0 million.

In addition, to our annual scheduled impairment test, in accordance with the provisions of the authoritative accounting guidance for the impairment or disposal of long-lived assets, we test certain long-lived assets for impairment if a triggering event occurs. During the first quarter ofthree months ended March 31, 2011, we performed an interim impairment test ofon the trademark we recorded in connection with the valuation of Borgata due to our consideration of a change in facts and circumstances surrounding an adverse change in the business climate in the Atlantic City region. As a result, we recorded an impairment charge ofa $5.0 million impairment to the trademark.
We are entirely dependent upon our properties for future cash flows and our continued success depends on our ability to draw customers The impairment test was performed due to our properties. Significant negative industry or economic trends, reduced estimatesconsideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, Borgata's projected future cash flows, disruptionsresults could be further negatively impacted by a new property that formally opened in Atlantic City, on May 25, 2012. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to our business, slower growth rates or lackthe results of growththis impairment test.

Having performed an initial interim impairment test related to the Borgata trademark during the first quarter of 2011, we have established the first quarter as its prospective annual impairment test date as well, and we performed an interim impairment test over the Borgata trademark at January 1, 2012. Our analyses consisted of a valuation of the Borgata trademark, using the relief from royalty method. The only significant changes in our business have resulted in significant write-downsassumptions from the initial fair valuation were revised revenue and profitability projections, reflecting the impact of the changed present and forecasted circumstances. The impairment charges duringtest consisted of a comparison of the years ended December 31, 2009 and 2008. If one or morefair value of such negative events were to recur, additionaltrademark with its carrying amount. As a result of the impairment charges may be required in future periods. Iftest, we are required todid not record additionalany impairment charges, this could have a material adverse impact on our consolidated financial statements.

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In August 2008, due to the difficult environment in the capital markets, as well as weak economic conditions,first quarter of 2012.

On August 1, 2008, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area;area, nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorptionamount of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.

The change in circumstances implies that the carrying amounts of the assets related to Echelon may not be recoverable; therefore, we performed an impairment test of these assets during the years ended December 31, 2011 2010, and 2009. We initially performed this evaluation during the year ended December 31, 2009, when the continued suspension was announced and have reconsidered our assumptions on a regular basis since such date. However, due to the degradation in economic conditions in the intervening period since, we have performed these analyses during the year ended December 31, 2011 to evaluate any further depression in real estate or land values as well as any deterioration in our initial cash flow assumptions.2010. The outcome of this evaluation did not resultthese evaluations resulted in anno impairment of Echelon's assets, as the estimated weighted net undiscounted cash flows from the project exceedexceeded the current carrying value of the assets of approximately $1.1 billion at both December 31, 2011 and 2010. AsHowever,

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during the three months ended December 31, 2012, we further developreconsidered our commitment to complete the Echelon project and exploreconcluded we would not resume development. On March 4, 2013, we sold the Echelon site and related improvements on the site and received net proceeds of $157.0 million. Based on the exploration of the viability of alternatives for the project, in the three months ended December 31, 2012, we will continue to monitor these assets for recoverability. If we are subject torecorded a non-cash write-downimpairment charge of theseapproximately $1.0 billion based on the difference between the book value of the assets it could haveand the estimated realizable value of the assets.

We also recorded a material adverse impact on our consolidated financial statements.non-cash impairment charge of $17.5 million to the Sam's Town Shreveport gaming license in connection with the annual impairment test. During the year ended December 31, 2012, this property's operating results were less than expected due to weaker than anticipated discretionary consumer spending and increased competition.
Due to the circumstances regarding the final development plan of Echelon, we reviewed our former investment in Morgans/LV Investment LLC ("Morgans"), a joint venture with Morgans Hotel Group Co., for impairment during the year ended December 31, 2009. Considering the subsequent mutual termination of this joint venture, certain of our contributions, primarily related to the architectural and design plans, were ultimately not realizable and, as a result, we recorded an other-than-temporary non cash impairment charge of $13.5 million during the year ended December 31, 2009 related to such costs.
In addition, during the year ended December 31, 2009, in conjunction with an amendment to the Original Dania Jai-Alai purchase agreementAgreement to settle the contingent payment prior to the satisfaction of the legal conditions, we recorded the remaining $28.4 million of the $75 million contingent liability as an additional cost of the acquisition (by increasing goodwill). We tested the goodwill for recoverability, which resulted in a noncashnon-cash impairment charge of $28.4 million during the year ended December 31, 2009.

If our estimates of projected cash flows related to our assets are not achieved, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

Our partner in the Holding Company, the limited liability company that owns and operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey, has divested its 50% interest and we do not have the ability to select the new partner.
We own a 50% controlling interest in the limited liability company that operates Borgata. MGM currently beneficially owns the other 50% interest. As a result of the New Jersey Department of Gaming Enforcement's (the "NJDGE") investigation of MGM's relationship with its joint venture partner in Macau, MGM entered into a settlement agreement with the NJDGE and the New Jersey Casino Control Commission (the "NJCCC") under which MGM placed its 50% ownership interest in Borgata (the "MGM Interest") into a divestiture trust (the "Divestiture Trust"), which was established for the purpose of selling the MGM Interest to a third party. On February 20, 2013, MGM announced that it had entered into an amendment with the NJDGE, effective February 13, 2013, pursuant to which MGM was allowed to reapply to the New Jersey Casino Control Commission for licensure in New Jersey with the deadline to sell the MGM Interest deferred pending the outcome of the licensure process.
We are the managing member of the limited liability company that operates Borgata, and have been, and will continue to be responsible for the day-to-day operations of Borgata, including the operations and improvement of the facility and business. Additionally, we hold a right of first refusal on any sale of the MGM Interest in Borgata. However, if MGM's efforts to be relicensed in New Jersey fail and they are forced to sell the MGM Interest, we believe we will need to expend managerial resources to effectuate the eventual sale of the MGM Interest from the Divestiture Trust to a new partner, regardless of whether we exercise our right of first refusal. Other than exercising our right of first refusal, we generally do not have the ability to affect the selection of the potential new partner at Borgata.
While we believe we will retain direct control of the operations of Borgata, based on our current operating agreement, a new partner may want to negotiate greater rights or different terms. If we agree to consider changes to the operating agreement, these negotiations may decrease our ability to directly control the facility and effectively manage our financial risk. Any new partner could have economic or business interests or goals that are inconsistent with our economic or business interests or goals. The ongoing operation of the facility could change if we agree to negotiate agreements with a new partner that contain terms that differ from our existing operating agreement.
In addition, Borgata'sthe Borgata bank credit facility, as amended, matures in August 2014. At the time of maturity, if Borgata is unable to refinance its bank credit facility on favorable terms, additional credit support and/or capital contributions in the form of equity may be necessary to fund the ongoing operations of Borgata. This additional credit and/or equity may need to be contributed by us or a new partner, if any, or from both. If we are unable to obtain adequate financing in a timely manner, or at all, we may be

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unable to meet the operating cash flow needs of Borgata, and our investment would be at risk. Moreover, if any new partner does not have the financial resources to meet its share of the obligations, or subsequently declares bankruptcy, we could be required to fund more than our 50% share.

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We face risks associated with growth and acquisitions.
As part of our business strategy, we regularly evaluate opportunities for growth through development of gaming operations in existing or new markets, through acquiring other gaming entertainment facilities or through redeveloping our existing gaming facilities. For example, in November 2012, we completed the Peninsula Acquisition, and in October 2011, we consummatedcompleted the acquisition of the IP. In February 2007, we completed the Barbary Coast exchange transaction. In January 2009, we completed the hotel construction project at Blue Chip. We may also pursue expansion opportunities, including joint ventures, in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. The expansion of our operations, whether through acquisitions, development or internal growth, could divert management's attention and could also cause us to incur substantial costs, including legal, professional and consulting fees. There can be no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems. Additionally, there can be no assurance that we will receive gaming or other necessary licenses or approvals for our new projects or that gaming will be approved in jurisdictions where it is not currently approved.

Ballot measures or other voter-approved initiatives to allow gaming in jurisdictions where gaming, or certain types of gaming (such as slots), was not previously permitted could be challenged, and, if such challenges are successful, these ballot measures or initiatives could be invalidated. Furthermore, there can be no assurance that there will not be similar or other challenges to legalized gaming in existing or current markets in which we may operate or have development plans, and successful challenges to legalized gaming could require us to abandon or substantially curtail our operations or development plans in those locations, which could have a material adverse effect on our financial condition and results of operations.

In August 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.
We can provide no assurances as to when, or if, construction will resume on Echelon, or if we will be able to obtain alternative sources of financing for the project. We can provide no assurances regarding the timing or effects of our delay of construction at Echelon and when, or if, construction will recommence, or the effect that such delay will have on our business, operations or financial condition. In addition, our agreements or arrangements with third parties could require additional fees or terms in connection with modifying their agreements that may be unfavorable to us, and we can provide no assurances that we will be able to reach agreement on any modified terms.
There can be no assurance that we will not face similar challenges and difficulties with respect to new development projects or expansion efforts that we may undertake, which could result in significant sunk costs that we may not be able to fully recoup or that otherwise have a material adverse effect on our financial condition and results of operations.
 
Our expansion and development of Echelon Resortsopportunities, including the development costs associated with the Kansas Star facility, may face significant risks inherent in construction projects.
We regularly evaluate expansion, development, investment and renovation opportunities. On January 4, 2006,For example, we announced our planned Las Vegas Stripare undergoing further development Echelon,of the Kansas Star facility, which represents the largest and most expensive development project we have undertaken to date.entails significant risks.

This project and any other development projects we may undertake will be subject to the many other risks inherent in the expansion or renovation of an existing enterprise or construction of a new enterprise, including unanticipated design, construction, regulatory, environmental and operating problems and lack of demand for our projects. Our current and future projects could also experience:

changes to plans and specifications (including changes for the Kansas Star construction facility, some of which may require the approval of the Kansas Lottery Commission);
delays and significant cost increases;
shortages of materials;
shortages of skilled labor or work stoppages for contractors and subcontractors;
labor disputes or work stoppages;
disputes with and defaults by contractors and subcontractors;
health and safety incidents and site accidents;
engineering problems, including defective plans and specifications;
poor performance or nonperformance by any of our joint venture partners or other third parties on whom we place reliance;
changes in laws and regulations, or in the interpretation and enforcement of laws and regulations, applicable to gaming facilities, real estate development or construction projects, including by the Kansas Racing and Gaming Commission;
unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems;
environmental issues, including the discovery of unknown environmental contamination;
weather interference, floods, fires or other casualty losses;
other unanticipated circumstances or cost increases; and
failure to obtain necessary licenses, permits, entitlements or other governmental approvals.
The occurrence of any of these development and construction risks could increase the total costs of our construction projects, including the Kansas Star facility, or delay or prevent the construction or opening or otherwise affect the design and features of our construction projects, such as the Kansas Star facility, which could materially adversely affect our plan of operations, financial condition and ability to satisfy our debt obligations.

We have entered into a fixed-price, or guaranteed maximum price, contract with a construction manager for the construction of

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the first phase of the Kansas Star facility, however there is no guarantee we will be able to do so with respect to construction of the final phase of the development. As a result, we may be required to rely heavily on our in-house development and
weather interference, floods, fires or other casualty losses.
construction team to manage construction costs and coordinate the work of the various trade contractors. The completion dateslack of any fixed-price contract with a construction manager or general contractor for construction of the final phase would put more of the risk of cost-overruns on us. If we are unable to manage costs or we are unable to raise additional capital required to complete the Kansas Star facility, we may not be able to complete the project, which may have an adverse impact on our projects could differ significantly from expectationsbusiness and prospects for construction-related or other reasons.growth.
In addition, actual costs and construction periods for any of our projects can differ significantly from initial expectations. Our initial project costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared at inception of the project in consultation with architects and contractors. Many of these costs can increase over time as the project is built to completion. We have incurred significant incremental costs in connection with delaying construction of Echelon and anticipate that additional cost increases could continue to occur if and when we recommence development of Echelon.
Additional costs upon restarting construction of Echelon could include, without limitation, costs associated with remobilization, changes in design, increases in material, labor, or insurance costs, construction code changes during the delay period, corrosive damage risk, damage to uncompleted structures, etc. The cost of any project may vary significantly from initial budget expectations and we may have a limited amount of capital resources to fund cost overruns. If we cannot finance cost overruns on a timely basis, the completion of one or more projects may be delayed until adequate funding is available. We can provide no assurance that any project will be completed on time, if at all, or within established budgets, or that any project will result in increased earnings to us. Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.

OurThe failure to obtain necessary government approvals in a timely manner, or at all, can adversely impact our various expansion, development, investment and renovation projects may face significant risks inherent in construction projects or implementing a new marketing strategy, including receipt of necessary government approvals.projects.
Certain permits, licenses and approvals necessary for some of our current or anticipated projects have not yet been obtained. The scope of the approvals required for expansion, development, investment or renovation projects can be extensive and may include gaming approvals, state and local land-use permits and building and zoning permits. Unexpected changes or concessions required by local, state or federal regulatory authorities could involve significant additional costs and delay the scheduled openings of the facilities. We may not obtain the necessary permits, licenses and approvals within the anticipated time frames, or at all.

In addition, although we design our projects to minimize disruption of our existing business operations, expansion and renovation projects require, from time to time, all or portions of affected existing operations to be closed or disrupted. For example, to make way for the development of Echelon, we closed Stardust in November 2006 and demolished the property in March 2007. Any significant disruption in operations of a property could have a significant adverse effect on our business, financial condition and results of operations.

LVE isThe development costs of the Kansas Star facility are estimates only, and actual development costs may be higher than expected.
We have developed our budgets based on our plans, which are subject to change. We expect the total development cost of the Kansas Star facility to be approximately $329 million, including the privilege fee, construction costs, land acquisition costs, development costs relating to a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts, we have entered into an ESA with LVE, to design, build, own (other than the underlying real propertyhotel which is leased from Echelon Resorts)being developed by a third party, costs of furniture, fixtures and operate a central energy centerequipment, pre-opening expenses, initial cage cash, and related distribution systemother development costs. While we believe that the overall budget for the development costs for the Kansas Star facility is reasonable, these development costs are only estimates and the actual development costs may be significantly higher than expected. Unforeseen or unexpected difficulties or delays during construction may also adversely impact the Kansas Star facility's budget. Our inability to pay development costs as they are incurred will negatively affect our planned Echelon resort development. Pursuantability to complete the ESA, LVE will provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associatedKansas Star facility on time.
Our Lottery Gaming Facility Management Contract with the Echelon developmentState of Kansas contractually obligates us to open certain phases of our project or other third parties. However, sinceby certain specified dates. For example, with certain exceptions, our permanent gaming facility must be completed by January 14, 2013, and our entire construction project (as set forth in the Management Contract) must be completed no later than January 14, 2015. If we are obligatedfail to purchase substantially all of the output of the central energy center,meet these future completion dates, we are the primary beneficiary under the terms of the ESA.
LVE has suspended construction of the central energy center while the Echelon project is delayed. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unlessManagement Contract. If we breach our Management Contract, the State of Kansas has certain remedies, up to and including cancellation of our contract, which if it recommenced and proceeded with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter. On March 7, 2011, Echelon Resorts and LVE entered into bothoccurred, would cause a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). Under the Periodic Fee Agreement, Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. The prohibition on the initiation of litigation and the tolling of the statute of limitations provided for in the Periodic Fee Agreement should be applicable to any litigationmaterial adverse impact with respect to LVE's April 3, 2009 claimour business, results of an alleged breach of the ESA. Under the Periodic Fee Agreement, Echelon Resorts has agreed to pay LVE, beginning March 4, 2011, the Periodic Feeoperations, cash flows and an operation and maintenance fee until either (i) Echelon Resorts notifies LVE that it has resumed construction of a portion of the Echelon development project that it will own in fee simple and Echelon Resorts and LVE have mutually agreed to changes to the dates in their respective construction milestones under the ESA: or (ii)

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Echelon Resorts exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval. We have posted a letter of credit in the amount of $6 million to secure Echelon Resorts' obligation to pay the Periodic Fee and the operation and maintenance fee.
Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and related distribution system for a price of $195.1 million, subject to certain possible adjustments. The ESA will be terminated concurrent with the purchase of LVE's assets.financial condition.
If we are unable to finance our expansion, development, investment and renovation projects, as well as other capital expenditures, through cash flow from operations, borrowings under our Amended Credit Facility and additional financings, our expansion, development, investment and renovation efforts will be jeopardized.
We intend to finance our current and future expansion, development, investment and renovation projects, as well as our other capital expenditures, primarily with cash flow from operations, borrowings under our Amended Credit Facility, and equity or debt financings. If we are unable to finance our current or future expansion, development, investment and renovation projects, or our other capital expenditures, we will have to adopt one or more alternatives, such as reducing, delaying or abandoning planned expansion, development, investment and renovation projects as well as other capital expenditures, selling assets, restructuring debt, forgoing any future distribution of dividends, obtaining additional equity financing or joint venture partners, or modifying our Amended Credit Facility. These sources of funds may not be sufficient to finance our expansion, development, investment and renovation projects, and other financing may not be available on acceptable terms, in a timely manner, or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness.

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In the past few years there have been significant disruptions in the global capital markets that have adversely impacted the ability of borrowers to access capital. We anticipate that these disruptions may continue for the foreseeable future. We anticipate that funding for any of our expansion projects would come from cash flows from operations and availability under our Amended Credit Facility (to the extent that availability exists under our Amended Credit Facility, as applicable, after we meet our working capital needs).
If availability under our Amended Credit Facility does not exist or we are otherwise unable to make sufficient borrowings thereunder, any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. As a result, if we are unable to obtain adequate project financing in a timely manner, or at all, we may be forced to sell assets in order to raise capital for projects, limit the scope of, or defer such projects, or cancel the projects altogether. In the event that capital markets do not improve and we are unable to access capital with more favorable terms, additional equity and/or credit support may be necessary to obtain construction financing for the remaining cost of the project.
 
Risks Related to the Regulation of our Industry

We are subject to extensive governmental regulation, as well as federal, state and local laws affecting business in general, which may harm our business.
The ownership, management and operation of our gaming facilities are subject to extensive laws, regulations and ordinances which are administered by the Nevada Gaming Commission and Gaming Control Board, Mississippi Gaming Commission, Indiana Gaming Commission, Illinois Gaming Board, New Jersey Casino Control Commission, Iowa Racing and Gaming Commission, the Kansas Lottery Commission, the Kansas Racing and Gaming Commission, the Louisiana State Gaming Control Board, the Louisiana State Racing Commission and various other federal, state and local government entities and agencies. We are subject to a variety of regulations in the jurisdictions in which we operate. Regulatory authorities at the federal, state and local levels have broad powers with respectthat apply specifically to the licensing of casino operationsgaming industry and may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fineshorse racetracks and take other actions, any one of which could have a significant adverse effect on our business, financial condition and results of operations.casinos, in addition to regulations applicable to businesses generally. A more detailed description of the governmental gaming regulations to which we are subject is included in Exhibit 99.499.1 to our Registration StatementAnnual Report on Form S-4 filed with10-K for the SEC on September 2, 2011, which in incorporated herein by reference.year ended December 31, 2011. If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals are introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and our company.

To date, we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the operation of our properties. However, we can give no assurance that any additional licenses, permits and approvals that may be required will be given or that existing ones will be renewed or will not be revoked. Renewal is subject to, among other things, continued satisfaction of suitability requirements. Any failure to renew or maintain our licenses or to receive new licenses when necessary would have a material adverse effect on us.

Gambling
Legislative or administrative changes in applicable legal requirements, including legislation to prohibit casino gaming, have been proposed in the past. For example, in 1996, the State of Louisiana adopted a statute in connection with which votes were held locally where gaming operations were conducted and which, had the continuation of gaming been rejected by the voters, might have resulted in the termination of operations at the end of their current license terms. During the 1996 local gaming referendums, Lafayette Parish voted to disallow gaming in the Parish, whereas St. Landry Parish, the site of our racino, voted in favor of gaming. All parishes where riverboat gaming operations are currently conducted voted to continue riverboat gaming, but there can be no guarantee that similar referenda might not produce unfavorable results in the future. Proposals to amend or supplement the Louisiana Riverboat Economic Development and Gaming Control Act and the Pari-Mutuel Act also are frequently introduced in the Louisiana State legislature. In the 2001 session, a representative from Orleans Parish introduced a proposal to repeal the authority of horse racetracks in Calasieu Parish (the site of Delta Downs) and St. Landry Parish (the site of our racino) to conduct slot machine gaming at such horse racetracks and to repeal the special taxing districts created for such purposes. If adopted, this proposal would have effectively prohibited us from operating the casino portion of our racino. In addition, the Louisiana legislature, from time to time, considers proposals to repeal the Pari-Mutuel Act.

The legislation permitting gaming in Iowa authorizes the granting of licenses to “qualified sponsoring organizations.” Such “qualified sponsoring organizations” may operate the gambling structure itself, subject to satisfying necessary licensing requirements, or it may enter into an agreement with an operator to operate gambling on its behalf. An operator must be approved and licensed by the Iowa Racing and Gaming Commission. The DRA, a not-for-profit corporation organized for the purpose of operating a pari-mutuel greyhound racing facility in Dubuque, Iowa, first received a riverboat gaming license in 1990 and, pursuant to the Amended DRA Operating Agreement, has served as the “qualified sponsoring organization” of the Diamond Jo since March 18, 1993. The term of the Amended DRA Operating Agreement expires on December 31, 2018. The WCDA, pursuant to the WCDA Operating Agreement, serves as the “qualified sponsoring organization” of Diamond Jo Worth. The term of the WCDA

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Operating Agreement expires on March 31, 2015, and is subject to automatic three-year renewal periods. If the Amended DRA Operating Agreement or WCDA Operating Agreement were to terminate, or if the DRA or WCDA were to otherwise discontinue acting as our “qualified sponsoring organization” with respect to our operation of the Diamond Jo or Diamond Jo Worth, respectively, and we were unable to obtain approval from the Iowa Racing and Gaming Commission to partner with an alternative “qualified sponsoring organization” as required by our gaming license, we would no longer be able to continue our Diamond Jo or Diamond Jo Worth operations, which would materially and adversely affect our business, results of operations and cash flows.
Regulation of smoking
Each of New Jersey and Illinois has adopted laws that significantly restrict, or otherwise ban, smoking at our properties in those jurisdictions. The New Jersey and Illinois laws that restrict smoking at casinos, and similar legislation in other jurisdictions in which we operate, could materially impact the results of operations of our properties in those jurisdictions.
Additionally, onOn April 15, 2007, an ordinance in Atlantic City became effective which extended smoking restrictions under the New Jersey Smoke-Free Air Act. This ordinance mandated that casinos restrict smoking to designated areas of up to 25% of the casino floor. During April 2008, Atlantic City's City Council unanimously approved an amendment to the ordinance, banning smoking entirely on all casino gaming floors and casino simulcasting areas, but allowing smoking in separately exhausted, non-gaming, smoking lounges. The amendment to the ordinance became effective on October 15, 2008, however, on October 27, 2008,

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Atlantic City's City Council voted to postpone the full smoking ban for at least one year due to, among other things, the weakened economy and increased competition in adjoining states. The postponement of the full smoking ban became effective on November 16, 2008. In December 2009, Atlantic City's City Council announced that it would not consider a full smoking ban in casinos pending further review.
Additionally, on July 1, 2012, a state statute in Indiana will become effective that imposes a state wide smoking ban in specified businesses, buildings, public places and other articulated locations. The statute specifically exempts riverboat casinos, and all other gaming facilities in Indiana, from the smoking ban. However, the statute allows local government to enact a more restrictive smoking ban than the state statute and also leaves in place any more restrictive local legislation that exists as of the effective date of the statute. To date, neither Michigan City nor LaPorte County, where Blue Chip is located, have enacted any ordinance or other law which would impose a smoking ban on Blue Chip.
Regulation of directors, officers, key employees and partners
Our directors, officers, key employees and joint venture partners must meet approval standards of certain state regulatory authorities. If state regulatory authorities were to find a person occupying any such position or a joint venture partner unsuitable, we would be required to sever our relationship with that person or the joint venture partner may be required to dispose of their interest. State regulatory agencies may conduct investigations into the conduct or associations of our directors, officers, key employees or joint venture partners to ensure compliance with applicable standards.
Certain public and private issuances of securities and other transactions that we are party to also require the approval of some state regulatory authorities.

Live racing regulations
Louisiana gaming regulations and our gaming license for the Evangeline Downs require that we, among other things, conduct a minimum of 80 live racing days in a consecutive 20-week period each year of live horse race meetings at the horse racetrack. Live racing days typically vary in number from year to year and are based on a number of factors, many of which are beyond our control, including the number of suitable race horses and the occurrence of severe weather. If we fail to have the minimum number of racing days, our gaming license with respect to the racino may be canceled, and the casino will be required to cease operations. Any cessation of our operation would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.
Regulations affecting businesses in general
In addition to gaming regulations, we are also subject to various federal, state and local laws and regulations affecting businesses in general. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, smoking, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. For example, Nevada recently enacted legislation that eliminated, in most instances, and, for certain pre-existing development projects, such as Echelon, reduced, property tax breaks and retroactively eliminated certain sales tax exemptions offered as incentives to companies developing projects that meet certain environmental “green” standards. As a result, we, along with other companies developing projects that meet such standards, may not realize the full tax benefits that were originally anticipated.


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We are subject to extensive taxation policies, which may harm our business.
The federal government has, from time to time, considered a federal tax on casino revenues and may consider such a tax in the future. If such an increase were to be enacted, our ability to incur additional indebtedness in the future to finance casino development projects could be materially and adversely affected. In addition, gaming companies are currently subject to significant state and local taxes and fees, in addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any time. For example, in June 2006, the Illinois legislature passed certain amendments to the Riverboat Gambling Act, which affected the tax rate at Par-A-Dice. The legislation, which imposes an incremental 5% tax on adjusted gross gaming revenues, was retroactive to July 1, 2005. As a result of this legislation, we were required to pay additional taxes, resulting in a $6.7 million tax assessment in June 2006.

We are subject to significant taxes and fees relating to our gaming operations, which are subject to increase at any time. Currently, in Iowa, we are taxed at an effective rate of approximately 21% of our adjusted gross receipts by the State of Iowa, we pay the city of Dubuque a fee equal to $500,000 per year and we pay a fee equal to 4.5% and 5.76% of adjusted gross receipts to the DRA and WCDA, respectively. In addition, all Iowa gaming licensees share equally in costs of the Iowa Racing and Gaming Commission and related entities to administer gaming in Iowa, which is currently approximately $0.9 million per year per facility. Currently, at Evangeline Downs, we are taxed at an effective rate of approximately 36.5% of our adjusted gross slot revenue and pay to the Louisiana State Racing Commission a fee of $0.25 for each patron who enters the racino on live race days from the hours of 6:00 pm to midnight, enters the racino during non-racing season from the hours of noon to midnight Thursday through Monday, or enters any one of our OTBs. Our Amelia Belle riverboat casino in Louisiana pays an annual state gaming tax rate of 21.5% of adjusted gross receipts. Additionally, ABC has an agreement with the Parish of St. Mary to permit the berthing of the riverboat casino in Amelia, Louisiana. That agreement provides for percentage fees based on the level of net gaming revenue as follows: the first $60 million, 2.5%; $60 to $96 million, 3.5%; and greater than $96 million, 5.0%. The annual minimum fee due under the agreement is $1.5 million. The Kansas Star, pursuant to its Management Contract with the State of Kansas pays total taxes of between 27% and 31% of gross gaming revenue, based on achievement of the following revenue levels: 27% on gross gaming revenue up to $180 million, 29% on amounts from $180 million to $220 million, and 31% on amounts above $220 million in gross gaming revenue. KSC is also contractually obligated to pay its proportionate share of certain expenses incurred by the Kansas Lottery Commission and the Kansas Racing and Gaming Commission, which are estimated to be approximately $3.9 million on an annual basis.

Nevada Use Tax Refund Claims
On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. As a result of this decision, refund claims were filed for use taxtaxes paid, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties. We estimate the refund to be in the range of $17.9$17.9 million to $20.3$20.3 million, including interest. In 2009, the Department audited and denied our refund claim while simultaneously issuing a $12.3$12.3 million sales tax deficiency assessment, plus interest of $7.5 million.$7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge ("Judge"ALJ") in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision to the Nevada State Tax Commission (the "Commission"). On August 8, 2011, the Commission remanded the case back for a second administrative hearing, which was held on September 26, 2011, to allow for the introduction of additional supporting documentation. The JudgeALJ issued a decision on November 8, 2011, reversing her position on the employee meal refund claim while also affirming the denial of the complimentary meal refund, as well as the denial of a retroactive application of the sales tax measure to both employee and complimentary meals. The Judge'sALJ's decision was affirmed in a Commission hearing on January 23, 2012. On February 15, 2012 we filed a petition for judicial review in Clark County District Court. We received a split decision at our District Court hearing on October 17, 2012. The District Court Judge (“Judge”) affirmed the ALJ decision that sales tax was applicable to complimentary meals and reversed the decision on employee meals, concluding that such meals were exempt from sales tax. The Department has asserted that, although the statute of limitations prohibits their ability to collect incremental sales tax on complimentary meals, the statutes provide for an offset of the incremental sales tax against refunds due on employee meals. As such, the Department believes that it is not required to pay the employee meal refunds. We are appealing the decision on complimentary meals to the Nevada State Supreme Court and the Department has appealed the decision on employee meals. The Judge did not issue a decision with respect to the refund claim offset; and pending the ultimate resolution of the appeal at the State Supreme Court, we expect the offset issue will either be addressed by the Supreme Court or remanded back to District Court. Due to the uncertainty surrounding the ultimate resolution of our appeal to Districtthe State Supreme Court, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. ForOn July 6, 2012 the Department retracted its previous guidance requiring payment of sales tax, on complimentary and employee meals, for periods subsequent to May 2008, February 15, 2012. The updated guidance defers the requirement to collect and remit sales tax, without interest or penalty, on complimentary and employee meals until the occurrence of a defined future event. Based on the Department's updated guidance,

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we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is probable, based on both procedural issues and the technical merits of the Department's arguments, that we will owe this tax.

properties.
Blue Chip Property Taxes

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Blue Chip has previously received a valuation notice from the county assessor indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. In December 2007, we received the property tax bill related to our 2006 tax assessment in the amount $6.2$6.2 million, which we appealed; and, inappealed. In February 2009, we received a notice of revaluation, which reducedreducing the initial tax assessment by approximately $2.2 million.$2.2 million. Since then, we have made the minimum required payment against the provisional bills related to thereceived in years from 2007 through 2011,2012, all of which were based on the 2006 valuation notice. During the year ended December 31, 2011, we reached settlements with the county assessor, reducing the annual valuation for years 2006 through 2009. Based on these settlements, we revised our cumulative property tax accrual to reflect the retrospective effect of the revised valuations. The impact of these revisions to the valuations resulted in a reduction of our property tax accrual of approximately $9.7$9.7 million, which was cumulatively reversed through property tax expense during the year ended December 31, 2011.
Although weWe received the 2010 tax assessment in January 2013 but have not received valuation notices for years 2010 and 2011, or final tax rates for the years 2007 through 2011 weor 2012. The 2010 tax assessment increased the taxable property value approximately 46% over the 2009 settlement valuation. We have appealed the 2010 tax assessment and believe the assessments for the period from January 1, 20072010 through December 31, 20112012 could result in a total property tax obligation, net of previous payments, ranging between $10.6$5.0 million and $15.1$14.1 million. We have accrued, net of the payment of the minimum requirements discussed above, approximately $15.1$14.1 million for this property tax liability as of December 31, 2011,2012, based on what we believe to be the most likely outcome within our range, once all valuations have been received and all tax rates have been finalized; however, we can provide no assurances that the estimated amount accrued will approximate the actual amount billed. The final tax assessment notices for the period January 1, 20072011 through December 31, 2011,2012, which have not been received as of December 31, 2011,2012, could result in further adjustment to our estimated property tax liability at Blue Chip.

New Jersey Income Taxes
Atlantic City casinos, including Borgata, currently pay a 9.25% effective tax rate on gross gaming revenues. We also pay property taxes, sales and use taxes, payroll taxes, franchise taxes, room taxes, parking fees, various license fees, investigative fees and our proportionate share of regulatory costs. Our profitability depends on generating enough revenues to pay gaming taxes and other largely variable expenses, such as payroll and marketing, as well as largely fixed expenses, such as property taxes and interest expense. Borgata is treated as a partnership for federal income tax purposes and therefore federal income taxes are the responsibility of its members. Casino partnerships in New Jersey, however, are subject to state income taxes under the Casino Control Act. Therefore, Borgata is required to record New Jersey state income taxes. We cannot assure you that the State of New Jersey will not enact legislation that increases gaming tax rates.

Increase in Taxation
If there is any material increase in state and local taxes and fees, our business, financial condition and results of operations could be adversely affected.
We own real property and are subject to extensive environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.liabilities, and could affect our ability to develop, sell or rent our property or to borrow money where such property is required to be used as collateral.
We may incur costsare subject to comply withvarious federal, state and local environmental requirements, such aslaws, ordinances and regulations, including those relatinggoverning discharges to discharges intoair and water, the air, water and land, thegeneration, handling, management and disposal of solid andpetroleum products or hazardous wastesubstances or wastes, and the cleanuphealth and safety of our property affected by hazardous substances. Under these and other environmental requirements weemployees. Permits may be required for our operations and these permits are subject to investigaterenewal, modification and, clean upin some cases, revocation. In addition, under environmental laws, ordinances or regulations, a current or previous owner or operator of property may be liable for the costs of investigation and removal or remediation of some kinds of hazardous or toxic substances or chemical releasespetroleum products on, under, or in its property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at our property. Asthe time they occurred. Additionally, as an owner or operator, we could also be held responsible to a governmental entity or third parties for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination. These laws typically impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. The liability under those laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of those substances may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use our property.

In addition, as part of our business in Worth County, Iowa, we operate a gas station, which includes a number of underground storage tanks containing petroleum products. The presence of, or failure to remediate properly, the substances may adversely affect

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the ability to sell or rent the property or to borrow funds using the property as collateral. Additionally, the owner of a site may be subject to claims by third parties based on damages and costs resulting from environmental contamination emanating from a site.

We have reviewed environmental assessments, in some cases including soil and groundwater testing, relating to our currently owned and leased properties in Dubuque, Iowa, and other properties we may lease from the City of Dubuque or other parties. As a result, we have become aware that there is contamination present on some of these properties apparently due to past industrial activities. Additionally, the location of the Kansas Star is the site of several non-operational oil wells, the remediation of which has been addressed in connection with the construction of the development project. With respect to parcels we currently own or lease, we believe, based on the types and amount of contamination identified, the anticipated uses of the properties and the potential that the contamination, in some cases, may have migrated onto our properties from nearby properties, that any cost to clean up these properties will not result in a material adverse effect on our earnings and cash flows. We have also reviewed environmental assessments and are not aware of any environmental liabilities related to our properties at Evangeline Downs, Diamond Jo Worth and Amelia Belle Casino.

We do not anticipate any material adverse effect on our earnings, cash flows or competitive position relating to existing environmental matters, but it is possible that future developments could lead to material costs of environmental compliance for us and that these costs could have a material adverse effect on our business and financial condition, operating results and cash flows.
 
Borgata is a participant in a multiemployer pension plan, and the plan has been certified in critical status by the fund's actuary.
In connection with Borgata's collective bargaining agreement with the culinary and hotel workers union, Local 54/UNITE HERE, it participates in the UNITE HERE National Retirement Fund pension plan (the “Fund”). On March 31, 2010, as a result of the extraordinary decline in the financial markets and downturn in the economy, the Fund was certified in critical status by the Fund's actuary under the federal multiemployer plan funding laws pursuant to the Pension Protection Act of 2006 (the “PPA”). In connection with the certification, the Fund's board of trustees has adopted a rehabilitation plan effective on April 1, 2010 (the “Rehabilitation Plan”) with the goal of enabling the Fund to emerge from critical status by January 1, 2023. The Rehabilitation Plan provides for certain increases in employer contributions and, in some cases, a reduction in participant benefits. On May 28, 2010, Borgata agreed upon a schedule with Local 54/UNITE HERE pursuant to which it began making increased monthly contributions to the Fund oneffective October 1, 2011.
Borgata's current monthly pension contributions to the Fund range from $0.4 million to $0.5 million, and its unfunded vested liability to the Fund is $47.1$63.8 million for the plan year beginning on January 1, 2011. A renewed economic decline could have a

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significant adverse effect on the financial condition of the Fund, which may require Borgata to make contributions in addition to those already contemplated. Any such increases in required contributions could adversely affect Borgata's results of operations.
Additionally, in connection with Borgata's collective bargaining agreements with the Local 68 Engineers Union Pension Plan and the NJ Carpenters Pension Fund, it participates in other multiemployer pension plans that have been certified in critical status under the federal multiemployer plan funding laws pursuant to the PPA. The boards of trustees of these plans have adopted rehabilitation plans and Borgata is currently in discussions with the boards regarding its level of participation in the rehabilitation plans. The impact of the rehabilitation plans is not expected to have a material adverse effect on Borgata's financial condition, results of operations or cash flows. Borgata's current monthly pension contributions to the funds associated with these plans is approximately less than $0.1 million per month in the aggregate. Borgata's aggregate unfunded vested liability to these funds is approximately $4.3$4.5 million.

Under applicable federal law, any employer contributing to a multiemployer pension plan that completely ceases participating in the plan while it is underfunded is subject to payment of such employer's assessed share of the aggregate unfunded vested benefits of the plan. In certain circumstances, an employer can also be assessed withdrawal liability for a partial withdrawal from a multiemployer pension plan. Based on an estimate provided by the Fund in April 2010, Borgata has estimated that its pre-tax withdrawal, assuming a hypothetical immediate and complete withdrawal from the Fund, could be in excess of $47 million. In addition, Borgata estimates the pre-tax withdrawal liability for the other funds to which it contributes to be approximately $4.0 million. However, the exact amount of potential exposure could be higher or lower than the estimate, depending on, among other things, the nature and timing of any triggering events and the funded status of the Fund, or other funds to which it contributes, at that time.
 
Risks Related to our Properties

We own facilities that are located in areas that experience extreme weather conditions.
Extreme weather conditions may interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected areas.

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For example, due to flooding of the Mississippi River, the Mississippi Gaming Commission ordered the nine casinos located in Tunica, Mississippi to close indefinitely to ensure the safety of visitors and employees. Accordingly, effective May 1, 2011, we closed Sam's Town Hotel and Gambling Hall in Tunica. We were able to reopen on May 28, 2011; however, Sam's Town Hotel and Gambling Hall suffered minor damage, and we are still negotiatinghave reached a settlement with our insurer. In addition, the Amelia Belle was negatively impacted by the opening of the Morganza Spillway, due to imminent threat of severe flooding.

In addition, certain of our properties have been forced to close due to hurricanes. In August 2008, Treasure Chest was closed for eight days overincluding Labor Day weekend due to Hurricane Gustav. In September 2008, Treasure Chest was closed for two days as a result of Hurricane Ike and in 2005 the property was closed for 44 days as a result of Hurricane Katrina. Delta Downs was closed for six days in August 2008 due to Hurricane Gustav and seven days in September 2008 due to Hurricane Ike. Hurricane Gustav forced the closure of Evangeline Downs for five days in 2008 and Amelia Belle was closed from August 2005 to May 2007 due to Hurricane Katrina. In 2005, Delta Downs suffered significant property damage as a result of Hurricane Rita and closed for 42 days. In September 2011, Borgata was closed for 3three days due to Hurricane Irene. In October and November 2012, Borgata was closed for four days due to Hurricane Sandy.
Moreover, Blue Chip, Par-A-Dice, Sam's Town Tunica, Sam's Town Tunica, Sam's Town Shreveport, Treasure Chest and Borgata are each located in an area that has been identified by the director of the Federal Emergency Management Agency (“FEMA”) as a special flood hazard area, which, according to the FEMA statistics, has a 1% chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.
In addition to the risk of flooding and hurricanes, snowstorms and other adverse weather conditions may interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected area. For example, during January and February 2011, much of the country was impacted by some of the worst winter weather in decades, particularly in the Midwest. Although our properties at Blue Chip and Par-A-Dice were not closed as a result, these storms made it very difficult for our customers to visit, and we believe such winter weather had a material and adverse impact on the results of our operations during such time. Additionally, February 2010 was the snowiest month ever recorded in Atlantic City, which generally kept would-be gamblers from traveling to Borgata, contributing to a drop in Borgata's monthly revenues from January to February. The 2010 winter season was the worst on record, and travel throughout the entire Northeast was extremely difficult. The residual impact from these record winter storms resulted in day trip visitations to Atlantic City that were reduced or delayed as regional school calendars were extended in order to make up for prior school closures. Additionally, extreme heat and low precipitation levels in the second quarterlatter half of the first six months of 2010, particularly in the month of June, had an adverse impact on visitation and spending at Borgata's property. If there is a prolonged disruption at Borgata or any of our other properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition could be materially adversely affected.
To maintain our gaming license for our Evangeline Downs racino, we must conduct a minimum of 80 live racing days in a consecutive 20-week period each year of live horse race meetings at the racetrack, and poor weather conditions may make it difficult for us to comply with this requirement.
While we maintain insurance coverage that may cover certain of the costs and loss of revenue that we incur as a result of some

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extreme weather conditions, our coverage is subject to deductibles and limits on maximum benefits. There can be no assurance that we will be able to fully collect, if at all, on any claims resulting from extreme weather conditions. If any of our properties are damaged or if their operations are disrupted as a result of extreme weather in the future, or if extreme weather adversely impacts general economic or other conditions in the areas in which our properties are located or from which they draw their patrons, our business, financial condition and results of operations could be materially adversely affected.

If we are not ultimately successful in dismissing the action filed against Treasure Chest Casino, we may potentially lose our ability to operate the Treasure Chest Casino property and our business, financial condition and results of operations could be materially adversely affected.
Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland's objection. Copeland then filed an appeal of the agency's decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain

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other parties seeking the revocation of Treasure Chest's license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial court's decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. On September 2, 2011, the judge issued an Order stating that the case should be remanded to state district court but allowed for additional filings by September 13, 2011. A Remand Order was issued on September 15, 2011, sending the case back to the 19th19th Judicial District Court, East Baton Rouge Parish, State of Louisiana. Guidry filed a motion for partial summary judgment on November 14, 2011 to limit the damages in the case. Treasure Chest also filed a motion for protective order on November 18, 2011.joined in the motion. The hearing on the pending motionsMotion for Partial Summary Judgment was held on September 10, 2012. On October 3, 2012, Judge Clark granted the motion which effectively struck Copeland's demands for loss profits, the value of the Treasure Chest license and the value of Treasure Chest's success. On October 26, 2012, Copeland filed a supervisory writ application with the First Circuit Court of Appeal asking that the partial summary judgment be reversed. Treasure Chest and Guidry opposed the writ. On February 13, 2013, the writ was denied leaving intact the partial summary judgment. Discovery is scheduled for March 26, 2012.proceeding. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on ourTreasure Chest's business, financial condition and results of operations.
Our insurance coverage may not be adequate to cover all possible losses that our properties could suffer. In addition, our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future.
Although we have “all risk” property insurance coverage for our operating properties, which covers damage caused by a casualty loss (such as fire, natural disasters, acts of war, or terrorism), each policy has certain exclusions. In addition, our property insurance coverage is in an amount that may be significantly less than the expected replacement cost of rebuilding the facilities if there was a total loss. Our level of insurance coverage also may not be adequate to cover all losses in the event of a major casualty. In addition, certain casualty events, such as labor strikes, nuclear events, acts of war, loss of income due to cancellation of room reservations or conventions due to fear of terrorism, deterioration or corrosion, insect or animal damage and pollution, may not be covered at all under our policies. Therefore, certain acts could expose us to substantial uninsured losses.
We also have “builder's risk” insurance coverage for our development and expansion projects, including Echelon.projects. Builder's risk insurance provides coverage for projects during their construction for damage caused by a casualty loss. In general, our builder's

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risk coverage is subject to the same exclusions, risks and deficiencies as those described above for our all-risk property coverage. Our level of builder's risk insurance coverage may not be adequate to cover all losses in the event of a major casualty.
Blue Chip, Par-A-Dice, Sam's Town Tunica, Sam's Town Shreveport, Treasure Chest and Borgata are each located in an area that has been identified by the director of the FEMA as a special flood hazard area. According to the FEMA statistics, a special flood hazard area has a 1% chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year. Over a 30-year period, the risk of a 100-year flood in a special flood hazard area is 26%. Our level of flood insurance coverage may not be adequate to cover all losses in the event of a major flood.
Due to flooding of the Mississippi River, Sam's Town Hotel and Gambling Hall was closed from May 1, 2011 until May 28, 2011. Sam's Town Hotel and Gambling Hall was damaged, and while we carry business interruption insurance and general liability insurance, we have not settled on our claims, and this insurance may not be adequate to cover all losses in any such event.
We renew our insurance policies (other than our builder's risk insurance) on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy limits or agree to certain exclusions from our coverage.

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Our debt instruments and other material agreements require us to meet certain standards related to insurance coverage. Failure to satisfy these requirements could result in an event of default under these debt instruments or material agreements.
We draw a significant percentage of our customers from certain geographic regions. Events adversely impacting the economy or these regions, including public health outbreaks and man-made or natural disasters, may adversely impact our business.
The California, Fremont and Main Street Station draw a substantial portion of their customers from the Hawaiian market. For the year ended December 31, 2011,2012, patrons from Hawaii comprised 68%66% of the room nights sold at the California, 53%48% at Fremont and 55%52% at Main Street Station. Decreases in discretionary consumer spending, as well as an increase in fuel costs or transportation prices, a decrease in airplane seat availability, or a deterioration of relations with tour and travel agents, particularly as they affect travel between the Hawaiian market and our facilities, could adversely affect our business, financial condition and results of operations.
 
Our Las Vegas properties also draw a substantial number of customers from certain other specific geographic areas, including the Southern California, Arizona and Las Vegas local markets. Native American casinos in California and other parts of the United States have diverted some potential visitors away from Nevada, which has had and could continue to have a negative effect on Nevada gaming markets. In addition, due to our significant concentration of properties in Nevada, any man-made or natural disasters in or around Nevada, or the areas from which we draw customers to our Las Vegas properties, could have a significant adverse effect on our business, financial condition and results of operations. Each of our properties located outside of Nevada depends primarily on visitors from their respective surrounding regions and are subject to comparable risk.
Additionally, the expansion of casino gaming in or near the mid-Atlantic region from which Borgata attracts and expects to attract most of its customers could have a significant adverse effect on its business, results of operations and financial condition. In 2010, Pennsylvania passed legislation allowing table games at certain casinos in the state, and other states near New Jersey, including New York, Delaware, Connecticut, and Maryland have or are currently contemplating gaming legislation. The expansion of gaming facilities in nearby states will further increase competition and may adversely impact our business, financial condition and results of operations.
Borgata also competes with Native American tribes in the Northeast and Mid-Atlantic region. Expansion of Native American gaming could have an adverse effect on Borgata's business, results of operations and financial condition, as Native American gaming facilities typically have a significant operating advantage over Borgata due to lower gaming taxes, allowing those facilities to market more aggressively and to expand or update their facilities at an accelerated rate.
The strength and profitability of our business depends on consumer demand for hotel casino resorts in general and for the type of amenities our properties offer. Changes in consumer preferences or discretionary consumer spending could harm our business. The terrorist attacks of September 11, 2001, other terrorist activities in the United States and elsewhere, military conflicts in Iraq, Afghanistan and in the Middle East, outbreaks of infectious disease and pandemics, adverse weather conditions and natural disasters, among other things, have had negative impacts on travel and leisure expenditures. In addition, other factors affecting travel and discretionary consumer spending, including general economic conditions, disposable consumer income, fears of further economic decline and reduced consumer confidence in the economy, may negatively impact our business. We cannot predict the extent to which similar events and conditions may continue to affect us in the future. An extended period of reduced discretionary spending and/or disruptions or declines in tourism could significantly harm our operations.
Furthermore, our facilities are subject to the risk that operations could be halted for a temporary or extended period of time, as a

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result of casualty, flooding, forces of nature, adverse weather conditions, mechanical failure, or extended or extraordinary maintenance, among other causes. If there is a prolonged disruption at any of our properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition could be materially adversely affected.
The outbreak of public health threats at any of our properties or in the areas in which they are located, or the perception that such threats exist, including pandemic health threats, such as the avian influenza virus, SARS, or the H1N1 flu, among others, could have a significant adverse effect on our business, financial condition and results of operations. Likewise, adverse economic conditions that affect the national or regional economies in which we operate, whether resulting from war, terrorist activities or other geopolitical conflict, weather, general or localized economic downturns or related events or other factors, could have a significant adverse effect on our business, financial condition and results of operations.
In addition, to the extent that the airline industry is negatively impacted due to the effects of the economic recession and continued economic downturn, outbreak of war, public health threats, terrorist or similar activity, increased security restrictions or the public's general reluctance to travel by air, our business, financial condition and results of operations could be adversely affected.

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Energy price increases may adversely affect our cost of operations and our revenues.
Our casino properties use significant amounts of electricity, natural gas and other forms of energy. In addition, our Hawaiian air charter operation uses a significant amount of jet fuel. While no shortages of energy or fuel have been experienced to date, substantial increases in energy and fuel prices, including jet fuel prices, in the United States have, and may continue to, negatively affect our results of operations. The extent of the impact is subject to the magnitude and duration of the energy and fuel price increases, of which the impact could be material. In addition, energy and gasoline price increases could result in a decline of disposable income of potential customers, an increase in the cost of travel and a corresponding decrease in visitation and spending at our properties, which could have a significant adverse effect on our business, financial condition and results of operations.
 
Borgata has an executory contract with a wholly-owned subsidiary of a local utility company with terms that extend to June 2028, 20 years from the opening of The Water Club. The utility company provides Borgata with electricity and thermal energy (hot water and chilled water). Obligations under the thermal energy executory contract contain both fixed fees and variable fees based upon usage rates. The fixed fee components under the thermal energy executory contract were estimated at approximately $11.4$11.6 million per annum at December 31, 2011.2012. Borgata is also obligated to purchase a certain portion of its electricity demand at essentially a fixed rate which is estimated at approximately $1.7 million per annum. Electricity demand in excess of the commitment is subject to market rates based on Borgata's tariff class.

Our facilities, including our riverboats and dockside facilities, are subject to risks relating to mechanical failure and regulatory compliance.
Generally, all of our facilities are subject to the risk that operations could be halted for a temporary or extended period of time, as the result of casualty, forces of nature, mechanical failure, or extended or extraordinary maintenance, among other causes. In addition, our gaming operations, including those conducted on riverboats or at dockside facilities could be damaged or halted due to extreme weather conditions.
 
We currently conduct our Treasure Chest, Par-A-Dice, Blue Chip, and Sam's Town Shreveport and Amelia Belle gaming operations on riverboats. Each of our riverboats must comply with United States Coast Guard (“USCG”) requirements as to boat design, on-board facilities, equipment, personnel and safety. Each riverboat must hold a Certificate of Inspection for stabilization and flotation, and may also be subject to local zoning codes. The USCG requirements establish design standards, set limits on the operation of the vessels and require individual licensing of all personnel involved with the operation of the vessels. Loss of a vessel's Certificate of Inspection would preclude its use as a casino.
USCG regulations require a hull inspection for all riverboats at five-year intervals. Under certain circumstances, alternative hull inspections may be approved. The USCG may require that such hull inspections be conducted at a dry-docking facility, and if so required, the cost of travel to and from such docking facility, as well as the time required for inspections of the affected riverboats, could be significant. To date, the USCG has allowed in-place underwater inspections of our riverboats twice every five years on alternate two and three year schedules. The USCG may not continue to allow these types of inspections in the future. The loss of a dockside casino or riverboat casino from service for any period of time could adversely affect our business, financial condition and results of operations.
Indiana and Louisiana have adopted alternate inspection standards for riverboats in those states. The standards require inspection by the American Bureau Shipping Consulting (“ABSC”). ABSC inspection for our riverboats at Blue Chip, Treasure Chest and Sam's Town Shreveport commenced during 2010. The Par-A-Dice riverboat will remain inspected by the USCG for the foreseeable future. ABSC imposes essentially the same design, personnel, safety, and hull inspection standards as the USCG. Therefore, the risks to our business associated with USCG inspection should not change by reason of inspection by ABSC. Failure of a vessel

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to meet the applicable USCG or ABSC standards would preclude its use as a casino.
USCG regulations also require us to prepare and follow certain security programs. In 2004, we implemented the American Gaming Association's Alternative Security Program at our riverboat casinos and dockside facilities. The American Gaming Association's Alternative Security Program is specifically designed to address maritime security requirements at riverboat casinos and their respective dockside facilities. Only portions of those regulations will apply to our riverboats inspected by ABSC. Changes to these regulations could adversely affect our business, financial condition and results of operations.
Some of our hotels and casinos are located on leased property. If we default on one or more leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected hotel and/or casino.
We lease certain parcels of land on which The Orleans, Suncoast, Treasure Chest, Sam's Town Shreveport, IP and Borgata's hotel and gaming facility are located. In addition, we lease other parcels of land on which portions of the California and the Fremont are located. As a ground lessee, we have the right to use the leased land; however, we do not retain fee ownership in the underlying land. Accordingly, with respect to the leased land, we will have no interest in the land or improvements thereon at the expiration of the ground leases. Moreover, since we do not completely control the land underlying the property, a landowner could take

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certain actions to disrupt our rights in the land leased under the long term leases. While such interruption is unlikely, such events are beyond our control. If the entity owning any leased land chose to disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our business and operations could be adversely affected. If we were to default on any one or more of these leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected land and any improvements on the land, including the hotels and casinos. This would have a significant adverse effect on our business, financial condition and results of operations as we would then be unable to operate all or portions of the affected facilities.
 
Risks Related to our Indebtedness

We have a significant amount of indebtedness.
We had total consolidated long-term debt, net ofincluding current maturities, of approximately $3.3$3.00 billion at December 31, 2011.2012, excluding debt held by MDFC and Peninsula Gaming. If we pursue, or continue to pursue, any expansion, development, investment or renovation projects, we expect that our long-term debt will substantially increase in connection with related capital expenditures. This indebtedness could have important consequences, including:

difficulty in satisfying our obligations under our current indebtedness;
increasing our vulnerability to general adverse economic and industry conditions;
requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, which would reduce the availability of our cash flows to fund working capital, capital expenditures, expansion efforts and other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
placing us at a disadvantage compared to our competitors that have less debt; and
limiting, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds.

Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could have a significant adverse effect on our business, results of operations and financial condition.

Our debt instruments contain, and any future debt instruments likely will contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

incur additional debt, including providing guarantees or credit support;
incur liens securing indebtedness or other obligations;
make certain investments;
dispose of assets;
make certain acquisitions;
pay dividends or make distributions and make other restricted payments;
enter into sale and leaseback transactions;
engage in any new businesses; and
enter into transactions with our stockholders and our affiliates.

In addition to our debt instruments, our indirect wholly-owned subsidiaries, MDFC and Peninsula Gaming, each have a significant amount of indebtedness which contain restrictive covenants that impose significant operating and financial restrictions on each company, including limitations on dividends, distributions and certain other restricted payments, which could have a significant adverse effect on our business, results of operations and financial condition.

Boyd Gaming Amended Credit Facility
Aggregate commitmentsAt December 31, 2012, approximately $1.47 billion was outstanding under the Amendedour Credit Facility are approximately $1.6 billion (including $825$782.5 million of term loans and $807$684.1 million of revolving commitments), In November 2011, we exercised $350with $14.5 million allocated to support various letters of credit, leaving remaining contractual availability of approximately $253.1 million

Interest on $450 million of a $500 million increase optionterm loans under our Amended Credit Facility. At December 31, 2011, our Amended Credit Facility provides a revolving facility of $1.8

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billion, the original term of approximately $475 million, and the increased term loan of $350.0 million. The Amended Credit Facility also allows for additional increases to the commitments of $150 million through additional revolving term loans.

Term loans under the Amended Credit Facility amortizeamortizes in an annual amount equal to 5% of the original principal amount thereof, commencing March 31, 2011, payable on a quarterly basis. Amortization on the original term loan commenced on March 31, 2011; amortization on the increased term loan will commence on March 31, 2012.

The interest rate per annum applicable to revolving andsuch term loans under the Amended Credit Facility are based upon, at ourthe option of the Company, LIBOR or the “base rate”rate,” plus an applicable margin in either case. The "base rate"applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio. Interest on $332.5 million of term loans under our Credit Facility amortizes in an annual amount equal to 5% of the Amendedoriginal principal amount thereof, commencing in March 2012 and payable on a quarterly basis. At any time and to the extent that such

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term loan is a Eurodollar Rate Loan, the term loan will bear interest on the outstanding principal amount thereof for each quarterly interest period at a rate per annual equal to the “effective Eurodollar Rate” for such period plus 4.75%, and at any time and to the extent that such term loan bears interest at the base rate, the outstanding principal amount thereof at a rate per annum equal to the base rate for such Interest period plus 3.75%.The applicable margin on the outstanding balance on the revolver portion of our Credit Facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.00% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Credit Facility. The “base rate” under the Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) (i) with respect to the revolving facility and the original term loan, the Eurodollar rate for a one month period plus 1.00% and (ii) with respect to the increased term loan, the "effective Eurodollar rate". The "effective Eurodollar rate" is defined as the greater of (x) the Eurodollar Rate in effect for such Eurodollar Rate Loan under the Amended Credit Facility and (y) 1.25% for any interest period.

The applicable margin on the outstanding balance on the revolving facility and the original term loan is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio which ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (is using the base rate). Theblended interest rate per annum applicable to the increased term loan is (a) the effective Eurodollar rate plus 4.75% iffor outstanding borrowings under our Credit Facility was 4.2% and to the extent the increased term loan is a Eurodollar Rate Loan4.2% at December 31, 2012 and 2011, respectively. The Company's obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and (b)are secured by the base rate plus 3.75% ifcapital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the extentperformance of the increased term loan is a Base Rate Loansecured obligations under the Amended Credit Facility.
The Amended Credit Facility contains certain financial and other covenants, including, without limitation, various covenants that:
require the maintenance of a minimum consolidated interest coverage ratio;
establish a maximum permitted consolidated total leverage ratio;
establish a maximum permitted secured leverage ratio;
impose limitations on the incurrence of indebtedness;
impose limitations on transfers, sales and other dispositions; and
impose restrictions on investments, dividends and certain other payments.
Subject to certain exceptions, we may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.
In addition, our Amended
Our Credit Facility requires us to maintain certain ratios, including a minimum Interest Coverage Ratio, (as defined in the Amended Credit Facility) of 2.00 to 1.00, a Total Leverage Ratio and a Secured Leverage Ratio (both(each as defined in the Amended Credit Facility) that adjust over the life of our Amended Credit Facility. We believe that we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, at December 31, 2011, were 2.50 to 1.00, 6.80 to 1.00 and 4.27 to 1.00, respectively.
At December 31, 2011, assuming our current level of Consolidated Funded Indebtedness remains constant, we estimate that an 12.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to exceed our maximum permitted consolidated Total Leverage Ratio covenant for that period. In addition, at December 31, 2011, assuming our current level of Secured Indebtedness remains constant, we estimate that 5.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to exceed our maximum permitted Secured Leverage Ratio covenant for that period. Additionally, at December 31, 2011, assuming our current level of interest expense remains constant, we estimate that a 20.1% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to go below our minimum consolidated Interest Coverage Ratio covenant for that period.Ratio.

However, in the event that we project that our Consolidated EBITDAfuture performance may decline by such levels or more,result in our not being in compliance with these covenants, we could implement certain actions in an effort to minimize the possibility of a breach of the maximum permitted consolidated Total Leverage Ratio, the maximum permitted Secured Leverage Ratio and the minimum consolidated Interest Coverage Ratio covenants. These actions may include, among others, reducing payroll, benefits and certain other operating costs, deferring or eliminating certain maintenance, expansion or other capital expenditures, reducing our outstanding indebtedness through repurchases or redemption, and/or increasing cash by selling assets or issuing equity.

Peninsula Gaming Credit Facility
In connection with the Peninsula Acquisition and Peninsula Gaming (as successor to Boyd Acquisition Sub, LLC, an indirect wholly owned subsidiary of Boyd (“Merger Sub”)) entered into a Credit Agreement (the "Peninsula Credit Agreement") dated as of November 14, 2012, with the lenders party thereto and Bank of America, N.A., as administrative agent, collateral agent, swing line lender, and L/C issuer. The Credit Agreement provides for the $875.0 million Peninsula Credit Facility, which consists of (a) a term loan facility of $825.0 million and (b) a revolving credit facility of $50.0 million. At December 31, 2012, approximately $854.4 million (including $825.0 million in term loans and $29.4 million of revolving commitments) was outstanding. The maturity date for obligations under the Peninsula Credit Facility is November 17, 2017.

The interest rate on the outstanding balance of the term loan is based upon, at Peninsula's option either: (i) the Eurodollar rate plus 4.50%, or (ii) the base rate plus 3.50%. The interest rate on the outstanding balance from time to time of the revolving loans is based upon, at the Peninsula's option either: (i) the Eurodollar rate plus 4.00%, or (ii) the base rate plus 3.00%. The base rate under the Peninsula Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one-month period plus 1.00%. The Peninsula Credit Facility also establishes, with respect to outstanding balances under the Term Loan, a minimum Eurodollar rate for any interest period of 1.25%. In addition, Peninsula Gaming Senior Subordinated and Senior Notes
Debt service requirements under our current outstanding senior subordinated notes and senior notes consistwill incur a commitment fee on the unused portion of semi- annual interest payments (based upon fixed annual interest rates ranging from 6.75% to 9.125%) and repaymentthe Peninsula Credit Facility at a per annum rate of our 6.75% and 7.125% senior0.50%.

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subordinated notes due on April 15, 2014Peninsula Gaming's obligations under the Peninsula Credit Facility, subject to certain exceptions, are guaranteed by Peninsula Gaming's subsidiaries and February 1, 2016, respectively, and repayment of our 9.125% senior notes due on December 1, 2018.

Borgata Long-Term Debt
Borgata has a bank credit facility. The Borgata bank credit facility, as amended, provides for a $75 million senior secured revolving credit facility and matures in August 2014. The Borgata bank credit facility, as amended, is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and isare secured by athe capital stock and equity interests of Peninsula Gaming's subsidiaries. In addition, subject to certain exceptions, Peninsula Gaming and each of the guarantors granted the collateral agent first priority lienliens and security interests on substantially all of Borgata's assets,the real and personal property (other than gaming licenses and subject to certain exceptions.other exceptions) of Peninsula Gaming and its subsidiaries as additional security for the performance of the obligations under the Peninsula Credit Facility. The obligations under the Borgata bank credit facility, as amended, have priorityrevolver rank second in right of payment to Borgata's senior secured notes.

Borgata's bank credit facility, as amended,the obligations under the term loan. The Peninsula Credit Facility contains customary affirmative and negative covenants including(and are subject to customary exceptions). Peninsula Gaming is required to maintain (i) beginning with the fiscal quarter ended March 31, 2013, a maximum consolidated leverage ratio over each twelve month period ending on the last day of each fiscal quarter (discussed below), (ii) beginning with the fiscal quarter ended March 31, 2013, a minimum consolidated interest coverage ratio of 2.00 to 1.00 as of the end of each calendar quarter, and (iii) a maximum amount of capital expenditures for each fiscal year.

The minimum consolidated Interest Coverage Ratio is calculated as (a) twelve-month trailing Consolidated EBITDA, to (b) consolidated interest expense.

The maximum permitted consolidated Leverage Ratio is calculated as Consolidated Fund Indebtedness less Excess Cash to twelve-month trailing Consolidated EBITDA.

Capital Expenditures should not be made by Peninsula Gaming or any of its Restricted Subsidiaries (excluding (i) capital expenditures which adds to or improves any existing property and (ii) capital expenditures made prior to the first anniversary of the Funding Date relating to integration and/or transition of business systems) in an aggregate amount in excess of $20.0 million in any fiscal year; provided that no default has occurred and is continuing or would result from such expenditure, any portion of such maximum amount, if not expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next following fiscal year.

While we are not guarantors of the Peninsula Credit Facility, the Peninsula Credit Agreement contains other financial and other covenants that limit Borgata'scould affect Peninsula Gaming's ability to:
incur additional debt;
to pay dividends to us, including, without limitation, various covenants that:
         impose limitations on the incurrence of indebtedness;
         impose limitations on transfers, sales and make other distributions;
create liens;
enter into transactions with affiliates;
merge or consolidate;dispositions; and
engage in unrelated business activities.         impose restrictions on investments, dividends and certain other payments.

In addition, Borgata Bank Credit Facility
Borgata has significant indebtedness, including the Borgata bank credit facility, which could affect its ability to pay dividends to us. While we received a one-time distribution from Borgata of approximately $135.4 million in August 2010 in connection with Borgata's financing, any future distribution from Borgata (other than distributions to satisfy tax liabilities relating to income of Borgata) will be subject to the limitations on dividends, distributions and certain other restricted payments under Borgata's bank credit agreementfacility and the indenture governing Borgata's senior secured notes.
We did not receive distributions from Borgata during the year ended
At December 31, 2011. Excluding2012, the one-time distribution fromoutstanding balance under the Borgata discussed above, our distributions frombank credit facility, as amended, was $20.0 million, which bore an interest rate of 4.94%. Contractual availability under the Borgata were $20.8bank credit facility, as amended, at December 31, 2012 was $40.0 million.

On December 27, 2012, MDFC entered into a Second Borgata Credit Facility Amendment that (i) decreases the minimum Consolidated EBITDA (as defined therein) to $110.0 million for fiscal quarters ending December 31, 2012 and thereafter, (ii) modifies the definition of Consolidated EBITDA to exclude certain losses, charges, and expenses, (iii) adjusts the calculation of Consolidated EBITDA such that for the fiscal quarter ending December 31, 2012 through the fiscal quarter ending September 30, 2013, Consolidated EBITDA will be computed by including the four fiscal quarters with the highest Consolidated EBITDA out of the most recently ended five fiscal quarters, (iv) reduces the Aggregate Commitments (as defined therein) to $60.0 million, (v) modifies the Use of Proceeds covenant to provide that the proceeds of revolving loans can only be used to repurchase or redeem MDFC's senior secured notes if, after giving affect thereto, the aggregate amount of outstanding loans and letters of credit under the Borgata bank credit facility does not exceed $50.0 million, and $60.1(vi) adds a covenant prohibiting MDFC and MDDC from repurchasing or redeeming MDFC's senior secured notes at any time unless Consolidated EBITDA was at least $125.0 million duringfor the yearsmost recently ended December 31, 2010period of four consecutive fiscal quarters prior thereto.

As amended, the Borgata bank credit facility provides for a $60 million senior secured revolving credit facility and 2009, respectively. Othermatures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of Borgata's assets, subject to certain exceptions. The obligations

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under the Borgata bank credit facility have priority in payment to Borgata's senior secured notes. Neither we, nor our subsidiaries, are guarantors of the Borgata bank credit facility, as amended.

Outstanding borrowings under the Borgata bank credit facility, as amended, accrue interest at a selected rate based upon either: (i) highest of (a) the agent bank's quoted prime rate, (b) the one-month Eurodollar rate plus 1.00%, or (c) the daily federal funds rate plus 1.50%, and in any event not less than 1.50% (such highest rate, the August 2010 distribution,"base rate"), or (ii) the Eurodollar rate, plus with respect to each clause (i) and (ii) an applicable margin as provided in the Borgata bank credit facility. In addition, a commitment fee is incurred on the unused portion of the Borgata bank credit facility ranging from 0.50% per annum to 1.00% per annum.

The Borgata bank credit facility, as amended, contains certain financial and other covenants, including, without limitation, (i) establishing a minimum consolidated EBITDA (as defined in the Borgata bank credit facility) of $110 million over each trailing twelve-month period ending on the last day of each calendar quarter; (ii) imposing limitations on MDFC's ability to incur additional debt; and (iii) imposing restrictions on Borgata's ability to pay dividends and make other distributions, from Borgata have generally declinedmake certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

In addition, Borgata's bank credit facility contains customary affirmative and negative covenants, including covenants that limit Borgata's ability to:
    incur additional debt;
    pay dividends and make other distributions;
    create liens;
    enter into transactions with affiliates;
    merge or consolidate; and
    engage in unrelated business activities.

The increase in our consolidated leverage and debt service obligations as a result of the declinePeninsula Acquisition, may adversely affect our consolidated financial condition, results of operations and earnings per share.
As a result of the Peninsula Acquisition, we now have a greater amount of debt on a consolidated basis than we have maintained in the past. As of December 31, 2012, our indebtedness primarily consists of $1.6 billion in principal outstanding under our Credit Facility and $1.3 billion aggregate principal amount of our senior and senior subordinated notes, which are the obligations of Boyd Gaming, $854.9 million in principal outstanding under Peninsula's Credit Facility and $350 million aggregate principal amount of Peninsula's senior note, and $20.0 million outstanding under the Borgata bank credit facility and Borgata's operating results. Borgata has significant uses for its$791.5million aggregate outstanding principal amount of senior secured notes which are the obligations of Borgata. Our maintenance of higher levels of indebtedness could have adverse consequences including impairing our ability to obtain additional financing in the future.
Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors. Furthermore, our operations may not generate sufficient cash flows including maintenance capital expenditures, interest payments, state income taxesto enable us to meet our expenses and the repayment of debt. Borgata's cash flows are primarily used for its business needs and are not generally available, to service our indebtedness, exceptdebt. As a result, we may need to enter into new financing arrangements to obtain the extent distributions are paidnecessary funds. If we determine that it is necessary to seek additional funding for any reason, we may not be able to obtain such funding or, if funding is available, obtain it on acceptable terms. If we fail to make a payment on our debt, we could be in default on such debt, and this default could cause us to satisfybe in default on our other outstanding indebtedness.
The terms of the Peninsula Gaming indebtedness limits the payment of dividends (other than tax liabilities relateddistributions), distributions and management fees from Peninsula Gaming to incomeBoyd Acquisition II, LLC ("HoldCo"). The promissory note that HoldCo entered into upon the closing of Borgata.the Peninsula Acquisition (the “HoldCo Note”) , which we entered into upon the closing of the Peninsula Acquisition, imposes limitations on HoldCo and on Peninsula Gaming and Peninsula Gaming's subsidiaries with respect to (i) incurrence of indebtedness, (ii) liens, (iii) consolidations and mergers, (iv) sales and other dispositions of assets and (v) restricted payments, including investments. Subject to certain exceptions, we may be required to repay the amounts outstanding under the HoldCo Note in connection with certain assets sales by Peninsula Gaming or upon a change of control.
 
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and expansion efforts will depend upon our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
 
It is unlikely that our business will generate sufficient cash flows from operations, or that future borrowings will be available to us under our Amended Credit Facility in amounts sufficient to enable us to pay our indebtedness, as such indebtedness matures and to fund our other liquidity needs. We believe that we will need to refinance all or a portion of our indebtedness, at or before maturity, and

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cannot provide assurances that we will be able to refinance any of our indebtedness, including our Amended Credit Facility, on commercially reasonable terms, or at all. We may have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint venture partners. These financing strategies may not be affected on satisfactory terms, if at all. In addition, certain states' laws contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Some restrictions may prevent us from obtaining necessary capital.
We and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks described above.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenturesindenture governing our senior subordinated and senior subordinated notes and Borgata's senior secured notes dowill not fully prohibit us or our subsidiaries from doing so. Approximately $136.8 million ofAt December 31, 2012, contractual availability was available for borrowing under our Amendedthe Boyd Credit Facility, at December 31, 2011.Peninsula Credit Facility and Borgata bank credit facility were $253.1 million, $12.7 million and $40.0 million, respectively. All of those borrowings would be effectively senior to our senior and senior subordinated notes and the guarantees of our subsidiary guarantors to the extent of the value of the collateral securing such borrowings. If new debt is added to our, or our subsidiaries', current debt levels, the related risks that we or they now face could intensify.
 
Borgata may be unable to refinance its indebtedness.
In August 2010, Borgata entered intohas outstanding indebtedness consisting of a $150$60.0 million bank credit facility that matures in August 2014 and issued $800 million in

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senior secured debt, $400 million of which matures in October 2015 and $400 million of which matures in August 2018.

On November 11, 2011, MDFC entered into the "Borgata bank credit facility Amendment", which, among other things, modifies certain terms of the Borgata bank credit facility. The Borgata bank credit facility Amendment: (i) reduces the aggregate commitments under the Borgata bank credit facility to a maximum amount of $75 million; (ii) decreases the minimum Consolidated EBITDA (as defined in the Borgata bank credit facility, as amended) to $125 million for a trailing-twelve month period ending on the last day of a calendar quarter; (iii) eliminates the covenant requiring Borgata to have a minimum amount of cash, cash equivalents, and unused commitments; and (iv) adds a covenant prohibiting Borgata from borrowing under the Borgata bank credit facility, as amended, to purchase its senior secured notes at any time when the total amount outstanding under the Borgata bank credit facility is $65 million or more.

Borgata's ability to refinance its indebtedness will depend on its ability to generate future cash flow and Borgata is entirely dependent on its operations, including the Water Club, for all of its cash flow. Its ability to generate cash in the future, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control.
 
It is unlikely that Borgata's business will generate sufficient cash flows from operations in amounts sufficient to enable it to pay the principal on its indebtedness at maturity and to fund its other liquidity needs. We believe Borgata will need to refinance all or a portion of its indebtedness before maturity, and we cannot provide assurances that it will be able to repay or refinance its indebtedness on commercially reasonable terms, or at all. Borgata may have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint venture partners. These financing strategies may not be affected on satisfactory terms, if at all. In addition, New Jersey laws and regulations contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Such restrictions may prevent Borgata from obtaining necessary capital.
If we are unable to finance our expansion, development, investment and renovation projects, as well as other capital expenditures, through cash flow, borrowings under the credit facility and additional financings, our expansion, development, investment and renovation efforts will be jeopardized.
We intend to finance our current and future expansion, development, investment and renovation projects, as well as our other capital expenditures, primarily with cash flow from operations, borrowings under the Amended Credit Facility, and equity or debt financings. If we are unable to finance our current or future expansion, development, investment and renovation projects, or our other capital expenditures, we will have to adopt one or more alternatives, such as reducing, delaying or abandoning planned expansion, development, investment and renovation projects as well as other capital expenditures, selling assets, restructuring debt, reducing the amount or suspending or discontinuing the distribution of dividends, obtaining additional equity financing or joint venture partners, or modifying the Amended Credit Facility. These sources of funds may not be sufficient to finance our expansion, development, investment and renovation projects, and other financing may not be available on acceptable terms, in a timely manner, or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness.
Recently, there have been significant disruptions in the global capital markets that have adversely impacted the ability of borrowers to access capital. We anticipate that these disruptions may continue for the foreseeable future. We anticipate that we will be able to fund any expansion projects using cash flows from operations and availability under the Amended Credit Facility (to the extent that availability exists after we meet our working capital needs).
If availability under the Amended Credit Facility does not exist or we are otherwise unable to make sufficient borrowings thereunder, any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. As a result, if we are unable to obtain adequate project financing in a timely manner, or at all, we may be forced to sell assets in order to raise capital for projects, limit the scope of, or defer such projects, or cancel the projects altogether. In the event that capital markets do not improve and we are unable to access capital with more favorable terms, additional equity and/or credit support may be necessary to obtain construction financing for the remaining cost of the project.


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Risks Related to the Peninsula Acquisition
We may face integration difficulties and may be unable to integrate Peninsula Gaming's business into Boyd Gaming's business successfully or realize the anticipated benefits of the Peninsula Acquisition.
The merger involved the combination of two companies that previously operated as independent companies. Peninsula Gaming is now an indirect wholly-owned subsidiary of Boyd Gaming. We will be required to devote significant management attention and resources to integrating the two companies business practices and operations. Potential difficulties we may encounter as part of the integration process include the following:

the inability to successfully combine our two businesses in a manner that permits the us to achieve the full revenue and other benefits anticipated to result from the Peninsula Acquisition;
complexities associated with managing the combined businesses, including difficulty addressing possible differences in corporate cultures and management philosophies and the challenge of integrating complex systems, technology, networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies; and
potential unknown liabilities and unforeseen increased expenses associated with the Peninsula Acquisition.

In addition, it is possible that the integration process could result in:

diversion of the attention of each company's management; and
the disruption of, or the loss of momentum in, each company's ongoing businesses or inconsistencies in standards, controls, procedures and policies,

any of which could adversely affect our ability to maintain relationships with customers, suppliers, employees and other constituencies or our ability to achieve the anticipated benefits of the Peninsula Acquisition, or could reduce our earnings or otherwise adversely affect our business and financial results.
Our future results may differ materially from the unaudited pro forma financial statements that we have previously disclosed.
The pro forma financial statements that we have previously disclosed are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of our financial condition or results of operations following the Peninsula Acquisition for several reasons. Our actual financial condition and results of operations following the Peninsula Acquisition may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations following the Peninsula Acquisition. Any potential decline in our financial condition or results of operations may cause significant variations to our stock price.
Our future results could suffer if we cannot effectively manage our expanded operations following the Peninsula Acquisition.
Following the Peninsula Acquisition, the size of the combined businesses is significantly larger than the previous size of either Boyd Gaming's or Peninsula Gaming's business. Our future success depends, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that we will be successful or that we will realize any operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from the Peninsula Acquisition.
We expect to further incur substantial expenses related to the Peninsula Acquisition and the integration of our businesses.
We have already incurred and expect to incur further substantial expenses in connection with the Peninsula Acquisition and the integration of our businesses. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including purchasing, accounting and finance, sales, payroll, pricing, marketing and benefits. While we have assumed that a certain level of expenses will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses likely will result in us taking significant charges against earnings, and the amount and timing of such charges are uncertain at present.

The increase in our consolidated leverage and debt service obligations as a result of the Peninsula Acquisition may adversely affect our consolidated financial condition, results of operations and earnings per share
As a result of the Peninsula Acquisition, we have a greater amount of debt on a consolidated basis than we had maintained in the past. As of December 31, 2012, our indebtedness primarily consists of $1.6 billion in principal outstanding under our Credit Facility and $1.3 billion aggregate principal amount of our senior and senior subordinated notes, which are the obligations of Boyd Gaming, $854.9 million in principal outstanding under the Peninsula Credit Facility and $350 million aggregate principal amount

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of Peninsula's senior note, and $20.0 million outstanding under the Borgata bank credit facility and Borgata's $791.5million aggregate outstanding principal amount of senior secured notes which are the obligations of Borgata. Our maintenance of higher levels of indebtedness could have adverse consequences including impairing our ability to obtain additional financing in the future.
Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors. Furthermore, our operations may not generate sufficient cash flows to enable us to meet our expenses and service our debt. As a result, we may need to enter into new financing arrangements to obtain the necessary funds. If we determine that it is necessary to seek additional funding for any reason, we may not be able to obtain such funding or, if funding is available, obtain it on acceptable terms. If we fail to make a payment on our debt, we could be in default on such debt, and this default could cause us to be in default on our other outstanding indebtedness.
The terms of the Peninsula Gaming indebtedness limit payment of dividends (other than tax distributions), distributions and management fees from Peninsula Gaming to HoldCo. The HoldCo Note imposes limitations on HoldCo and on Peninsula Gaming and Peninsula Gaming's subsidiaries with respect to (i) incurrence of indebtedness, (ii) liens, (iii) consolidations and mergers, (iv) sales and other dispositions of assets and (v) restricted payments, including investments. Subject to certain exceptions, we may be required to repay the amounts outstanding under the HoldCo Note in connection with certain assets sales by Peninsula Gaming or upon a change of control.

Risks Related to our Equity Ownership
Our common stock price may fluctuate substantially, and a shareholder's investment could decline in value.
The market price of our common stock may fluctuate substantially due to many factors, including:
 
actual or anticipated fluctuations in our results of operations;
announcements of significant acquisitions or other agreements by us or by our competitors;
our sale of common stock or other securities in the future;
trading volume of our common stock;
conditions and trends in the gaming and destination entertainment industries;

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changes in the estimation of the future size and growth of our markets; and
general economic conditions, including, without limitation, changes in the cost of fuel and air travel.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to companies' operating performance. Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, shareholder derivative lawsuits and/or securities class action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management's attention and resources.
 
Certain of our stockholders own large interests in our capital stock and may significantly influence our affairs.
William S. Boyd, our Executive Chairman of the Board of Directors, together with his immediate family, beneficially owned approximately 36%37% of the Company's outstanding shares of common stock as of December 31, 2011.2012. As such, the Boyd family has the ability to significantly influence our affairs, including the election of members of our Board of Directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation, or sale of assets.


ITEM 1B.Unresolved Staff Comments.
None.ITEM 1B.    Unresolved Staff Comments
None


ITEM 2.Properties.
Information relating to the location and general characteristics of our properties appears in tabular format under Part I, Item 1, Business - Properties, and is incorporated herein by reference.
As of December 31, 2011,2012, some of our hotel casinos and development projects are located on leased property, including:
The Orleans, located on 77 acres of leased land.
Suncoast, located on 49 acres of leased land.
California, located on 13.9 acres of owned land and 1.6 acres of leased land.

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Fremont, located on 1.4 acres of owned land and 0.9 acres of leased land.
IP Casino Resort Spa, located on 24 acres of owned land and 3.9 acres of leased land.
Treasure Chest, located on 14 acres of leased land.
Sam's Town Shreveport, located on 18 acres of leased land.
Borgata, located on 26 acres of owned land and 19.6 acres of leased land.
Diamond Jo Dubuque, located on 7 acres of owned land and leases approximately 2.0 acres of parking surfaces.
Diamond Jo Worth, located on 36 acres of owned land and 10 acres of leased land. Diamond Jo Worth also leases 30 acres of additional hunting land at its Pheasant Links facility in Emmons, Minnesota.
Evangeline Downs, located on 649 acres of owned land and leases the facilities that comprise the Henderson, Eunice and St. Martinville OTB's.
Kansas Star, located on 202 acres of land.


ITEM 3.Legal Proceedings.
ITEM 3.    Legal Proceedings

Copeland
Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland's objection. Copeland then filed an appeal of the agency's decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on
appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest's license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial court's decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and

34


the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. On September 2, 2011, the judge issued an Order stating that the case should be remanded to state district court but allowed for additional filings by September 13, 2011. A Remand Order was issued on September 15, 2011, sending the case back to the 19th Judicial District Court, East Baton Rouge Parish, State of Louisiana. Guidry filed a motion for partial summary judgment on November 14, 2011 to limit the damages in the case. Treasure Chest also filed a motion for protective order on November 18, 2011.joined in the motion. The hearing on the pending motionsMotion for Partial Summary Judgment was held on September 10, 2012. On October 3, 2012, Judge Clark granted the motion which effectively struck Copeland's demands for loss profits, the value of the Treasure Chest license and the value of Treasure Chest's success. On October 26, 2012, Copeland filed a supervisory writ application with the First Circuit Court of Appeal asking

38


that the partial summary judgment be reversed. Treasure Chest and Guidry opposed the writ. On February 13, 2013, the writ was denied leaving intact the partial summary judgment. Discovery is scheduled for March 26, 2012.proceeding. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on ourTreasure Chest's business, financial condition and results of operations.
Nevada Use Tax Refund Claims
On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. As a result of this decision, refund claims were filed for use taxtaxes paid, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties. We estimate the refund to be in the range of $17.9$17.9 million to $20.3$20.3 million, including interest. In 2009, the Department audited and denied our refund claim while simultaneously issuing a $12.3$12.3 million sales tax deficiency assessment, plus interest of $7.5 million.$7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge ("Judge"ALJ") in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision to the Nevada State Tax Commission (the "Commission"). On August 8, 2011, the Commission remanded the case back for a second administrative hearing, which was held on September 26, 2011, to allow for the introduction of additional supporting documentation. The JudgeALJ issued a decision on November 8, 2011, reversing her position on the employee meal refund claim while also affirming the denial of the complimentary meal refund, as well as the denial of a retroactive application of the sales tax measure to both employee and complimentary meals. The Judge'sALJ's decision was affirmed in a Commission hearing on January 23, 2012. On February 15, 2012 we filed a petition for judicial review in Clark County District Court. We received a split decision at our District Court hearing on October 17, 2012. The District Court Judge (“Judge”) affirmed the ALJ decision that sales tax was applicable to complimentary meals and reversed the decision on employee meals, concluding that such meals were exempt from sales tax. The Department has asserted that, although the statute of limitations prohibits their ability to collect incremental sales tax on complimentary meals, the statutes provide for an offset of the incremental sales tax against refunds due on employee meals. As such, the Department believes that it is not required to pay the employee meal refunds. We are appealing the decision on complimentary meals to the Nevada State Supreme Court and the Department has appealed the decision on employee meals. The Judge did not issue a decision with respect to the refund claim offset; and pending the ultimate resolution of the appeal at the State Supreme Court, we expect the offset issue will either be addressed by the Supreme Court or remanded back to District Court. Due to the uncertainty surrounding the ultimate resolution of our appeal to Districtthe State Supreme Court, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. ForOn July 6, 2012 the Department retracted its previous guidance requiring payment of sales tax, on complimentary and employee meals, for periods subsequent to May 2008,February 15, 2012. The updated guidance defers the requirement to collect and remit sales tax, without interest or penalty, on complimentary and employee meals until the occurrence of a defined future event. Based on the Department's updated guidance, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is probable, based on both procedural issues and the technical merits of the Department's arguments, that we will owe this tax.properties.
Blue Chip Property Taxes
Blue Chip has previously received a valuation notice from the county assessor indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. In December 2007, we received the property tax bill related to our 2006 tax assessment in the amount $6.2$6.2 million, which we appealed; and, inappealed. In February 2009, we received a notice of revaluation, which reducedreducing the initial tax assessment by approximately $2.2 million.$2.2 million. Since then, we have made the minimum required payment against the provisional bills related to thereceived in years from 2007 through 2011,2012, all of which were based on the 2006 valuation notice. During the year ended December 31, 2011, we reached settlements with the county assessor, reducing the annual valuation for years 2006 through 2009. Based on these settlements, we revised our cumulative property tax accrual to reflect the retrospective effect of the revised valuations. The impact of these revisions to the valuations resulted in a reduction of our property tax accrual of approximately $9.7$9.7 million, which was cumulatively reversed through property tax expense during the year ended December 31, 2011.
Although weWe received the 2010 tax assessment in January 2013 but have not received valuation notices for years 2010 and 2011, or final tax rates for the years 2007 through 2011 weor 2012. The 2010 tax assessment increased the taxable property value approximately 46% over the 2009 settlement valuation. We have appealed the 2010 tax assessment and believe the assessments for the period from January 1, 20072010 through December 31, 20112012 could result in a total property tax

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obligationprevious payments, ranging between $10.6$5.0 million and $15.1$14.1 million. We have accrued, net of the payment of the minimum requirements discussed above, approximately $15.1$14.1 million for this property tax liability as of December 31, 2011,2012, based on what we believe to be the most likely outcome within our range, once all valuations have been received and all tax rates have been finalized; however, we can provide no assurances that the estimated amount accrued will approximate the actual amount billed. The final tax assessment notices for the period January 1, 20072011 through December 31, 2011,2012, which have not been received as of December 31, 2011,2012, could result in further adjustment to our estimated property tax liability at Blue Chip.

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Legal Matters
We are also parties to various legal proceedings arising in the ordinary course of business. We believe that, except for the Copeland matter discussed above, all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.


ITEM 4.    Mine Safety Disclosures

Not applicable


ITEM 4A.Executive Officers of the Registrant.
ITEM 4A.    Executive Officers of the Registrant
The following table sets forth the non-director executive officers of Boyd Gaming Corporation as of February 29, 2012:March 13, 2013:
Name Age Position
Paul J. Chakmak 4748 Executive Vice President and Chief Operating Officer
Brian A. Larson 5657 Executive Vice President, Secretary and General Counsel
Josh Hirsberg 5051 Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
Ellie J. BowdishAnthony D. McDuffie 4452 Vice President and Chief Accounting Officer (Principal Accounting Officer)
Paul J. Chakmak has served as our Executive Vice President and Chief Operating Officer since January 1, 2008. Mr. Chakmak joined us in February 2004 as our Senior Vice President - Finance and Treasurer, and was appointed Executive Vice President, Chief Financial Officer and Treasurer on June 1, 2006.
Brian A. Larson has served as our Executive Vice President and General Counsel since January 1, 2008 and as our Secretary since February 2001. Mr. Larson became our Senior Vice President and General Counsel in January 1998. He became our Associate General Counsel in March 1993 and Vice President-Development in June 1993.
Josh Hirsberg joined the Company as our Senior Vice President, Chief Financial Officer and Treasurer effective January 1, 2008. Prior to his position with the Company, Mr. Hirsberg served as the Chief Financial Officer for EdgeStar Partners, a Las Vegas-based resort development concern. He previously held several senior-level finance positions in the gaming industry, including Vice President and Treasurer for Caesars Entertainment and Vice President, Strategic Planning and Investor Relations for Harrah's Entertainment.
Ellie J. Bowdish joined the CompanyAnthony D. McDuffie has served as our Vice President and Chief Accounting Officer effective December 1, 2009. Ms. Bowdishsince March 2013. Prior to being appointed Vice President and Chief Accounting Officer, Mr. McDuffie, served as the Company's Director, Accounting Policy & Reporting, since October 2012. Mr. McDuffie previously served in different positions with First Data Corporation, an electronic commerce and payment solutions company, most recently as the Vice President, LegalFinance and Business Services, of the Prepaid Services business segment and previously as the Vice President, Controller of Pinnacle Airlines Corp. from October 2011 until September 2012. Prior to joining Pinnacle Airlines, Mr. McDuffie served as a financial accounting consultant to businesses in the Payment Services business segment.manufacturing, health care and emergency air ambulance industries from May 2009 until October 2011.  Mr. McDuffie served as Controller and Chief Accounting Officer of Caesars Entertainment Corporation from November 2001 to May 2009.

PART II


ITEM 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is listed on the New York Stock Exchange under the symbol “BYD.” Information with respect to sales prices and record holders of our common stock is set forth below.
Market Information
The following table sets forth, for the calendar quarters indicated, the high and low sales prices of our common stock as reported by the New York Stock Exchange.
 High Low
Year Ended December 31, 2011   
First Quarter$12.42
 $9.00
Second Quarter10.26
 7.73
Third Quarter9.64
 4.90
Fourth Quarter7.63
 4.48
Year Ended December 31, 2010   
First Quarter10.11
 7.49
Second Quarter13.78
 8.49
Third Quarter9.03
 6.80
Fourth Quarter10.60
 7.24

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 High Low
Year Ended December 31, 2012   
First Quarter$9.61
 $6.91
Second Quarter8.25
 6.79
Third Quarter7.32
 5.30
Fourth Quarter6.99
 4.76
Year Ended December 31, 2011   
First Quarter12.42
 9.00
Second Quarter10.26
 7.73
Third Quarter9.64
 4.90
Fourth Quarter7.63
 4.48
On February 29, 2012,28, 2013, the closing sales price of our common stock on the NYSE was $8.01$6.57 per share. On that date, we had approximately 862844 holders of record of our common stock and our directors and executive officers owned approximately 38%36% of the outstanding shares. There are no other classes of common equity outstanding.
Dividends
Dividends are declared at the discretion of our Board of Directors. In July 2008, our Board of Directors suspended the payment of a quarterly dividend for future periods, and we therefore have not paid any dividends since that date, or within the span of the past three yearthree-year period. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our Amended Credit Facility and our outstanding notes.
Share Repurchase Program
In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program. Through December 31, 2011,2012, we have repurchased 1.7 million shares of our common stock under the share repurchase program and are authorized to repurchase up to an additional $92.1 million in shares.
Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our Amended Credit Facility.
We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our Amended Credit Facility and our outstanding notes.
No purchases under our stock repurchase program were made during the fourth quarter of the fiscal year ended December 31, 2011.2012. In the future, we may acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.
Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of this Annual Report on Form 10-K contains information concerning securities authorized for issuance under equity compensation plans.
Stock Performance Graph
The graph below compares the five-year cumulative total return on our common stock to the cumulative total return of the Standard & Poor's MidCap 400 Index (“S&P 400”) and certain companies in our peer group, which is comprised of Ameristar Casinos, Inc., Isle of Capri Casinos, Inc. and Pinnacle Entertainment, Inc. The performance graph assumes that $100 was invested on December 31, 20052007 in each of the Company's common stock, the S&P 400 and our peer group, and that all dividends were reinvested. The stock price performance shown in this graph is neither necessarily indicative of, nor intended to suggest, future stock price performance.


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Indexed ReturnsIndexed Returns
Boyd Gaming Corp.  S&P 400  Peer GroupBoyd Gaming Corp.  S&P 400  Peer Group
December 2007$76.25
 $107.98
 $75.57
December 200810.73
 68.86
 23.43
14.08
 63.77
 31.00
December 200918.99
 94.60
 36.98
24.91
 87.61
 48.94
December 201024.06
 119.80
 46.73
31.55
 110.94
 61.84
December 201116.93
 117.72
 40.08
22.20
 109.02
 53.03
December 201219.76
 128.51
 80.12
The performance graph should not be deemed filed or incorporated by reference into any other of our filings under the Securities Act of 1933 or the Exchange Act of 1934, unless we specifically incorporate the performance graph by reference therein.

ITEM 6.Selected Financial Data.
ITEM 6.    Selected Financial Data
We have derived the selected consolidated financial data presented below as of December 31, 20112012 and 20102011 and for the three years in the period ended December 31, 20112012 from the audited consolidated financial statements contained elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data presented below as of December 31, 2010, 2009, 2008 and 20072008 and as of and for the years ended December 31, 20082009 and 20072008 has been derived from our audited consolidated financial statements not contained herein. Operating results for the periods presented below are not necessarily indicative of the results that may be expected for future years.

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Years Ended December 31,Years Ended December 31,
2011 2010 2009 2008 20072012 2011 2010 2009 2008
(In thousands)(In thousands)
Statement of Operations Data:                  
Revenues                  
Gaming$1,986,644
 $1,812,487
 $1,372,091
 $1,477,476
 $1,666,422
$2,110,233
 $1,986,644
 $1,812,487
 $1,372,091
 $1,477,476
Food and beverage388,148
 347,588
 229,374
 251,854
 273,036
417,506
 388,148
 347,588
 229,374
 251,854
Room246,209
 211,046
 122,305
 140,651
 153,691
264,903
 246,209
 211,046
 122,305
 140,651
Other135,176
 123,603
 100,396
 117,574
 128,870
145,460
 135,176
 123,603
 100,396
 117,574
Gross Revenue$2,756,177
 $2,494,724
 $1,824,166
 $1,987,555
 $2,222,019
$2,938,102
 $2,756,177
 $2,494,724
 $1,824,166
 $1,987,555
                  
Operating income (loss)$233,104
 $189,359
 $156,193
 $(153,429) $354,232
$(854,875) $233,104
 $189,359
 $156,193
 $(153,429)
                  
Income (loss) from continuing operations before income taxes$(6,278) $20,486
 $5,317
 $(249,536) $184,935
$(1,143,847) $(6,278) $20,486
 $5,317
 $(249,536)
                  
Income taxes$(1,721) $(8,236) $(1,076) $26,531
 $(64,027)$220,772
 $(1,721) $(8,236) $(1,076) $26,531
                  
Income from discontinued operations$
 $
 $
 $
 $182,127
         
Noncontrolling interests$4,145
 $(1,940) $
 $
 $
$14,210
 $4,145
 $(1,940) $
 $
                  
Net income (loss) attributable to Boyd Gaming Corporation$(3,854) $10,310
 $4,241
 $(223,005) $303,035
$(908,865) $(3,854) $10,310
 $4,241
 $(223,005)
                  
Basic net income (loss) per share from continuing operations$(0.04) $0.12
 $0.05
 $(2.54) $1.38
$(10.37) $(0.04) $0.12
 $0.05
 $(2.54)
                  
Basic net income per share from discontinued operations$
 $
 $
 $
 $2.08
         
Diluted net income (loss) per share from continuing operations$(0.04) $0.12
 $0.05
 $(2.54) $1.36
$(10.37) $(0.04) $0.12
 $0.05
 $(2.54)
         
Diluted net income per share from discontinued operations$
 $
 $
 $
 $2.06
                  
Balance Sheet Data:                  
Cash and cash equivalents$178,756
 $145,623
 $93,202
 $98,152
 $165,701
$192,828
 $178,756
 $145,623
 $93,202
 $98,152
Total assets5,883,054
 5,656,861
 4,459,957
 4,605,427
 4,487,596
6,332,193
 5,883,054
 5,656,861
 4,459,957
 4,605,427
Long-term debt, net of current maturities3,347,226
 3,193,065
 2,576,911
 2,647,058
 2,265,929
4,827,853
 3,347,226
 3,193,065
 2,576,911
 2,647,058
Total stockholders' equity1,374,079
 1,361,369
 1,156,369
 1,143,522
 1,385,406
467,127
 1,374,079
 1,361,369
 1,156,369
 1,143,522
The following summarizes the significant transactions recorded during each of the years referenced:
Year Ended December 31, 2012
$1.05 billion of non-cash impairment charges, primarily consisting of $993.9 million related to the Echelon development, $17.5 million for the write-down of the Sam's Town Shreveport gaming license, and $39.4 million related to various parcels of undeveloped land. In December 2012, we reconsidered our commitment to complete the Echelon project and concluded that we would not resume development.
$145.4 million of incremental net revenue and $18.9 million of incremental operating income related to the acquisition of IP from January 1, 2012 through September 30, 2012, compared to the same period in the prior year, as the acquisition of IP occurred on October 4, 2011;
$56.9 million of incremental net revenue and $4.7 million of incremental operating income related to the acquisition of Peninsula Gaming on November 20, 2012, and the inclusion of its results in our consolidated financial statements from such date through December 31, 2012;
$18.7 million of acquisition costs were recorded, primarily related to the acquisition of Peninsula Gaming on November 20, 2012;
$7.7 million gain on insurance proceeds related to the subrogation of insurance claims related to the fire that occurred during construction of The Water Club at Borgata in September 2007 and from business interruption proceeds due to the

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mandated closure of the property by civil authorities and the Division of Gaming Enforcement for three days in August 2011 related to Hurricane Irene; and
$7.1 million gain on insurance settlement, net of flood expenses, recorded for gains on business interruption proceeds due to flooding of the Mississippi River and temporary closure of our Tunica property in May 2011.
Year Ended December 31, 2011
$44.6 million of incremental net revenue and $3.2 million of incremental operating income related to the acquisition of IP on October 4, 2011 and the inclusion of their results in our consolidated financial statements from such date through December 31, 2011;
$7.0 million of income related to the forfeited deposits from the buyers on the proposed sale of Dania Jai-Alai, which sale was never consummated;completed;
$6.4 million of acquisition costs were recorded, of which $4.8 million related to the purchase of IP on October 4, 2011;
$5.0 million non-cash impairment charge to the Borgata trademark, representing the amount by which the carrying amount

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exceeded its fair value due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City;
$4.6 million bargain purchase gain representing the excess fair value of the identified assets over the total purchase consideration related to the acquisition of IP; and
$1.1 million non-cash impairment charge to Borgata's investment in an unconsolidated subsidiary, representing the amount by which the carrying value of the investment exceeded its potential liquidation value.
Year ended December 31, 2010
$28.2 million of incremental interest expense at Borgata, of which $26.1 million related to the impact of additional amounts at a higher rate, and $2.0 million related to the accelerated write off of deferred loan fees on refinanced borrowings;
$10 million of other income, representing a fee from MGM related to the amendment to our operating agreement, whereby we assumed effective control of Borgata;
$7.5 million of preopening expense related to the ongoing maintenance and preservation of Echelon, as well as other business development activities; and
$4.7 million of write-downs and other charges, of which $4.0$4.0 million related to acquisition expenses.expenses; and
$2.5 million gain on equity distribution in connection with a $30.8 million priority distribution received from Borgata, which is equal to the excess prior capital contributions made by us;us.
Year ended December 31, 2009
$41.8 million of write-downs and other charges, net;
$17.8 million of preopening expenses;
$15.3 million gain on the early retirement of debt;
$14.3 million gain related to our share of property damage insurance recoveries at Borgata;
$8.9 million of retroactive interest expense related to our contingent payment for Dania Jai-Alai; and
$1.8 million of accelerated interest expense related to our Amended Credit Facility.
Year ended December 31, 2008
$385.5 million of write-downs and other charges, net;
$28.6 million gain on the early retirements of debt;
$20.3 million of preopening expenses; and

44


$3.7 million one-time permanent unfavorable tax adjustment related to non-recurring state income tax valuation allowances.
Year ended December 31, 2007
$22.8 million of preopening expenses;
$16.9 million loss on the early retirements of debt;
$12.1 million of write-downs and other charges, net;
$3.2 million for a one-time retroactive property tax adjustment at Blue Chip; and
$1.3 million of one-time permanent tax benefits resulting from a charitable contribution and a state income tax credit.
The following is a listing of significant events affecting our business during the five-year period ended December 31, 2011:2012:
On December 27, 2012, we entered into the First Credit Facility Amendment, among the Company, the Credit Facility Lenders and Bank of America, N.A., as administrative agent and letter of credit issue, that (i) decreases the minimum Interest Coverage Ratio (as defined therein) for the fiscal quarters ending June 30, 2013 and September 30, 2013, (ii) increases the maximum Total Leverage Ratio (as defined therein) for fiscal quarters ending December 31, 2012 and thereafter, (iii) increases the maximum Secured Leverage Ratio (as defined therein) for fiscal quarters ending December 31, 2012 and thereafter, (iv) during the first four calendar quarters after the execution of any management agreement pursuant to which management fees are payable to the Company or a restricted subsidiary of the Company, adjusts the calculation of Consolidated EBITDA (as defined therein) to reflect the annualized pro forma management fees paid in cash or to be paid in cash pursuant to such agreement, (v) modifies the definition of Consolidated EBITDA to exclude any non-cash income or gain and any non-cash loss, costs, and expenses resulting from earn out obligations and other contingent consideration, (vi) adjusts the calculation of Borgata EBIT (as defined therein) such that for the fiscal quarter ending December 31, 2012 through the fiscal quarter ending September 30, 2013, Borgata EBIT will be computed by including the four fiscal quarters with the highest Borgata EBIT out of the most recently ended five fiscal quarters, and (vii) modifies the definition of Interest Coverage Ratio to exclude any non-cash interest expense resulting from earn out obligations and other contingent consideration.
On December 27, 2012, MDFC entered into the Second Borgata Credit Facility Amendment, among MDFC, MDDC, the Borgata Lenders and Wells Fargo, as administrative agent, that (i) decreases the minimum Consolidated EBITDA (as defined therein) to $110.0 million for fiscal quarters ending December 31, 2012 and thereafter, (ii) modifies the definition of Consolidated EBITDA to exclude certain losses, charges, and expenses, (iii) adjusts the calculation of Consolidated EBITDA such that for the fiscal quarter ending December 31, 2012 through the fiscal quarter ending September 30, 2013, Consolidated EBITDA will be computed by including the four fiscal quarters with the highest Consolidated EBITDA out of the most recently ended five fiscal quarters, (iv) reduces the Aggregate Commitments (as defined therein) to $60.0 million, (v) modifies the Use of Proceeds covenant to provide that the proceeds of revolving loans can only be used to repurchase or redeem MDFC's senior secured notes if after giving affect thereto, the aggregate amount of outstanding loans and letters of credit under the Borgata bank credit facility does not exceed $50.0 million, and (vi) adds a covenant prohibiting MDFC and MDDC from repurchasing or redeeming MDFC's senior secured notes at any time unless Consolidated EBITDA was at least $125.0 million for the most recently ended period of four consecutive fiscal quarters prior thereto.
On November 20, 2012, we completed the Peninsula Acquisition pursuant to an Agreement and Plan of Merger, under which an indirect wholly-owned subsidiary of the Company acquired the assets and assumed the liabilities. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012. The Peninsula Acquisition added five properties to our portfolio: the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Casino in Northwood, Iowa; Evangeline Downs Racetrack and Casino in Opelousas, Louisiana; and Amelia Belle Casino in Amelia, Louisiana.
On July 24, 2012, we announced that we had entered into a development agreement with Sunrise Sports Entertainment, LLP, the operator of the BB&T Center, a major entertainment venue in South Florida and home to the NHL's Florida Panthers, for a new project in Broward County, Florida. The agreement provides the Company the opportunity to take advantage of the potential to expand gaming in South Florida at the site of the BB&T Center.
On July 24, 2012, we announced a development agreement with Wilton Rancheria, a federally-recognized tribe located about 30 miles southeast of Sacramento, California, to develop and manage a gaming entertainment complex.
On October 4, 2011, we consummatedcompleted the acquisition of IP pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities related

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to the IP, on an as-is basis. The net purchase price was $280.6 million. Accordingly, the acquired assets and assumed liabilities of IP are included in our consolidated balance sheet as of December 31, 2011 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from October 4, 2011 through December 31, 2011, reported in our consolidated statements of operations and cash flows, respectively, during the year ended December 31, 2011.
On October 31, 2011, we announced that we had entered into an agreement with bwin.party digital entertainment plc,

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the world's largest publicly traded online gaming company. Should Congress legalize online poker in the United States, and subject to regulatory approvals, we would acquire a 10% stake in a new company that would offer online poker to U.S.-based players under bwin.party's brands, including PartyPoker. Separately, we entered into a 15-year agreement to use bwin.party's technology platform and associated services, at favorable rates and costs to us, to offer online poker to U.S. players under a brand we develop.
On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (the successor in interest to MGM MIRAGE) ("MGM"), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. As a result, we have included Borgata in our consolidated balance sheet as of December 31, 2011 and 2010, and its results of operations and cash flows from March 24, 2010 through December 31, 2010 and for the full year ended December 31, 2011 in our consolidated statements of operations and cash flows for the years ended December 31, 2011 and 2010, respectively. Prior period amounts were not restated or recasted as a result of this change.
Blue Chip opened on January 22, 2009, following completion of an expansion project that added a 22-story hotel, which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues to the existing property structures.
In 2008, we established our nationwide branding initiative and loyalty program. Players are able to use their “B Connected” (or, formerly, "Club Coast") cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming properties in Nevada, Illinois, Indiana, Louisiana and Mississippi.
The Water Club, a 798-room boutique hotel expansion project at Borgata, opened in June 2008. The expansion includes five swimming pools, a state-of-the-art spa, additional meeting and retail space, and a separate porte-cochere and front desk.
We began construction on Echelon, our multibillion dollar Las Vegas Strip development project, in the second quarter of 2007. Echelon is located on the former Stardust site, which we closed in November 2006 and demolished in March 2007. In August 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.
In February 2007, we completed our exchange of the Barbary Coast Hotel and Casino and its related 4.2 acres of land for approximately 24 acres located north of and contiguous to our Echelon development project on the Las Vegas Strip in a nonmonetary, tax-free transaction. The results of Barbary Coast were classified as discontinued operations during the year ended December 31, 2007.

ITEM 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
Boyd Gaming Corporation (the “Company,” the “Registrant,” “Boyd Gaming,” “we” or “us”) is a multi-jurisdictional gaming company that has been operating for approximately 3637 years.

Our Properties
We are a diversified operator of 1621 wholly-owned gaming entertainment properties and one controlling interest in a limited liability company. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana, Kansas, Iowa and New Jersey, which we aggregate in order to present the following fourfive reportable segments:

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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 and 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 Gaming
Diamond Jo DubuqueDubuque, Iowa
Diamond Jo WorthNorthwood, Iowa
Evangeline Downs Racetrack and CasinoOpelousas, Louisiana
Amelia Belle CasinoAmelia, Louisiana
Kansas Star CasinoMulvane, Kansas
Atlantic City  
     Borgata Hotel Casino & Spa Atlantic City, New Jersey

Hawaiian Operations
In addition to these properties, we own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.

Dania Jai-Alai
We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility located onwith approximately 47 acres of related land located in Dania Beach, Broward County, Florida.
The results of Dania Jai-Alai are included as part of the “Other” category in our segment information. As discussed in Note 24, Subsequent Events, on February 22, 2013, we and Dania Entertainment entered into the New Dania Agreement for the sale of certain assets and liabilities of the Dania Jai-Alai Business, for a purchase price of $65.5 million. The closing of the transactions contemplated by the New Dania Agreement is expected to occur on or prior to May 24, 2013, subject to certain closing conditions.
Echelon Development
Additionally, we own approximatelyWe owned 87 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project ("Echelon") iswas to be located. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of Echelon. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expectWe originally expected to resume construction of Echelon fordevelopment in the project in three to five years. We also doHowever, as discussed in Note 5, Assets Held for Development, and Note 24, Subsequent Events, during the three months ended December 31, 2012, we reconsidered our commitment to complete the Echelon project and concluded that we would not believeresume development.


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On March 1, 2013, we entered into a definitive agreement with Genting to sell the Echelon site for $350.0 million in cash. The sale agreement included the 87-acre land parcel as well as site improvements, including the district energy system and central energy center that financing forwas to be built by LVE. The transaction was completed on March 4, 2013, and we received $157.0 million of net proceeds after payment of a development project like Echelon is currently available on terms satisfactoryportion of the proceeds to us.a third party to fulfill our obligations to LVE Energy Partners, LLC.

Our Emphasis
We operate gaming entertainment properties, most of which also include hotel, dining, retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the volume and spending levels of customers at our properties, which affects our operating results.
 
Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. While we do provide casino credit, subject to certain gaming regulations and jurisdictions, most of our customers wager with cash and pay for non-gaming services by cash or credit card.
 
Our industry is capital intensive;intensive and we rely heavily on the ability of our properties to generate operating cash flow in order to fund maintenance capital expenditures, fund acquisitions, provide excess cash for future development, repay debt financing and

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associated interest costs, purchase our debt or equity securities, pay income taxes and pay dividends.
 
Our Key Performance Indicators
We use several key performance indicators to evaluate the operations of our wholly owned properties and Borgata. These key performance indicators include the following indicators in the following categories:

Gaming revenue indicators:
Slot handle and table game drop are indicators of volume and/or market share. Slot handle means the dollar amount wagered in slot machines and table game drop means the total amount of cash deposited in table games drop boxes, plus the sum of markers issued at all table games.
Slot win and table game hold percentages represent the relationship between slot handle and table game drop to gaming wins and losses. Slot win and table game hold means the difference between customer wagers and customer winnings on slot machines and table games, respectively.

Food and beverage revenue indicators: average guest check is an indicator of volume and product offerings and is defined as the average amount spent per customer visit; number of guests served is an indicator of volume; and the cost per guest served is an indicator of operating margin.

Room revenue indicators: hotel occupancy rate is an indicator of volume measuring the utilization of our available rooms; and average daily rate ("ADR") is a price indicator.

Our Strategy
Our overriding strategy is to increase shareholder value. We follow several strategic initiatives on which we are focused to improve and grow our business.
 
Strengthening our Balance Sheet: We remain committed to strengthening our balance sheet through diversifying and increasing cash flows to provide for deleveraging.
 
Operating Efficiently: We also remain committed to operating more efficiently and endeavor to prevent unneeded expense in our business. The efficiencies of our business model position us to flow a substantial portion of revenue gains directly to the bottom line. Margin improvements will remain a driver of profit growth for the Company going forward.
 
Evaluating Acquisition Opportunities: We evaluate potential transactions and acquisitions in a way that is strategic, deliberate, and disciplined. Our intention is to pursue opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price.
 
Maintaining our Brand: The ability of our employees to deliver great customer service remains a key differentiator for our Company and our brands. Our employees are an important reason that our customers continue to choose our properties over the competition across the country.
 
Our Focus
Our focus has been and will remain on: (i) ensuring our existing operations are managed as efficiently as possible, improving profitability and remaining positioned for growth; (ii) our capital structure and strengthening our balance sheet, not just by paying

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down debt, but also by strengthening our operations and diversifying our asset base; and (iii) our growth strategy, which is built on finding those assets that are a good strategic fit and provide an appropriate return to our shareholders.
Overall Outlook
We believe that our key operating results for the year ended December 31, 2011 have begun to show positive trends.2012 demonstrate some recovering trends in our business with certain regions showing more favorable results than others. Although the severe economic recession over the course of the past several years the severe economic recession has had a profound effect on consumer confidence and has shifted spending away from discretionary items, such as leisure, hospitality, gaming and entertainment activities, recent quarterly results indicate that we have realized some stabilizing trendsrecoverability in our business, as we saw several consecutive quarters of encouraging trends and anticipated that this recovery would continue. However, starting in May 2012, we began to experience weakness in economic trends locally, nationally and globally, due to a variety of factors. We believe the economic recovery slowed and consumer confidence retracted during the second quarter of 2012 and as a result, our results for the second quarter did not meet our expectations, which also impacted our results for the year ended December 31, 2012. During the fourth quarter, we were encouraged to see sequential growth in our Las Vegas Locals business. Recently,We recognized $993.9 million in non-cash impairment charges related to our Echelon project. The disposal of Echelon represents our priority to strengthen our balance sheet and generally, the tourism industry has shown signs of recovery, as evidenced by increased visitation, hotel room rates and convention business.improve our long-term financial position.

Economic Influence
Due to a number of factors affecting consumers, including the increasing Federal deficit and uncertainties surrounding the ability to achieve reconciliation to avoid the fiscal cliff, volatility in the stock market, the European debt crisis and high unemployment levels, all of which have resulted in reduced levels of consumer spending, the outlook for the gaming industry remains unpredictable. We believe the severity and length of recovery from this economic recession has had a profound effect on consumer behavior and has led to a shift in spending from discretionary items. Because of these uncertain conditions, we have increasingly focused on managing our operating margins.margins and increasing our brand awareness. Our present objective is to manage our cost and expense structure to address the current deterioration in business volumes, generatinggenerate strong and stable cash flows and positioningposition the Company to benefit from improved flow through of revenue growth.

Positioning
We continually work to position our Company for greater success by strengthening our existing operations and growing through capital investment and other strategic initiatives. For instance, in November 2012, we completed the Peninsula Acquisition and added five properties to our portfolio; the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas, Diamond Jo Casino in Dubuque, Iowa, Diamond Jo Casino in Northwood, Iowa, Evangeline Downs Racetrack and Casino in Opelousas, Louisiana, and Amelia Belle Casino in Amelia, Louisiana.

In October 2011, we purchased the IP Casino Resort Spa (the "IP")in Biloxi, Mississippi, which is a premier casino resort located on the Mississippi Gulf Coastgulf coast and includes 1,100 guest rooms and suites, a 70,000 square-foot casino, a 1,400-seat theater offering regular headline entertainment, a spa and salon, and 73,000 square feet of meeting and convention space, as well as eight restaurants. Additionally, in January 2009, we opened our 22-story hotel at Blue Chip Casino, Hotel &and Spa in Michigan City, Indiana ("Blue Chip"), which includes 300 guest rooms, a spa and fitness center, additional meeting and event space, as well as new dining and nightlife venues.

Boyd Brand Awareness
We have also established a nationwide branding initiative and loyalty program. Previously, players were able to use their “Club Coast” or “B Connected” cards to earn and redeem points at nearly all of our wholly-owned Boyd Gaming properties in Nevada, Illinois, Indiana, Louisiana and Mississippi. In June 2010, we launched an enhanced, multi-property player loyalty program under the “B Connected” brand, which replaced the “Club Coast” program. Customers under the “Club Coast” program were able to keep all earned benefits and club points they had previously earned under the program. The new “B Connected” club, among other

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benefits, extends the time period over which players may qualify for promotion and increases the credits awarded to reel slot and table games players.
In addition to the “B Connected” player loyalty program, we launched the “B Connected Mobile” program in July 2010. “B Connected Mobile,” the first multi-property, loyalty program based iPhone application of its kind in the gaming industry, is a personalized mobile application that delivers customized offers and information directly to a customer's iPhone, iPad. or Android device, making "B Connected Mobile" the first application of its kind available on multiple platforms. The application further expands the benefits of the “B Connected” program. “B Connected Mobile” provides real-time personalized information when a customer visits a Boyd property, including hotel, dining and gaming offers, such as “Best Rates Available” on hotel rooms for “B Connected” members, instant access to event information, schedules and special offers at all Boyd Gaming properties using a search engine which allows customers to find Boyd Gaming casinos that have their favorite machines and displays the games' locations on a casino floor map, the ability to track “B Connected” point balances in real time, and the ability to make immediate hotel or restaurant reservations. These tools help customers get the greatest value out of their B Connected membership, and ensure that our marketing is as effective as possible.

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We have continued to improve our B Connected loyalty program with the introduction of "B Connected Social" in the first quarter of 2012, which rewards users for using B Connected Online, B Connected Mobile, or sharing offers and events on social networks.  B Connected Social is a dynamic network loyalty program that allows B Connected members to share offers with friends, connect to their favorite social networks, check in online via certain social networks, as well as, participate in a variety of online activities including interfacing with B Connected Online or B Connected Mobile, participate in online contests, and register for alerts to deliver targeted information specific to the B Connected member.

Borgata Brand Awareness
Borgata sponsors its own program to expand its brand awareness and leverage its strong loyalty card program, predicated on efforts to use marketing and promotional programs to serve an important role: to retain existing customers, maintain trip frequency and acquire new customers. Borgata offer its guests comprehensive, competitive and targeted marketing and promotion programs. The “My Borgata Rewards” program, for example, offers players a hassle-free way of earning slot dollars, comp dollars and other rewards and benefits based on game play, with convenient on-line access of account balances and other program information. In addition, Borgata strives to differentiate its casino with high-quality guest services to further enhance overall brand and customer experience to position Borgata as the must visit property in Atlantic City. Borgata maintains a database of nearly 3.1 million customers enrolled in “My Borgata Rewards,” which is used to support its marketing efforts.

Other Promotional Activities
From time to time, we offer other promotional offers and discounts targeted towards new customers, frequent customers, inactive customers, customers of various levels of play, and prospective customers who have not yet visited our properties, andas well as mid-week and other promotional activities that seek to generate visits to our properties during slower periods. Unlike some of our competitors, our promotional slot dollars are restricted and can only be redeemed for slot play and may not be cashed out. Comp dollars, generally in the form of monetary discounts, and other rewards generally can only be redeemed at our restaurants, retail and spa facilities.
Development Activities
Echelon
InOn August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of Echelon. We originally expected to resume development in the project of three to five years. As discussed in Note 5, Assets Held for Development, and Note 24, Subsequent Events, in December 2012, we reconsidered our multibillion dollarcommitment to complete the Echelon development project and concluded that we would not resume development.

On March 1, 2013, we entered into a definitive agreement with Genting to sell the Echelon site for $350.0 million in cash. The sale agreement included the 87-acre land parcel as well as site improvements, including the district energy system and central energy center that was to be built by LVE. The transaction was completed on the Las Vegas Strip. At that time,March 4, 2013, and we did not anticipate the long-term effectsreceived $157.0 million of net proceeds after payment of a portion of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.
Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we continue to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project. As we develop and explore the viability of alternatives for the project, we will monitor these assets for recoverability. If we are subjectproceeds to a non-cash write-down of these assets, it could have a material adverse impact onthird party to fulfill our consolidated financial statements.obligations to LVE Energy Partners, LLC.

Central Energy Facility
LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we haveWe had entered into an Energy Sales Agreement ("ESA")ESA with LVE to design, build, own (other than the underlying real property which is leased from Echelon Resorts)Echelon) and operate a district energy system and central energy center and related distribution system for our planned Echelon resort development. Pursuantdevelopment to the ESA, LVE will provide electricity, emergency electricity generation, and chilled and hot water electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. However, since we are obligated to purchase substantially

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all of the output of the central energy center, we are the primary beneficiary under the terms of the ESA.

LVE has suspendedbegan construction of the centralfacility in 2007 and expected to provide full energy center whileservices to Echelon in 2010, when we originally expected to open. However, LVE suspended construction in January 2009, after our announcement of the Echelon project is delayed.delay of Echelon. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommencedrecommences and proceededproceeds with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

On March 7, 2011,1, 2013, as part of the sale of the Echelon Resorts and LVEsite, we entered into both a purchase optiondefinitive agreement (the "Purchase Option Agreement" and a periodic fee agreement (the "Periodic Fee Agreement"). Under the Periodic Fee Agreement, Echelon Resorts andwith LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. The prohibitionpermit Genting to acquire LVE's power plant improvements on the initiation of litigation and the tolling of the statute of limitations provided for in the Periodic Fee Agreement should be applicable to any litigation with respect to LVE's April 3, 2009 claim of an alleged breach of the ESA. Under the Periodic Fee Agreement, Echelon Resorts agreed to pay LVE, beginningsite. The transaction was completed on March 4, 2011, a monthly Periodic Fee2013 and an operation and maintenance fee until either (i) Echelon Resorts notifiesGenting paid LVE that it has resumed construction of a portion of$187.0 million at the Echelon development project that it owns in fee simple and Echelon Resorts and LVE have mutually agreed to changes to the dates in their respective construction milestones under the ESA, or (ii) Echelon Resorts exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon's prior approval. We have posted a letter of credit in the amount of $6 million to secure Echelon's Resorts obligation to pay the Periodic Fee and the operation and maintenance fee.closing.
Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and related distribution system for a price of $195.1 million, subject to certain possible adjustments. Both the ESA and the Periodic Fee Agreement would be terminated concurrent with the purchase of the LVE assets pursuant to the Purchase Option Agreement.
As of December 31, 2011, we have incurred approximately $926.0 million in capitalized costs related to the Echelon project, including land, and not including approximately $163.8 million associated with the construction costs of the central energy facility. As part of the delay of the project, we expect to additionally incur approximately $0.3 million to $1.0 million of capitalized costs annually, principally related to the offsite fabrication of a skylight and curtain wall as well as offsite improvements. We expect to incur a one-time capitalized cost of $4.2 million, principally related to site beautification in 2012. In addition, we expect annual recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, of approximately $15.5 million to $17.0 million that will be charged to preopening or other expense as incurred during the project's suspension period.
In addition to the expansion projects mentioned above, we regularly evaluate opportunities for growth through the development of gaming operations in existing or new markets, along with opportunities associated with acquiring other gaming entertainment facilities.

Other Events
Terminated agreement to sell Dania Jai AlaiAcquisition of Peninsula Gaming
On April 29, 2011,November 20, 2012, we completed the Aragon GroupPeninsula Acquisition pursuant to an Agreement and Summersport Enterprises, LLC, twoPlan of ourMerger, under which an indirect wholly-owned subsidiaries (the “Sellers”),subsidiary of the Company acquired the assets and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) forassumed the sale of certainliabilities. Accordingly, the acquired assets and liabilities of Dania Jai-Alai. Pursuant to the terms of the Agreement, the Sellers agreed to sell and transfer, and the Buyer agreed to purchase and assume, certain assets and liabilities related to Dania Jai-Alai, for a purchase price of $80 million. On September 15, 2011, the Buyer elected to extend the closing date of its pending acquisition of Dania Jai-Alai in Dania Beach, Fla. The sale was then expected to close on or before November 28, 2011. As permitted under the terms of the definitive sale agreement, the Buyer had made an additional, non-refundable payment of $2 million to BoydPeninsula Gaming in exchange for the extension of the closing date. Boyd Gaming previously received a $5 million non-refundable deposit upon execution of the definitive agreement. The Agreement provided that the closing of the transactions contemplated by the Agreement was to occur on or prior to November 28, 2011; however, on November 28, 2011, we announced the termination of the Agreement after receiving notice from the Buyer that the Buyer would be unable to close on such date. Accordingly, all non-refundable deposits made by the Buyer were forfeited at such date. We remain the owner of Dania Jai-Alai and will continue to operate the property for the foreseeable future.


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Agreement with bwin.party
On October 31, 2011, we announced that we had entered into an agreement with bwin.party digital entertainment plc, the world's largest publicly traded online gaming company. Should Congress legalize online poker in the United States, and subject to regulatory approvals, we would acquire a 10% stake in a new company that would offer online poker to U.S.-based players under bwin.party's brands, including PartyPoker. Separately, we entered into a 15-year agreement to use bwin.party's technology platform and associated services, at favorable rates and costs to us, to offer online poker to U.S. players under a brand we develop.

Acquisition of IP Casino Resort Spa
On October 4, 2011, we consummated the acquisition of IP in Biloxi, Mississippi pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities, respectively, related to the Imperial Palace Biloxi , on an as-is basis. The net purchase price was approximately $280.6 million. The financial position of IP isare included in our consolidated balance sheet as of December 31, 2011;2012 and itsthe results of its operations for the period from October 4, 2011 through December 31, 2011and cash flows are includedreported in our consolidated statements of operations and cash flows forfrom November 20, 2012

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through December 31, 2012, during the year ended December 31, 2011.2012. The Peninsula Acquisition added five properties to our portfolio: the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Casino in Northwood, Iowa; Evangeline Downs Racetrack and Casino in Opelousas, Louisiana; and Amelia Belle Casino in Amelia, Louisiana.

Consolidation of BorgataNew Development Agreements
On MarchJuly 24, 2010, as2012, we announced that we had entered into a development agreement with Sunrise Sports Entertainment, LLP, the operator of the BB&T Center, a major entertainment venue in South Florida and home to the NHL's Florida Panthers, for a new project in Broward County, Florida. The agreement provides the Company the opportunity to take advantage of the potential to expand gaming in South Florida at the site of the BB&T Center.

On July 24, 2012, we announced a development agreement and management agreement with Wilton Rancheria, a federally-recognized tribe located about 30 miles southeast of Sacramento, California, to develop and manage a gaming entertainment complex.

Borgata Closure Due to Post-Tropical Storm
The Borgata was ordered to close from October 28, 2012 to November 2, 2012 by the Division of Gaming Enforcement Office of the Attorney General of the State of New Jersey ("NJDGE") due to a post-tropical storm. As a result of the amendment to our operating agreement with MGM, which provided, among other things, forstorm, the termination of MGM's participating rights inproperty suffered minor property damage, however, the operations of Borgata, we effectively obtained control of Borgata. As a result, we have consolidated the financial positionsurrounding area experienced severe flooding and results of operations of Borgata from March 24, 2010 through December 31, 2010. Period prior to such date were not restated or recasted as a result of this change and reflect the accounting for our interest in Borgata under the equity method. Accordingly, the financial position of Borgata is presented in our consolidated balance sheets as of December 31, 2011 and December 31, 2010; its results of operations for the year ended December 31, 2011 are included in our consolidated statement of operations and cash flows for the year ended December 31, 2011; its results of operations for the period from March 24, 2010 through December 31, 2010 are included in our consolidated statement of operations and cash flows for the year ended December 31, 2010 and for the full year ended December 31, 2011.significant property damage.

RESULTS OF OPERATIONS
Summary
Years Ended December 31, 2012, 2011 2010 and 20092010
We believe that our key operating results for the year ended December 31, 2011 showed increasing positive2012 demonstrate some recovering trends throughout the year.in our business with certain regions showing more favorable operating results than others. Although over the course of the past several years, the severe economic recession has had a profound effect on consumer confidence, and has shifted spending away from discretionary items, such as leisure, hospitality, gaming and entertainment activities, results during the year ended December 31, 20112012 indicate that we havecontinue to face a challenging economic environment despite having realized some stabilizing trends in our business. Generally, the job market is strengthening, as the national unemployment rate has continued to decline throughout 2011.2012; however, these favorable factors were offset by fluctuating consumer confidence and uncertainties regarding government fiscal policies. Starting in May 2012, we began to experience weakness in economic trends locally and nationally, that were further amplified by the global macro-economic issues, due to a variety of factors. As the job market recovers and expands, we believe that consumer confidence will strengthen further. These and other positive trends reflect recoveries in our wholly-owned businesses.

Specifically, in our Las Vegas Locals region, visitor counts, room rates and convention sales began to stabilize and slightly increase over the past eighteen months.prior year. Our Downtown Las Vegas segment is benefiting from successful marketing efforts to our Hawaiian customers, and the strength of the local Hawaiian economy. The economy in the Midwest and South region has been more resilient than the national and Las Vegas economies, as certain of our properties reported margin improvements and record growth during the year ended December 31, 2011.economies. Although we have gained recordcontinue to be the market share and increased non-gaming revenuesleader in Atlantic City, the entire market continues to experience a difficult period, due to increased local and regional competition.competition, as well as the recovery that is ongoing due to the post-tropical storm that closed the Borgata from October 28, 2012 to November 2, 2012.

ThroughoutAs discussed in Note 3, Consolidation of Certain Interests, we concluded that a change in control of the discussionBorgata had occurred and we began consolidating the Borgata into our financial statements effective March 24, 2010. We had previously accounted for and reported the Borgata as an equity method investment. Given the significance of the impact of this change in this section,accounting method on our financial statements and to enhance the understanding of our financial results, in addition to a comparison of our actual results, we are also providing a supplemental comparison of certain line items in our results of operations for the yearsyear ended December 31, 2010 and 2009 are presented both on an actual and a pro forma basis, giving effect ofto the consolidation of Borgata as if suchit had occurred on January 1, 2010, or 2009, respectively, rather than March 24, 2010. TheseThe pro forma presentations are provided for the purposes of comparability, and all such results and discussions reflecting these pro forma adjustments are identified as such.


51


Overview of Key Operating Results
Years Ended December 31, 2011, 2010 and 2009

46


Years Ended December 31,Years Ended December 31,
2011 2010 2010 2009 20092012 2011 2010 2010
  Actual Pro Forma Actual Pro Forma    Actual Pro Forma
(In thousands)(In thousands)
Net revenues$2,336,238
 $2,140,899
 $2,299,188
 $1,640,986
 $2,418,394
$2,487,426
 $2,336,238
 $2,140,899
 $2,299,188
Operating income233,104
 189,359
 197,504
 156,193
 229,616
Operating income (loss)(854,875) 233,104
 189,359
 197,504
Net income (loss) attributable to Boyd Gaming Corporation(3,854) 10,310
 10,310
 4,241
 4,241
(908,865) (3,854) 10,310
 10,310

Years Ended December 31, 2012 and 2011
Net Revenues
Net revenues were $2.5 billion for the year ended December 31, 2012 as compared to $2.3 billion for the comparable period in the prior year, an increase of approximately $151 million or 6.5%. The Peninsula Acquisition, which occurred on November 20, 2012, renumerated $56.9 million in net revenues during the year ended December 31, 2012. Additionally, the IP, acquired on October 4, 2011, contributed $187.9 million in net revenues during the year ended December 31, 2012, as compared to $44.6 million in net revenues during the period from October 4, 2011 through December 31, 2011. Our year to date results were impacted by weaker than expected mid-year results, and our increase in net revenues were partially offset by increased promotional activities. Promotional allowances increased by $30.7 million primarily due to $2.2 million related to the acquisition of Peninsula Gaming on November 20, 2012, and a full year of IP promotional allowances of $47.1 million, compared to $11.6 million in the prior year for the period from October 4, 2011 to December 31, 2011. The incremental increase in promotional allowances from Peninsula Gaming and IP was offset by a $6.9 million decrease in promotional activities at Borgata. As discussed below, we saw stabilizing and improving trends throughout the year ended December 31, 2012, which were offset by a decline in certain local markets, the most significant decrease of which was in Atlantic City.

Operating Income (Loss)
Operating loss was $854.9 million for the year ended December 31, 2012 as compared to operating income of $233.1 million for the year ended December 31, 2011. The primary decrease was due to $1.1 billion of non-cash impairment charges, of which $993.9 million related to the Echelon project and $17.5 million related to the write-down of the Sam's Town Shreveport gaming license in connection with our annual impairment test. Additionally, the decrease in operating income was due to an increase in gaming, food and beverage, and selling, general and administrative expenses that were not offset by a proportionate increase in net revenues. Although Peninsula Gaming contributed $56.9 million in incremental net revenues, this increase was offset by a $44.1 million decrease in net revenues at Borgata, which was closed from October 28, 2012 to November 2, 2012, due to a post-tropical storm. Operating income was also negatively impacted by other operating items, net, which included charges of $18.7 million of acquisition costs related primarily to the acquisition of Peninsula Gaming and the evaluation of other acquisition opportunities during the year ended December 31, 2012.

Net Loss Attributable to Boyd Gaming Corporation
Net loss attributable to Boyd Gaming Corporation was $908.9 million for the year ended December 31, 2012, compared to a net loss of $3.9 million for the corresponding period of the prior year, due primarily to the flow through impact of the impairment and other operating items, net, discussed above and significantly higher interest costs associated with the acquisition financing of Peninsula Gaming including the 8.375% Senior Note due 2018 and the Peninsula Gaming Credit Facility. During the year ended December 31, 2012, interest expense, net, increased $39.3 million or 15.7%, respectively, compared to the prior year.

Years Ended December 31, 2011 and 2010
Net Revenues
Net revenues were $2.34 billion for the year ended December 31, 2011 as compared to a pro forma $2.30$2.14 billion in net revenues for the comparable period in the prior year, an increase of approximately $195.3 million or 9.1%, due primarily to the consolidation of the Borgata On a pro forma basis to reflect the consolidation of the Borgata as if had occurred on January 1, 2010, net revenues increased approximately $37.1 million or 1.6%. The increase in net revenues during the year ended December 31, 2011 compared to the pro forma during the comparable period in the prior year was due to the acquisition of IP. The IP acquisition which occurred on October 4, 2011, remunerated $44.6 million in net revenues during the period from October 4, 2011 through December 31, 2011. While certain properties and regions showed growth in the latter half of the year ended December 31, 2011, our business continued to stabilize throughout the year but net revenues wererevenue growth was partially offset by increased promotional activities. Promotional allowances increased by $22.0 million primarily due to the acquisition of IP, which represented $11.6 million of this increase, as well as Borgata's promotional allowances which increased by $12.9 million in response to increased competition. The increase in IP and Borgata promotional allowances was offset by our cost containment measures at other properties. As discussed below,

52


we saw stabilizing and improving trends throughout the year ended December 31, 2011, which were offset by a decline in our other segments, the most significant decrease of which was in Atlantic City.

Operating Income
Operating income was $233.1 million for the year ended December 31, 2011 as compared to $189.4 million for the year ended December 31, 2010, representing an increase of $43.7 million or 23.1%, reflecting the impact of the consolidation of the Borgata in late first quarter 2010. On a pro forma basis, operating income was $233.1 million for the year ended December 31, 2011 as compared to $197.5 million for the year ended December 31, 2010, on a pro forma basis, representing an increase of $35.6 million or 18.0%. ThisThe increase in operating income was due to improved operating efficiencies, which given our focus on cost containment over the past several years, largely improvesimproved our profit margins, which increased overall by 160 basis points. The increase was also somewhat attributable to the operating performance of IP since its acquisition, which contributed approximately $3.2 million in operating income during the year ended December 31, 2011. The increase was offset by an incremental $9.3 million in other operating charges,items, net, which represented charges of $14.1 million, and included $6.7 million of asset impairment charges, $6.4 million of acquisition costs related primarily to the acquisition of IP and the evaluation of other acquisition opportunities and $1.4 million related to the insurance deductible and other non-reimbursable costs related to the flooding at Sam's Town Tunica during the year ended December 31, 2011.

Net Loss Attributable to Boyd Gaming Corporation
Net loss attributable to Boyd Gaming Corporation was $3.9 million for the year ended December 31, 2011, compared to net income of $10.3 million for the corresponding period of the prior year,year. The net loss was due primarily to significantly higher interest costs. On a comparative basis, non-recurring other income and gains recorded during these periods waswere relatively consistent.
Years Ended December 31, 2010 and 2009
Net Revenues
Pro forma net revenues were $2.30 billion for the year ended December 31, 2010 as compared to pro forma net revenues of $2.42 billion for the comparable period in the prior year, a decrease of approximately $119.2 million or 4.9%. The decline was primarily due to lower levels of consumer spending, room rate pressures experienced in our Las Vegas Locals region and lower visitor volumes in our Downtown region. In addition, net revenues at our Louisiana properties stabilized in the latter half of 2010 but continued to decline throughout the year as market conditions normalized in that region from the strong and, in some cases, record levels in the prior year. Borgata contributed $738.4 million in net revenues, on a pro forma basis, which reflected a decline of $39.0 million from the comparable prior year period primarily due to the impact of declines in table game hold, adverse impact of severe weather and reduced visitation to Atlantic City during the year.

Operating Income
On a comparable pro forma basis, operating income declined by 14.0% to $197.5 million during the year ended December 31, 2010 compared to the prior year, primarily due to the residual effect of the net revenue items identified above for the years ended December 31, 2010 and 2009. During the year ended December 31, 2010, operating income from Borgata, reflected on a comparable pro forma basis in both periods, declined $47.2 million, or 32.1%, due to the lower net revenue base and insurance gain on workers compensation.
Net Income (Loss) Attributable to Boyd Gaming Corporation
Net income attributable to Boyd Gaming Corporation increased by $6.1 million, or 143.1%, due primarily to the recognition of

47


the $10.0 million payment associated with the amendment to our operating agreement with MGM earlier that year. The overall increase in net income was offset by increased interest expense, due primarily to the refinancing of Borgata's debt, and by a change in the fair value of our derivative instruments due to the de-designation of such as hedged during the year ended December 31, 2010.
Operating Revenues
Years Ended December 31, 2012, 2011 2010 and 20092010
The following analysis discusses our operating revenues on a consolidated basis, which are further supplemented by our operating segment detail below.

We derive the majority of our gross revenues from our gaming operations, which generated approximately 72%, 73%72% and 75%73% of gross revenues for the years ended December 31, 2012, 2011 2010 and 20092010 respectively. Food and beverage gross revenues, which generated approximately 14% of gross revenues for each of the years ended December 31, 2012, 2011 and 2010, and 13% during the year ended December 31, 2009, represent the next most significant revenue source, followed by room and other, both of which separately contributed less than 10% of gross revenues during all of these respective years.


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Year Ended December 31,Year Ended December 31,
2011 2010 2010 2009 20092012 2011 2010 2010
  Actual Pro Forma Actual Pro Forma    Actual Pro Forma
(In thousands)(In thousands)
REVENUES                
Gaming$1,986,644
 $1,812,487
 $1,950,318
 $1,372,091
 $2,063,519
$2,110,233
 $1,986,644
 $1,812,487
 $1,950,318
Food and beverage388,148
 347,588
 378,806
 229,374
 372,784
417,506
 388,148
 347,588
 378,806
Room246,209
 211,046
 235,200
 122,305
 235,448
264,903
 246,209
 211,046
 235,200
Other135,176
 123,603
 132,782
 100,396
 143,016
145,460
 135,176
 123,603
 132,782
Gross revenues2,756,177
 2,494,724
 2,697,106
 1,824,166
 2,814,767
2,938,102
 2,756,177
 2,494,724
 2,697,106
Less promotional allowances419,939
 353,825
 397,918
 183,180
 396,373
450,676
 419,939
 353,825
 397,918
Net revenues$2,336,238
 $2,140,899
 $2,299,188
 $1,640,986
 $2,418,394
$2,487,426
 $2,336,238
 $2,140,899
 $2,299,188
                
COSTS AND EXPENSES                
Gaming$924,451
 $859,818
 $919,679
 $664,739
 $945,359
$1,011,064
 $924,451
 $859,818
 $919,679
Food and beverage200,165
 180,840
 194,340
 125,830
 190,047
219,921
 200,165
 180,840
 194,340
Room56,111
 49,323
 51,508
 39,655
 51,595
55,531
 56,111
 49,323
 51,508
Other108,907
 99,458
 106,585
 77,840
 112,748
111,075
 108,907
 99,458
 106,585
$1,289,634
 $1,189,439
 $1,272,112
 $908,064
 $1,299,749
$1,397,591
 $1,289,634
 $1,189,439
 $1,272,112
MARGINS                
Gaming53.47% 52.56% 52.84% 51.55% 54.19%52.09% 53.47% 52.56% 52.84%
Food and beverage48.43% 47.97% 48.70% 45.14% 49.02%47.33% 48.43% 47.97% 48.70%
Room77.21% 76.63% 78.10% 67.58% 78.09%79.04% 77.21% 76.63% 78.10%
Other19.43% 19.53% 19.73% 22.47% 21.16%23.64% 19.43% 19.53% 19.73%

Years Ended December 31, 2012 and 2011
Gaming
Gaming revenues are significantly comprised of the net win from our slot machine operations and to a lesser extent from table games win. Gaming revenues increased by $123.6 million, or 6.2%, during the year ended December 31, 2012 as compared to the prior year period primarily due to an $118.6 million increase in gaming revenues at IP compared to the period from consummation on October 4, 2011 through December 31, 2011. Excluding IP and Peninsula Gaming, overall slot handle decreased 1.7%, while slot hold remained relatively unchanged compared to the same period in the prior year. Although gaming margins decreased slightly from 53.5% to 52.2%, we continue to focus on our cost containment measures.

Food and Beverage
Food and beverage revenues increased by $29.4 million, or 7.6% during the year ended December 31, 2012 as compared to the corresponding amount from the prior year period primarily due to an $28.0 million increase in food and beverage revenues at IP compared to the period from consummation on October 4, 2011 through December 31, 2011. Excluding Peninsula Gaming, the number of food covers increased 5.9%, and the average guest check increased 2.1%. The $23.6 million increase in food and beverage expense is due to the 5.9% increase in food covers and a 3.6% increase in the cost per cover.
Room
Room revenues increased by $18.7 million, or 7.6%, of which IP contributed $23.1 million in incremental revenues during the year ended December 31, 2012 compared to the period from consummation on October 4, 2011 through December 31, 2011 in the prior year. The ADR increased 1.5%, which was slightly offset by a 1.7% decrease in hotel occupancy largely driven by a decrease in leisure travel. Room margins improved from 77.2% to 79.0% due to our cost containment measures, as the increase in our cost per room of less than 1.0% was more than offset by the 1.5% increase in the ADR.

Other
Other revenues increased by $10.3 million, or 7.6%, of which IP contributed $9.0 million in incremental revenues during the year ended December 31, 2012 compared to the period from consummation on October 4, 2011 through December 31, 2011 in the prior year. Additionally, the Peninsula Acquisition that closed on November 20, 2012, resulted in $1.7 million of incremental other revenues for the year ending December 31, 2012. The results reflect the differing amenities offered at our properties, including

54


entertainment and nightclub revenues, retail sales, theater tickets and other venues. Related other expenses remained relatively flat as compared to the prior year due to our cost containment measures, resulting in an increase in overall margins.

Years Ended December 31, 2011 and 2010
Gaming
Gaming revenues are significantly comprised of the net win from our slot machine operations and to a lesser extent from table games win. Gaming revenues increased by $174.2 million, or 9.6%, during the year ended December 31, 2011 as compared to the corresponding prior year period due primarily to the consolidation of the Borgata. On a pro forma basis, gaming revenues increased by $36.3 million, or 1.9%, during the year ended December 31, 2011 as compared to the corresponding pro forma amount from the prior year due primarily to increases in slot handle and slot win of 0.8% and 2.1%, respectively, which resulted in a 1.3% increase in slot win percentage. Additionally, table drop and table game win increased 3.0% and 6.9%, respectively, which yielded a 3.8% corresponding increase in the table game win percentage.year. IP accounted for a $38.5 million increase in gaming revenues, rendering aan essentially flat performance year over year across various properties. Gaming related costs remained flat, onincreased due to the consolidation of Borgata and the addition in 2011 of the IP. On a pro forma basis, basedgaming related costs were relative flat, reflecting on our focus on cost containment measures and resulting in a slight increase of 63 basis points in gross gaming margins.

Food and Beverage

48


Food and beverage revenues increased by $9.3$40.6 million, or 2.5%11.7% during the year ended December 31, 2011 as compared to the corresponding prior year period due primarily to the consolidation of the Borgata. On a pro forma amountcomparative basis, food and beverage revenues increased by $9.3 million, or 2.5% from the prior year periodperiod. The increase in food and beverage revenues compared to prior year pro forma results is primarily due to the acquisition of IP in October 4, 2011. Additionally, during the year ended December 31, 2012, there was a 2.8% increase in the average guest check, which more than offset the 1.5% decrease in food covers. IP contributed $8.5 million of food and beverage revenue, and its average guest check and food covers are included herein. The increase in food and beverage costs of $19.3 million and $5.8 million on an actual and pro forma basis is due to a 3.7% increase in cost per cover.
 
Room
Room revenues increased by $11.0$35.2 million, or 4.7%16.7%, of which IP contributed $7.2 million during the year ended December 31, 2011 as compared to the corresponding pro forma amount from the prior year period, due primarily to the consolidation of the Borgata. Room revenues increased by $11.0 million, or 4.7% during the year ended December 31, 2011 as compared on a pro forma basis to the prior year period. The increase during the year ended December 31, 2011, compared to the prior year pro forma results is due to the acquisition of IP, which contributed $7.2 million in room revenues since its acquisition on October 4, 2011. The increase was also due to an increase in the average daily rate ("ADR")ADR of 1.6% and increase in occupancy of 0.9% driven by destination and convention business. The increase in room costs and expenses during the year ended December 31, 2011 of $6.8 million , or 13.8% on an actual comparison basis and $4.6 million, or 8.9% on a pro forma basis, ,compared to the same period in the prior year is due to the increased occupancy coupled with a 1.2% increase in cost per room, which resulted in a reduction in margin of 89 basis points.
 
Other
Other revenues increased by $2.4$11.6 million, or 1.8%9.4% during the year ended December 31, 2011 as compared to the correspondingprior year due to the consolidation of the Borgata. Other revenues increased by $2.4 million, or 1.8%, on a pro forma amount frombasis. The increases in actual and pro forma results during the prior year period,ended December 31, 2011, were primarily due to increased hotel occupancy and differing amenities offered at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Related other expenses increased by 2.2% and 9.5% as compared to the prior year and actual and pro forma amounts due to lower overall margins on the respective composition of increased sales.


Years Ended December 2010 and 2009
55

Gaming
Gaming revenues are significantly comprisedTable of the net win from our slot machine operations and to a lesser extent from table games win. On a comparable pro forma basis, gaming revenue decreased $113.2 million, or 5.5% during the year ended December 31, 2010 compared to the prior year. The decrease was due primarily to decreases in slot handle of 4.6%, partially offset by a 1.8% increase in slot drop, resulting in a net decrease in slot win of 2.9%. Additionally, table games drop and win decreased by a respective 5.6% and 10.4%, which resulted in a 5.1% corresponding decrease in the table game win percentage. We believe the decrease in gaming volumes reflected the ongoing constraints in consumer spending which resulted from the weakened economy. Gaming related costs decreased $25.7 million as a result of the factors mentioned above.Contents

Food and Beverage
On a comparable pro forma basis, food and beverage revenues increased by $6.0 million, or 1.6% during the year ended December 31, 2010 as compared to the corresponding pro forma amount from the prior year period due to a slight increase in banquet sales and a shift in consumer spending patterns. There was a 1.3% increase in the average guest check.

Room
On a comparable pro forma basis, room revenues remained relatively flat and decreased $0.2 million during the year ended December 31, 2010.

Other
On a comparable pro forma basis, other revenues decreased $10.2 million, or 7.2% and other expenses decreased $6.2 million, or 5.5% during the year ended December 31, 2010 as compared to the prior year, primarily due to a reduction in the number of shows held at our entertainment venues.

Revenues and Adjusted EBITDA by Reportable Segment
We determine each of our properties' profitability based upon Adjusted EBITDA, which represents earnings before interest expense, income taxes, depreciation and amortization, deferred rent, preopening expenses, share-based compensation expense, and other operating charges, as applicable. Reportable Segment Adjusted EBITDA is the aggregate sum of the Adjusted EBITDA for each of the properties comprising our Las Vegas Locals, Downtown Las Vegas, Midwest and South and Atlantic City segments and also includes our share of Borgata's operating income, (during the period in which it was accounted for under the equity method of accounting in 2009), before net amortization, preopening and other items.

The following table presents our net revenues and Adjusted EBITDA, by Reportable Segment, for the years ended December 31, 2012, 2011 2010 and 2009.2010.

  Year Ended December 31,
  2012 2011 2010 2010
      Actual Pro Forma
Net Revenues (In thousands)
     Las Vegas Locals $591,306
 $604,965
 $607,366
 $607,366
     Downtown Las Vegas 224,178
 224,251
 218,222
 218,222
     Midwest and South 924,188
 771,354
 728,767
 728,767
Peninsula Gaming 56,925
 
 
 
     Atlantic City 686,222
 730,274
 580,140
 738,429
          Reportable segment net revenues 2,482,819
 2,330,844
 2,134,495
 2,292,784
     Other 4,607
 5,394
 6,404
 6,404
Net revenues $2,487,426
 $2,336,238
 $2,140,899
 $2,299,188

Years Ended December 31, 2012 and 2011
Las Vegas Locals
Net revenues declined slightly by 2.3% during the year ended December 31, 2012, as compared to the corresponding period of the prior year. Local competition has created an elevated promotional environment that resulted in an 2.7% increase in promotional allowances during the year ended December 31, 2012. Additionally, gross gaming revenues decreased $13.0 million primarily due to a 4.3% and 1.7% decrease in table game drop and slot drop respectively, which were not offset by slight increases in table game and slot hold. These decreases were only partially offset by sales growth generated in our food and beverage outlets as food covers increased 3.2%, resulting in a $2.3 million increase in food and beverage revenues as compared to the corresponding period of the prior year.
Downtown Las Vegas
Net revenues were virtually unchanged during the year ended December, 2012, as compared to the corresponding period of the prior year. The leisure travel market continues to be challenging and we experienced a 2.4% decrease in the hotel occupancy rate, primarily driven by a 7.3% decrease in our Hawaiian occupied rooms compared to the corresponding period of the prior year. Additionally, we experienced a $2.2 million decrease in gaming revenue due to a 1.8% decrease in slot drop. These decreases were offset by a $1.1 million increase in food and beverage revenues and a decrease of $0.8 million in promotional allowances due to our cost containment.
Midwest and South
Net revenues increased by $152.8 million during the year ended December 31, 2011, as compared to the corresponding period of the prior year. The increase in net revenues was from the acquisition of IP, which renumerated $187.9 million in year to date net revenues compared to $44.6 million in net revenues for the fourth quarter of 2011, an increase of $143.3 million respectively. Including IP, food covers increased 24.3% and the average guest check increased 8.7% respectively. Similarly, including IP, table game drop and slot handle increased 34.3% and 16.6%, respectively, as compared to the corresponding period of the prior year.

Peninsula Gaming
Net revenues were $56.9 million for the period of acquisition from November 20, 2012 to December 31, 2012. The segment reported growth from the prior year when Peninsula Gaming was a standalone company, due to a full quarter of contributions from the Kansas Star, which commenced operations on December 20, 2011.

Atlantic City
Net revenues for the year ended December 31, 2012, as compared to the year ended December 31, 2011, decreased by 6.0% to $686.2 million from $730.3 million. Overall, results during the year were negatively impacted by the order to close Borgata from October 28, 2012 to November 2, 2012 due to a post-tropical storm. As a result of the storm, the property suffered minor property damage, however, the surrounding area experienced severe flooding and significant property damage. Additionally, throughout the year, Borgata has been adversely impacted by increased local and regional competition particularly in the Atlantic City and Eastern Pennsylvania gaming markets. As a result of these factors, gaming revenues, food and beverage revenues, and room revenues decreased by $39.3 million, $7.7 million, and $2.1 million, respectively. The decrease in gaming revenues was attributed

4956


  Year Ended December 31,
  2011 2010 2010 2009
    Actual Pro Forma  
  (In thousands)
Net Revenues        
     Las Vegas Locals $604,965
 $607,366
 $607,366
 $641,941
     Downtown Las Vegas 224,251
 218,222
 218,222
 229,149
     Midwest and South 771,354
 728,767
 728,767
 762,336
     Atlantic City 730,274
 580,140
 738,429
 
          Reportable segment net revenues 2,330,844
 2,134,495
 2,292,784
 1,633,426
     Other 5,394
 6,404
 6,404
 7,560
Net revenues $2,336,238
 $2,140,899
 $2,299,188
 $1,640,986
         
Adjusted EBITDA        
     Las Vegas Locals $145,848
 $137,464
 $137,464
 $155,336
     Downtown Las Vegas 35,214
 34,227
 34,227
 46,102
     Midwest and South 167,101
 143,699
 143,699
 165,534
     Wholly-owned Adjusted EBITDA 348,163
 315,390
 315,390
 366,972
     Atlantic City 158,126
 136,278
 169,393
 
Our share of Borgata's operating income before net amortization, preopening and other items 
 8,146
 
 59,470
Adjusted EBITDA $506,289
 $459,814
 $484,783
 $426,442
to a decrease in table game drop, and slot drop of 9.7% and 3.8%, respectively. Despite the challenging environment, Borgata continues to be the leader in the Atlantic City market.

Years Ended December 31, 2011 and 2010
Las Vegas Locals
Net revenues declined slightly by 0.4% while Adjusted EBITDA increased by 6.1% during the year ended December 31, 2011, as compared to the corresponding period of the prior year, reflecting improved overall operating performance, generated by successful cost containment initiatives. Although local competition has created an elevated promotional environment; however, through strategic marketing, the region has increased margins by 148 basis points for the year ended December 31, 2011, as compared to the same period in the prior year. The segment also generated growth in hotel occupancy and average daily rates due to increased convention business in the Las Vegas market generally.
 
Downtown Las Vegas
Net revenues and Adjusted EBITDA increased by 2.8% and 2.9% respectively, during the year ended December, 2011, as compared to the corresponding period of the prior year, due primarily to growth in all primary operating revenues: gaming, food and beverage and room, generated largely from our Hawaiian customers. Greater efficiencies in our operations contributed to strong flow-through in our results, which were partially offset by significantly higher fuel costs at our Hawaiian charter operation. Jet fuel prices have risen sharply during the year, and while our ability to increase fares is limited by fierce competition, we recently introduced a new aircraft on the charter service that will increase capacity and improve costs.
 
Midwest and South
Net revenues and Adjusted EBITDA increased by 5.8% and 16.3%, respectively, during the year ended December 31, 2011, as compared to the corresponding period of the prior year.year as our business continued to grow across this region, due to geographic resiliency, most particularly resulting from economic strength in southern Louisiana. The increase in net revenues was entirely from the acquisition of IP, which renumerated $44.6 million to our revenues for the fourth quarter of 2011. While $8.4 million of the $23.4 million increase in Adjusted EBITDA is related to the acquisition of IP, the remaining increase to Adjusted EBITDA is from our business continuing to grow across this region, due to geographic resiliency, most particularly resulting from economic strength in southern Louisiana. Margin improvements of 212 basis points (excluding the effect of IP), have resulted from tight cost control, including disciplined marketing spend.
 
Atlantic City
Net revenues for the year ended December 31, 2011, as compared to the prior year increased by 25.9% to $730.3 million. The 2011 period included a full year of results for the Borgata in contrast to the prior year, which only included the results for Borgata from March 24, 2010, when we began consolidating the property, On a pro forma resultsbasis, net revenues for the year ended December 31, 2010,2011, as compared to the prior year period decreased by 1.1% to $730.3 million from $738.4 million, and Adjusted EBITDA declined by 6.7% to $158.1 million from $169.4 million. Overall, results during the year2011 were negatively impacted by the closure of the property during Hurricane Irene, which cost the property three days of business volume during a relatively busy summer month. Additionally, throughout the year,2011, Borgata

50


has been was adversely impacted by promotional spend, which increased to 34.6% of gross gaming revenue for the year ended December 31, 2011 from 32.8% for the prior year. This spend represented increased promotional incentives in response to the increasingly competitive environment in the Atlantic City and Eastern Pennsylvania gaming markets.

Years Ended December 31, 2010 and 2009
Las Vegas Locals
Net revenues and Adjusted EBITDA declined 5.4% and 11.5%, respectively, during the year ended December 31, 2010 as compared to the prior year, due primarily to cautious discretionary spending by our unrated and lower-tiered players. Both revenues and Adjusted EBITDA improved in each quarter of 2010, signaling signs of recovery in this region; however, the promotional environment continues to be highly competitive.

Downtown Las Vegas
Net revenues and Adjusted EBITDA declined 4.8% and 25.8%, respectively, during the year ended December 31, 2010 as compared to the prior year due primarily to higher fuel costs and lower ticket prices on our Hawaiian charter operation. We retained market share but saw noticeable declines in the amount of spend per visit by our customers.
Midwest and South
Net revenues and Adjusted EBITDA declined by 4.4% and 13.2%, respectively, during the year ended December 31, 2010 as compared to the prior year due primarily to lower levels of consumer spending; however, our business continues to stabilize across this region. We returned to growth in both gross revenues and Adjusted EBITDA during the latter half of 2010.
Atlantic City
During the year ended 2010, we recorded $169.4 million of Adjusted EBITDA related to Borgata, driven by $738.4 million in net revenues. Net revenues decreased $39.0 million during the year ended December 31, 2010 as compared to the prior year pro forma period. The decrease in net revenues is due to a decline in table game win of 15% and slot win of 1.9%, which were due to an 8.3% decrease in table games drop, a 100 basis point decrease in the table games hold percentage and a 3.0% decrease in slot handle. These results have been negatively impacted by heightened competition in the Atlantic City market. We also believe the decrease in gaming volumes reflect the ongoing constraints in consumer spending resulting from the weakened economy.

Other Costs and Expenses
The following costs and expenses, as presented in our consolidated statements of operations, are further discussed below:


Year Ended December 31,Year Ended December 31,
2011 2010 2010 2009 20092012 2011 2010 2010
  Actual Pro Forma Actual Pro Forma    Actual Pro Forma
(In thousands)(In thousands)
Selling, general and administrative$394,991
 $369,217
 $398,198
 $284,937
 $413,101
$452,926
 $394,991
 $369,217
 $398,198
Maintenance and utilities153,512
 140,722
 154,244
 92,296
 152,196
155,016
 153,512
 140,722
 154,244
Depreciation and amortization195,343
 199,275
 216,029
 164,427
 244,444
214,332
 195,343
 199,275
 216,029
Corporate expense48,962
 48,861
 48,861
 47,617
 47,617
50,719
 48,962
 48,861
 48,861
Preopening expense6,634
 7,459
 7,459
 17,798
 18,497
11,541
 6,634
 7,459
 7,459
Other operating charges, net14,058
 4,713
 4,781
 41,780
 13,174
Other operating items, net6,650
 8,007
 4,713
 4,781
Impairment of assets1,053,526
 6,051
 
 

Years Ended December 31, 20112012 and 20102011
Selling, general and administrative
Selling, general and administrative expenses, as a percentage of gross revenues, declinedincreased slightly from 14.8%14.3% to 14.3%15.4% during

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the year ended December 31, 20112012 as compared to the corresponding pro forma period of the prior year, despiteyear. The increase in selling, general and administrative expenses as a percentage of gross revenues was largely due to a decrease in gross gaming revenues in our Las Vegas Locals, Downtown, and Atlantic City segments, that were not offset by the reporting of additional costs related to IP.expenses associated with IP and Peninsula Gaming. These costs primarily include marketing, technology, compliance and risk, surveillance and security. These costs have generally been reduced in the periods presented due to disciplined and targeted marketing spend, and our ongoing cost containment efforts.
 
Maintenance and Utilities
Maintenance and utilities expenses, as a percentage of gross revenues, decreased from 5.7%5.6% to 5.6%5.3%, on a pro forma basis, during the year ended December 31, 20112012 as compared to the corresponding period of the prior year. The decreases in each period areis primarily due primarily to the fact that no major maintenance projects were undertaken in either period, coupled with cost reductions

51


associated with the Company's conscious energy savings initiatives.
 
Depreciation and Amortization
Depreciation and amortization expense as a percentage of gross revenues increased to 7.3% from 7.1% during the year ended December 31, 2012, as compared to the corresponding period of the prior year. The increase in gross revenues due to the addition of IP and Peninsula Gaming, that resulted in incremental revenues for the period from January 1, 2012 through October 4, 2012 and from November 20, 2012 through December 31, 2012, respectively, offset depreciation and amortization expense for capital assets acquired and placed in service during the current year, as compared to the corresponding period of the prior year.
Corporate Expense
Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense. The levels of corporate expense, as a percentage of gross revenues decreased slightly from 1.8% to 1.7%, compared to the corresponding period of the prior year which reflects the ongoing efforts to contain costs in all elements of the business.
Preopening Expenses
We expense certain costs of start-up activities as incurred. During each of the years ended December 31, 2012 and 2011, we recorded preopening expenses related to Echelon, our ongoing efforts to develop gaming activities in other jurisdictions and expenses related to other business development activities. Additionally, the Periodic Fees related to LVE, as discussed above, are included in the expenses related to Echelon during the year ended December 31, 2012; however, such amounts were eliminated upon the consolidation of LVE and not reflected in total preopening expenses.
Impairment and Other Operating Items, Net
Impairment and other operating items, net generally include losses on the impairment or disposal of certain assets, costs incurred in relation to acquisition activities and costs (or recoveries) associated with property damage from natural disasters. These costs were comprised of the following items during the years ended December 31, 2012 and 2011:

 Year Ended December 31,
 2012 2011
 (In thousands)
Impairments$1,053,526
 $6,051
    
Other operating items, net   
Acquisition-related expenses$18,651
 $6,375
Gain on insurance settlement, net of flood expenses(7,098) 1,428
Gain on insurance proceeds(7,694) 
Hurricane expenses2,668
 
Asset write-downs, net of gain on disposal123
 690
Measurement period adjustments
 (486)
Total other operating items, net$6,650
 $8,007

Impairments
During the year ended December 31, 2012, we recorded asset impairments primarily related to the following items:

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Development Assets: We recorded a non-cash impairment charge of $1.05 billion, primarily consisting of $993.9 million related to the Echelon development and $39.4 million related to various parcels of undeveloped land.
Sam's Town Shreveport: We recorded a non-cash impairment charge of $17.5 million which relates to the write-down of Sam's Town Shreveport's gaming license in connection with our annual impairment test.
Borgata: We recorded a non-cash impairment charge of $2.8 million related to a parking structure project that will not be further developed.

During the year ended December 31, 2011, we recorded asset impairments primarily related to the following items:

Impairment of Trademark: We recorded a $5.0 million impairment to the trademark, representing the amount by which the carrying amount exceeded its fair value.

Impairment of Investment in Unconsolidated Subsidiary: We recorded a non-cash impairment charge to Borgata's investment in an unconsolidated subsidiary in the amount of $1.1 million, representing the amount by which the carrying value of the investment exceeded its potential liquidated value.

Other Operating Items, Net
Acquisition-Related Expenses
During the year ended December 31, 2012, 2011, and 2010, we recorded $18.7 million, $6.4 million, and $4.0 million of expenses related to evaluating various acquisition possibilities and other business development activities. Acquisition related expenses for the year ended December 31, 2012, primarily relate to our acquisition of Peninsula Gaming that was completed on November 20, 2012. Acquisition expenses for the years ended December 31, 2011 and 2010 primarily relate to our acquisition of IP that was completed on October 4, 2011.

Gain on Insurance Settlement, Net of Flood Expenses
During the year ended December 31, 2012, we recorded $7.1 million of gains on business interruption insurance proceeds, net of flood expenses, due to flooding of the Mississippi River and temporary closure of our Tunica property in May 2011, compared to flood expenses of $1.4 million, net of recoveries, during the year ended December 31, 2011.

Gain on Insurance Proceeds
During the year ended December 31, 2012, we recognized a gain of $7.7 million consisting of $3.9 million related to the subrogation of insurance claims related to the fire that occurred during construction of The Water Club at Borgata in September 2007 and $3.8 million from business interruption proceeds due to the mandated closure of the property by civil authorities and the Division of Gaming Enforcement for three days in August 2011 related to Hurricane Irene.

Years Ended December 31, 2011 and 2010
Selling, general and administrative
Selling, general and administrative expenses increased $25.8 million in 2011 over the prior year due to the consolidation of the Borgata and the incremental costs incurred by the addition of IP during 2011. These costs primarily include marketing, technology, compliance and risk, surveillance and security. These costs have generally been reduced in the periods presented due to disciplined and targeted marketing spend, and our ongoing cost containment efforts. On a pro forma basis, selling, general and administrative expenses, as a percentage of gross revenues, declined slightly from 14.8% to 14.3% during 2011 as compared to the prior year, despite the reporting of additional costs related to IP.
Maintenance and Utilities
Maintenance and utilities expenses decreased $12.8 million during the year ended December 31, 2011 as compared to the prior year. On a pro forma basis, maintenance and utilities expenses, as a percentage of gross revenues, decreased from 5.7% to 5.6%, during 2011 as compared to the prior year. The decrease is due primarily to the fact that no major maintenance projects were undertaken, coupled with cost reductions associated with the Company's energy savings initiatives.

Depreciation and Amortization
Depreciation and amortization expense decreased $3.9 million during the year ended December 31, 2011 as compared to the same period in the prior year. Depreciation and amortization expense declined, on a pro forma basis, as a percentage of gross revenues from 8.0% to 7.1% during the year ended December 31, 2011 as compared to the corresponding period of the prior year. The declinedecrease in depreciation expense was due to certain property and equipment becoming fully depreciated and no significant expansion capital expenditures being placed into service during these periods and was despite the recording of approximately $4.9 million of additional depreciation and amortization related to IP.

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Corporate Expense
Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense. The levels of corporate expense, as a percentage of gross revenues remained flat at 1.8% of gross revenues during each of the years ended December 31, 2011 and 2010, respectively, which reflects the ongoing efforts to contain costs in all elements of the business.
 
Preopening Expenses
We expense certain costs of start-up activities as incurred. During each of the years ended December 31, 20112012 and 2010,2011, we recorded preopening expenses related to Echelon, which as a percentage of gross revenues remained relatively flat, expenses related to our efforts to develop gaming activities in other jurisdictions and expenses related to other business development activities. Additionally, the Periodic Fees related to LVE, as discussed above, are included in the expenses related to Echelon during the year ended December 31, 2011;2012; however, such amounts were eliminated upon the consolidation of LVE and not reflected in total preopening expenses.
 
Impairment and Other Operating Charges,Items, Net
Other operating charges,items, net generally include losses on the impairment or disposal of certain assets, costs incurred in relation to acquisition activities and costs (or recoveries) associated with property damage from natural disasters. These costs were comprised of the following items during the years ended December 31, 2011 and 2010:

 Year Ended December 31,
 2011 2010
 (In thousands)
Asset impairments and write-downs$6,741
 $736
Acquisition related expenses6,375
 3,977
Flood expenses, net of recoveries1,428
 
Measurement period adjustments(486) 
Other operating charges, net$14,058
 $4,713

During the year ended December 31, 2011, asset impairment charges primarily related to the write down of Borgata's trademark value by $5.0 million, and an impairment of its equity method investment of $1.1 million. Acquisition expenses represent our costs related to the IP acquisition of $4.8 million, as well as costs incurred during the evaluation of other business prospects and opportunities. Additionally, we incurred $1.4 million related to the payment of our insurance deductible and related and non-reimbursable costs, net of recoveries, for the closure of Sam's Town Tunica during the year due to the flooding of the Mississippi river.

Years Ended December 31, 2010 and 2009
Selling, general and administrative
Selling, general and administrative expenses, as a percentage of gross revenues, were fairly consistent at 14.8% and 14.7% , on a pro forma basis, during the years ended December 31, 2010 and 2009, respectively, due to our ongoing cost containment efforts.

Maintenance and Utilities
Maintenance and utilities expenses were relatively consistent during the years ended December 2010 and 2009, at 5.7% and 5.4% of gross revenues, respectively, on a pro forma basis, as no major maintenance projects were undertaken in either year. The incremental increase in maintenance and utilities as a percentage of gross revenues during the years ended December 31, 2010 and 2009, respectively, reflects an overall increase in energy costs.

Depreciation and Amortization

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Depreciation and amortization expense remained relatively consistent during the pro forma year ended December 31, 2010, as compared to the corresponding period of the prior year, representing 8.0% and 8.7%, of gross revenues respectively. There were no significant expansion capital expenditures that were placed into service during 2010. In 2009, the opening of the hotel tower at Blue Chip resulted in increased depreciation of this building and was offset by other fully depreciated assets.

Corporate Expense
Corporate expense represents unallocated payroll, professional fees, and various other expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense. Corporate expense on a pro forma basis was relatively flat during the year ended December 31, 2010, as compared to the corresponding prior year, representing 1.8% and 1.7% of gross revenues, respectively.

Preopening Expense
We expense certain costs of start-up activities as incurred. During the years ended December 31, 2010 and 2009, we recorded preopening expenses related to Echelon, our hotel and expansion project at Blue Chip, our efforts to develop gaming activities in other jurisdictions and other business development activities. On a pro forma basis, preopening expenses decreased $11.0 million for the year ended December 31, 2010, as compared to the prior year, due to the delay of Echelon.

Other Operating Charges, Net
Other operating charges, net primarily represent asset impairment charges and other non-recurring charges. During the year ended December 31, 2010, other operating charges, net was primarily comprised of $4.0 million in expenses related to acquisition activities and a $0.5 million impairment charge on a fair value adjustment related to our investment in certain bonds. During the year ended December 31, 2009, other operating charges, net primarily consisted of total non-cash impairment charges of $42.7 million, of which $13.5 million related to the write-down of our former investment in the Morgans joint venture and $28.4 million related to the impairment of Dania Jai-Alai's goodwill in connection with the January 2009 amendment to the Dania Jai-Alai purchase agreement to settle the contingent payment prior to the satisfaction of certain legal conditions.

Operating Income from Borgata
Years Ended December 31, 2010 and 2009
Our share of Borgata's operating income before net amortization, preopening and other items from decreased $59.5 million to $8.1 million during the year ended December 31, 2010, as compared to the prior year, due to the consolidation of Borgata's results beginning in March 2010. On a pro forma basis, comparing the results of Borgata as if we had applied equity method accounting in both respective periods, operating income for the full year ended December 31, 2010 was $49.8 million, representing a decrease of $9.7 million from the prior year, which reflects the overall decline in consumer spending globally, the heightened competition in Atlantic City, as well as the effects of the severe winter storms making travel extremely difficult throughout the entire Northeast during the fourth quarter of 2010.

Other Expense (Income)
Interest Expense, net
Years Ended December 31, 2012, 2011 2010 and 20092010
  Year Ended December 31,
  2012 2011 2010 2010
      Actual Pro Forma
Interest Expense, net (In thousands)
Boyd Gaming Corporation $183,796
 $152,618
 $119,310
 $119,310
Peninsula Gaming 9,814
 
 
 
Borgata 82,902
 81,314
 45,139
 50,199
Variable interest entity 12,323
 16,753
 16,104
 16,104
  $288,835
 $250,685
 $180,553
 $185,613
         
Average Long-Term Debt Balance        
Boyd Gaming Corporation, excluding Peninsula Gaming $2,707,189
 $2,447,557
 $2,467,303
 $2,467,303
Peninsula Gaming 848,500
 
 
 
Borgata 815,308
 822,589
 706,102
 706,102
         
Weighted Average Interest Rates        
Boyd Gaming Corporation 6.8% 6.2% 4.8% 4.8%
Peninsula Gaming 6.5% % % %
Borgata 10.2% 9.9% 6.4% 7.1%

Years Ended December 31, 2012 and 2011
Summary
Interest expense, net of capitalized interest and interest income, was $288.8 million for the year ended December 31, 2012, as compared to $250.7 million during the comparable period in the prior year, representing an increase of 15.2%. Excluding the effects of the interest recorded related to the variable interest entity's non-recourse debt during each of the years ended December

5360


31, 2012 and 2011, interest expense would have been $276.5 million and $233.9 million, respectively, or an increase of 18.2%.
   Year Ended December 31,
   2011 2010 2010 2009
     Actual Pro Forma  
   (In thousands)
Interest Expense, net         
     Boyd Gaming Corporation  $152,618
 $119,310
 $119,310
 $146,824
     Borgata  81,314
 45,139
 50,199
 
     Variable interest entity  16,753
 16,104
 16,104
 
   $250,685
 $180,553
 $185,613
 $146,824
          
Average Long-Term Debt Balance         
     Boyd Gaming Corporation  $2,447,557
 $2,467,303
 $2,467,303
 $2,611,985
     Borgata  $822,589
 $706,102
 $706,102
 $
          
Weighted Average Interest Rates         
     Boyd Gaming Corporation  6.2% 4.8% 4.8% 5.6%
     Borgata  9.9% 6.4% 7.1% N/A
Boyd Gaming Corporation
The increase in interest expense, net of capitalized interest and interest income of $31.2 million during the year ended December 31, 2012, as compared to the corresponding period in the prior year was due to higher average interest rates on amounts outstanding under our credit facility related to certain refinancing and incremental borrowing activities associated with the Peninsula Acquisition. Interest expense also increased during the year ended December 31, 2012 due to the issuance of $350 million 9.0% senior notes due 2020 on June 8, 2012. The interest rate on the credit facility is substantially lower than on our high yield notes, thereby diluting the rate effect of our high yield notes, resulting in an overall weighted average borrowing rate of 6.6% and 6.2% at December 31, 2012 and 2011, respectively. At December 31, 2012, 50.8% of our debt was based upon variable rates of interest, compared to 62.8% of our debt at December 31, 2011.
We previously were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. As market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps, the effect of the swaps increased our interest expense by $11.8 million for the year ended December 31, 2011. Our interest rate swap agreements expired on June 30, 2011.
Peninsula Gaming
The average balance under the Peninsula Gaming Credit Facility for the period November 20, 2012 through December 31, 2012 was $848.5 million at a blended rate of 5.7%. During the period November 20, 2012 through December 31, 2012 the blended interest rate on the Peninsula Gaming outstanding senior notes was 8.4%, and the average outstanding balances during the period November 20, 2012 through December 31, 2012 was $350.0 million. The interest rate on the Peninsula Gaming Credit Facility is substantially lower than on the high yield notes, thereby diluting the rate effect, resulting in an overall weighted average borrowing rate of 6.5% during the period November 20, 2012 through December 31, 2012. At December 31, 2012, 70.9% of Peninsula Gaming's debt was based upon variable rates of interest, compared to 0.7% of our debt at December 31, 2011.

Borgata
The increase in interest expense, net of capitalized interest and interest income, during the years ended December 31, 2012 and 2011, as compared to corresponding period in the prior year were due to higher average interest rates. The increase in interest expense of $1.6 million during the year ended December 31, 2012 is due to a lower average balance of variable rate debt. On December 27, 2012, Borgata's credit facility was amended, reducing the aggregate commitment of the bank credit facility to a maximum amount of $60 million from $75 million. At December 31, 2012, variable rate debt represented 2.5% of outstanding debt compared to 4.8% in the prior year. As such, Borgata's average interest rates were not diluted by a higher proportion of variable rate date compared to Borgata's fixed rate notes.

Years Ended December 31, 2011 and 2010
Summary
Interest expense was $250.7 million for the year ended December 31, 2011, as compared to $180.6 million during the comparable period in the prior year, representing an increase of 38.8%. On a pro forma basis, interest expense was $250.7 million for the year ended December 31, 2011, as compared to $185.6 million during the comparable pro forma period in the prior year, representing an increase of 35.1%. Excluding the effects of the interest recordedexpense related to the variable interest entity's non-recourse debt during each of the years ended December 31, 2011 and 2010, the interest expense would have been $233.9 million and $169.5 million, respectively, or an increase of 38.0%.

Boyd Gaming Corporation
The increase in interest expense of $33.3 million during the year ended December 31, 2011, as compared to the corresponding period in the prior year on an actual and pro forma basis was due to higher interest rates on amounts outstanding under our credit facility related to certain refinancing and incremental borrowing activities in the fourth quarter of 2011, and the full year impact of the refinancing transaction that occurred in the fourth quarter of 2010. Average balances during the year ended December 31, 2011 reflect approximately $1.43 billion in amounts outstanding under our credit facility at a blended rate of 3.5%, as compared to average outstanding balances during the year ended December 31, 2010 of $1.42 billion at a blended rate of 3.3%. At December 31, 2011 and 2010, the blended interest rate on our outstanding senior and senior subordinated notes was 8.1% at each date, and our average outstanding balances during the years ended December 31, 2011 and 2010 were $2.4 billion and $2.5 billion, respectively. The interest rate on the credit facility is substantially lower than on our high yield notes, thereby diluting the rate effect of our high yield notes, resulting in an overall weighted average borrowing rate of 6.2% and 4.8% at December 31, 2011 and 2010, respectively. At December 31, 2011, 62.8% of our debt was based upon variable rates of interest, compared to 59.8% of our debt at December 31, 2010.


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We previously were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. As market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps, the effect of the swaps increased our interest expense by $11.8 million and $22.7 million for the years ended December 31, 2011and 2010, respectively. Our interest rate swap agreements expired on June 30, 2011.
 
Borgata
The increasesincrease in interest expense during the yearsyear ended December 31, 2011, and 2010, as compared to corresponding pro forma period in the prior year werewas due to higher average interest rates on higher average outstanding debt balances. The increase wasincreases were $36.2 million and $31.1 million on an actual and pro forma basis, respectively, during the year ended December 31, 2011, which reflects the effect of the refinancing, which closed during the third quarter of 2010. Interest expense increased by 62% during the year ended December 31, 2011 due entirely to the refinancing impact, the full effect of which was realized in such year. At December 31, 2011, the blended interest rate on Borgata's credit facility and senior secured notes was 4.5% and 9.7%, respectively, as compared to blended interest rates of 4.2% and 9.7% on these respective borrowings at December 31, 2010.

Years Ended December 31, 2010 and 2009
Boyd Gaming Corporation

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Interest expense, net was $119.3 million for the year ended December 31, 2010, an 18.7% decline as compared to the corresponding period of the prior year. The decline was due to lower average interest rates during the year ended December 31, 2010 as compared to 2009, which were 4.7% versus 5.4%, respectively, and lower average note payable and outstanding debt balances, which declined to $2.5 billion from $2.7 billion during the respective periods. At December 31, 2010, 59.8% of our debt was based upon variable rates of interest, compared to 74.4% of our debt at December 31, 2009.

We previously were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. As market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps, the effect of the swaps increased our interest expense by $22.7 million and $23.6 million for the years ended December 31, 2010 and 2009, respectively.

Borgata
Interest expense, net was $50.2 million for the year ended December 31, 2010, an 81.4% increase as compared to expense of $27.7 million during the year ended December 31, 2009. The increase is primarily due to higher average interest rates during the year ended December 31, 2010 as compared to 2009, which were 6.0% versus 3.5%, respectively, due to the refinancing of Borgata's credit facility. In addition, as a result of the termination of its former credit facility in 2010, approximately $2.0 million of unamortized debt fees related to the former credit facility were accelerated into expense. During the year ended December 31, 2009, we recorded our share of Borgata's interest expense is included in other operating expenses from Borgata, under the equity method.

Gain on Early Retirements of Debt
Years Ended December 31, 2012, 2011 2010 and 20092010
During the year ended December, 2012, we did not repurchase or retire any of our debt.

During the year ended December, 2011, Borgata purchased and retired a principal amount of $8.5 million of its senior secured notes for a purchase price of $8.2 million, resulting in a gain of less than $0.1 million.

During the year ended December 31, 2010, we purchased and retired $33.0 million principal amount of Boyd's senior subordinated notes. The total purchase price of the notes was $28.9 million resulting in a gain of $3.6 million, net. The gains are computed net of original issue discount, deferred financing and underwriting fees. In November 2010, we tendered for purchase all of our outstanding 7.75% senior subordinated notes due 2012. Approximately $92.1 million principal amount of the 7.75% senior subordinated notes were tendered for purchase pursuant to our tender offer. We paid $95.3 million in connection with the tender offer, including accrued interest of $2.9 million, and recognized a loss on such tender of $0.8 million, based on the difference between the consideration fee, redemption price and the net carrying value of the notes in addition to unamortized debt financing costs written off in conjunction with the purchase of the notes. Additionally, in December 2010, we called the remaining 7.75% senior subordinated notes due 2012 at par, which had a principal balance of $66.8 million. We recognized a loss of $0.4 million upon calling such notes, which consisted of our write-off of the remaining unamortized debt financing costs associated with the notes.

During the year ended December 31, 2009, we purchased and retired $105.3 million principal amount of our senior subordinated notes. The total purchase price of the notes was $89.5 million, resulting in a gain of $15.3 million, net of associated deferred financing costs.

Gain on Equity Distribution
Year Ended December 31, 2012, 2011 and 2010
During the year ended December 31, 2012 and 2011, there were no equity distributions from Borgata. During the year ended December 31, 2010, we received a $135.4 million distribution from Borgata. The distribution included a priority distribution of $30.8 million, which is equal to the excess prior capital contributions we previously made. We recorded a $2.5 million gain upon receipt of this distribution, which gain was equal to the basis difference on our equity contribution during the period in which we were amortizing a portion of such excess contribution.

Other Income (Loss)
Years Ended December 31, 2012, 2011 and 2010
During the year ended December 31, 2012, we recorded approximately $0.1 million for our share of loss from operations related to an investment in a third party venture whose primary purpose is to operate a hotel adjacent to the Evangeline Downs Racetrack and Casino.
During the year ended December 31, 2011, we received $7.0 million in non-refundable fees related to the anticipated closing of the sale of Dania Jai-Alai, which was terminated due to the buyer's inability to close as scheduled. We also recorded a $4.6 million bargain purchase gain related to the acquisition of IP.
During the year ended December 31, 2010, we received a $10 million fee from MGM in consideration for the amendment to our operating agreement related to Borgata.
Income Taxes

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Years Ended September 30,December 31, 2012, 2011 2010 and 20092010
The effective tax rate during the years ended December 31, 2011, 2010 and 2009 was (27.4%), 40.2% and 20.2%, respectively. Our effective tax rate for the years ended December 31,2012, 2011 and 2010 was favorably19.3%, (27.4%) and unfavorably40.2%, respectively. The tax benefit for the year ended December 31, 2012 was adversely impacted by permanent adjustments relatedthe valuation allowance on our deferred tax

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assets. The valuation allowance was also applied to our consolidation of Borgatafederal and LVE, respectively. We consolidate Borgata's income and LVE's loss for financial statement purposes; however, under federalcertain state income tax statutes, we are subject to incomenet operating losses and other deferred tax assets. The tax benefit was favorably impacted by the reversal of interest accrued on unrecognized tax benefits, resulting from the effective settlement reached in connection with our fifty percent interest in Borgata and exclude LVE's loss in its entirety.IRS audit. During the year ended December 31, 2011, our tax provision was adversely impacted by certain recurring permanent adjustments that are unaffected by our loss from continuing operations and favorably impacted by a nontaxable acquisition related gain. Additionally, in the year ended December 31, 2011, and to a lesser extent in the year ended December 31, 2010, our state tax provision was adversely impacted by a statutory change in state income tax rates, changes in apportionment and the geographic mix of our income. The relative impact of equity based state taxes was more significant in the year ended December 31, 2011 due to a loss from continuing operations. TheOur effective tax provision for the year ended December 31, 2009 was favorablyrates are also impacted by a permanent adjustments related to our consolidation of Borgata and LVE. We consolidate Borgata and LVE for financial statement purposes; however, under federal income tax benefit realizedstatutes, we are subject to income tax on our fifty percent interest in connection with an IRS auditBorgata and exclude LVE in its entirety. In 2012 the reversalexclusion of interest accrued in connection with unrecognized tax benefits. The state tax provision wasBorgata and LVE's loss adversely impacted by changes in apportionment, exam settlements and the geographic mix of our income.

Adjusted Earnings (Loss) and Adjusted EPS
Years Ended December 31, 2011, 2010 and 2009
We believe that Adjusted Earnings (Loss) and Adjusted Earnings Per Share ("EPS") are important supplemental measures of operating performance to investors, and management believes that Adjusted Earnings (Loss) and Adjusted EPS are widely used measures of performance in the gaming industry. We use Adjusted Earnings (Loss) and Adjusted EPS in this Annual Report on Form 10-K because we believe they are useful to investors in allowing greater transparency related to significant measures used by management in its financial and operational decision-making. Management believes it is appropriate to adjust net income (loss) attributable to Boyd Gaming Corporation for certain adjustments, which are eliminated from net income (loss) in order to enable investors to isolate the core operating results of the Company.
Adjusted Earnings (Loss) is net income (loss) before preopening expenses, adjustments to propertyeffective tax accruals, net, change in value of derivative instruments, write-downs and other items, net, gain on early retirements of debt, other non-recurring items and our share of Borgata's other items and write-downs, net.

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The following tables present our Adjusted Earnings (Loss) and Adjusted Earnings per Share for the years ended December 31, 2011, 2010 and 2009.
  Year Ended December 31,
 2011 2010 2009
   Actual  
 (In thousands, except per share data)
Net income (loss) attributable to Boyd Gaming Corporation$(3,854) $10,310
 $4,241
Adjustments related to Boyd Gaming:     
Preopening expenses, excluding impact of LVE17,492
 8,405
 17,798
Adjustments to property tax accruals, net(7,464) 
 
Other operating charges, net7,660
 4,721
 41,813
Accelerated amortization on deferred loan fees376
 
 1,813
Change in fair value of derivative instruments265
 480
 
(Gain) loss on early retirements of debt, net20
 (2,758) (15,284)
Other income(11,582) (10,000) 
Prior period expense for finalization of purchase price for Dania Jai-Alai
 
 8,883
Gain on equity distribution
 (2,535) 
      
Adjustments related to Borgata:     
Preopening expenses228
 
 349
Other operating charges, net1,575
 (8) (14,303)
Accelerated amortization on deferred loan fees1,029
 2,012
 
Valuation adjustments related to consolidation, net5,389
 
 
Gain on early retirements of debt, net(6) 
 
Our share of Borgata's other operating charges, net
 34
 
Total adjustments14,982
 351
 41,069
      
Income tax effect for above adjustments(5,648) 899
 (13,680)
Impact on noncontrolling interests(4,108) (1,002) 
Adjusted earnings$1,372
 $10,558
 $31,630
      
Weighted average shares outstanding87,518
 86,831
 86,517
      
Basic and diluted net income (loss) per common share, as reported$(0.04) $0.12
 $0.05
      
      
Basic or diluted net income per common share, as reported$(0.04) $0.12
 $0.05
Adjustments related to Boyd Gaming:     
Preopening expenses, excluding impact of LVE0.20
 0.10
 0.22
Adjustments to property tax accruals, net(0.09) 
 0.01
Other operating charges, net0.09
 0.05
 0.48
Accelerated amortization on deferred loan fees
 
 0.02
Change in fair value of derivative instruments
 0.01
 
(Gain) loss on early retirements of debt, net
 (0.03) (0.17)
Other income(0.13) (0.12) 
Prior period expense for finalization of purchase price for Dania Jai-Alai
 
 0.10
Gain on equity distribution
 (0.03) 
      
Adjustments related to Borgata:     

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Preopening expenses
 
 
Other operating charges, net0.02
 
 (0.17)
Accelerated amortization on deferred loan fees0.01
 0.02
 
Valuation adjustments related to consolidation, net0.06
 
 
Gain on early retirements of debt, net
 
 
Our share of Borgata's other operating charges, net
 
 
Total adjustments0.16
 
 0.48
      
Income tax effect for above adjustments(0.06) 0.01
 (0.16)
Impact on noncontrolling interests(0.05) (0.01) 
Adjusted earnings per share$0.01
 $0.12
 $0.37
Net income per share during the year ended December 31, 2011 was reported using our basic weighted average shares outstanding, as all common shares were anti-dilutive due to the net loss for such respective period; however, adjusted earnings per share for the year ended December 31, 2011 was computed using our diluted weighted average shares outstanding, as our adjustment to net loss, as reported under GAAP, resulted in adjusted earnings.
During the years ended December 31, 2011, 2010 and 2009, the following items were included in the calculation of Adjusted earnings and Adjusted earnings per share:
Adjustments Related to Boyd Gaming Corporation
Preopening Expenses, Excluding Impact of Consolidation of LVE
Preopening expenses are comprised of costs primarily related to maintenance of Echelon and expenditures for the exploration of new business development initiatives.
Adjustments to Property Tax Accruals
Property tax accruals have been adjusted based on assessments from the relevant taxing authorities and changes in our estimate of past liabilities related to such assessments.
Other Operating Charges, net
Write-downs and other charges generally include losses on the disposal or impairment of certain assets, costs incurred in relation to acquisition activities and costs associated with property damage from natural disasters.
Accelerated Amortization of Deferred Loan Costs
This amortization represents the remaining unamortized deferred loan fees associated with the non-extending credit facility, which was repaid during the year ended December 31, 2011, and the remaining unamortized balance of deferred loan fees associated with the prior credit facility, which were accelerated and written off upon the amendment and restatement of such facility in the year ended December 2009.

Change in Fair Value of Derivative Instruments
Change in fair value of derivative instruments is comprised of the charge to earnings for the change in fair value of our interest rate swaps that were de-designated as cash flow hedges during 2010.
(Gain) Loss on Early Retirements of Debt
(Gain) loss on early retirements of debt represents the difference between the principal amount of our senior subordinated notes repurchased and the purchase price of such notes.
Other Income
Other income represents the non-refundable fee received in connection with our agreement to extend the closing of Dania and the bargain purchased gain realized from the acquisition of IP in 2011. Other income represents the consent fee received in connection with our agreement to modify the Borgata operating agreement in 2010.
Gain on Equity Distribution
This gain represents the difference between the total distribution received from Borgata for our unilateral capital contribution and its carrying value.
Adjustments Related to Borgata

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Preopening Expenses
Preopening expenses at Borgata related to costs incurred to open a new retail outlet during the quarter.
Other operating charges, net
Other operating charges generally include losses on the disposal or impairment of certain assets, costs incurred in relation to acquisition activities and insurance costs associated with property damage from natural disasters.
Accelerated Amortization of Deferred Loan Fees
This amortization represents an accelerated amortization of the pro rated portion of the unamortized deferred loan fees related to Borgata's credit facility, as amended during the year ended December 31, 2011, to reflect the reduced borrowing capacity under such amendment, and the remaining unamortized balance of deferred loan fees associated with their former credit facility, which were accelerated and written off upon the refinancing of all Borgata's debt in August 2010.
Valuation Adjustments Related to Consolidation, net
These adjustments represent the aggregate impact of the measurement activity associated with the changes from historical value to fair value of Borgata, upon consolidation, primarily representing depreciation and amortization expense resulting from the recordation of certain tangible and intangible assets.
Gain on Early Retirements of Debt
Gain on early retirements of debt represents the difference between the principal amount of our senior subordinated notes repurchased and the purchase price of such notes.rate.

LIQUIDITY AND CAPITAL RESOURCES
Financial Position
The following discussion highlights the material changes in our financial position as of December 31, 20112012 and 2010.2011.

Current Maturities of Our Indebtedness
We classified certain non-extending balances due under our Credit Facility as a current maturity, as such amounts come due within the next twelve months. In March 2012, we reclassified $10.9 million for a note payable under our Credit Facility that matures on March 28, 2013 from long-term to current. Subsequently, on February 28, 2013, we paid the balance due on this note payable.

While we anticipate the remaining availability under our Credit Facility will provide the short term liquidity required to fund our existing debt obligations, management will review other plans to aggressively pursue the repayment of all debt as currently due.

Long-Term Debt Refinancing Activities
In November, 2011, we signed a Lender Joinder Agreement to increase the term loan commitments under our Amended Credit Facility by an aggregate amount of $350 million. This commitment was funded on November 10, 2011. We used the proceeds to repay the non-extended portion of our Amended Credit Facility, which would have otherwise matured in May 2012. We believe this borrowing, as well as remaining availability under our Amended Credit Facility provides the short term liquidity required to fund our existing debt obligations.

Acquisition of Peninsula Gaming
On November 20, 2012, we completed the Peninsula Acquisition pursuant to an Agreement and Plan of Merger, under which an indirect wholly-owned subsidiary of the Company acquired the assets and assumed the liabilities. The net purchase price, after adjustment for working capital and other items, was approximately $1.48 billion. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012. The Peninsula Acquisition added five properties to our portfolio: the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Casino in Northwood, Iowa; Evangeline Downs Racetrack and Casino in Opelousas, Louisiana; and Amelia Belle Casino in Amelia, Louisiana.

Acquisition of IP Casino Resort Spa
On October 4, 2011, the Company consummatedcompleted the acquisition of IP for a net purchase price of $280.6 million. The purchase was financed with cash on hand and a borrowing under our Amended Credit Facility of approximately $200 million. At December 31, 2011, we reported IP's total assets and liabilities of $318.2 million and $27.3 million, respectively, in our consolidated balance sheet.

Consolidation of Variable Interest Entity
Given that we are the primary beneficiary and as a result of our adoption of the authoritative accounting guidance regarding the consolidation of variable interest entities, we were required to consolidate the financial position and results of operations of LVE for the year endedLVE. At December 31, 2010.2012, we reported LVE's total assets and total liabilities of $188.8 million and $233.8 million, respectively in our consolidated balance sheet. At December 31, 2011, we reported LVE's total assets and total liabilities of $189.9 million and $238.9 million, respectively in our condensed consolidated balance sheet. At December 31, 2010, we reported LVE's total assets and total liabilities of $217.3 million and $264.4 million, respectively in our condensed consolidated balance sheet. However, LVE's financial position, including its working capital and indebtedness, are not discussed herein as such indebtedness is non-recourse to us and will not require our working capital or free cash flows in order to service such. Therefore, the assets and liabilities of LVE are completely disregarded from the discussion below.

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Consolidation of Borgata
As of December 31, 2012, we reported Borgata's total assets and liabilities of $1.38 billion and $934.2 million respectively in our consolidated balance sheet. As of December 31, 2011, we reported Borgata's total assets and liabilities of $1.44 billion and $951.8million$951.8 million respectively in our consolidated balance sheet. As of December 31, 2010, we reported Borgata's total assets and total liabilities of $1.48 billion and $755.7 million, respectively in our consolidated balance sheet as a result of the consolidation of Borgata. The value of our controlling interest was $397.9 million, which includes a control premium, and the value of the noncontrolling interest was $325.6 million at December 31, 2010.
 
Working Capital
Historically, we have operated with minimal or negative levels of working capital in order to minimize borrowings and related interest costs under our Amended Credit Facility. At December 31, 20112012 and 2010,2011, we had balances of cash and cash equivalents

59

Table of Contents$
192.8 million

of $178.8 million and $145.6$178.8 million, respectively. Despite such amounts of cash, we had working capital deficits of $129.1$195.3 million and $109.8$129.1 million at such respective dates. However, without giving effect to the consolidation of LVE, as we have no claim to their assets, nor any recourse for their obligations, our cash balances and working capital deficits were as follows at December 31, 20112012 and 2010:

2011:
 December 31,December 31,
 2011 20102012 2011
 (In thousands)(In thousands)
Cash balance:       
Boyd Gaming Corporation $132,494
 $103,193
$125,996
 $132,494
Peninsula Gaming32,239
 
Borgata $46,224
 $42,099
34,125
 46,224
       
Working capital surplus (deficit):       
Boyd Gaming Corporation $(91,935) $(68,022)$(126,415) $(91,935)
Peninsula Gaming(16,817) 
Borgata $(8,467) $(19,489)(16,855) (8,621)

We, Peninsula Gaming, and Borgata separately manage our working capital positions, including our levels of cash and indebtedness. Our respective bank credit facilities generally provide any necessary funds for our day-to-day operations, interest and tax payments, as well as capital expenditures. On a daily basis, we evaluate our cash position and adjust the balance under our respective bank credit facilities as necessary, by either borrowing or paying down with excess cash. We also plan the timing and the amounts of our capital expenditures. We each believe that our borrowing capacity under our respective bank credit facilities, subject to restrictive covenants, and cash flows from operating activities will be sufficient to meet our respective projected operating and maintenance capital expenditures for at least the next twelve months. The source of funds for the repayment of our respective debt or our respective development projects is derived primarily from cash flows from operations and availability under our respective bank credit facilities, to the extent availability exists after we meet our respective working capital needs, and subject to restrictive covenants.
 
We, Peninsula Gaming, or Borgata could also seek to secure additional working capital, repay our respective current debt maturities, or fund our respective development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings. If availability does not exist under our respective bank credit facilities, or we are not otherwise able to draw funds on our respective bank credit facilities, additional financing may not be available to either us or Borgata, and if available, may not be on terms favorable to either us or Borgata.

Indebtedness
OurAs of December 31, 2012, our indebtedness primarily consists of $1.6the following: (i) $1.5 billion outstanding under our $1.8 billion AmendedBoyd Credit Facility (including $825$782.5 million of term loans), and $956.4 million$1.3 billion aggregate principal amount of our senior and senior subordinated notes, which are the obligations of Boyd, (ii) $854.4 million outstanding under our $875 million Peninsula Gaming Credit Facility (including an outstanding$825 million term loan), and $350 million aggregate principal amount of $40.0our senior notes, which are obligations of the Peninsula Gaming subsidiaries, and (iii) $20.0 million under a $75$60 million Borgata bank credit facility, as amended, and $791.5 million aggregate principal amount of senior secured notes, all of which are the obligations of Borgata. On March 7, 2013, we issued a notice of election to redeem $150 million of our 6.75% Senior Subordinated Notes due April 2014 (the "6.75% Notes") outstanding on April 6, 2013. The 6.75% Notes will be redeemed at a redemption price of 100% of their principal amount plus accrued and unpaid interest to the redemption date, April 6, 2013.



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Long-term debt, net of current maturities consists of the following:
 December 31, 2012
 Outstanding Principal Unamortized Discount  Unamortized Origination Fees  Long-Term Debt, Net
 (In thousands)
Boyd Gaming Corporation Debt:       
Bank credit facility$1,474,850
 $(5,001) $(3,214) $1,466,635
9.125% senior notes due 2018500,000
 
 (7,320) 492,680
9.00% senior notes due 2020350,000
 
 
 350,000
6.75% senior subordinated notes due 2014215,668
 
 
 215,668
7.125% senior subordinated notes due 2016240,750
 
 
 240,750
Other158,141
 (32,666) 
 125,475
 2,939,409
 (37,667) (10,534) 2,891,208
        
Peninsula Gaming Financing       
Bank credit facility854,400
 
 
 854,400
8.375% senior notes due 2018350,000
 
 
 350,000
Other494
 (3) 
 491
 1,204,894
 (3) 
 1,204,891
Total Boyd Debt4,144,303
 (37,670) (10,534) 4,096,099
        
Borgata Debt:       
Bank credit facility20,000
 
 
 20,000
9.50% senior secured notes due 2015398,000
 (2,525) (5,928) 389,547
9.875% senior secured notes due 2018393,500
 (2,103) (7,620) 383,777
 811,500
 (4,628) (13,548) 793,324
Less current maturities61,570
 
 
 61,570
Long-term debt, net$4,894,233
 $(42,298) $(24,082) $4,827,853
        


6065


 December 31, 2011
 Outstanding Principal Unamortized Discount  Unamortized Origination Fees  Long-Term Debt, Net
 (In thousands)
Boyd Gaming Corporation Debt:       
Bank credit facility$1,632,750
 $(4,318) $(6,717) $1,621,715
9.125% senior notes due 2018500,000
 
 (8,556) 491,444
6.75% senior subordinated notes due 2014215,668
 
 
 215,668
7.125% senior subordinated notes due 2016240,750
 
 
 240,750
Other11,071
 
 
 11,071
 $2,600,239
 $(4,318) $(15,273) $2,580,648
        
Borgata Debt:       
Bank credit facility40,200
 
 
 40,200
9.50% senior secured notes due 2015398,000
 (3,271) (7,680) 387,049
9.875% senior secured notes due 2018393,500
 (2,366) (8,575) 382,559
 $831,700
 $(5,637) $(16,255) $809,808
Less current maturities43,230
 
 
 43,230
Long-term debt, net$3,388,709
 $(9,955) $(31,528) $3,347,226
        

December 31, 2010December 31, 2011
Outstanding Principal Unamortized Discount  Unamortized Origination Fees  Long-Term Debt, NetOutstanding Principal Unamortized Discount  Unamortized Origination Fees  Long-Term Debt, Net
(In thousands)(In thousands)
Boyd Gaming Corporation Debt:              
Bank credit facility$1,425,000
 $
 $
 $1,425,000
$1,632,750
 $(4,318) $(6,717) $1,621,715
9.125% senior notes due 2018500,000
 
 (9,794) 490,206
500,000
 
 (8,556) 491,444
6.75% senior subordinated notes due 2014215,668
 
 
 215,668
215,668
 
 
 215,668
7.125% senior subordinated notes due 2016240,750
 
 
 240,750
240,750
 
 
 240,750
Other11,761
 
 
��11,761
11,071
 
 
 11,071
$2,393,179
 $
 $(9,794) $2,383,385
2,600,239
 (4,318) (15,273) 2,580,648
              
Borgata Debt:              
Bank credit facility60,900
 
 
 60,900
40,200
 
 
 40,200
9.50% senior secured notes due 2015400,000
 (3,969) (9,319) 386,712
398,000
 (3,271) (7,680) 387,049
9.875% senior secured notes due 2018400,000
 (2,648) (9,594) 387,758
393,500
 (2,366) (8,575) 382,559
$860,900
 $(6,617) $(18,913) $835,370
831,700
 (5,637) (16,255) 809,808
Less current maturities25,690
     25,690
43,230
     43,230
Long-term debt, net$3,228,389
 $(6,617) $(28,707) $3,193,065
$3,388,709
 $(9,955) $(31,528) $3,347,226

Boyd Gaming Corporation Debt
Bank Credit Facility
On December 3, 2010, we entered into an Amendment and Restatement Agreement among certain financial institutions (each a “Lender”),the Credit Facility Lenders, Bank of America, N.A., as administrative agent and letter of credit issuer and Wells Fargo Bank, National Association,

61


as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009, (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the former credit facility and (ii) permit consenting Credit Facility Lenders to extend the maturity date of their commitments, new Credit Facility Lenders to issue revolving commitments and term loans and existing Credit Facility Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the effective date. All capitalized terms used in this disclosure, not otherwise defined herein, have the meanings ascribed to such terms in the Credit Facility.
The blended interest rate for outstanding borrowings under our Amended
In December 2012, we entered into the First Credit Facility was 4.2% and 3.8% at December 31, 2011 and 2010, respectively. At December 31, 2011, approximately $1.63 billion was outstanding under our AmendedAmendment among the Credit Facility with $15.5 million allocated to support various lettersLenders, and Bank of America, N.A., as administrative agent and letter of credit leaving remaining contractual availabilityissuer. The First Credit Facility Amendment restates the definition of approximately $136.8 million.Consolidated EBITDA, consolidated Interest Coverage Ratio, Total Leverage Ratio and Secured Leverage Ratio (as defined below).

The amounts outstanding under the Amended Credit Facility are comprised of the following:
 December 31, December 31,
 2011 2010 2012 2011
 (In thousands) (In thousands)
Extended Revolving Facility $807,000
 $597,636
 $660,000
 $807,000
Non-Extended Revolving Facility 
 327,364
Initial Term Loan 475,000
 500,000
 450,000
 475,000
Incremental Term Loan 338,965
 
 332,500
 338,965
Swing Loan 750
 
 24,135
 750
 $1,621,715
 $1,425,000
    
Total amounts outstanding under Credit Facility, net $1,466,635
 $1,621,715


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Availability
As of December 31, 2012, our bank credit facility is comprised of the following components and commitments:
  Original Commitment Present Commitment Remaining Availability
  (In thousands)
Extended Revolving Facility $960,000
 $960,000
 $253,105
Initial Term Loan 500,000
 500,000
 
Incremental Term Loan 
 350,000
 
Total commitments under Credit Facility, net $1,460,000
 $1,810,000
 $253,105

Extended Revolving Facility
Each of the Extending Lenders permanently reduced their commitments under the former credit facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (excluding the non-extending amounts), which commitments may be increased from time to time by up to $500 million through additional revolving credit or term loans under the Amended Credit Facility. The applicable margin on the outstanding balance on the Extended Revolving Facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.0% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Amended Credit Facility. The “base rate” under the Amended Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%.

The letter of credit fees under the Amended Credit Facility remain the same as those under the Credit Facility; however, the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility. Subject to certain conditions, amounts outstanding under the Amended Credit Facility may be prepaid without premium or penalty, and the unutilized portion of any of the commitments may be terminated without penalty.

Initial Term Loan
The Amended Credit Facility included the conversion of certain outstanding revolving commitments to a term loan in the amount of $500 million (the "Initial Term Loan"). Pursuant to the terms of the Amended Credit Facility, the Initial Term Loan amortizes in an annual amount equal to 5% of the original principal amount thereof, commencing March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to term loans under the Amended Credit Facility are based upon, at the option of the Company, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio.

IncrementalIncreased Term Loan
OnIn November 2, 2011, we exercised $350 million of the Company entered into the Lender Joinder Agreement, which increases the term loan commitments$500 million increase option under the Amendedour Credit Facility bythrough an aggregate amount of $350 million (the “IncrementalIncreased Term Loan”).

Loan. The Incrementalproceeds from the Increased Term Loan was funded on November 10, 2011, with proceeds beingwere used to repay the outstanding Non-Extended Revolving Facility. The Non-Extended Revolving Facility, was terminated in full on November 10, 2011 by borrowing under the

62


Extended Revolving Facility, which augmented the proceeds from the Incremental Term Loan in an amount sufficient to repay the outstanding balance of the Non-Extended Revolving Facility in full.
and all related commitments thereunder were terminated. Pursuant to its terms, the IncrementalIncreased Term Loan amortizes in an annual amount equal to 5.0%5% of the original principal amount thereof, commencing in March 2012 and payable on a quarterly basis. At any time and to the extent that the IncrementalIncreased Term Loan is a Eurodollar Rate Loan, the IncrementalIncreased Term Loan shall bear interest on the outstanding principal amount thereof for each quarterly interest period at a rate per annual equal to the “effective Eurodollar Rate” for such period plus 4.75%, and at any time and to the extent that the IncrementalIncreased Term Loan bears interest at the base rate, the outstanding principal amount thereof at a rate per annum equal to the base rate for such Interest Periodperiod plus 3.75%.

Interest and Fees
The applicable margin on the outstanding balance on the Extended Revolving Facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.00% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Credit Facility. The “base rate” under the Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%.

The letter of credit fees under the Credit Facility remain the same as those under the Credit Facility; however, the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility. Subject to certain conditions, amounts outstanding under the Credit Facility may be prepaid without premium or penalty, and the unutilized portion of any of the commitments may be terminated without penalty.

The blended interest rate for outstanding borrowings under our Credit Facility was 4.2% and 4.2% at December 31, 2012 and 2011, respectively. At December 31, 2012, approximately $1.47 billion was outstanding under our Credit Facility, with $14.5

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million allocated to support various letters of credit, leaving remaining contractual availability of approximately $253.1 million
Guarantees
The Company's obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Amended Credit Facility.

Financial and Other Covenants
The Amended Credit Facility contains certain financial and other covenants, as amended December 27, 2012, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio of 2.00 to 1.00 through March 31, 2013, (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below), (iii) establishing a maximum permitted secured leverage ratio (discussed below), (iv) imposing limitations on the incurrence of indebtedness, (v) imposing limitations on transfers, sales and other dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.
The minimum consolidated Interest Coverage Ratio (as defined in our Amended Credit Facility) is calculated as (a) twelve-month trailing Consolidated EBITDA, (as defined in our Amended Credit Facility) to (b) consolidated interest expense (as also defined in our Amended Credit Facility).expense.
The maximum permitted consolidated Total Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility).EBITDA. The following table provides our maximum Total Leverage Ratio, as amended December 27, 2012, during the remaining term of the Amended Credit Facility.
Maximum Total
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 2010 through and including December 31, 20117.75 to 1.00
March 31, 2012 through and including September 30, 20127.50 to 1.00
December 31, 2012 and March 31, 20137.25 to 1.00
June 30, 20137.00 to 1.00
September 30, 2013 and December 31, 20136.75 to 1.00
March 31, 20146.50 to 1.00
June 30, 20146.25 to 1.00
September 30, 20146.00 to 1.00
December 31, 20145.75 to 1.00
March 31, 2015 and thereafter5.50 to 1.00
 Maximum Total
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 2012 through September 30, 20137.75to1.00
December 31, 20137.50to1.00
March 31, 2014 through September 30, 20147.25to1.00
December 31, 2014 and March 31, 20157.00to1.00
June 30, 2015 and thereafter6.75to1.00
The maximum permitted Secured Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility).EBITDA. The following table provides our maximum Secured Leverage Ratio, as amended December 27, 2012, during the remaining term of the Amended Credit Facility.

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Minimum Secured
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 2010 through and including March 31, 20124.50 to 1.00
June 30, 2012 and September 30, 20124.25 to 1.00
December 31, 2012 and March 31, 20134.00 to 1.00
June 30, 2013 and September 30, 20133.75 to 1.00
December 31, 2013 and March 31, 20143.50 to 1.00
June 30, 2014 and thereafter3.25 to 1.00
 Maximum Secured
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 20124.25to1.00
March 31, 2013 through September 30, 20134.50to1.00
December 31, 20134.25to1.00
March 31, 2014 through December 31, 20144.00to1.00
March 31, 20153.75to1.00
June 30, 2015 and thereafter3.50to1.00
Compliance with Financial Covenants
We believe that, , at December 31, 2011,2012, we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, at December 31, 2011, were 2.50 to 1.00, 6.80 to 1.00 and 4.27 to 1.00, respectively.

At December 31, 2011, assuming our current level of Consolidated Funded Indebtedness remains constant, we estimate that an 12.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to exceed our maximum permitted consolidated Total Leverage Ratio covenant for that period. In addition, at December 31, 2011, assuming our current level of Secured Indebtedness remains constant, we estimate that 5.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to exceed our maximum permitted Secured Leverage Ratio covenant for that period. Additionally, at December 31, 2011, assuming our current level of interest expense remains constant, we estimate that a 20.1% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to go below our minimum consolidated Interest Coverage Ratio covenant for that period.

Debt Financing Costs
In November 2011, we repaid the amounts outstanding under the non-extended credit facility, with proceeds from the issuance of the Incremental Term Loan. The unamortized deferred loan fees remaining on that borrowing in the amount of approximately $0.4 million were recorded in interest expense during the year ended December 31, 2011. Additionally, in conjunction with the Amended Credit Facility and the subsequent issuance of the IncrementalIncreased Term Loan, we incurred approximately $13.9$20.6 million and $20.6$13.9 million, respectively, in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Amended Credit Facility. DueIn May 2012, in conjunction with the Lender Joinder Agreement and the subsequent

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issuance of the Incremental Term Loan, we incurred approximately $1.5 million of incremental debt financing costs, which were expensed when this borrowing was repaid, due to the decreasereduction in borrowing capacity uponavailable commitment under the amendment discussed herein, we recorded incremental interest expense of approximately $1.8 million during the year ended December 31, 2009, related to the accelerated amortization of deferred debt costs related to the Amended Credit Facility.

Senior Notes
9.125% Senior Notes due December 2018
Significant Terms
On November 10, 2010, we issued, through a private placement, $500 million aggregate principal amount of 9.125% senior notes due December 2018. The notes require semi-annual interest payments on December 1 and June 1 of each year, which commenced on June 1, 2011. The notes will mature on December 1, 2018 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. The 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 indenture governing the notes) 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. We believe that we are in compliance with these covenants at December 31, 2011.2012. In addition, upon the occurrence of a change of control (as defined in the indenture governing the notes), we will be required, unless certain conditions are met, to offer to repurchase the notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, 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 notes. At any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.125% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to December 1, 2014, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to December 1, 2014, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.563% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.

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Registration Rights Agreement
Pursuant to the registration rights agreement entered into with the initial purchasers of these senior notes at the time of the private placement, on September 15, 2011, the Company commenced an offer to exchange all of the outstanding $500 million aggregate principal amount of the notes that have been registered under the Securities Act of 1933. On October 18, 2011, the expiration date of the exchange offer, 100% of the notes were validly tendered and accepted for exchange.

Senior Notes
9.00% Senior Notes due July 2020
Significant Terms
On June 8, 2012, we issued $350 million aggregate principal amount of 9.00% senior notes due July 2020. The notes require semiannual interest payments on January 1 and July 1 of each year, commencing on January 1, 2013. The notes will mature on July 1, 2020 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. The notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restrictive subsidiaries (as defined in the indenture governing the notes) 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. We believe that we are in compliance with these covenants at December 31, 2012. In addition, upon the occurrence of a change in control (as defined in the indenture governing the notes), we will be required, unless certain conditions are met, to offer to repurchase the notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, 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 purchase the notes. At any time prior to July 1, 2015, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109% of the principal amount thereof, plus accrued and unpaid interest and additional interest (as defined in the indenture), if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to July 1, 2016, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding, the applicable redemption date, plus a make whole premium. Subsequent to July 1, 2016, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.50% in 2016 to 100% in 2018 and thereafter, plus accrued and unpaid interest.

Registration Rights Agreement
Pursuant to the registration rights agreement entered into with the initial purchasers of these senior notes on June 8, 2012, the date the 9.00% notes were issued, we agreed that, subject to certain suspension and other rights provided in the Registration Rights Agreement, we will file a registration statement with the SEC with respect to a registered exchange offer to exchange the 2020 notes for new notes with terms substantially identical in all material respects to the 2020 notes, consummate the exchange offer

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within 365 days of the issuance of the 2020 notes, and in certain circumstances, if required by the registration rights agreement, file a shelf registration statement.

Senior Subordinated Notes
6.75% Senior Subordinated Notes due April 2014 
Significant Terms
On March 7, 2013, we issued a notice of election to redeem $150 million of our 6.75% Notes outstanding on April 6, 2013. The 6.75% Notes will be redeemed at a redemption price of 100% of their principal amount plus accrued and unpaid interest to the redemption date, April 6, 2013. On April 15, 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all, except for $50 thousand in aggregate principal amount of these notes, were exchanged for substantially similar notes that were registered with the SEC. The notes require semi-annual interest payments on April 15 and October 15 of each year, through April 2014, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at December 31, 2011.2012. Presently, we may redeem all or a portion of the notes at a redemption price of 100% plus accrued and unpaid interest through maturity in 2014.
 
Senior Subordinated Notes
7.125% Senior Subordinated Notes due February 2016
Significant Terms
On January 30, 2006, we issued $250 million principal amount of 7.125% senior subordinated notes due February 2016. The notes require semi-annual interest payments on February 1 and August 1 of each year, through February 2016, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at December 31, 2011.2012. We may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.563% in 2011 to 100% in 2014 and thereafter, plus accrued and unpaid interest.
Repurchases of Senior Subordinated Notes
We did not repurchase any of our senior subordinated or senior notes during the year ended December 31, 2011. In addition to the tender for purchase and call for redemption of all of our outstanding 7.75% senior subordinated notes due 2012, as described below, during the years ended December 31, 2010 and 2009, we also purchased and retired $33.0 million in principal amount of our senior subordinated notes during the year ended December 31, 2010. The total purchase price of the notes was $28.9 million resulting in a gain of $3.6 million, net of associated deferred financing fees, which was recorded on our consolidated statements of operations for the respective period. The transactions were funded by availability under our former bank credit facility.

Senior Subordinated Notes
7.75% Senior Subordinated Notes due December 2012
Significant Terms
In November 2010, we tendered for purchase all of our outstanding 7.75% senior subordinated notes due 2012. Approximately $92.1 million principal amount of the 7.75% senior subordinated notes due 2012 were tendered pursuant to our tender offer. We paid $95.3 million in connection with the tender offer, including accrued interest of $2.9 million, and recognized a loss on such tender of $0.8 million, based on the difference between the consideration fee, redemption price and the net carrying value of the notes in addition to unamortized debt financing costs written off in conjunction with the purchase of the notes. Additionally, in December 2010, we called the remaining 7.75% senior subordinated notes due 2012 at par, which had a principal balance of $66.8 million. We recognized a loss of $0.4 million upon calling such notes, which consisted of our write-off of the remaining unamortized debt financing costs associated with the notes.

Debt Service Requirements
Debt service requirements under our current outstanding senior subordinated notes and senior notes consist of semi- annual interest payments (based upon fixed annual interest rates ranging from 6.75% to 9.125%) and repayment of our 6.75% and 7.125% senior subordinated notes due on April 15, 2014 and February 1, 2016, respectively, and repayment of our 9.125% senior notes due on December 1, 2018.

Borgata DebtOther Notes
Borgata Bank Credit FacilityOn November 20, 2012, Boyd completed its previously announced acquisition of Peninsula Gaming pursuant to the Merger Agreement entered into on May 16, 2012, by and among Boyd, HoldCo, Merger Sub, Peninsula Gaming Partners, LLC (“PGP”)and Peninsula Gaming, and HoldCo issued the HoldCo Note, in favor of PGP, for approximately $147.8 million. Discount on the note was $34.2 million leaving a note payable to PGP in the amount of $113.6 million, which is still preliminary and subject to

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purchase accounting adjustments. The HoldCo Note provides for interest at a per annum rate equal to (i) from the issue date to but excluding the first anniversary of the issue date) zero percent, (ii) from the first anniversary of the issue date to but excluding the second anniversary of the issue date, six percent, (iii) from the second anniversary of the issue date to but excluding the third anniversary of the issue date, eight percent, and (iv) from and after the third anniversary of the issue date, ten percent. At the option of HoldCo, interest may be paid in cash or paid-in-kind. Accrued but unpaid interest is added to the principal balance of the HoldCo Note semi-annually. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. HoldCo may prepay the obligations under the HoldCo Note at any time, in whole or in part, without premium or penalty.

Peninsula Gaming Debt
Bank Credit Facility
Credit Agreement
On November 20, 2012, Boyd completed its previously announced Peninsula Acquisition and Merger Sub entered into the Peninsula Credit Agreement dated as of November 14, 2012, with the lenders party thereto and Bank of America, N.A., as administrative agent, collateral agent, swing line lender, and L/C issuer.
Pursuant to the terms of the Merger Agreement, upon consummation of the Merger, Peninsula Gaming assumed all assets and liabilities of Merger Sub and became the borrower under the Credit Agreement (as defined below) and, together with Peninsula Gaming Corp. upon consummation of the Finance Company Merger, the issuer of Peninsula Gaming Senior Notes (as defined below)

The Peninsula Credit Agreement provides for the $875 million Peninsula Credit Facility, which consists of (a) a term loan facility of $825 million (the “Peninsula Term Loan”) and (b) a revolving credit facility of $50 million (the “Peninsula Revolver”). The Peninsula Term Loan was fully funded concurrently with the closing of the Peninsula Acquisition. A portion of the Peninsula Revolver was funded concurrently with the closing of the Peninsula Acquisition. The maturity date for obligations under the Peninsula Credit Facility is November 17, 2017.

Interest and Fees
The interest rate on the outstanding balance of the Peninsula Term Loan is based upon, at Peninsula Gaming's option either: (i) the Eurodollar rate plus 4.50%, or (ii) the base rate plus 3.50%. The interest rate on the outstanding balance from time to time of the Revolving Loans is based upon, at Peninsula Gaming's option either: (i) the Eurodollar rate plus 4.00%, or (ii) the base rate plus 3.00%. The base rate under the Peninsula Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one-month period plus 1.00%. The Peninsula Credit Facility also establishes, with respect to outstanding balances under the Peninsula Term Loan, a minimum Eurodollar rate for any interest period of 1.25%. In addition, Peninsula Gaming will incur a commitment fee on the unused portion of the Peninsula Credit Facility at a per annum rate of 0.50%.

The blended interest rate for outstanding borrowings under the Peninsula Credit Facility was 5.7% at December 31, 2012. At December 31, 2012, approximately $29.4 million was outstanding under the Peninsula Revolver, with $7.9 million allocated to support various letters of credit, leaving remaining contractual availability of $12.7 million.

Guarantees
Peninsula Gaming's obligations under the Peninsula Credit Facility, subject to certain exceptions, are guaranteed by Peninsula Gaming's subsidiaries and are secured by the capital stock and equity interests of Peninsula Gaming's subsidiaries. In addition, subject to certain exceptions, Peninsula Gaming and each of the guarantors granted the collateral agent first priority liens and security interests on substantially all of the real and personal property (other than gaming licenses and subject to certain other exceptions) of Peninsula Gaming and its subsidiaries as additional security for the performance of the obligations under the Peninsula Credit Facility. The obligations under the Peninsula Revolver rank second in right of payment to the obligations under the Peninsula Term Loan.

Optional and Mandatory Prepayments
The Peninsula Credit Facility requires that Peninsula Gaming prepay the loans with proceeds of any significant asset sale or event of loss. The Peninsula Credit Facility also requires fixed quarterly amortization and requires that Peninsula Gaming use a portion of its annual excess cash flow to prepay the loans. The Peninsula Revolver can be terminated without premium or penalty, upon payment of the outstanding amounts owned with respect thereto. The Peninsula Term Loan can be prepaid without premium or penalty, except that a 1.0% premium is payable in connection with prepayments of the Peninsula Term Loan prior to November 20, 2013 through the issuance of indebtedness having a lower interest rate that the interest rate payable in respect of the Peninsula Term Loan.


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Financial and Other Covenants
The Peninsula Credit Facility contains customary affirmative and negative covenants (and are subject to customary exceptions). Peninsula Gaming is required to maintain (i) maximum consolidated interest coverage ratio over each twelve month period ending on the last fiscal day of each quarter (discussed below), (ii) beginning with the fiscal quarter ended March 31, 2013, a minimum consolidated interest coverage ratio of 2.0 to 1.0 as of the end of each calendar quarter, and (iii) a maximum amount of capital expenditures for each fiscal year.

The minimum consolidated Interest Coverage Ratio is calculated as (a) the twelve-month trailing Consolidated EBITDA, to (b) consolidated interest expense.

The maximum permitted consolidated Leverage Ratio is calculated as Consolidated Fund Indebtedness less Excess Cash to twelve-month trailing Consolidated EBITDA. The following table provides our maximum Consolidated Leverage Ratio during the remaining term of the Peninsula Credit Facility

   Maximum Consolidated
For the Trailing Four Quarters Ending Leverage Ratio
March 31, 2013 through September 30, 20137.25to1.00
December 31 2013 through June 30, 20147.00to1.00
September 30, 2014 and December 31, 20146.75to1.00
March 31, 2015 and June 30, 20156.50to1.00
September 30, 2015 and December 31, 20156.25to1.00
March 31, 2016 and June 30, 20166.00to1.00
September 30, 2016 and December 31, 20165.75to1.00
March 31, 2107 and June 30, 20175.50to1.00
September 30, 2017 and thereafter5.25to1.00

Capital Expenditures should not be made by Peninsula Gaming or any of its Restricted Subsidiaries (excluding (i) capital expenditures which adds to or improves any existing property and (ii) capital expenditures made prior to the first anniversary of the Funding Date relating to integration and/or transition of business systems) in an aggregate amount in excess of $20.0 million in any fiscal year; provided that no default has occurred and is continuing or would result from such expenditure.

Optional and Mandatory Prepayments
The Peninsula Credit Facility requires that Peninsula Gaming prepay the loans with proceeds of any significant asset sale or event of loss. The Peninsula Credit Facility also requires fixed quarterly amortization and requires that Peninsula Gaming use a portion of its annual excess cash flow to prepay the loans. The Peninsula Revolver can be terminated without premium or penalty, upon payment of the outstanding amounts owned with respect thereto. The Peninsula Term Loan can be prepaid without premium or penalty, except that a 1.0% premium is payable in connection with prepayments of the Peninsula Term Loan prior to November 20, 2013 through the issuance of indebtedness having a lower interest rate that the interest rate payable in respect of the Peninsula Term Loan.

Compliance with Financial and Other Covenants
We believe that, at December 31, 2012, Peninsula Gaming was in compliance with its financial covenants, including capital expenditures and the minimum consolidated Interest Coverage Ratio and the maximum permitted consolidated Leverage Ratio at December 31, 2012.

Debt Financing Costs
In conjunction with the Credit Facility, we incurred approximately $33.8 million in debt financing costs, that have been deferred and are being amortized over the term of the Credit Facility using the effective interest method.

Peninsula Gaming 8.375% Senior Notes Due 2018
Significant Terms
On August 16, 2012, we closed and offering of $350 million aggregate principal amount of 8.375% senior notes due February 2018 by Merger Sub and Boyd Acquisition Finance Corp. (“Boyd Finance Co.,” and together with Merger Sub, the “Issuers”), a direct wholly owned subsidiary of Merger Sub. The notes were issued pursuant to an Indenture dated August 16, 2012 (the "Indenture") by and among the Issuers, and U.S. Bank National Association, as trustee (the "Trustee"). The consummation of the

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Peninsula Acquisition occurred on November 20, 2012, at which time, Peninsula Gaming and PGC assumed the obligations of the Merger Sub and Boyd Finance Co. and became the Issuers under the Indenture. The Indenture provides that the Notes bear interest at a rate of 8.375% per annum. The Notes mature on February 15, 2018. Prior to the consummation of the Peninsula Acquisition, the Notes were not guaranteed. Upon the consummation of the Peninsula Acquisition, the Notes are fully and unconditionally guaranteed, on a joint and several basis, by Peninsula Gaming's subsidiaries (other than PGP). The 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 Indenture) to incur additional indebtedness or liens, pay dividends or make distributions, make certain investments, and sell or merge with other companies. We believe that we are in compliance with these covenants at December 31, 2012. 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 notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, 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 notes. At any time prior to August 15, 2014, the Issuers may redeem up to 35% of the aggregate principal amount of the Notes at a redemption price equal to 108.375% of the principal amount thereof, plus accrued and unpaid interest, up to, but excluding, the applicable redemption date, with the net cash proceeds that the Issuers raise in one or more equity offerings. In addition, prior to August 15, 2014, the Issuers may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to August 15, 2014, we may redeem all or a portion of the Notes at a redemption prices (expressed as percentages of the principal amount) ranging from 106.281% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.
Registration
The senior notes have not been, and will not be, registered under the Securities Act of 1933, as amended, (the “Securities Act”) and will be offered only to: (i) qualified institutional buyers as defined in Rule 144A under the Securities Act; and (ii) outside the United States to non-U.S. persons in compliance with Regulation S under the Securities Act.

Debt Financing Costs
In conjunction with the issuance of the Notes, we incurred approximately $14.2 million in debt financing costs that have been deferred and are being amortized over the term of the Notes using the effective interest method.

Other
KSC has agreements with various slot vendors to finance the purchase of slot machines over a period of twelve months at zero percent financing for the interim phase of the Kansas Star development project. The total financing under these agreements was $22.3 million with an imputed discount of $1.0 million. As of December 31, 2012, KSC had $0.5 million recorded related to slot machine financing at KSC. Monthly financing payments conclude February 2013.

Borgata Debt
Borgata Bank Credit Facility
Significant Terms
On August 6, 2010, Marina District Finance Company, Inc. (the “MDFC”)MDFC announced that it had closed a $950 million debt financing, consisting of the establishment of a $150 million new payment priority secured revolvingthe Borgata bank credit facility (the "Borgata bank credit facility") and the issuance of $800 million of aggregate principal amount of notes. MDFC is a wholly-owned subsidiary of Marina District Development Company, ("MDDC"),MDDC, which develops and owns Borgata, and which is the guarantor of both the Borgata bank credit facility and the notes. The proceeds from the financing were used to (i) pay fees and expenses related to the financing; (ii) repay the former credit facility; and (iii) make a one-time distribution to Borgata's joint venture owners.

On November 11, 2011, MDFC entered into a First Amendment to Credit Agreement (the "Borgata bank credit facility"First Borgata Credit Facility Amendment") among MDFC, MDDC, certain other financial institutions (each a "Lender", and collectively the "Lenders")Borgata Lenders and Wells Fargo, National Association ("Wells Fargo"), as administrative agent (in such capacity, "Administrative Agent") for the Borgata Lenders. The First Borgata Credit Facility Amendment modifies certain terms of the Borgata bank credit facility,facility.

On December 27, 2012, MDFC entered into the Second Borgata Credit Facility Amendment to Credit Agreement among MDFC, MDDC, the Borgata the Lenders from time to time party thereto, the Administrative Agent, and Wells Fargo.

The Borgata bank credit facility Amendment: (i) reduces the aggregate commitments underFargo, as administrative agent for the Borgata bank credit facility to a maximum amount of $75 million; (ii)Lenders, that (i) decreases the minimum Consolidated EBITDA (as defined in the Borgata bank credit facility)therein) to $125$110.0 million for a trailing-twelve month periodfiscal quarters ending onDecember 31, 2012 and thereafter, (ii) modifies the last daydefinition of a calendar quarter;Consolidated EBITDA to exclude certain losses, charges, and expenses, (iii) eliminatesadjusts the calculation of Consolidated EBITDA such that for the fiscal quarter ending December 31, 2012 through the fiscal quarter ending September 30, 2013, Consolidated EBITDA will be computed by including the four fiscal quarters with the highest Consolidated EBITDA out of the most recently ended five fiscal quarters, (iv) reduces the Aggregate Commitments (as defined therein) to $60.0 million, (v) modifies the Use of Proceeds covenant requiring Borgata to have a minimumprovide that the proceeds of revolving loans can only be used to repurchase or redeem MDFC's senior secured notes if, after giving affect thereto, the aggregate amount of cash, cash equivalents,outstanding loans and unused commitments; and (iv) adds a covenant prohibiting Borgata from borrowingletters of credit under the Borgata bank credit facility to purchase itsdoes not exceed $50.0 million, and (vi) adds a covenant prohibiting MDFC and MDDC from

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repurchasing or redeeming MDFC's senior secured notes at any time whenunless Consolidated EBITDA was at least $125.0 million for the total amount outstanding under the Borgata bank credit facility is $65 million or more.most recently ended period of four consecutive fiscal quarters prior thereto.

As amended, the Borgata bank credit facility provides for a $75$60 million senior secured revolving credit facility and matures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of Borgata's assets, subject to certain exceptions. The obligations under the Borgata bank credit facility have priority in payment to Borgata's senior secured notes.

Guarantees
Neither Boyd Gaming Corporation nor its subsidiaries are guarantors of the Borgata bank credit facility, as amended.

Interest Rate
Outstanding borrowings under the Borgata bank credit facility, as amended, accrue interest at a selected rate based upon either: (i) highest of (a) the agent bank's quoted prime rate, (b) the one-month Eurodollar rate plus 1.00%, or (c) the daily federal funds rate plus 1.50%, and in any event not less than 1.50% (such highest rate, the "base rate"), or (ii) the Eurodollar rate, plus with respect to each clause (i) and (ii) an applicable margin as provided in the Borgata bank credit facility. In addition, a commitment fee is incurred on the unused portion of the Borgata bank credit facility ranging from 0.50% per annum to 1.00% per annum.

At December 31, 2011,2012, the outstanding balance under the Borgata bank credit facility, as amended, was $40.2$20.0 million, which bore an interest rate of 4.4%4.9%. Contractual availability under the Borgata bank credit facility, as amended, at December 31, 20112012 was $34.8$40.0 million.
Financial and Other Covenants
The Borgata bank credit facility, as amended, contains certain financial and other covenants, including, without limitation, (i) establishing a minimum consolidated EBITDA (as defined in the Borgata bank credit facility) of $125$110 million over each trailing twelve-month period ending on the last day of each calendar quarter; (ii) imposing limitations on MDFC's ability to incur additional debt; and (iii) imposing restrictions on Borgata's ability to pay dividends and make other distributions, make certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

Compliance with Financial Covenants
We believe that MDFC was in compliance with the amended Borgata bank credit facility covenants, specificallyincluding the minimum consolidated EBITDA, which, at December 31, 2011, was $160.0 million.EBITDA.

Debt Financing Costs
In conjunction with the Borgata bank credit facility and the amendment thereto, during the years ended December 31, 2012, 2011, and 2010, we incurred approximately $0.4 million, $1.2 million and $3.0 million, respectively, in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Borgata bank credit facility. During the year ended December 31, 2011, Borgata also accelerated the amortization of approximately $1.0 million of the net outstanding deferred loan fees, which adjusted the fees by an amount representing the pro rated reduction in borrowing capacity under the Borgata credit facility.
Borgata Senior Secured Notes

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9.5% Senior Secured Notes Due 2015
Significant Terms
In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.5% senior secured notes due October 2015, at an issue price of 98.943%, resulting in a discount at issuance of $4.2 million. The notes require semi-annual interest payments on April 15 and October 15, commencing April 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contains covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at December 31, 2011.2012.

At any time prior to October 15, 2013, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until October 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.50% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to October 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after October 15, 2013, MDFC shall have the option to redeem the 2015 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.75% beginning on October 15, 2013 to 102.375% beginning on October 15, 2014, plus accrued and unpaid interest to the applicable redemption date.

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Borgata Senior Secured Notes
9.875% Senior Secured Notes Due 2018
Significant Terms
In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.875% senior secured notes due August 2018, at an issue price of 99.315%, resulting in an original issue discount of $2.7 million. The notes require semi-annual interest payments on February 15 and August 15, commencing February 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at December 31, 2011.2012.

At any time prior to August 15, 2014, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until August 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to August 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after August 15, 2013, MDFC shall have the option to redeem the 2018 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.938% beginning on August 15, 2014, to 102.469% beginning on August 15, 2015, to 100% beginning on August 15, 2016 and thereafter, plus accrued and unpaid interest, to the applicable redemption date.
Original Issue Discount
The original issue discount has been recorded as an offset to the principal amount of these notes and is being accreted to interest expense over the term of the notes using the effective interest method. At December 31, 2011,2012, the effective interest rate on the 9.50%9.5% notes due 2015 notes was 10.2% and on the 9.875% notes due 2018 was 10.2% and 10.3%., respectively.

Repurchase of Senior Secured Notes
During the year ended December 31, 2011, MDFC repurchased and retired $8.5 million, principal amount, in total, of their senior secured notes, which included $2.0 million of the 9.5% notes and $6.5 million of the 9.875% notes. The total purchase price of the notes was $8.2 million, resulting in a gain of $0.1 million, net of associated deferred financing fees, which is recorded as a gain on early retirement of debt in our consolidated statement of operations during the year ended December 31, 2011.

Cash Flows SummaryIndenture
Years EndedThe indenture governing both the 9.5% notes and the 9.875% notes allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, our coverage ratio (as defined in the indenture, essentially a ratio of consolidated EBITDA to fixed charges, including interest) for a trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Such pro forma coverage ratio was above 2.0 to 1.0 at the dates in which these respective tranches of senior secured notes were issued; however, at December 31, 2011 2010 and 20092012, our coverage ratio (as defined in the indenture) is below 2.0 to 1.0. Accordingly, the indenture prohibits us from incurring new indebtedness; however, we may still borrow under the $60 million senior secured credit facility. At December 31, 2012, the outstanding balance under the Borgata bank credit facility was $20.0 million leaving contractual availability of $40.0 million.


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Scheduled Maturities of Long-Term Debt
The scheduled maturities of long-term debt, as discussed above, are as follows:

 Year Ended December 31,
 2011 2010 2009
 (In thousands)
Net cash provided by operating activities$253,510
 $269,391
 $241,963
      
Cash flows from investing activities:   
Capital expenditures(87,224) (75,958) (157,557)
Cash paid for acquisitions, net of cash received(278,456) 
 
Cash paid to acquire development agreement(24,450) 
 
Net cash effect upon change in controlling interest of Borgata
 26,025
 
Net cash effect upon consolidation of variable interest entity
 41
 
Net additional cash paid for Dania Jai-Alai
 
 (9,375)
Decrease in restricted investments26,801
 (1,131) 
Other investing activities542
 2,146
 1,804
Net cash used in investing activities(362,787) (48,877) (165,128)
      
Cash flows from financing activities:   
Borrowings under bank credit facility391,329
 758,774
 656,440
Payments under bank credit facility(183,579) (1,250,674) (620,655)
Borrowings under Borgata bank credit facility741,300
 533,673
 
Payments under Borgata bank credit facility(762,000) (1,105,062) 
Proceeds from issuance of senior secured notes
 490,000
 
Proceeds from issuance of Borgata senior secured notes
 773,176
 
Debt financing costs, net(15,374) (27,057) (932)
Payments on retirements of long-term debt(8,198) (187,693) (89,482)
Payments under note payable
 (46,875) (18,750)
Payments under notes payable by variable interest entity(27,000) 
 
Proceeds from variable interest entity's issuance of debt7,199
 18,091
 
Payments on loans to members of variable interest entity(592) (1,194) 
Repurchase and retirement of common stock
 
 (7,950)
Distributions from Borgata
 (123,422) 
Other financing activities(675) 170
 (456)
Net cash provided by (used in) financing activities142,410
 (168,093) (81,785)
Increase (decrease) in cash and cash equivalents33,133
 52,421
 (4,950)
Cash and cash equivalents, beginning of period145,623
 93,202
 98,152
Cash and cash equivalents, end of period$178,756
 $145,623
 $93,202
 For the Year Ending December 31,
 Boyd Gaming Peninsula Gaming Borgata Total
 (In thousands)
For the year ending December 31,       
2013$52,841
 $8,729
 $
 $61,570
2014258,168
 8,262
 20,000
 286,430
20151,389,850
 8,253
 398,000
 1,796,103
2016240,750
 8,250
 
 249,000
2017
 821,400
 
 821,400
Thereafter997,800
 350,000
 393,500
 1,741,300
Total outstanding principal of long-term debt$2,939,409
 $1,204,894
 $811,500
 $4,955,803


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Cash Flows Summary
Years Ended December 31, 2012 2011 and 2010
 Year Ended December 31,
 2012 2011 2010
 (In thousands)
Net cash provided by operating activities$142,445
 $253,510
 $269,391
      
Cash flows from investing activities:     
Capital expenditures(125,974) (87,224) (75,958)
Cash paid for acquisitions, net of cash received(1,324,198) (278,456) 
Cash paid to acquire development agreement
 (24,450) 
Net cash effect upon change in controlling interest of Borgata
 
 26,025
Net cash effect upon consolidation of variable interest entity
 
 41
Decrease in restricted investments
 26,801
 (1,131)
Other investing activities15,013
 542
 2,146
Net cash used in investing activities(1,435,159) (362,787) (48,877)
      
Cash flows from financing activities:     
Borrowings under Boyd bank credit facility787,100
 391,329
 758,774
Payments under Boyd bank credit facility(951,250) (183,579) (1,250,674)
Borrowings under Peninsula Gaming bank credit facility871,100
 
 
Payments under Peninsula Gaming bank credit facility(16,700) 
 
Borrowings under Borgata bank credit facility632,700
 741,300
 533,673
Payments under Borgata bank credit facility(652,900) (762,000) (1,105,062)
Proceeds from issuance of senior secured notes700,000
 
 490,000
Proceeds from issuance of Borgata senior secured notes
 
 773,176
Debt financing costs, net(65,083) (15,374) (27,057)
Payments on retirements of long-term debt
 (8,198) (187,693)
Payments under note payable
 
 (46,875)
Payments under notes payable by variable interest entity
 (27,000) 
Proceeds from variable interest entity's issuance of debt3,374
 7,199
 18,091
Payments on loans to members of variable interest entity(928) (592) (1,194)
Distributions from Borgata
 
 (123,422)
Other financing activities(627) (675) 170
Net cash provided by (used in) financing activities1,306,786
 142,410
 (168,093)
Increase (decrease) in cash and cash equivalents14,072
 33,133
 52,421
Cash and cash equivalents, beginning of period178,756
 145,623
 93,202
Cash and cash equivalents, end of period$192,828
 $178,756
 $145,623

Cash Flows from Operating Activities
During the years ended December 31, 2012, 2011 2010 and 2009,2010, we generated net operating cash flow of $142.4 million, $253.5 million, and $269.4 million, respectively. Generally, operating cash flows decreased during the year ended December 31, 2012, as compared to the prior year, due to increased interest expense including interest incurred on debt issued in advance of the closing of the Peninsula transaction, increased selling, general and $242.0 million, respectively.administrative expenses, and nonrecurring acquisition costs primarily related to the Peninsula acquisition. Generally, operating cash flows decreased during the year ended December 31, 2011, as compared to the prior year, due to a decrease in net income, which was primarily driven by increases in interest incurred on higher average outstanding debt balances compounded by higher average interest rates on fixed-rate debt.

We received distributions from Borgata of $20.8 million and $60.1 million during the yearsyear ended December 31, 2010 and 2009, respectively.2010. Borgata has significant uses for its cash flows, including maintenance capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata's cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness. As discussed above, Borgata's bank credit facility, as amended, and senior secured

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notes contain certain covenants. Borgata's bank credit facility, as amended, allows for certain limited distributions to be made to its partners. In the event that Borgata fails to comply with its covenants, it may be prevented from making any distributions to us during such period of noncompliance.

Cash Flows from Investing Activities
Our industry is capital intensive and we use cash flows for investments in maintenance capital expenditures, acquisitions and

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future development or business opportunities.
 
Capital Expenditures
Our estimated total capital expenditures for 2013 are expected to be approximately $153.0 million and are primarily comprised of $43.0 million for various maintenance capital expenditures across all our properties, $25.0 million for gaming equipment, $17.2 million for room renovations, and $17.1 million of certain capital improvement projects with respect to the IP. We intend to fund such capital expenditures through our bank credit facility and operating cash flows.

Cash paid for capital expenditures on major projects for the year ended December 31, 2012 was $126.0 million. Major capital expenditures during the year included $34.7 million related to Borgata's room renovation and refurbishment associated with the suite remodel, $28.0 million for capital improvement projects at IP, $11.4 million for building renovations, of which $6.8 million related to room remodel at Gold Coast and Sam's Town Shreveport, and $7.6 million related to Peninsula Gaming, primarily related to the development of the Kansas Star. In addition, we paid approximately $9.0million for maintenance capital expenditures for the year ended December 31, 2012.

Cash paid for capital expenditures on major projects for the year ended December 31, 2011 was $87.2 million and included the initial phase of Borgata's suite remodel, which included spending of approximately $15.6 million, $7.2 million for the room remodeling for Sam's Town Shreveport, and $9.1 million for gaming equipment. In addition, we paid approximately $57.4 million for maintenance capital expenditures for the year ended December 31, 2011.
Cash paid for capital expenditures on major projects for the year ended December 31, 2010 was $76.0 million and included the Echelon development project, which included spending of approximately $25.9 million, and maintenance capital expenditures of approximately $52.1 million. Cash paid for

Borgata Capital Expenditures
Borgata continually performs on-going refurbishment and maintenance at facilities to maintain standards of quality. Certain of these maintenance costs are capitalized, if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. Although Borgata does not have any present future expansion projects, if any opportunities arise, such projects will require significant capital commitments. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. Borgata must also comply with covenants and restrictions set forth in the debt agreements.

Borgata intends to incur $25.0 million, primarily on room remodel and various maintenance capital projects with such capital expenditures on major projects was $157.6 million duringbeing funded through the credit facility and operating cash flows. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. Borgata must also comply with covenants and restrictions set forth in the debt agreements.

Asset Acquisitions
During the year ended December 31, 2009, which included2012, we acquired Peninsula Gaming for a net purchase price of approximately $122 million for Echelon as well as and our new hotel tower at Blue Chip. In addition, we paid approximately $35 million for maintenance capital expenditures during$1.32 billion, net of cash. We completed the year ended December 31, 2009.
Asset Acquisitions
Peninsula Gaming transaction on November 20, 2011. During the year ended December 31, 2011, we acquired IP for a net purchase price, net of cash of $278.5 million.million on October 2, 2011. Additionally, we purchased the membership interests of an LLC for $24.5 million, and in exchange recorded assets at the same value. During the year ended December 31, 2009, we paid an additional $9.4 million for our acquisition of Dania Jai-Alai.
 
Cash from Borgata Consolidation
As a result of our consolidation of Borgata during the year ended December 31, 2010, we included its cash balance of $26.0 million as an investing cash flow.

Restricted Investment
During the year ended December 31, 2011, as a result of the consolidation of LVE as a variable interest entity, we recorded the liquidation of its restricted investment in the amount of $27.2 million, the proceeds of which were used to repay certain of its existing indebtedness, all of which is non-recourse to us.
 


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Cash Flows from Financing Activities
We rely upon our financing cash flows to provide funding for investment opportunities, repayments of obligations and ongoing operations.

Borrowings and Payments under Credit Facility
During the year ended December 31, 2012, we had net cash used of $164.2 million due to payments against Boyd's bank credit facility, and PGL had net cash provided of $854.4 million due to the issuance of a credit facility of $875 million related to the acquisition of PGL. In conjunction with the Boyd and Peninsula Gaming credit facilities, Boyd and PGL incurred $2.6 million and $33.8 million, respectively, in debt financing costs, which have been deferred and are being amortized over the term of the Peninsula Gaming credit facility. Borgata had net cash uses of less than $1.0 million due to payments against Borgata's bank credit facility, as amended. The use of funds for the repayments of Boyd's bank credit facility was primarily from cash flows from operations. The source of funds from the borrowings of our PGL's Credit Facility was primarily related to incremental cash necessary to close on our acquisition of Peninsula Gaming during the fourth quarter of the year ended December 31, 2012.
During the year ended December 31, 2011, net borrowings under our Amended Credit Facility were $207.8 million, while net payments under Borgata'sthe Borgata bank credit facility, as amended, were $20.7 million. The use of funds from the borrowings of our Amended Credit Facility was primarily related to incremental cash necessary to close on our acquisition of IP during the fourth quarter of the year ended December 31, 2011, while source of funds for the repayments of Borgata'sthe Borgata bank credit facility, as amended, were primarily from cash flows from operations. We actively manage our cash position for purposes of managing our outstanding credit facility borrowings. In November 2011, we repaid the non-extending portion of our Amended Credit Facility upon the consummation of our refinancing effort, which included the issuance of the Incremental Term Loan for $350.0$350 million. Borgata repaid its previous credit facility during the year ended December 31, 2010 upon the consummation of a refinancing effort, which included the issuance of $800 million in senior notes, as discussed below.

Proceeds from Issuance of Notes
On June 8, 2012, we issued $350 million aggregate principal amount 9.00% Senior Notes. In connection with the issuance of the 9.00% Senior Notes, we incurred approximately $14.0 million in debt financing costs, which have been deferred and are being amortized over the term of the 9.00% Senior Notes. On August 16, 2012, we issued $350 million aggregate principal amount of 8.375% Senior Notes.In connection with the issuance of the 8.375% Senior Notes, PGL incurred approximately $14.2 million in debt financing costs, which have been deferred and are being amortized over the term of the 8.375% Senior Notes. On November 20, 2012, upon the consummation of the Merger of PGL, PGL and PGC assumed the obligations of the 8.375% Senior Notes. The 8.375% are fully and unconditionally guaranteed by PGL's subsidiaries (other than PGC). In August 2010, Borgata completed a refinancing of its existing debt structure, and thereby repaid all amounts due under its existing credit facility by issuing two tranches of senior secured notes in the$400 million aggregate principal amount of $800 million. The net9.5% Senior Secured Notes and $400 million aggregate principal amount 9.875% Senior Secured Notes. In connection with the issuance of the proceeds from this offering, as reduced for underwritingSenior Secured Notes, we incurred approximately $26,800 in debt financing costs, which have been deferred and other fees,are being amortized over the terms of $773.2 million was recorded during the year ended December 31, 2010.notes. On November 2010, we issued, through a private placement, $500 million aggregate principal amount of 9.125% senior notesSenior Notes due December 2018. The notes require semi-annual payments on December 1 and June 1 of each year commencing on June 1, 2011. The notes will mature on December 1, 2018 and are fully and unconditionally guaranteed by certain of our current and future domestic restricted subsidiaries.
RetirementRetirements of Long-Term Debt
During the year ended December 31, 2011, Borgata repurchased and retired $8.5 million, principal amount, in total, of their senior secured notes, which included $2.0 million of the 9.5% notes and $6.5 million of the 9.875% notes. The total purchase price of the notes was $8.2 million, resulting in a gain of $0.1 million, net of associated deferred financing fees, which is recorded as a gain on early retirement of debt in our consolidated statement of operations during the year ended December 31, 2011.

Excluding the tender offer and redemption discussed below, during the year ended December 31, 2010, we purchased and retired $33.0 million principal amount of our senior subordinated notes. The total purchase price of the notes was $28.9 million, resulting

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in a gain of $3.9 million, net of associated deferred financing fees. Such gain was offset by the loss we recorded in connection with our tender offer and redemption of our former 7.75% senior subordinated notes.

In November 2010, we tendered for purchase all of our outstanding 7.75% senior subordinated notes due 2012. Approximately $92.1 million principal amount of the 7.75% senior subordinated notes due 2012 were tendered for purchase pursuant to our tender offer. We paid $95.3 million in connection with the tender offer, including accrued interest of $2.9 million, and recognized a loss on such tender of $0.8 million, based on the difference between the consideration fee, redemption price and the net carrying value of the notes in addition to unamortized debt financing costs written off in conjunction with the purchase of the notes. Additionally, in December 2010, we called the remaining 7.75% senior subordinated notes due 2012 at par, which had a principal balance of $66.8 million. We recognized a loss of $0.4 million upon calling such notes, which consisted of our write-off of the remaining unamortized debt financing costs associated with the notes.


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Payments under Note Payable
During the year ended December 31, 2010, we made a final principal paymentTable of $46.9 million related to the promissory note to the seller of Dania Jai-Alai.Contents


Payments on Variable Interest Entity Non-Recourse Obligation
During the year ended December 31, 2011, LVE made a principal repayment of $27.0 million related to its outstanding obligations, the proceeds for which were funded from the liquidation of restricted investments, as discussed above.
 
Distributions from Borgata
During the year ended December 31, 2010, primarily in connection with its debt refinancing, Borgata made distribution to us of $154.2 million, which included a return of capital of $30.8 million. This distribution was made on a one-time basis, at the time of its debt refinancing. Subsequently, Borgata'sthe Borgata bank credit facility, as amended, allows for certain limited distributions to be made to its partners, and accordingly, we do not anticipate significant future distributions.

Dividends
Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our Amended Credit Facility. In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods; therefore, we did not declare a dividend during the years ended December 31, 2012, 2011 2010 and 2009.2010.

Share Repurchase Program
Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our Amended Credit Facility. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our Amended Credit Facility.

In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program.
 
During the years ended December 31, 2012 and 2011 and 2010, we did not repurchase any shares of our common stock. During the year ended December 31, 2009, we repurchased and retired 1.7 million shares of our common stock at an average price of $4.61 per share. We are currently authorized to repurchase up to an additional $92.1 million in shares of our common stock under the share repurchase program.

We have in the past, and may in the future, acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.

Other Items Affecting Liquidity
There have been significant disruptions in the global capital markets that have adversely impacted the ability of borrowers to access capital, with such disruptions expected to continue for the foreseeable future. Despite these disruptions, we anticipate the ability to fund our capital requirements using cash flows from operations and availability under our AmendedBoyd and Peninsula Gaming Credit Facility, to the extent availability exists after we meet our working capital needs for the next twelve months. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. The outcome of the following specific matters, including our commitments and contingencies, may also affect our liquidity.


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On November 20, 2012, we completed the Peninsula Acquisition pursuant to an Agreement and Plan of Merger, under which an indirect wholly-owned subsidiary of the Company acquired the assets and assumed the liabilities. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012. The Peninsula Acquisition added five properties to our portfolio: the Kansas Star Casino, Hotel and Event Center in Mulvane, Kansas; Diamond Jo Casino in Dubuque, Iowa; Diamond Jo Casino in Northwood, Iowa; Evangeline Downs Racetrack and Casino in Opelousas, Louisiana; and Amelia Belle Casino in Amelia, Louisiana.


Acquisition of IP Casino Resort Spa
On October 4, 2011, we completed our previously announced acquisition of the assets of the IP, for a purchase price of $280.6 million in cash, net of certain retrospective working capital adjustments. Following the closing of the transaction, we also made a charitable contribution to the Engelstad Family Foundation equal to an aggregate of $10 million, which is included in the net purchase price, and which funds are intended to be distributed on behalf of, and in the name of, Boyd Gaming, over five years to charitable organizations to be designated by Boyd Gaming. In addition, following the closing, we intend to perform certain capital

80


improvement projects with respect to the IP with costs estimated to be $44 million. As of December 31, 2012, we have incurred a total of $29.5 million related to these improvement projects.

Disposition of Echelon project and Dania
We are committed to strengthening our balance sheet. For instance, on February 22, 2013, we and Dania Entertainment Center, LLC (the "Buyer") entered into an Asset Purchase Agreement (the "Agreement") for the sale of certain assets and liabilities of the Dania Jai-Alai Business, our pari-mutuel facility, located in Dania Beach, Broward County, Florida at which jai-alai and related gaming operations are conducted, including poker and inter-track wagering, for a purchase price of $65.5 million (the "Purchase Price"). The closing of the transactions contemplated by the Agreement is subject to certain closing conditions and is expected to occur at or before May 24, 2013.

On March 1, 2013, we entered into a definitive agreement with Genting to sell the Echelon site for $350.0 million in cash. The sale agreement included the 87-acre land parcel as well as site improvements, including the district energy system and central energy center that was to be built by LVE. The transaction was completed on March 4, 2013, and we received $157.0 million of net proceeds after payment of a portion of the proceeds to a third party to fulfill our obligations to LVE Energy Partners, LLC.

Commitments
Capital Spending and Development
We continually perform on-going refurbishment and maintenance at our facilities to maintain our standards of quality. Certain of these maintenance costs are capitalized, if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. Although we do not have any present future expansion projects, if any opportunities arise, such projects will require significant capital commitments. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. We must also comply with covenants and restrictions set forth in our debt agreements.

Our estimated total capital expenditures for 20122013 are expected to be approximately $142$153.0 million and are primarily comprised of $44$43.0 million for various maintenance capital expenditures across all our properties, $25.0 million for gaming equipment, $17.2 million for room renovations, and $17.1 million of certain capital improvement projects with respect to the consummation of IP and various maintenance capital projects.IP. We intend to fund such capital expenditures through our Amended Credit Facility and operating cash flows.

Echelon
In August 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.
Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we continue to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures, scope modifications, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on Echelon, or if we will be able to obtain alternative sources of financing for the project.
We evaluate our investment in assets held for development in accordance with the authoritative accounting guidance on impairment or disposal of long lived assets. For a long-lived asset to be held and used, such as these assets under development, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. For these assets under development, future cash flows include remaining construction costs.
The further delay of the suspension of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time, we performed an impairment test of these assets. These impairment tests were comprised of an appraisal of the development and an analysis of its future undiscounted cash flow, and contemplated several viable alternative plans for the future development of Echelon. The cash inflows related to the revenue projections for the individual components associated with each planned construction scenario, offset by outflows for estimated costs to complete the development and ongoing maintenance and operating costs. Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood.
We initially performed this evaluation during the year ended December 31, 2009, when the continued suspension was announced, and have reconsidered our assumptions on a regular basis since such date. However, due to the degradation in economic conditions in the intervening period since, we re-performed these analyses during the year ended December 31, 2011 to evaluate any further depression in real estate or land values as well as any deterioration in our initial cash flow assumptions. The outcome of this evaluation did not result in an impairment of Echelon's assets, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets of approximately $1.0 billion at both December 31, 2011 and 2010. As we further develop and explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.

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As part of our delay of the project, the capitalized costs related to the Echelon project included land and construction in progress. The construction and development costs consist primarily of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees. We expect to incur a one-time capitalized cost of $4.2 million, principally related to site beautification and preservation in 2012. Additionally we expect to incur approximately $0.3 million to $1.0 million of capitalized costs annually, principally related to such items as site preparation work, underground utility installation, infrastructure and consulting.

In addition, we expect recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, of approximately $15.5 million to $17.0 million per annum that will be charged to preopening or other expense as incurred during the project's suspension period.
The following information summarizes the contingencies with respect to our various material commitments, which are in addition to capitalized costs and annual recurring project costs, related to Echelon:

Energy Sales Agreement
LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE, to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. Pursuant to the ESA, LVE will provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. However, since we are obligated to purchase substantially all of the output of the central energy center, we are the primary beneficiary under the terms of the ESA.

LVE has suspended construction of the central energy center while the Echelon project is delayed. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommenced and proceeded with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). Under the Periodic Fee Agreement, Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. The prohibition on the initiation of litigation and the tolling of the statute of limitations provided for in the Periodic Fee Agreement should be applicable to any litigation with respect to LVE's April 3, 2009 claim of an alleged breach of the ESA. Under the Periodic Fee Agreement, Echelon Resorts agreed to pay LVE, beginning on March 4, 2011, a monthly Periodic Fee and an operation and maintenance fee until either (i) Echelon Resorts notifies LVE that it has resumed construction of a portion of the Echelon development project that it owns in fee simple and Echelon Resorts and LVE have mutually agreed to changes to the dates in their respective construction milestones under the ESA, or (ii) Echelon Resorts exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon's prior approval. We have posted a letter of credit in the amount of $6 million to secure Echelon's Resorts obligation to pay the Periodic Fee and the operation and maintenance fee.
Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and related distribution system for a price of $195.1 million, subject to certain possible adjustments. Both the ESA and the Periodic Fee Agreement would be terminated concurrent with the purchase of the LVE assets pursuant to the Purchase Option Agreement.
Line Extension and Service Agreement (“LEA”)
In March 2007, we entered into an LEA with Nevada Power Company (currently known as NV Energy) related to the construction of a substation at Echelon and the delivery of power to Echelon. We have assigned most of our obligations under the LEA to LVE (see Energy Sales Agreement (“ESA”) above). We have retained an obligation to pay liquidated damages of $5.0 million to NV Energy, in the event that Echelon does not physically accept permanent electric service by January 1, 2012 through the substation to be built by NV Energy pursuant to the LEA. On August 29, 2008, NV Energy issued a letter declaring a force majeure event

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that extends the time for performance of obligations under the LEA, including its obligation to construct the substation from which Echelon is to accept delivery of permanent electric service. NV Energy has not built the substation and we currently do not have an obligation to pay the liquidated damage amount of $5.0 million because delivery of permanent electric service from the substation is not possible. Our contingent liability to pay liquidated damages to NV Energy will be recorded and charged to expense on our consolidated statement of operations when, or if, it becomes probable that we will not be able to accept, in accordance with the terms of the LEA, permanent electric service from a substation when built by NV Energy.

Construction Agreements
We have exercised our rights under our standard form construction contracts to terminate our agreements with our contractors. All major construction agreements have been terminated and closed-out with final payments made to the contractors in exchange for final releases, with the exception of certain custom skylight, curtain wall, and elevator orders, which we are in the process of closing out based upon final material deliveries and negotiations. Storage of our steel continues under long-term offsite lease agreements.

Clark County Fees
In November 2007, we entered into an agreement with Clark County for the development of the project. The agreement requires payment of $5.2 million, allocated among four annual installments, which commenced in January 2008. We have made the first of those payments. In December 2008, Clark County granted us a one year deferral for each of the remaining fixed annual installments due under the development agreement. Clark County is in the process of reviewing our request for a further deferral of the remaining fixed annual payments for up to five years. While they consider our request, no payments are due. Furthermore, we are also responsible for our share of the cost of new pedestrian bridges that may be constructed by Clark County, of which our share is estimated to be $8 million. The bridges will not be required to be built until after construction Echelon on recommences.

LEED Tax Credits
We are pursuing Echelon's certification under the Leadership in Energy and Environmental Design (“LEED”) Silver Standard (or equivalent) for the project as part of the State of Nevada's tax incentive program (the “LEED Program”). The LEED Program allows for Echelon to receive an exemption on the non-state, local sales and use tax rate of 5.75% on qualifying construction materials purchased prior to December 31, 2010. As we intend to resume construction of Echelon and qualify for the LEED Silver Standard (or equivalent) certification, we will not record a liability for the abated local portion of sales and use tax on the qualifying construction materials; however, if Echelon does not open or if it fails to qualify for the LEED Silver Standard certification (or equivalent) after its completion, we will accrue and pay the deferral amount of sales and use tax ($9.2 million at December 31, 2011), plus interest at the rate of 6% per annum, which will be recorded as construction in progress on our consolidated balance sheet. We remain eligible for the LEED program, notwithstanding our suspension of the Echelon project.

Other Agreements
Certain other agreements, such as office leases and warehouse leases will be charged to preopening expense as incurred. While we can provide no assurances, we do not believe that any of our other agreements for the project give rise to any material liabilities resulting from the delay of the project. We believe that continuing committed costs under the lease agreements, on an aggregate basis, will be approximately $0.7 million annually.

Borgata
Utility Contract
In 2005, Borgata amended its executory contracts with a wholly-owned subsidiary of a local utility company, extending the end of the term to 20 years from the opening of The Water Club. The utility company provides Borgata with electricity and thermal energy (hot water and chilled water). Obligations under the thermal energy executory contract contain both fixed fees and variable fees based upon usage rates. The fixed fee components under the thermal energy executory contract are currently estimated at approximately $11.4 million per annum. Borgata also committed to purchase a certain portion of its electricity demand at essentially a fixed rate, which is estimated at approximately $1.7 million per annum. Electricity demand in excess of the commitment is subject to market rates based on Borgata's tariff class.
Investment Alternative Tax
The New Jersey Casino Control Act provides, among other things, for an assessment of licensees equal to 1.25% of their gross gaming revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues. Generally, Borgata may satisfy this investment obligation by investing in qualified eligible direct investments, by making qualified contributions or by depositing funds with the New Jersey Casino Reinvestment Development Authority (“CRDA”). Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be donated to the CRDA in exchange for credits against future CRDA investment obligations. CRDA bonds have terms up to fifty years and bear interest at below market rates.

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Borgata's CRDA obligations for the years ended December 31, 2012, 2011 and 2010 and 2009 were $8.1$7.7 million, $8.1 million and $8.7$8.1 million, respectively, of which valuation provisions of $4.4 million, $3.5 million $4.6 million and $5.1$4.6 million, respectively, were recorded due to the respective underlying agreements.
Purse Enhancement Agreement
In August 2008, Borgata and the ten other casinos in the Atlantic City market (collectively, the “Casinos”) entered into a Purse Enhancement Agreement (the “Agreement”) with the New Jersey Sports & Exposition Authority (the “NJSEA”) and the Casino Reinvestment Development Authority in the interest of further deferring or preventing the proliferation of competitive gaming at New Jersey racing tracks through December 31, 2011. In addition to the continued prohibition of casino gaming in New Jersey outside of Atlantic City, legislation was enacted to provide for the deduction of certain promotional gaming credits from the

81


calculation of the tax on casino gross revenue.

Under the terms of the Agreement, the Casinos are required to make scheduled payments to the NJSEA totaling $90 million to be used for certain authorized purposes (the “Authorized Uses”) as defined by the Agreement. In the event any of the $90 million is not used by NJSEA for the Authorized Uses by January 1, 2012, the unused funds shall be returned by NJSEA to the Casinos pro rata based upon the share each casino contributed. For each year, each casino's share of the scheduled payments will equate to a percentage representing its gross gaming revenue for the prior calendar year compared to the gross gaming revenues for that period for all Casinos. Each casino, solely and individually, shall be responsible for its respective share of the scheduled amounts due. In the event that any casino shall fail to make its payment as required, the remaining Casinos shall have the right, but not the obligation, to cure a payment delinquency. As a result, Borgata expenses its pro rata share of the $90 million, estimated to be approximately $15.0 million based on its actual market shares of gross gaming revenue, on a straight-line basis over the applicable term of the Agreement. Borgata recorded expense of $5.1 million $5.1 million and $4.8 million during each of the years ended December 31, 2011 2010 and 2009,2010, respectively.

Atlantic City Tourism District
As part of the State of New Jersey's plan to revitalize Atlantic City, a new law was enacted in February 2011 requiring that a tourism district (the “Tourism District”) be created and managed by the CRDA. The Tourism District has been established to include each of the Atlantic City casino properties along with certain other tourism related areas of Atlantic City. The law requires that a public-private partnership be created between the CRDA and a private entity that represents existing and future casino licensees. The private entity, known as The Atlantic City Alliance (the “ACA”), has been established in the form of a not-for-profit limited liability company, of which MDDC is a member. The public-private partnership between the ACA and CRDA shall be for an initial term of five years and its general purpose shall be to revitalize the Tourism District. The law requires that a $5 million contribution be made to this effort by all casinos prior to 2012 followed by an annual amount of $30 million to be contributed by the casinos commencing January 1, 2012 for a term of five years. Each casino's share of the annual contributions will equate to a percentage representing its gross gaming revenue for the prior calendar year compared to the aggregate gross gaming revenues for that period for all casinos. As a result, Borgata will expense their pro rata share of the $155 million as incurred. As ofDuring the year ended December 31, 2012 and 2011, Borgata incurred expense of $6.1 million and $0.9 million for the pro rata share of the initial contribution to the ACAACA.

Capital Spending and Development
Borgata continually performs on-going refurbishment and maintenance at facilities to maintain standards of quality. Certain of these maintenance costs are capitalized, if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. Although Borgata does not have any present future expansion projects, if any opportunities arise, such projects will require significant capital commitments. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. Borgata must also comply with covenants and restrictions set forth in the debt agreements.

Borgata intends to incur $59$25 million during 2013, primarily on room remodel and various maintenance capital projects with such capital expenditures being funded through the credit facility and operating cash flows. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. Borgata must also comply with covenants and restrictions set forth in the debt agreements.

Contingencies
Copeland
Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland's objection. Copeland then filed an appeal of the agency's decision with the Nineteenth Judicial District

74


Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on
appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest's license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial court's decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007,

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the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. On September 2, 2011, the judge issued an Order stating that the case should be remanded to state district court but allowed for additional filings by September 13, 2011. A Remand Order was issued on September 15, 2011, sending the case back to the 19th Judicial District Court, East Baton Rouge Parish, State of Louisiana. Guidry filed a motion for partial summary judgment on November 14, 2011 to limit the damages in the case. Treasure Chest also filed a motion for protective order on November 18, 2011.joined in the motion. The hearing on the pending motionsMotion for Partial Summary Judgment was held on September 10, 2012. On October 3, 2012, Judge Clark granted the motion which effectively struck Copeland's demands for loss profits, the value of the Treasure Chest license and the value of Treasure Chest's success. On October 26, 2012, Copeland filed a supervisory writ application with the First Circuit Court of Appeal asking that the partial summary judgment be reversed. Treasure Chest and Guidry opposed the writ. On February 13, 2013, the writ was denied leaving intact the partial summary judgment. Discovery is scheduled for March 26, 2012.proceeding. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on ourTreasure Chest's business, financial condition and results of operations.

Nevada Use Tax Refund Claims
On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. As a result of this decision, refund claims were filed for use taxtaxes paid, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties. We estimate the refund to be in the range of $17.9$17.9 million to $20.3$20.3 million, including interest. In 2009, the Department audited and denied our refund claim while simultaneously issuing a $12.3$12.3 million sales tax deficiency assessment, plus interest of $7.5 million.$7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge ("Judge"ALJ") in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision to the Nevada State Tax Commission (the "Commission"). On August 8, 2011, the Commission remanded the case back for a second administrative hearing, which was held on September 26, 2011, to allow for the introduction of additional supporting documentation. The JudgeALJ issued a decision on November 8, 2011, reversing her position on the employee meal refund claim while also affirming the denial of the complimentary meal refund, as well as the denial of a retroactive application of the sales tax measure to both employee and complimentary meals. The Judge'sALJ's decision was affirmed in a Commission hearing on January 23, 2012. On February 15, 2012 we filed a petition for judicial review in Clark County District Court. We received a split decision at our District Court hearing on October 17, 2012. The District Court Judge (“Judge”) affirmed the ALJ decision that sales tax was applicable to complimentary meals and reversed the decision on employee meals, concluding that such meals were exempt from sales tax. The Department has asserted that, although the statute of limitations prohibits their ability to collect incremental sales tax on complimentary meals, the statutes provide for an offset of the incremental sales tax against refunds due on employee meals. As such, the Department believes that it is not required to pay the employee meal refunds. We are appealing the decision on complimentary meals to the Nevada State Supreme Court and the Department has appealed the decision on employee meals. The Judge did not issue a decision with respect to the refund claim offset; and pending the ultimate resolution of the appeal at the State Supreme Court, we expect the offset issue will either be addressed by the Supreme Court or remanded back to District Court. Due to the uncertainty surrounding the ultimate resolution of our appeal to Districtthe State Supreme Court, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. ForOn July 6, 2012 the Department retracted its previous guidance requiring payment of sales tax, on complimentary and employee meals, for periods subsequent to May 2008,February 15, 2012. The updated guidance defers the requirement to collect and remit sales tax, without interest or penalty, on complimentary and employee meals until the occurrence of a defined future event. Based on the Department's updated guidance, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is probable, based on both procedural issues and the technical meritsproperties.

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Blue Chip Property Taxes
Blue Chip has previously received a valuation notice from the county assessor indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. In December 2007, we received the property tax bill related to our 2006 tax

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assessment in the amount $6.2$6.2 million, which we appealed; and, inappealed. In February 2009, we received a notice of revaluation, which reducedreducing the initial tax assessment by approximately $2.2 million.$2.2 million. Since then, we have made the minimum required payment against the provisional bills related to thereceived in years from 2007 through 2011,2012, all of which were based on the 2006 valuation notice. During the year ended December 31, 2011, we reached settlements with the county assessor, reducing the annual valuation for years 2006 through 2009. Based on these settlements, we revised our cumulative property tax accrual to reflect the retrospective effect of the revised valuations. The impact of these revisions to the valuations resulted in a reduction of our property tax accrual of approximately $9.7$9.7 million, which was cumulatively reversed through property tax expense during the year ended December 31, 2011.
Although weWe received the 2010 tax assessment in January 2013 but have not received valuation notices for years 2010 and 2011, or final tax rates for the years 2007 through 2011 weor 2012. The 2010 tax assessment increased the taxable property value approximately 46% over the 2009 settlement valuation. We have appealed the 2010 tax assessment and believe the assessments for the period from January 1, 20072010 through December 31, 20112012 could result in a total property tax obligation, net of previous payments, ranging between $10.6$5.0 million and $15.1$14.1 million. We have accrued, net of the payment of the minimum requirements discussed above, approximately $15.1$14.1 million for this property tax liability as of December 31, 2011,2012, based on what we believe to be the most likely outcome within our range, once all valuations have been received and all tax rates have been finalized; however, we can provide no assurances that the estimated amount accrued will approximate the actual amount billed. The final tax assessment notices for the period January 1, 20072011 through December 31, 2011,2012, which have not been received as of December 31, 2011,2012, could result in further adjustment to our estimated property tax liability at Blue Chip.


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Contractual Obligations
The following summarizes our contractual obligations as of December 31, 2011:2012:




 Year Ending December 31,
 Total 2013 2014 2015 2016 2017  Thereafter
 (In thousands)
CONTRACTUAL COMMITMENTS:             
Long Term Debt             
Boyd Gaming Corporation Debt:             
Bank credit facility$1,474,850
 $42,500
 $42,500
 $1,389,850
 $
 $
 $
9.125% senior notes500,000
 
 
 
 
 
 500,000
9.00% senior notes350,000
 
 
 
 
 
 350,000
6.75% senior subordinated notes215,668
 
 215,668
 
 
 
 
7.125% senior subordinated notes240,750
 
 
 
 240,750
 
 
Other158,141
 10,341
 
 
 
 
 147,800
 2,939,409
 52,841
 258,168
 1,389,850
 240,750
 
 997,800
              
Peninsula Gaming Financing:             
Bank credit facility854,400
 8,235
 8,262
 8,253
 8,250
 821,400
 
8.375% senior notes350,000
 
 
 
 
 
 350,000
Other494
 494
 
 
 
 
 
 $1,204,894
 $8,729
 $8,262
 $8,253
 $8,250
 $821,400
 $350,000
              
Borgata Debt:             
Bank credit facility$20,000
 $
 $20,000
 $
 $
 $
 $
9.50% senior secured notes398,000
 
 
 398,000
 
 
 
9.875% senior secured notes393,500
 
 
 
 
 
 393,500
 811,500
 
 20,000
 398,000
 
 
 393,500
 

 

          
Long-term debt$4,955,803
 $61,570
 $286,430
 $1,796,103
 $249,000
 $821,400
 $1,741,300
              
Interest on Fixed Rate Debt             
Boyd Gaming$546,284
 $110,308
 $99,835
 $95,589
 $79,722
 $78,197
 $82,633
Peninsula Gaming152,667
 29,312
 29,312
 29,312
 29,312
 29,312
 6,107
Borgata323,935
 76,687
 76,668
 68,686
 38,858
 38,858
 24,178
              
Operating Leases             
Boyd Gaming$456,885
 $15,872
 $12,921
 $11,590
 $10,043
 $9,875
 $396,584
Borgata357,266
 7,195
 6,864
 6,480
 6,414
 6,382
 323,931
              
PURCHASE OLBIGATIONS:             
Entertainment Contracts             
Boyd Gaming$4,099
 $4,099
 $
 $
 $
 $
 $
Borgata4,058
 1,300
 1,352
 1,406
 
 
 
              
Construction Projects             
Boyd Gaming$20,899
 $20,779
 $120
 $
 $
 $
 $
Borgata
 
 
 
 
 
 
              
Other             
Boyd Gaming$110,043
 $45,979
 $29,426
 $5,171
 $4,503
 $2,657
 $22,307
Borgata2,313
 2,313
 
 
 
 
 
              
OTHER LONG-TERM CONTRACTS:             
Boyd Gaming$614,138
 $13,828
 $25,185
 $25,063
 $25,015
 $25,013
 $500,034
Borgata237,408
 19,338
 19,338
 19,338
 19,338
 13,338
 146,718
              
TOTAL CONTRACTUAL OBLIGATIONS$7,785,798
 $408,580
 $587,451
 $2,058,738
 $462,205
 $1,025,032
 $3,243,792


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 Year Ending December 31,
 Total 2012 2013 2014 2015 2016  Thereafter
 (In thousands)
CONTRACTUAL COMMITMENTS:

            
Long Term Debt
            
Boyd Gaming Corporation Debt:
            
Bank credit facility$1,632,750
 $42,500
 $42,500
 $42,500
 $1,505,250
 $
 $
9.125% senior notes500,000
 
 
 
 
 
 500,000
6.75% senior subordinated notes215,668
 
 
 215,668
 
 
 
7.125% senior subordinated notes240,750
 
 
 
 
 240,750
 
Other11,071
 730
 10,341
 
 
 
 
 2,600,239
 43,230
 52,841
 258,168
 1,505,250
 240,750
 500,000
              
Borgata Debt:             
Bank credit facility40,200
 
 
 40,200
 
 
 
9.50% senior secured notes398,000
 
 
 
 398,000
 
 
9.875% senior secured notes393,500
 
 
 
 
 
 393,500
 831,700
 
 
 40,200
 398,000
 
 393,500
Less current maturities43,230
 43,230
 
 
 
 
 
Long-term debt, net3,388,709
 
 52,841
 298,368
 1,903,250
 240,750
 893,500
              
Interest on Fixed Rate Debt             
Boyd Gaming383,462
 79,236
 78,509
 67,897
 63,651
 47,784
 46,385
Borgata400,585
 76,668
 76,668
 76,668
 68,686
 38,858
 63,037
              
Operating Leases             
Boyd Gaming478,627
 14,991
 13,672
 11,768
 9,606
 9,593
 418,997
Borgata338,481
 6,820
 6,062
 5,870
 5,753
 5,735
 308,241
              
PURCHASE OLBIGATIONS:             
Entertainment Contracts             
Boyd Gaming$1,648
 $1,648
 $
 $
 $
 $
 $
Borgata1,250
 1,250
 
 
 
 
 
              
Construction Projects             
Boyd Gaming70,977
 56,719
 3,676
 3,557
 3,393
 3,632
 
Borgata16,457
 16,457
 
 
 
 
 
              
Other             
Boyd Gaming104,561
 40,355
 35,934
 26,354
 980
 938
 
Borgata
 
 
 
 
 
 
              
OTHER LONG-TERM CONTRACTS:             
Boyd Gaming$627,272
 $12,890
 $12,838
 $24,217
 $24,086
 $24,041
 $529,200
Borgata100,759
 13,271
 13,271
 13,271
 13,271
 13,271
 34,404
              
TOTAL CONTRACTUAL OBLIGATIONS$5,956,018
 $363,535
 $293,471
 $527,970
 $2,092,676
 $384,602
 $2,293,764

Other Opportunities
We regularly investigate and pursue additional expansion opportunities in markets where casino gaming is currently permitted. We also pursue expansion opportunities in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. Such expansions will be affected and determined by several key factors, which may include the following:

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the outcome of gaming license selection processes;
the approval of gaming in jurisdictions where we have been active but where casino gaming is not currently permitted;
identification of additional suitable investment opportunities in current gaming jurisdictions; and
availability of acceptable financing.
 
Additional projects may require us to make substantial investments or may cause us to incur substantial costs related to the investigation and pursuit of such opportunities, which investments and costs we may fund through cash flow from operations or availability under our Amended Credit Facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to us. Moreover, we can provide no assurances that any expansion opportunity will result in a completed transaction.

Off Balance Sheet Arrangements
Our off balance sheet arrangements mainly consist of the following agreements to provide electricity, emergency electricity generation, and chilled and hot water to Echelon and Borgata.

Energy Sales Agreement
As discussed in Note 1, Summary of Significant Accounting Policies - Basis of Presentation, in April 2007,On February 22, 2013, we and Dania Entertainment Center, LLC (the "Buyer") entered into an Energy SalesAsset Purchase Agreement (the "ESA""Agreement") with LVE. LVE is a joint venture between Marina Energy LLCfor the sale of certain assets and DCO ECH Energy, LLC, to design, build, own (other thanliabilities of the underlying real propertyDania Jai-Alai Business, our pari-mutuel facility, located in Dania Beach, Broward County, Florida at which is leased from Echelon Resorts) and operate a central energy centerjai-alai and related distribution systemgaming operations are conducted, including poker and inter-track wagering, for our planned Echelon resort development. Pursuant to the ESA, LVE will provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. However, since we are obligated toa purchase substantially allprice of $65.5 million (the "Purchase Price"). The closing of the output oftransactions contemplated by the central energy center, we are the primary beneficiary under the terms of the ESA.

LVE has suspended construction of the central energy center while the Echelon projectAgreement is delayed. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommencedsubject to certain closing conditions and proceeded with construction of the Echelon development project byis expected to occur at or before May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.24, 2013.

On March 7, 2011, Echelon Resorts and LVE1, 2013, we entered into both a purchase optiondefinitive agreement (the "Purchase Option Agreement" and a periodic feeto sell the Echelon site for $350 million in cash. The sale agreement (the "Periodic Fee Agreement"). Underincludes the Periodic Fee Agreement, Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect.87-acre land parcel, as well as site improvements. The prohibition on the initiation of litigation and the tolling of the statute of limitations provided for in the Periodic Fee Agreement should be applicable to any litigation with respect to LVE's April 3, 2009 claim of an alleged breach of the ESA. Under the Periodic Fee Agreement, Echelon Resorts agreed to pay LVE, beginningtransaction was completed on March 4, 2011, a monthly Periodic Fee2013, and an operation and maintenance fee until either (i) Echelon Resorts notifies LVE that it has resumed constructionwe received $157.0 million of net proceeds after payment of a portion of the Echelon development project that it owns in fee simple and Echelon Resorts and LVE have mutually agreedproceeds to changesa third party to the dates in their respective construction milestones under the ESA, or (ii) Echelon Resorts exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon's prior approval. We have posted a letter of credit in the amount of $6 million to secure Echelon's Resorts obligation to pay the Periodic Fee and the operation and maintenance fee.
Under the Purchase Option Agreement, Echelon Resorts has the right, at its sole discretion, upon written noticefulfill our obligations to LVE to purchase the assets of LVE including the central energy center and related distribution system for a price of $195.1 million, subject to certain possible adjustments. Both the ESA and the Periodic Fee Agreement would be terminated concurrent with the purchase of the LVE assets pursuant to the Purchase Option Agreement.Energy Partners, LLC.
Utility Contract
In 2005, Borgata amended its executory contracts with a wholly-owned subsidiary of a local utility company, extending the end of the term to 20 years from the opening of The Water Club. The utility company provides Borgata with electricity and thermal energy (hot water and chilled water). Obligations under the thermal energy executory contract contain both fixed fees and variable

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fees based upon usage rates. The fixed fee components under the thermal energy executory contract are currently estimated at approximately $11.4 million per annum. Borgata also committed to purchase a certain portion of its electricity demand at essentially a fixed rate, which is estimated at approximately $1.7 million per annum. Electricity demand in excess of the commitment is subject to market rates based on Borgata's tariff class.

Indemnification
We have entered into certain agreements that contain indemnification provisions, as well as indemnification agreements involving certain of our executive officers and directors. These agreements provide indemnity insurance pursuant to which directors and officers are indemnified or insured against liability or loss under certain circumstances, which may include liability or related loss under the Securities Act and the Exchange Act. In addition, our Restated Articles of Incorporation and Restated Bylaws contain provisions that provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by law.

Outstanding Letters of Credit
At December 31, 20112012 and 2010,2011, we had outstanding letters of credit totaling $15.5$14.5 million and $17.0$15.5 million, respectively.
 
Other Arrangements
We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions other than interest rate swaps, interest rate collars and interest rate caps.


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Critical Accounting Policies
Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. In accordance with GAAP, we are required to make estimates and assumptions that affect the reported amounts included in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. On an ongoing basis, management reviews and refines those estimates, the following of which materially impact our consolidated financial statements: the recoverability of long-lived assets; preservation of assets held for development; application of acquisition method of accounting to our controlling interest in Borgata; valuation of indefinite-lived intangible assets and goodwill; determination of self-insured reserves; and provisions for deferred tax assets, certain tax liabilities and uncertain tax positions.
 
Judgments are based on information including, but not limited to, historical experience, industry trends, conventional practices, expert opinions, terms of existing agreements and information from outside sources. Judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from these estimates.
 
We believe the following critical accounting policies require a higher degree of judgment and complexity, the sensitivity of which could result in a material impact on our consolidated financial statements.
 
Recoverability of Long-Lived Assets
We evaluate the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If triggering events are identified, we then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples.
 
We reconsider changes in circumstances on a frequent basis, and if a triggering event related to potential impairment has occurred, we solicit third party valuation expertise to assist in the valuation of our investment. There are three generally accepted approaches available in developing an opinion of value: the cost, sales comparison and income approaches. We generally consider each of these approaches in developing a recommendation of the fair value of the asset; however the reliability of each approach is dependent upon the availability and comparability of the market data uncovered, as well as, the decision-making criteria used by market participants when evaluating a property. We will bifurcate our investment and apply the most indicative approach to overall fair valuation, or in some cases, a weighted analysis of any or all of these methods.
 
Developing an opinion of land value is typically accomplished using a sales comparison approach by analyzing recent sales transactions of similar sites. Potential comparables are researched and the pertinent facts are confirmed with parties involved in the transaction. This process fosters a general understanding of the potential comparable sales and facilitates the selection of the most relevant comparables by the appraiser. Valuation is typically accomplished using a unit of comparison such as price per square foot of land or potential building area. Adjustments are applied to the unit of comparison from an analysis of comparable

79


sales, and the adjusted unit of comparison is then used to derive a value for the property.
 
The cost approach is based on the premise that a prudent investor would pay no more for an asset of similar utility than its replacement or reproduction cost. The cost to replace the asset would include the cost of constructing a similar asset of equivalent utility at prices applicable at the time of the valuation date. To arrive at an estimate of the fair value using the cost approach, the replacement cost new is determined and reduced for depreciation of the asset. Replacement cost new is defined as the current cost of producing or constructing a similar new item having the nearest equivalent utility as the property being valued.
 
The income approach focuses on the income-producing capability of the asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in applying this approach include estimating the expected before-tax cash flows attributable to the asset over its life and converting these before-tax cash flows to present value through capitalization or discounting. The process uses a rate of return that accounts for both the time value of money and risk factors. There are two common methods for converting net income into value, those methods are the direct capitalization and discounted cash flow methods ("DCF"). Direct capitalization is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step by dividing the income estimate by an appropriate capitalization rate. Under the DCF method, anticipated future cash flows and a reversionary value are discounted to an opinion of net present value at a specific internal rate of return or a yield rate, because net operating income of the subject property is not fully stabilized.
 
Our long-lived assets were carried at $3.54$3.96 billion at December 31, 2011,2012, or 60.1%62.5% of our consolidated total assets. A long-lived

87


asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The following are examples of such events or changes in circumstances:

i.a significant decrease in the market price of a long-lived asset;

ii.a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition;

iii.a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;

iv.an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;

v.a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and/or

vi.a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

We did not identify any events or circumstances which required us to evaluate impairment of any of these assetsAs further discussed in Note 4, Property and Equipment, Net, during the yearsyear ended December 31, 2011 or 2010.2012, we recognized $39.4 million of non-cash impairment charges related to various parcels of undeveloped land. As further discussed in Note 4, Assets Held for Development, we also recognized $993.9 million of non-cash impairment charges related to our Echelon project including land, and construction in progress based on the difference between the book value of the assets and the estimated realizable value of the assets.

PreservationDisposal of Assets Held for Development
We evaluateIn August 2008, we announced the carrying valuedelay of assets held forour multibillion dollar Echelon development whenever events or changesproject on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in circumstances indicatethe Las Vegas geographical area; nor did we predict that the carrying value of such assets may not be recoverable. We review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is basedincremental supply becoming available on the estimated future resultsLas Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples.market.
At December 31, 2011 and 2010, the capitalized costs related to the Echelon project of $1.1 billion, included land, construction in progress and the central energy facility. The construction and development costs consist primarily of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees.

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The suspensionfurther delay of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time, we performed an impairment test of these assets. These impairment tests of these assets, during the years ended December 31, 2011 and 2009. This impairment test waswere comprised of aan appraisal of the development and an analysis of its future undiscounted cash flow, analysis, and contemplated several viable alternative plans for the future development of Echelon. We did not identify any events or circumstances which required us to evaluate impairment of any of these assets during the year ended December 31, 2010.
The impairment tests performed during the years ended December 31, 2011 and 2009 analyzed three scenarios: One such scenario includes the outright sale of the project as is, which is primarily based upon land value. We considered the land value by analyzing recent sales transactions of sites with similar characteristics such as location, zoning, access, and visibility, to establish a general understanding of the potential comparable sales. The recoverability under this option represented any excess sales price, net of estimated selling costs, from the land over the carrying value of the assets, including land, held for development.
Another scenario is the full development of the project, as designed, at a later date. The cash inflows related to this option represent the revenue projections for the individual components associated with each planned construction element (casino, hotel, food and beverage, retail, convention and other), based upon the estimated respective dates of completion and particular graduated absorption rates. These projections arescenario, offset by outflows for incurred and estimated costs to complete the development. For costs already incurred,development and ongoing maintenance and operating costs.
We initially performed this evaluation during the year ended December 31, 2009. We updated these analyses during the year ended December 31, 2011 to compensate for potential losses due to the delay, we adjusted for (i) physical deterioration; (ii) functional obsolescence; and (iii) economic obsolescence. Physical deterioration is impairment to the condition of the asset brought about by “wear and tear,” disintegration, and/evaluate any further depression in real estate or the action of the elements. Functional obsolescence is the impairment in the efficiency of the asset brought about by such factors as inadequacy or change in technology that affect the asset. Economic obsolescence is the impairment in the desirability of the asset arising from external economic forces, building code enhancements or changes in supply and demand relationships. For estimated costs to complete, we applied selected construction expense growth rates to our present cost analysis. In addition to these hard and soft construction costs, we estimated outflows for preservation costs that are intended and required to maintain the development site and the existing structuresland values as well as development materials for future use. These net outflows were incrementally added toany deterioration in our estimated operating and ongoing maintenance costs, to establish the undiscounted netin initial cash flow of the project.
Our final scenario is a scaled-down version of the full project, whereby only certain components would be developed. This cash flow projection considered the inflows and outflows discussed above, with relevant curtailment for revenue from, and costs related to, the amenities not completed.
Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood.assumptions. The outcome of this evaluation resulted in the determination that there was no impairment of theEchelon's assets, held for development duringas the years ended December 31, 2011, 2010 or 2009. The estimated weighted net undiscounted cash flows from the project exceededexceed the current carrying value of the assets heldof approximately $1.3 billion at December 31, 2011.
In December 2012, we reconsidered our commitment to complete the Echelon project and concluded we would not resume development. As a result of this decision, we now expect to dispose of the assets. We updated our impairment analysis to compare the difference between the book value of the assets and the estimated realizable value of the assets. Based on this scenario, we recognized an impairment at December 31, 2012, of $993.9 million based on the difference between the book value of the assets and the estimated realizable value of the assets as discussed in Note 4, Property and Equipment, and Note 5, Assets Held for development by approximately $10.6 billion asDevelopment. Due to the termination of December 2011.the project, no additional project costs will be capitalized.

Application of Acquisition Method of Accounting
Acquisition of Peninsula Gaming
On November 20, 2012, we completed the Peninsula Acquisition pursuant to an Agreement and Plan of Merger (the "Merger Agreement") entered into on May 16, 2012, by and among the Company, Boyd Acquisition II, LLC, Boyd Acquisition Sub, LLC, Peninsula Gaming Partners, LLC ("PGP") and Peninsula Gaming, LLC, under which an indirect wholly owned subsidiary of the

88


Company acquired 100% of the outstanding common shares of Peninsula Gaming, the assets and assumed the liabilities. The acquisition added five properties from three different states including Kansas, Iowa and Louisiana. Peninsula Gaming owns and operates Diamond Jo casino in Dubuque, Iowa, Evangeline Downs Racetrack and Casino, in St. Landry Parish, Louisiana, various off track betting facilities in Louisiana, Diamond Jo casino in Northwood, Iowa, Amelia Belle casino in Amelia, Louisiana, and the Kansas Star Casino, Hotel and Event Center ("Kansas Star") near Wichita, Kansas. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012. As a result of the Peninsula Acquisition, the Company will be able to expand its operations to the new geographical areas. The net purchase price, after adjustment for working capital and other items was approximately $1.48 billion.
The financial position of Peninsula Gaming is consolidated in our consolidated balance sheet as of December 31, 2012. In total, Peninsula Gaming represents 25.4% of our consolidated total assets at December 31, 2012, respectively. During the year ended December 31, 2012, PGL contributed $56.9 million in net revenues for the period from November 20, 2012 through December 31, 2012.

Acquisition of IP Casino Resort Spa ("IP")
On October 4, 2011, we consummatedcompleted the acquisition of IP Casino Resort Spa ("IP") in Biloxi, Mississippi pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities, respectively, related to the Imperial Palace Biloxi , on an as-is basis. The net purchase price was approximately $280.6 million. In addition to the net purchase price, the Company intends to perform certain capital improvement projects with respect to the property at an estimated cost of $44 million. The business combination resulted in the recording of a bargain purchase gain of approximately $4.6 million, due to the excess fair value of net identifiable assets over the total consideration, and is reflected in other income on the consolidated statement of operations during the year ended December 31, 2011.

The Company has applied the acquisition method of accounting to this business combination, which promulgates the following:

Identifying the acquirer
The Company did not acquire the equity interests of the sellers, but rather acquired certain assets and assumed certain liabilities. However, the assets acquired and liabilities assumed by the Company constitute a business, as all associated processes and productive outputs were obtained in the transaction. The Company created a wholly-owned subsidiary to record the activities of this business.

Determining the acquisition date
Title to all acquired assets, transfer of licensing requirements and the assumption of certain liabilities occurred upon closing, at midnight on October 4, 2011.


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Recognizing and measuring the identifiable assets acquired and the liabilities assumed
The Company has completed its valuation procedures, and the resulting fair value of the acquired assets and assumed liabilities has been recorded based upon our consideration of an independent valuation of the business enterprise and IP's tangible and intangible assets. 

Recognizing and measuring goodwill or a gain from a bargain purchase
The Company had recorded a bargain purchase in this business combination, as further discussed below, because the fair values of the identifiable net assets acquired and liabilities assumed exceeded the consideration transferred.

The application of the acquisition method accounting guidance had the following effects on our consolidated financial statements: (i)  we measured the fair value of identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions and recognized such in our consolidated balance sheet as of October 4, 2011; and (ii) we have reported the operating results of IP in our consolidated statements of operations and cash flows for the period from October 4, 2011 through December 31, 2011.

We engaged third party valuation expertise to assist in the fair value determination of identifiable intangible assets such as customer relationships, trademark and any other significant tangible assets or liabilities, such as long-lived property. Enterprise value allocation methodology requires management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities primarily using discounted cash flows and replacement cost analysis. If estimates or assumptions used to complete the enterprise valuation and estimate the fair value of acquired assets and liabilities significantly differed from assumptions made, the resulting difference could materially affect the fair value of net assets. We will undertake impairment tests of the indefinite lived intangible assets, in accordance with our policy.

As part of the valuation, we acquired intangible assets, including the IP trademark. The fair value of the identified intangible assets was determined using a cash flow model following the income approach. The value of the trademark relied upon a relief from royalty method, which discounts a steam of payments associated with the right to use such name. The value of customer relationships followed a multi-period excess earnings method, which is an application of the discounted cash flow method and computes the present value of after-tax cash flows attributable to the associated future income stream. As a result of the business combination and fair value analysis, we recorded $25.3 million for the IP trademark.
The financial position of IP is consolidated in our consolidated balance sheet as of December 31, 2011; and in total, we recorded the fair value of its assets of $304.9 million, and fair value of liabilities assumed of $19.7 million. In total, the assets of IP acquired represent 5.4% of our consolidated total assets at December 31, 2011.

Consolidation of Borgata
Upon effectively obtaining control of Borgata, we were required to apply acquisition method of accounting in accordance with the authoritative accounting guidance for business combinations. The application of the acquisition method of accounting guidance had the following effects on our consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity.
 
The provisional fair value measurements and estimates of these items were subsequently refined during the one-year measurement period. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, we had not completed our procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. Our subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement period adjustments were identified and retrospectively recorded in our consolidated balance sheet as of December 31, 2010. These measurement period adjustments materially shifted the value of certain tangible and intangible assets. We have applied the measurement period adjustments retrospectively to the consolidated balance sheet reported as of December 31, 2010. However, the impact on the consolidated statement of operations for the year ended December 31, 2010, as retrospectively adjusted, to the statement as reported was not material, and was therefore not adjusted for any measurement period adjustments. The revisions to the provisional values of assets consists of reallocations of certain tangible assets and the recordation of other intangible assets; the accrual of certain liabilities, including the recording of the deferred tax effect of the appreciated asset values; and the resulting effect on the fair value of the controlling and noncontrolling interests.
 
We determined the fair value of identifiable intangible assets such as customer relationships, a trademark and any other significant tangible assets or liabilities, such as long-lived property. The enterprise value allocation methodology required management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities. Management estimated the fair

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value of assets and liabilities primarily using discounted cash flows and replacement cost analysis. If estimates or assumptions used to complete the enterprise valuation and estimate the fair value of acquired assets and liabilities significantly differed from assumptions made, the resulting difference could materially affect the fair value of net assets. We will continue to perform impairment tests of the indefinite-lived intangible assets in accordance with our existing policy, as discussed below. Additionally, given the anticipated sale of the MGM Interest, we will maintain a heightened awareness of any potential triggering events which would indicate a possible impairment of the intangible assets or long-lived assets.
 
The financial position of Borgata is consolidated in our consolidated balance sheet as of December 31, 20112012 and 2010;2011; and during the year ended December 31, 2010, we recorded a step up to the basis of Borgata's historical financial statements of $16.8 million,

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which is an appreciation over their historical book basis of approximately 1%. In total, the fair value of the assets consolidated as a result of this change in control represents approximately 26% of our consolidated total assets at December 31, 2010.
 
Valuation of Indefinite-Lived Intangible Assets
Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, performed in the second quarter of each year, and between annual test dates in certain circumstances. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year period.
 
The carrying value of our gaming license rights at both December 31, 2011 and 2010 was $371.4 million, or 6.3% and 6.6% of our consolidated total assets, respectively, and the fair value of our reporting units exceeded their carrying value by $222.1 million and $179.4 million, or by a multiple of 1.60 and 1.48, respectively.
Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the brand name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years. Applying the selected pretax royalty rates to the applicable revenue base in each period yielded pretax income for each property's trademarks and trade name. These pretax totals were tax effected utilizing the applicable tax rate to arrive at net, after-tax cash flows. The net, after-tax flows were then discounted to present value utilizing an appropriate discount rate. The present value of the after-tax cash flows were then added to the present value of the amortization tax benefit (considering the 15-year amortization of intangible assets pursuant to recent tax legislation) to arrive at the recommended fair values for the trademarks and trade names.
 
At December 31, 2012, the carrying value of our trademarks was $186.8 million, which includes the addition of $50.8 million related to the acquisition of Peninsula Gaming and $60.0 million related to the consolidation of Borgata. At December 31, 2012, the fair value of our trademarks exceeded their carrying value. At December 31, 2011, the carrying value of our trademarks was $136 million, which includes the addition of $25.3 million related to the acquisition of IP and $65 million related to the consolidation of Borgata during the years ended December 31, 2011 and 2010, respectively, the total of which represents 2.3% of our total consolidated assets. The fair value of our trademarks exceeded their carrying value by $18.2 million, or 13.4%, respectively. At December 31, 2010, the carrying value of our trademarks was $115.7 million, or 2.0% of our consolidated total assets, and2011, the fair value of our trademarks exceeded their carrying value by $4.6 million, or 11.0%, respectively.value.

These indefinite-lived intangible assets are not subject to amortization, but are subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances. Our impairment test, performed in the second quarter of 2011 did not result in any impairment of these intangible assets during the year ended December 31, 2011. We did however, perform an interim test with respect to the Borgata trademark, and recorded a $5.0 million impairment of the Borgata trademark during the year ended December 31, 2011, based on a degradation in their forecasted revenues due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, ourBorgata's projected future results will be further negatively impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011.

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Specific to the value of Borgata's trademark, a respective annual decline in their gaming revenues of 6%, in hotel revenues of 11% or an aggregate decline in both streams of 4% would impact the fair value of the trademark by $1 million, and result in a future impairment in our carrying value.

We evaluate whether any triggering events or changes in circumstances had occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. This evaluation required significant judgment, including consideration of whether there had been any significant adverse changes in legal factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or likely sale or disposal of all or a significant portion of a reporting unit. Based upon this evaluation, we concluded that there had not been any triggering events or changes in circumstances that indicated an impairment condition existed as of December 31, 2011.2012. If an event described above occurs, and results in a significant impact to our revenue and profitability projections, or any significant assumption in our valuations methods is adversely impacted, the impact could result in a material impairment charge in the future.

Valuation of Goodwill
The authoritative guidance related to goodwill impairment requires goodwill to be tested for impairment at the reporting unit level at least annually using a two-step impairment test. Step One of the test is a screen used to identify whether or not goodwill impairment may exist. In Step One, an entity compares the fair value of a reporting unit with its carrying amount. If a reporting unit's carrying amount exceeds its fair value, goodwill impairment may exist. Step Two of the test must then be performed to

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measure the amount of impairment, if any. In Step Two, an entity compares the implied fair value of goodwill with its carrying amount. An impairment loss is measured by the excess of the carrying amount of goodwill over its implied fair value. The implied fair value of goodwill should be determined in the same manner that goodwill is measured in a business combination; that is, an entity must allocate the fair value of a reporting unit to the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination.
 
We solicit third party valuation expertise to assist in the performance of the Step One valuations of the goodwill of our reporting units. We perform the test in the second quarter of our fiscal calendar year, using a weighting of two different approaches was employed to determine fair value: (i) the income approach and (ii) the market approach.
 
The income approach is based on a discounted cash flow method, which focuses on the expected cash flow of the subject company. In applying this approach, the cash flow available for distribution is calculated for a finite period of years. Cash flow available for distribution is defined, for purposes of this analysis, as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the subject company. The cash flow available for distribution and the terminal value (the value of the subject company at the end of the estimation period) are then discounted to present value to derive an indication of value of the business enterprise.
 
In the valuation of an asset, the income approach focuses on the income-producing capability of the subject asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in applying this approach include estimating the expected after-tax cash flows attributable to the asset over its life and converting these after-tax cash flows to present value through “discounting.” The discounting process uses a rate of return which accounts for both the time value of money and investment risk factors. Finally, the present value of the after-tax cash flows over the life of the asset is totaled to arrive at an indication of the fair value of the asset.
 
The market approach is comprised of the guideline company method, which focuses on comparing the subject company to selected reasonably similar, or “guideline”, publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the subject company relative to the selected guideline companies; and (iii) applied to the operating data of the subject company to arrive at an indication of value. In the valuation of an asset, the market approach measures value based on what typical purchasers in the market have paid for assets which can be considered reasonably similar to those being valued. When the market approach is utilized, data are collected on the prices paid for reasonably comparable assets. Adjustments are made to the similar assets to compensate for differences between reasonably similar assets and the asset being valued. The application of the market approach results in an estimate of the price reasonably expected to be realized from the sale of the subject asset.
 
The two methodologies were weighted 80.0% toward the income approach and 20.0% toward the market approach, to arrive at an overall fair value. At December 31, 20112012 and 2010,2011, the fair value of our reporting units exceeded their carrying value by $730.9 million and $610.1 million, or by a multiple of 3.4 and 1.5, with no individual reporting unit having less than a 0.8 coverage. The carrying value of our goodwill at December 31, 2011 and 2010 was $213.6 million, or 3.6% and 3.8%, respectively, of our consolidated total assets.value. At such dates, we evaluated whether any triggering events or changes in circumstances had occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. This evaluation required significant

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judgment, including consideration of whether there had been any significant adverse changes in legal factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or likely sale or disposal of all or a significant portion of a reporting unit. Based upon this evaluation, we concluded that there had not been any triggering events or changes in circumstances that indicated an impairment condition existed at either December 31, 20112012 or 2010.2011.
 
Although we satisfied Step One by a fair margin for each reporting unit tested certain underlying assumptions and variables could greatly impact the results of future tests.
 
On a macro-economic level, we believe that over the next few years, several trends are expected to continue to adversely affect the gaming industry. The most significant trends include (i) delayed development of new construction; (ii) increased bankruptcy filings; and (iii) decreased consolidation. The impact of the weakening economy, credit crunch, and general outlook of the casino resort industry is illustrated through the recent trend of abandoned casino projects. Bankruptcy has served as a deterrent to deals because of the large decline in cash flow as well as significant increases in leverage. Debt to EBITDA ratios for public companies has nearly doubled overall in the past few years, indicating that such a drastic increase shows the inability to service debt. Although we cannot control or influence the impact of these factors from a fair valuation perspective, they could nonetheless have a material effect on the results of valuation, particularly the guideline company method under the market approach, in the future.
 
Additionally, several of the assumptions underlying the discounted cash flow method under the income approach could pose a high degree of sensitivity to the resulting fair value. These factors include, but are not limited to, the following: total revenue, depreciation expense, depreciation overhang, tax expense and effective rates, debt-free net working capital, capital additions,

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terminal year growth factor, discount rate and the capitalization rate. A change in any of these variables that cause our undiscounted cash flows or terminal value or both to adversely and materially change would result in the failure of the Step One test, and a resulting impairment of our goodwill in an amount up to its book value of $213.6$694.9 million.

Determination of Self-Insured Reserves
The Company is fully self-insured for general liability costs and self-insured for workers' compensation costs up to a stop loss limit of $0.5 million. Self-insurance reserves include accruals of estimated settlements for known claims, (“Case Reserves”) as well as accruals of estimates for claims incurred but not yet reported (“IBNR”). Case reserves represent estimated liability for unpaid loss, based on a claims administrator's estimates of future payments on individual reported claims, including Loss Adjustment Expenses (“LAE”). Generally, LAE includes claims settlement costs directly assigned to specific claims, such as legal fees. We estimate case and LAE reserves on a combined basis, but do not include claim administration costs in our estimated ultimate loss reserves. IBNR reserves include the provision for unreported claims, changes in case reserves, and future payments on reopened claims.

We have relied upon an industry-based method to establish our self-insurance reserves, which projects the ultimate losses estimated by multiplying the exposures by a selected ultimate loss rate. The selected ultimate loss rates were determined based on a review of ultimate loss rates for prior years, adjusted for loss and exposure trend, and benefit level changes. We believe this method best provides an appropriate result, given the maturing experience and relative stabilization of our claims history. In previous years, and in certain instances, loss rates were based on industry Loss Development Factors (“LDFs”). Industry LDFs are from various national sources for workers compensation and general liability claims, and we utilize the most recent information available, although there is some lag time between compilation and publishing of such reports, during which unfavorable trends or data could emerge, which would not be reflected in our reserves.

For workers' compensation, using payroll by state as weights, we calculate a weighted average industry LDF; for general liability claims, we use gross revenues as weights, and apply to a weighted average Industry LDF to yield an initial expectation of the ultimate loss amount. The paid LDFs are used to determine the percentage of the expected ultimate loss that is expected to be unpaid as of the reserving date. This future unpaid percentage is multiplied by the expected ultimate losses to derive the expected future paid losses. As a loss year matures, the expected future paid losses are replaced by actual paid losses.

The LDFs applied to determine the factors used to compute our workers' compensation reserves have increased by approximately 3.8% over the past three years. Using the year ending December 31, 2011 as a static period, average annual increases in these LDF based on the three four years, would result in an increase of $0.3 million in our workers' compensation reserves and guest claims respectively.

In the computation of workers' compensation claims, we exclude any claim which has reached our stop loss limitation; and therefore, we do not include any allowance for expected recoverable from excess or reinsurance. We are, however, contingently liable in the event such reinsurer cannot meet its obligations. Although we place this risk with insurers rated better than A with AM Best, a national insurance company rating agency, there can be no assurance that such reinsurer will be able to meet their obligations in the future. At December 31, 2011,2012, unpaid case reserves on claims in excess of $0.5 million, which we have subrogated to the

85


reinsurer, totaled less than $0.2 million.

In estimating our reserves for unpaid losses, it is also necessary to project future loss payments. Actual future losses will not develop exactly as projected and may, in fact, vary significantly from the projections. Further, the projections make no provision for future emergence of new classes of losses or types of losses not sufficiently represented in our historical database or that are not yet quantifiable. Additionally, our results are estimates based on long term averages. Actual loss experience in any given year may differ from what is suggested by these averages. The sensitivity of key variables and assumptions in the analysis was considered. Key variables and assumptions include (but are not limited to) loss development factors, trend factors and the expected loss rates/ratios used. It is possible that reasonable alternative selections would produce materially different reserve estimates.

Management believes the estimates of future liability are reasonable based upon this methodology; however, changes in key variables and assumptions used above, or generally in health care costs, accident frequency and severity could materially affect the estimate for these reserves.

Provisions for Deferred Tax Assets, Certain Tax Liabilities and Uncertain Tax Positions
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on 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 usability of operating loss and tax credit carryforwards before expiration, and tax planning alternatives.


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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.

We recognize the tax benefit from an uncertain tax position only when it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

We have established contingency reserves for material, known tax exposures. Our tax reserves reflect management's judgment as to the resolution of the issues involved if subject to judicial review. While we believe our reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a taxing authority will be resolved at a financial cost that does not exceed its related reserve. With respect to these reserves, our income tax expense would include (i) any changes in tax reserves arising from material changes during the period in the facts and circumstances (i.e., new information) surrounding a tax issue and (ii) any difference from our tax position as recorded in the financial statements and the final resolution of a tax issue during the period.

Our tax reservesbalance for our uncertain tax positionsbenefits as of December 31, 2011 were $42.32012 was $38.4 million. While we believe that our reserves are adequate to cover reasonably expected tax risks, in the event that the ultimate resolution of our uncertain tax positions differ from our estimates, we may be exposed to material increases in income tax expense, which could materially impact our financial position, results of operations and cash flows.

Recently Issued Accounting Pronouncements
A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.
 
Accounting Standards Update 2011-09 Employer's Participation in Multiemployer Benefit Plans2012-02 Intangibles - Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment ("Update 2011-09"2011-02")
In September 2011,July 2012, the Financial Accounting Standards Board ("FASB") issued Update 2011-092012-02 which is an amendment to Topic 715-80350-30 of the Accounting Standards Codification ("ASC").

The objective of Update 2011-092012-02 is to amend ASC 715-80 by increasing the quantitative and qualitative disclosures an employer

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is required to provide about its participation in significant multiemployer plans that offer pension or other post-retirement benefits. The objective of Update 2011-09350-30 is to enhance transparencyreduce the cost and complexity of disclosures about (1) the significant multiemployer plansperforming an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in which an employer participates, (2) the level of the employer's participation in those plans, (3) the financial health of the plans, and (4) the nature of the employer's commitments to the plans.

We adopted Update 2011-09 during the year ended December 31, 2011. Update 2011-09 did not have a material impact on our consolidated financial statements.

Accounting Standards Update 2011-08 Intangibles, Goodwill and Other ("Update 2011-08")
In September 2011, the FASB issued Update 2011-08which is an amendment to ASC Topic 350.
impairment testing guidance among long-lived asset categories. The objective of Update 2011-08 is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update 2011-08 permitguidance permits an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary tothe indefinite-lived intangible asset and perform the two-step goodwillquantitative impairment test described in Topic ASC 350. (the more-likely-than-not threshold is defined as having a likelihood of more than 50 percent). Previous guidance under Topic ASC 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit withto its carrying amount, including goodwill (step one).value. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in Update 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than itsthe carrying amount.value, the entity must record an impairment.

The amendment will beUpdate 2012-02 is effective for our fiscal year,annual and interim periods within theimpairment tests performed for fiscal yearyears beginning January 1,after September 15, 2012, although early adoption is permitted. In September 2012, the Company adopted Update 2011-082012-02. Update 2012-02 will not have a material impact on the computation of the impairment of goodwill or other intangibles.
Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")
In June 2011, the FASB issued Update 2011-05 which is an amendment to Topic ASC 220.
The objective of Update 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.
Update 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does Update 2011-05 affect how earnings per share is calculated or presented. Update 2011-05 should be applied retrospectively and will be effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.

Accounting Standards Update 2011-12 Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards (“Update 2011-12”)
In December 2011, the FASB issued Update 2011-12which is an update to ASC Topic 220.

Update 2011-12 defers certain provisions of Update 2011-05, which required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement of operations and the statement of comprehensive income, as discussed above in Update 2011-05 (both for interim and annual financial statements). Accordingly, this requirement is indefinitely deferred and will be deliberated by the FASB at a future date. During this time of deliberation, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not superseded or otherwise effected, including

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the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements.

The effective date of Update 2011-12 is for fiscal years and interim periods with those fiscal years beginning January 1, 2012. Update 2011-12 will not have a material impact on the computation of comprehensive income.indefinite-lived intangible assets.

ITEM 7A.Quantitative and Qualitative Disclosure about Market Risk.
ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market, short-term and long-term LIBOR rates, and short-term Eurodollar rates, and their potential impact on our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under ours and Borgata's bank credit facilities.
Borrowings under our AmendedBoyd's Credit Facility are based upon, at our option, LIBOR or the “base rate,” plus an applicable margin in either case. The “base rate” under the Amended Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%. Pursuant to the Amended Credit Facility, (i) at any time and to the extent that the Incremental Term Loan is a Eurodollar Rate Loan, the Incremental Term Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annual equal to the “effective Eurodollar

93


Rate” for such period plus 4.75%, and (ii) at any time and to the extent that the Incremental Term Loan is a Base Rate Committed Loan, the Incremental Term Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Base Rate for such Interest Period plus 3.75%. The applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio. The applicable margin on the outstanding balance on the extended revolving facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate).
Borrowings under Peninsula Gaming's Credit Facility consist of the Term Loan and the Revolver. The applicable margin on the outstanding balance on the Term Loan is (i) 4.50% (if using LIBOR), or 3.50% (if using the base rate). The applicable margin on the outstanding balance on the Revolver is (i) 4.00% (if using LIBOR) or 3.00% (if using the base rate). In addition, Peninsula Gaming will incur a commitment fee on the unused portion of the Credit Facility at a per annum rate of 0.50%. The “base rate” under the Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one-month period plus 1.00%.
Outstanding borrowings under the Borgata bank credit facility, as amended, accrue interest at a rate based upon either: (i) the highest of (a) the agent bank's quoted prime rate, (b) the one-month Eurodollar rate plus 1.00%, and (c) the daily federal funds rate plus 1.50%, and in any event not less than 1.50% (such highest rate, the “base rate”), or (ii) the Eurodollar rate, plus with respect to each of clause (i) and (ii) an applicable margin as provided in the Borgata bank credit facility, as amended. In addition, a commitment fee is incurred on the unused portion of the Borgata bank credit facility, as amended, ranging from 0.50% per annum to 1.00% per annum.
We also attemptHistorically, we have attempted to manage the impact of interest rate risk on Boyd's long-term debt by utilizing derivative financial instruments in accordance with established policies and procedures. We do not utilize derivative financial instruments for trading or speculative purposes.
The Company previously entered into floating-to-fixed interest rate swap arrangements in order to manage interest rate risk relating to its Amended Credit Facility. We were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. These interest rate swap agreements modified the Company's exposure to interest rate risk by synthetically converting a portion of the Company's floating rate debt to a fixed rate. The interest rate swap agreements terminated on June 30, 2011.
The following table provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations. For our debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. The weighted-average variable rates are based upon prevailing interest rates.

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The scheduled maturities of our long-term debt outstanding for the years ending December 31 are as follows.


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Expected Maturity DateExpected Maturity Date
Year Ending December 31,Year Ending December 31,
2012 2013 2014 20152016 Thereafter Total 
Fair
Value
2013 2014 2015 2016 2017 Thereafter Total 
Fair
Value
(In thousands, except percentages)(In thousands, except percentages)
Boyd Gaming Corporation Debt                            
Long-term debt (including current portion):               
  
  
  
    
  
  
Fixed-rate$730
 $10,341
 $215,668
 $
$240,750
 $500,000
 $967,489
 $897,886
$10,341
 $215,668
 $
 $240,750
 $
 $850,000
 $1,316,759
 $1,447,574
Average interest rate8.1% 8.1% 8.1% 8.5%8.5% 9.1% 8.4%  8.3% 7.2% 7.2% 9.1% 9.1% 9.1% 8.3%  
Variable-rate$42,500
 $42,500
 $42,500
 $1,505,250
$
 $
 $1,632,750
 $1,388,630
$42,500
 $42,500
 $1,389,850
 $
 $
 $147,800
 $1,622,650
 $1,508,516
Average interest rate4.7% 4.7% 4.7% 4.2%% % 4.6%  4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2%  
                            
Peninsula Gaming               
Long-term debt (including current portion):               
Fixed-rate$479
 $12
 $3
 $
 $
 $350,000
 $350,494
 $368,215
Average interest rate8.4% 8.4% 8.4% 8.4% 8.4% 8.4% 8.4%  
Variable-rate$8,250
 $8,250
 $8,250
 $8,250
 $821,400
 $
 $854,400
 $868,838
Average interest rate5.7% 5.7% 5.7% 5.7% 5.7% % 5.7%  
               
Borgata Debt                            
Long-term debt (including current portion): 
  
  
  
   
  
  
 
  
  
  
    
  
  
Fixed-rate$
 $
 $
 $398,000
$
 $393,500
 $791,500
 $736,185
$
 $
 $398,000
 $
 $
 $393,500
 $791,500
 $776,100
Average interest rate9.7% 9.7% 9.7% 9.7%9.9%
9.9% 9.8%  9.7% 9.7% 9.7% 9.9% 9.9%
9.9% 9.8%  
Variable-rate$
 $
 $40,200
 $
$
 $
 $40,200
 $40,200
$
 $20,000
 $
 $
 $
 $
 $20,000
 $20,000
Average interest rate4.4% 4.4% 4.4% 4.4%% % 4.4%  4.9% 4.9% % % % % 4.9%  
As of December 31, 2011, our2012, Boyd, Peninsula Gaming, and Borgata's long-term variable-rate borrowings represented approximately 49.7%50.2%. 70.9%, and 2.5%, of our total long-term debt, including the effects of our interest rate swaps.respectively. Based on December 31, 20112012 debt levels, a 100 basis point change in LIBOR or the base rate would cause the annual interest costs to change by approximately $16.3$14.8 million, $0.3 million, and $0.4$0.2 million for Boyd, Peninsula Gaming and Borgata respectively.

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The following table provides other information about our long-term debt at December 31, 2011.2012.
December 31, 2011December 31, 2012
Outstanding
Face
Amount
 
Carrying
Value
 
Estimated
Fair Value
 
Fair
Value
Hierarchy
Outstanding
Face
Amount
 
Carrying
Value
 
Estimated
Fair Value
 
Fair
Value
Hierarchy
(In thousands)(In thousands)
Boyd Gaming Corporation Debt            
Bank credit facility$1,632,750
 $1,621,715
 $1,388,630
 Level 2$1,474,850
 $1,466,635
 $1,508,516
 Level 2
9.125% senior notes due 2018500,000
 491,444
 471,000
 Level 1500,000
 492,680
 523,995
 Level 1
9.00% Senior Notes due 2020350,000
 350,000
 347,158
 Level 1
6.75% senior subordinated notes due 2014215,668
 215,668
 208,120
 Level 1215,668
 215,668
 216,460
 Level 1
7.125% senior subordinated notes due 2016240,750
 240,750
 208,249
 Level 1240,750
 240,750
 236,537
 Level 1
Other11,071
 11,071
 10,517
 Level 3158,141
 125,475
 123,424
 Level 3
Total Boyd Gaming Debt2,939,409
 2,891,208
 2,956,090
 
      
Peninsula Gaming Financing      
Bank credit facility854,400

854,400
 868,838
 Level 2
8.375% senior notes due 2018350,000
350,000,000
350,000
 367,721
 Level 1
Other494
 491
 494
 
Total Peninsula Gaming Debt1,204,894
 1,204,891
 1,237,053
 
            
Borgata Debt            
Borgata bank credit facility40,200
 40,200
 40,200
 Level 220,000
 20,000
 20,000
 Level 2
9.50% senior secured notes due 2015398,000
 387,049
 378,100
 Level 1398,000
 389,547
 402,275
 Level 1
9.875% senior secured notes due 2018393,500
 382,559
 358,085
 Level 1393,500
 383,777
 373,825
 Level 1
Less current maturities43,230
 43,230
 43,230
 Level 2
Total Borgata Debt811,500
 793,324
 796,100
 
      
Total long-term debt$3,388,709
 $3,347,226
 $3,019,671
 $4,955,803
 $4,889,423
 $4,989,243
 
The estimated fair value of our Amended Credit FacilityBoyd, and Peninsula Gaming's credit facility is based on a relative value analysis performed on or about December 31, 2011.2012. The estimated fair value of Borgata'sthe Borgata bank credit facility, as amended, at December 31, 20102012 approximates its carrying value due to the short-term maturities and variable pricing of the Eurodollar loans comprising the Borgata bank credit facility, as amended.facility. The estimated fair values of ourBoyd's senior subordinated and senior notes, Peninsula Gaming's senior notes, and Borgata's senior secured notes are based on quoted market prices as of December 31, 2011.2012. Debt included in the “Other” category is fixed-rate debt that is due March 2013 and 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.

89




ITEM 8.    Financial Statements and Supplementary Data.Data
The information required by this Item is contained in Part IV, Item 15 of this Annual Report on Form 10-K under Financial Statements. The audited consolidated financial statements for Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, our 50% joint venture in Atlantic City, as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 are included in Exhibit 99.2 to our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 5, 2011.

ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in or disagreements with accountants on accounting and financial disclosures during the threetwo years in the period ended December 31, 2011.2012.


ITEM 9A.Controls and Procedures.
ITEM 9A.    Controls and Procedures

96


As of the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we include a report of management's assessment of the design and effectiveness of our internal controls as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 2011.2012. Our independent registered public accounting firm also reported on the effectiveness of our internal controls over financial reporting. Management's report and the independent registered public accounting firm's attestation report are located below.
There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our internal control over financial reporting as of the end of the most recent fiscal year, December 31, 2011,2012, based on the framework set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

On October 4, 2011,November 20, 2012, we consummatedcompleted the Peninsula acquisition of IP Casino Resort Spa ("IP") in Biloxi, Mississippi pursuant to an Agreement for Purchase and Sale.Plan of Merger, under which an indirect wholly-owned subsidiary of the Company acquired the assets and assumed the liabilities. The financial positionPeninsula Acquisition added five properties from three different states including Kansas, Iowa and Louisiana. Accordingly, the acquired assets and liabilities of IP isPeninsula Gaming are included in our consolidated balance sheet as of December 31, 20112012 and theirthe results of its operations and cash flows are reflectedreported in our consolidated statements of operations and cash flows for the period from October 4, 2011November 20, 2012 through December 31, 2011.2012, respectively, during the year ended December 31, 2012. However, we have elected to exclude IPPeninsula Gaming from the scope of our report on internal control over financial reporting as of December 31, 2011.2012. The financial position of IPPeninsula Gaming represented approximately 7.4% of our net assets and 5.4%25.3% of our total assets at December 31, 2011,2012, and its results of operations increased our net revenues by 2.3% and decreased our operating incomeloss by 1.9% and 1.4%0.6%, respectively, during the year ended December 31, 2011.2012.

Based on our evaluation under the framework set forth in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2011,2012, the end of our most recent fiscal year.

Deloitte & Touche LLP, an independent registered public accounting firm has issued an attestation report on our internal control over financial reporting as of December 31, 2011,2012, which report follows below.


9097



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Boyd Gaming Corporation and Subsidiaries:

We have audited the internal control over financial reporting of Boyd Gaming Corporation and Subsidiaries (the “Company”) as of December 31, 2011,2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management's Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting of IP Casino Resort and Spaat Peninsula Gaming, LLC (“IP”Peninsula Gaming”), which was acquired on October 4, 2011.November 20, 2012. The financial position of IPPeninsula Gaming represents approximately 5.4%25.3% of the Company's total assets and 7.4% of the Company's net assets at December 31, 2011,2012, and its results of operations increased the Company's net revenues by 2.3% and decreased its operating incomeloss by 1.9% and 1.4%0.6%, respectively.during the year ended December 31, 2012. Accordingly, our audit did not include the internal control over financial reporting for IP.Peninsula Gaming. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the Company's Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011,2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2011,2012 of the Company and our report dated March 7, 201216, 2013 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP

Las Vegas, Nevada
March 7, 201216, 2013

9198





ITEM 9B.Other Information.
None.ITEM 9B.    Other Information
None

PART III


ITEM 10.Directors, Executive Officers and Corporate Governance.
ITEM 10.    Directors, Executive Officers and Corporate Governance
Information required by this item regarding the members of our board of directors and our audit committee, including our audit committee financial expert, is set forth under the captions Board Committees - Audit Committee, Director Nominees, and Section 16(a) Beneficial Ownership Reporting Compliance in our Definitive Proxy Statement to be filed in connection with our 2012 Annual Meeting of Stockholders and is incorporated herein by reference. Information required by this item regarding non-director executive officers of the Company is set forth in Item 4A of Part I of this Annual Report on Form 10-K.
Code of Ethics. We have adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to each of our directors, executive officers and employees. Our Code of Ethics is posted on our website at www.boydgaming.com. Any waivers or amendments to our Code of Ethics will be posted on our website.



ITEM 11.Executive Compensation.
ITEM 11.    Executive Compensation
The information required by this item is set forth under the captions Executive Officer and Director Compensation, Compensation and Stock Option Committee Interlocks and Insider Participation, and Compensation and Stock Option Committee Report in our Definitive Proxy Statement to be filed in connection with our 2012 Annual Meeting of Stockholders and is incorporated herein by reference.


ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
ITEM 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is set forth under the captions Ownership of Certain Beneficial Owners and Management and Equity Compensation Plan Information in our Definitive Proxy Statement to be filed in connection with our 2012 Annual Meeting of Stockholders and is incorporated herein by reference.


ITEM 13.Certain Relationships and Related Transactions, and Director Independence.
ITEM 13.    Certain Relationships and Related Transactions, and Director Independence
The information required by this item is set forth under the captions Transactions with Related Persons and Director Independence in our Definitive Proxy Statement to be filed in connection with our 2012 Annual Meeting of Stockholders and is incorporated herein by reference.


ITEM 14.Principal Accounting Fees and Services.
ITEM 14.    Principal Accounting Fees and Services
Information about principal accounting fees and services, as well as the audit committee's pre-approval policies appears under the captions Audit and Non-Audit Fees and Audit Committee Pre-Approval of Audit and Non-Audit Services in our Definitive Proxy Statement to be filed in connection with our 2012 Annual Meeting of Stockholders and is incorporated herein by reference.


PART IV

ITEM 15.Exhibits, Financial Statement Schedules.
ITEM 15.    Exhibits Financial Statement Schedules

9299


  Page No.
1.Financial Statements. 
   
The following consolidated financial statements for the three years in the period ended December 31, 20112012 are filed as part of this Report:
   
44
   
45
   
47

   
48
   
50
   
54

The accompanying audited consolidated financial statements of Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” “we” or “us”) have been prepared in accordance with the instructions to Form 10-K and Article 10 of Regulation S-X and include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”).

When we filed our Annual Report on Form 10-K for the year ended December 31, 2010 with the Securities and Exchange Commission ("SEC") on March 15, 2011, (the “Provisional Form 10-K”), the initial acquisition method accounting for the effective change in control of Borgata Hotel Casino and Spa ("Borgata") was incomplete. The application of acquisition method accounting, required in accordance with the authoritative accounting guidance for business combinations, initially had the following effects on our unaudited condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the provisional fair value of the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the provisional fair value of the noncontrolling interest held in trust as a separate component of our stockholders' equity.

Since the filing of the Provisional Form 10-K, we have made adjustments to the provisional fair value amounts recognized at the date of effective change in control, or March 24, 2010, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. These adjustments, referred to herein as “measurement period adjustments” materially shifted the value of certain tangible and intangible assets. We have applied the measurement period adjustments retrospectively to the condensed consolidated balance sheet reported as of December 31, 2010, as previously reported in the Provisional Form 10-K; however, the impact on the accompanying consolidated statement of operations for the year ended December 31, 2010, as retrospectively adjusted to the statement as reported in the Provisional Form 10-K was not material, and was therefore not adjusted for any measurement period adjustments.

Additionally, in preparing the consolidated financial statements for the year ended December 31, 2011, the Company discovered an immaterial error that impacted the previously issued consolidated financial statements as of and for the year ended December 31, 2010. The error related to a misclassification in the financial statements of LVE, the variable interest entity that we were required to consolidate during the year ended December 31, 2010. Such financial statements improperly reported interest costs as a capitalized asset, when the related costs should have been expensed due to the suspension of related construction activities.

The Company assessed the materiality of this error on both a quantitative and qualitative basis, and determined that the error was immaterial to previously reported amounts as reported in the consolidated financial statements and notes thereto, for the year ended December 31, 2010. The revision of the previously issued consolidated financial statements resulted in minor impacts on certain line items in our consolidated balance sheet, statements of operations, changes in stockholders' equity and cash flows, yet had no impact on net income or retained earnings as previously reported. These corrections have been disclosed herein, and all resulting changes are reflecting in the consolidated financial statements presented herein as of and for the year ended December 31, 2010.


93100




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
Boyd Gaming Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Boyd Gaming Corporation and Subsidiaries (the “Company”) as of December 31, 20112012 and 2010,2011, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011.2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Boyd Gaming Corporation and Subsidiaries as at December 31, 20112012 and 2010,2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011,2012, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2011,2012, based on the criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2012,16, 2013, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Las Vegas, Nevada
March 7, 201216, 2013



94101


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of December 31, 20112012 and 20102011

December 31,December 31,
2011 20102012 2011 
(In thousands, except share and per share data)(In thousands except per share data)
ASSETS     
Current assets       
Cash and cash equivalents$178,756
 $145,623
$192,828
 $178,756
 
Restricted cash15,753
 19,494
22,900
 15,753
 
Accounts receivable, net58,589
 48,888
62,040
 58,589
 
Inventories17,493
 16,029
18,618
 17,493
 
Prepaid expenses and other current assets47,465
 37,153
48,709
 47,465
 
Income taxes receivable3,268
 5,249
2,875
 3,268
 
Deferred income taxes21,570
 8,149
Deferred income taxes and current tax assets7,623
 21,570
 
Total current assets342,894
 280,585
355,593
 342,894
 
   
Property and equipment, net3,542,108
 3,383,371
3,624,988
 3,542,108
 
Assets held for development1,089,819
 1,086,844
331,770
 1,089,819
 
Debt financing costs, net32,099
 34,993
85,468
 32,099
 
Restricted investments held by variable interest entity21,367
 48,168
21,382
 21,367
 
Other assets, net67,173
 69,610
98,425
 67,173
 
Intangible assets, net574,018
 539,714
1,119,638
 574,018
 
Goodwill, net213,576
 213,576
694,929
 213,576
 
Total assets$5,883,054
 $5,656,861
$6,332,193
 $5,883,054
 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY       
Current liabilities       
Current maturities of long-term debt$43,230
 $25,690
$61,570
 $43,230
 
Accounts payable98,015
 57,183
91,210
 98,015
 
Accrued liabilities295,459
 278,469
364,542
 295,459
 
Tax liabilities5,630
 6,506
Non-recourse obligations of variable interest entity29,686
 22,487
Deferred income taxes and income taxes payable8,129
 5,630
 
Current maturities of non-recourse obligations of variable interest entity225,113
 29,686
 
Total current liabilities472,020
 390,335
750,564
 472,020
 
   
Long-term debt, net of current maturities3,347,226
 3,193,065
4,827,853
 3,347,226
 
Deferred income taxes379,958
 362,174
139,943
 379,958
 
Other long-term tax liabilities45,598
 44,813
43,457
 45,598
 
Other liabilities71,193
 84,533
103,249
 71,193
 
Non-recourse obligations of variable interest entity192,980
 220,572

 192,980
 
   
Commitments and contingencies (Note 13)

 


 
 
   
Stockholders’ equity       
Preferred stock, $0.01 par value, 5,000,000 shares authorized
 

 
 
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,572,098 and 86,244,978 shares outstanding863
 862
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,871,977 and 86,572,098 shares outstanding869
 863
 
Additional paid-in capital644,174
 635,028
655,694
 644,174
 
Retained earnings557,055
 560,909
Accumulated other comprehensive loss, net
 (7,594)
Retained earnings (accumulated deficit)(351,810) 557,055
 
Accumulated other comprehensive income(962) 
 
Total Boyd Gaming Corporation stockholders’ equity1,202,092
 1,189,205
303,791
 1,202,092
 
Noncontrolling interests171,987
 172,164
Noncontrolling interest163,336
 171,987
 
Total stockholders’ equity1,374,079
 1,361,369
467,127
 1,374,079
 
Total liabilities and stockholders’ equity$5,883,054
 $5,656,861
$6,332,193
 $5,883,054
 

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


95102


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 2012, 2011 2010 and 20092010

Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
     (In thousands, except per share data)
REVENUES(In thousands, except per share data)     
Operating revenues:          
Gaming$1,986,644
 $1,812,487
 $1,372,091
$2,110,233
 $1,986,644
 $1,812,487
Food and beverage388,148
 347,588
 229,374
417,506
 388,148
 347,588
Room246,209
 211,046
 122,305
264,903
 246,209
 211,046
Other135,176
 123,603
 100,396
145,460
 135,176
 123,603
Gross revenues2,756,177
 2,494,724
 1,824,166
2,938,102
 2,756,177
 2,494,724
Less promotional allowances419,939
 353,825
 183,180
450,676
 419,939
 353,825
Net revenues2,336,238
 2,140,899
 1,640,986
2,487,426
 2,336,238
 2,140,899
COST AND EXPENSES          
Operating costs and expenses:          
Gaming924,451
 859,818
 664,739
1,011,064
 924,451
 859,818
Food and beverage200,165
 180,840
 125,830
219,921
 200,165
 180,840
Room56,111
 49,323
 39,655
55,531
 56,111
 49,323
Other108,907
 99,458
 77,840
111,075
 108,907
 99,458
Selling, general and administrative394,991
 369,217
 284,937
452,926
 394,991
 369,217
Maintenance and utilities153,512
 140,722
 92,296
155,016
 153,512
 140,722
Depreciation and amortization195,343
 199,275
 164,427
214,332
 195,343
 199,275
Corporate expense48,962
 48,861
 47,617
50,719
 48,962
 48,861
Preopening expenses6,634
 7,459
 17,798
Other operating charges, net14,058
 4,713
 41,780
Preopening expense11,541
 6,634
 7,459
Impairments of assets1,053,526
 6,051
 
Other operating items, net6,650
 8,007
 4,713
Total operating costs and expenses2,103,134
 1,959,686
 1,556,919
3,342,301
 2,103,134
 1,959,686
Operating income from Borgata
 8,146
 72,126

 
 8,146
Operating income233,104
 189,359
 156,193
Operating income (loss)(854,875) 233,104
 189,359
Other expense (income):          
Interest income(46) (5) (6)(1,169) (46) (5)
Interest expense, net of amounts capitalized250,731
 180,558
 146,830
290,004
 250,731
 180,558
Fair value adjustment of derivative instruments265
 480
 

 265
 480
(Gain) loss on early retirements of debt14
 (2,758) (15,284)
 14
 (2,758)
Gain on equity distribution
 (2,535) 

 
 (2,535)
Other income(11,582) (10,000) 
137
 (11,582) (10,000)
Other non-operating expenses
 
 33

 
 3,133
Other non-operating expenses from Borgata, net
 3,133
 19,303
Total other expense, net239,382
 168,873
 150,876
288,972
 239,382
 168,873
Income (loss) before income taxes(6,278) 20,486
 5,317
(1,143,847) (6,278) 20,486
Income taxes(1,721) (8,236) (1,076)220,772
 (1,721) (8,236)
Net income (loss)(7,999) 12,250
 4,241
(923,075) (7,999) 12,250
Net (income) loss attributable to noncontrolling interests4,145
 (1,940) 
Net (income) loss attributable to noncontrolling interest14,210
 4,145
 (1,940)
Net income (loss) attributable to Boyd Gaming Corporation$(3,854) $10,310
 $4,241
$(908,865) $(3,854) $10,310
     
Basic net income (loss)per common share$(0.04) $0.12
 $0.05
Basic net income (loss) per common share$(10.37) $(0.04) $0.12
Weighted average basic shares outstanding87,263
 86,601
 86,429
87,652
 87,263
 86,601
Diluted net income (loss) per common share$(0.04) $0.12
 $0.05
$(10.37) $(0.04) $0.12
Weighted average diluted shares outstanding87,263
 86,831
 86,517
87,652
 87,263
 86,831
The accompanying notes are an integral part of these consolidated financial statements.

96103


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITYCOMPREHENSIVE INCOME (LOSS)
for the years ended December 31, 2012, 2011 2010 and 20092010

   Boyd Gaming Corporation Stockholders’ Equity    
   Common Stock          
 Other Comprehensive Income (Loss) Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss, Net Noncontrolling Interests Total Stockholders’ Equity
 (In thousands, except share data)
Balances, January 1, 2009  87,814,061
 $878
 $616,304
 $546,358
 $(20,018) $
 $1,143,522
Net income$4,241
 
 
 
 4,241
 
 
 4,241
Derivative instruments fair value  adjustment, net of taxes of $9791,892
 
 
 
 
 1,892
 
 1,892
Comprehensive income$6,133
              
Stock options exercised  29,797
 
 160
 
 
 
 160
Settlement of restricted stock units  11,281
 
 
 
 
 
 
Tax effect of share-based compensation arrangements  
 
 (1,384) 
 
 
 (1,384)
Share-based compensation costs  
 
 15,888
 
 
 
 15,888
Dividends paid on common stock  (1,724,685) (17) (7,933) 
 
 
 (7,950)
Balances, December 31, 2009  86,130,454
 861
 623,035
 550,599
 (18,126) 
 1,156,369
Net income$12,250
 
 
 
 10,310
 
 1,940
 12,250
Derivative instruments fair  value adjustment, net of taxes of $5,8246,416
 
 
 
 
 10,532
 (4,116) 6,416
Comprehensive income18,666
              
Comprehensive loss attributable to noncontrolling interests2,176
 
 
 
 
 
 
 
Comprehensive income attributable to Boyd Gaming Corporation$20,842
              
Stock options exercised  114,524
 1
 669
 
 
 
 670
Share-based compensation costs  
 
 11,324
 
 
 
 11,324
Noncontrolling interest attributable to Borgata  
 
 
 
 
 219,256
 219,256
Noncontrolling interest attributable to LVE  
 
 
 
 
 (44,916) (44,916)
Balances, December 31, 2010  86,244,978
 862
 635,028
 560,909
 (7,594) 172,164
 1,361,369
Net income$(7,999) 
 
 
 (3,854) 
 (4,145) (7,999)
Derivative instruments fair value  adjustment, net of taxes of $4,23011,562
 
 
 
 
 7,594
 3,968
 11,562
Comprehensive income3,563
             

Comprehensive income attributable to noncontrolling interests177
 
 
 
 
 
 
 
Comprehensive income attributable to Boyd Gaming Corporation$3,740
              
Stock options exercised  72,757
 1
 396
 
 
 
 397
Award of restricted stock units  254,363
 
 (383) 
 
 
 (383)
Tax effect of share-based compensation arrangements  
 
 (863) 
 
 
 (863)
Share-based compensation costs  
 
 9,996
 
 
 
 9,996
Balances, December 31, 2011  86,572,098
 $863
 $644,174
 $557,055
 $
 $171,987
 $1,374,079
  Year Ended December 31,
  2012 2011 2010
  (In thousands)
Net income (loss) $(923,075) $(7,999) $12,250
Other comprehensive income, net of tax:      
   Fair value of derivative instruments, net 5,539
 11,562
 6,416
   Fair value of adjustments to available-for-sale securities (962) 
 
Comprehensive income (loss) (918,498) 3,563
 18,666
Less: other comprehensive income (loss) attributable to noncontrolling interest 5,539
 3,968
 (4,116)
Less: net income (loss) attributable to noncontrolling interest (14,210) (4,145) 1,940
Comprehensive income (loss) attributable to Boyd Gaming Corporation $(909,827) $3,740
 $20,842

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

97104


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
for the years ended December 31, 2012, 2011 and 2010

 Boyd Gaming Corporation Stockholders’ Equity      
       Retained Accumulated    
     Additional Earnings/ Other   Total
 Common Stock Paid-in (Accumulated Comprehensive Noncontrolling Stockholders'
 Shares Amount Capital Deficit) Loss, Net Interest Equity
 (In thousands, except share data)
Balances, January 1, 201086,130,454
 $861
 $623,035
 $550,599
 $(18,126) $
 $1,156,369
Net income (loss)
 
 
 10,310
 
 1,940
 12,250
Comprehensive income (loss) attributable to noncontrolling interest
 
 
 
 10,532
 (4,116) 6,416
Stock options exercised114,524
 1
 669
 
 
 
 670
Share-based compensation costs
 
 11,324
 
 
 
 11,324
Noncontrolling interest attributable to Borgata
 
 
 
 
 219,256
 219,256
Noncontrolling interest attributable to LVE
 
 
 
 
 (44,916) (44,916)
Balances, December 31, 201086,244,978
 862
 635,028
 560,909
 (7,594) 172,164
 1,361,369
Net income (loss)
 
 
 (3,854) 
 (4,145) (7,999)
Comprehensive income (loss) attributable to noncontrolling interest
 
 
 
 7,594
 3,968
 11,562
Stock options exercised72,757
 1
 396
 
 
 
 397
Release of restricted stock units254,363
 
 (383) 
 
 
 (383)
Tax effect of share-based compensation arrangements
 
 (863) 
 
 
 (863)
Share-based compensation costs
 
 9,996
 
 
 
 9,996
Balances, December 31, 201186,572,098
 863
 644,174
 557,055
 
 171,987
 1,374,079
Net income (loss)
 
 
 (908,865) 
 (14,210) (923,075)
Capital investment attributable to noncontrolling interest
 
 
 
 
 20
 20
Comprehensive income attributable to noncontrolling interest
 
 
 
 
 5,539
 5,539
Unrealized loss on investment available for sale
 
 
 
 (962) 
 (962)
Stock options exercised16,835
 
 117
 
 
 
 117
Release of restricted stock units, net of tax283,044
 3
 (252) 
 
 
 (249)
Tax effect from share-based compensation arrangements
 
 (586) 
 
 
 (586)
Share-based compensation costs
 
 12,247
 
 
 
 12,247
Other
 3
 (6) 
 
 
 (3)
Balances, December 31, 201286,871,977
 $869
 $655,694
 $(351,810) $(962) $163,336
 $467,127

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


105


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2012, 2011 2010 and 20092010
______________________________________________________________________________________________________ 
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
(In thousands)
(In thousands)
Cash Flows from Operating Activities          
Net income (loss)$(7,999) $12,250
 $4,241
$(923,075) $(7,999) $12,250
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization195,343
 199,275
 164,427
214,332
 195,343
 199,275
Amortization of debt financing costs11,853
 5,369
 6,279
21,616
 11,853
 5,369
Amortization of discounts on senior secured notes3,390
 1,294
 
Amortization of discounts on debt3,716
 3,390
 1,294
Share-based compensation expense9,996
 11,324
 15,888
12,247
 9,996
 11,324
Deferred income taxes(2,381) 6,284
 15,574
(218,594) (2,381) 6,284
Operating and non-operating income from Borgata
 (5,013) (52,823)
 
 (5,013)
Distributions of earnings received from Borgata
 1,910
 60,136

 
 1,910
Gain on equity distribution
 (2,535) 

 
 (2,535)
Noncash asset write-downs7,764
 
 42,350
1,053,526
 7,764
 
Gain on early retirements of debt14
 (2,758) (15,284)
Gain on insurance settlement(7,098) 
 
Gain on insurance subrogation settlement(7,694) 
 
(Gain) loss on early retirements of debt
 14
 (2,758)
Bargain purchase gain(4,582) 
 

 (4,582) 
Other operating activities8,392
 (5,635) (3,421)8,959
 8,392
 (5,635)
Changes in operating assets and liabilities:          
Restricted cash3,741
 (3,326) 8,141
(3,858) 3,741
 (3,326)
Accounts receivable, net(11,794) (3,808) 2,791
9,475
 (11,794) (3,808)
Inventories114
 (519) (67)575
 114
 (519)
Prepaid expenses and other current assets(3,673) (3,371) 15,598
7,192
 (3,673) (3,371)
Income taxes receivable2,010
 15,658
 (5,692)450
 2,010
 15,658
Other long-term tax assets6,601
 (4,725) (1,038)(12,537) 6,601
 (4,725)
Other assets, net(2,839) (3,038) 3,423
1,065
 (2,839) (3,038)
Accounts payable and accrued liabilities42,910
 36,934
 (18,538)(12,385) 42,910
 36,934
Income taxes payable(5,905) 805
 
Income taxes
 (5,905) 805
Other long-term tax liabilities5,815
 2,305
 (4,618)601
 5,815
 2,305
Other liabilities(5,260) 10,711
 4,596
(6,068) (5,260) 10,711
Net cash provided by operating activities253,510
 269,391
 241,963
142,445
 253,510
 269,391
     
Cash Flows from Investing Activities          
Capital expenditures(87,224) (75,958) (157,557)(125,974) (87,224) (75,958)
Cash paid for acquisitions, net of cash received(278,456) 
 
(1,324,198) (278,456) 
Cash paid to acquire development agreement(24,450) 
 

 (24,450) 
Net cash effect upon change in controlling interest of Borgata
 26,025
 
Net cash effect upon change in controlling interest in Borgata
 
 26,025
Net cash effect upon consolidation of variable interest entity
 41
 

 
 41
Change in restricted investments26,801
 (1,131) 

 26,801
 (1,131)
Net additional cash paid for Dania Jai-Alai
 
 (9,375)
Other investing activities542
 2,146
 1,804
15,013
 542
 2,146
Net cash used in investing activities(362,787) (48,877) (165,128)(1,435,159) (362,787) (48,877)



98106



BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
for the years ended December 31, 2011, 2010 and 2009
Cash Flows from Financing Activities     
Borrowings under bank credit facility391,329
 758,774
 656,440
Payments under bank credit facility(183,579) (1,250,674) (620,655)
Borrowings under Borgata bank credit facility741,300
 533,673
 
Payments under Borgata bank credit facility(762,000) (1,105,062) 
Proceeds from issuance of senior notes, net
 490,000
 
Proceeds from issuance of Borgata senior secured notes, net
 773,176
 
Debt financing costs, net(15,374) (27,057) (932)
Payments on retirements of long-term debt(8,198) (187,693) (89,482)
Payments under note payable
 (46,875) (18,750)
Payments on non-recourse obligations of variable interest entity(27,000) 
 
Proceeds from issuance of non-recourse debt7,199
 18,091
 
Payments on loans to variable interest entity's members(592) (1,194) 
Repurchase and retirement of common stock
 
 (7,950)
Distributions from Borgata
 (123,422) 
Other financing activities(675) 170
 (456)
Net cash provided by (used in) financing activities142,410
 (168,093) (81,785)
Increase (decrease) in cash and cash equivalents33,133
 52,421
 (4,950)
Cash and cash equivalents, beginning of period145,623
 93,202
 98,152
Cash and cash equivalents, end of period$178,756
 $145,623
 $93,202
      
Supplemental Disclosure of Cash Flow Information     
Cash paid for interest, net of amounts capitalized$233,043
 $129,070
 $142,670
Cash received (paid) for income taxes, net of income taxes paid4,946
 (9,661) (1,768)
      
Supplemental Schedule of Noncash Investing and Financing Activities     
Payables incurred for capital expenditures$6,324
 $8,798
 $35,973
Fair value adjustment on derivative instruments11,931
 17,742
 4,952
Transfer of investment in unconsolidated subsidiary to property and equipment
 
 4,427
Increase in term loan under Amended Credit Facility350,000
 
 
Extinguishment of previous Borgata credit facility with advance from new Borgata credit facility
 73,010
 
      
Fair Value of IP Assets Acquired and Liabilities Assumed     
Accounts receivable, net$1,230
 $
 $
Inventories1,579
 
 
Prepaid expenses and other current assets6,638
 
 
Property and equipment, net264,703
 
 
Intangible assets28,600
 
 
     Fair value of assets acquired, net of cash received$302,750
 $
 $
      
Accounts payable$3,018
 $
 $
Accrued liabilities14,182
 
 
Deferred income taxes2,512
 
 
     Fair value of liabilities assumed19,712
 
 
Fair value of net assets$283,038
 $
 $
      

99


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
for the years ended December 31, 2012, 2011 2010 and 20092010
______________________________________________________________________________________________________ 
Fair Value of Assets Acquired and Liabilities Assumed Under Development Agreement     
Intangible assets$21,373
 $
 $
Note receivable3,077
 
 
Fair value of assets acquired$24,450
 $
 $
      
Fair Value of Assets and Liabilities Consolidated (net of Cash Recorded) Due to Change in Controlling Interest of Borgata     
Accounts receivable, net$
 $29,099
 $
Inventories
 4,118
 
Prepaid expenses and other current assets
 9,201
 
Deferred income taxes
 1,290
 
Property and equipment, net
 1,293,792
 
Intangible assets
 14,000
 
 Indefinite lived intangible assets
 65,000
 
Other assets, net
 36,641
 
     Fair value of assets consolidated$
 $1,453,141
 $
Current maturities of long-term debt$
 $632,289
 $
Accounts payable
 8,729
 
Income taxes payable
 7,579
 
Accrued liabilities
 66,854
 
Other liabilities
 40,204
 
     Fair value of liabilities consolidated$
 $755,655
 $
      
Assets and Liabilities Consolidated (net of Cash Recorded) Due to Consolidation of Variable Interest Entity     
    Accounts receivable$
 $1,351
 $
    Assets held for development
 163,806
 
    Debt financing costs, net
 3,647
 
    Restricted investments
 48,168
 
        Total assets consolidated, net of cash$
 $216,972
 $
    Accounts payable$
 $393
 $
    Accrued liabilities
 1,040
 
    Obligations of variable interest entity
 243,059
 
    Other liabilities
 19,904
 
    Noncontrolling interests
 (47,092) 
        Total liabilities and noncontrolling interests consolidated$
 $217,304
 $
      
 Year Ended December 31,
 2012 2011 2010
 
(In thousands)
 
Cash Flows from Financing Activities     
Borrowings under bank credit facility787,100
 391,329
 758,774
Payments under bank credit facility(951,250) (183,579) (1,250,674)
Borrowings under Peninsula bank credit facility871,100
 
 
Payments against Peninsula bank credit facility(16,700) 
 
Borrowings under Borgata bank credit facility632,700
 741,300
 533,673
Payments under Borgata bank credit facility(652,900) (762,000) (1,105,062)
Proceeds from issuance of senior notes, net700,000
 
 490,000
Proceeds from issuance of Borgata senior secured notes, net
 
 773,176
Debt financing costs, net(65,083) (15,374) (27,057)
Payments on retirements of long-term debt
 (8,198) (187,693)
Payments under note payable
 
 (46,875)
Payments on non-recourse debt of variable interest entity
 (27,000) 
Proceeds from issuance of non-recourse debt by variable interest entity3,374
 7,199
 18,091
Payments on loans to variable interest entity's members(928) (592) (1,194)
Distributions from Borgata
 
 (123,422)
Other financing activities(627) (675) 170
Net cash provided by (used in) financing activities1,306,786
 142,410
 (168,093)
Change in cash and cash equivalents14,072
 33,133
 52,421
Cash and cash equivalents, beginning of period178,756
 145,623
 93,202
Cash and cash equivalents, end of period$192,828
 $178,756
 $145,623
      
Supplemental Disclosure of Cash Flow Information     
Cash paid for interest, net of amounts capitalized$239,871
 $233,043
 129,070
Cash paid (received) for income taxes, net of refunds492
 4,946
 (9,661)
Supplemental Schedule of Noncash Investing and Financing Activities     
Payables incurred for capital expenditures$15,810
 $6,324
 $8,798
Increase (decrease) in fair value of derivative instruments
 11,931
 17,742
Increase in term loan under Credit Facility
 350,000
 
Extinguishment of previous Borgata credit facility with advance from new Borgata credit facility
 
 73,010
      
Fair Value of Peninsula Gaming Assets Acquired and Liabilities Assumed     
Accounts receivable, net$6,217
 $
 $
Inventories1,839
 
 
Prepaid expenses and other current assets40,554
 
 
Property and equipment, net430,093
 
 
Intangible assets577,501
 
 
Other assets49,339
 
 
     Fair value of assets acquired, net of cash received$1,105,543
 $
 $
      
Accounts payable$19,231
 $
 $
Accrued liabilities48,165
 
 
Obligations under assessment arrangements26,444
 
 
Other liabilities15,919
 
 
Fair value of liabilities assumed109,759
 
 
Fair value of net assets$995,784
 $
 $


100107


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued— (Continued)
for the years ended December 31, 2012, 2011 2010 and 20092010

Acquisition of Dania Jai-Alai     
Fair value of noncash assets acquired$
 $
 $28,352
Additional cash paid
 
 (9,375)
Termination of contingent liability
 
 46,648
Note payable issued
 
 (65,625)
 $
 $
 $
 Year Ended December 31,
 2012 2011 2010
 
(In thousands)
Fair Value of IP Assets Acquired and Liabilities Assumed     
Accounts receivable, net$
 $1,230
 $
Inventories
 1,579
 
Prepaid expenses and other current assets
 6,638
 
Property and equipment, net
 264,703
 
Intangible assets
 28,600
 
     Fair value of assets acquired, net of cash received$
 $302,750
 $
      
Accounts payable$
 $3,018
 $
Accrued liabilities
 14,182
 
Deferred income taxes
 2,512
 
     Fair value of liabilities assumed
 19,712
 
     Fair value of net assets$
 $283,038
 $
      
Fair Value of Assets Acquired and Liabilities Assumed Under Development Agreement     
Intangible assets$
 $21,373
 $
Note receivable
 3,077
 
     Fair value of assets acquired$
 $24,450
 $
      
Fair Value of Assets Acquired and Liabilities Consolidated (net of Cash Recorded) Due to Change in Controlling Interest of Borgata     
Accounts receivable, net$
 $
 $29,099
Inventories
 
 4,118
Prepaid expenses and other current assets
 
 9,201
Deferred income taxes
 
 1,290
Property and equipment, net
 
 1,293,792
Intangible assets
 
 14,000
Indefinite-lived intangible assets
 
 65,000
Other assets, net
 
 36,641
     Fair value of assets consolidated$
 $
 $1,453,141
      
Current maturities of long-term debt$
 $
 $632,289
Accounts payable
 
 8,729
Income taxes payable
 
 7,579
Accrued liabilities
 
 66,854
Other liabilities
 
 40,204
     Fair value of liabilities assumed$
 $
 $755,655



108


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
for the years ended December 31, 2012, 2011 and 2010

 Year Ended December 31,
 2012 2011 2010
 
(In thousands)
Assets and Liabilities Consolidated (net of Cash Recorded) Due to Consolidation of Variable Interest Entity     
Accounts receivable, net$
 $
 $1,351
Assets held for development
 
 163,806
Debt financing costs, net
 
 3,647
Restricted investments
 
 48,168
     Total assets consolidated, net of cash$
 $
 $216,972
      
Accounts payable$
 $
 $393
Accrued liabilities
 
 1,040
Obligations of variable interest entity
 
 243,059
Other liabilities
 
 19,904
Noncontrolling interests
 
 (47,092)
     Total liabilities and noncontrolling interests consolidated$
 $
 $217,304

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




101109


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010


NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” "Boyd Gaming," “we” or “us”) was incorporated in the state of Nevada in 1988 and has been operating since 1973. The Company's common stock is traded on the New York Stock Exchange under the symbol “BYD”.
We are a diversified operator of 16 wholly-owned21 wholly owned gaming entertainment properties and one controlling interest in a limited liability company. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana, Kansas, Iowa and New Jersey which we aggregate in order to present fourthe following five reportable segments:
Las Vegas Locals 
Gold Coast Hotel and CasinoLas Vegas, Nevada
The Orleans Hotel and CasinoLas Vegas, Nevada
     The Orleans Hotel and CasinoLas Vegas, Nevada
Sam's Town Hotel and Gambling HallLas Vegas, Nevada
Suncoast Hotel and CasinoLas Vegas, Nevada
     Suncoast Hotel and CasinoLas Vegas, Nevada
Eldorado CasinoHenderson, Nevada
Jokers Wild CasinoHenderson, Nevada
  
Downtown Las Vegas 
California Hotel and CasinoLas Vegas, Nevada
Fremont Hotel and CasinoLas Vegas, Nevada
Main Street Station Casino, Brewery and HotelLas Vegas, Nevada
  
Midwest and South         
Sam's Town Hotel and Gambling HallTunica, Mississippi
IP Casino Resort SpaBiloxi, Mississippi
Par-A-Dice Hotel and CasinoEast Peoria, Illinois
Blue Chip Casino, Hotel & SpaMichigan City, Indiana
Treasure Chest CasinoKenner, Louisiana
Delta Downs Racetrack Casino & HotelVinton, Louisiana
Sam's Town Hotel and CasinoShreveport, Louisiana
  
Peninsula Gaming
Diamond JoDubuque, Iowa
Diamond Jo WorthNorthwood, Iowa
Evangeline Downs Racetrack and CasinoOpelousas, Louisiana
Amelia Belle CasinoAmelia, Louisiana
Kansas Star CasinoMulvane, Kansas
 
Atlantic City                     
Borgata Hotel Casino & SpaAtlantic City, New Jersey

Hawaiian Operations
In addition to these properties, we own and operate a travel agency in Hawaii, that operates our Hawaiian charter and a captive insurance company, also in Hawaii, that underwrites travel-related insurance. Results for our travel agency and our captive insurance company are included in our Downtown Las Vegas segment, as our Downtown Las Vegas properties focus theirconcentrate significant marketing efforts on gaming customers from Hawaii.


110

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Dania Jai-Alai
We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility located onwith approximately 47 acres of related land located in Dania Beach, Broward County, Florida. The results of Dania Jai-Alai are included as part of the “Other” category in our segment information. As discussed in Note 24, Subsequent Events, on February 22, 2013, we and Dania Entertainment Center, LLC ("Dania Entertainment") entered into an Asset Purchase Agreement (the "New Dania Agreement") for the sale of certain assets and liabilities of the Dania Jai-Alai Business, for a purchase price of $65.5 million. The closing of the transactions contemplated by the New Dania Agreement is expected to occur on or prior to May 24, 2013, subject to certain closing conditions.

Echelon Development
Additionally, we own approximately owned 87 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project ("Echelon"(“Echelon”) iswas to be located. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of Echelon. AsWe originally expected to resume development in the project in three to five years. However, as discussed in Note 5, Assets Held for Development, and Note 24, Subsequent Events, in December 2012, we doreconsidered our commitment to complete the Echelon project and concluded that we would not believe that a significant level of economic recovery has occurredresume development.

102


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
On March 1, 2013, we entered into a definitive agreement with Genting Assets, Inc. (“Genting”) to sell the Echelon site for $350 million in cash. The sale agreement included the 87-acre land parcel as well as site improvements, including the district energy system and central energy center that was to be built by LVE Energy Partners, LLC (“LVE”). See “Development Project-Central Energy Facility.” The transaction was completed on March 4, 2013, and we received $157 millionof December 31, 2011 and 2010 and fornet proceeds after payment of a portion of the years ended December 31, 2011, 2010 and 2009

along the Las Vegas Strip, or that financing forproceeds to a development project like Echelon is currently available on terms satisfactorythird party to us, we do not expectfulfill our obligations to resume construction of Echelon for three to five years.LVE Energy Partners, LLC.

Basis of Presentation
Acquisition of IP Casino Resort SpaPeninsula Gaming, LLC
On November 20, 2012, we completed the acquisition of Peninsula Gaming, LLC ("Peninsula Gaming") pursuant to an Agreement and Plan of Merger, under which an indirect wholly owned subsidiary of the Company acquired the assets and assumed the liabilities of Peninsula Gaming. The net purchase price, after adjustment for working capital and other items, was approximately $1.48 billion. The acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012.

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

The financial position of IP is included in our consolidated balance sheetsheets as of December 31, 2012 and 2011; its results of its operations for the full year ended December 31, 2012 and the period from October 4 2011 through December 31, 2011 are included in our consolidated statements of operations and cash flows for the yearyears ended December 31, 2012, and 2011.

Effective Control of Borgata
On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (the successor in interest to MGM MIRAGE) (“MGM”("MGM") (our original 50% partner in Borgata), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. The amendment to the operating agreement was related to MGM's divestiture of its interest pursuant to a regulatory settlement, as discussed further in Note 3, Consolidation of Certain Interests. This resulting change in control required acquisition method of accounting in accordance with the authoritative accounting guidance for business combinations. As a result, we measured our previously held equity interest at a provisional fair value as of March 24, 2010, the date of effective control.

The financial position of Borgata is included in our consolidated balance sheets as of December 31, 20112012 and 2010;2011; its results of operations for the full yearyears ended December 31, 2012 and 2011 and the period from March 24 through December 31, 2010 are included in our consolidated statements of operations and cash flows for the years ended December 31, 2012, 2011 and 2010. Prior period amounts were not restated or recasted as a result of this change; however, detailed pro forma financial information is presented in Note 3, Consolidation of Certain Interests for the year ended December 31, 2009.change. We also recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity. At December 31, 2012 and 2011, approximately $1.39 billion and $1.44 billion, respectively, of our consolidated total assets are related to Borgata.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Consolidation of Variable Interest Entity
LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. We havehad entered into an Energy Sales Agreement (the "ESA") with LVE to design, build, own (other than the underlying real property which is leased from Echelon) and operate a district energy system and central energy center for our planned Echelon resort development. In April 2007, we entered into an Energy Sales Agreement (“The ESA”) with LVE to provideprovides electricity, emergency electricity generation, and chilled and hot water to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties.

LVE began construction of the facility in 2007 and expected to provide full energy services to Echelon in 2010, when we originally expected to open. However, LVE suspended construction in January 2009, after our announcement of the delay of Echelon. On April 3, 2009, LVE notified us that, in its view, Echelon would be in breach of the ESA unless it recommences and proceeds with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

On March 7, 2011, Echelon and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee Agreement (the "Periodic Fee Agreement"). LVE has agreed not to initiate any litigation with respect to its April 3, 2009 claim of an alleged breach of the ESA and both Echelon and LVE have mutually agreed that neither LVE nor Echelon would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. Under the Periodic Fee Agreement, Echelon has agreed to pay LVE, beginning March 4, 2011, a monthly periodic fee (the “Periodic Fee”) and an operation and maintenance fee until Echelon either (i) resumes construction of the project or (ii) exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee will be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon's prior approval.


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Under the Purchase Option Agreement, Echelon has the right, upon written notice to LVE, to purchase the assets of LVE relating to the central energy center and energy distribution system for a price of $195.1 million, subject to certain possible adjustments. The ESA will be terminated concurrent with the purchase of the LVE assets.

New consolidation guidance regarding the variable interest model became effective on January 1, 2010. Under this new qualitative model, the primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the variable interest entity that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The primary beneficiary is required to consolidate the variable interest entity unless specific exceptions or exclusions are met. The authoritative literature on consolidations provides guidance related to variable interest entities.

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

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

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

This guidance required us to consolidate LVE for financial statement purposes, as we determined that we are presently the primary beneficiary of the executory contract, the ESA, giving rise to the variable interest.

PrinciplesLVE began construction of Consolidation
The accompanying consolidated financial statements include the accountsfacility in 2007 but suspended construction in January 2009, after our announcement of Boyd Gaming Corporationthe delay of Echelon. On April 3, 2009, LVE notified us that, in its view, Echelon would be in breach of the ESA unless it recommences and its subsidiaries.proceeds with construction of the Echelon development project by May 6, 2009.

As discussed above,On March 7, 2011, Echelon and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee Agreement (the "Periodic Fee Agreement"). LVE had agreed not to initiate any litigation with respect to its April 3, 2009 claim of an alleged breach of the financial positionESA and both Echelon and LVE have mutually agreed that neither LVE nor Echelon would give notice of, IPfile or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is included in our consolidated balance sheet effect. Under the Periodic Fee Agreement, Echelon had agreed to pay LVE, beginning March 4, 2011, a monthly periodic fee (the “Periodic Fee”) and an operation and maintenance fee until Echelon either (i) resumed construction of the project or (ii) exercised its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee was fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee was to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon's prior approval.

On January 27, 2013, the Purchase Option Agreement was amended. Under the Amended Purchase Option Agreement, Echelon Resorts LLC ("Echelon Resorts") had the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and related distribution system for a price of $187.0 million, subject to certain possible adjustments. Both the ESA and the Periodic Fee Agreement would have been terminated concurrent with the purchase of the LVE

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2011; its results of operations for the period from October 4,2012 and 2011 through December 31, 2011 are included in our consolidated statements of operations and cash flows for the year ended December 31, 2011.

Additionally, as discussed above, the financial position of Borgata is included in our consolidated balance sheets as of December 31, 2011 and 2010; its results of operations and cash flows for the full year ended December 31, 2011 and the period from March 24 through December 31, 2010 are included in our consolidated statements of operations and cash flows for the years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, approximately $1.44 billion and $1.48 billion, respectively, of our consolidated total assets relate to Borgata.

Additionally, the financial position and results of operations of LVE are included in our consolidated financial statements as of and for the years ended December 31, 2011 and 2010. At December 31,2012, 2011 and 2010 approximately $189.9




assets pursuant to the Purchase Option Agreement, as amended.
On March 1, 2013, as part of the sale of the Echelon site, we entered into a definitive agreement with LVE to permit Genting to acquire LVE's power plant improvements on the Echelon site. The transaction was completed on March 4, 2013 and Genting paid LVE $187.0 million and $217.3 million, respectively, of our consolidated total assets relate to LVE, however, certain of these assets, approximating $163.8 million at both respective dates, are pledged as security on LVE's outstanding construction loan advances, and an additional $21.4 million and $48.2 million, respectively, of such assets are held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing.closing.
All material intercompany accounts and transactions have been eliminated in consolidation.
Other Investments
Investments in unconsolidated affiliates, which are less than 50% owned and do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method.

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BOYD GAMING CORPORATION AND SUBSIDIARIESIntercompany Transactions
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedAll material intercompany accounts and transactions have been eliminated in consolidation.
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with maturities of three months or less at their date of purchase, 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.

Restricted Cash
Restricted cash consists primarily of advance payments related to: (i) future bookings with our Hawaiian travel agency; and (ii) amounts on depositrestricted by regulation for horse racing purposes at Delta Downs and Evangeline Downs. Certain of these restricted cash balances are invested in highly liquid instruments with a maturity of 90 days or less.
Accounts Receivable, net
Accounts receivable consist primarily of casino, hotel and other receivables. Accounts receivable are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible, based upon historical collection experience, the age of the receivable and other relevant economic factors. An estimated allowance for doubtful accounts is maintained to reduce our receivables to their carrying amount. As a result, the net carrying value approximates fair value.

The activity comprising our allowance for doubtful accounts during the years ended December 31, 2012, 2011 2010 and 20092010 is as follows:
 Year Ended December 31,
 2011 2010 2009
   (In thousands)  
Beginning balance, January 1$26,514
 $4,169
 $5,376
Additions due to consolidation of Borgata
 24,212
 
Additions due to acquisition of IP Casino Resort Spa2,072
 
 
Additions3,864
 2,766
 1,030
Deductions(3,959) (4,633) (2,237)
Ending balance$28,491
 $26,514
 $4,169

During the year ended December 31, 2011, approximately $2.1 million of additions to both the allowance and the ending balance in the allowance at December 31, 2011 resulted from the purchase of IP on October 4, 2011. During the year ended December 31, 2010, approximately $24.2 million of the additions to the allowance, and $23.3 million of the ending balance in the allowance as of December 31, 2010 resulted from the consolidation of Borgata.
 Year Ended December 31,
 2012 2011 2010
   (In thousands)  
Beginning balance, January 1$28,491
 $26,514
 $4,169
Additions due to consolidation of Borgata
 
 24,212
Additions due to acquisition of IP
 2,072
 
Additions1,549
 3,864
 2,766
Deductions(4,347) (3,959) (4,633)
Ending balance$25,693
 $28,491
 $26,514

Management does not believe that any significant concentrations of credit risk existed as of December 31, 2011.2012.

Inventories
Inventories consist primarily of food and beverage and retail items and are stated at the lower of cost or market. Cost is determined using the weighted-average inventory method.

Property and Equipment, Net
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




of the assets or, for leasehold improvements, over the shorter of the asset's useful life or term of the lease.

The estimated useful lives of our major components of property and equipment are:
Building and improvements10 through 40 years
Riverboats and barges10 through 40 years
Furniture and equipment3 through 10 years

Gains or losses on disposals of assets are recognized as incurred, using the specific identification method.incurred. Costs of major

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.
We evaluate the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. For an asset that is to be disposed of, we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For a long-lived asset to be held and used, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. If an asset is under development, future cash flows include remaining construction costs. All resulting recognized impairment charges are recorded as operating expenses. See Note 18, Impairments and Other Operating Charges, netItems, Net, for a discussion of impairment charges related to our long-lived assets.

Assets Held for Development
The costs incurred relative to projects under development are carried at cost. Development costs clearly associated with the acquisition, development, and construction of a project are capitalized as a cost of that project, during the periods in which activities necessary to get the property ready for its intended use are in progress. Certain pre-acquisition costs, not qualifying for capitalization, are charged to preopening or other operating expense as incurred.

We evaluate our investment in assets held for development in accordance with the authoritative accounting guidance on impairment or disposal of long lived assets. For a long-lived asset to be held and used, such as these assets under development, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. For these assets under development, future cash flows include remaining construction costs.

Capitalized Interest
Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete.
If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. We amortizeInterest capitalized interest overduring the estimated useful life of the related assets.
years ended December 31, 2012 and 2011 was $1.0 million and $0.4 million, respectively. There were no activities or expenditures related to this project which qualified for interest capitalization during the years ended December 31, 2011 or 2010. Interest capitalized during the year ended December 31, 2009 was $0.4 million.2010.
Debt Financing Costs
Debt financing costs, which include legal, credit, and other direct costs related to the issuance of our outstanding debt, are deferred and amortized to interest expense over the contractual term of the underlying long-term debt using the effective interest method. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt financing costs.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Restricted Investments
In accordance with the terms of the tax-exempt loan agreements, which are the obligations of LVE, unused proceeds are required to be held in escrow pending approval of construction expenditures. These investments are held in an interest-bearing account.
CRDA Investments
New Jersey state law provides, among other things, for an assessment of licensees equal to 1.25% of gross gaming revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues. Generally, a licensee may satisfy this investment obligation by: (i) investing in qualified eligible direct investments; (ii) making qualified contributions; or (iii) depositing funds with the New Jersey Casino Reinvestment Development Authority (“CRDA”). Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be donated to the CRDA in exchange for credits against future CRDA investment obligations. CRDA bonds have terms up to 50 years and bear interest at below market rates. Our net deposits with the CRDA, held by Borgata, eligible to be used to fund qualified investments were $40.0$28.5 million and $35.8$25.9 million as of December 31, 20112012 and 2010,2011, respectively, and are included in other assets, net, on our consolidated balance sheets.

Peninsula Gaming Investments
Peninsula Gaming has an investment in $22.4 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 ("City Bonds"). This investment is classified as available-for-sale and is recorded at fair-value. The fair value at December 31, 2012 was $17.9 million. At December 31, 2012, $0.3 million is included as a current asset in other current assets, and $17.6 million is included in long-term other assets, net.

Future maturities of the City Bonds, excluding the discount, at December 31, 2012 for the years ending December 31 are summarized as follows:
City Bond Maturities(In thousands)
2013$330
2014355
2015380
2016410
2017440
Thereafter20,520
Total$22,435
Intangible Assets
Intangible assets include customer relationships, favorable lease rates, development agreements, trademarks and gaming license rights.rights and trademarks.
Amortizing Intangible Assets: Assets
Customer relationships represent the value of repeat business associated with our customer loyalty

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

programs. These intangible assets were typicallyare being amortized on an accelerated method over their approximate useful life. Favorable lease rates represent the amount by which acquired lease rental rates are favorable to market terms. These favorable lease values are amortized over the remaining lease term, primarily on leasehold land interests, originally ranging in remaining duration from 41 to 52 years.years. Development agreements are contracts between two parties establishing an agreement for development of a product or service. These agreements are amortized over the respective cash flow period of the related agreement.
Indefinite Lived
Indefinite-Lived Intangible Assets: Assets
Trademarks are based on the value of our brand,brands, which reflectsreflect the level of service and quality we provide and from which we generate repeat business. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test. We perform the annual test, for the indefinite lived intangible assets of Borgata in the first quarter of each year, and those of our wholly-owned propertieshistorically performed in the second quarter of each year. We also perform interim testsyear, and between such annual test dates in certain circumstances. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010





During the fourth quarter of 2012, the Company changed the date of its annual indefinite-lived intangible assets impairment test dates to October 1 to better align with the Company's annual financial planning process. Prior to the fourth quarter of 2012, the Company performed annual impairment tests on defined sub-sets of its indefinite-lived intangible assets on January 1, April 1 and October 1. The January 1 and April 1 tests were performed on their respective test dates during 2012, and did not result in any impairment.

Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognized. Goodwill is not subject to amortization, but it is subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances.
Goodwill for relevant reporting units is tested for impairment using a weighted discounted cash flow analysis and an earnings multiple valuation technique based on the estimated future results of our reporting units discounted using our weighted-average cost of capital and market indicators of terminal year capitalization rates. The implied fair value of a reporting unit's goodwill is compared to the carrying value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to its assets and liabilities and the amount remaining, if any, is the implied fair value of goodwill. If the implied fair value of the goodwill is less than its carrying value then it must be written down to its implied fair value.

In January 2012, the Company adopted accounting guidance simplifying how entities test goodwill for impairment. The guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the second step of the goodwill impairment test. If it is determined the fair value of a reporting unit is less than its carrying amount, then the entity must perform the test to measure the amount of the impairment loss, if any. An entity is no longer required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

During the fourth quarter of 2012, the Company changed the date of its annual goodwill impairment test dates to October 1. Prior to the fourth quarter of 2012, the Company performed annual impairment tests on its goodwill on April 1 and October 1 for different reporting units. The change in the impairment test dates for all reporting units to October 1 did not delay, accelerate or avoid an impairment charge. The April 1 test performed during 2012 prior to the change did not result in any impairment. Management believes that the new impairment test date is preferable because it is more closely aligned with the Company's annual financial planning and budgeting process. These financial plans are a key component utilized in the annual impairment testing process. The change in the impairment test dates constitutes a change in accounting principle under ASC 250, “Accounting for Changes and Error Corrections,” and had no impact on the Company's consolidated balance sheet, statement of operations or cash flows. The Company determined it was impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each October 1 for periods prior to October 1, 2012 without the use of hindsight.  As such, the Company has prospectively applied the change in annual goodwill impairment testing date from October 1, 2012.

Slot Bonus Point Program
We have established promotional programs to encourage repeat business from frequent and active slot machine customers and patrons. Members earn points based on gaming activity and such points can be redeemed for cash, or to a lesser extent,complimentary slot play, and other free goods and services. We accrue forrecord bonus points expected to be redeemed for cashcomplimentary slot play as a reduction to gaming revenue and accrue for bonus points expected to be redeemed for free goods and services as gaming expense.promotional allowances. The accruals are based on estimates and assumptions regarding the mix of cash, complimentary slot play, and other free goods and services that will be redeemed and the costs of providing those benefits. Historical data is used to assist in the determination of the estimated accruals. The slot bonus point accrual is included in accrued liabilities on our consolidated balance sheets.

Long-Term Debt, Net
Long-term debt is reported at amortized cost. TheAny discount on the senior secured notes and theunderwriting or other transaction costs paid to the initial purchasers or lenders upon issuance of the senior and senior secured notesour debt instruments are recorded as an adjustment to the face amount of our outstanding debt. This resulting difference between the net proceeds upon issuance of the senior and senior secured notes and the face amount of the senior secured notesunderlying debt is accreted to interest expense using the effective interest method.method over the term of the underlying debt.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Income Taxes
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with the usabilityutilization of operating loss and tax credit carryforwards before expiration and tax planning alternatives.strategies.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

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.

Self-Insurance Reserves
We are self-insured for general liability costs and self-insured up to certain stop loss amounts for employee health coverage and workers' compensation costs. Borgata is currently self-insured with respect to each catastrophe related property damage claim, non-catastrophe related property damage claim, general liability claim, and non-union employee medical case, respectively. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. Management believes the estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. Certain of these claims represent obligations to make future payments; and therefore we discount such reserves to an amount representing the present value of the claims which will be paid in the future using a blended rate, which represents the inherent risk and the average payout duration. Self-insurance reserves are included in other liabilities on our consolidated balance sheets.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




 Year Ended December 31,
 2012 2011 2010
 (In thousands)
Beginning balance$34,500
 $31,721
 $27,825
Additions     
Charged to costs and expenses103,802
 89,464
 77,307
Due to consolidation of Borgata
 
 15,544
Due to acquisitions359
 1,111
 
Payments made99,998
 87,796
 88,955
Ending Balance$38,663
 $34,500
 $31,721

Derivative Instruments
The Company applies hedge accounting to certain derivative instruments, which is conditional upon satisfying specific documentation and performance criteria. In particular, the underlying hedged item must expose the Company to risks associated with market fluctuations and the instrument used as the hedging derivative must generate offsetting effects in prescribed magnitudes. If these criteria are not met, a change in the market value of the financial instrument and all associated settlements would be recognized as gains or losses in the period of change.
Under cash flow hedge accounting, effective derivative results are initially recorded in other comprehensive income (“OCI”) and later reclassified to earnings, coinciding with the income recognition relating to the variable interest payments being hedged (i.e., when the interest expense on the variable-rate liability is recorded in earnings). Any hedge ineffectiveness (which represents the amount by which hedge results exceed the variability in the cash flows of the forecasted transaction due to the risk being hedged) is recorded in current period earnings.
During the years ended December 31, 2011 2010 and 2009,2010, the Company had certain derivative instruments that were not designated to qualify for hedge accounting. The periodic change in the mark-to-market of these derivative instruments iswas recorded in current period earnings.
Derivatives are included in the consolidated balance sheets as assets or liabilities at fair value. Certain interest rate swap contract liabilities included in our consolidation of LVE are recorded in other liabilities on the consolidated balance sheets at December 31, 20112012 and 2010.2011.
Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and all other non-stockholder changes in equity, or other comprehensive income.income (loss). Components of the Company's comprehensive income (loss) are reported in the accompanying consolidated statements of stockholders' equity. The cumulative balance of other comprehensive income (loss) consists solely of fair value adjustments related to hedged derivative instruments and unrealized gains and losses on the investment available for sale resulting from changes in fair value.

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BOYD GAMING CORPORATION AND SUBSIDIARIESNoncontrolling Interest
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as ofAt December 31, 2012 and 2011, and 2010 andnoncontrolling interests are comprised of: (i) the 50% interest in Borgata, held in trust for the years ended December 31, 2011, 2010economic benefit of MGM; and 2009

instruments.
Noncontrolling Interests
(ii) all 100% of the members' equity interest in LVE, the variable interest entity, which is consolidated in our financial statements, but in which we hold no equity interest. Noncontrolling interests includes the portion of the ownership in Borgata not directly attributable to Boyd, and isare reported as a separate component of our stockholders' equity in our consolidated financial statements.balance sheet. Our consolidated net income is reported at amounts that include the amounts attributable to both us and the noncontrolling interests. At December 31, 2011 and 2010, noncontrolling interests are comprised of: (i) the 50% interest in Borgata, held by the Divestiture Trust for the economic benefit of MGM, which was initially recorded at fair value, at the date of the effective change in control, on March 24, 2010; and (ii) all 100% of the members' equity interest in LVE, the variable interest entity which was consolidated in our financial statements effective January 1, 2010, but in which we hold no equity interest.

Revenue Recognition
Gaming revenue represents the net win from gaming activities, which is the aggregate difference between gaming wins and losses. The majority of our gaming revenue is counted in the form of cash and chips and therefore is not subject to any significant or complex estimation procedures. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gross gaming revenues.

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

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




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

Promotional Allowances
The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as a promotional allowances.allowance. Promotional allowances also include incentives earned in our slot bonus program such as cash, complimentary play, and the estimated retail value of goods and services (such as complimentary rooms and food and beverages) earned in our slot bonus point program.. We reward customers, through the use of bonus programs, with points based on amounts wagered or won that can be redeemed for a specified period of time, principally for cash,complimentary play, and to a lesser extent for goods or services, depending upon the property. We record the estimated retail value of these goods and services as revenue and then deduct them as promotional allowances
The amounts included in promotional allowances for the years ended December 31, 20112012, 20102011 and 20092010 are as follows:
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
  (In thousands)  (In thousands)
Rooms$130,168
109,268
$109,268

$50,885
$144,605
 $130,168
 $109,268
Food and beverage175,391
159,229
159,229

112,368
191,419
 175,391
 159,229
Other114,380
85,328
85,328

19,927
114,652
 114,380
 85,328
Total promotional allowances$419,939
 $353,825
 $183,180
$450,676
 $419,939
 $353,825

The estimated costs of providing such promotional allowances for the years ended December 31, 20112012, 20102011 and 20092010 are as follows:
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
  (In thousands)  (In thousands)
Rooms$58,821
 $53,928
 $29,766
$62,323
 $58,821
 $53,928
Food and beverage158,881
 159,617
 114,711
182,138
 158,881
 159,617
Other18,092
 16,884
 6,031
21,641
 18,092
 16,884
Total cost of promotional allowances$235,795
 $230,429
 $150,508
$266,102
 $235,794
 $230,429

Gaming Taxes
We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are an assessment ofassessed based on our gaming revenues and are recorded as a gaming expense onin the consolidated statements of operations. These

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 taxes totaled approximately $270.3 million, $258.4 million and 2010 and$256.5 million for the years ended December 31, 2012, 2011 and 2010, and 2009

taxes totaled approximately $258.4 million, $256.5 million and $215.6 million for the years ended December 31, 2011, 2010 and 2009, respectively.
Advertising Expense
Direct advertising costs are expensed the first time such advertising appears. Advertising costs are included in selling, general and administrative expenses on the consolidated statements of operations and totaled $33.1$38.3 million $31.8, $33.1 million and $21.2$31.8 million for the years ended December 31, 2012, 2011 and 2010, and 2009, respectively.
Corporate Expense
Corporate expense represents unallocated payroll, professional fees, aircraft costs and various other expenses that are not directly related to our casino hotel operations. Corporate expense totaled $49.0 million, $48.950.7 million, $49.0 million and $47.648.9 million for the years ended December 31, 2012, 2011 2010 and 2009,2010, respectively.
Preopening Expenses
Certain costs of start-up activities are expensed as incurred. The following reconciles our preopening expenses to provide the amounts incurred, net of the amounts eliminated upon the consolidation of LVE.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
  (In thousands)    (In thousands)  
Preopening expense:          
Amounts incurred by Boyd Gaming Corporation$17,492
 $8,405
 $17,798
$22,437
 $17,492
 $8,405
Amounts eliminated upon consolidation of LVE(10,858) (946) 
(10,896) (10,858) (946)
Amounts reported in our consolidated statements of operations$6,634
 $7,459
 $17,798
$11,541
 $6,634
 $7,459
Share-Based Compensation
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. Compensation costs related to stock option awards are calculated based on the fair value of each major option grant on the date of the grant using the Black-Scholes option pricing model, which requires the following assumptions: expected stock price volatility, risk-free interest rates, expected option lives and dividend yields. We formed our assumptions using historical experience and observable market conditions.
The following table discloses the weighted-average assumptions used in estimating the fair value of our significant stock option grants and awards during the years ended December 31, 2012, 2011, 2010 and 2009.2010.
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
Expected stock price volatility79.7% 72.9% 69.6%77.11% 79.70% 72.90%
Annual dividend rate% % %
 
 
Risk-free interest rate0.4% 0.9% 2.1%0.55% 0.40% 0.90%
Expected option life (in years)3
 4.3
 4.3
4.3
 3.0
 4.3
Estimated fair value per share$3.44
 $4.67
 $4.18
$3.04
 $3.44
 $4.67

Earnings per Share
Basic earnings per share is computed by dividing net income (loss) applicable to Boyd Gaming Corporation stockholders, excluding net income attributable to noncontrolling interests, by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially-dilutive securities, such as stock options.

The weighted average number of common and common share equivalent shares used in the calculations of basic and diluted earnings per share calculations for the years ended December 31, 2011,2012, 2011and 2010, and 2009, consisted of the following amounts:

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
 Year Ended December 31,
 2012 2011 2010 
 (In thousands)
Weighted average shares outstanding:      
Basic87,652
 87,263
 86,601
 
Potential dilutive effect
 
 230
 
Diluted87,652
 87,263
 86,831
 
as
Anti-dilutive options totaling 8.1 million have been excluded from the computation of diluted earnings per share during the years ended December 31, 2011 and 2010, andas these shares were out of the money. Due to the net losses for the years ended December 31, 2011, 20102012 and 2009

 Year Ended December 31,
 2011 2010 2009
   (In thousands)  
Earnings per share:     
Basic weighted average shares outstanding$87,263
 $86,601
 $86,429
Potential dilutive effect
 230
 88
Diluted weighted average shares outstanding$87,263
 $86,831
 $86,517
Due to the net loss for the year ended December 31, 2011, the effect of all potential common share equivalents was anti-dilutive, and therefore all such shares were excluded from the computation of diluted earnings per share. Anti-dilutive options totaling 8.1 millionweighted average shares outstanding.

Comprehensive Income (Loss)
In January 2012, the Company adopted guidance requiring the presentation of comprehensive income (loss), the components of

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 8.6 million have been excluded from the computation of diluted earnings per share as these shares were out of the money during2011 and for the years ended December 31, 20102012, 2011 and December 31, 20092010




net income (loss), and the components of other comprehensive income (loss) either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. Comprehensive income (loss) includes net income (loss) and all other non-stockholder changes in equity, or other comprehensive income (loss). Components of the Company's comprehensive income (loss) are reported in the accompanying consolidated statements of comprehensive income (loss). The cumulative balance of other comprehensive income (loss) consists of fair value adjustments related to hedged derivative instruments held by the variable interest entity and unrealized gains and losses from the available for sale investment.
Concentration of Credit Risk
Financial instruments that subject us to credit risk consist of cash equivalents, accounts receivable and interest rate swap contracts. Our interest rate swap contracts terminated on June 30, 2011.
Our policy is to limit the amount of credit exposure to any one financial institution, and place investments with financial institutions evaluated as being creditworthy, or in short-term money market and tax-free bond funds which are exposed to minimal interest rate and credit risk. We have bank deposits which may at times exceed federally-insured limits.
Concentration of credit risk, with respect to gaming receivables, is limited through our credit evaluation process. We issue markers to approved gaming customers only following credit checks and investigations of creditworthiness.
Credit valuations of counterparties to our swap contracts are performed to reflect the impact of the credit ratings of both such counterparties, based primarily upon the market value of the credit default rates of the respective parties.
Certain Risks and Uncertainties
Our operations are dependent on our continued licensing by state gaming commissions. The loss of a license, in any jurisdiction in which we operate, could have a material adverse effect on future results of operations.
We are dependent on each gaming property's local market for a significant number of our patrons and revenues. If economic conditions in these areas deteriorate or additional gaming licenses are awarded in these markets, our results of operations could be adversely affected.
We are dependent on the economy of the United States, in general, and any deterioration in the national economic, energy, credit and capital markets could have a material adverse effect on future results of operations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated into our consolidated financial statements include the estimated allowance for doubtful accounts receivable, the estimated useful lives for depreciable and amortizable assets, recoverability of assets held for development, measurement of the fair value of our controlling interest and the noncontrolling interest in Borgata, fair valuations of acquired assets and assumed liabilities, estimated cash flows in assessing the recoverability of long-lived assets and assumptions relative to the valuation and impairment of goodwill and intangible assets, estimated valuation allowances for deferred tax assets, accruals for slot bonus point programs, estimates of certain tax liabilities and uncertain tax positions, determination of self-insured liability reserves, computation of share-based payment valuation assumptions, estimates of fair values of assets and liabilities measured at fair value, estimates of fair values of assets and liabilities disclosed at fair value, fair values of derivative instruments and assessments of contingencies and litigation and claims. Actual results could differ from these estimates.

Reclassifications
Certain prior period amounts presented in our consolidated financial statements have been reclassified to conform to the current presentation. These reclassifications related to the disaggregation of non-cash impairment charges that were previously accumulated in other operating items, net, to impairment of assets in our consolidated statements of operations for the years ended December 31, 2011 and 2010, respectively. These reclassifications had no effect on our retained earnings or net income (loss) as previously reported. The

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

reclassifications specifically had the following impacts on our consolidated balance sheets at December 31, 2011 and 2010 in that our investment in an unconsolidated subsidiary was reclassified to other assets based on the relative immateriality of such investment and to reflect the fact that the investment is presently being liquidated.

Revisions to Previously Issued Financial Statements
Certain prior period amounts presented in our consolidated financial statements have been revised to reflect the correction of an immaterial error. The Company assessed the materiality of this error on both a quantitative and qualitative basis, and determined that the error was immaterial to previously reported amounts as reported in the consolidated financial statements and notes thereto, for the year ended December 31, 2010. The revision of the previously issued financial statements resulted in minor impacts on certain line items in our consolidated balance sheet, statements of operations, changes in stockholders' equity and cash flows, yet had no impact on net income attributable to Boyd Gaming Corporation or retained earnings as previously reported. See further disclosure in Note 24, Revisions to Consolidated Financial Statements.

Recently Issued Accounting Pronouncements
A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.
 
Accounting Standards Update 2011-09 Employer's Participation in Multiemployer Benefit Plans2012-02 Intangibles - Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment ("Update 2011-09"2011-02")
In September 2011,July 2012, the Financial Accounting Standards Board ("FASB") issued Update 2011-092012-02 which is an amendment to Topic 715-80350-30 of the Accounting Standards Codification ("ASC").

The objective of Update 2011-092012-02 is to amend ASC 715-80 by increasing the quantitative and qualitative disclosures an employer is required to provide about its participation in significant multiemployer plans that offer pension or other post-retirement benefits. The objective of Update 2011-09350-30 is to enhance transparencyreduce the cost and complexity of disclosures about (1) the significant multiemployer plansperforming an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in which an employer participates, (2) the level of the employer's participation in those plans, (3) the financial health of the plans, and (4) the nature of the employer's commitments to the plans.

We adopted Update 2011-09 during the year ended December 31, 2011. Update 2011-09 did not have a material impact on our consolidated financial statements.

Accounting Standards Update 2011-08 Intangibles, Goodwill and Other ("Update 2011-08")
In September 2011, the FASB issued Update 2011-08which is an amendment to ASC Topic 350.
impairment testing guidance among long-lived asset categories. The objective of Update 2011-08 is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update 2011-08 permitguidance permits an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary tothe indefinite-lived intangible asset and perform the two-step goodwillquantitative impairment test described in Topic ASC 350. (the more-likely-than-not threshold is defined as having a likelihood of more than 50 percent). Previous guidance under Topic ASC 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit withto its carrying amount, including goodwill (step one).value. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in Update 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than itsthe carrying amount.value, the entity must record an impairment.

The amendment will beUpdate 2012-02 is effective for our fiscal year,annual and interim periods withinimpairment tests performed for fiscal years beginning after September 15,

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the fiscal year beginning January 1, years ended December 31, 2012, 2011 and 2010




2012, although early adoption is permitted. In September 2012, the Company adopted Update 2011-08 will2012-02. Update 2012-02 did not have a material impact on the computation of the impairment of goodwill orindefinite-lived intangible assets.

NOTE 2.    ASSET ACQUISITIONS
Peninsula Gaming
Overview
On November 20, 2012, we completed the acquisition of Peninsula Gaming pursuant to an Agreement and Plan of Merger (the "Merger Agreement") entered into on May 16, 2012, by and among the Company, Boyd Acquisition II, LLC, Boyd Acquisition Sub, LLC, Peninsula Gaming Partners, LLC and Peninsula Gaming, under which an indirect wholly owned subsidiary of the Company acquired 100% of the outstanding common shares of Peninsula Gaming, the assets and assumed the liabilities. The acquisition added five properties from three different states including Kansas, Iowa and Louisiana. Peninsula Gaming owns and operates Diamond Jo casino in Dubuque, Iowa, Evangeline Downs Racetrack and Casino, in St. Landry Parish, Louisiana, various off track betting facilities in Louisiana, Diamond Jo casino in Northwood, Iowa, Amelia Belle casino in Amelia, Louisiana, and the Kansas Star Casino, Hotel and Event Center ("Kansas Star") near Wichita, Kansas. Accordingly, the acquired assets and liabilities of Peninsula Gaming are included in our consolidated balance sheet as of December 31, 2012 and the results of its operations and cash flows are reported in our consolidated statements of operations and cash flows from November 20, 2012 through December 31, 2012, respectively, during the year ended December 31, 2012. As a result of this acquisition, the Company will be able to expand its operations to the new geographical areas. The net purchase price, after adjustment for working capital and other intangibles.items was approximately $1.48 billion.

Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")
In June 2011, the FASB issued Update 2011-05 which is an amendment to Topic ASC 220.
Consideration Transferred
The objectivefair value of Update 2011-05 isthe consideration transferred on the acquisition date, and as retrospectively adjusted, included the purchase price of the net assets transferred and certain liabilities incurred on behalf of the sellers. Total consideration was comprised of the following:
   Total Consideration
   (In thousands)
Cash Paid to Seller $1,353,737
HoldCo Note 113,600
Contingent consideration - Kansas Star earn out 9,800
Gross Consideration $1,477,137

The fair value of the Note to improve the comparability, consistency,Seller and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update 2011-05 provides an entityContingent Consideration were estimated by management with the optionassistance of an independent third-party valuation firm as of the acquisition date. The amount of the HoldCo Note remains subject to presentadjustment pursuant to the totalterms of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entityMerger Agreement.

Contingent Consideration
The Company is required to presentmake a contingent payment to the sellers if the EBITDA of certain assets of Kansas Star Casino ("KSC") exceeds $105.0 million. The payout is 7.5 times each componentdollar in excess of net incomeEBITDA greater than $105.0 million in the calendar year 2015. The fair value of the contingent consideration was calculated using an option pricing model, which requires management to forecast EBITDA for 2015, a discount rate based on weighted average cost of capital and volatility of earnings. The fair value of the contingent consideration arrangement at the acquisition date was estimated to be $9.8 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 EBITDA of KSC is less than the target, the Company is not required to make any additional consideration payout.
Status of Purchase Price Allocation
The Company has recognized the assets acquired and liabilities assumed in the Merger based on preliminary fair value estimates as of the date of the Merger. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair value of the assets acquired and liabilities assumed, along with total net income, each componentthe related allocations of other comprehensivegoodwill and intangible assets. The fair values of certain tangible assets, intangible assets, the note payable to seller, certain contingent liabilities and residual goodwill are the most significant areas not yet finalized and therefore are subject to change. The final fair value determinations

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement,are expected to be completed no later than the entity is required to present the componentsthird quarter of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income2013. The final fair value determinations may be significantly different than those reflected in the statementconsolidated financial statements at December 31, 2012.
Acquisition Method of net income. Accounting
The statementCompany followed the acquisition method of other comprehensive income should immediately followaccounting per ASC 805 guidance. In accordance with ASC 805, the statementCompany allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values, which were determined primarily by management with assistance from third-party appraisals. The excess of net income and include the componentspurchase price over those fair values was recorded as goodwill. The fair values set forth below are preliminary. The following table summarizes the allocation of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.
Update 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does Update 2011-05 affect how earnings per share is calculated or presented. Update 2011-05 should be applied retrospectively and will be effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.purchase price.

Accounting Standards Update 2011-12 Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards (“Update 2011-12”)
In December 2011, the FASB issued Update 2011-12which is an update to ASC Topic 220.

Update 2011-12 defers certain provisions of Update 2011-05, which required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement of operations and the statement of comprehensive income, as discussed above in Update 2011-05 (both for interim and annual financial statements). Accordingly, this requirement is indefinitely deferred and will be deliberated by the FASB at a future date. During this time of deliberation, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not superseded or otherwise effected, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements.
  As Recorded, at Fair Value
  (In thousands)
   
Current assets $48,610
Property and equipment, net 430,093
Intangible assets 577,501
Other assets 49,339
Total acquired assets 1,105,543
   
Current liabilities 67,396
Other liabilities 42,363
Total liabilities assumed 109,759
Net identifiable assets acquired 995,784
Goodwill 481,353
Net assets acquired $1,477,137

The effective date of Update 2011-12 is for fiscal yearsfollowing table summarizes the acquired property and interim periods with those fiscal years beginning January 1, 2012. Update 2011-12 will not have a material impact on the computation of comprehensive income.equipment and weighted average useful lives.

 Useful Lives As Recorded, at Fair Value
   (In thousands)
Land  $39,240
Buildings and improvements3 through 40 years 283,391
Furniture and equipment1 through 12 years 88,069
Riverboat5 through 40 years 19,393
Total property and equipment acquired  $430,093
    


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NOTE 2. ACQUISITIONSBOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




The following table summarizes the acquired intangible assets and weighted average useful lives of definite-lived intangible assets.
 Useful Lives As Recorded, at Fair Value
   (In thousands)
Customer relationships4.9 years $136,300
Non-compete agreement0.9 years 3,200
TrademarkIndefinite 50,800
Gaming license rightsIndefinite 387,201
     Total intangible assets acquired  $577,501
    

The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Peninsula Gaming. All of the $481.3 million of goodwill was assigned to the Peninsula Gaming reportable segment. All of the goodwill is expected to be deductible for income tax purposes. As of December 31, 2012, there were no changes in the recognized amounts of goodwill resulting from the acquisition of Peninsula Gaming.
The Company recognized $18.7 million of acquisition related costs that were expensed in the current period. These costs are included in the consolidated statements of operations in the line item entitled “Other operating items, net”.
Consolidated Statement of Operations for the period from November 20, 2012 through December 31, 2012
The following supplemental information presents the financial results of Peninsula Gaming included in the Company's consolidated statement of operations for the year ended December 31, 2012.
  Period from
  November 20 to
  December 31, 2012
  (In thousands)
Consolidated Statement of Operations 
Net revenues $56,925
Net loss $(5,225)

IP Casino Resort Spa
Overview
On October 4, 2011, we consummatedcompleted the acquisition of IP Casino Resort Spa ("IP") in Biloxi, Mississippi pursuant to an Agreement for Purchase and Sale, under which the seller agreed to sell and transfer, and the Company agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP, , on an as-is basis. The net purchase price, after adjustment for working capital and other items, was approximately $280.6 million.
$280.6 million. The IP Casino Resort Spa is one of the premier resorts on the Mississippi Gulf Coast. Completely remodeled in 2005, the property features nearly 1,100 hotel rooms and suites; a 70,000-square-foot casino with 1,900 slot machines and 62 table games; 73,000 square feet of convention and meeting space; a spa and salon; a 1,400-seat theater offering regular headline entertainment; six lounges and bars; and eight restaurants, including Thirty-Two, a steak and seafood restaurant, and Tien, an upscale Asian restaurant, both AAA Four Diamond-recognized.
Acquisition Method Accounting
The Company has applied the acquisition method of accounting to this business combination which promulgates the following:

Identifying the acquirer
The Company did not acquire the equity interests of the sellers, but rather acquired certain assets and assumed certain liabilities. However, the assets acquired and liabilities assumed by the Company constitute a business, as all associated processes and productive outputs were obtainedresulted in the transaction.recording of a bargain purchase gain of approximately $4.6 million, due to the excess fair value of net identifiable assets over the total consideration. The Company created a wholly-owned subsidiary to recordbargain purchase gain was reported in other income in our consolidated statement of operations during the activities of this business.

Determining the acquisition date
Title to all acquired assets, transfer of licensing requirements and the assumption of certain liabilities occurred upon closing, at midnight on October 4, 2011.


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the yearsyear ended December 31, 2011, 2010 and 2009

Recognizing and measuring the identifiable assets acquired and the liabilities assumed
The Company has completed its valuation procedures, and the resulting fair value of the acquired assets and assumed liabilities has been recorded based upon our consideration of an independent valuation of the business enterprise and IP's tangible and intangible assets. 

Recognizing and measuring goodwill or a gain from a bargain purchase
The Company has recorded a bargain purchase in this business combination, as further discussed below, because the fair values of the identifiable net assets acquired and liabilities assumed exceeded the consideration transferred.

The application of the acquisition method accounting guidance had the following effects on our consolidated financial statements: (i)  we measured the fair value of identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions and recognized such in our consolidated balance sheet as of October 4, 2011; and (ii) we have reported the operating results of IP in our consolidated statements of operations and cash flows for the period from October 4, 2011 through December 31, 2011 (the "Stub Period").2011.

Consideration Transferred
The fair value of the consideration transferred on the acquisition date, and as retrospectively adjusted, included the purchase price of the net assets transferred and certain liabilities incurred on behalf of the sellers. Total consideration was comprised of the following:

   Total Consideration
   (In thousands)
Cash paid directly to or on behalf of sellers:  
 Purchase price pursuant to the Agreement for Purchase and Sale $277,000
 Donation to charitable foundation at direction of seller 10,000
    
Liabilities assumed on behalf of sellers:  
 Certain employee obligations assumed on behalf of seller 1,881
    
Adjustment for value of current assets acquired and current liabilities assumed:  
 Working capital adjustments (8,252)
 Total consideration $280,629
  Total Consideration
  (In thousands)
Purchase price $287,000
Liabilities assumed on behalf of the seller 1,881
Working capital adjustments (8,252)
Total consideration $280,629


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




In addition to this total consideration, the Company intends to performis in the process of performing certain capital improvement projects with respect to the property at an estimated cost of $44 million.$44 million. Pursuant to the terms of the agreement, to the extent that the costs of the capital improvements exceed the original cost estimate, the Company will be solely responsible for the additional costs; however, to the extent that costs are less than the original cost estimate, the Company is obligated to pay the seller an amount equal to one-half of the difference between the actual costs and the original estimated costs. The Company has not recorded any contingent consideration as a result; however, as it is presently likely that these capital improvements will require the entire $44$44 million spend. During the year ended December 31, 2012, the Company has incurred $28.0 million in capital improvement expenditures related to these projects. Cumulative total project expenditures were $29.5 million through December 31, 2012.

Acquisition ExpensesMethod of Accounting
Acquisition-related costsThe Company followed the acquisition method of accounting per ASC 805 guidance. In accordance with ASC 805, the Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values, which were not included as partdetermined primarily by management with assistance from third-party appraisals. The excess of the consideration transferred, but rather expensedpurchase price over those fair values was recorded as incurred.goodwill. The Company incurred and expensedfair values set forth below are preliminary. The following table summarizes the following acquisition costs associated with this acquisition:


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
asallocation of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

  Acquisition
  Expenses
  (In thousands)
Year ended December 31, 2011:  
Transaction fee $3,026
Advisory services 765
Legal fees 553
Closing costs 321
Other expenses 106
Total acquisition expenses $4,771
purchase price.

TheseThe Company recognized $4.8 million of acquisition expenses are reported in the other operating charges, net line item on our consolidated statement of operationsrelated costs that were expensed during the year ended December 31, 2011.

These costs are included in the consolidated income statement in the line item entitled “Other operating items, net”.
Consolidated Balance Sheet Impact
The following table summarizes the recognized fair values of the assets acquired and liabilities assumed as of October 4, 2011.

 As Recorded, at Fair Value As Recorded, at Fair Value
 (In thousands) (In thousands)
Current Assets  
Assets  
Cash and cash equivalents $2,173
 $2,173
Accounts receivable, net 1,230
 1,230
Inventories 1,579
 1,579
Prepaid expenses and other current assets 6,638
 6,638
  
Tangible Assets  
Total current assets 11,620
Property and equipment, net 264,703
 264,703
  
Identified Intangible Assets  
Trademark 25,300
Customer relationships 3,300
Intangible assets 28,600
Total acquired assets 304,923
 304,923
    
Current liabilities  
Liabilities  
Accounts payable 3,018
 3,018
Accrued liabilities 14,182
 14,182
 
Total current liabilities 17,200
Other liabilities 
 2,512
Deferred tax liability 2,512
Total liabilities assumed 19,712
 19,712
Net identifiable assets $285,211
 $285,211

The fair value of the current assets acquired and current liabilities assumed was presumed to be historical acquired value, based on the relatively short term nature of these assets and liabilities. The $1.2$1.2 million of acquired accounts receivable iswas net of a $2.1$2.1 million reserve, reducing the gross amount of $3.3$3.3 million to an amount reflecting the expected cash flows from such outstanding balances.


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

The fair value of the tangible assets utilized a combination of the income, market or cost approaches, depending on the characteristics of the asset classification. With respect to certain personal property components of these assets (slot machines, furniture, fixtures and equipment, resort sign, vehicles and computer equipment) the cost approach was used, which is based on replacement or reproduction costs of the asset. The fair value of the barge, as well as land was determined using the market approach, which considers sales of comparable assets and applies compensating factors for any differences specific to the particular assets. Building and site improvements were valued using the cost approach using a direct cost model built on estimates of replacement cost.

The fair value of the identified intangible assets was determined using a cash flow model following the income approach. Specifically, the identified intangible assets include the value of the IP trademark and customer relationships. The value of the trademark relied upon a relief from royalty method, which discounts a stream of payments associated with the right to use such name. The value of customer relationships followed a multi-period excess earnings method, which is an application of the discounted cash flow method and computes the present value of after-tax cash flows attributable to the associated future income stream.

Bargain Purchase Gain
The business combination resulted in the recording of a bargain purchase gain, due to the excess fair value of net identifiable assets over the total consideration. The gain was computed as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




  Bargain
  Purchase Gain
  (In thousands)
Fair value of net identifiable assets $285,211
Total consideration 280,629
Bargain purchase gain $4,582

The bargain purchase gain was reported in other income in our consolidated statement of operations during the year ended December 31, 2011.

Upon the initial determination that the fair value of the acquired net assets would result in a gain representing a bargain purchase, the Company reassessed the valuation assumptions utilized to determine these fair values as part of the acquisition method accounting. The reassessment performed focused on whether the Company had: (i) correctly identified all of the assets acquired and all of the liabilities assumed; and (ii) critically reviewed the procedures used to measure the relative fair values of such amounts. As a result of this reassessment, certain adjustments to the valuation assumptions were identified and modified; however, the effect of such was a significant reduction, but not a full elimination of the bargain purchase gain. The Company believes the reassessment appropriately reflects its consideration of all available information as of the acquisition date.

The events and circumstances resulting in a bargain purchase of IP were primarily related to the acceptance of the property in an "as-is" condition, coupled with the facts that there was not a competitive bidding process, and the representations and warranties received from the seller were not conventional or conforming for this size or type of transaction.

During our preliminary due diligence process, we identified certain deferred maintenance issues regarding the property, after initial negotiations had commenced. As previously disclosed, the Company intends to immediately begin capital improvements to the property at an estimated cost of $44 million. These improvements are necessary to extend the useful life of the hull on which the gaming barge sits, and perform other deferred maintenance projects related to the back of house areas. Additionally, and as importantly, the improvements to the hull will preserve compliance with specific building codes.

The sellers of the IP did not run a competitive bidding process, and the Company's purchase was on an "as-is" basis. While the negotiations were relatively confined prior to the discovery of these required improvements, we believe it was advantageous to our overall negotiations to deal directly with the sellers on these issues, as such were identified. The Company's willingness to accept, and ultimately fund the significant cost to pay for these improvements provided an advantageous position to renegotiate the original purchase price.

CondensedConsolidated Statements of Operations
for the period from October 4, 2011 through December 31, 2011
The following supplemental information presents the financial results of IP included in the Company's consolidated statement of operations for the year ended December 31, 2011.
  Period from
  October 4 to
  December 31, 2011
  (In thousands)
Consolidated Statement of Operations 
Net revenues $44,627
Net income $3,203

Supplemental Unaudited Pro Forma Information
The following table presents pro forma results of the Company, as though Peninsula Gaming had been acquired as of January 1, 2011. The pro forma results do not necessarily represent the results that may occur in the future. The pro forma amounts include the historical operating results of the Company and Peninsula Gaming prior to the acquisition, with adjustments directly attributable to the acquisition.

  Year Ended December 31, 2012
  Boyd Gaming   Boyd Gaming
  Corporation Peninsula Gaming Corporation
  (As Reported)   (Pro Forma)
  (In thousands)
Net revenues $2,487,426
 $465,188
 $2,952,614
Net loss attributable to Boyd Gaming Corporation $(908,865) $(43,210) $(952,075)
Basic and diluted net loss per share $(10.37)   $(10.86)
       

The following table presents pro forma results of the Company, as though IP and Peninsula had been acquired as of the beginning of the earliest period presented, January 1, 2011. The pro forma results do not necessarily represent the results that may occur in the future. The pro forma amounts include the historical operating results of the Company, Peninsula Gaming and IP combined prior to the acquisition, with adjustments directly attributable to the acquisition.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




  October 4 through December 31, 2011
Condensed Statement of Operations (In thousands)
Net revenues $44,627
   
Operating income $3,203
  Year Ended December 31, 2011
  Boyd Gaming   Boyd Gaming
  Corporation Combined Corporation
  (As Reported) (Historical) (Pro Forma)
  (In thousands)
Net revenues $2,336,238
 $457,934
 $2,794,172
Net loss attributable to Boyd Gaming Corporation $(3,854) $(17,063) $(20,917)
Basic and diluted net loss per share $(0.04)   $(0.24)
       

Supplemental Unaudited Pro Forma Informationand Other Adjustments
The unaudited pro forma results, as presented belowabove, include adjustments related to:to record: (i) the effectsnet incremental depreciation expense for the depreciation and amortization resulting from the adjustments to the valueadjustment of property and equipment to fair value and the allocation of a portion of the purchase price to amortizing intangible assets resulting from acquisition method accounting;assets; (ii) the reversalelimination of certain activity conducted with the prior seller;historical management fee paid by Peninsula Gaming to an affiliate; (iii) the impact ofincrease in interest expense incurred on the capitalization of the entity formed throughincremental borrowings incurred by Boyd to fund the acquisition; and (iv) the reclassificationestimated tax effect of certain items to conform to the Company's consolidated presentation. The pro forma results also reflect adjustments to conform the historical results with the Company's accounting policies. However, the pro forma results do not include any anticipated synergies or other expected benefitsadjustments and on the historical taxable income of Peninsula Gaming; and (v) miscellaneous adjustments as a result of the acquisition. Accordingly,preliminary purchase price allocation on the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions and merger been consummated at any of these earlier dates presented herein.

Pro Forma Consolidated Statement of Income
for the year ended December 31, 2011
(unaudited)
The following supplemental pro forma information presents the financial results as if we acquired IP as of January 1, 2011, and consolidated such results for the period from January 1, 2011 through October 3, 2011 (the "Straddle Period"). This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what the actual results for the year ended December 31, 2011 would have been had we acquired IP on January 1, 2011, nor are they indicative of any future results.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

 Year Ended December 31, 2011
 Boyd Gaming IP Pro Forma   Boyd Gaming
 Corporation (historical) and Other   Corporation
 (as reported) Straddle Period Adjustments Eliminations (pro forma)
 (In thousands)
Revenues         
   Gaming$1,986,644
 $104,698
 $
 $
 $2,091,342
   Food and beverage388,148
 31,323
 
 
 419,471
   Rooms246,209
 26,084
 
 
 272,293
   Other135,176
 6,150
 
 
 141,326
Gross revenues2,756,177
 168,255
 
 
 2,924,432
Less promotional allowances419,939
 42,651
 
 
 462,590
      Net revenues2,336,238
 125,604
 
 
 2,461,842
          
Costs and expenses         
   Gaming924,451
 36,123
 
 
 960,574
   Food and beverage200,165
 9,396
 
 
 209,561
   Rooms56,111
 28,551
 
 
 84,662
   Other108,907
 5,782
 
 
 114,689
   Selling, general and administrative394,991
 18,596
 
 
 413,587
   Maintenance and utilities153,512
 15,447
 
 
 168,959
   Depreciation and amortization195,343
 26,935
 (10,237)i
 212,041
   Corporate expense48,962
 
 
 
 48,962
   Preopening expenses6,634
 
 
 
 6,634
   Other operating charges, net14,058
 1,773
 
 
 15,831
      Total costs and expenses2,103,134
 142,603
 (10,237) 
 2,235,500
Operating income233,104
 (16,999) 10,237
 
 226,342
Other (income) expense         
   Interest income(46) 
 
   (46)
   Interest expense, net of capitalized amounts250,731
 
 19,950
ii(19,950) 250,731
Fair value adjustment of derivatives265
 
 
 
 265
Loss on early retirement of debt14
 
 
 
 14
   Other (income) expense(11,582) 
 
 
 (11,582)
      Total other (income) expense, net239,382
 
 19,950
 (19,950) 239,382
          
Loss before income taxes(6,278) (16,999) (9,713) 19,950
 (13,040)
Income taxes(1,721) 
 
iii
 (1,721)
Net loss(7,999) (16,999) (9,713) 19,950
 (14,761)
Net loss attributable to noncontrolling interests4,145
 
 
 
 4,145
Net loss attributable to Boyd Gaming Corporation$(3,854) $(16,999) $(9,713) $19,950
 $(10,616)

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009


Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 2010
(unaudited)
The following supplemental pro forma information presents the financial results as if we acquired IP as of January 1, 2010. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative or what the actual results for the year ended December 31, 2010 would have been had we acquired IP on January 1, 2010, nor are they indicative of any future results. The "as reported (and revised)" column reflects certain revisions to our consolidated financial statements as of December 31, 2010, for the correction of an immaterial error. See further discussion of these revisions in Note 24, Revision to Consolidated Financial Statement
 Year Ended December 31, 2010
 Boyd Gaming   Pro Forma   Boyd Gaming
 Corporation IP and Other   Corporation
 (as reported and revised) (historical) Adjustments Eliminations (pro forma)
 (In thousands)
Revenues         
   Gaming$1,812,487
 $179,529
 $
 $
 $1,992,016
   Food and beverage347,588
 33,159
 
 
 380,747
   Rooms211,046
 38,738
 
 
 249,784
   Other123,603
 9,252
 
 
 132,855
Gross revenues2,494,724
 260,678
 
 
 2,755,402
Less promotional allowances353,825
 56,081
 
 
 409,906
      Net revenues2,140,899
 204,597
 
 
 2,345,496
          
Costs and expenses         
   Gaming859,818
 48,857
 
 
 908,675
   Food and beverage180,840
 12,288
 
 
 193,128
   Rooms49,323
 35,116
 
 
 84,439
   Other99,458
 6,327
 
 
 105,785
   Selling, general and administrative369,217
 41,311
 
 
 410,528
   Maintenance and utilities140,722
 20,288
 
 
 161,010
   Depreciation and amortization199,275
 43,722
 (26,632)i
 216,365
   Corporate expense48,861
 
 
 
 48,861
   Preopening expenses7,459
 
 
 
 7,459
   Other operating charges, net4,713
 (14,434) 
 
 (9,721)
      Total costs and expenses1,959,686
 193,475
 (26,632) 
 2,126,529
Operating income from Borgata8,146
 
 
   8,146
Operating income189,359
 11,122
 26,632
 
 227,113
Other (income) expense         
   Interest income(5) (115) 
   (120)
   Interest expense, net of capitalized amounts180,558
 
 19,950
ii(19,950) 180,558
Fair value adjustment of derivatives480
 
 
 
 480
Gain on early retirement of debt(2,758) 
 
 
 (2,758)
Gain on equity distribution(2,535) 
 
 
 (2,535)
Other income(10,000) 
 
 
 (10,000)
Operating expense from Borgata3,133
 
 
 
 3,133
      Total other (income) expense, net168,873
 (115) 19,950
 (19,950) 168,758
Income before income taxes20,486
 11,237
 6,682
 19,950
 58,355
Income taxes(8,236) 
 
iii
 (8,236)
Net income12,250
 11,237
 6,682
 19,950
 50,119
Net income attributable to noncontrolling interests(1,940) 
 
 
 (1,940)
Net income attributable to Boyd Gaming Corporation$10,310
 $11,237
 $6,682
 $19,950
 $48,179

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009


Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 2009
(unaudited)
The following supplemental pro forma information presents the financial results as if we acquired IP as of January 1, 2009. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what the actual results for the year ended December 31, 2009 would have been had we acquired IP on January 1, 2009, nor are they indicative of any future results.

 Year Ended December 31, 2009
 Boyd Gaming   Pro Forma   Boyd Gaming
 Corporation IP and Other   Corporation
 (as reported) (historical) Adjustments Eliminations (pro forma)
 (In thousands)
Revenues         
   Gaming$1,372,091
 $174,072
 $
 $
 $1,546,163
   Food and beverage229,374
 32,863
 
 
 262,237
   Rooms122,305
 37,045
 
 
 159,350
   Other100,396
 9,514
 
 
 109,910
Gross revenues1,824,166
 253,494
 
 
 2,077,660
Less promotional allowances183,180
 52,438
 
 
 235,618
      Net revenues1,640,986
 201,056
 
 
 1,842,042
          
Costs and expenses         
   Gaming664,739
 50,164
 
 
 714,903
   Food and beverage125,830
 12,965
 
 
 138,795
   Rooms39,655
 34,485
 
 
 74,140
   Other77,840
 7,332
 
 
 85,172
   Selling, general and administrative284,937
 45,717
 
 
 330,654
   Maintenance and utilities92,296
 21,185
 
 
 113,481
   Depreciation and amortization164,427
 45,680
 (24,940)i
 185,167
   Corporate expense47,617
 
 
 
 47,617
   Preopening expenses17,798
 
 
 
 17,798
   Other operating charges, net41,780
 1,065
 
 
 42,845
      Total costs and expenses1,556,919
 218,593
 (24,940) 
 1,750,572
Operating income from Borgata72,126
 
 
   72,126
Operating income156,193
 (17,537) 24,940
 
 163,596
Other (income) expense         
   Interest income(6) (172) 
   (178)
   Interest expense, net of capitalized amounts146,830
 
 19,950
ii(19,950) 146,830
Gain on early retirement of debt(15,284) 
 
 
 (15,284)
Other expense33
 
 
 
 33
Operating expense from Borgata19,303
 
 
 
 19,303
      Total other (income) expense, net150,876
 (172) 19,950
 (19,950) 150,704
Income(loss) before income taxes5,317
 (17,365) 4,990
 19,950
 12,892
Income taxes(1,076) 
 
iii
 (1,076)
Net income (loss)$4,241
 $(17,365) $4,990
 $19,950
 $11,816


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Pro Forma and Other Adjustments
These adjustments in each of the years presented above represent the following: (i) adjustment to historical depreciation and amortization expense related to the revision of previous net book value to fair value, as part of our application of acquisition method accounting, coupled with an adjustment to the useful lives of certain classes of assets to conform to the Company's policies; (ii) the adjustment to interest expense representing the debt service requirements on a borrowing arrangement with an affiliate, which, in part, funded the purchase price; and (iii) consideration of separate income tax expense, which was deemed unnecessary, as the newly formed entity is an LLC and therefore not subject to direct taxation, a tax sharing arrangements has not and will not be executed with the parent of this LLC, and respective tax expenses and attributes are not pushed down to our operating entities as a matter of policy.liabilities.

Other Acquisitions
Development Agreement
In September 2011, the Company acquired the membership interests of a limited liability company (the "LLC") for a purchase price of $24.5 million.$24.5 million. The primary asset of the LLC iswas a previously executed development agreement (the "Development Agreement") with a Native American Tribetribe (the "Tribe"). The Development Agreement establishespurchase price was allocated primarily to an intangible asset associated with the terms betweenCompany's rights under the LLCagreement to assist the Tribe in the development and management of a gaming facility on the Tribes land.

In July 2012, the Company and the Tribe under whichamended and replaced the agreement with a gaming facility will be developed on the Tribe's land.new development agreement and a management agreement (the "Agreements"). The Development Agreement provides a fee of 5% of gross revenues of the gaming operations, (subject to a maximum percentage capped by Indian Gaming Regulation), upon completion of development, and for a subsequent period of seven years.
The fair value of the assets of the LLC was allocated in our consolidated financial statements as follows:
   December 31, 2011
   (In thousands)
Assets acquired:   
Intangible value of Development Agreement  $21,373
Note receivable from Tribe (at present value) 3,077 
Purchase price  $24,450

Other than the obligation under the Development Agreement to develop the gaming facility, there were no liabilities assumed in connection with the acquisition of the LLC. In addition to approximately $4.5 million expended by the prior owners of the LLC related to pre-development efforts, we are obligatedAgreements obligate us to fund certain pre-development costs, which are estimated to be approximately $1$1 million to $2$2 million annually, for the next several years. Theseyears and to assist the Tribe in its development and oversight of the gaming facility construction. Upon opening, we will manage the gaming facility. The pre-development costs funded by us are reimbursable to us with future cash flows from the operations of the gaming facility and are evidenced byunder terms of a note receivable from the Tribe.

The Agreements provide that the Company will receive future revenue for its services to the Tribe contingent upon successful development of the gaming facility and based on future net revenues at the gaming facility. Development is in the preliminary stages and no time schedule has been established as to when the Tribe will be able to formalize plans and begin construction.

NOTE 3.    CONSOLIDATION OF CERTAIN INTERESTS
Controlling Interest
Borgata Hotel Casino and Spa
Overview
WeThe Company and MGM Resorts International ("MGM") each originally held a 50% interest in Marina District Development Holding Co., LLC (“Holding Company”). The Holding Company owns all the equity interests in Marina District Development Company, LLC, ("MDDC"), d.b.a. Borgata Hotel Casino and Spa.

In February 2010, we entered into an agreement with MGM to amend the operating agreement to, among other things, facilitate the transfer of MGM's Interestinterest in the Holding Company ("MGM Interest") to a divestiture trust (“Divestiture Trust”) established for the purpose of selling the MGM Interest to a third party. The proposed sale of the MGM Interest through the Divestiture Trust was a part of a then-proposed settlement agreement between MGM and the New Jersey DivisionDepartment of Gaming Enforcement (the "NJDGE"“NJDGE”). Pursuant to the terms of the amended operating agreement, in connection with the refinancing of the Borgata bank credit facility on August 6, 2010, the Holding Company made a $135.4 million one-time distribution to us, of which $30.8 million was a priority distribution equal to the excess prior capital contributions made by us.

On March 17, 2010, MGM announced that its settlement agreement with the NJDGE had been approved.approved by the New Jersey Casino Control Commission ("NJCCC"). Under the terms of the settlement agreement, MGM agreed to transfer the MGM Interest into

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




the Divestiture Trust and further agreed to sell such interest within a 30-month30-month period. During the first 18 months of such period, (which has subsequently been extended by an additional 12 months), MGM has the power to direct the trustee to sell the MGM Interest, subject to the approval of the NJCCC. If the sale has not occurred by such time, the trustee will be solely responsible for the sale of the MGM Interest. The MGM Interest was transferred to the Divestiture Trust on March 24, 2010.
In connection
MGM has subsequently announced that it has entered into an amendment with respect to its settlement agreement with the amendments toNJDGE, as approved by the operating agreements MGM relinquished all of its specific participating rights underNJCCC. The amendment provides that the operating agreement, and we retained all authority to manage the day-to-day operations of Borgata. MGM's relinquishment of its participating rights effectively provided us with direct control of Borgata. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations. Accordingly, on March 24,

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

2010, as a resultmandated sale of the amendmentMGM Interest be increased by an additional 18 months to our operating agreement with MGM, which provided, among other things, fora total of 48 months.  During the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata.

The financial position of Borgata is presented in our condensed consolidated balance sheets as of December 31, 2011 and December 31, 2010; its results of operations for the year ended December 31, 2011 are included in our consolidated statement of operations and cash flows for the year ended December 31, 2011; its results of operations for the period fromfirst 36 months (or until March 24, 2010 through December 31, 2010 are included in our condensed consolidated statement of operations and cash flows2013), MGM has the right to direct the Divestiture Trust to sell the MGM Interest. If a sale is not concluded by that time, the Divestiture Trust will be responsible for selling MGM's Interest during the year ended December 31, 2010.following 12-month period.

Effective Change in Control
In connection with the amendments to the operating agreements MGM relinquished all of its specific participating rights under the operating agreement, and we retained all authority to manage the day-to-day operations of Borgata. MGM's relinquishment of its participating rights effectively provided us with direct control of Borgata. Accordingly, on March 24, 2010, we effectively obtained control of Borgata. This resulting change in control required acquisition method of accounting in accordance with the authoritative accounting guidance for business combinations.

Acquisition Method of Accounting
The application of the acquisition method of accounting guidance had the following effects on our consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity. The provisional fair value measurements and estimates of these items were estimated as of the date we effectively obtained control.
 
The provisional fair value measurements and estimates of these items have been subsequently refined. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, the Company had not completed its procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. The Company's subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement adjustments were identified and retrospectively recorded in the consolidated balance sheet as of December 31, 2010, and certain disclosures were updated to reflect the measurement period adjustments, as reflected herein.
Measurement Period Adjustments
We have made adjustments to the provisional fair value amounts recognized at the date of effective change in control to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. These adjustments, referred to herein as “measurement period adjustments” materially impacted the value of certain tangible and intangible assets. We applied the measurement period adjustments retrospectively to these consolidated financial statements. Accordingly, the audited consolidated financial statements, as initially filed in the Provisional Form 10-K, have been revised to reflect the measurement period adjustments as retrospectively recorded on the date of the effective change in control, as if these measurement period adjustments had been recorded initially therein.

The revisions to the provisional values of assets consists of reallocations of certain tangible assets and the recordation of other intangible assets; the accrual of certain liabilities, including the recording of the deferred tax effect of the appreciated asset values; and the resulting effect on the fair value of the controlling and noncontrolling interests. 
The results as reported herein will differ from the stand alone results as separately reported by Borgata, as these measurement period adjustments have not been pushed down to Borgata.

More specifically, the provisional assets and liabilities, as initially recorded as of March 24, 2010, were impacted by the valuation as follows:

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

 Fair Value Provisional Value Adjustment
 (In thousands)
ASSETS     
Cash$26,025
  $26,025
  $
 
Current assets43,708   43,945   (237) 
Property and equipment, net1,293,792   1,352,320   (58,528) 
Other assets, net36,641   40,099   (3,458) 
Customer lists14,000      14,000  
Trademark65,000      65,000  
Value of assets$1,479,166
  $1,462,389
  $16,777
 
      
LIABILITES     
Current maturities of long-term debt$632,289
  $632,289
  $
 
Other current liabilities83,162   84,470   (1,308) 
Other long-term liabilities40,204   40,642   (438) 
Value of liabilities$755,655
  $757,401
  $(1,746) 
      
CONTROLLING INTEREST$397,931
  $367,897
  $30,034
 
      
NONCONTROLLING INTERESTS$325,580
  $337,091
  $(11,511) 

Retrospective Adjustment to Condensed Consolidated Balance Sheet
We have retrospectively adjusted the provisional values to reflect the fair valuation, and therefore, our consolidated balance sheet as of December 31, 2010 presented herein reflects the following measurement adjustments. The "As Provisionally Reported (and Revised)" column reflects certain revisions to our consolidated financial statements as of December 31, 2010, for the correction of an immaterial error. See further discussion of these revisions in Note 24, Revision to Consolidated Financial Statements.

  As Provisionally Reported (and Revised) Acquisition Method Accounting and Measurement Adjustments As Retrospectively Adjusted
    (In thousands)  
ASSETS      
Current assets      
Cash and cash equivalents $145,623
 $
 $145,623
Restricted cash 19,494
   19,494
Accounts receivable, net 48,888
   48,888
Inventories 16,029
   16,029
Prepaid expenses and other current assets 37,390
 (237) 37,153
Income taxes receivable 5,249
   5,249
Deferred income taxes 8,149
   8,149
Total current assets 280,822
 (237) 280,585
       
Property and equipment, net 3,471,933
 (88,562) 3,383,371
Assets held for development 1,086,844
   1,086,844
Debt financing costs, net 38,451
 (3,458) 34,993

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Restricted investments 48,168
   48,168
Other assets, net 69,610
   69,610
Intangible assets, net 460,714
 79,000
 539,714
Goodwill, net 213,576
   213,576
Total assets $5,670,118
 $(13,257) $5,656,861
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities      
Current maturities of long-term debt $25,690
 $
 $25,690
Accounts payable 57,183
   57,183
Accrued liabilities 279,777
 (1,308) 278,469
Tax liabilities 6,506
   6,506
Non-recourse obligations of variable interest entity 22,487
 
 22,487
Total current liabilities 391,643
 (1,308) 390,335
       
Long-term debt, net of current maturities 3,193,065
   3,193,065
Deferred income taxes 360,342
 1,832
 362,174
Other long-term tax liabilities 44,813
   44,813
Other liabilities 86,803
 (2,270) 84,533
Non-recourse obligations of variable interest entity 220,572
   220,572
       
Stockholders’ equity      
Preferred stock, $0.01 par value, 5,000,000 shares authorized 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,244,978 and 86,130,454 shares outstanding 862
   862
Additional paid-in capital 635,028
   635,028
Retained earnings 560,909
   560,909
Accumulated other comprehensive loss, net (7,594)   (7,594)
Total Boyd Gaming Corporation stockholders’ equity 1,189,205
 
 1,189,205
Noncontrolling interests 183,675
 (11,511) 172,164
Total stockholders’ equity 1,372,880
 (11,511) 1,361,369
Total liabilities and stockholders’ equity $5,670,118
 $(13,257) $5,656,861

Bargain Purchase Gain
The fair valuation resulted in the recording of a bargain purchase gain, due to the excess fair value of Borgata over the historical basis orof our equity interest in Borgata. Recorded in other operating charges,items, net on the consolidated statementsstatement of operations, this gain was recorded as a cumulative adjustment during the year ended December 31, 2011.

The gain was computed as follows:

 Bargain
 Purchase Gain
Bargain
Purchase Gain
 (In thousands)(In thousands)
Fair value of controlling equity interest $397,931
$397,931
Carrying value of equity investment in Borgata 397,622
397,622
Bargain purchase gain $309
$309

The fair value of our controlling interest included a $72.4$72.4 million control premium, which iswas reflected in the fair value of the enterprise, and included in the calculation of the bargain purchase gain. A control premium of 10% was applied to the enterprise value members' equity, excluding interest bearing debt, to calculate an indicated value of equity on a controlling basis. While the value of control is somewhat below prevailing market rates, we believe the control premium reflects the value of our influence, mitigated by only a 50% interest and return.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




mitigated by only a 50% interest and return.

Condensed Consolidated StatementsStatement of Operations
We have not applied the measurement period adjustments retrospectively to the consolidated statementsstatement of operations for the year ended December 31, 2010, because the impact on such, as retrospectively adjusted to the statements as reported was not material. Had the measurement period adjustments been retrospectively adjusted, the results of operations would have reflected the following impact as if the adjustments had been recorded on the date of effective control in the following amounts, for the following periods throughout the year ended December 31, 2010:2010.

 Year Ended
Year Ended December 31, 2010 December 31, 2010
(In thousands) (In thousands)
Maintenance and utilities$141
 $141
Depreciation and amortization2,221
 2,221
Other operating charges, net(61)
Other operating items, net (61)
Total operating costs and expenses2,301
 2,301
Interest expense3,458
 3,458
Total other expense, net3,458
 3,458
Income (loss) before income taxes$(1,157) $(1,157)



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Results of Borgata
(for the period from March 24, 2010 through December 31, 2010)2010)
reflected on a fully consolidated basis
The results of Borgata, as included in the accompanying consolidated statements of operations from the date we effectively obtained control, March 24, 2010 through December 31, 2010,, are comprised of the following. These results do not reflect the retrospective impact from the measurement period adjustments discussed above, as such amounts were not material to the year ended December 31, 2010.
 March 24, through
 December 31, 2010
 
(In thousands)
Statement of Operations 
Revenues 
Gaming$506,073
Food and beverage116,534
Room91,045
Other33,752
Gross revenues747,404
Less promotional allowances167,264
Net revenues580,140
  
Costs and expenses 
Gaming203,962
Food and beverage55,989
Room11,806
Other27,209
Selling, general and administrative94,983
Maintenance and utilities49,913
Depreciation and amortization52,886
Other operating items, net(8)
Total costs and expenses496,740
  
Operating income83,400
  
Other expense 
Interest expense45,139
Total other expense, net45,139
  
Income before provision for state income taxes38,261
Provision for state income taxes(4,067)
Net income$34,194








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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2011, 2010 and 2009

 March 24, through December 31, 2011
 (In thousands)
Statement of Operations 
Revenues 
Gaming$506,073
Food and beverage116,534
Room91,045
Other33,752
Gross revenues747,404
Less promotional allowances167,264
Net revenues580,140
  
Costs and expenses 
Gaming203,962
Food and beverage55,989
Room11,806
Other27,209
Selling, general and administrative94,983
Maintenance and utilities49,913
Depreciation and amortization52,886
Other operating charges, net(8)
Total costs and expenses496,740
  
Operating income83,400
  
Other expense 
Interest expense45,139
Total other expense, net45,139
  
Income before provision for state income taxes38,261
Provision for state income taxes(4,067)
Net income$34,194

Results of Borgata
(for the years ended December 31, 2009)
reflected on the equity method
Our share of Borgata's results for the year ended December 31, 2009 were recorded on the equity method of accounting, and included in our accompanying consolidated statements of operations as follows:
 December 31,
 2009
 (In thousands)
Our share of Borgata's operating income$73,424
Net amortization expense related to our investment in Borgata(1,298)
Operating income from Borgata, as reported on our consolidated financial statements$72,126
  
Other non-operating expenses from Borgata, as reported on our consolidated financial statements$19,303

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31,2012, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009




Our historical net investment in Borgata differs from our share of the underlying equity in Borgata. In 2004, pursuant to an agreement with MGM related to the funding of Borgata's original project costs, we made an excess capital contribution to Borgata of $30.8 million. We were ratably amortizing $15.4 million (50% of the excess contribution, which corresponds to our ownership percentage of Borgata) over 40 years. As discussed in the Overview section above, of the $135.4 million distribution we received from the Holding Company on August 6, 2010, $30.8 million was a priority distribution equal to the excess capital contribution. As a result, during the year ended December 31, 2010, we recorded a $2.5 million gain in connection with the receipt of this distribution, which gain was equal to the basis difference on our equity contribution during the period in which such was outstanding. Such gain is reported in gain on equity distribution on the consolidated statement of operations for the year ended December 31, 2010.
During Borgata's initial development, construction and preopening phases, we capitalized the interest, in the total amount of $37.4 million, on our investment and were ratably amortizing our capitalized interest over 40 years.
We recorded $1.1 million of amortization related to the excess contribution and capitalized interest during the year ended December 31, 2010 and recorded $1.3 million of such amortization during the year ended December 31, 2009.

Supplemental Pro Forma Information
Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2010
(unaudited)

The following supplemental pro forma information presents the financial results as if the effective control of Borgata had occurred as of the beginning of the earliest period presented herein, or on January 1, 2010. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what the actual results for the year ended December 31, 2010 would have been had the consolidation of Borgata been completed as of the earlier date, nor are they indicative of any future results. The "As Reported (and Revised)" column reflects certain revisions to our consolidated financial statements as of December 31, 2010, for the correction of an immaterial error. See further discussion of these revisions in Note 24, Revision to Consolidated Financial Statements.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Year Ended December 31, 2010
 Year Ended December 31, 2010      Boyd Gaming
 Boyd Gaming Corporation     Boyd Gaming CorporationBoyd Gaming Borgata Stub   Corporation
 As Reported (and Revised) Borgata Stub Period Adjustments Pro FormaCorporation Period Adjustments Pro Forma
Revenues   (In thousands)         
Gaming $1,812,487
 $137,831
 $
 $1,950,318
$1,812,487
 $137,831
 $
 $1,950,318
Food and beverage 347,588
 31,218
 
 378,806
347,588
 31,218
 
 378,806
Room 211,046
 24,154
 
 235,200
211,046
 24,154
 
 235,200
Other 123,603
 9,179
 
 132,782
123,603
 9,179
 
 132,782
Gross revenues 2,494,724
 202,382
 
 2,697,106
2,494,724
 202,382
 
 2,697,106
Less promotional allowances 353,825
 44,093
 
 397,918
353,825
 44,093
 
 397,918
Net revenues 2,140,899
 158,289
 
 2,299,188
2,140,899
 158,289
 
 2,299,188
Costs and expenses               
Gaming 859,818
 59,861
 
 919,679
859,818
 59,861
 
 919,679
Food and beverage 180,840
 13,500
 
 194,340
180,840
 13,500
 
 194,340
Room 49,323
 2,185
 
 51,508
49,323
 2,185
 
 51,508
Other 99,458
 7,127
 
 106,585
99,458
 7,127
 
 106,585
Selling, general and administrative 369,217
 28,981
 
 398,198
369,217
 28,981
 
 398,198
Maintenance and utilities 140,722
 13,522
 
 154,244
140,722
 13,522
 
 154,244
Depreciation and amortization 199,275
 16,754
 
 216,029
199,275
 16,754
 
 216,029
Corporate expense 48,861
 
 
 48,861
48,861
 
 
 48,861
Preopening expenses 7,459
 
 
 7,459
7,459
 
 
 7,459
Other operating charges, net 4,713
 68
 
 4,781
Impairments and other operating items736
 
 
 736
Other operating items, net3,977
 68
 
 4,045
Total costs and expenses 1,959,686
 141,998
 
 2,101,684
1,959,686
 141,998
 
 2,101,684
Operating income from Borgata 8,146
 
 (8,146) 
8,146
 
 (8,146) 
Operating income 189,359
 16,291
 (8,146) 197,504
189,359
 16,291
 (8,146) 197,504
Other expense (income)               
Interest income (5) 
 
 (5)(5) 
 
 (5)
Interest expense, net 180,558
 5,060
 
 185,618
Interest expense, net of amounts capitalized180,558
 5,060
 
 185,618
Other income 480
 
 
 480
(9,520) 
 
 (9,520)
Gain on early retirements of debt (2,758) 
 
 (2,758)(2,758) 
 
 (2,758)
Gain on controlling interest in Borgata (2,535) 
 
 (2,535)(2,535) 
 
 (2,535)
Other income (10,000) 
 
 (10,000)
Other non-operating expenses 
 
 
 
Other non-operating expenses from Borgata, net 3,133
 
 (3,133) 
3,133
 
 (3,133) 
Total other expense, net 168,873
 5,060
 (3,133) 170,800
168,873
 5,060
 (3,133) 170,800
        
Income (loss) before income taxes 20,486
 11,231
 (5,013) 26,704
20,486
 11,231
 (5,013) 26,704
Income taxes (8,236) (1,206) 
 (9,442)(8,236) (1,206) 
 (9,442)
Net income (loss) 12,250
 $10,025
 (5,013) 17,262
12,250
 10,025
 (5,013) 17,262
Net income attributable to noncontrolling interests (1,940) 
 (5,012) (6,952)(1,940) 
 (5,012) (6,952)
Net income attributable to Boyd Gaming Corporation $10,310
 $10,025
 $(10,025) $10,310
$10,310
 $10,025
 $(10,025) $10,310










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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009


Pro Forma Condensed Consolidated Statement of Operations
(for the year ended December 31, 2009)
(unaudited)
  Year Ended December 31, 2009
  Boyd Gaming Corporation     Boyd Gaming Corporation
  As Reported Borgata Adjustments Pro Forma
Revenues   (In thousands)  
   Gaming $1,372,091
 $691,428
 $
 $2,063,519
   Food and beverage 229,374
 143,410
 
 372,784
   Room 122,305
 113,143
 
 235,448
   Other 100,396
 42,620
 
 143,016
Gross revenues 1,824,166
 990,601
 
 2,814,767
Less promotional allowances 183,180
 213,193
 
 396,373
      Net revenues 1,640,986
 777,408
 
 2,418,394
Costs and expenses        
   Gaming 664,739
 280,620
 
 945,359
   Food and beverage 125,830
 64,217
 
 190,047
   Room 39,655
 11,940
 
 51,595
   Other 77,840
 34,908
 
 112,748
   Selling, general and administrative 284,937
 128,164
 
 413,101
   Maintenance and utilities 92,296
 59,900
 
 152,196
   Depreciation and amortization 164,427
 78,719
 1,298
 244,444
   Corporate expense 47,617
 
 
 47,617
   Preopening expenses 17,798
 699
 
 18,497
   Other operating charges, net 41,780
 (28,606) 
 13,174
      Total costs and expenses 1,556,919
 630,561
 1,298
 2,188,778
Operating income from Borgata 72,126
 
 (72,126) 
Operating income 156,193
 146,847
 (73,424) 229,616
Other expense (income)        
   Interest income (6) 
 
 (6)
   Interest expense, net 146,830
 27,668
 
 174,498
   Gain on early retirements of debt (15,284) 
 
 (15,284)
   Other non-operating expenses 33
 
 
 33
   Other non-operating expenses from Borgata, net 19,303
 
 (19,303) 
      Total other expense, net 150,876
 27,668
 (19,303) 159,241
         
Income (loss) before income taxes 5,317
 119,179
 (54,121) 70,375
Income taxes (1,076) (10,938) 
 (12,014)
   Net income (loss) 4,241
 $108,241
 (54,121) 58,361
Net loss attributable to noncontrolling interests 
 
 (54,120) (54,120)
Net income attributable to Boyd Gaming Corporation $4,241
 $108,241
 $(108,241) $4,241
   









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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

The pro forma adjustments reflect the differences resulting from the conversion of the equity method of accounting to a fully consolidated presentation. There were no significant intercompany transactions affecting the statements


132

Table of operations between the Boyd entities and Borgata which would require elimination during the year ended Contents
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2009.
In addition to2012 and 2011 and for the pro forma adjustments reflecting the differences resulting from the conversion of the equity method of accounting to a fully consolidated presentation, there is a $1.3 million adjustment during the yearyears ended December 31, 2009, representing the amortization of our unilateral capital investment in Borgata. Historically, we reduced this amount from our operating income from Borgata.2012, 2011 and 2010




Borgata Distributions
Borgata's bank credit facility allows for certain limited distributions to be made to its joint venture partners. Excluding the $135.4$135.4 million one-time distribution we received from Borgata in connection with their debt refinancing, as discussed above, our distributions from Borgata were $20.8 million and $60.120.8 million duringfor the yearsyear ended December 31, 2010 and 2009, respectively. Borgata has significant uses for its cash flows, including maintenance capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata's cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness.2010.

Variable Interest
LVE Energy Partners, LLC
LVE is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts, we had entered into an Energy Sales Agreement ("ESA") with LVE to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development and to provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties.

Current accounting guidance requires us to consolidate LVE for financial statement purposes, as we determined that we are the primary beneficiary of the executory contract, the ESA, giving rise to the variable interest.

As discussed in Note 5, Assets Held for Development, and Note 24, Subsequent Events, on March 1, 2013, we entered into a definitive agreement to sell the Echelon site for $350 million in cash. In connection with this transaction, on March 4, 2013, we exercised an option to acquire the central energy center assets from LVE for $187.0 million and immediately sold these assets to the buyer of Echelon. The ESA agreement was terminated. As a result, we will cease consolidation of LVE as of March 4, 2013.

The effects of the consolidation onof LVE on our financial position as of December 31, 20112012 and 2010,2011, and its impact on our results of operations for the years ended December 31, 2012, 2011 and 2010 are reconciled by respective line items to amounts as reported in our condensed consolidated balance sheets and condensed consolidated statements of operations are presented below.

The primary impact on our condensed consolidated balance sheets at December 31, 2011 and 2010 was as follows:


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Balance Sheet
The impact on our consolidated balance sheets as of December 31, 2012 and December 31, 2011 was as follows:
 December 31, 2011December 31, 2012
 Boyd Gaming     Boyd Gaming      Boyd Gaming
 Corporation     CorporationBoyd Gaming     Corporation
 (excluding LVE, LLC) LVE, LLC Eliminations (as consolidated)Corporation LVE, LLC Eliminations (as consolidated)
 (In thousands)(In thousands)
ASSETS               
Current assets $340,762
 $2,132
 $
 $342,894
$354,140
 $1,453
 $
 $355,593
Property and equipment, net 3,542,108
 
 
 3,542,108
3,624,988
 
 
 3,624,988
Assets held for development 926,013
 163,806
 
 1,089,819
168,251
 163,519
 
 331,770
Debt financing costs, net 29,544
 2,555
 
 32,099
83,020
 2,448
 
 85,468
Restricted investments held by variable interest entity 
 21,367
 
 21,367
Restricted investments
 21,382
 
 21,382
Other assets 67,173
 
 
 67,173
98,425
 
 
 98,425
Intangible assets, net 574,018
 
 
 574,018
1,119,638
 
 
 1,119,638
Goodwill, net 213,576
 
 
 213,576
694,929
 
 
 694,929
Total assets $5,693,194
 $189,860
 $
 $5,883,054
Total Assets$6,143,391
 $188,802
 $
 $6,332,193
               
LIABILITES        
LIABILITIES       
Current maturities of long-term debt $43,230
 $
 $
 $43,230
$61,570
 $
 $
 $61,570
Accounts payable 97,727
 288
 
 98,015
91,046
 164
 
 91,210
Accrued and other liabilities 294,578
 881
 
 295,459
356,056
 8,486
 
 364,542
Non-recourse obligations of variable interest entity 
 29,686
 
 29,686
        
Income taxes payable8,129
 
 
 8,129
Current non-recourse obligations of variable interest entity
 225,113
 
 225,113
Long-term debt, net of current maturities 3,347,226
 
 
 3,347,226
4,827,853
 
 
 4,827,853
Deferred income taxes 379,958
 
 
 379,958
139,943
 
 
 139,943
Other liabilities 107,377
 15,044
 
 122,421
Non-recourse obligations of variable interest entity 
 192,980
 
 192,980
Long-term tax and other liabilities146,706
 
 
 146,706
               
STOCKHOLDERS' EQUITY               
Common stock 863
 
 
 863
869
 
 
 869
Additional paid-in capital 644,174
 
 
 644,174
655,694
 
 
 655,694
Retained earnings 557,055
 
 
 557,055
Accumulated other comprehensive loss, net 
 
 
 
Noncontrolling interests 221,006
 (49,019) 
 171,987
Total liabilities and stockholders' equity $5,693,194
 $189,860
 $
 $5,883,054
Retained earnings, including accumulated other comprehensive income (loss)(352,772) 
 
 (352,772)
Noncontrolling interest208,297
 (44,961) 
 163,336
Total Liabilities and Stockholders' Equity$6,143,391
 $188,802
 $
 $6,332,193
       


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Balance Sheet
as of December 31, 2010
 December 31, 2010December 31, 2011
 Boyd Gaming     Boyd Gaming      Boyd Gaming
 Corporation     CorporationBoyd Gaming     Corporation
 (excluding LVE, LLC) LVE, LLC Eliminations (as consolidated)Corporation LVE, LLC Eliminations (as consolidated)
 
(In thousands)
(In thousands)
ASSETS               
Current assets $278,902
 $1,683
 $
 $280,585
$340,762
 $2,132
 $
 $342,894
Property and equipment, net 3,383,371
 
 
 3,383,371
3,542,108
 
 
 3,542,108
Assets held for development 923,038
 163,806
 
 1,086,844
926,013
 163,806
 
 1,089,819
Debt financing costs, net 31,346
 3,647
 
 34,993
29,544
 2,555
 
 32,099
Restricted investments held by variable interest entity 
 48,168
 
 48,168
Restricted investments
 21,367
 
 21,367
Other assets 69,610
 
 
 69,610
67,173
 
 
 67,173
Intangible assets, net 539,714
 
 
 539,714
574,018
 
 
 574,018
Goodwill, net 213,576
 
 
 213,576
213,576
 
 
 213,576
Total assets $5,439,557
 $217,304
 $
 $5,656,861
Total Assets$5,693,194
 $189,860
 $
 $5,883,054
               
LIABILITES        
LIABILITIES       
Current maturities of long-term debt $25,690
 $
 $
 $25,690
$43,230
 $
 $
 $43,230
Accounts payable 56,790
 393
 
 57,183
97,727
 288
 
 98,015
Accrued and other liabilities 277,429
 1,040
 
 278,469
294,578
 881
 
 295,459
Non-recourse obligations of variable interest entity 
 22,487
 
 22,487
        
Income taxes payable5,630
 
 
 5,630
Current non-recourse obligations of variable interest entity
 29,686
 
 29,686
Long-term debt, net of current maturities 3,193,065
 
 
 3,193,065
3,347,226
 
 
 3,347,226
Deferred income taxes 362,174
 
 
 362,174
379,958
 
 
 379,958
Other liabilities 115,948
 19,904
 
 135,852
Non-recourse obligations of variable interest entity 
 220,572
 
 220,572
Long-term tax and other liabilities101,747
 15,044
 
 116,791
Long-term non-recourse obligations of variable interest entity
 192,980
 
 192,980
               
STOCKHOLDERS' EQUITY               
Common stock 862
 
 
 862
863
 
 
 863
Additional paid-in capital 635,028
 
 
 635,028
644,174
 
 
 644,174
Retained earnings 560,909
 
 
 560,909
557,055
 
 
 557,055
Accumulated other comprehensive loss, net (7,594) 
 
 (7,594)
Noncontrolling interests 219,256
 (47,092) 
 172,164
Total liabilities and stockholders' equity $5,439,557
 $217,304
 $
 $5,656,861
        
Noncontrolling interest221,006
 (49,019) 
 171,987
Total Liabilities and Stockholders' Equity$5,693,194
 $189,860
 $
 $5,883,054




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




The summarized impact on our condensed consolidated statementsstatement of operations for the years ended December 31, 2012, 2011 and 2010 was as follows:

Condensed Consolidating Statement of Operations
for the year ended December 31, 2011
 Year Ended December 31, 2011Year Ended December 31, 2012
 Boyd Gaming     Boyd Gaming      Boyd Gaming
 Corporation     CorporationBoyd Gaming     Corporation
 (excluding LVE, LLC) LVE, LLC Eliminations (as consolidated)Corporation LVE, LLC Eliminations (as consolidated)
 (In thousands)(In thousands)
REVENUES               
Other revenue $135,176
 $10,858
 $(10,858) $135,176
$145,460
 $10,896
 $(10,896) $145,460
               
COSTS AND EXPENSES               
Selling, general and administrative$452,872
 $54
 $
 $452,926
Preopening expenses 17,492
 
 (10,858) 6,634
22,437
 
 (10,896) 11,541
               
Operating income $222,246
 $10,858
 $
 $233,104
$(865,717) $10,842
 $
 $(854,875)
               
Other expense               
Interest expense, net $233,932
 $16,753
 $
 $250,685
Interest expense, net of amounts capitalized$277,681
 $12,323
 $
 $290,004
               
Loss before income taxes $(383) $(5,895) $
 $(6,278)
Income (loss) before income taxes$(1,142,366) $(1,481) $
 $(1,143,847)
Income taxes (1,721) 
 
 (1,721)220,772
 
 
 220,772
Net loss (2,104) (5,895) 
 (7,999)
Net (income) loss attributable to noncontrolling interests (1,750) 5,895
 
 4,145
Net loss attributable to Boyd Gaming Corporation $(3,854) $
 $
 $(3,854)
Net income (loss)(921,594) (1,481) 
 (923,075)
Net (income) loss attributable to noncontrolling interest12,729
 
 1,481
 14,210
Net income (loss) attributable to Boyd Gaming Corporation$(908,865) $(1,481) $1,481
 $(908,865)




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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Statement of Operations
for the year ended December 31, 2010
 Year Ended December 31, 2010Year Ended December 31, 2011
 Boyd Gaming     Boyd Gaming      Boyd Gaming
 Corporation     CorporationBoyd Gaming     Corporation
 (excluding LVE, LLC) LVE, LLC Eliminations (as consolidated)Corporation LVE, LLC Eliminations (as consolidated)
 (In thousands)(In thousands)
REVENUES               
Other revenue $123,603
 $
 $
 $123,603
$135,176
 $10,858
 $(10,858) $135,176
               
COSTS AND EXPENSES               
Selling, general and administrative$394,991
 $
 $
 $394,991
Maintenance and utilities153,512
 
 
 153,512
Preopening expenses 8,405
 
 (946) 7,459
17,492
 
 (10,858) 6,634
               
Operating income $188,413
 $
 $946
 $189,359
$222,246
 $10,858
 $
 $233,104
               
Other expense               
Interest expense, net 164,449
 16,104
 
 180,553
Interest expense, net of amounts capitalized$233,978
 $16,753
 $
 $250,731
               
Income (loss) before income taxes $35,644
 $(16,104) $946
 $20,486
$(383) $(5,895) $
 $(6,278)
Income taxes (8,236) 
 
 (8,236)(1,721) 
 
 (1,721)
Net income (loss) 27,408
 (16,104) 946
 12,250
Net (income) loss attributable to noncontrolling interests (17,098) 16,104
 (946) (1,940)
Net income attributable to Boyd Gaming Corporation $10,310
 $
 $
 $10,310
Net loss(2,104) (5,895) 
 (7,999)
Net (income) loss attributable to noncontrolling interest(1,750) 
 5,895
 4,145
Net income (loss) attributable to Boyd Gaming Corporation$(3,854) $(5,895) $5,895
 $(3,854)





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




 Year Ended December 31, 2010
       Boyd Gaming
 Boyd Gaming     Corporation
 Corporation LVE, LLC Eliminations (as consolidated)
 (In thousands)
REVENUES       
Other revenue$123,603
 $
 $
 $123,603
        
COSTS AND EXPENSES       
Selling, general and administrative$369,217
 $
 $
 $369,217
Maintenance and utilities140,722
 
 
 140,722
Preopening expenses8,405
 
 (946) 7,459
        
Operating income$188,413
 $
 $946
 $189,359
        
Other expense       
Interest expenses, net of amounts capitalized$164,454
 $16,104
 $
 $180,558
        
Income (loss) before income taxes$35,644
 $(16,104) $946
 $20,486
Income taxes(8,236) 
 
 (8,236)
Net income (loss)27,408
 (16,104) 946
 12,250
Net (income) loss attributable to noncontrolling interest(17,098) 
 15,158
 (1,940)
Net income (loss) attributable to Boyd Gaming Corporation$10,310
 $(16,104) $16,104
 $10,310

NOTE 4.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following.following:
December 31,December 31,
2011 20102012 2011
(In thousands)(In thousands)
Land$614,697
 $576,947
$377,748
 $614,697
Buildings and improvements3,513,230
 3,309,506
3,827,980
 3,513,230
Furniture and equipment1,306,150
 1,185,737
Riverboats and barges1,185,737
 1,131,837
187,620
 168,204
Furniture and equipment168,204
 167,420
Other37,368
 25,423
50,720
 37,368
Total property and equipment5,519,236
 5,211,133
5,750,218
 5,519,236
Less accumulated depreciation1,977,128
 1,827,762
2,125,230
 1,977,128
Property and equipment, net$3,542,108
 $3,383,371
$3,624,988
 $3,542,108

Depreciation expense for the yearyears ended December 31, 2012, 2011 and 2010 was $199.5 million, $190.6 millionand 2009 was $190.6$199.0 million $199.0 million and $164.0 million,, respectively.

Other assets presented in the table above primarily relatesrelate to property and equipment-related costs capitalized in conjunction with major improvements and that have not yet been placed into service, and such costs are not currently being depreciated.
We test certain of these property and equipment assets for recoverability if a recent operating or cash flow loss, combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses, is associated with the use of a long-lived asset.
Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

During the year ended December 31, 2012, we reclassified $237.0 million of land adjacent to the Echelon project to assets held for development, based on the decision not to resume development of the Echelon project, and the expectation to dispose of the assets, including the adjacent land. See Note 5, Assets Held for Development, and Note 18, Impairments and Other Operating Items, Net, for discussion of impairment charges recognized in the year ended December 31, 2012.

There were no impairments of long-lived assets during the yearyears ended December 31, 2011.2011 and 2010.

NOTE 5.    ASSETS HELD FOR DEVELOPMENT
Assets held for development, which is comprised of assets associated with the site of our Echelon development project, consists of the following:
December 31,December 31,
2011 20102012 2011
(In thousands)(In thousands)
Echelon Project Infrastructure      
Land$215,969
 $213,649
$453,013
 $215,969
Construction and developments costs500,787
 500,132
Construction and development costs499,842
 500,787
Project management and other costs115,712
 115,712
115,712
 115,712
Professional and design fees93,545
 93,545
93,545
 93,545
   
Central Energy Facility      
Construction and development costs163,806
 163,806
163,519
 163,806
Total assets held for development$1,089,819
 $1,086,844
1,325,631
 1,089,819
   
Impairment993,861
 
Total assets held for development, net of impairment$331,770
 $1,089,819

Echelon Project Infrastructure and Central Energy Facility
At December 31, 2012, and 2011, the capitalized costs related to the Echelon project included land and construction in progress.related costs. The construction and development costs consist primarily of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees.

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

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

As referenced in Note 13, Commitments and Contingencies, these capitalized costs and recurring project costs are in addition to other contingencies with respect to our various commitments, including commitments and contingencies with respect to the ESA entered into between Echelon and LVE.
We evaluate our investment in assets held for development in accordance with the authoritative accounting guidance on impairment or disposal of long lived assets. For a long-lived asset to be held and used, such as these assets under development, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. For these assets under development, future cash flows include remaining construction costs.
The further delay of the suspension of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time, we performed an impairment test of these assets. These impairment tests were comprised of an appraisal of the development and an analysis of its future undiscounted cash flow, and contemplated several viable alternative plans for the future development of Echelon. The cash inflows related to the revenue projections for the individual components associated with each planned construction scenario, offset by outflows for estimated costs to complete the development and ongoing maintenance and operating costs. Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

We initially performed this evaluation during the year ended December 31, 2009, when the continued suspension was announced, and have reconsidered our assumptions on a regular basis since such date. However, due to the degradation in economic conditions in the intervening period, we re-performed these analyses during the year ended December 31, 2011 to evaluate any further depression in real estate or land values as well as any deterioration in our initial cash flow assumptions. The outcome of this evaluation did not result in an impairment of Echelon's assets, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets of approximately $1.0 billion at both December 31, 2011 and 2010. As we further develop and explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.
Our analysis is predicated on the most viable options for the conversion of this development. One such scenario includes the outright sale of the project as is, which is primarily based upon land value. We considered the land value by analyzing recent sales transactions of sites with similar characteristics such as location, zoning, access, and visibility, to establish a general understanding of the potential comparable sales. The recoverability under this option represented any excess sales price, net of estimated selling costs, from the land over the carrying value of the assets, including land, held for development.
Another scenario is the full development of the project, as designed, at a later date. The cash inflows related to this option represent the revenue projections for the individual components associated with each planned construction element (casino, hotel, food and beverage, retail, convention and other), based upon the estimated respective dates of completion and particular graduated absorption rates. These projections are offset by outflows for incurred and estimated costs to complete the development. For costs already incurred, and to compensate for potential losses due to the delay, we adjusted for (i) physical deterioration; (ii) functional obsolescence; and (iii) economic obsolescence. Physical deterioration is impairment to the condition of the asset brought about by “wear and tear,” disintegration, and/or the action of the elements. Functional obsolescence is the impairment in the efficiency of the asset brought about by such factors as inadequacy or change in technology that affect the asset. Economic obsolescence is the impairment in the desirability of the asset arising from external economic forces, building code enhancements or changes in supply and demand relationships. For estimated costs to complete, we applied selected construction expense growth rates to our present cost analysis. In addition to these hard and soft construction costs, we estimated outflows for preservation costs that are intended and required to maintain the development site and the existing structures as well as development materials for future use. These net outflows were incrementally added to our estimated operating and ongoing maintenance costs, to establish the undiscounted net cash flow of the project.
Our final scenario is a scaled-down version of the full project, whereby only certain components would be developed. This cash flow projection considered the inflows and outflows discussed above, with relevant curtailment for revenue from, and costs related to, the amenities not completed.
Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood. The outcome of this evaluation resulted in the determination that there was no impairment of the assets held for development, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets held for development. As we further explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.
Central Energy Facility
The capitalized construction costs of the central energy facility include labor, materials, construction overhead and capitalized interest, all of which has been directly incurred by LVE. Depreciation is generally recorded on a straight line basis over useful lives of property ranging from 5 to 50 years, but has not commenced on the components of the facility, as it has not been placed in service. The costs of repairs, maintenance, including planned major maintenance activities and minor replacements of property are charged to maintenance expense as incurred.
These assets are tested for recoverability whenever events or changes in circumstances indicate that such amounts may be recoverable. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. There was no identified impairment of these assets during the years ended December 31, 2011 and 2010.
The assets of the central energy facility are pledged as collateral to the outstanding debt obligations of LVE, as further discussed in Note 9, Non-recourse Obligations of Variable Interest Entity below..


136In December 2012, we reconsidered our commitment to complete the Echelon project and concluded that we would not resume development. As a result of this decision, we now expect to dispose of the assets. The value of certain additional parcels of land adjacent to the Echelon site that are also expected to be sold have been reclassified to assets held for development at December 31, 2012 presentation purposes.


BOYD GAMING CORPORATION AND SUBSIDIARIESDue to the termination of the project, no additional project costs will be capitalized. Additionally, we have recognized an impairment of $993.9 million based on the difference between the book value of the assets and the estimated realizable value of the assets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

NOTE 6.    INTANGIBLE ASSETS
Intangible assets consist of the following:

139

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Weighted Average Life Gross Carrying Value  Cumulative Amortization  Cumulative Impairment Losses Intangible Assets, NetDecember 31, 2012
Amortizing Intangibles: (In thousands)  
Weighted Gross   Cumulative  
Average Life Carrying Cumulative Impairment Intangible
Remaining Value Amortization Losses Assets, Net
 (In thousands)
Amortizing intangibles:        
Customer relationships3.7 years $17,700
 $(10,026) $
 $7,674
4.5 years $154,000
 $(23,059) $
 $130,941
Non-competition agreement0.9 years 3,200
 (354) 
 2,846
Favorable lease rates43.8 years 45,370
 (7,825) 
 37,545
35.4 years 45,370
 (8,867) 
 36,503
Development agreement10 years 21,373
 
 
 21,373
 21,373
 
 
 21,373
 84,443
 (17,851) 
 66,592
 223,943
 (32,280) 
 191,663
                
Indefinite-Lived Intangibles:        
Indefinite lived intangible assets:        
TrademarksIndefinite 141,000
 
 (5,000) 136,000
Indefinite 191,800
 
 (5,000) 186,800
Gaming license rightsIndefinite 567,886
 (33,960) (162,500) 371,426
Indefinite 955,135
 (33,960) (180,000) 741,175
 708,886
 (33,960) (167,500) 507,426
 1,146,935
 (33,960) (185,000) 927,975
December 31, 2011 $793,329
 $(51,811) $(167,500) $574,018
        
Amortizing Intangibles:        
Customer relationships5 years $14,400
 $(400) $
 $14,000
Favorable lease rates43.8 years 45,370
 (6,782) 
 38,588
 59,770
 (7,182) 
 52,588
Indefinite-Lived Intangibles:        
TrademarksIndefinite 115,700
 
 
 115,700
Gaming license rightsIndefinite 567,886
 (33,960) (162,500) 371,426
 683,586
 (33,960) (162,500) 487,126
December 31, 2010 $743,356
 $(41,142) $(162,500) $539,714
Balance, December 31, 2012 $1,370,878
 $(66,240) $(185,000) $1,119,638

 December 31, 2011
 Weighted Gross   Cumulative  
 Average Life Carrying Cumulative Impairment Intangible
 Remaining Value Amortization Losses Assets, Net
   (In thousands)
Amortizing intangibles:         
Customer relationships2.2 years $17,700
 $(10,026) $
 $7,674
Favorable lease rates36.4 years 45,370
 (7,825) 
 37,545
     Development agreement 21,373
 
 
 21,373
   84,443
 (17,851) 
 66,592
          
Indefinite lived intangible assets:         
TrademarksIndefinite 141,000
 
 (5,000) 136,000
Gaming license rightsIndefinite 567,886
 (33,960) (162,500) 371,426
   708,886
 (33,960) (167,500) 507,426
Balance, December 31, 2011  $793,329
 $(51,811) $(167,500) $574,018

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

Favorable Lease Rates
Favorable lease rates represent the rental rates for assumed land leases that are favorable to comparable market rates. The fair value is determined on a technique whereby the difference between the lease rate and the then current market rate for the remaining

140

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




contractual term is discounted to present value. The assumptions underlying this computation include the actual lease rates, the expected remaining lease term, including renewal options, based on the existing lease; current rates of rent for leases on comparable properties with similar terms obtained from market data and analysis; and an assumed discount rate. The estimates underlying the result covered a term of 41 to 52 years.years.

Development AgreementsAgreement
Development agreements are contracts between two parties establishing an agreement for development of a product or service. The value of development agreements is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The fair value of the development agreement is determinedan acquired contract under which a gaming facility will be developed on the Tribe's land. This asset although amortizable, will not be amortized until development is completed, which at an amount equal to the present value of the incremental cash flows attributable only to future development revenue, discounted to the present value at a risk-adjusted rate of

137


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for2012 remains indeterminate. In the years ended December 31, 2011, 2010 and 2009

return. With respectinterim, this asset will be subject to the application of this methodology, we used the following significant assumptions: future development revenues; general and administrative expenses; and discount rate. The projections are modeled for a ten year period, representing the cash flow earnings period pursuant to the development agreement.an annual impairment test.

Indefinite-LivedIndefinite Lived Intangible Assets
Trademarks
Trademarks are based on the value of our brands, which reflectsreflect the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their names.name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the Coast properties, the IP and Borgata names.name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen15 years.

Gaming License Rights
Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year-year period.
Activity For the Years Ended December 31, 2012, 2011 and 2010
The following table sets forth the changes in these intangible assets during the years ended December 31, 2012, 2011 2010 and 2009:2010:
Customer Relationships Favorable Lease Rates Development Agreement Trademarks  Gaming License Rights  Intangible Assets, NetCustomer Relationships Non-competition Agreement Favorable Lease Rates Development Agreements Trademarks  Gaming License Rights  Intangible Assets, Net
    (In thousands)    (In thousands)
Balance January 1, 2009$37
 $40,675
 $
 $50,700
 $371,426
 $462,838
Balance, January 1, 2010$
 $
 $39,631
 $
 $50,700
 $371,426
 $461,757
Additions
 
 
 
 
 
14,000
 
 
 
 65,000
 
 79,000
Impairments
 
 
 
 
 

 
 
 
 
 
 
Amortization(37) (1,044) 
 
 
 (1,081)
 
 (1,043) 
 
 
 (1,043)
Balance December 31, 2009
 39,631
 
 50,700
 371,426
 461,757
Balance, December 31, 201014,000
 
 38,588
 
 115,700
 371,426
 539,714
Additions14,000
 
 
 65,000
 
 79,000
3,300
 
 
 21,373
 25,300
 
 49,973
Impairments
 
 
 
 
 

 
 
 
 (5,000) 
 (5,000)
Amortization
 (1,043) 
 
 
 (1,043)(9,626)

 (1,043) 
 
 
 (10,669)
Balance December 31, 201014,000
 38,588
 
 115,700
 371,426
 539,714
Balance, December 31, 20117,674
 
 37,545
 21,373
 136,000
 371,426
 574,018
Additions3,300
 
 21,373
 25,300
 
 49,973
136,300
 3,200
 
 
 50,800
 387,249
 577,549
Impairments
 
 
 (5,000) 
 (5,000)
 
 
 
 
 (17,500) (17,500)
Amortization(9,626) (1,043) 
 
 
 (10,669)(13,033)
(354) (1,042) 
 
 
 (14,429)
Balance December 31, 2011$7,674
 $37,545
 $21,373
 $136,000
 $371,426
 $574,018
Balance, December 31, 2012$130,941
 $2,846
 $36,503
 $21,373
 $186,800
 $741,175
 $1,119,638


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Future Amortization
Customer relationships are being amortized on an accelerated basis over an approximate four-yearremaining five-year period. Favorable lease rates are being amortized on a straight-line basis over a weighted-average original useful life of 43.8 years. The development agreement will be amortized using the straight-line method over the expected useful life beginning after development is complete and fees are being earned from the commencement of operations.years. Future amortization is as follows:

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

For the Year Ending December 31, Customer Relationships Favorable Lease RatesDevelopment AgreementTotal
 (In thousands) Customer Relationships Non-competition Agreement Favorable Lease Rates Total
2012 $4,308
 $1,043
 $
 $5,351
 
 (In thousands)
For the year ending December 31,        
2013 2,591
 1,043
 
 3,634
  $45,675
 $2,846
 $1,043
 $49,564
2014 775
 1,043
 1,053
 2,871
  33,310
 
 1,043
 34,353
2015   1,043
 2,401
 3,444
  25,652
 
 1,043
 26,695
2016   1,043
 2,689
 3,732
  14,870
 
 1,043
 15,913
2017 11,434
 
 1,043
 12,477
Thereafter   32,330
 15,230
 47,560
  
 
 31,288
 31,288
 $7,674
 $37,545
 $21,373
 $66,592 
Total future amortization $130,941
 $2,846
 $36,503
 $170,290

Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life,life; however, these assets are subject to an annual impairment test.
Impairment TestingConsiderations
Intangible assets include gaming license rights, trademarks and customer lists. Indefinite-livedIndefinite lived intangible assets are not subject to amortization, but they are subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances.
License
Interim Testing
During the first quarter of 2012, we performed an interim impairment test of the Borgata trademark asset. Having performed an initial interim impairment test related to the Borgata trademark asset during the first quarter of 2011, we had established the first quarter as its prospective annual impairment test date. Our analyses consisted of a valuation of the Borgata trademark, using the relief from royalty method, as discussed above. The impairment test consisted of a comparison of the fair value of trademark with its carrying amount. As a result of the impairment test, we did not record any impairment in the first quarter of 2012.

During the first quarter of 2011, we performed an interim impairment test of the Borgata trademark asset we recorded in connection with the valuation of Borgata due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results had been adversely impacted by increased regional competition and that, in addition, our projected future results would be further impacted by the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test. As a result of the impairment test, we recorded a $5.0 million impairment charge in the first quarter of 2011, representing the amount by which the carrying amount exceeded its fair value.

Annual Testing
During the fourth quarter of 2012, the Company changed the date of its annual indefinite-lived intangible assets impairment test dates to October 1 to better align with the Company's annual financial planning process. Prior to the fourth quarter of 2012, the Company performed annual impairment tests on defined sub-sets of its indefinite-lived intangible assets on January 1, April 1 and October 1. The January 1 and April 1 tests were performed on their respective test dates during 2012, and did not result in any impairment.

During the year ended December 31, 2012, Sam's Town Shreveport's operating results were less than expected due to weaker than anticipated discretionary consumer spending and increased competition. As a result, we recognized a non-cash impairment charge of $17.5 million to our gaming license rights at our Sam's Town Shreveport location. The impairment testing performed during the second quarter of 2012, prior to the change of impairment testing date to October 1, did not require us to record an impairment charge. The impairment testing performed in the second quarter of 2011 also did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could

142

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




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

Annual Test - year ended December 31, 2011
The results of our annual scheduled impairment test of indefinite-lived intangible assets, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future impairment charge, which could have a material adverse impact on our consolidated financial statements.
Interim Test - year ended December 31, 2011
During the first quarter of 2011, we performed an interim impairment test over the trademark we recorded in connection with the valuation of Borgata due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, our projected future results will be further impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test. Having performed an interim impairment test related to the Borgata trademark at a date earlier than when otherwise planned, we have established the first quarter as its prospective annual impairment test date as well.
Our analysis consisted of a valuation of the trademark, using the relief from royalty method, as discussed above. The only significant change in our assumptions from the initial fair valuation were revised revenue and profitability projections, reflecting the impact of the changed present and forecasted circumstances. The impairment test is required to consist of a comparison of the fair value of trademark with its carrying amount. As a result, we recorded a $5.0 million impairment to the trademark, representing the amount by which the carrying amount exceeded its fair value.


NOTE 7.     GOODWILL
Goodwill is an asset representing the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognized and consists of the following:

139


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Gross Carrying Value Cumulative Amortization  Cumulative Impairment Losses Goodwill, NetGross Carrying Value Cumulative Amortization  Cumulative Impairment Losses Goodwill, Net
(In thousands)(In thousands)
Reportable Segment:       
Goodwill, net by Reportable Segment:       
Las Vegas Locals$378,192
 $
 $(165,479) $212,713
$378,192
 $
 $(165,479) $212,713
Downtown Las Vegas6,997
 (6,134) 
 863
6,997
 (6,134) 
 863
Midwest and South50,671
 
 (50,671) 
50,671
 
 (50,671) 
December 31, 2011$435,860
 $(6,134) $(216,150) $213,576
Peninsula Gaming481,353
 
 
 481,353
Balance, December 31, 2012$917,213
 $(6,134) $(216,150) $694,929
Goodwill is valued
We evaluate goodwill using a weighted average allocation of both the income and market approach models. The income approach is based upon a discounted cash flow method, whereas the market approach uses the guidelinesguideline public company method. Specifically, the income approach focuses on the expected cash flow of the subject reporting unit, considering the available cash flow for a finite period of years. Available cash flow is defined as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the reporting unit. The underlying premise of the income approach is that the value of goodwill can be measured by the present value of the net economic benefit to be received over the life of the reporting unit. The market approach focuses on comparing the reporting unit to selected reasonable similar (or “guideline”) publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of our reporting unit relative to the selected guideline companies; and (iii) applied to the operating data of our reporting unit to arrive at an indication of value. The application of the market approach results in an estimate of the price reasonable expected to be realized from the sale of the subject reporting unit.
The following table sets forth
Changes in Goodwill
During the changeyear ended December 31, 2012, we recorded $481.4 million of goodwill due to our acquisition of Peninsula Gaming on November 20, 2012. There were no changes in our goodwill, net, during the years ended December 31, 2011 2010 and 2009.or 2010.
 Goodwill, Net
 (In thousands)
Balance January 1, 2009$213,576
Additions28,352
Impairments(28,352)
Balance December 31, 2009213,576
Additions
Impairments
Balance December 31, 2010213,576
Additions
Impairments
Balance December 31, 2011$213,576
Acquisition of Dania Jai-Alai
In March 2007, we acquired Dania Jai-Alai and approximately 47 acres of related land located in Dania Beach, Florida. Dania Jai-Alai is one of four pari-mutuel facilities in Broward County approved under Florida law to operate 2,000 Class III slot machines. We paid approximately $81 million to close this transaction, and agreed to pay, in March 2010, or earlier, a contingent payment of an additional $75 million to the seller, plus interest accrued at the prime rate (the “contingent payment”), if certain legal conditions were satisfied.
In January 2009, we amended the purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions. The principal terms of the amendment were as follows: (i) we paid $9.4 million to the seller in January 2009, plus $9.1 million of interest accrued from the March 1, 2007 date of the acquisition; and (ii) we issued an 8% promissory note to the seller in the amount of $65.6 million, plus accrued interest. The terms of the note required principal payments of $9.4 million, plus accrued interest, in April 2009 and July 2009, and a final principal payment of $46.9 million, plus accrued interest, due in January 2010. The promissory note was secured by a letter of credit under our bank credit facility, and we have made all scheduled payments on the promissory note, including the final payment in January 2010.

140143

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




In conjunction withThe following table sets forth the amendment to the purchase agreement, we recorded the remaining $28.4 million of the $75 million contingent liability as additionalchanges in our goodwill, net, during the yearyears ended December 31, 2009. However, upon evaluation of this additional goodwill for recoverability, we recorded a non-cash impairment charge of $28.4 million (see Note 18, Other Operating Charges, Net).2012, 2011 and 2010.

  Goodwill, Net
  (In thousands)
Balance, January 1, 2010 $213,576
Additions 
Impairments 
Balance, December 31, 2010 213,576
Additions 
Impairments 
Balance, December 31, 2011 213,576
Additions 481,353
Impairments 
Balance, December 31, 2012 $694,929

Impairment Testing
We performAs discussed in Note 1, Summary of Significant Accounting Policies, during the fourth quarter of 2012, the Company changed the date of its annual goodwill impairment test dates to October 1. Prior to the fourth quarter of 2012, the Company performed annual impairment tests on its goodwill on April 1 and October 1 for different reporting units. The change in the impairment test dates for all reporting units to October 1 did not delay, accelerate or avoid an impairment charge. The April 1 test performed prior to the change did not result in any impairment. Management believes that the new impairment test date is preferable because it is more closely aligned with the Company's annual financial planning and budgeting process. These financial plans are a key component utilized in the annual impairment testing process. The change in the impairment test dates constitutes a change in accounting principle under ASC 250, “Accounting for Changes and Error Corrections,” and had no impact on the Company's consolidated balance sheet, statement of operations or cash flows. The Company determined it was impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each October 1 for periods prior to October 1, 2012 without the use of hindsight.  As such, the Company has prospectively applied the change in annual goodwill impairment testing date from October 1, 2012.

Prior to this change, we performed an annual impairment test of our goodwill in the second quarter of each year, which resulted in no impairment charge as of such measurement dates in 2012, 2011 or 2010, nor was there an impairment charge as of the measurement date for the years ended December 31, 2011, 2010 and 2009. TheOctober 1, 2012 test date. However, if our estimates of projected cash flows related to these properties are not achieved, or our enterprise values are significantly adversely affected by economic changes, or if any other significant assumptions are changed, we may be subject to an interim impairment test for goodwill included the income and market approaches, as applicable. The income approach incorporated the use of the discounted cash flow method, whereas the market approach incorporated the use of the guideline company method.prior to our next scheduled annual impairment test, which could have a material adverse impact on our consolidated financial statements.

NOTE 8.    ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 31,December 31,
2011 20102012 2011
(In thousands)(In thousands)
Payroll and related expenses$80,720
 $73,054
$86,716
 $80,720
Interest41,344
 51,347
67,145
 41,344
Gaming liabilities76,591
 70,907
85,561
 76,591
Accrued expenses and other liabilities96,804
 83,161
125,120
 96,804
Total accrued liabilities$295,459
 $278,469
$364,542
 $295,459



144

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




NOTE 9.    NON-RECOURSE OBLIGATIONS OF VARIABLE INTEREST ENTITY
The non-recourse obligations of variable interest entity represent the outstanding debt all of which is classified as current, of LVE and is comprised of the following:
December 31,December 31,
2011 20102012 2011
(In thousands)(In thousands)
Non-recourse obligations of variable interest entity, current:      
Notes payable to members$29,686
 $22,487
$33,061
 $29,686
Construction and term loan facility119,052
 
Tax-exempt variable rate bonds73,000
 
      
Non-recourse obligations of variable interest entity, long term:      
Construction and term loan facility$119,980
 $120,572

 119,980
Tax-exempt variable rate bonds73,000
 100,000

 73,000
$192,980
 $220,572
Total non-recourse obligations of variable interest entity$225,113
 $222,666

Assets serving as collateral for these debt obligations, primarily consist of certain assets held for development with a carrying value of $163.8$163.5 million at December 31, 2011 and 2010,$163.8 million and restricted investments of $21.4 and 48.2$21.4 million at for each of the years ended December 31, 2012 and 2011, and 2010, respectively.

The consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010 includes $5.9include $1.5 million, $5.9 million and $15.2$15.2 million of losses, respectively, therelated to this consolidated variable interest entity. The consolidated statements of cash flows include $6.7for the years ended December 31, 2012, 2011 and 2010 reflect $2.3 million, $6.7 million and $21.4$21.4 million of net operating cash outflows, respectively, related to this consolidated variable interest entity; however, none of the offsetting consolidated income or operating cash inflows are available to service this debt, which is non-recourse and non-guaranteed by Boyd.

Construction and Term Loan Facility
In December 2007, LVE entered into a construction and term loan facility with two commercial banks with a committed amount of up to $143.5$143.5 million, of which $120.0$119.1 million and $120.6$120.0 million was were outstanding at December 31, 20112012 and 2010,2011, respectively. Proceeds from the construction loan were used to finance the construction of the central energy center and district energy system and central energy center.system. The loan is secured by the assets of LVE and does not contain financial covenants. The original loan maturities were as follows:

141


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011$83.1 million and 2010 and for the years ended December 31, 2011, 2010 and 2009

$4.2 million in 2011; $83.1 million in 2012 and 2011, respectively, with the remainder in 2013.

The construction loan bears interest at a variable rate based on the London InterBank Offered Rate ("LIBOR"). LVE entered into an interest rate swap with scheduled increasedincreases in the notional amount designed to fix the LIBOR portion of the interest rate on this debt until its maturity in November 2013, which was hedged against the outstanding debt. However, due to the construction delays, the outstanding amount of debt did not increase as fast as the contractual increases in notional amount of the swap, which rendered a portion of the swap ineffective, and as a result the swap was de-designated in July 2011. The effective interest rate on the outstanding construction loan, including the impact of the effective portion of the swap, was approximately 6.84% during the years ended December 31, 2011 and 2010.

During the year ended December 31, 2011, LVE repaid $0.6 million in principal on the construction loan. Proceeds from the construction loan were used to finance the construction of the district energy system and central energy center. The loan is secured by the assets of LVE and contains no financial covenants.

Tax-exempt Variable Rate Bonds
In December 2007, LVE issued $100.0$100 million of tax-exempt variable rate bonds through the State of Nevada Department of Business and Industry, which mature in October 2035. Unused proceeds from the tax-exempt, variable rate bonds are required to be escrowed pending approved construction expenditures. Such unused funds are reported as restricted investments inon our consolidated balance sheet.

The tax-exempt variable rate bonds bear interest at rates that are determined by a remarketing agent on a weekly basis. LVE entered into an interest rate swap with a total notional amount of $100.0$100 million that effectively fixes the underlying interest rate index on these bonds until November 2013. Investors in these bonds receive liquidity and credit support provided by a letter of credit from a commercial bank. This letter of credit expires in November 2013, but can be accelerated by the bank in the event of a default under the construction and term loan facility. The effective interest rate on these bonds, including the impact


145

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of the swapDecember 31, 2012 and the cost of the related letter of credit, was approximately 5.80% during2011 and for the years ended December 31, 2012, 2011 and 2010.2010




In July 2011, LVE retired $27.0$27 million of these tax-exempt bonds, using funds in its restricted investment account, which is held in escrow.

Events of Default
The central energy center and district energy system and central energy center are being financed by LVE with debt that is non-recourse to us. The outstanding balance of LVE's bank debt was approximately $193.0million and $220.6 million as of December 31, 2011 and 2010, respectively, consisting of borrowing under the construction and term loan facility of $120.0 million and $120.6 million and outstanding tax-exempt bonds of $73.0 million and $100.0 million as of December 31, 2011 and 2010, respectively. 

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

LVE intendsDisposition of Consolidated Variable Interest Entity
As discussed in Note 5, Assets Held for Development, and Note 24, Subsequent Events, on March 1, 2013, we entered into a definitive agreement to seek additional financing to completesell the facility once construction ofEchelon site for $350 million in cash. At such date, the resort resumes.Purchase Option Agreement was exercised, and prospectively, will no longer be consolidated in our consolidated financial statements based on the authoritative literature on consolidations.


NOTE 10.    LONG-TERM DEBT NET OF CURRENT MATURITIES
Long-term debt, net of current maturities consists of the following:

142146

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




December 31, 2011December 31, 2012
Outstanding Principal Unamortized Discount  Unamortized Origination Fees  Long-Term Debt, Net    Unamortized  
(In thousands)Outstanding Unamortized Origination Long-Term
Boyd Gaming Corporation Debt:       
Principal Discount Fees Debt, Net
(In thousands)
Boyd Gaming Long-Term Debt:       
Bank credit facility$1,632,750
 $(4,318) $(6,717) $1,621,715
$1,474,850
 $(5,001) $(3,214) $1,466,635
9.125% senior notes due 2018500,000
 
 (8,556) 491,444
500,000
 
 (7,320) 492,680
9.00% senior notes due 2020350,000
 
 
 350,000
6.75% senior subordinated notes due 2014215,668
 
 
 215,668
215,668
 
 
 215,668
7.125% senior subordinated notes due 2016240,750
 
 
 240,750
240,750
 
 
 240,750
Other11,071
 
 
 11,071
158,141
 (32,666) 
 125,475
$2,600,239
 $(4,318) $(15,273) $2,580,648
2,939,409
 (37,667) (10,534) 2,891,208
       
Peninsula Gaming Financing       
Bank credit facility854,400
 
 
 854,400
8.375% senior notes due 2018350,000
 
 
 350,000
Other494
 (3) 
 491
1,204,894
 (3) 
 1,204,891
Total Boyd Debt4,144,303
 (37,670) (10,534) 4,096,099
              
Borgata Debt:              
Bank credit facility40,200
 
 
 40,200
20,000
 
 
 20,000
9.50% senior secured notes due 2015398,000
 (3,271) (7,680) 387,049
398,000
 (2,525) (5,928) 389,547
9.875% senior secured notes due 2018393,500
 (2,366) (8,575) 382,559
393,500
 (2,103) (7,620) 383,777
$831,700
 $(5,637) $(16,255) $809,808
811,500
 (4,628) (13,548) 793,324
Less current maturities43,230
 
 
 43,230
61,570
 
 
 61,570
Long-term debt, net$3,388,709
 $(9,955) $(31,528) $3,347,226
$4,894,233
 $(42,298) $(24,082) $4,827,853
       

 December 31, 2010
 Outstanding Principal Unamortized Discount  Unamortized Origination Fees  Long-Term Debt, Net
 (In thousands)
Boyd Gaming Corporation Debt:       
Bank credit facility$1,425,000
 $
 $
 $1,425,000
9.125% senior notes due 2018500,000
 
 (9,794) 490,206
6.75% senior subordinated notes due 2014215,668
 
 
 215,668
7.125% senior subordinated notes due 2016240,750
 
 
 240,750
Other11,761
 
 
 11,761
 $2,393,179
 $
 $(9,794) $2,383,385
        
Borgata Debt:       
Bank credit facility60,900
 
 
 60,900
9.50% senior secured notes due 2015400,000
 (3,969) (9,319) 386,712
9.875% senior secured notes due 2018400,000
 (2,648) (9,594) 387,758
 $860,900
 $(6,617) $(18,913) $835,370
Less current maturities25,690
     25,690
Long-term debt, net$3,228,389
 $(6,617) $(28,707) $3,193,065

Boyd Gaming Corporation Debt
Bank Credit Facility
On December 3, 2010, we entered into an Amendment and Restatement Agreement among certain financial institutions (each a

143147

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




“Lender”
 December 31, 2011
     Unamortized  
 Outstanding Unamortized Origination Long-Term
 Principal Discount Fees Debt, Net
 (In thousands)
Boyd Gaming Long-Term Debt:       
Bank credit facility$1,632,750
 $(4,318) $(6,717) $1,621,715
9.125% senior notes due 2018500,000
 
 (8,556) 491,444
6.75% senior subordinated notes due 2014215,668
 
 
 215,668
7.125% senior subordinated notes due 2016240,750
 
 
 240,750
Other11,071
 
 
 11,071
 2,600,239
 (4,318) (15,273) 2,580,648
        
Borgata Debt:       
Bank credit facility40,200
 
 
 40,200
9.50% senior secured notes due 2015398,000
 (3,271) (7,680) 387,049
9.875% senior secured notes due 2018393,500
 (2,366) (8,575) 382,559
 831,700
 (5,637) (16,255) 809,808
Less current maturities43,230
 
 
 43,230
Long-term debt, net$3,388,709
 $(9,955) $(31,528) $3,347,226

Boyd Gaming Corporation Debt
Bank Credit Facility
Agreement
In December 2010, we entered into a Second Amended and Restated Credit Agreement among certain financial institutions (each a “Lender”), Bank of America, N.A., as administrative agent and letter of credit issuer and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit“Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the former credit facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the effective date. All capitalized terms used in this note not otherwise defined herein have the meanings ascribed to such terms in the Credit Facility.

In December 2012, we entered into the first amendment to the Second Amended and Restated Credit Agreement among certain financial institutions (collectively, the "Lenders"), and Bank of America, N.A., as administrative agent and letter of credit issuer. The blended interest rate for outstanding borrowings under our Amended Credit Facility was 4.2%amendment restates the definition of Consolidated EBITDA, consolidated Interest Coverage Ratio, Total Leverage Ratio and 3.8% atSecured Leverage Ratio (as defined below).


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 respectively. At December 31, 2011, approximately $1.63 billion was outstanding under our Amended Credit Facility, with $15.5 million allocated to support various letters of credit, leaving remaining contractual availability of approximately $136.8 million.




Amounts Outstanding
The net amounts outstanding under the Amended Credit Facility are comprised of the following:
 December 31, December 31,
 2011 2010 2012 2011
 
(In thousands)
 
(In thousands)
Extended Revolving Facility $807,000
 $572,636
 $660,000
 $807,000
Non-Extended Revolving Facility 
 327,364
Initial Term Loan 475,000
 500,000
 450,000
 475,000
Incremental Term Loan 338,965
 
Increased Term Loan 332,500
 338,965
Swing Loan 750
 25,000
 24,135
 750
 $1,621,715
 $1,425,000
Total outstanding borrowings under Credit Facility, netTotal outstanding borrowings under Credit Facility, net$1,466,635
 $1,621,715

Availability
As of December 31 2012, our Credit Facility is comprised of the following components and commitments:
 Original Commitment Present Commitment Remaining Availability
 
(In thousands)
Extended Revolving Facility$960,000
 $960,000
 $253,105
Initial Term Loan500,000
 500,000
 
Increased Term Loan
 350,000
 
Total commitments under Credit Facility$1,460,000
 $1,810,000
 $253,105

Extended Revolving Facility
Each of the Extending Lenders permanently reduced their commitments under the former credit facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3$3 billion to approximately $1.5$1.5 billion (excluding the non-extending amounts), which commitments may be increased from time to time by up to $500$500 million through additional revolving credit or term loans under the Amended Credit Facility. The applicable margin on

Lender Joinder Agreement
On May 30, 2012, we entered into a lender joinder agreement (the "Lender Joinder Agreement") among the outstanding balance on the Extended Revolving Facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.0% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Amended Credit Facility. The “base rate” under the Amended Credit Facility is the highest of (x)Company, Bank of America's publicly-announced prime rate, (y)America, N.A. ("Bank of America"), Deutsche Bank Trust Company Americas, JPMorgan Chase Bank, N.A. and UBS Loan Finance LLC, each as an increasing lender, and Bank of America, as the federal funds rate plus 0.50%, or (z)administrative agent, providing for, among other things, an incremental Class A Revolving Commitment (as defined in the Eurodollar rate for a one month period plus 1.00%.

TheCompany's Second Amended and Restated Credit Agreement, dated as of December 17, 2010, among the lenders party thereto, Bank of America, as administrative agent and letter of credit fees underissuer and Wells Fargo Bank, National Association, as swing line lender in the Amended Credit Facility remainamount of $150 million (the "Increased Revolving Commitment"). The Increased Revolving Commitment became effective and the same as thoseinitial revolving loans were funded thereunder on May 30, 2012.

Pursuant to the Lender Joinder Agreement, concurrently with the closing of the 9.00% senior notes due 2020 offering (see 9.00% Senior Notes due 2020 below), we were required to give an irrevocable notice of election to permanently reduce the Class A Revolving Commitment under the Credit Facility; however,Facility by $150 million, which became effective with the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility. Subject to certain conditions, amounts outstanding under the Amended Credit Facility may be prepaid without premium or penalty, and the unutilized portion of anyissuance of the commitments may be terminated without penalty.9.00% senior notes on June 8, 2012.

Initial Term Loan
The Amended Credit Facility included the conversion of certain outstanding revolving commitments to a term loan in the amount of $500$500 million (the "Initial Term Loan"). Pursuant to the terms of the Amended Credit Facility, the Initial Term Loan amortizes in an annual amount equal to 5% of the original principal amount thereof, commencing March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to term loans under the Amended Credit Facility are based upon, at the option of the Company, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio.

Incremental Term Loan
On November 2, 2011, the Company entered into the “Lender Joinder Agreement”, which increases the term loan commitments under the Amended Credit Facility by an aggregate amount of $350 million (the “Incremental Term Loan”).

144149

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010





The IncrementalIncreased Term Loan was funded on
In November 10, 2011, withwe exercised $350 million of the $500 million increase option under our Credit Facility through an Increased Term Loan. The proceeds beingfrom the Increased Term Loan were used to repay the outstanding Non-Extended Revolving Facility. The Non-Extended Revolving Facility, was terminated in full on November 10, 2011 by borrowing under the Extended Revolving Facility, which augmented the proceeds from the Incremental Term Loan in an amount sufficient to repay the outstanding balance of the Non-Extended Revolving Facility in full.
and all related commitments thereunder were terminated. Pursuant to its terms, the IncrementalIncreased Term Loan amortizes in an annual amount equal to 5.0%5% of the original principal amount thereof, commencing in March 2012 and payable on a quarterly basis. At any time and to the extent that the IncrementalIncreased Term Loan is a Eurodollar Rate Loan, the IncrementalIncreased Term Loan shall bear interest on the outstanding principal amount thereof for each quarterly interest period at a rate per annual equal to the “effective Eurodollar Rate” for such period plus 4.75%, and at any time and to the extent that the IncrementalIncreased Term Loan bears interest at the base rate, the outstanding principal amount thereof at a rate per annum equal to the base rate for such Interest Periodperiod plus 3.75%.

Interest and Fees
The applicable margin on the outstanding balance on the Extended Revolving Facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.00% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Credit Facility. The “base rate” under the Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%.

The letter of credit fees under the Credit Facility remain the same as those under the Credit Facility; however, the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility. Subject to certain conditions, amounts outstanding under the Credit Facility may be prepaid without premium or penalty, and the unutilized portion of any of the commitments may be terminated without penalty.

The blended interest rate for outstanding borrowings under our Credit Facility was 4.2% and 4.2% at December 31, 2012 and 2011, respectively. At December 31, 2012, approximately $1.47 billion was outstanding under our Credit Facility, with $14.5 million allocated to support various letters of credit, leaving remaining contractual availability of approximately $253.1 million

Guarantees
The Company's obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Amended Credit Facility.

Financial and Other Covenants
The Amended Credit Facility contains certain financial and other covenants, as amended December 27, 2012, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio of 2.00 to 1.00 through March 31, 2013, (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below), (iii) establishing a maximum permitted secured leverage ratio (discussed below), (iv) imposing limitations on the incurrence of indebtedness, (v) imposing limitations on transfers, sales and other dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.
The minimum consolidated Interest Coverage Ratio (as defined in our Amended Credit Facility) is calculated as (a) the twelve-month trailing Consolidated EBITDA, (as defined in our Amended Credit Facility) to (b) consolidated interest expense (as also defined in our Amended Credit Facility).expense.
The maximum permitted consolidated Total Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility).EBITDA. The following table provides our maximum Total Leverage Ratio, as amended December 27, 2012, during the remaining term of the Credit Facility.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




 Maximum Total
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 2012 through September 30, 20137.75to1.00
December 31, 20137.50to1.00
March 31, 2014 through September 30, 20147.25to1.00
December 31, 2014 and March 31, 20157.00to1.00
June 30, 2015 and thereafter6.75to1.00
The maximum permitted Secured Leverage Ratio is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA. The following table provides our maximum Secured Leverage Ratio, as amended December 27, 2012, during the remaining term of the Amended Credit Facility.
Maximum Total
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 2010 through and including December 31, 20117.75 to 1.00
March 31, 2012 through and including September 30, 20127.50 to 1.00
December 31, 2012 and March 31, 20137.25 to 1.00
June 30, 20137.00 to 1.00
September 30, 2013 and December 31, 20136.75 to 1.00
March 31, 20146.50 to 1.00
June 30, 20146.25 to 1.00
September 30, 20146.00 to 1.00
December 31, 20145.75 to 1.00
March 31, 2015 and thereafter5.50 to 1.00
The maximum permitted Secured Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). The following table provides our maximum Secured Leverage Ratio during the remaining term of the Amended Credit Facility.

145


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Minimum Secured
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 2010 through and including March 31, 20124.50 to 1.00
June 30, 2012 and September 30, 20124.25 to 1.00
December 31, 2012 and March 31, 20134.00 to 1.00
June 30, 2013 and September 30, 20133.75 to 1.00
December 31, 2013 and March 31, 20143.50 to 1.00
June 30, 2014 and thereafter3.25 to 1.00

 Maximum Secured
For the Trailing Four Quarters EndingLeverage Ratio
December 31, 20124.25to1.00
March 31, 2013 through September 30, 20134.50to1.00
December 31, 20134.25to1.00
March 31, 2014 through December 31, 20144.00to1.00
March 31, 20153.75to1.00
June 30, 2015 and thereafter3.50to1.00
Compliance with Financial Covenants
We believe that, , at December 31, 2011, we were in compliance with the Amended Credit Facilityour debt covenants, including the maximum consolidated Total Leverage Ratio, the maximum Secured Leverage Ratio and the minimum consolidated Interest Coverage Ratio the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, at December 31, 2011, were 2.50 to 1.00, 6.80 to 1.00 and 4.27 to 1.00, respectively.

At December 31, 2011, assuming our current level of Consolidated Funded Indebtedness remains constant, we estimate that an 12.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to exceed our maximum permitted consolidated Total Leverage Ratio covenant for that period. In addition, at December 31, 2011, assuming our current level of Secured Indebtedness remains constant, we estimate that 5.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to exceed our maximum permitted Secured Leverage Ratio covenant for that period. Additionally, at December 31, 2011, assuming our current level of interest expense remains constant, we estimate that a 20.1% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to December 31, 2011, would cause us to go below our minimum consolidated Interest Coverage Ratio covenant for that period.2012.

Debt Financing Costs
In November 2011, we repaid the amounts outstanding under the non-extended credit facility, with proceeds from the issuance of the Incremental Term Loan. The unamortized deferred loan fees remaining on that borrowing in the amount of approximately $0.4 million were recorded in interest expense during the year ended December 31, 2011. Additionally, in conjunction with the Amended Credit Facility and the subsequent issuance of the IncrementalIncreased Term Loan, we incurred approximately $13.9$20.6 million and $20.6$13.9 million, respectively, in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Amended Credit Facility. DueIn May 2012, in conjunction with the Lender Joinder Agreement and the subsequent issuance of the Incremental Term Loan, we incurred approximately $1.5 million of incremental debt financing costs, which were expensed when this borrowing was repaid, due to the decreasereduction in borrowing capacity uponavailable commitment under the amendment discussed herein, we recorded incremental interest expense of approximately $1.8 million during the year ended December 31, 2009, related to the accelerated amortization of deferred debt costs related to the Amended Credit Facility.

Senior Notes
9.125% Senior Notes due December 2018
Significant Terms
On November 10, 2010, we issued, through a private placement, $500$500 million aggregate principal amount of 9.125% senior notes due December 2018. The notes require semi-annual interest payments on December 1 and June 1 of each year, which commenced on June 1, 2011. The notes will mature on December 1, 2018 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. The 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 indenture governing the notes) 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. We believe that we are in compliance with these covenants at December 31, 2011.2012. In addition, upon the occurrence of a change of control (as defined in the indenture governing the notes), we will be required, unless certain conditions are met, to offer to repurchase the notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, 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 notes. At any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.125% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition,

146


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

prior to December 1, 2014, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole

151

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




premium. Subsequent to December 1, 2014, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.563% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.
 
Registration Rights Agreement
Pursuant to the registration rights agreement entered into with the initial purchasers of these senior notes at the time of the private placement, on September 15, 2011, the Company commenced an offer to exchange all of the outstanding $500$500 million aggregate principal amount of the notes that have been registered under the Securities Act of 1933. On October 18, 2011, the expiration date of the exchange offer, 100% of the notes were validly tendered and accepted for exchange.

Senior Notes
9.00% Senior Notes due July 2020
Significant Terms
On June 8, 2012, we issued $350 million aggregate principal amount of 9.00% senior notes due July 2020. The notes require semiannual interest payments on January 1 and July 1 of each year, commencing on January 1, 2013. The notes will mature on July 1, 2020 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. The notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restrictive subsidiaries (as defined in the indenture governing the notes) 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. We believe that we are in compliance with these covenants at December 31, 2012. In addition, upon the occurrence of a change in control (as defined in the indenture governing the notes), we will be required, unless certain conditions are met, to offer to repurchase the notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, 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 purchase the notes. At any time prior to July 1, 2015, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109% of the principal amount thereof, plus accrued and unpaid interest and additional interest (as defined in the indenture), if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to July 1, 2016, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding, the applicable redemption date, plus a make whole premium. Subsequent to July 1, 2016, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.50% in 2016 to 100% in 2018 and thereafter, plus accrued and unpaid interest.

Registration Rights Agreement
Pursuant to the registration rights agreement entered into with the initial purchasers of these senior notes on June 8, 2012, the date the 9.00% notes were issued, we agreed that, subject to certain suspension and other rights provided in the Registration Rights Agreement, we will file a registration statement with the SEC with respect to a registered exchange offer to exchange the 2020 notes for new notes with terms substantially identical in all material respects to the 2020 notes, consummate the exchange offer within 365 days of the issuance of the 2020 notes, and in certain circumstances, if required by the registration rights agreement, file a shelf registration statement.

Senior Subordinated Notes
6.75% Senior Subordinated Notes due April 2014 
Significant Terms
On March 7, 2013, we issued a notice of election to redeem $150 million of our 6.75% Senior Subordinated Notes due April 2014 (the "6.75% Notes) outstanding on April 6, 2013. The 6.75% Notes will be redeemed at a redemption price of 100.00% of their principal amount plus accrued and unpaid interest to the redemption date, April 6, 2013. On April 15, 2004, we issued, through a private placement, $350$350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all, except for $50$50 thousand in aggregate principal amount of these notes, were exchanged for substantially similar notes that were registered with the SEC. The notes require semi-annual interest payments on April 15 and October 15 of each year, through April 2014, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at December 31, 2011.2012. Presently, we may redeem all or a portion of the notes at a redemption price of 100% plus accrued and unpaid interest through maturity in 2014.


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Senior Subordinated Notes
7.125% Senior Subordinated Notes due February 2016
Significant Terms
On January 30, 2006, we issued $250$250 million principal amount of 7.125% senior subordinated notes due February 2016. The notes require semi-annual interest payments on February 1 and August 1 of each year, through February 2016, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at December 31, 2011. We2012. Presently, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.563% in 2011 to 100% in 2014 and thereafter, plus accrued and unpaid interest.
Repurchases
Repurchase of Senior Subordinated Notes
We did not repurchase any of our senior subordinated or senior subordinated notes during the yearyears ended December 31, 2012 or 2011. In addition to the tender for purchase and call for redemption of all of our outstanding 7.75% senior subordinated notes due 2012, as described below, during the yearsyear ended December 31, 2010, and 2009, we also purchasedpurchase and retired $33.0$33 million in principal amount of our senior subordinated notes during the year ended December 31, 2010. The total purchase price of the notes was $28.9$28.9 million, resulting in a gain of $3.6$3.6 million, net of associated deferred financing fees, which was recorded on our consolidated statements of operations for the respective period. The transactions were funded by the availability under our former bank credit facility.

7.75% Senior Subordinated Notes due December 2012
Significant Terms
In November 2010, we tendered for purchase all of our outstanding 7.75% senior subordinated notes due 2012. Approximately $92.1 million principal amount of the 7.75% senior subordinated notes due 2012 were tendered pursuant to our tender offer. We paid $95.3 million in connection with the tender offer, including accrued interest of $2.9 million, and recognized a loss on such tender of $0.8 million, based on the difference between the consideration fee, redemption price and the net carrying value of the notes in addition to unamortized debt financing costs written off in conjunction with the purchase of the notes. Additionally, in December 2010, we called the remaining 7.75% senior subordinated notes due 2012 at par, which had a principal balance of $66.8 million. We recognized a loss of $0.4 million upon calling such notes, which consisted of our write-off of the remaining unamortized debt financing costs associated with the notes.

Debt Service Requirements
Debt service requirements under our current outstanding senior subordinated notes and senior notes consist of semi- annual interest

147


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

payments (based upon fixed annual interest rates ranging from 6.75% to 9.125%) and principal repayment of our 6.75% and 7.125% senior subordinated notes due on April 15, 2014 and February 1, 2016, respectively, and principal repayment of our 9.125% and 9.00% senior notes due on December 1, 2018 and July 1, 2020, respectively.

Other Notes
On November 20, 2012, Boyd completed its previously announced acquisition of Peninsula Gaming pursuant to the Merger Agreement entered into on May 16, 2012, by and among Boyd, Boyd Acquisition II, LLC ("HoldCo"), Boyd Acquisition Sub, LLC, an indirect wholly owned subsidiary of Boyd (“Merger Sub”), PGP and Peninsula Gaming, and HoldCo issued a promissory note that HoldCo entered into upon the closing of the acquisition (the "HoldCo Note"), in favor of PGP, for approximately $147.8 million. Discount on the note was $34.2 million leaving a note payable to PGP in the amount of $113.6 million, which is still preliminary and subject to purchase accounting adjustments. The HoldCo Note provides for interest at a per annum rate equal to (i) from the issue date to but excluding the first anniversary of the issue date, ) zero percent, (ii) from the first anniversary of the issue date to but excluding the second anniversary of the issue date, six percent, (iii) from the second anniversary of the issue date to but excluding the third anniversary of the issue date, eight percent, and (iv) from and after the third anniversary of the issue date, ten percent. At the option of HoldCo, interest may be paid in cash or paid-in-kind. Accrued but unpaid interest is added to the principal balance of the HoldCo Note semi-annually. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. HoldCo may prepay the obligations under the HoldCo Note at any time, in whole or in part, without premium or penalty.

Peninsula Gaming Debt
Bank Credit Facility
Credit Agreement
On November 20, 2012, Boyd completed its previously announced acquisition of Peninsula Gaming pursuant to the Merger Agreement and Merger Sub entered into a Credit Agreement (the "Peninsula Credit Agreement") dated as of November 14, 2012, with the lenders party thereto and Bank of America, N.A., as administrative agent, collateral agent, swing line lender, and L/C issuer.
Pursuant to the terms of the Merger Agreement, upon consummation of the Merger, Peninsula Gaming assumed all assets and liabilities of Merger Sub and became the borrower under the Credit Agreement (as defined below) and, together with Peninsula Gaming Corp. upon consummation of the Finance Company Merger, the issuer of Peninsula Gaming Senior Notes (as defined below)

The Peninsula Credit Agreement provides for a $875.0 million senior secured credit facility (the “Peninsula Credit Facility”), which consists of (a) a term loan facility of $825.0 million (the “Peninsula Term Loan”) and (b) a revolving credit facility of $50.0

153

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




million (the “Peninsula Revolver”). The Peninsula Term Loan was fully funded concurrently with the closing of the Peninsula Merger. A portion of the Peninsula Revolver was funded concurrently with the closing of the acquisition. The maturity date for obligations under the Peninsula Credit Facility is November 17, 2017.

Interest and Fees
The interest rate on the outstanding balance of the Peninsula Term Loan is based upon, at Peninsula Gaming's option either: (i) the Eurodollar rate plus 4.50%, or (ii) the base rate plus 3.50%. The interest rate on the outstanding balance from time to time of the Revolving Loans is based upon, at Peninsula Gaming's option either: (i) the Eurodollar rate plus 4.00%, or (ii) the base rate plus 3.00%. The base rate under the Peninsula Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one-month period plus 1.00%. The Peninsula Credit Facility also establishes, with respect to outstanding balances under the Term Loan, a minimum Eurodollar rate for any interest period of 1.25%. In addition, Peninsula Gaming will incur a commitment fee on the unused portion of the Peninsula Credit Facility at a per annum rate of 0.50%.

The blended interest rate for outstanding borrowings under our Peninsula Credit Facility was 5.7% at December 31, 2012. At December 31, 2012, approximately $29.4 million was outstanding under the Peninsula Revolver, with $7.9 million allocated to support various letters of credit, leaving remaining contractual availability of $12.7 million.

Guarantees and Collateral
Peninsula Gaming's obligations under the Peninsula Credit Facility, subject to certain exceptions, are guaranteed by Peninsula Gaming's subsidiaries and are secured by the capital stock and equity interests of Peninsula Gaming's subsidiaries. In addition, subject to certain exceptions, Peninsula Gaming and each of the guarantors granted the collateral agent first priority liens and security interests on substantially all of the real and personal property (other than gaming licenses and subject to certain other exceptions) of Peninsula Gaming and its subsidiaries as additional security for the performance of the obligations under the Peninsula Credit Facility. The obligations under the Revolver rank senior in right of payment to the obligations under the Term Loan.

Optional and Mandatory Prepayments
The Peninsula Credit Facility requires that Peninsula Gaming prepay the loans with proceeds of any significant asset sale or event of loss. The Peninsula Credit Facility also requires fixed quarterly amortization of principal equal to 0.25% of the original aggregate principal amount of the Peninsula Term Loan beginning March 31, 2013 and requires that Peninsula Gaming use a portion of its annual excess cash flow to prepay the loans. The Peninsula Revolver can be terminated without premium or penalty, upon payment of the outstanding amounts owned with respect thereto. The Peninsula Term Loan can be prepaid without premium or penalty, except that a 1.0% premium is payable in connection with prepayments of the Peninsula Term Loan prior to November 20, 2013 through the issuance of indebtedness having a lower interest rate that the interest rate payable in respect of the Peninsula Term Loan.

Financial and Other Covenants
The Peninsula Credit Facility contains customary affirmative and negative covenants (and are subject to customary exceptions). Peninsula Gaming is required to maintain (i) maximum consolidated interest coverage ratio over each twelve month period ending on the last fiscal day of each quarter (discussed below), (ii) beginning with the fiscal quarter ended March 31, 2013, a minimum consolidated interest coverage ratio of 2.0 to 1.0 as of the end of each calendar quarter, and (iii) a maximum amount of capital expenditures for each fiscal year.

The minimum consolidated Interest Coverage Ratio is calculated as (a) the twelve-month trailing Consolidated EBITDA, to (b) consolidated interest expense.


154

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




The maximum permitted consolidated Leverage Ratio is calculated as Consolidated Fund Indebtedness less Excess Cash to twelve-month trailing Consolidated EBITDA. The following table provides our maximum Consolidated Leverage Ratio during the remaining term of the Peninsula Credit Facility.

   Maximum Consolidated
For the Trailing Four Quarters Ending Leverage Ratio
March 31, 2013 through September 30, 20137.25to1.00
December 31 2013 through June 30, 20147.00to1.00
September 30, 2014 through December 31, 20146.75to1.00
March 31, 2015 through June 30, 20156.50to1.00
September 30, 2015 through December 31, 20156.25to1.00
March 31, 2016 through June 30, 20166.00to1.00
September 30, 2016 through December 31, 20165.75to1.00
March 31, 2107 through June 30, 20175.50to1.00
September 30, 2017 and thereafter5.25to1.00

Capital Expenditures should not be made by Peninsula Gaming or any of its Restricted Subsidiaries (excluding (i) capital expenditures which adds to or improves any existing property and (ii) capital expenditures made prior to the first anniversary of the Funding Date relating to integration and/or transition of business systems) in an aggregate amount in excess of $20.0 million in any fiscal year; provided that no default has occurred and is continuing or would result from such expenditure.

Compliance with Financial and Other Covenants
We believe that, at December 31, 2012, we were in compliance with our financial covenants, including capital expenditures and the minimum consolidated Interest Coverage Ratio and the maximum permitted consolidated Leverage Ratio at December 31, 2012.

Debt Financing Costs
In conjunction with the Credit Facility, we incurred approximately $33.8 million in debt financing costs, that have been deferred and are being amortized over the term of the Credit Facility using the effective interest method.

Senior Notes
Peninsula Gaming 8.375% Senior Notes Due 2018
Significant Terms
On August 16, 2012, we closed and offering of $350 million aggregate principal amount of 8.375% senior notes due February 2018 by Merger Sub and Boyd Acquisition Finance Corp. (“Boyd Finance Co.,” and together with Merger Sub, the “Issuers”), a direct wholly owned subsidiary of Merger Sub. The notes were issued pursuant to an Indenture dated August 16, 2012 (the "Indenture") by and among the Issuers, and U.S. Bank National Association, as trustee (the "Trustee"). The consummation of the acquisition of Peninsula Gaming occurred on November 20, 2012, at which time, Peninsula Gaming and PGC assumed the obligations of the Merger Sub and Boyd Finance Co. and became the Issuers under the Indenture. The Indenture provides that the Notes bear interest at a rate of 8.375% per annum. The Notes mature on February 15, 2018. Prior to the consummation of the acquisition, the Notes were not guaranteed. Upon the consummation of the acquisition, the Notes are fully and unconditionally guaranteed, on a joint and several basis, by Peninsula Gaming's subsidiaries (other than PGP). The 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 Indenture) to incur additional indebtedness or liens, pay dividends or make distributions, make certain investments, and sell or merge with other companies. We believe that we are in compliance with these covenants at December 31, 2012. 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 notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, 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 notes. At any time prior to August 15, 2014, the Issuers may redeem up to 35% of the aggregate principal amount of the Notes at a redemption price equal to 108.375% of the principal amount thereof, plus accrued and unpaid interest, up to, but excluding, the applicable redemption date, with the net cash proceeds that the Issuers raise in one or more equity offerings. In addition, prior to August 15, 2014, the Issuers may redeem the Notes, in whole or in part,

155

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to August 15, 2014, we may redeem all or a portion of the Notes at a redemption prices (expressed as percentages of the principal amount) ranging from 106.281% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.
The senior notes have not been, and will not be, registered under the Securities Act of 1933, as amended, (the “Securities Act”) and will be offered only to: (i) qualified institutional buyers as defined in Rule 144A under the Securities Act; and (ii) outside the United States to non-U.S. persons in compliance with Regulation S under the Securities Act.

Debt Financing Costs
In conjunction with the issuance of the Notes, we incurred approximately $14.2 million in debt financing costs that have been deferred and are being amortized over the term of the Notes using the effective interest method.
Financial and Other Covenants
The PGL credit facility is subject to guarantee, collateral requirements and certain restrictive covenants that, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the Indenture) to incur additional indebtedness or liens, pay dividends or make distributions, make certain investments, and sell or merge with other companies.

Other
KSC has agreements with various slot vendors to finance the purchase of slot machines over a period of twelve months at zero percent financing for the interim phase of the Kansas Star development project. The total financing under these agreements was $22.3 million with an imputed discount of $1.0 million. As of December 31, 2012, KSC had $0.5 million recorded related to slot machine financing at KSC. Monthly financing payments conclude February 2013.

Borgata Debt
Borgata Bank Credit Facility
Significant Terms
On August 6, 2010, Marina District Finance Company, Inc. (the “MDFC”) announced that it had closed a $950$950 million debt financing, consisting of the establishment of a $150$150 million new payment priority secured revolving credit facility (the "Borgata bank credit facility") and the issuance of $800$800 million of aggregate principal amount of notes. MDFC is a wholly-owned subsidiary of Marina District Development Company ("MDDC"), which develops and owns Borgata, and which is the guarantor of both the Borgata bank credit facility and the notes. The proceeds from the financing were used to (i) pay fees and expenses related to the financing; (ii) repay the former credit facility; and (iii) make a one-time distribution to Borgata's joint venture owners.

On November 11, 2011, MDFC entered into a First Amendment to Credit Agreement (the "Borgata bank credit facility"First Borgata Credit Facility Amendment") among MDFC, MDDC, certain other financial institutions (each a "Lender""Borgata Lender", and collectively the "Lenders""Borgata Lenders") and Wells Fargo, National Association ("Wells Fargo"), as administrative agent (in such capacity, "Administrative Agent") for the Borgata Lenders. The terms of the First Borgata Credit Facility Amendment modifies certain terms of the Borgata bank credit facility among Borgata, the Borgata Lenders from time to time party thereto, the Administrative Agent, and Wells Fargo.

The On December 27, 2012, MDFC entered into a Second Amendment to Credit Agreement among MDFC, MDDC ("Borgata bank credit facility Amendment: (i) reduces the aggregate commitments underLenders") and Wells Fargo, as administrative agent for the Borgata bank credit facility to a maximum amount of $75 million; (ii)Lenders that (i) decreases the minimum Consolidated EBITDA (as defined intherein) to $110 million for fiscal quarters ending December 31, 2012 and thereafter, (ii) modifies the Borgata bank credit facility)definition of Consolidated EBITDA to $125exclude certain losses, charges, and expenses, (iii) adjusts the calculation of Consolidated EBITDA such that for the fiscal quarter ending December 31, 2012 through the fiscal quarter ending September 30, 2013, Consolidated EBITDA will be computed by including the four fiscal quarters with the highest Consolidated EBITDA out of the most recently ended five fiscal quarters, (iv) reduces the Aggregate Commitments (as defined therein) to $60 million for a trailing-twelve month period ending on, (v) modifies the last dayUse of a calendar quarter; (iii) eliminatesProceeds covenant to provide that the covenant requiring Borgataproceeds of revolving loans can only be used to have a minimumrepurchase or redeem MDFC's senior secured notes if, after giving affect thereto, the aggregate amount of cash, cash equivalents,outstanding loans and unused commitments; and (iv) adds a covenant prohibiting Borgata from borrowingletters of credit under the Borgata bank credit facility to purchase itsdoes not exceed $50 million and (vi) adds a covenant prohibiting MDFC and MDDC from repurchasing or redeeming MDFC's senior secured notes at any time whenunless Consolidated EBITDA was at least $125 million for the total amount outstanding under the Borgata bank credit facility is $65 million or more.most recently ended period of four consecutive fiscal quarters prior thereto.


156

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




As amended, the Borgata bank credit facility provides for a $75$60 million senior secured revolving credit facility and matures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of Borgata's assets, subject to certain exceptions. The obligations under the Borgata bank credit facility have priority in payment to Borgata's senior secured notes.

Guarantees
Neither Boyd Gaming Corporation, nor its subsidiaries are guarantors of the Borgata bank credit facility, as amended.

Interest Rate
Outstanding borrowings under the Borgata bank credit facility, as amended, accrue interest at a selected rate based upon either: (i) highest of (a) the agent bank's quoted prime rate, (b) the one-month Eurodollar rate plus 1.00%, or (c) the daily federal funds rate plus 1.50%, and in any event not less than 1.50% (such highest rate, the "base rate"), or (ii) the Eurodollar rate, plus with respect to each clause (i) and (ii) an applicable margin as provided in the Borgata bank credit facility. In addition, a commitment fee is incurred on the unused portion of the Borgata bank credit facility ranging from 0.50% per annum to 1.00% per annum.

At December 31, 2011,2012, the outstanding balance under the Borgata bank credit facility, as amended, was $40.2$20.0 million, which bore an interest rate of 4.4%4.94%. Contractual availability under the Borgata bank credit facility, as amended, at December 31, 20112012 was $34.8 million.$40.0 million.
Financial and Other Covenants
The Borgata bank credit facility, as amended, contains certain financial and other covenants, including, without limitation, (i) establishing a minimum consolidated EBITDA (as defined in the Borgata bank credit facility) of $125$110 million over each trailing twelve-month period ending on the last day of each calendar quarter; (ii) imposing limitations on MDFC's ability to incur additional debt; and (iii) imposing restrictions on Borgata's ability to pay dividends and make other distributions, make certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

Compliance with Financial Covenants
We believe that MDFC was in compliance with the amended Borgata bank credit facility covenants, specificallyincluding the minimum consolidated EBITDA, which, at December 31, 2011, was $160.0 million.EBITDA.

148


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009


Debt Financing Costs
In conjunction with the Borgata bank credit facility and the amendment thereto, during the years ended December 31, 2012, 2011 and 2010, we incurred approximately $1.2incremental debt financing costs of $0.4 million, $1.2 million and $3.0$3.0 million, respectively, related to the Borgata bank credit facility in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Borgata bank credit facility. During the year ended December 31, 2011, Borgata also accelerated the amortization of approximately $1.0 million of the net outstanding deferred loan fees, which adjusted the fees by an amount representing the pro rated reduction in borrowing capacity under the Borgata credit facility.
Borgata Senior Secured Notes
9.5% Senior Secured Notes Due 2015
Significant Terms
In August 2010, MDFC issued, through a private placement, $400$400 million principal amount of 9.5% senior secured notes due October 2015, at an issue price of 98.943%, resulting in a discount at issuance of $4.2 million.$4.2 million. The notes require semi-annual interest payments on April 15 and October 15, commencing April 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contains covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at December 31, 2011.2012.

At any time prior to October 15, 2013, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until October 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.50% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to October 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after October 15, 2013, MDFC shall have the option to redeem the 2015 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.75% beginning on October 15, 2013 to 102.375% beginning on October 15, 2014, plus accrued and unpaid interest to the applicable redemption date.

157

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Borgata Senior Secured Notes
9.875% Senior Secured Notes Due 2018
Significant Terms
In August 2010, MDFC issued, through a private placement, $400$400 million principal amount of 9.875% senior secured notes due August 2018, at an issue price of 99.315%, resulting in an original issue discount of $2.7 million.$2.7 million. The notes require semi-annual interest payments on February 15 and August 15, commencing February 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at December 31, 2011.2012.

At any time prior to August 15, 2014, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until August 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to August 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after August 15, 2013, MDFC shall have the option to redeem the 2018 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.938% beginning on August 15, 2014, to 102.469% beginning on August 15, 2015, to 100% beginning on August 15, 2016 and thereafter, plus accrued and unpaid interest, to the applicable redemption date.
Original Issue Discount
The original issue discount has been recorded as an offset to the principal amount of these notes and is being accreted to interest expense over the term of the notes using the effective interest method. At December 31, 2011,2012, the effective interest rate on the 9.50%9.5% notes due 2015 notes and the 9.875% notes due 2018 was 10.2% and 10.3%, respectively.

Repurchase of Senior Secured Notes
During the year ended December 31, 2011, MDFC repurchased and retired $8.5$8.5 million, principal amount, in total, of their senior

149


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

secured notes, which included $2.0$2.0 million of the 9.5% notes and $6.5$6.5 million of the 9.875% notes. The total purchase price of the notes was $8.2$8.2 million, resulting in a gain of $0.1$0.1 million, net of associated deferred financing fees, which is recorded as a gain on early retirement of debt in our consolidated statement of operations during the year ended December 31, 2011.

Indenture
The indenture governing both the 9.5% notes and the 9.875% notes allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, our coverage ratio (as defined in the indenture, essentially a ratio of consolidated EBITDA to fixed charges, including interest) for a trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Such pro forma coverage ratio was above 2.0 to 1.0 at the dates in which these respective tranches of senior secured notes were issued; however, at December 31, 2012, our coverage ratio (as defined in the indenture) is below 2.0 to 1.0. Accordingly, the indenture prohibits us from incurring new indebtedness; however, we may still borrow under the $60 million senior secured credit facility. At December 31, 2012, the outstanding balance under the Borgata bank credit facility was $20.0 million leaving contractual availability of $40.0 million.


158

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Scheduled Maturities of Long-Term Debt
The scheduled maturities of long-term debt, as discussed above, are as follows:

For the Year Ending December 31,Boyd Gaming Peninsula Gaming Borgata Total
Boyd Gaming Long -Term Debt Borgata Long-Term Debt  Total Long-Term Debt(In thousands)
(In thousands)
2012$43,230
 $
 $43,230
For the year ending December 31,       
201352,841
 
 52,841
$52,841
 $8,729
 $
 $61,570
2014258,168
 40,200
 298,368
258,168
 8,262
 20,000
 286,430
20151,505,250
 398,000
 1,903,250
1,389,850
 8,253
 398,000
 1,796,103
2016240,750
 
 240,750
240,750
 8,250
 
 249,000
2017
 821,400
 
 821,400
Thereafter500,000
 393,500
 893,500
997,800
 350,000
 393,500
 1,741,300
$2,600,239
 $831,700
 $3,431,939
Total outstanding principal of long-term debt$2,939,409
 $1,204,894
 $811,500
 $4,955,803


NOTE 11.    INCOME TAXES

Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are provided to record the effects of temporary differences between the tax basis of an asset or liability and its amount as reported in our consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.
Deferred tax assets and liabilities presented on the consolidated balance sheets are as follows:

December 31,December 31,
2011 20102012 2011
(In thousands)(In thousands)
Current deferred tax liability$7,473
 $
Non-current deferred tax liability$379,958
 $362,174
139,943
 379,958
Current deferred tax asset21,570
 8,149
3,561
 21,570
Net deferred tax liability$358,388
 $354,025
$143,855
 $358,388


159

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




The components comprising our deferred tax assets and liabilities are as follows.follows:

150


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

December 31,December 31,
2011 20102012 2011
(In thousands)(In thousands)
Deferred tax assets      
Difference between book and tax basis of property$114,742
 $
Federal net operating loss carryforwards39,996
 11,504
Share-based compensation$25,465
 $23,584
28,532
 25,465
State net operating loss carryforwards26,230
 13,883
Reserve for employee benefits14,159
 12,342
14,647
 14,159
Federal net operating loss carryforwards11,504
 
State net operating loss carry-forwards, net of federal effect9,024
 9,685
Provision for doubtful accounts4,807
 4,818
Preopening expense4,141
 2,587
8,155
 4,141
Tax credit carryforwards2,722
 1,430
4,309
 2,722
Provision for doubtful accounts3,709
 4,807
Reserve differential for gaming activities596
 1,307
2,510
 596
Derivative instruments market adjustment
 4,229
Other9,697
 7,714
16,322
 19,259
Gross deferred tax assets82,115
 67,696
259,152
 96,536
Valuation allowance(11,238) (11,987)(204,583) (11,238)
Deferred tax assets, net of valuation allowance70,877
 55,709
54,569
 85,298
      
Deferred tax liabilities      
Difference between book and tax basis of:   
Property$243,812
 $246,841
Intangible assets152,140
 132,898
State tax liability, net of federal effect19,208
 16,223
Difference between book and tax basis of intangible assets161,214
 152,140
State tax liability19,389
 28,770
Prepaid services and supplies11,068
 6,723
Gain on early retirement of debt6,731
 6,731
6,731
 6,731
Prepaid services and supplies6,723
 5,780
Difference between book and tax basis of property
 243,812
Other651
 1,261
22
 5,510
Gross deferred tax liabilities429,265
 409,734
198,424
 443,686
      
Deferred tax liabilities, net$358,388
 $354,025
$143,855
 $358,388
Valuation Allowance on Deferred Tax Assets

At December 31, 2011,2012, we had unused federal general business tax credits of approximately $2.7$4.3 million which may be carried forward or used until expiration beginning in 2030. We have a federal income tax net operating loss of approximately $41.0$104.0 million of, which $8.3 million will be carried back to 2010 and $32.7 million may be carried forward or used until expiration beginning in 2031. We also have state income tax net operating loss carryforwards of approximately $170.7$365.9 million primarily in the states of Indiana and Louisiana,, which may be used to reduce future state income taxes. The state net operating loss carryforwards will expire in various years ranging from 20122013 to 2031,2032, if not fully utilized.

As a result of certain realization requirements of ASC 718, Compensation - Stock Compensation, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2012, and December 31, 2011, that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation that are greater than the compensation recognized for financial reporting. Equity will be increased if and when such deferred tax assets are ultimately realized. The Company uses ASC 740 ordering when determining when excess tax benefits have been realized.

Valuation Allowance on Deferred Tax Assets
Management assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. In evaluating our ability to recover deferred tax assets, we consider whether it is more likely

160

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2012.

As of December 31, 2012, we concluded that it was more likely than not that the benefit from certain deferred tax assets would not be realized. As a result of our analysis, a valuation allowance of $182.5 million has been recorded on our federal income tax net operating loss carryforwards and certain other deferred tax assets. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. A valuation allowance in the amount of $22.1 millionhas also been recorded on a material portion of our state netincome tax operating losses, primarily in Indiana, along with certain other state deferred tax assets, which are not presently expected to be realized. Certain state net operating losses arising from stock option exercises will result in approximately $1.3 million of additional paid in capital, if realized.
Our valuation allowance also includes amounts related to goodwill acquired in connection with the purchase of one of our operating properties that was closed in 2007. Realization of a tax benefit associated with this attribute is contingent on the occurrence of future events which, at present, we do not believe likely to occur.
Provision (Benefit) for Income Taxes
A summary of the provision (benefit) for income taxes is as follows.follows:


151

 Year Ended December 31,
 2012 2011 2010
 (In thousands)
Current     
Federal$(235) $(550) $1,892
State302
 2,603
 3,090
Total current taxes67
 2,053
 4,982
Deferred     
Federal(215,710) (3,287) 1,022
State(5,129) 2,955
 2,232
Total deferred taxes(220,839) (332) 3,254
Provision for income taxes$(220,772) $1,721
 $8,236

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 andOur tax benefit for the yearsyear ended December 31, 2011, 20102012 was adversely impacted by a valuation allowance on our deferred tax assets. A valuation allowance was also applied to our federal and 2009

certain state income tax net operating losses and other deferred tax assets. The tax benefit was favorably impacted by the reversal of interest accrued on unrecognized tax benefits, resulting from the effective settlement reached in connection with our IRS audit.
 Year Ended December 31,
 2011 2010 2009
 (In thousands)
Current     
Federal$(550) $1,892
 $(11,550)
State2,603
 3,090
 634
Total current taxes2,053
 4,982
 (10,916)
Deferred     
Federal(3,287) 1,022
 8,765
State2,955
 2,232
 3,227
Total deferred taxes(332) 3,254
 11,992
Provision for income taxes$1,721
 $8,236
 $1,076
Our tax provision for the year ended December 31, 2011 was favorably and unfavorably impacted by permanent adjustments related to our consolidation of Borgata and LVE, respectively. We consolidate Borgata's income and LVE's loss for financial statement purposes; however, under federal income tax statutes, we are subject to income tax on our fifty percent interest in Borgata and exclude LVE's loss in its entirety. Our tax provision was adversely impacted by certain recurring permanent adjustments that are unaffected by our loss from continuing operations and favorably impacted by a nontaxable acquisition related gain. Additionally, our state tax provision was adversely impacted by a statutory change in state income tax rates, changes in apportionment and the geographic mix of our income. The relative impact of equity based state taxes was also more significant in 2011 due to a loss from continuing operations.

Our tax provision for the year ended December 31, 2010 was favorably and unfavorably impacted by permanent adjustments related to our consolidation of Borgata and LVE, respectively. Additionally, our state tax provision was adversely impacted by a statutory change in state income tax rates, changes in apportionment and the geographic mix of our income; and favorably impacted by the release of valuation allowances resulting from the organizational restructuring of our Louisiana properties.

Our effective tax provisionrates are also impacted by permanent adjustments related to our consolidation of Borgata and LVE. We consolidate Borgata and LVE for financial statement purposes; however, under federal income tax statutes, we are subject to income tax on our fifty percent interest in Borgata and exclude LVE in its entirety.


161

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the yearyears ended December 31, 2009 was favorably impacted by a permanent tax benefit realized in connection with an IRS audit2012, 2011 and the reversal of interest accrued in connection with unrecognized tax benefits. The state tax provision was adversely impacted by changes in apportionment, exam settlements and the geographic mix of our income.2010




The following table provides a reconciliation between the federal statutory rate and the effective income tax rate, expressed as a
percentage of income from operations before income taxes, for the years ended December 31, 2010, 20092012, 2011 and 2008.2010.
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
Tax at federal statutory rate35.0 % 35.0 % 35.0 %35.0 % 35.0 % 35.0 %
Valuation allowance for deferred tax assets(15.5)%  %  %
Noncontrolling interests(0.5)% (27.7)% (1.5)%
State income taxes, net of federal benefit(52.8)% 11.9 % 47.2 %0.4 % (52.8)% 11.9 %
Noncontrolling interests(27.7)% (1.5)%  %
Nontaxable gain on acquisition25.5 %  %  %
Company provided benefits(0.1)% (6.9)% 3.5 %
Compensation-based credits16.3 % (6.0)% (29.8)%0.1 % 16.3 % (6.0)%
Accrued interest on uncertain tax benefits(16.0)% 1.6 % (10.3)% % (16.0)% 1.6 %
Company provided benefits(6.9)% 3.5 % 16.6 %
Acquisition costs %  % (54.1)%
Nontaxable gain on acquisition % 25.5 %  %
Other, net(0.8)% (4.3)% 15.6 %(0.1)% (0.8)% (4.3)%
Effective tax rate(27.4)% 40.2 % 20.2 %19.3 % (27.4)% 40.2 %

Status of Examinations
During the fourth quarter of 2010, the2012, we effectively settled our 2001-2004 Internal Revenue Service began fieldwork in connection with the audit of our federal income tax returns filed for the years ended December 31, 2005 through 2009. During 2011, weexamination and received Notices of Proposed Adjustments primarily(“Adjustments”) in connection with our 2005-2009 Internal Revenue Service examination. We have agreed to certain Adjustments and the related tax effect is presented in our consolidated balance sheet. We continue to evaluate the remaining Adjustments and to the extent they remain unresolved at the audit's conclusion, we intend to contest such Adjustments through available administrative procedures. The Internal Revenue Service has rescinded the Adjustments issued in 2011 related to our capitalization policy on certain repair expenditures. We do not believe the proposed adjustments areexpenditures, consistent with applicableguidelines issued in anticipation of final tangible property regulations. The expiration of the statute of limitation related to our federal tax lawreturns for the tax years 2003 through 2004 and existing Treasury Regulations and intend2005 through 2009 have been extended to contest such adjustments, to the extent they

152


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 20112013 and 2010 and for the years ended December 31, 2011, 2010 and 2009

remain unresolved at the audit's conclusion, through available administrative procedures. During 2009, the Internal Revenue Service concluded its field examination of our federal income tax returns filed for the years ended December 31, 2003 and December 31, 2004.June 30, 2014, respectively. Additionally, although tax years 2001 and 2002 are closed by statute, the tax returns filed in those years are subject to adjustment, to the extent of net operating loss carrybacks utilized in those years. We reached a partial agreement in connection with the adjustments proposed in the audit and are appealing the unresolved issues. The expiration of the statute of limitation related to our federal tax returns for the tax years 2003 through 2004 and 2005 through 2009 have been extended to December 31, 2012 and December 31, 2013, respectively. The statute of limitations for our remaining federal tax returns will expire over the period September 2014 through September 2015.2016.

We are also currently under examination for various state income and franchise tax matters. Certain adjustments in the state examinations are contingent on resolution of our federal examinations. As it relates to our material state returns, we are subject to examination for tax years ended on or after December 31, 2001 and the statute of limitations will begin to expire over the period October 2012September 2013 through October 2016.2017.

Based on our current expectations for the final resolutions of these federal and state income tax matters, we believe that we have adequately reserved for any tax liability; however, the ultimate resolution of these examinations may result in an outcome that is different than our current expectation. We do not believe the ultimate resolution of these examinations will have a material impact on our consolidated financial statements.

Other Long-termLong-Term Tax Liabilities
The impact of an uncertain income tax position taken in our income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position is not recognized if it has less than a 50%50% likelihood of being sustained. Our liability for uncertain tax positions is recorded as other current tax liabilities and other long-term tax liabilities in our consolidated balance sheets.

162

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
(In thousands)(In thousands)
Unrecognized tax benefit, beginning of year$38,336
 $29,053
 $30,485
$42,320
 $38,336
 $29,053
Additions:          
Tax positions related to consolidation of Borgata
 8,714
 

 
 8,714
Tax positions related to current year1,438
 1,511
 1,630
1,468
 1,438
 1,511
Tax positions related to prior years3,718
 
 6,769
15,456
 3,718
 
Reductions:          
Tax positions related to prior years(1,172) (918) (8,044)(10,969) (1,172) (918)
Settlement with taxing authorities
 
 (1,764)(9,852) 
 
Lapse of applicable statute of limitations
 (24) (23)
 
 (24)
Unrecognized tax benefits$42,320
 $38,336
 $29,053
$38,423
 $42,320
 $38,336

Included in the $42.3$38.4 million balance of unrecognized tax benefits at December 31, 2011,2012, are $6.8$6.7 million of federally tax effected benefits that, if recognized, would impact the effective tax rate. We recognize accrued interest related to unrecognized tax benefits in our income tax provision. During the years ended December 31, 2012, 2011 2010 and 2009,2010, we recognized accrued interest and penalties of approximately $2.4$(0.2) million $2.0, $2.4 million and $(0.8)$2.0 million, respectively, in our income tax provision. We have accrued $12.6$12.4 million and $10.2$12.6 million of interest and penalties as of December 31, 20112012 and 2010,2011, respectively, in our consolidated balance sheet.sheets.
During the year ended December 31, 2009, we reached a partial agreement on certain issues in our Internal Revenue Service examination.
As a result of the agreed adjustments,effective settlement in our 2001-2004 Internal Revenue Service examination, we reduced our federal unrecognized tax benefits by $5.2$9.9 million on a net basis,, of which $3.2$0.1 million impacted our effective tax rate. Additionally, we reduced the interest accrued on our federal unrecognized tax benefits by $3.2$4.0 million and recorded a $2.4$2.6 million benefit to our tax provision. We have also appealed certain issues which remain unresolved at the close of the examination.


153


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

We are in various stages of the examination and appeals process in connection with many of our audits and it is difficult to determine when these examinations will be closed; however, it is reasonably possible over the next twelve-month period that our unrecognized tax benefits as of December 31, 2011,2012, may decrease by approximately $5.0$1.2 million to $14.0$22.6 million none, of which wouldup to $1.1 million could impact our effective tax rate. Such reduction is due to the resolution of certain issues, primarily related to the depreciable lives of assets, raised in connection with our federal and state examinations. Other than the resolution of the audits discussed above, we do not anticipate any material changes to our unrecognized tax benefits over the next twelve-month period.

NOTE 12.     DERIVATIVE INSTRUMENTS
We utilizehave utilized derivative instruments to manage interest rate risk.

Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. We designated our current interest rate swaps as cash flow hedges through September 30, 2010, and measured their effectiveness using the long-haul method. If the derivative qualifies and is designated as a hedge, depending on the nature of the hedge, changes in its fair value will either be offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The effective portion of any gain or loss on our interest rate swaps is recorded in other comprehensive income (loss). We use the hypothetical derivative method to measure the ineffective portion of our interest rate swaps. Any ineffective portion of a derivative's change in fair value is immediately recognized in earnings.

Interest Rate Swap Agreements
The Company haspreviously entered into floating-to-fixed interest rate swap arrangements in order to manage interest rate risk relating to its Amended Credit Facility.Facility, which matured on June 30, 2011. We were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500$500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. These interest rate swap agreements modified the Company's exposure to interest rate risk by synthetically converting a portion of the Company's floating rate debt to a fixed rate. The interest rate swap agreements terminated

163

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




matured on June 30, 2011, however, the following presents the activity related to our accounting for the interest rate swaps during the periods in which they were outstanding.
The following table presents the historical
Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value ofthrough income. During the interest rate swaps recorded in the accompanying consolidated balance sheet as of years ended December 31, 2011 and 2010,, the balance of which was included in other long-term liabilities.
         
Effective Date Notional Amount Fixed Rate  Fair Value of LiabilityMaturity Date
  (In thousands)
    (In thousands)
  
September 28, 2007 $100,000
 5.13%  $2,374
 June 30, 2011
September 28, 2007 200,000
 5.14%  4,751
 June 30, 2011
June 30, 2008 200,000
 5.13%  4,746
 June 30, 2011
Totals $500,000
    $11,871
  
If we had terminated ourdesignated certain interest rate swaps as of December 31, 2010, we would have been required to pay a total of $12.0 million based on the settlement values of such derivative instruments.cash flow hedges.

Hedge Accounting
These derivative instruments have beenwere accounted for as cash flow hedges through September 30, 2010. Accounting for cash flow hedging requires determining a division of hedge results deemed effective and deemed ineffective. However, most of the Company's hedges were designeddesignated in such a way so as to perfectly offset specifically-defined interest payments, such that no ineffectiveness has occurred, nor would any ineffectiveness occur, as long as the forecasted cash flows of the designated hedged items and the associated swap contracts remain unchanged.

However, on October 1, 2010, in anticipation of the refinancing of our bank credit facility, we de-designated all of our interest rate swap agreements as cash flow hedges. Concurrent with the de-designation of the hedging relationship, hedge accounting was suspended and the amount remaining in accumulated other comprehensive loss associated with this cash flow hedging relationship was frozen. This amount is beingwas amortized into interest expense over the respective remaining termterms of the associated debt.agreements. Prospectively, all changes in the fair value of these interest rate swaps will be recognized immediately in earnings.

154


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Fair Value
Fair value approximates the amount the Company would pay if these contracts were settled at the respective valuation dates. Fair value is estimated based upon current, and predictions of future, interest rate levels along a yield curve, the remaining duration of the instruments and other market conditions, and therefore, is subject to significant estimation and a high degree of variability and fluctuation between periods. The fair value is adjusted, to reflect the impact of credit ratings of the counterparties orof the Company, as applicable. These adjustments resulted in a reduction in the fair values as compared to their settlement values.

Credit risk relating to derivative counterparties is mitigated by using multiple, highly rated counterparties, and the credit quality of each is monitored on an ongoing basis.

The fair values of our derivative instruments at December 31, 2010 included approximately $0.2 million of credit valuation adjustments to reflect the impact of the credit ratings of both the Company and our counterparties, based primarily upon the market value of the credit default swaps of the respective parties. These credit valuation adjustments resulted in a reduction in the fair values of our derivative instruments as compared to their settlement values.

Classification of Changes in Fair Value
The effect of derivative instruments on the consolidated statements of operations for the years ended December 31, 2011 2010 and 20092010 was as follows:follows (in thousands):
Derivatives in a Cash Flow Hedging Relationship - Interest Rate Swap Contracts 
Gain (Loss)
 Recognized in
 OCI on Derivative
 (Effective Portion)
 
Location of Gain
 (Loss) Reclassified
 from AOCI
 into Income
 (Ineffective Portion)
 
Gain (Loss)
 Reclassified
 from AOCI
 into Income
 (Ineffective Portion)
 (In thousands) (In thousands)   Location of Gain Gain (Loss)
   (Loss) Reclassified Reclassified
 Gain Recognized in from AOCI from AOCI
Derivatives in a Cash Flow Hedging Relationship - OCI on Derivative into Income Into Income
Interest Rate Swap Contracts (Effective Portion) (Ineffective Portion) (Ineffective Portion)
Year Ended    
December 31, 2011 $
 Interest expense $(11,824) $
 Interest expense $(11,824)
Year Ended    
December 31, 2010 16,356
 Interest expense (4,580) $16,356
 Interest Expense $(4,580)
December 31, 2009 2,871
 Interest expense 2,081


164

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Derivatives Not Designated
as Hedging Instruments - Interest Rate Swap Contracts
 
Location of Gain
 (Loss) Recognized
 in Income on Derivative
 (Ineffective Portion)
 
Loss Recognized in
Income on Derivative
 (Ineffective Portion)
 (In thousands) Location of Gain Gain (Loss)
 (Loss) Reclassified Reclassified
 from AOCI from AOCI
Derivatives Not Designated as Hedging Instruments -Derivatives Not Designated as Hedging Instruments - into Income Into Income
Interest Rate Swap ContractsInterest Rate Swap Contracts (Ineffective Portion) (Ineffective Portion)
Year Ended  
December 31, 2011 Fair value adjustment of derivative instruments $265
 Fair value adjustment of derivative instruments $265
Year Ended  
December 31, 2010 Fair value adjustment of derivative instruments 480
 Fair value adjustment of derivative instruments $480
December 31, 2009 Fair value adjustment of derivative instruments 

The net effect of our floating-to-fixed interest rate swaps resulted in an increase in interest expense of $11.8$11.8 million $22.7 and $22.7 million and $23.6 million for the years ended December 31, 2011, 2010 and 2009,2010, respectively, as compared to the contractual rate of the underlying hedged debt, for these periods. Due to the maturity of the floating-to-fixed interest rate swaps in June 2011, there was no interest expense recorded during the year ended December 31, 2012.

Due to the de-designation of the floating-to-fixed interest rate swaps in October 2010, we recognized losses of $0.3$0.3 million and $0.5$0.5 million on the change in fair value of these swap forswaps during the years ended December 31, 2011 and 2010, respectively. In addition, the Company amortized $11.8$11.8 million $4.6 and $4.6 million and accreted $2.1 million during the years ended December 31, 2011 2010 and 2009,2010, respectively, through other comprehensive income related to these and other derivatives that were previously de-designated as hedging instruments.

NOTE 13.    COMMITMENTS AND CONTINGENCIES
Commitments
Capital Spending and Development
We continually perform on-going refurbishment and maintenance at our facilities to maintain our standards of quality. Certain of

155


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

these maintenance costs are capitalized, if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. Although we do not have any present future expansion projects, if any opportunities arise, such projects will require significant capital commitments. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. We must also comply with covenants and restrictions set forth in our debt agreements.

Our estimated total capital expenditures for 2012 are expected to be approximately $142.3 million and are primarily comprised of $44 million of certain capital improvement projects with respect to the consummation of IP and various maintenance capital projects. We intend to fund such capital expenditures through our bank credit facility and operating cash flows.

Echelon
In August 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At that time, we did not anticipate the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, or that financing for a development project like Echelon is currently available on terms satisfactory to us, we do not expect to resume construction of Echelon for three to five years.

Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we continue to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project.
The further delay of the suspension of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time, we performed an impairment test of these assets. These impairment tests were comprised of an appraisal of the development and an analysis of its future undiscounted cash flow, and contemplated several viable alternative plans for the future development of Echelon. The cash inflows related to the revenue projections for the individual components associated with each planned construction scenario, offset by outflows for estimated costs to complete the development and ongoing maintenance and operating costs. Because no specific strategic plan can be determined with certainty at
We initially performed this time,evaluation during the analysis consideredyear ended December 31, 2009. We updated these analyses during the netyear ended December 31, 2011 to evaluate any further depression in real estate or land values as well as any deterioration in our in initial cash flows related to each alternative, weighted against its projected likelihood.flow assumptions. The outcome of this evaluation resulted in no impairment of Echelon's assets, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets of approximately $1.01.1 billion at both December 31, 2011 and 2010.2011.
We initially performed this evaluation during the year endedIn December 31, 2009, when the continued suspension was announced. However, due2012, we reconsidered our commitment to the degradation in economic conditions in the intervening period since, we updated these analyses during the year ended December 31, 2011 to evaluate any further depression in real estate or land values as well as any deterioration in our in initial cash flow assumptions. There was no impairment required as a result of these tests at either date. As we develop and explore the viability of alternatives for the project, we will monitor these assets for recoverability. If we are subject to a noncash write-down of these assets, it could have a material adverse impact on our consolidated financial statements.
Due to our delay of the project, we expect to incur capitalized costs related tocomplete the Echelon project and construction in progress. The construction and development costs consist primarilyconcluded we would not resume development. As a result of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees.

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

In addition, we expect recurring project costs, consisting primarily of monthly charges related to constructiondispose of the central energy center, site security, property taxes, rent and insurance, ranging from $15.5 millionassets. We updated our impairment analysis to $17.0 million per annum that will be charged to preopening or other expense as incurred during the project's suspension period.
The following information summarizes the contingencies with respect to our various material commitments, which are in additioncompare

156165

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




the difference between the book value of the assets and the estimated realizable value of the assets. Based on this scenario, we recognized an impairment at December 31, 2012, of $993.9 million based on the difference between the book value of the assets and the estimated realizable value of the assets as discussed in Note 4, Property and Equipment, net, and Note 5, Assets Held for Development. Due to the termination of the project, no additional project costs will be capitalized.
The following information summarizes the contractual obligations during the year ended December 31, 2012 with respect to our various material commitments, which are in addition to capitalized costs and annual recurring project costs, related to Echelon:

Energy Sales Agreement
LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts, LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE, to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. Pursuant to the ESA, LVE willwould provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. However, since we are obligated to purchase substantially all of the output of the central energy center, we arewere the primary beneficiary under the terms of the ESA.

LVE has suspended construction of the central energy center while the Echelon project iswas delayed. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommenced and proceeded with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter.

On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). Under the Periodic Fee Agreement, Echelon Resorts and LVE havehad mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. The prohibition on the initiation of litigation and the tolling of the statute of limitations provided for in the Periodic Fee Agreement should be applicable to any litigation with respect to LVE's April 3, 2009 claim of an alleged breach of the ESA. Under the Periodic Fee Agreement, Echelon Resorts agreed to pay LVE, beginning on March 4, 2011, a monthly Periodic Fee and an operation and maintenance fee until either (i) Echelon Resorts notifiesnotified LVE that it has resumed construction of a portion of the Echelon development project that it owns in fee simple and Echelon Resorts and LVE have mutually agreed to changes to the dates in their respective construction milestones under the ESA, or (ii) Echelon Resorts exercisesexercised its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee iswas fixed at $11.9$11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannotcould not exceed $0.6$0.6 million per annum without Echelon's prior approval. We havehad posted a letter of credit in the amount of $6$6 million to secure Echelon's Resorts obligation to pay the Periodic Fee and the operation and maintenance fee.

On January 27, 2013, the Purchase Option Agreement was amended. Under the Amended Purchase Option Agreement, Echelon Resorts hashad the right, at its sole discretion, upon written notice to LVE, to purchase the assets of LVE including the central energy center and related distribution system for a price of $195.1$187.0 million, subject to certain possible adjustments. Both the ESA and the Periodic Fee Agreement would behave been terminated concurrent with the purchase of the LVE assets pursuant to the Purchase Option Agreement, as amended.
On March 1, 2013, we entered into a definitive agreement to sell the Echelon site for $350 million in cash, which resulted in the execution of the Purchase Option Agreement. The sale agreement included the 87-acre land parcel, as well as site improvements, including the district energy system and central energy center that was to be built by LVE. The transaction was completed on March 4, 2013, and we received $163.8 million of proceeds after payments were made to LVE for the central energy center and related distribution system. After certain additional transaction fees are paid, we realized approximately $157 million in net proceeds from the sale after payment of a portion of the proceeds to a third party to fulfill our obligations to LVE Energy Partners, LLC.

Line Extension and Service Agreement (“LEA”)
In March 2007, we entered into an LEA with Nevada Power Company (currently known as NV Energy) related to the construction of a substation at Echelon and the delivery of power to Echelon. We have assigned most of our obligations under the LEA to LVE (see Energy Sales Agreement (“ESA”) above). We have retained an obligationThe agreement provides that Echelon is to pay liquidated damages of $5.0$5 million to NV Energy, in the event that Echelon doeswe do not physically accept permanent electric service by January 1, 2012 through the substation to be built by NV Energy pursuant to the LEA. On August 29, 2008, NV Energy issued a letter declaring a force majeure event that extendsextended the time for performance of obligations under the LEA, including its obligation to construct the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




substation from which Echelon iswas to accept delivery of permanent electric service. NV Energy has not built the substation, and we currently do not have an obligation to pay the liquidated damage amount of $5.0$5 million due to the force majeure event and because delivery of permanent electric service from the substation is not possible. Our contingent liability to pay liquidated damages to NV Energy will be recorded and charged to expense on our consolidated statement of operations when, or if, it becomes probable that we will not be able to accept, in accordance with the terms of the LEA, permanent electric service from a substation when built by NV Energy.

Construction Agreements
We have exercised our rights under our standard form construction contracts to terminate our agreements with our contractors. All major construction agreements have been terminated and closed-out with final payments made to the contractors in exchange for final releases, with the exception of certain custom skylight, curtain wall, and elevator orders, which we are in the process of

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

closing out based upon final material deliveries and negotiations. Storage of our steel continues under long-term offsite lease agreements.

Clark County Fees
In November 2007, we entered into an agreement with Clark County for the development of the project. The agreement requiresrequired payment of $5.2$5.2 million, allocated among four annual installments, which commenced in January 2008. We have made the first of those payments. In December 2008, Clark County granted us a one year deferral for each of the remaining fixed annual installments due under the development agreement. Clark County isagreement and was in the process of reviewing our request for a further deferral of the remaining fixed annual payments for up to five years. While they considerAt December 31, 2012, the outstanding amount on this agreement is $3.9 million. We have accounted for this liability in our request, no payments are due. Furthermore, we are also responsible for our share of the cost of new pedestrian bridges that may be constructed by Clark County, of which our share is estimated to be $8 million. The bridges will not be required to be built until after construction on Echelon recommences.impairment.

LEED Tax Credits
We arewere pursuing Echelon's certification under the Leadership in Energy and Environmental Design (“LEED”) Silver Standard (or equivalent) for the project as part of the State of Nevada's tax incentive program (the “LEED Program”). The LEED Program allowsallowed for Echelon to receive an exemption on the non-state, local sales and use tax rate of 5.75% on qualifying construction materials purchased prior to December 31, 2010. AsWe reconsidered our commitment to complete the Echelon project and concluded that we intend towould not resume construction of Echelon andEchelon. As such, we would not qualify for the LEED Silver Standard (or equivalent) certification,certification. As a result, we willdo not record a liabilityremain eligible for the LEED program. We included the estimated amount for the abated local portion of sales and use tax, plus interest at a rate of 6.00% per annum, on the qualifying construction materials; however, if Echelon does not open or if it fails to qualify for the LEED Silver Standard certification (or equivalent) after its completion, we will accrue and pay the deferral amountmaterials as part of sales and use tax ($9.2 millionour impairment at December 31, 2010), plus interest at the rate of 6% per annum, which will be recorded as construction in progress on our consolidated balance sheet. We remain eligible for the LEED program, notwithstanding our suspension of the Echelon project.2012.

Other Agreements
CertainDuring the year ended December 31, 2012, certain other agreements, such as office leases and warehouse leases will bewere charged to preopening expense as incurred. While we can provide no assurances, we do not believe that any of our other agreements for the project give rise to any material liabilities resulting from the delaydecision not to pursue further development of the project. We believe that continuing committed costs under the lease agreements, on an aggregate basis, will be approximately $0.7 million annually.

BorgataKansas Management Contract
Capital SpendingOn January 14, 2011, the Kansas Management Contract was approved by the Kansas Racing and Development
Borgata continually performs on-going refurbishment and maintenance at facilitiesGaming Commission ("KRGC"). The Kansas Management Contract contractually obligates the Kansas Star Casino, LLC ("KSC") to maintain standards of quality. Certain of these maintenance costs are capitalized, if such improvement or refurbishment extends the lifeopen certain phases of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. Although Borgata does not have any present future expansion projects, if any opportunities arise, such projects will require significant capital commitments. The commitment of capitalproject by certain specified dates. With certain exceptions, the permanent gaming facility must be completed by January 14, 2013, and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. Borgata must also comply with covenants and restrictionsentire construction project (as set forth in the debt agreements.contract) including the development of an equine complex for events and shows that includes multiple arenas and barn facilities and 150 additional hotel rooms must be completed no later than January 14, 2015. In addition, as of January 14, 2015, KSC is obligated to have made a minimum investment in infrastructure related to the Kansas Star development of $225.0 million, inclusive of any third party investments but exclusive of a $25.0 million privilege fee. We opened its permanent gaming facility on December 12, 2012 and project to date expenditures total more than $225.0 million as of December 31, 2012 which exceeds the minimum investment in infrastructure commitment. We currently expect to meet the remaining January 14, 2015 completion date.

Borgata intendsAs part of the Kansas Management Contract, KSC committed to incur $59.4donate $1.5 million primarily each year to support education in the local area in which the Kansas Star casino operates for the duration of the Kansas Management Contract. The first distribution under this commitment was made as scheduled in 2012 and was recorded as an expense in Selling, general and administrative expenses on room remodelthe consolidated statements of operations.

Mulvane Development Agreement
On March 7, 2011, Kansas Star entered into a Development Agreement with Mulvane (“Mulvane Development Agreement”) related to the provision of water, sewer, and various maintenance capital projects withelectrical utilities to the Kansas Star site. This agreement sets forth certain parameters governing the use of public financing for the provision of such capital expenditures being fundedutilities, through the credit facility and operating cash flows. The commitmentissuance of capital andgeneral obligation bonds by Mulvane, paid for through the related timing thereof are contingent upon, among other things, negotiationimposition of final agreements and receipt of approvals froma special tax assessment on the appropriate regulatory bodies. Borgata must also comply with covenants and restrictions set forthKansas Star site payable over 15 years in an amount equal to Mulvane's full obligations under the debt agreements.general obligation bonds. 

Borgata Expansions
On June 27, 2008, Borgata's second hotel, The Water Club, held its grand opening. The Water Club is a 798-room hotel, featuring five swimming pools, a state-of-the-art spa, and additional meeting and retail space. Borgata financedDuring the expansion from its cash flows from operations and through borrowings under its bank credit facility.
On September 23, 2007, The Water Club, then under construction sustained a fire that caused damageperiod of the infrastructure improvements, Mulvane will issue obligation bonds, the proceeds of which will be used to property with a carrying valuepay for the construction costs of approximately $11.4 million. Borgata's insurance policies included coverage for replacement coststhe improvements. During the year ended, December 31, 2012, Mulvane has issued $18.8 million in general obligation bonds related to property damage, withthese infrastructure improvements. All payments under the exceptionspecial tax assessment are secured by an irrevocable letters of minor amounts principally related to insurance deductibles and certain other limitations. In addition, Borgata had “delay-in-completion” insurance coverage forcredit issued by the Company in favor of Mulvane. The Water Club for certain costs, subject to various limitations and deductibles. On August 10, 2009, Borgata reached a final settlement of $40 million with its insurance carrier and recognized a gain of $28.7 million, included in other items and write-downs, net, on its consolidated statement of income, representing the amount of insurance advances in excess of the $11.3 million carrying value of assets damaged and destroyed by the fire (after its $0.1 million deductible).outstanding

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




letters of credit supporting these utilities improvements shall be reduced to an amount equal to three times the annual special assessment tax imposed on KSC plus outstanding letters of credit issued related to infrastructure improvements to be completed in future years.  

During 2013, the City of Mulvane will perform additional infrastructure improvements that will benefit the Kansas Star site. Upon completion of the improvements, the City will issue additional 15 years general obligation bonds to repay construction costs of the improvements. As of December 31, 2012, the Company has issued $0.9 million in letters of credit in favor of the City to secure payments made by the City related to these additional infrastructure improvements which will be reduced to an amount equal to three times the annual special assessment tax imposed on KSC upon completion of these additional improvements and issuance of the additional general obligation bonds. Future obligations approximate less than $2.0 million per year through 2027.

Minimum Assessment Agreement
In 2007, Diamond Jo Dubuque entered a Minimum Assessment Agreement with the City of Dubuque. Under the Minimum Assessment Agreement, Diamond Jo Dubuque and the City agreed to a minimum taxable value related to the new casino of $57.9 million.  Diamond Jo Dubuque and the City agreed to pay property taxes to the City based on the actual taxable value of the casino, but not less than the minimum taxable value.  Scheduled payments of principal and interest on the City Bonds will be funded through Diamond Jo Dubuque's payment obligations under the Minimum Assessment Agreement.  Diamond Jo Dubuque's is also obligated to pay any shortfall should property taxes be insufficient to fund the principal and interest payments on the City Bonds.

As a result of purchase accounting the Minimum Assessment Agreement obligation was revalued to fair value. Interest costs under the Minimum Assessment Agreement obligation are expensed as incurred. The remaining obligation under the Minimum Assessment Agreement at December 31, 2012 was $1.9 million, which was recorded in Accrued liabilities on the consolidated balance sheet and $15.2 million, net of a $3.3 million discount, which was recorded as a long-term obligation in Other liabilities on the consolidated balance sheet. The discount will be amortized to interest expense over the life of the Minimum Assessment Agreement. Total minimum payments by Diamond Jo Dubuque under the Minimum Assessment Agreement are approximately $1.9 million per year through 2036.

Merger Earnout
Under the terms of the Merger Agreement, Boyd Acquisition II, LLC, an indirect wholly-owned subsidiary of Boyd, is obligated to make an additional payment to PGP in 2016 if KSC's EBITDA, as defined in the Merger Agreement, for 2015 exceeds $105.0 million. The additional payment would be in an amount 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.
Contingent Payments
In connection with KSC’s acquisition of a land purchase option to purchase land upon which KSC’s casino is currently being developed, KSC is required to pay a former casino project developer and option holder 1% of KSC’s EBITDA each month for a period of 10 years commencing December 20, 2011.

Borgata
Utility Contract
In 2005, Borgata amended its executory contracts with a wholly-owned subsidiary of a local utility company, extending the end of the term to 20twenty years from the opening of The Water Club. The utility company provides Borgata with electricity and thermal energy (hot water and chilled water). Obligations under the thermal energy executory contract contain both fixed fees and variable fees based upon usage rates. The fixed fee components under the thermal energy executory contract are currently estimated at approximately $11.4$11.6 million per annum. Borgata also committed to purchase a certain portion of its electricity demand at essentially a fixed rate, which is estimated at approximately $1.7$1.7 million per annum. Electricity demand in excess of the commitment is subject to market rates based on Borgata's tariff class.
Investment Alternative Tax
The New Jersey Casino Control Act provides, among other things, for an assessment of licensees equal to 1.25% of their gross gaming revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues. Generally, Borgata may satisfy this investment obligation by investing in qualified eligible direct investments, by making qualified contributions or by depositing funds with the New Jersey Casino Reinvestment Development Authority (“CRDA”). Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be donated to the CRDA in exchange for

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




credits against future CRDA investment obligations. CRDA bonds have terms up to fifty years and bear interest at below market rates.
Borgata's CRDA obligations for the years ended December 31, 2012, 2011 and 2010 were $7.7 million, $8.1 millionand 2009 were $8.1$8.1 million $8.1 million and $8.7 million,, respectively, of which valuation provisions of $3.5$4.4 million $4.6, $3.5 million and $5.1$4.6 million, respectively, were recorded due to the respective underlying agreements.
Purse Enhancement Agreement
In August 2008, Borgata and the ten other casinos in the Atlantic City market (collectively, the “Casinos”) entered into a Purse Enhancement Agreement (the “Agreement”) with the New Jersey Sports & Exposition Authority (the “NJSEA”) and the Casino Reinvestment Development Authority in the interest of further deferring or preventing the proliferation of competitive gaming at New Jersey racing tracks through December 31, 2011. In addition to the continued prohibition of casino gaming in New Jersey outside of Atlantic City, legislation was enacted to provide for the deduction of certain promotional gaming credits from the calculation of the tax on casino gross revenue.
Under the terms of the Agreement, the Casinos are required to make scheduled payments to the NJSEA totaling $90$90 million to be used for certain authorized purposes (the “Authorized Uses”) as defined by the Agreement. In the event any of the $90 million is not used by NJSEA for the Authorized Uses by January 1, 2012, the unused funds shall be returned by NJSEA to the Casinos pro rata based upon the share each casino contributed. For each year, each casino's share of the scheduled payments will equate to a percentage representing its gross gaming revenue for the prior calendar year compared to the gross gaming revenues for that period for all Casinos. Each casino, solely and individually, shall be responsible for its respective share of the scheduled amounts due. In the event that any casino shall fail to make its payment as required, the remaining Casinos shall have the right, but not the obligation, to cure a payment delinquency. As a result, Borgata expenses its pro rata share of the $90$90 million, estimated to be approximately $15.0$15.0 million based on its actual market shares of gross gaming revenue, on a straight-line basis over the applicable term of the Agreement. Borgata recorded expense of $5.1$5.1 million $5.1 million and $4.8 million during each of the years ended December 31, 2011 2010 and 2009, respectively.2010.
Atlantic City Tourism District
As part of the State of New Jersey's plan to revitalize Atlantic City, a new law was enacted in February 2011 requiring that a tourism district (the “Tourism District”) be created and managed by the CRDA. The Tourism District has been established to include each of the Atlantic City casino properties along with certain other tourism related areas of Atlantic City. The law requires that a public-private partnership be created between the CRDA and a private entity that represents existing and future casino licensees. The private entity, known as The Atlantic City Alliance (the “ACA”), has been established in the form of a not-for-profit limited liability company, of which MDDC is a member. The public-private partnership between the ACA and CRDA shall be for an initial term of five years and its general purpose shall be to revitalize the Tourism District. The law requires that a $5$5 million contribution be made to this effort by all casinos prior to 2012 followed by an annual amount of $30$30 million to be contributed by the casinos commencing January 1, 2012 for a term of five years. Each casino's share of the annual contributions will equate to a percentage representing its gross gaming revenue for the prior calendar year compared to the aggregate gross gaming revenues for that period for all casinos. As a result, Borgata will expense their pro rata share of the $155$155 million as incurred. As ofDuring the year ended December 31, 2012 and 2011, Borgata incurred expense of $0.9$6.1 million and $0.9 million for the pro rata share of the initial contribution to the ACA.
Boyd Leases
The Orleans Hotel and Casino

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

The Orleans is situated on approximately 77 acres of leased land. The lease had an effective commencement date of October 1, 1995, an initial term of 50 years, and includes an option, exercisable by us, to extend the initial term for an additional 25 years. The lease provides for monthly rental payments of $0.3$0.3 million through February 2011 which such annual rental payments will thereafter increase by a compounding basis at a rate of 3.0% per annum. In addition, we have an option to purchase the real property during a two-yeartwo-year period commencing February 2016.

Suncoast Hotel and Casino
Suncoast is situated on approximately 49 acres of leased land. The lease had an effective commencement date of September 1, 1995, an initial term of 60 years, and contains three options to extend the landterm of the lease for ten years each. The original lease term expires in December 2055. The lease contains2055, exclusive of the three options to extend the term of the lease for 10 years each. The lease provides for monthly rental payments of approximately $0.2$0.2 million in 2004 that increase slightly each year. The landlord has the option to require us to purchase the property at the end of 2014 and each year end through 2018, at the fair market value of the real property at the time the landlord exercises the option, subject to certain pricing limitations. If we do not purchase the property if and when required, we would be in default under the lease agreement.


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




California Hotel and Casino
The California is situated on approximately 13.914 acres of owned land, and 1.6two acres of leased land, respectively. The leased land had an effective commencement date of September 1, 1973 with a term of 60 years. The lease provides for monthly rental payments of $3,000 for$3,000 through the first 10 months,June 30, 1973, and $6,500$6,500 from July 1, 1974 through August 31, 2003, with a cost-of-living index adjustment preceding the initial month of each of the eight three year-year periods from September 1, 2003 through August 31, 2027, and the initial month of each of the final two-yeartwo-year periods from September 1, 2027 through August 31, 2030, and two-monththe initial month of the final two-month remaining period. Monthly rent for the last 30 years of the lease will be negotiated and agreed upon, but shall be no less than $6,500$6,500 per month, or less than any rent computed for a prior month, whichever is more. In addition, we have the right of first refusal in the event the lessor shall receive from a third party a bona fide offer to purchase the premises.

Fremont Hotel and Casino
The Fremont is situated on approximately 2.7three acres of land, of which 0.9 acres areone acre is leased pursuant to six separate long-term ground lease agreements (collectively, the “Fremont Ground Leases”). The Fremont Ground Leases have lease terms ranging between 79 to 99 years. Five of the Fremont Ground Leases have expiration dates in either July or August 2053, and the sixth Fremont Ground Lease has an expiration date in December 2077. Only one of the Fremont Ground Leases, the one which expiresThe lease expiring in December 2077, also contains a right of first refusal in the event that the lessor intends to sell that leased premises. None of the Fremont Ground Leases have option rights to further extend their lease terms. Each of the Fremont Ground Leases provide for monthly rental payments, with a cumulative current monthly rent of approximately $0.1 million.$0.1 million. The monthly rental obligations of the Fremont Ground Leases are generally subject to periodic adjustment based on changes in the consumer price index (“CPI”). Principally, these CPI adjustments are done in either 5five or 10 yearten-year lease term cycles; however, one of the Fremont Ground Leases adjusts every two years of its lease term.

Sam's Town Hotel and Gambling Hall
Sam's Town Tunica is located on approximately 150 acres of owned real estate (the “Property”). However, the original sellers of the Property have an option to repurchase the Property in 2033 (the “Option Exercise Date”) for $0.9 million.$0.9 million. The option will be deemed to be automatically exercised unless the original sellers notify the Company to the contrary at least 60 days prior to the Option Exercise Date.

Sam's Town Hotel and Casino
Sam's Town Shreveport is located on 18 acres of leased land and is a party to a Hotel Ground Lease with the City of Shreveport dated as of March 10, 1998, as amended, and an Amended and Restated Ground Lease dated as of March 10, 1998, as amended (together, the “Shreveport Ground Leases”). The initial terms of the Shreveport Ground Leases expired on April 30, 1999, but the Shreveport Ground Leases have been renewed and are still in effect. The Shreveport Ground Leases may be renewed for additional renewal terms which finally expire on March 10, 2048. Aggregate rent payable under the Shreveport Ground Leases is equal to (i) base rent of $532,306 (currently)$0.53 million, as of December 31, 2012 plus (ii) percentage rent of 1% of the adjusted gross revenue from hotel and casino operations plus (iii) 4.75% of adjusted gross gaming revenue for admission taxes. Also, real estate taxes, insurance, utilities and other charges against the property are payable by the Company. Sam's Town Shreveport is also a party to a Commercial Lease with the State of Louisiana dated as of July 6, 1994, as amended by an amendment dated as of April 24, 2001 (together, the “Lease”). The initial term of the Lease expired in July 2004 but was renewed for an additional 10 yearten-year term and is still in effect. The Lease may be renewed for two additional 10-yearten-year renewal terms. The annual rent now payable under the Lease is $0.07 million.$0.07 million.

Treasure Chest Casino
Treasure Chest is located on 14 acres of leased land and is a party to an Amended and Restated Lease for Parking and Other

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Amenities with the City of Kenner dated as of December 3, 1993, as amended (the “Lease”). The initial term of the Lease expired but the Lease has been renewed and is still in effect. The Lease may be renewed for additional renewal terms which finally expire on July 1, 2029. Rent payable under the Lease is the sum of (i) a base rent determined by formula plus (ii) a $2.50$2.50 per capita rent for each person entering the casino. For the years ended December 31, 2012, 2011 2010 and 2009,2010, rent paid to the City was $5.1$5.1 million $4.6, $5.1 million and $4.6 million.$4.6 million. Treasure Chest is also a party to a Commercial Lease with the State of Louisiana dated as of March 9, 1994 (the “State Lease”). The initial term of the State Lease expired in March 2004 but was renewed for an additional 10 yearten-year term and is still in effect. The Lease may be renewed for two additional 10-yearten-year renewal terms. The annual rent now payable under the Lease is $0.1 million.$0.1 million.

IP Casino Resort Spa
IP is located on 24 acres of owned land and leases approximately 3.884 acres of submerged tidelands from the state of Mississippi. The lease commenced on December 2005 and expires in 2035. The lease payment is adjusted annually at the end of each term

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




based on the all urban consumer price index. The lease expense for the year ended December 31, 2011 was approximately $0.2$0.2 million for the stub period and will approximate $0.8$0.8 million during the year ending December 31, 2012. Additionally, IP leases a parking lot from the City of Biloxi on a monthly basis. The parking lot lease will expire in August 2013 unless extended by written agreement.

Diamond Jo Dubuque
DJL currently has approximately 500 surface parking spaces that are in close proximity to its casino located on properties that DJL leases under an operating lease for $500,000 annually through December 2018.   In accordance with an operating agreement between DJL and the Dubuque Racing Association, Ltd. (“DRA”), the DRA reimburses DJL for these lease payments.

Diamond Jo Worth
DJW leases, under an operating lease, 10 acres of land north of the casino that is used for patron parking. This lease requires DJW to pay less than $0.1 million per year as rent through June 2016.  The property lease also allows for the purchase of the leased land at the expiration of the lease for a total purchase price of approximately $0.8 million. In addition, DJW also leases, under an operating lease, 30 acres of land through August 2013 for use as additional hunting land at its Pheasant Links facility in Emmons, Minnesota. Total rent expense for these leases are less than $0.1 million annually.

The Company currently leases, under an operating lease, approximately 10,876 square feet of office space in Dubuque, Iowa. Total rent expense for this lease is approximately $0.2 million annually.

The Company leases three of its OTB facilities and other equipment under noncancelable operating leases. The Company also leases certain gaming machines and other equipment under cancelable leases. These cancelable leases require either fixed monthly payments or contingent monthly rental payments based on usage of the equipment.
Borgata Leases
As of December 31, 2010, MDDC owns approximately 26.026 acres of land and all improvements thereon with respect to that portion of the property consisting of the Borgata Hotel. In addition, MDDC, as lessee, entered into a series of ground leases with MGM, as lessor, for a total of approximately 19.620 acres of land underlying the employee parking garage, public space expansion, the rooms expansion, a parking structure, aand modified surface parking lot and a proposed alternative parking structure.reside, as well as, an undeveloped parcel. On November 4, 2010, MGM announced that it had closed the sale of land leased to MDDC for the public space expansion, rooms expansion, parking structure and proposed alternative parking structure.the undeveloped parcel. Other than MDDC's obligation to pay rent (in an amount equal to the amount paid under the parking structure ground lease) and property taxes pursuant to the alternative parking structure ground lease, Borgata's obligations under the ground leases were not modified by the sale. The leases consist of:
Lease and Option Agreement, dated as of January 16, 2002, as amended by a letter agreement, dated April 10, 2009, a letter agreement, dated September 21, 2009, the Modification of Lease and Option Agreement, dated as of August 20, 2004, and the Second Modification of Employee Parking Structure Lease and Option Agreement, dated March 23, 2010, for approximately 2.02 acres of land underlying the parking garage;
Expansion Ground Lease, dated as of January 1, 2005, as amended by the Modification of Expansion Ground Lease, dated March 23, 2010, for approximately 3.54 acres of land underlying the Public Space Expansion;
Tower Expansion & Additional Structured Parking Ground Lease Agreement, dated as of January 1, 2005, as amended by the Modification of Tower Expansion & Additional Structured Parking Ground Lease Agreement, dated February 20, 2010, and the Second Modification of Tower Expansion & Additional Structured Parking Ground Lease Agreement, dated March 23, 2010, for approximately 1.62 acres of land underlying the Rooms Expansion and 2.73 acres of land underlying a parking structure each;
Surface Lot Ground Lease, dated as of August 20, 2004, as amended by the Modification of Surface Lot Ground Lease, dated March 23, 2010, for approximately 8.48 acres of land consisting of the surface parking lot; and
Ground Lease Agreement, dated as of March 23, 2010, for approximately 1.4 acres1 acre of an undeveloped land underlying a proposed additional parking structure.parcel.
Pursuant to the alternative parking structure ground lease, (i) commencing on the date of the Divestiture Trust's agreement to sell the land underlying the ground leases, MDDC became responsible for all real property taxes assessed against the land underlying the alternative parking structure ground lease and (ii) payment of monthly rent under the alternative parking structure ground lease shall be deferred until the earliest to occur of (x) the date 18 months following the execution of the sale agreement, (y) completion of construction of The Water Club parking garage, and (z) expiration of the term of the Divestiture Trust. Effective as of the date of execution of the sale agreement, the monthly rent due under the alternative parking structure ground lease was in an amount

171

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




consistent with the rent due under the parking structure ground lease on a per square foot basis.
The lease terms extend until December 31, 2070 with the exception of the surface parking lot lease. The surface parking lot ground lease is on a month-to-month term and may be terminated by either party effective on the last day of the month that is six months after notice is given. In addition, the surface parking lot ground lease will terminate on any termination of the Divestiture Trust, unless the New Jersey Casino Control Commission ("NJCCC") approves an extended term of such lease.

161


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

MDDC owns all improvements made on the leased lands during the term of each ground lease. Upon expiration of such term, ownership of such improvements reverts back to the landlord.
If during the term of the rooms expansion ground lease, the public space expansion ground lease or the alternate parking structure ground lease, the third party landlord ("Landlord") or any person associated with the Landlord is found by the NJCCC to be unsuitable to be associated with a casino enterprise and such person is not removed from such association in a manner acceptable to the NJCCC, then MDDC may, upon written notice to the Landlord, elect to purchase the leased land for the appraised value as determined under the terms of such ground leases, unless the Landlord elects, upon receipt of such notice, to sell the land to a third party, subject to the ground leases. If the Landlord elects to sell the land to a third party but is unable to do so within one year, then the Landlord must sell the land to MDDC for the appraised value.
In addition, MDDC has an option to purchase the land leased under the parking structure ground lease at any time during the term of that lease so long as it is not in default thereunder, at fair market value as determined in accordance with the terms of parking structure ground lease. In the event that the land underlying the surface parking lot ground lease is sold to a third party, MDDC has the option to build a parking garage, if necessary, to replace the lost parking spaces on the land underlying the alternate parking structure ground lease.
Future Minimum Lease Payments and Rental Income
Future minimum lease payments required under noncancelable operating leases, which are primarily these land leases, as of December 31, 20112012 are as follows:
Boyd Gaming Lease Obligations Borgata Lease Obligations Total Lease ObligationsBoyd Gaming Lease Obligations Borgata Lease Obligations Total Lease Obligations
For the Year Ending December 31,For the Year Ending December 31, (In thousands)
2012$14,991
 $6,820
 $21,811
201313,672
 6,062
 19,734
$19,174
 $7,195
 $26,369
201411,768
 5,870
 17,638
13,657
 6,863
 20,520
20159,606
 5,753
 15,359
11,776
 6,480
 18,256
20169,593
 5,735
 15,328
10,215
 6,414
 16,629
201710,040
 6,382
 16,422
Thereafter418,997
 308,241
 727,238
396,584
 323,931
 720,515
$478,627
 $338,481
 $817,108
$461,446
 $357,265
 $818,711
Rent expense for the years ended December 31, 2012, 2011 and 2010 was $29.3 million, $28.4 millionand 2009 was $28.4$26.7 million $26.7 million and $18.1 million , and is included in selling, general and administrative expenses on the accompanying consolidated statements of operations.

172

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Future minimum rental income, which is primarily related to retail and restaurant facilities located within our properties, as of December 31, 20112012 is as follows:
Boyd Gaming Rental Income Borgata Rental Income Total Rental Income
Boyd Gaming Rental Income Borgata Rental Income Total Rental Income(In thousands)
For the Year Ending December 31,For the Year Ending December 31, For the Year Ending December 31, 
2012$1,049
 $1,819
 $2,868
2013683
 1,237
 1,920
$1,091
 $1,743
 $2,834
2014187
 423
 610
496
 1,605
 2,101
2015144
 423
 567
377
 1,605
 1,982
201620
 324
 344
196
 1,506
 1,702
2017146
 1,435
 1,581
Thereafter
 360
 360
54
 6,327
 6,381
$2,083
 $4,586
 $6,669
$2,360
 $14,221
 $16,581

Contingencies
Copeland

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland's objection. Copeland then filed an appeal of the agency's decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on
appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest's license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial court's decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. On September 2, 2011, the judge issued an Order stating that the case should be remanded to state district court but allowed for additional filings by September 13, 2011. A Remand Order was issued on September 15, 2011, sending the case back to the 19th Judicial District Court, East Baton Rouge Parish, State of Louisiana. Guidry filed a motion for partial summary judgment on November 14, 2011 to limit the damages in the case. Treasure Chest also filed a motion for protective order on November 18, 2011.joined in the motion. The hearing on the pending motionsMotion for Partial Summary Judgment was held on September 10, 2012. On October 3, 2012, Judge Clark granted the motion

173

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




which effectively struck Copeland's demands for loss profits, the value of the Treasure Chest license and the value of Treasure Chest's success. On October 26, 2012, Copeland filed a supervisory writ application with the First Circuit Court of Appeal asking that the partial summary judgment be reversed. Treasure Chest and Guidry opposed the writ. On February 13, 2013, the writ was denied leaving intact the partial summary judgment. Discovery is scheduled for March 26, 2012.proceeding. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on ourTreasure Chest's business, financial condition and results of operations.
Nevada Use Tax Refund Claims
On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. As a result of this decision, refund claims were filed for use taxtaxes paid, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties. We estimate the refund to be in the range of $17.9$17.9 million to $20.3$20.3 million, including interest. In 2009, the Department audited and denied our refund claim while simultaneously issuing a $12.3$12.3 million sales tax deficiency assessment, plus interest of $7.5 million.$7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge ("Judge"ALJ") in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision to the Nevada State Tax Commission (the "Commission"). On August 8, 2011, the Commission remanded the case back for a second administrative hearing, which was held on September 26, 2011, to allow for the introduction of additional supporting documentation. The JudgeALJ issued a decision on November 8, 2011, reversing her position on the employee meal refund claim while also affirming the denial of the complimentary meal refund, as well as the denial of a retroactive application of the sales tax measure to both employee and complimentary meals. The Judge'sALJ's decision was affirmed in a Commission hearing on January 23, 2012. On February 15, 2012 we filed a petition for judicial review in Clark County District Court. We received a split decision at our District Court hearing on October 17, 2012. The District Court Judge (“Judge”) affirmed the ALJ decision that sales tax was applicable to complimentary meals and reversed the decision on employee meals, concluding that such meals were exempt from sales tax. The Department has asserted that, although the statute of limitations prohibits their ability to collect incremental sales tax on complimentary meals, the statutes provide for an offset of the incremental sales tax against refunds due on employee meals. As such, the Department believes that it is not required to pay the employee meal refunds. We are appealing the decision on complimentary meals to the Nevada State Supreme Court and the Department has appealed the decision on employee meals. The Judge did not issue a decision with respect to the refund claim offset; and pending the ultimate resolution of the appeal at the State Supreme Court, we expect the offset issue will either be addressed by the Supreme Court or remanded back to District Court. Due to the uncertainty surrounding the ultimate resolution of our appeal to Districtthe State Supreme Court, as well as subsequent

163


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. ForOn July 6, 2012 the Department retracted its previous guidance requiring payment of sales tax, on complimentary and employee meals, for periods subsequent to May 2008,February 15, 2012. The updated guidance defers the requirement to collect and remit sales tax, without interest or penalty, on complimentary and employee meals until the occurrence of a defined future event. Based on the Department's updated guidance, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is probable, based on both procedural issues and the technical merits of the Department's arguments, that we will owe this tax.properties.
Blue Chip Property Taxes
Blue Chip has previously received a valuation notice from the county assessor indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. In December 2007, we received the property tax bill related to our 2006 tax assessment in the amount $6.2$6.2 million, which we appealed; and, inappealed. In February 2009, we received a notice of revaluation, which reducedreducing the initial tax assessment by approximately $2.2 million.$2.2 million. Since then, we have made the minimum required payment against the provisional bills related to thereceived in years from 2007 through 2011,2012, all of which were based on the 2006 valuation notice. During the year ended December 31, 2011, we reached settlements with the county assessor, reducing the annual valuation for years 2006 through 2009. Based on these settlements, we revised our cumulative property tax accrual to reflect the retrospective effect of the revised valuations. The impact of these revisions to the valuations resulted in a reduction of our property tax accrual of approximately $9.7$9.7 million, which was cumulatively reversed through property tax expense during the year ended December 31, 2011.
Although weWe received the 2010 tax assessment in January 2013 but have not received valuation notices for years 2010 and 2011, or final tax rates for the years 2007 through 2011 weor 2012. The 2010 tax assessment increased the taxable property value approximately 46% over the 2009 settlement valuation. We have appealed the 2010 tax assessment and believe the assessments for the period from January 1, 20072010 through December 31, 20112012 could result in a total property tax obligation, net of previous payments, ranging between $10.6$5.0 million and $15.1$14.1 million. We have accrued, net of the payment of the minimum requirements discussed above, approximately $15.1$14.1 million for this property

174

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




tax liability as of December 31, 2011,2012, based on what we believe to be the most likely outcome within our range, once all valuations have been received and all tax rates have been finalized; however, we can provide no assurances that the estimated amount accrued will approximate the actual amount billed. The final tax assessment notices for the period January 1, 20072011 through December 31, 2011,2012, which have not been received as of December 31, 2011,2012, could result in further adjustment to our estimated property tax liability at Blue Chip.
Legal Matters
We are also parties to various legal proceedings arising in the ordinary course of business. We believe that, except for the Copeland matter discussed above, all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.

NOTE 14.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
Share Repurchase Program
PursuantWe have in the past, and may in the future, acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine from time to authorization bytime. In July 2008, our Board of Directors underauthorized an amendment to our existing share repurchase program up to $100 millionincrease the amount of our common stock is available to be repurchased.repurchased to $100 million. We are not obligated to purchase any shares under our stock repurchase program.

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund anythe repurchases under the stock repurchase program with existing cash resources and availability under our Amended Credit Facility.

We are also subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our Amended Credit Facility.

During the years ended December 31, 2012, 2011 and 2010, we did not repurchase any shares of our common stock. During the year ended December 31, 2009, we repurchased and retired 1.7 million shares of our common stock at an average price of $4.61 per share. We are currently authorized to repurchase up to an additional $92.1$92.1 million in shares of our common stock under the share repurchase program.
In the future, we may acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine from time to time.
Dividends
Dividends are declared at the discretion of our Board's discretion.Board of Directors. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. ThereCredit Facility. No dividends were no cash dividends declared or paid during the years ended December 31, 2012, 2011 2010 and 2009.

164


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods. or 2010.
Stock Option Incentive Plan
On May 15, 2008,17, 2012, at our2008 Annual Meeting of Stockholders, the Company's stockholders approved anthe amendment to ourand restatement of the Company's 2002 Stock Incentive Plan increasing(the "2002 Plan") as the 2012 Stock Incentive Plan (the "2012 Plan") in order to (a) provide for a term ending ten years from the date of stockholder approval at the Annual Meeting, (b) increase the maximum number of shares of Boyd Gaming Corporation'sthe Company's common stock authorized for issuance over the term of such planthe 2012 Plan by 54 million shares from 12 million to 17 million shares. to 21 million shares, (c) permit the future grant of certain equity-based awards, including awards designed to constitute performance-based compensation under Section 162(m) of the Internal Revenue Code, and (d) make certain other changes. Under our 20022012 Stock Incentive Plan, approximately 0.82.2 million shares remain available for grant at December 31, 2011.2012. The number of authorized but unissued shares of common stock under this plan as of December 31, 20112012 was approximately 14.317.8 million shares.
Options granted under the plan generally become exercisable ratably over a three-yearthree-year period from the date of grant. Options that have been granted under the plan had an exercise price equal to the market price of our common stock on the date of grant and will expire no later than ten years after the date of grant.

175

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Summarized stock option plan activity for the years ended December 31, 2012, 2011 2010 and 20092010 is as follows.
Options Weighted Average Option Price Weighted Average Remaining Term Aggregate Intrinsic ValueOptions Weighted Average Option Price Weighted Average Remaining Term Aggregate Intrinsic Value
    (In years) (In thousands)    (In years) (In thousands)
Outstanding at January 1, 20098,786,480
 $31.19
    
Granted1,426,992
 7.57
    
Canceled(614,018) 32.2
    
Exercised(29,797) 5.39
    
Outstanding at December 31, 20099,569,657
 27.68
    
Outstanding at January 1, 20109,569,657
 $27.68
  
Granted1,190,867
 8.34
    1,190,867
 8.34
  
Canceled(126,496) 24.64
    (126,496) 24.64
  
Exercised(114,525) 6.31
    (114,525) 6.31
  
Outstanding at December 31, 201010,519,503
 25.76
    10,519,503
 25.76
  
Granted541,340
 6.74
    541,340
 6.74
  
Canceled(316,743) 29.91
    (316,743) 29.91
  
Exercised(72,757) 5.46
    (72,757) 5.46
  
Outstanding at December 31, 201110,671,343
 $24.81
 5.6
 $1,420
10,671,343
 24.81
  
       
Exercisable at December 31, 20107,950,012
 $31.55
 5.4
 $4,824
Granted537,840
 5.22
  
Canceled(366,344) 21.4
  
Exercised(16,835) 6.95
  
Outstanding at December 31, 201210,826,004
 $23.98
 5.0 $810
            
Exercisable at December 31, 20118,911,028
 $28.2028
 5.0
 $1,011
8,911,028
 $28.20
 4.9 $1,011
     
Exercisable at December 31, 20129,545,547
 $26.31
 4.5 $47
Share-based compensation costs related to stock option awards are calculated based on the fair value of each option grant on the date of the grant using the Black-Scholes option pricing model.
The following table summarizes the information about stock options outstanding and exercisable at December 31, 2011.2012.

165


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

  Options Outstanding Options Exercisable
Range of Exercise Prices Number Outstanding Weighted-Average Remaining Contractual Life (Years) Weighted-Average Exercise Price Number Exercisable Weighted-Average Exercise Price
$6.60 - $6.60 1,175,385
 6.8 $6.60 1,175,385
 $6.60
6.70 - 6.70 537,840
 9.9 6.70 
 
7.55 - 7.55 1,337,323
 7.8 7.55 891,046
 7.55
8.34 - 8.34 1,165,784
 8.8 8.34 392,086
 8.34
11.28 - 33.31 759,190
 1.4 16.66 756,690
 16.68
36.76 - 36.76 1,438,826
 2.9 36.76 1,438,826
 36.76
38.11 - 38.11 491,000
 5.9 38.11 491,000
 38.11
39.00 - 39.00 1,357,000
 4.8 39.00 1,357,000
 39.00
39.78 - 39.78 1,069,500
 5.8 39.78 1,069,500
 39.78
39.96 - 52.35 1,339,495
 3.8 40.22 1,339,495
 40.22
$6.60 - $52.35 10,671,343
 5.6 $24.81 8,911,028
 $28.20
  Options Outstanding Options Exercisable
Range of Exercise Prices Number Outstanding Weighted-Average Remaining Contractual Life (Years) Weighted-Average Exercise Price Number Exercisable Weighted-Average Exercise Price
$5.22-$5.22 537,840
 9.8 $5.22
 
 $
6.60-6.60 1,162,552
 5.8 6.60
 1,162,552
 6.60
6.70-6.70 537,840
 8.9 6.70
 179,284
 6.70
7.55-7.55 1,327,655
 6.8 7.55
 1,327,655
 7.55
8.34-8.34 1,160,533
 7.8 8.34
 776,472
 8.34
11.28-33.31 470,928
 0.9 16.35
 470,928
 16.35
36.76-36.76 1,436,827
 1.9 36.76
 1,436,827
 36.76
38.11-38.11 491,000
 4.9 38.11
 491,000
 38.11
39.00-39.00 1,336,500
 3.8 39.00
 1,336,500
 39.00
39.78-52.35 2,364,329
 3.7 39.95
 2,364,329
 39.95
5.22-52.35 10,826,004
 5.0 $23.98
 9,545,547
 $26.31
The total intrinsic value of in-the-money options exercised during the years ended December 31, 2012, 2011 and 2010 was $19 thousand, $0.3 millionand 2009 was $0.3$0.7 million $0.7 million and $0.1 million,, respectively. The total fair value of options vested during the years ended December 31,

176

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 2010 and 2009for the years ended December 31, 2012, 2011 and 2010




2012, 2011 and 2010 was approximately $5.1$4.8 million $9.7, $5.1 million and $15.5$9.7 million, respectively. As of December 31, 2011,2012, there was approximately $7.4$3.8 million of total unrecognized share-based compensation costs related to unvested stock options, which is expected to be recognized over approximately three1.4 years, the weighted-average remaining requisite service period.

Restricted Stock Units
Our 2012 Plan amended and restated the 2002 Stock Incentive Plan, provideswhich provided for the grant of Restricted Stock Units (“RSUs”). AnA RSU is an award which may be earned in whole, or in part, upon the passage of time, and which may be settled for cash, shares, other securities or a combination thereof. The RSUs do not contain voting rights and are not entitled to dividends. The RSUs are subject to the terms and conditions contained in the applicable award agreement and our 2002 Stock Incentive Plan.

We annually award RSUs to certain members of our Board of Directors. Each RSU is fully vested upon grant and is to be paid in shares of common stock upon cessation of service to the Company. We also grant RSUs to members of management of the Company, which represents a contingent right to receive one share of our common stock upon vesting.

During the years ended December 31, 2012, 2011 2010 and 2009,2010, certain of our executive management employees were granted RSUs, totaling approximately 695,000751,000 units, 429,000695,000 units, and 354,000429,000 units, respectively. Each of these RSUs represent a contingent right to receive one share of Boyd Gaming Corporation common stock upon vesting. These RSUs will vest three years fromwere issued for past service; therefore, they are fully vested on the date of issuance.
Summarized RSU activity forissuance and expensed on the years ended December 31, 2011, 2010 and 2009 is as follows.date of issuance.

166177

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Summarized RSU activity for the years ended December 31, 2012, 2011 and 2010 is as follows.
Restricted Stock Units  Weighted Average Grant Date Fair ValueRestricted Stock Units  Weighted Average Grant Date Fair Value
Outstanding at January 1, 2009572,071
 
Granted421,826
 $7.94
Canceled(12,508) 
Awarded(11,281) 
Outstanding at December 31, 2009970,108
 
Outstanding at January 1, 2010970,108
  
Granted485,067
 $8.36485,067
 $8.36
Canceled(19,080) (19,080) 
Awarded
 
 
Outstanding at December 31, 20101,436,095
 1,436,095
 
Granted765,516
 $6.96765,516
 $6.96
Canceled(41,340) (41,340) 
Awarded(310,881) (310,881) 
Outstanding at December 31, 20111,849,390
 1,849,390
 
  
Vested at December 31, 2010180,701
 
Granted860,376
 $5.51
Canceled(9,781) 
Awarded(328,838) 
Outstanding at December 31, 20122,371,147
 
    
Vested at December 31, 2011573,798
 573,798
 
  
Vested at December 31, 2012955,693
 
As of December 31, 2011,2012, there was approximately $8.9$7.8 million of total unrecognized share-based compensation costs related to unvested RSUs, which is expected to be recognized over approximately three2.0 years.
Performance Stock Units
Our 2012 Plan amended and restated the 2002 Stock Incentive Plan, provideswhich provided for the grant of Performance Stock Units (“PSUs”). A PSU is an award which may be earned in whole, or in part, upon the passage of time, and the attainment of performance criteria, and which may be settled for cash, shares, other securities or a combination thereof. The PSUs do not contain voting rights and are not entitled to dividends. The PSUs are subject to the terms and conditions contained in the applicable award agreement and our 2002 Stock Incentive2012 Plan.
During the year ended December 31, 2011,2012, certain executive management employees were granted PSUs, totaling approximately 407,000423,955 units. Each of these PSUs represent a contingent right to receive a share of Boyd Gaming Corporation common stock; however, the actual denomination of units awarded is dependent upon the occurrence of: (i) a requisite service period; and (ii) an evaluation of specific performance conditions. The performance conditions are based on Company metrics for net revenue growth, EBITDA growth and customer service scores, all of which shall be determined on a comprehensive annual three year growth rate. Based upon actual and combined achievement, the number of units awarded could range from zero, if no conditions are met, a 50% payout if only threshold performance is achieved, a payout of100%of 100% for target performance, or a payout of up to 200% of the original award for achievement of maximum performance. Each condition weighs equally and separately in determining the payout, and based upon management's estimates at the service inception date, the Company is expected to meet the target for each performance condition. Therefore, the related compensation costs of these PSUs assumes all units granted will be awarded.
These PSUs will vest three years from the service inception date, during which time achievement of the related performance conditions will be evaluated, and the number of shares expected to be awarded, and resulting compensation expense, will be adjusted accordingly.
Summarized PSU activity for the years ended December 31, 2011 is as follows.

167178

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Summarized PSU activity for the years ended December 31, 2012, 2011 and 2010 is as follows.
Performance Stock Units  Weighted Average Grant Date Fair ValuePerformance Stock Units  Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010
 
  
Granted406,602
 $6.70406,602
 $6.70
Canceled
 
 
Awarded
 
 
Outstanding at December 31, 2011406,602
 406,602
 
Granted423,955
 $5.24
Canceled(1,427) 
Awarded
 
Outstanding at December 31, 2012829,130
 
    
Vested at December 31, 2011
 
 
  
Vested at December 31, 2012
 
As of December 31, 2011,2012, there was approximately $2.8$6.8 million of total unrecognized share-based compensation costs related to unvested PSUs, which is expected to be recognized over approximately three years.2.5 years.
Career Shares
Our Career Shares Program is a stock incentive award program for certain executive officers to provide for additional capital accumulation opportunities for retirement. The program incentifiesincentivizes and rewards executives for their period of service. Our Career Shares Program was adopted in December 2006, and modified in October 2010, as part of the overall update of our compensation programs. The Career Shares Program rewards eligible executives with annual grants of Boyd Gaming Corporation stock units, to be paid out at retirement. The payout at retirement is dependent upon the executive's age at such retirement and the number of years of service with the Company. Executives must be at least 55 years old and have at least 10 years of service to receive any payout at retirement. Career Shares do not contain voting rights and are not entitled to dividends. Career Shares are subject to the terms and conditions contained in the applicable award agreement and our 2002 Stock Incentive Plan. The Career Share awards are tranched by specific term, in the following periods: 10 years, 15 years and 20 years of service. These grants vest over the of remaining period of service required to fulfill the requisite years in each of these tranches, and compensation expense is recorded in accordance with the specific vesting provisions.
Summarized Career Shares activity for the years ended December 31, 2011, 2010 and 2009 is as follows.
 Career Shares Weighted Average Grant Date Fair Value
Outstanding at January 1, 200959,789
  
Granted250,160
 $5.00
Canceled(5,508)  
Awarded
  
Outstanding at December 31, 2009304,441
  
Granted146,622
 $8.60
Canceled(18,201)  
Awarded
  
Outstanding at December 31, 2010432,862
  
Granted113,495
 $10.81
Canceled(6,668)  
Awarded
  
Outstanding at December 31, 2011539,689
  
    
Vested at December 31, 2010122,055
  
    
Vested at December 31, 2011314,888
  
In January 2012, we issued approximately 163,000 Career Shares with a grant date fair value of $7.69 per share and recorded

168179

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




approximately $1.1 million of share-based compensation expense.Summarized Career Shares activity for the years ended December 31, 2012, 2011 and 2010 is as follows.
 Career Shares Weighted Average Grant Date Fair Value
Outstanding at January 1, 2010304,441
  
Granted146,622
 $8.60
Canceled(18,201)  
Awarded
  
Outstanding at December 31, 2010432,862
  
Granted113,495
 $10.81
Canceled(6,668)  
Awarded
  
Outstanding at December 31, 2011539,689
  
Granted163,137
 $7.69
Canceled
  
Awarded
  
Outstanding at December 31, 2012702,826
  
    
Vested at December 31, 2011314,888
  
    
Vested at December 31, 2012441,736
  

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.

The following table summarizes our share-based compensation costs by award type.
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
(In thousands)(In thousands)
Stock Options$4,850
 $9,104
 $13,876
$4,634
 $4,850
 $9,104
Restricted Stock Units3,062
 1,759
 1,588
5,816
 3,062
 1,759
Performance Stock Units76
 
 
729
 76
 
Career Shares2,008
 461
 424
1,068
 2,008
 461
Total shared-based compensation costs$9,996
 $11,324
 $15,888
$12,247
 $9,996
 $11,324


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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated financial statements.statements of operations.
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010 
(In thousands)(In thousands)
Gaming$192
 $318
 $146
$233
 $192
 $318
 
Food and beverage37
 61
 15
44
 37
 61
 
Room17
 29
 5
21
 17
 29
 
Selling, general and administrative977
 1,619
 3,125
1,183
 977
 1,619
 
Corporate expense8,773
 9,297
 10,683
10,766
 8,773
 9,297
 
Preopening expense
 
 1,914
Total shared-based compensation expense$9,996
 $11,324
 $15,888
$12,247
 $9,996
 $11,324
 

NOTE 15.    ACCUMULATED OTHER COMPREHENSIVE LOSS
Comprehensive income includes net income and all other non-stockholder changes in equity, or other comprehensive income. Components of the Company's comprehensive income are reported in the accompanying consolidated statements of comprehensive income. The cumulative balance of other comprehensive income consists of fair value adjustments related to hedged derivative instruments and unrealized gains and losses on the investment available for sale resulting from changes in fair value.

A portion of the net derivative instruments market adjustment included in accumulated other comprehensive loss, net, at December 31, 2011 relates to certain derivative instruments that we de-designated as cash flow hedges. As a result, we recognized $12.1 million in net losses related to these derivative instruments, included in accumulated other comprehensive loss, net, at December 31, 2011.

The following table reports the effects of the changes in the fair valuations of certain of our derivativefinancial instruments.
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
(In thousands)(In thousands)
Fair value adjustment of derivative instruments$11,824
 $16,356
 $2,871
$
 $11,824
 $16,356
Fair value adjustment of investment available for sale(962) 
 
Tax effect(4,230) (5,824) (979)
 (4,230) (5,824)
Fair value adjustment of derivative instruments, net of tax$7,594
 $10,532
 $1,892
Fair value adjustments, net of tax$(962) $7,594
 $10,532

NOTE 16.    NONCONTROLLING INTERESTSINTEREST
Noncontrolling interestsinterest represents: (i) the 50% interest in Borgata, held by the Divestiture Trust for the economic benefit of MGM, which was initially recorded at fair value at the date of the effective change in control, on March 24, 2010; and (ii) all 100% of the members' equity interest in LVE, the variable interest entity which was consolidated in our financial statements effective January 1, 2010, but in which we hold no equity interest. Pursuant to the authoritative accounting guidance for noncontrolling interests, a noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance, as is the case with LVE, as presented below.


169181

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Changes in the noncontrolling interestsinterest since such date are as follows:
Borgata LVE TotalBorgata LVE Other Total
(In thousands)(In thousands)
Beginning balance, January 1, 2010$325,580
 $(30,673) $294,907
$325,580
 $(27,818) $
 $297,762
Distributions(123,422) 
 (123,422)(123,422) 
 
 (123,422)
Attributable net income (loss)17,098
 (15,158) 1,940
17,098
 (15,158) 
 1,940
Comprehensive income
 (1,261) (1,261)
 (4,116) 
 (4,116)
Balance, December 31, 2010$219,256
 $(47,092) $172,164
219,256
 (47,092) 
 172,164
Attributable net income (loss)1,750
 (5,895) (4,145)1,750
 (5,895) 
 (4,145)
Comprehensive income
 3,968
 3,968

 3,968
 
 3,968
Balance December 31, 2011$221,006
 $(49,019) $171,987
Balance, December 31, 2011221,006
 (49,019) 
 171,987
Capital investment
 
 20
 20
Attributable net income (loss)(12,729) (1,481) 
 (14,210)
Comprehensive income
 5,539
 
 5,539
Balance, December 31, 2012$208,277
 $(44,961) $20
 $163,336

Borgata
Distributions
In connection with the refinancing of the Borgata credit facility in August 2010, the Holding Company made a $123.4$123.4 million one-time distribution to the Divestiture Trust, reflected above as a distribution to the noncontrolling interest.

LVE
Comprehensive Income
LVE has entered into interest rate derivative contracts in order to hedge exposure to increasing interest rates, and the impact of those rates on the cash flows of its variable-rate debt. LVE's active interest rate swaps are as follows:

Effective Date Notional Amount Fixed Rate Maturity Date Notional Amount Fixed Rate Maturity Date
 (In thousands)   
Derivatives Designated as Hedging Instruments: (In thousands)        
December 21, 2007 $131,986
 4.59% November 1, 2013 $131,986
 4.59% November 1, 2013
          
Derivatives Not Designated as Hedging Instruments:          
December 21, 2007 100,000
 3.42% November 1, 2013 100,000
 3.42% November 1, 2013
Totals $231,986
    $231,986
   

The fair value of these derivatives at December 31, 2011 and 2010 represents the amount LVE would have to pay the counterparty to terminate these contracts as of those dates. At inception, these interest rate derivatives were designated as cash flow hedges and were determined to be highly effective. Therefore, the changes in fair value of the effective portion of these derivatives have been recorded in accumulated other comprehensive loss. Unrealized gains and losses on the discontinued hedge that was previously recorded in accumulated other comprehensive loss will be reclassified into earnings when the forecasted transaction affects earnings, or when it is probable that it will not occur. Prior to our consolidation of LVE, hedge accounting had been discontinued on the interest rate swap related to the taxable debt because it was no longer expected to be highly effective in hedging the exposure to increasing interest rates and the impact of those rates on cash flows. The ineffective portion of the swap was due to the construction delays, which caused the outstanding amount of the variable-rate debt to increase at a slower pace than the contractual increases in notional amount of the swap. In July 2011, hedge accounting was discontinued on the interest rate swap related to the tax-exempt debt when $27.0$27.0 million of principal was repaid.

NOTE 17.     FAIR VALUE MEASUREMENTS
We have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair

182

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




value and 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.

170


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

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.

As required by the guidance for fair value measurements, 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.
December 31, 2011December 31, 2012
Balance Level 1 Level 2 Level 3Balance Level 1 Level 2 Level 3
  (In thousands)  (In thousands)
Assets              
Cash and cash equivalents$178,756
 $178,756
 $
 $
$192,828
 $192,828
 $
 $
Restricted cash22,900
 22,900
 
 
CRDA deposits28,464
 
 
 28,464
Investment available for sale17,907
 
 
 17,907
       
Liabilities       
Merger earnout$9,800
 $
 $
 $9,800


December 31, 2010December 31, 2011
Balance Level 1 Level 2 Level 3Balance Level 1 Level 2 Level 3
  (In thousands)  (In thousands)
Assets              
Cash and cash equivalents$145,623
 $145,623
 $
 $
$178,756
 $178,756
 $
 $
Liabilities       
Derivative instruments$11,871
 $
 $11,871
 $
Restricted cash15,753
 15,753
 
 
CRDA deposits25,905
 
 
 25,905

Cash and Restricted Cash
The fair value of our cash and cash equivalents, classified in the fair value hierarchy as Level 1, is based on statements received from our banks at December 31, 20112012 and 2010.2011.
Our derivative instruments are
The fair value of Borgata's CRDA deposits, classified in the fair value hierarchy as Level 2 3, is based on estimates of the realizable value applied to balances on statements received from the CRDA at December 31, 2012 and 2011.


183

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as the LIBOR swap rate is observable at commonly quoted intervalsof December 31, 2012 and 2011 and for the full termyears ended December 31, 2012, 2011 and 2010




Investment Available for Sale
Peninsula Gaming has an investment in a single municipal bond issuance of $22.4 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 ("City Bonds"). Peninsula Gaming is 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 interest rate swaps. See Note 12, Derivative Instrumentsfair value of such investment was determined using a combination of current market rates and estimates of market conditions for further discussion regardinginstruments with similar terms, maturities, and degrees of risk and an estimate from an independent source of what market participants would use in pricing the bonds. Unrealized gains and losses on this instrument resulting from changes in the fair valuationvalue of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the Company's balance sheets. The carrying value of the investment available for sale is included in Other assets, net, on the consolidated balance sheets. The discount associated with this investment is netted with the investment on the consolidated balance sheets 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 consolidated statements of operations.

Merger Earnout
Under the terms of the Merger Agreement, Boyd Acquisition II, LLC, an indirect wholly-owned subsidiary of Boyd, is obligated to make an additional payment to PGP in 2016 if KSC's EBITDA, as defined in the Merger Agreement, for 2015 exceeds $105.0 million. The additional payment would be in an amount 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 liability was initially recorded upon consummation of the Merger, at the estimated fair value of the earnout using the modified Black-Scholes option pricing model, which requires the following assumptions: expected EBITDA volatility, forecasted 2015 EBITDA, risk-free interest rates and risk adjusted discount rate. We formed our interest rate swaps.assumptions using historical experience in the gaming industry and observable market conditions. The contingent consideration agreement will be fair valued periodically with updated assumptions and any change in the fair value of the obligation will be included in the Consolidated Statements of Comprehensive Income (Loss). At December 31, 2012, the Company recorded a liability of $9.8 million related to the earnout which is included in Other Liabilities on the Consolidated Balance Sheet.

Contingent Payments
In connection with KSC’s acquisition of a land purchase option to purchase land upon which KSC’s casino is currently being developed, KSC is required to pay a former casino project developer and option holder 1% of KSC’s EBITDA each month for a period of 10 years commencing December 20, 2011. The liability was initially recorded upon consummation of the Merger, at the estimated fair value of the contingent land purchase price using a discounted cash flows approach. At December 31, 2012, the Company recorded a current liability of $0.9 million related to this agreement which was recorded in Accrued liabilities on the Consolidated Balance Sheet and a long term obligation of $3.6 million which is included in Other liabilities on the Consolidated Balance Sheet.


184

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




The following table summarizes the changes in fair value of the Company’s Level 3 assets and liabilities for the year ended December 31, 2012.
 Period from November 20, 2012 through December 31, 2012
 Assets Liabilities
 Investment available for sale Merger earnout and Contingent land purchase price
 (In thousands)
Balance at November 20, 2012$18,853
 $(14,304)
Total gains (losses) (realized or unrealized):   
     Included in earnings16
 (86)
     Included in other comprehensive income (loss)(962) 
Transfers in or out of Level 3
 
Purchases, sales, issuances and settlements:   
     Settlements
 27
Ending balance at December 31, 2012$17,907
 $(14,363)
    
 Included in interest income Included in interest expense
Gains (losses) included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date$16
 $(86)

Balances Disclosed at Fair Value
The following tables provide the fair value measurement information about our note receivable, obligation under minimum assessment agreements and other financial instruments at December 31, 2012.
 December 31, 2012
 Outstanding Face Amount Carrying Value Estimated Fair Value Fair Value Hierarchy
 (In thousands)
Assets       
     Note receivable$2,470
 $2,470
 $2,470
 Level 3
        
Liabilities       
     Obligation under assessment arrangements$38,787
 $29,335
 $29,113
 Level 3
     Other financial instruments500
 413
 413
 Level 3



185

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




The following table provides the fair value measurement information about our long-term debt at December 31, 2012 and December 31, 2011 and 2010..
 December 31, 2012
 Outstanding Face Amount Carrying Value Estimated Fair Value Fair Value Hierarchy
 (In thousands)
Boyd Gaming Debt:       
Bank credit facility$1,474,850
 $1,466,635
 $1,508,516
 Level 2
9.125% Senior Notes due 2018500,000
 492,680
 523,995
 Level 1
9.00% Senior Notes due 2020350,000
 350,000
 347,158
 Level 1
6.75% Senior Subordinated Notes due 2014215,668
 215,668
 216,460
 Level 1
7.125% Senior Subordinated Notes due 2016240,750
 240,750
 236,537
 Level 1
Other158,141
 125,475
 123,424
 Level 3
 2,939,409
 2,891,208
 2,956,090
  
        
Peninsula Gaming Financing       
Bank credit facility854,400
 854,400
 868,838
 Level 2
8.375% Senior Notes due 2018350,000
 350,000
 367,721
 Level 1
Other494
 491
 494
 Level 3
 1,204,894
 1,204,891
 1,237,053
  
Total Boyd debt4,144,303
 4,096,099
 4,193,143
  
        
Borgata Debt:       
Borgata bank credit facility20,000
 20,000
 20,000
 Level 2
Borgata 9.50% Senior Secured Notes due 2015398,000
 389,547
 402,275
 Level 1
Borgata 9.875% Senior Secured Notes due 2018393,500
 383,777
 373,825
 Level 1
 811,500
 793,324
 796,100
  
     Total debt$4,955,803
 $4,889,423
 $4,989,243
  











171186

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




December 31, 2011December 31, 2011
Outstanding Face Amount Carrying Value Estimated Fair Value Fair Value HierarchyOutstanding Face Amount Carrying Value Estimated Fair Value Fair Value Hierarchy
(In thousands)(In thousands)
Boyd Gaming Debt:            
Bank credit facility$1,632,750
 $1,621,715
 $1,388,630
 Level 2$1,632,750
 $1,621,715
 $1,388,630
 Level 2
9.125% senior notes due 2018500,000
 491,444
 471,000
 Level 1
6.75% senior subordinated notes due 2014215,668
 215,668
 208,120
 Level 1
7.125% senior subordinated notes due 2016240,750
 240,750
 208,249
 Level 1
9.125% Senior Notes due 2018500,000
 491,444
 471,000
 Level 1
6.75% Senior Subordinated Notes due 2014215,668
 215,668
 208,120
 Level 1
7.125% Senior Subordinated Notes due 2016240,750
 240,750
 208,249
 Level 1
Other11,071
 11,071
 10,517
 Level 311,071
 11,071
 10,517
 Level 3
Total Boyd debt2,600,239
 2,580,648
 2,286,516
 
      
Borgata Debt:            
Borgata bank credit facility40,200
 40,200
 40,200
 Level 240,200
 40,200
 40,200
 Level 2
9.50% senior secured notes due 2015398,000
 387,049
 378,100
 Level 1
9.875% senior secured notes due 2018393,500
 382,559
 358,085
 Level 1
Borgata 9.50% Senior Secured Notes due 2015398,000
 387,049
 378,100
 Level 1
Borgata 9.875% Senior Secured Notes due 2018393,500
 382,559
 358,085
 Level 1
Total Borgata debt831,700
 809,808
 776,385
 
      
Total debt$3,431,939
 $3,390,456
 $3,062,901
 $3,431,939
 $3,390,456
 $3,062,901
 

The following table provides the fair value measurement information on other liabilities at December 31, 2012.

 December 31, 2010
 Outstanding Face Amount Carrying Value Estimated Fair Value Fair Value Hierarchy
 (In thousands)
Boyd Gaming Debt:       
Bank credit facility$1,425,000
 $1,425,000
 $1,346,625
 Level 2
9.125% senior notes Due 2018500,000
 490,206
 487,755
 Level 1
6.75% senior subordinated notes Due 2014215,668
 215,668
 212,163
 Level 1
7.125% senior subordinated notes Due 2016240,750
 240,750
 217,879
 Level 1
Other11,761
 11,761
 11,173
 Level 3
Borgata Debt:       
Borgata bank credit facility60,900
 60,900
 60,900
 Level 2
Borgata 9.50% senior notes due 2015400,000
 386,712
 375,111
 Level 1
Borgata 8.75% senior notes due 2018400,000
 387,758
 379,518
 Level 1
Total debt$3,254,079
 $3,218,755
 $3,091,124
  
 December 31, 2012
 Outstanding Face Amount Carrying Value Estimated Fair Value Fair Value Hierarchy
 (In thousands)
Contingent liability$9,800
 $
 $9,800
 Level 3

The estimated fair value of the Amended Credit FacilityBoyd bank credit facility is based on a relative value analysis performed on or about December 31, 2012 and December 31, 2011. The estimated fair value of PGL's credit facility is based on a relative value analysis performed on or about December 31, 2011 and 2010, respectively.2012. The estimated fair value of Borgata's bank credit facility at December 31, 2012 and December 31, 2011 and 2010 approximates its carrying value due to the short-term nature and variable repricing of the underlying Eurodollar loans comprising the Borgata bank credit facility. The estimated fair values of our senior subordinated and senior notes, PGL's senior notes and Borgata's senior secured notes are based on quoted market prices as of December 31, 2012 and December 31, 2011 and 2010, respectively.. Debt included in the “Other” category is fixed-rate debt that is due March 2013 and 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.

Fair Value of Non-Recourse Obligations of Variable Interest Entity
At December 31, 2012 and December 31, 2011, the carrying value of LVE's long-term debt approximates its fair value due to the prevailing interest rates on the debt, which are comparable to market.

There were no transfers between Level 1, Level 2 and Level 23 measurements during the years ended December 31, 2012 or the year ended December 31, 2011. All Level I, Level 2 and 2010.Level 3 additions were due to the acquisition of Peninsula Gaming on November 20, 2011, which included the Peninsula Gaming 8.375% Senior Notes due 2018 (Level I), the Peninsula Gaming credit facility (Level 2) and the available for sale city bonds (Level 3).

NOTE 18.    IMPAIRMENTS AND OTHER OPERATING CHARGES,ITEMS, NET
Other operating charges, net, are comprised of the following:

172187

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




 Year Ended December 31,
 2011 2010 2009
 (In thousands)
Asset impairments and write-downs$6,741
 $736
 $42,745
Acquisition related expenses6,375
 3,977
 981
Flood expenses, net of recoveries1,428
 
 
Measurement period adjustments(486) 
 
Hurricane expenses and related items
 
 (1,946)
Other operating charges, net$14,058
 $4,713
 $41,780
 Year Ended December 31,
 2012 2011 2010
 (In thousands)
Impairments$1,053,526
 $6,051
 $
      
Other operating items, net     
Acquisition-related expenses$18,651
 $6,375
 $3,977
Gain on insurance settlement, net of flood expenses(7,098) 1,428
 
Gain on insurance proceeds(7,694) 
 
Hurricane expenses2,668
 
 
Asset write-downs, net of gain on disposal123
 690
 736
Measurement period adjustments
 (486) 
Total other operating items, net$6,650
 $8,007
 $4,713
Asset Impairments
During the year ended December 31, 2012, we recorded asset impairments primarily related to the following items:
Development Assets: We recorded a non-cash impairment charge of $1.05 billion, primarily consisting of $993.9 million related to the Echelon development and Write-Downs$39.4 million related to various parcels of undeveloped land. We decided not to proceed with the development of the Echelon site and as a result, recognized impairment associated with the project development costs.
Sam's Town Shreveport: We recorded a non-cash impairment charge of $17.5 million which relates to the write-down of Sam's Town Shreveport's gaming license in connection with our annual impairment test. During the year ended December 31, 2012, this property's operating results were less than expected due to weaker than anticipated discretionary consumer spending and increased competition.
Borgata: We recorded a non-cash impairment charge of $2.8 million related to a parking structure project that will not be further developed.

During the year ended December 31, 2011, we recorded asset impairments and write-downs, net primarily related to the following items:

Impairment of Trademark: Due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City, we performed an interim impairment test on the indefinite lived trademark recorded upon the consolidation of Borgata. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, ourBorgata's projected future results will be further negatively impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test.
 
Our analysis consisted of a valuation of the trademark, using the relief from royalty method. The only significant change in our assumptions from the initial fair valuation were revised revenue and profitability projections, reflecting the impact of the changed present and forecasted circumstances. The impairment test shall consistconsisted of a comparison of the fair value of trademark with its carrying amount. As a result, we recorded a $5.0$5.0 million impairment to the trademark, representing the amount by which the carrying amount exceeded its fair value.

Impairment of Investment in Unconsolidated Subsidiary: We also recorded a non-cash impairment charge to Borgata's investment in an unconsolidated subsidiary in the amount of $1.1$1.1 million, representing the amount by which the carrying value of the investment exceeded its potential liquidated value. Borgata previously entered into an agreement with two other Atlantic City casinos to form ACES. With each member having a 33.3% interest, this New Jersey limited liability company was formed for the purpose of contracting with New Jersey Transit to operate express rail service between Manhattan and Atlantic City. Each member has guaranteed, jointly and severally, liability for all terms, covenants and conditions of the ACES agreement with New Jersey Transit consisting primarily of the necessary operating and capital expenses of ACES. ACES suspended services in September, 2011, and accordingly, the joint venture agreement terminated in January 2012, which will forceforced a liquidation of the joint venture's assets.

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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Subsequent to the recordation of this impairment charge, the carrying value of this investment was $2.8$2.8 million at December 31, 2011.

During the year ended December 31, 2010,2012, the primary asset impairments and write-downs, net primarily consisted of a charge of $0.5 million related to this investment was liquidated.

Other Operating Items, Net
Acquisition-Related Expenses
During the impairment in the market valueyear ended December 31, 2012, 2011, and 2010, we recorded $18.7 million, $6.4 million, and $4.0 million of our investment in certain bonds.
Duringexpenses related to evaluating various acquisition possibilities and other business development activities. Acquisition related expenses for the year ended December 31, 2009, asset impairments and write-downs2012, primarily consist of the following:     
Morgans/LV Investment LLC: Due to the suspension of Echelon, we recorded an operating charge of $13.5 million related to the write-down of our former investment in the Morgans/LV Investment LLC ("Morgans").We were a 50% partner in a joint venture with Morgans Hotel Group Co., which was terminated effective as of December 31, 2009. We accounted for our investment in Morgans under the equity method. We evaluate our equity investments for impairment whenever events or changes in circumstances indicate that the carrying value of such investment may have experienced an “other-than-temporary” decline in value. If such conditions exist, we then compare the estimated fair value of the investmentrelate to our carrying value to identify any impairment and determine whether such impairment is other-than-temporary.
Due to the uncertainty regarding the final development planacquisition of Echelon, during the year ended December 31, 2009, we reviewed our former investment in the Morgans joint venture for impairment. This impairment testPeninsula Gaming that was comprised of a fair value assessment, using cash flow analyses related to several viable alternative plans for the future development of

173


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 andcompleted on November 20, 2012. Acquisition expenses for the years ended December 31, 2011 and 2010 and 2009

Echelon, because several differing strategic plans related to Echelon were being evaluated at this time, the test weighted several viable alternative plans with significant consideration given to the likelihood of constructing the plans designed pursuant to the joint venture. As a result of this analysis, we did not believe that certain contributions to the joint venture, primarily related to the architectural and design plans to which we have no future interest, title or right to use, would ultimately be realizable. Accordingly, we recorded an other-than-temporary non-cash impairment charge of $13.5 million during the year ended December 31, 2009 related to such costs. The remaining $4.4 million of our investment in Morgans represents previously reimbursed allocations of shared development costs related to the Echelon master plan. These costs revertedrelate to our basis in Echelon, reported as construction in progress, as the plans to construct the hotels were terminated contemporaneous with the terminationacquisition of the joint venture, and are included in our overall impairment evaluationIP that was completed on October 4, 2011.

Gain on Insurance Settlement, Net of the Echelon development.
Dania Jai-Alai: Non-cash impairment charge of $28.4 million which relates to the write-off of Dania Jai-Alai's goodwill in connection with an amendment to the purchase agreement to settle the contingent payment prior to the satisfaction of certain legal conditions. In January 2009, we amended the purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions. The principal terms of the amendment were as follows: (i) we paid $9.4 million to the seller in January 2009, plus $9.1 million of interest accrued from the March 1, 2007 date of the acquisition; and (ii) we issued an 8% promissory note to the seller in the amount of $65.6 million, plus accrued interest. The terms of the note required principal payments of $9.4 million, plus accrued interest, in April 2009 and July 2009, and a final principal payment of $46.9 million, plus accrued interest, due in January 2010. The promissory note was secured by a letter of credit under our bank credit facility, and we have made all scheduled payments on the promissory note, including the final payment in January 2010. In conjunction with the amendment to the purchase agreement, we recorded the remaining $28.4 million of the $75 million contingent liability as additional goodwill during the year ended December 31, 2009. However, upon evaluation of this additional goodwill for recoverability, we recorded a non-cash impairment charge of $28.4 million.
Acquisition RelatedFlood Expenses
During the years ended December 31, 2011, 2010, and 2009, we recorded $6.4 million, $4.0 million and $1.0 million, respectively, of direct expenses related to evaluating various acquisition opportunities and other business development activities.
Flood Expenses
During the year ended December 31, 2011,2012, we recorded $7.1 million of gains on business interruption insurance proceeds, net of flood expenses, due to flooding of the Mississippi River and temporary closure of theour Tunica property in May 2011, we recorded $1.4 million ofcompared to flood expenses of $1.4 million, net of estimated insurance recoveries.recoveries, during the year ended December 31, 2011.
Measurement Period Adjustments
Gain on Insurance Proceeds
During the year ended December 31, 2012, we recognized a gain of $7.7 million consisting of $3.9 million related to the subrogation of insurance claims related to the fire that occurred during construction of The Water Club at Borgata in September 2007 and $3.8 million from business interruption proceeds due to the mandated closure of the property by civil authorities and the Division of Gaming Enforcement for three days in August 2011 related to Hurricane Irene.

Hurricane Expenses
During the year ended December 31, 2012, we recognized $2.7 million for hurricane expenses in our Midwest and South region related to the mandatory closure of several of our properties for Hurricane Isaac.

Asset Write-downs, Net of Gain on Disposal
During the year ended December 31, 2012, 2011 and 2010, we recognized $0.1 million, $0.7 million, and $0.7 million respectively, in connection with the disposal of certain property and equipment in the ordinary course of business.

Measurement Period Adjustments
In connection with the valuation procedures we performed on Borgata, we recorded measurement adjustments of $0.5 million,during the year ended December 31, 2011, which were primarily comprised of a $0.3$0.3 million bargain purchase gain.
Hurricane Expenses and Related Items
During the year ended December 31, 2009, we recorded a gain of $2.1 million, net of hurricane related charges, from the recovery and settlement of our business interruption insurance claim related to the closure of Treasure Chest due to the effects of Hurricane Katrina in 2005.

NOTE 19.    EMPLOYEE BENEFIT PLANS

174


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

We and Borgata contribute to multiemployer pension defined benefit plans under terms of collective-bargaining agreements that cover our union-represented employees. These unions cover certain of our culinary, hotel and other trade workers. We and Borgata are obligated to make defined contributions under these plans.

The significant risks of participating in multiemployer plans include, but are not limited to, the following:

We and Borgata may elect to stop participating in our multi-employer plans. As a result, we and Borgata may be required to pay a withdrawal liability based on the underfunded status of the plan as applicable. Our ability to fund such payments would be based on the results of our operations and subject to the risk factors that impact our business. If any of these risks actually occur, our business, financial condition and results of operations could be materially and adversely affected and impact our ability to meet our obligations to the multiemployer plan.

We and Borgata may contribute assets to the multiemployer plan for the benefit of our covered employees that are used to provide benefits to employees of other participating employers.

We and Borgata may be required to fund additional amounts if other participating employers stop contributing to the multiemployer plan.

Contributions, based on wages paid to covered employees, totaled approximately $7.1$8.1 million $7.1, $7.1 million, and $1.0$7.1 million for

189

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 2010, and 2009,2010




the years ended December 31, 2012, 2011, and 2010, respectively. These aggregate contributions were not individually significant to any of the respective plans. Our share of the unfunded vested liability related to multi-employer plans, if any, is not determinable and our participation is not individually significant on an individual multiemployer plan basis. On October 4, 2011, we acquired IP, and on November 20, 2012, we acquired Peninsula Gaming, which resulted in greater employer contributions during the years ended December 31, 2012 as compared to December 31, 2011. There were no significant changes that would affect the comparability of our employer contributions during the years ended December 31, 2011 and 2010. However, employer contributions are not comparable for the years ended December 31 2010 and 2009, respectively, due to the fact that we consolidated the financial position of Borgata in our consolidated financial statements effective as of March 24, 2010. See Note 1, Summary of Significant Accounting Policies, for our accounting policies related to the consolidation of Borgata. As of December 31,January 1, 2011, Borgata's share of the unfunded vested liability related to its pension plans is $51.4 million.$68.3 million.

We and Borgata have retirement savings plans under Section 401(k) of the Internal Revenue Code covering our non-union employees. The plans allow employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plans. We expensed our voluntary contributions to the 401(k) profit-sharing plans and trusts of $5.1$5.3 million $5.1, $5.1 million, and $3.7$5.1 million for the years ended December 31, 2012, 2011 and 2010, and 2009, respectively.


NOTE 20.    SEGMENT INFORMATION
We have aggregated certain of our properties in order to present fourfive Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest and South; (iv) Peninsula Gaming; and (iv)(v) Atlantic City. The table below lists the classification of each of our properties.

190

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Las Vegas Locals 
Gold Coast Hotel and CasinoLas Vegas, Nevada
The Orleans Hotel and CasinoLas Vegas, Nevada
Sam's Town Hotel and Gambling HallLas Vegas, Nevada
Suncoast Hotel and CasinoLas Vegas, Nevada
Eldorado CasinoHenderson, Nevada
Jokers Wild CasinoHenderson, Nevada
  
Downtown Las Vegas 
California Hotel and CasinoLas Vegas, Nevada
Fremont Hotel and CasinoLas Vegas, Nevada
Main Street Station Casino, Brewery and HotelLas Vegas, Nevada
  
Midwest and South 
Sam's Town Hotel and Gambling HallTunica, Mississippi
IP Casino Resort SpaBiloxi, Mississippi
Par-A-Dice Hotel CasinoEast Peoria, Illinois
Blue Chip Casino, Hotel & SpaMichigan City, Indiana
Treasure Chest CasinoKenner, Louisiana
Delta Downs Racetrack Casino & HotelVinton, Louisiana
Sam's Town Hotel and CasinoShreveport, Louisiana
  
Peninsula Gaming
Diamond JoDubuque, Iowa
Diamond Jo WorthNorthwood, Iowa
Evangeline Downs Racetrack and CasinoOpelousas, Louisiana
Amelia Belle CasinoAmelia, Louisiana
Kansas Star CasinoMulvane, Kansas
Atlantic City 
Borgata Hotel Casino & SpaAtlantic City, New Jersey

Results of Operations - Adjusted EBITDA

175


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

We determine each of our wholly-owned properties' profitability based upon Property EBITDA, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, preopening expenses, write-downs and other charges,operating items, net, share-based compensation expense, deferred rent, change in value of derivative instruments, and gain/loss on early retirements of debt, as applicable. 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 Gaming segments, and also includes our share of Borgata's operating income before net amortization, preopening and other items applied retrospectively.items.

Results for Downtown Las Vegas include the results of our travel agency and captive insurance company.company in Hawaii. Effective April 1, 2008, we reclassified the reporting of our Midwest and South segment to exclude the results of Dania Jai-Alai, our pari-mutuel jai-alai facility, since it does not share similar economic characteristics with our other Midwest and South operations; therefore, the results of Dania Jai-Alai are included as part of the “Other” category on the accompanying table.

We reclassify the reporting of corporate expense on the accompanying table in order to exclude it from our subtotal for Reportable Segment Adjusted EBITDA and include it as part of total other operating costs and expenses. Furthermore, corporate expense is now presented to include 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, in addition to the corporate portion of share-based compensation expense. Other operating costs and expenses include Property EBITDA from

191

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010




Dania Jai-Alai, deferred rent, and share-based compensation expense charged to our Reportable Segments. Interest expense is net of interest income and amounts capitalized. Interest expense for the year ended December 31, 2009 includes $8.9 million of prior period interest expense (from March 1, 2007, the date of the acquisition of Dania Jai-Alai, to December 31, 2008) related to the January 2009 amendment to the purchase agreement resulting in the finalization of our purchase price for Dania Jai-Alai (see Note 7, Goodwill).

The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Adjusted EBITDA to operating income (loss), as reported in our accompanying consolidated statements of operations for the years ended December 31, 2011, 20102012 and 2009.2011.
 Year Ended December 31,
 2012 2011 2010
 (In thousands)
Net Revenues     
Las Vegas Locals$591,306
 $604,965
 $607,366
Downtown Las Vegas224,178
 224,251
 218,222
Midwest and South924,188
 771,354
 728,767
Peninsula Gaming56,925
 
 
Atlantic City686,222
 730,274
 580,140
Reportable Segment Net Revenues2,482,819
 2,330,844
 2,134,495
Other4,607
 5,394
 6,404
Net revenues$2,487,426
 $2,336,238
 $2,140,899
      
Reportable Segment Adjusted EBITDA     
Las Vegas Locals$128,742
 $145,848
 $137,464
Downtown Las Vegas32,832
 35,214
 34,227
Midwest and South192,349
 167,101
 143,699
Peninsula Gaming21,152
 
 
Atlantic City116,976
 158,126
 136,278
 492,051
 506,289
 451,668
Operating income from Borgata, net
 
 8,146
Adjusted EBITDA492,051
 506,289
 459,814
      
Other operating costs and expenses     
Depreciation and amortization214,332
 195,343
 199,275
Corporate expense50,719
 48,962
 48,861
Preopening expenses11,541
 6,634
 7,459
Impairments and other operating items, net1,053,526
 14,058
 4,713
Other16,808
 8,188
 10,147
Total other operating costs and expenses1,346,926
 273,185
 270,455
Operating income$(854,875) $233,104
 $189,359


176192

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




 Year Ended December 31,
 2011 2010 2009
 (In thousands)
Net Revenues     
Las Vegas Locals$604,965
 $607,366
 $641,941
Downtown Las Vegas224,251
 218,222
 229,149
Midwest and South771,354
 728,767
 762,336
Atlantic City730,274
 580,140
 
Reportable Segment Net Revenues2,330,844
 2,134,495
 1,633,426
Other5,394
 6,404
 7,560
Net revenues2,336,238
 2,140,899
 1,640,986
      
Reportable Segment Adjusted EBITDA     
Las Vegas Locals145,848
 137,464
 155,336
Downtown Las Vegas35,214
 34,227
 46,102
Midwest and South167,101
 143,699
 165,534
Atlantic City158,126
 136,278
 
 506,289
 451,668
 366,972
     Operating income from Borgata, net
 8,146
 59,470
          Adjusted EBITDA506,289
 459,814
 426,442
      
Other operating costs and expenses     
Depreciation and amortization195,343
 199,275
 165,725
Corporate expense48,962
 48,861
 47,617
Preopening expenses6,634
 7,459
 17,798
Our share of Borgata's preopening expenses
 
 349
Our share of Borgata's other items and write-downs, net
 
 (14,303)
Other operating charges, net14,058
 4,713
 41,780
Other8,188
 10,147
 11,283
Total other operating costs and expenses273,185
 270,455
 270,249
Operating income (loss)$233,104
 $189,359
 $156,193
The following table reconciles the presentation of depreciation and amortization expense on our consolidated statements of operations to the presentation on the accompanying table.
 Year Ended December 31,
 2011 2010 2009
 (In thousands)
Depreciation and amortization expense,
as reported in our consolidated statement of operations
$195,343
 $199,275
 $164,427
Net amortization expense related to our investment in Borgata
 
 1,298
Depreciation and amortization expense, as reported above$195,343
 $199,275
 $165,725
Total Assets
The Company's total assets, by Reportable Segment, consisted of the following amounts at December 31, 20112012 and 2010December 31, 2011:

177


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

December 31,Year Ended December 31,
2011 20102012 2011
(In thousands)(In thousands)
Assets      
Las Vegas Locals$1,260,458
 $1,284,160
$1,215,494
 $1,260,458
Downtown Las Vegas131,140
 136,868
133,689
 131,140
Midwest and South1,406,136
 1,117,959
1,367,063
 1,406,136
Peninsula Gaming1,604,778
 
Atlantic City1,435,332
 1,463,298
1,388,562
 1,435,332
Total reportable segment assets4,233,066
 4,002,285
Total Reportable Segment assets5,709,586
 4,233,066
Corporate395,436
 1,421,848
Other228,140
 255,847
227,171
 228,140
Corporate1,421,848
 1,398,729
Total assets$5,883,054
 $5,656,861
$6,332,193
 $5,883,054
Capital Expenditures
The Company utilizes the Corporate entities to centralize the development of major renovation and other capital development projects that are included as construction in progress. After the project is complete, the corporate entities transfer the projects to the segment subsidiaries.

The Company's capital expenditures for the years ended December 31, 2012, 2011, 2010, and 2009,2010, by Reportable Segment, consisted of the following:
Year Ended December 31,Year Ended December 31,
2011 2010 20092012 2011 2010
(In thousands)(In thousands)
Capital Expenditures:          
Las Vegas Locals$15,782
 $11,863
 $12,107
$23,349
 $15,782
 $11,863
Downtown Las Vegas4,420
 3,356
 3,294
7,248
 4,420
 3,356
Midwest and South19,770
 18,632
 21,665
60,572
 19,770
 18,632
Peninsula Gaming7,606
 
 
Atlantic City32,626
 12,637
 
34,742
 32,626
 12,637
Total Reportable Segment Capital Expenditures72,598
 46,488
 37,066
133,517
 72,598
 46,488
Other106
 (1,797) 185
706
 106
 (1,797)
Corporate entities11,859
 4,092
 33,969
(25,580) 11,859
 4,092
Total Capital Expenditures84,563
 48,783
 71,220
108,643
 84,563
 48,783
Change in Accrued Property Additions2,661
 27,175
 86,337
17,331
 2,661
 27,175
Cash-Based Capital Expenditures$87,224
 $75,958
 $157,557
$125,974
 $87,224
 $75,958


NOTE 21. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents selected quarterly financial information for the years ended December 31, 2012, 2011 and 2010.2010.


178193

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




December 31, 2011December 31, 2012
First Second Third Fourth YearFirst Second Third Fourth Year
(In thousands, except per share data)(In thousands, except per share data)
Summary Operating Results:                  
Net revenues$564,946
 $574,403
 $590,215
 $606,674
 $2,336,238
$633,083
 $615,222
 $613,279
 $625,842
 $2,487,426
Operating income48,104
 61,990
 68,164
 54,846
 233,104
Operating income (loss)76,582
 58,239
 48,348
 (1,038,044) (854,875)
Net income (loss) attributable to Boyd Gaming Corporation(3,521) (2,951) 3,109
 (491) (3,854)5,852
 977
 (15,796) (899,898) (908,865)
Basic and diluted net income (loss) per common share:                  
Basic net income (loss) per common share$(0.04) $(0.03) $0.04
 $(0.01) $(0.04)$0.07
 $0.01
 $(0.18) $(10.27) $(10.37)
Diluted net income (loss) per common share$(0.04) $(0.03) $0.04
 $(0.01) $(0.04)$0.07
 $0.01
 $(0.18) $(10.27) $(10.37)
                  
December 31, 2010December 31, 2011
First Second Third Fourth YearFirst Second Third Fourth Year
(In thousands, except per share data)(In thousands, except per share data)
Summary Operating Results:                  
Net revenues$415,135
 $578,446
 $595,378
 $551,940
 $2,140,899
$564,946
 $574,403
 $590,215
 $606,674
 $2,336,238
Operating income44,030
 49,676
 54,483
 41,170
 189,359
48,104
 61,990
 68,164
 54,846
 233,104
Net income (loss) attributable to Boyd Gaming Corporation8,435
 3,382
 5,591
 (7,098) 10,310
(3,521) (2,951) 3,109
 (491) (3,854)
Basic and diluted net income (loss) per common share:                  
Basic net income (loss) per common share$0.10
 $0.04
 $0.06
 $(0.08) $0.12
$(0.04) $(0.03) $0.04
 $(0.01) $(0.04)
Diluted net income (loss) per common share$0.10
 $0.04
 $0.06
 $(0.08) $0.12
$(0.04) $(0.03) $0.04
 $(0.01) $(0.04)


NOTE 22.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Pursuant to the prior registrations of our 9.125% Senior Notes due 2018, undercertain 100% owned subsidiaries provided joint and several and full and unconditional guarantees of the debt. Under the Securities Act of 1933, separate condensed
consolidating financial information for our subsidiary guarantors and non-guarantors of this debt is presented below. The non-guarantors primarily represent special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly-owned subsidiaries.

The tables below present the condensed consolidating balance sheets as of December 31, 20112012 and 20102011 and the condensed consolidatedconsolidating statements of operations and cash flows for each of the three years in the period ended December 31, 2011.

Condensed Consolidating Balance Sheets2012.


179194

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Balance Sheets

December 31, 2012
    Non- Non-    
    Guarantor Guarantor    
    Subsidiaries Subsidiaries    
December 31, 2011  Guarantor (100% (Not 100%    
Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries (100% Owned)  Non-Guarantor Subsidiaries (Not 100% Owned)  Eliminations ConsolidatedParent Subsidiaries Owned) Owned) Eliminations Consolidated
    (In thousands)        (In thousands)    
Assets                      
Cash and cash equivalents$364
 $128,185
 $3,944
 $46,263
 $
 $178,756
$2,520
 $118,714
 $37,002
 $34,592
 $
 $192,828
Other current assets29,818
 70,448
 13,459
 50,413
 
 164,138
87,967
 (4,905) 36,491
 49,843
 (6,631) 162,765
Property and equipment, net115,346
 2,120,227
 75,739
 1,230,796
 
 3,542,108
67,499
 1,691,120
 500,660
 1,365,709
 
 3,624,988
Assets held for development
 926,013
 
 163,806
 
 1,089,819
775
 330,995
 
 
 
 331,770
Investments in subsidiaries3,777,298
 353,740
 32
 
 (4,131,070) 
3,093,287
 (191,180) 
 
 (2,902,107) 
Intercompany receivable
 187,911
 
 
 (187,911) 

 264,687
 
 
 (264,687) 
Other assets, net28,501
 15,068
 5,993
 71,077
 
 120,639
45,844
 12,791
 81,891
 64,749
 
 205,275
Intangible assets, net
 487,907
 21,374
 64,737
 
 574,018

 468,229
 589,845
 61,564
 
 1,119,638
Goodwill, net
 212,794
 782
 
 
 213,576

 212,795
 482,134
 
 
 694,929
Total assets$3,951,327
 $4,502,293
 $121,323
 $1,627,092
 $(4,318,981) $5,883,054
$3,297,892
 $2,903,246
 $1,728,023
 $1,576,457
 $(3,173,425) $6,332,193
                      
Liabilities and Stockholders' Equity                      
Current maturities of long-term$42,500
 $730
 $
 $
 $
 $43,230
Current maturities of long-term debt$42,500
 $10,341
 $8,729
 $
 $

$61,570
Non-recourse debt      29,686
   29,686

 
 
 225,113
 
 225,113
Other current liabilities146,054
 152,437
 16,725
 102,484
 (18,596) 399,104
Current liabilities70,721
 203,484
 83,090
 109,441
 (2,855) 463,881
Intercompany payable455
 
 216,211
 
 (216,666) 
134,386
 
 129,985
 
 (264,371) 
Long-term debt, net of current maturities2,527,076
 10,341
 
 809,809
 
 3,347,226
2,723,232
 
 1,311,296
 793,325
 
 4,827,853
Due from affiliates
 
 
 
 
 
Other long-term liabilities33,150
 404,463
 1,537
 57,599
 
 496,749
23,262
 185,350
 42,595
 35,442
 
 286,649
Non-recourse debt
 
 
 192,980
 
 192,980

 
 
 
 
 
          
           
Preferred stock
 
 
 
 
 

 
 
 
 
 
Common stock863
 31,128
 32
 
 (31,160) 863
869
 31,097
 305,387
 
 (336,484) 869
Additional paid-in capital644,174
 2,984,250
 41,724
 476,733
 (3,502,707) 644,174
655,694
 2,538,402
 502,742
 476,733
 (3,517,877) 655,694
Retained earnings557,055
 918,944
 (154,906) (42,199) (721,839) 557,055
Retained earnings (deficit)(351,810) (65,428) (654,839) (63,597) 783,864
 (351,810)
Accumulated other comprehensive loss, net
 
 
 
 
 
(962) 
 (962) 
 962
 (962)
Total Boyd Gaming Corporation stockholders' equity1,202,092
 3,934,322
 (113,150) 434,534
 (4,255,706) 1,202,092
Noncontrolling interests
 
 
 
 171,987
 171,987
Total Boyd Gaming Corporation stockholders' equity (deficit)303,791
 2,504,071
 152,328
 413,136
 (3,069,535) 303,791
Noncontrolling interest







163,336
 163,336
Total stockholders' equity (deficit)1,202,092
 3,934,322
 (113,150) 434,534
 (4,083,719) 1,374,079
303,791
 2,504,071
 152,328
 413,136
 (2,906,199) 467,127
Total liabilities and stockholders' equity$3,951,327
 $4,502,293
 $121,323
 $1,627,092
 $(4,318,981) $5,883,054
$3,297,892
 $2,903,246
 $1,728,023
 $1,576,457
 $(3,173,425) $6,332,193


180195

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Balance Sheets - continued
December 31, 2011
    Non- Non-    
    Guarantor Guarantor    
    Subsidiaries Subsidiaries    
December 31, 2010  Guarantor (100% (Not 100%    
Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries (100% Owned)  Non-Guarantor Subsidiaries (Not 100% Owned)  Eliminations ConsolidatedParent Subsidiaries Owned) Owned) Eliminations Consolidated
    (In thousands)        (In thousands)    
Assets                      
Cash and cash equivalents$11,231
 $88,282
 $3,679
 $42,431
 $
 $145,623
$364
 $128,185
 $3,944
 $46,263
 $
 $178,756
Other current assets10,395
 61,829
 15,246
 47,492
 
 134,962
29,818
 70,448
 13,459
 50,413
 
 164,138
Property and equipment, net111,921
 1,939,834
 77,949
 1,253,667
 
 3,383,371
115,346
 2,120,227
 75,739
 1,230,796
 
 3,542,108
Assets held for development
 923,038
 
 163,806
 
 1,086,844

 926,013
 
 163,806
 
 1,089,819
Investments in subsidiaries3,373,486
 424,707
 
 5,185
 (3,803,378) 
3,777,298
 353,740
 32
 
 (4,131,070) 
Intercompany receivable50,824
 
 69,931
 
 (120,755) 

 187,911
 
 
 (187,911) 
Other assets, net73,420
 46,886
 2,979
 89,021
 (59,535) 152,771
28,501
 15,068
 5,993
 71,077
 
 120,639
Intangible assets, net
 460,714
 
 79,000
 
 539,714

 487,907
 21,374
 64,737
 
 574,018
Goodwill, net
 212,794
 782
 
 
 213,576

 212,794
 782
 
 
 213,576
Total assets$3,631,277
 $4,158,084
 $170,566
 $1,680,602
 $(3,983,668) $5,656,861
$3,951,327
 $4,502,293
 $121,323
 $1,627,092
 $(4,318,981) $5,883,054
                      
Liabilities and Stockholders' Equity                      
Current maturities of long-term$25,000
 $690
 $
 $
 $
 $25,690
Current maturities of non-recourse debt
 
 

22,487
 
 22,487
Other current liabilities39,663
 175,870
 17,464
 109,161
 
 342,158
Current maturities of long-term debt$42,500
 $730
 $
 $
 $
 $43,230
Non-recourse debt
 
 
 29,686
 
 29,686
Current liabilities146,054
 152,437
 16,725
 102,484
 (18,596) 399,104
Intercompany payable
 472,795
 246,144
 
 (718,939) 
455
 
 216,211
 
 (216,666) 
Long-term debt, net of current maturities2,346,623
 11,072
 
 835,370
 
 3,193,065
2,527,076
 10,341
 
 809,809
 
 3,347,226
Other long-term liabilities30,786
 399,148
 1,536
 60,050
 
 491,520
33,150
 404,463
 1,537
 57,599
 
 496,749
Non-recourse debt
 
 
 220,572
   220,572

 
 
 192,980
 
 192,980
          
           
Preferred stock
 
 
 
 
 

 
 
 
 
 
Common stock862
 30,298
 32
 
 (30,330) 862
863
 31,128
 32
 
 (31,160) 863
Additional paid-in capital635,028
 2,320,477
 41,724
 421,472
 (2,783,673) 635,028
644,174
 2,984,250
 41,724
 476,733
 (3,502,707) 644,174
Retained earnings560,909
 747,734
 (136,334) 11,490
 (622,890) 560,909
Accumulated other comprehensive loss, net(7,594) 
 
 
 
 (7,594)
Total Boyd Gaming Corporation stockholders' equity1,189,205
 3,098,509
 (94,578) 432,962
 (3,436,893) 1,189,205
Noncontrolling interests
 
 
1

 172,164
 172,164
Retained earnings (deficit)557,055
 918,944
 (154,906) (42,199) (721,839) 557,055
Total Boyd Gaming Corporation stockholders' equity (deficit)1,202,092
 3,934,322
 (113,150) 434,534
 (4,255,706) 1,202,092
Noncontrolling interest
 
 
 
 171,987
 171,987
Total stockholders' equity (deficit)1,189,205
 3,098,509
 (94,578) 432,962
 (3,264,729) 1,361,369
1,202,092
 3,934,322
 (113,150) 434,534
 (4,083,719) 1,374,079
Total liabilities and stockholders' equity$3,631,277
 $4,158,084
 $170,566
 $1,680,602
 $(3,983,668) $5,656,861
$3,951,327
 $4,502,293
 $121,323
 $1,627,092
 $(4,318,981) $5,883,054

181196

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Statements of Operations

 Year Ended December 31, 2011
 Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries (100% Owned)  Non-Guarantor Subsidiaries (Not 100% Owned)  Eliminations Consolidated
     (In thousands)    
Net revenues$149,168
 $1,550,197
 $55,767
 $730,274
 $(149,168) $2,336,238
            
Costs and expenses           
Operating
 848,973
 57,620
 383,041
 
 1,289,634
Selling, general and administrative
 258,026
 10,023
 126,942
 
 394,991
Maintenance and utilities
 89,092
 2,255
 62,165
 
 153,512
Depreciation and amortization8,371
 118,621
 2,914
 65,437
 
 195,343
Corporate expense95,847
 147
 1,194
 
 (48,226) 48,962
Preopening expenses907
 16,356
 
 (10,629) 
 6,634
Other operating charges, net6,054
 1,602
 3
 6,399
 
 14,058
        Total costs and expenses111,179
 1,332,817
 74,009
 633,355
 (48,226) 2,103,134
            
Equity in earnings of subsidiaries75,144
 (1,345) 
 
 (73,799) 
Operating income (loss)113,133
 216,035
 (18,242) 96,919
 (174,741) 233,104
            
Other expense (income)           
Interest expense, net151,931
 687
 
 98,067
 
 250,685
Fair value adjustment of derivative instruments265
 
 
 
 
 265
(Gain) Loss on early retirements of debt20
 
 
 (6) 
 14
Other income(7,000) (4,582) 
 
 
 (11,582)
        Total other expense, net145,216
 (3,895) 
 98,061
 
 239,382
            
Income (loss) before income taxes(32,083) 219,930
 (18,242) (1,142) (174,741) (6,278)
Income taxes28,229
 (34,349) 5,652
 (1,253) 
 (1,721)
Net income (loss)(3,854) 185,581
 (12,590) (2,395) (174,741) (7,999)
Noncontrolling interests
 
 
 
 4,145
 4,145
Net income (loss) attributable to Boyd Gaming Corporation$(3,854) $185,581
 $(12,590) $(2,395) $(170,596) $(3,854)



 Year Ended December 31, 2012
     Non- Non-    
     Guarantor Guarantor    
     Subsidiaries Subsidiaries    
   Guarantor (100% (Not 100%    
 Parent Subsidiaries Owned) Owned) Eliminations Consolidated
     (In thousands)    
Net revenues$138,926
 $1,689,284
 $111,921
 $697,118
 $(149,823) $2,487,426
            
Costs and expenses           
Operating
 940,450
 85,419
 371,722
 
 1,397,591
Selling, general and administrative
 296,840
 16,931
 139,155
 
 452,926
Maintenance and utilities
 92,312
 4,281
 58,423
 
 155,016
Depreciation and amortization7,984
 126,121
 15,963
 64,264
 
 214,332
Corporate expense86,084
 368
 1,631
 
 (37,364) 50,719
Preopening expenses1,207
 15,438
 5,552
 240
 (10,896) 11,541
Impairment of assets97,868
 1,044,112
 
 2,811
 (91,265) 1,053,526
Other operating items, net15,575
 (5,503) 3,081
 (6,503) 
 6,650
        Total costs and expenses208,718
 2,510,138
 132,858
 630,112
 (139,525) 3,342,301
            
Equity in loss (earnings) of subsidiaries929,465
 (535) (87,151) 
 (841,779) 
Operating income (loss)(999,257) (820,319) 66,214
 67,006
 831,481
 (854,875)
            
Other expense (income)           
Interest expense, net174,345
 634
 18,630
 95,226
 
 288,835
Other income
 
 (91,128) 
 91,265
 137
        Total other expense, net174,345
 634
 (72,498) 95,226
 91,265
 288,972
            
Income (loss) before income taxes(1,173,602) (820,953) 138,712
 (28,220) 740,216
 (1,143,847)
Income taxes264,737
 (50,745) 5,501
 1,279
 
 220,772
Net income (loss)(908,865) (871,698) 144,213
 (26,941) 740,216
 (923,075)
Net loss attributable to noncontrolling interest
 
 
 
 14,210
 14,210
Net income (loss) attributable to Boyd Gaming Corporation$(908,865) $(871,698) $144,213
 $(26,941) $754,426
 $(908,865)
Comprehensive income (loss)$(909,827) $(871,698) $144,213
 $(21,402) $740,216
 $(918,498)

182197

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Statements of Operations - continued

Year Ended December 31, 2011
    Non- Non-    
    Guarantor Guarantor    
    Subsidiaries Subsidiaries    
Year Ended December 31, 2010  Guarantor (100% (Not 100%    
Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries (100% Owned)  Non-Guarantor Subsidiaries (Not 100% Owned)  Eliminations ConsolidatedParent Subsidiaries Owned) Owned) Eliminations Consolidated
    (In thousands)        (In thousands)    
Net revenues$134,190
 $1,501,899
 $58,860
 $580,140
 $(134,190) $2,140,899
$149,168
 $1,550,197
 $55,767
 $730,274
 $(149,168) $2,336,238
                      
Costs and expenses                      
Operating
 835,489
 54,984
 298,966
 
 1,189,439

 848,973
 57,620
 383,041
 
 1,289,634
Selling, general and administrative
 265,376
 8,858
 94,983
 
 369,217

 258,026
 10,023
 126,942
 
 394,991
Maintenance and utilities
 87,499
 4,256
 48,967
 
 140,722

 89,092
 2,255
 62,165
 
 153,512
Depreciation and amortization11,955
 129,693
 4,741
 52,886
 
 199,275
8,371
 118,621
 2,914
 65,437
 
 195,343
Corporate expense83,437
 59,710
 9,295
 
 (103,581) 48,861
95,847
 147
 1,194
 
 (48,226) 48,962
Preopening expenses1,580
 
 7,523
 
 (1,644) 7,459
907
 16,356
 
 (10,629) 
 6,634
Other operating charges, net4,456
 68
 197
 (8) 
 4,713
Other operating items, net6,054
 1,602
 3
 6,399
 
 14,058
Total costs and expenses101,428
 1,377,835
 89,854
 495,794
 (105,225) 1,959,686
111,179
 1,332,817
 74,009
 633,355
 (48,226) 2,103,134
                      
Equity in earnings of subsidiaries65,159
 47,393
 
 
 (104,406) 8,146
Equity in loss (earnings) of subsidiaries(75,144) 1,345
 
 
 73,799
 
Operating income (loss)97,921
 171,457
 (30,994) 84,346
 (133,371) 189,359
113,133
 216,035
 (18,242) 96,919
 (174,741) 233,104
                      
Other expense (income)                      
Interest expense, net118,585
 731
 (6) 61,243
 
 180,553
151,931
 687
 
 98,067
 
 250,685
Fair value adjustment of derivative instruments480
 
 
 
 
 480
265
 
 
 
 
 265
Gain on early retirements of debt(2,758)   
 
 
 (2,758)20
 
 
 (6) 
 14
Other income
 (12,535)       (12,535)(7,000) (4,582) 
 
 
 (11,582)
Other non-operating expenses, net
 3,133
 
 
 
 3,133
Total other expense, net116,307
 (8,671) (6) 61,243
 
 168,873
145,216
 (3,895) 
 98,061
 
 239,382
                      
Income (loss) before income taxes(18,386) 180,128
 (30,988) 23,103
 (133,371) 20,486
(32,083) 219,930
 (18,242) (1,142) (174,741) (6,278)
Income taxes28,696
 (32,838) (27) (4,067) 
 (8,236)28,229
 (34,349) 5,652
 (1,253) 
 (1,721)
Net income (loss)10,310
 147,290
 (31,015) 19,036
 (133,371) 12,250
(3,854) 185,581
 (12,590) (2,395) (174,741) (7,999)
Noncontrolling interests
 
 
 
 (1,940) (1,940)
Net loss attributable to noncontrolling interest
 
 
 
 4,145
 4,145
Net income (loss) attributable to Boyd Gaming Corporation$10,310
 $147,290
 $(31,015) $19,036
 $(135,311) $10,310
$(3,854) $185,581
 $(12,590) $(2,395) $(170,596) $(3,854)
Comprehensive income (loss)$3,740
 $185,581
 $(12,590) $1,573
 $(174,741) $3,563




183198

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed
Consolidating Statements of Operations - continued

Year Ended December 31, 2010
    Non- Non-    
    Guarantor Guarantor    
    Subsidiaries Subsidiaries    
Year Ended December 31, 2009  Guarantor (100% (Not 100%    
Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries  Eliminations ConsolidatedParent Subsidiaries Owned) Owned) Eliminations Consolidated
  (In thousands)      (In thousands)    
Net revenues$69,774
 $1,630,321
 $10,665
 $(69,774) $1,640,986
$134,190
 $1,501,899
 $58,860
 $580,140
 $(134,190) $2,140,899
                    
Costs and expenses                    
Operating
 850,595
 57,469
 
 908,064

 835,489
 54,984
 298,966
 
 1,189,439
Selling, general and administrative
 272,945
 11,992
 
 284,937

 265,376
 8,858
 94,983
 
 369,217
Maintenance and utilities
 88,226
 4,070
 
 92,296

 87,499
 4,256
 48,967
 
 140,722
Depreciation and amortization13,415
 147,436
 3,576
 
 164,427
11,955
 129,693
 4,741
 52,886
 
 199,275
Corporate expense93,096
 52,545
 17,229
 (115,253) 47,617
83,437
 59,710
 9,295
 
 (103,581) 48,861
Preopening expenses260
 17,538
 
 
 17,798
1,580
 
 7,523
 
 (1,644) 7,459
Other operating charges, net981
 12,444
 28,355
 
 41,780
Other operating items, net4,456
 68
 197
 (8) 
 4,713
Total costs and expenses107,752
 1,441,729
 122,691
 (115,253) 1,556,919
101,428
 1,377,835
 89,854
 495,794
 (105,225) 1,959,686
                    
Equity in earnings of subsidiaries126,176
 71,617
 
 (125,667) 72,126
Equity in loss (earnings) of subsidiaries(65,159) (47,393) 
 
 104,406
 (8,146)
Operating income (loss)88,198
 260,209
 (112,026) (80,188) 156,193
97,921
 171,457
 (30,994) 84,346
 (133,371) 189,359
                    
Other expense (income)                    
Interest expense, net147,556
 (732) 
 
 146,824
118,585
 731
 (6) 61,243
 
 180,553
Fair value adjustment of derivative instruments480
 
 
 
 
 480
Gain on early retirements of debt(15,284) 
 
 
 (15,284)(2,758) 
 
 
 
 (2,758)
Other income
 (12,535) 
 
 
 (12,535)
Other non-operating expenses, net33
 19,303
 
 
 19,336

 3,133
 
 
 
 3,133
Total other expense, net132,305
 18,571
 
 
 150,876
116,307
 (8,671) (6) 61,243
 
 168,873
                    
Income (loss) before income taxes(44,107) 241,638
 (112,026) (80,188) 5,317
(18,386) 180,128
 (30,988) 23,103
 (133,371) 20,486
Income taxes48,348
 (55,065) 5,641
 
 (1,076)28,696
 (32,838) (27) (4,067) 
 (8,236)
Net income (loss)$4,241
 $186,573
 $(106,385) $(80,188) $4,241
10,310
 147,290
 (31,015) 19,036
 (133,371) 12,250
Net loss attributable to noncontrolling interest
 
 
 
 (1,940) (1,940)
Net income (loss) attributable to Boyd Gaming Corporation$10,310
 $147,290
 $(31,015) $19,036
 $(135,311) $10,310
Comprehensive income$20,842
 $147,290
 $(31,015) $14,920
 $(133,371) $18,666



184199

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Statements of Cash Flows

 Year Ended December 31, 2011
 Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries (100% Owned)  Non-Guarantor Subsidiaries (Not 100% Owned)  Eliminations Consolidated
     (In thousands)    
Cash flows from operating activities           
Net cash from operating activities$100,478
 $68,797
 $26,295
 $57,940
 $
 $253,510
            
Cash flows from investing activities           
Capital expenditures(24,815) (28,204) (1,579) (32,626) 
 (87,224)
Cash paid for business acquisition, net(278,456)         (278,456)
Cash paid for development agreement
 
 (24,450) 
 
 (24,450)
Other investing activities895
 
 
 26,448
 
 27,343
Net cash from investing activities(302,376) (28,204) (26,029) (6,178) 
 (362,787)
            
Cash flows from financing activities           
Borrowings under bank credit facility391,329
 
 
 741,300
 
 1,132,629
Payments under bank credit facility(183,579) 
 
 (762,000) 
 (945,579)
Debt financing cost, net(14,221) 
 
 (1,153) 
 (15,374)
Proceeds from issuance of debt
 
 
 7,199
 
 7,199
Payments on long-term debt
 (690) 
 
 
 (690)
Payments on retirements of long-term debt
 
 
 (8,198) 
 (8,198)
Proceed from stock options exercised15
 
 
 
 
 15
Payments under note payable by variable interest entity
 
 
 (27,000) 
 (27,000)
Other financing activities
 
 
 (592) 
 (592)
Net cash from financing activities193,544
 (690) 
 (50,444) 
 142,410
            
Net change in cash and cash equivalents(8,354) 39,903
 266
 1,318
 
 33,133
Cash and cash equivalents, beginning of period11,231
 88,282
 3,679
 42,431
 
 145,623
Cash and cash equivalents, end of period$2,877
 $128,185
 $3,945
 $43,749
 $
 $178,756




 Year Ended December 31, 2012
     Non- Non-    
     Guarantor Guarantor    
     Subsidiaries Subsidiaries    
   Guarantor (100% (Not 100%    
 Parent Subsidiaries Owned) Owned) Eliminations Consolidated
     (In thousands)    
Cash flows from operating activities           
Net cash from operating activities$77,534
 $16,372
 $9,995
 $34,252
 $4,292
 $142,445
            
Cash flows from investing activities           
Capital expenditures(50,536) (33,088) (7,894) (34,456) 
 (125,974)
Cash paid for acquisition, net of cash received(198,726) 
 (1,125,472) 
 
 (1,324,198)
Investment in and advances to unconsolidated subsidiaries, net4,292
 
 
 
 (4,292) 
Other investing activities(790) 7,245
 1,828
 6,730
 
 15,013
Net cash from investing activities(245,760) (25,843) (1,131,538) (27,726) (4,292) (1,435,159)
            
Cash flows from financing activities           
Borrowings under bank credit facility787,100
 
 871,100
 632,700
 
 2,290,900
Payments under bank credit facility(951,250) 
 (16,700) (652,900) 
 (1,620,850)
Debt issuance costs, net(16,651) 
 (47,989) (443) 
 (65,083)
Proceeds from issuance of senior secured notes350,000
 
 350,000
 
 
 700,000
Proceeds from variable interest entities' issuance of debt
 
 
 3,374
 
 3,374
Proceeds on loans to members of variable interest entity
 
 
 (928) 
 (928)
Other financing activities1,183
 
 (1,810) 
 
 (627)
Net cash from financing activities170,382
 
 1,154,601
 (18,197) 
 1,306,786
            
Net change in cash and cash equivalents2,156
 (9,471) 33,058
 (11,671) 
 14,072
Cash and cash equivalents, beginning of period364
 128,185
 3,944
 46,263
 
 178,756
Cash and cash equivalents, end of period$2,520
 $118,714
 $37,002
 $34,592
 $
 $192,828

185200

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Statements of Cash Flows - continued
Year Ended December 31, 2011
    Non- Non-    
    Guarantor Guarantor    
    Subsidiaries Subsidiaries    
Year Ended December 31, 2010  Guarantor (100% (Not 100%    
Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries (100% Owned)  Non-Guarantor Subsidiaries (Not 100% Owned)  Eliminations ConsolidatedParent Subsidiaries Owned) Owned) Eliminations Consolidated
    (In thousands)        (In thousands)    
Cash flows from operating activities                      
Net cash from operating activities$226,650
 $78,597
 $970
 $91,379
 $(128,205) $269,391
$97,965
 $68,797
 $26,294
 $60,454
 $
 $253,510
                      
Cash flows from investing activities                      
Capital expenditures(6,463) (56,884) (2,059) (10,552) 
 (75,958)(24,815) (28,204) (1,579) (32,626) 
 (87,224)
Net cash effect upon change in controlling interest of Borgata
 26,025
 
 26,025
 (26,025) 26,025
Cash paid for business acquisition, net(278,456) 
 
 
 
 (278,456)
Cash paid for development agreement
 
 (24,450) 
 
 (24,450)
Other investing activities69
 
 
 987
 
 1,056
895
 
 
 26,448
 
 27,343
Net cash from investing activities(6,394) (30,859) (2,059) 16,460
 (26,025) (48,877)(302,376) (28,204) (26,029) (6,178) 
 (362,787)
                      
Cash flows from financing activities                      
Borrowings under bank credit facility758,774
 
 
 533,673
 
 1,292,447
391,329
 
 
 741,300
 
 1,132,629
Payments under bank credit facility(1,250,674) 
 
 (1,105,062) 
 (2,355,736)(183,579) 
 
 (762,000) 
 (945,579)
Debt financing cost, net(20,617) (3,620) 
 (2,820) 
 (27,057)
Debt financing costs, net(14,221) 
 
 (1,153) 
 (15,374)
Proceeds from issuance of debt490,000
 
 
 773,176
 
 1,263,176

 
 
 7,199
 
 7,199
Proceeds from issuance of debt by variable interest entity
 
 
 18,091
 
 18,091
Payments on long-term debt
 (46,875) 
 (1,194) 
 (48,069)
 (690) 
 
 
 (690)
Payments on retirements of long-term debt(187,041) (652) 
   
 (187,693)
 
 
 (8,198) 
 (8,198)
Proceed from stock options exercised15
 
 
 
 
 15
Payments under note payable by variable interest entity
 
 
 (27,000) 
 (27,000)
Other financing activities170
 
 
 (277,652) 154,230
 (123,252)
 
 
 (592) 
 (592)
Net cash from financing activities(209,388) (51,147) 
 (61,788) 154,230
 (168,093)193,544
 (690) 
 (50,444) 
 142,410
                      
Net change in cash and cash equivalents10,868
 (3,409) (1,089) 46,051
 
 52,421
(10,867) 39,903
 265
 3,832
 
 33,133
Cash and cash equivalents, beginning of period363
 88,071
 4,768
 
 
 93,202
11,231
 88,282
 3,679
 42,431
 
 145,623
Cash and cash equivalents, end of period$11,231
 $84,662
 $3,679
 $46,051
 $
 $145,623
$364
 $128,185
 $3,944
 $46,263
 $
 $178,756
















186201

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued— (Continued)
as of December 31, 20112012 and 20102011 and for the years ended December 31, 2012, 2011 2010 and 20092010




Condensed Consolidating Statements of Cash Flows - continued

Year Ended December 31, 2010
    Non- Non-    
    Guarantor Guarantor    
    Subsidiaries Subsidiaries    
Year Ended December 31, 2009  Guarantor (100% (Not 100%    
Parent  Guarantor Subsidiaries  Non-Guarantor Subsidiaries  Eliminations ConsolidatedParent Subsidiaries Owned) Owned) Eliminations Consolidated
  (In thousands)      (In thousands)    
Cash flows from operating activities                    
Net cash from operating activities$65,751
 $173,249
 $2,963
 $
 $241,963
$226,650
 $78,597
 $970
 $91,379
 $(128,205) $269,391
                    
Cash flows from investing activities                    
Capital expenditures(5,706) (151,378) (473) 
 (157,557)(6,463) (56,884) (2,059) (10,552) 
 (75,958)
Net cash effect upon change in controlling interest of Borgata
 26,025
 
 26,025
 (26,025) 26,025
Other investing activities2,356
 (9,927) 
 
 (7,571)69
 
 
 987
 
 1,056
Net cash from investing activities(3,350) (161,305) (473) 
 (165,128)(6,394) (30,859) (2,059) 16,460
 (26,025) (48,877)
                    
Cash flows from financing activities                    
Payments of long-term debt(88,866) (19,366) 
 
 (108,232)
Borrowings under bank credit facility656,440
 
 
 
 656,440
758,774
 
 
 533,673
 
 1,292,447
Payments under bank credit facility(620,655) 
 
 
 (620,655)(1,250,674) 
 
 (1,105,062) 
 (2,355,736)
Debt financing costs, net(20,617) 
 
 (6,440) 
 (27,057)
Proceeds from issuance of debt490,000
 
 
 773,176
 
 1,263,176
Proceeds from issuance of debt by variable interest entity
 
 
 18,091
 
 18,091
Payments on long-term debt
 (46,875) 
 (1,194) 
 (48,069)
Payments on retirements of long-term debt(187,041) (652) 
 
 
 (187,693)
Other financing activities(9,338) 
 
 
 (9,338)170
 
 
 (277,652) 154,230
 (123,252)
Net cash from financing activities(62,419) (19,366) 
 
 (81,785)(209,388) (47,527) 
 (65,408) 154,230
 (168,093)
                    
Net change in cash and cash equivalents(18) (7,422) 2,490
 
 (4,950)10,868
 211
 (1,089) 42,431
 
 52,421
Cash and cash equivalents, beginning of period381
 95,493
 2,278
 
 98,152
363
 88,071
 4,768
 
 
 93,202
Cash and cash equivalents, end of period$363
 $88,071
 $4,768
 $
 $93,202
$11,231
 $88,282
 $3,679
 $42,431
 $
 $145,623



NOTE 23.     RELATED PARTY TRANSACTIONS
Boyd Percentage Ownership
William S. Boyd, our Executive Chairman of the Board of Directors, together with his immediate family, beneficially owned approximately 36%37% of our outstanding shares of common stock as of December 31, 2011.2012. As such, the Boyd family has the ability to significantly influence our affairs, including the election of members of our Board of Directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation or sale of assets. For each of the years ended December 31, 2012, 2011 2010 and 2009,2010, there were no related party transactions between the Company and the Boyd family.family other than compensation, including salary and equity incentives.
Compensation of Certain Borgata Employees
Borgata reimburses Boyd for compensation paid to employees performing services for Borgata and for out-of-pocket costs and expenses incurred related to travel. Boyd is also reimbursed for various payments made on Borgata's behalf, primarily related to third party insurance premiums and certain financing fees. The related amounts due to Boyd for these types of expenditures paid by Boyd were $0.3$0.5 million and $0.9$0.3 million at December 31, 20112012 and 2010,2011, respectively. Reimbursable expenditures were $10.0 million, $9.1 million$10.9

202

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of December 31, 2012 and $7.4 2011 and for the years ended December 31, 2012, 2011 and 2010




million, $10.0 million and $9.1 million for each of the years ended December 31 2012, 2011 2010 and 2009,2010, respectively. In each case, reimbursable expenses are included in selling, general and administrative on the consolidated statements of operations. Related party reimbursements are eliminated in consolidation.
Borgata Ground Leases
Borgata entered into a series of ground lease agreements with MGM totaling 19.6 acres that providesprovide the land on which Borgata's existing employee parking garage, public space expansion, rooms expansion, and modified surface parking lot and proposed alternative parking structure reside.reside, as well as, an undeveloped parcel. The lease terms extend until December 31, 2070 with the exception of the surface parking lot lease which could be terminated by either party upon 30 days written notice.effective on the last day of the month that is six months after notice is given. On November 4, 2010, MGM sold the land on which the employee parking garage, public space expansion and rooms expansion, as well as, the undeveloped parcel. Borgata did not have any amounts due to MGM or the third party land owner for these types of expenditures at either December 31, 2012, 2011 or 2010. On November 4, 2010, MGM sold the land comprising the employee parking garage, public space expansion, rooms expansionRent incurred for ground lease agreements was $5.8 million, $5.1 million and proposed alternative parking structure. Related rent incurred was $5.1$5.4 million $5.4 million and $6.5 million for the years ended December 31, 2012, 2011 2010 and 2009,2010, respectively, which was included in selling, general and administrative on the consolidated statements of operations.

187


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as Of these amounts, rent paid to MGM was less than $0.1 million for each of December 31, 2011 and 2010 and for the years ended December 31, 2012 and 2011, 2010 and 2009was $0.2 million for the year ended December 31, 2010.

Pursuant to the ground lease agreements, Borgata is responsible for reimbursing the land owner fordirect payment of related property taxes paid on its behalf. Borgata did not have any amounts due to MAC, Corp. (“MAC”), a second tier, wholly-owned subsidiary of MGM or the newthird party land owner for these types of expenditures at either December 31, 2012, 2011 or 2010. RelatedTotal property taxtaxes incurred was $14.0were $15.6 million $12.9, $14.0 million and $12.2$12.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. Of these amounts, property tax paid related to MGM was $2.8 million, $2.5 million, and 2009,$9.9 million for the years ended December 31, 2012, 2011 and 2010, respectively, which was included in selling, general and administrative on the consolidated statements of operations.


NOTE 24. REVISION TO CONSOLIDATED FINANCIAL STATEMENTS
In preparing the consolidated financial statements for the year ended December 31, 2011, the Company discovered an immaterial error that impacted the previously issued consolidated financial statements as of and for the year ended December 31, 2010. The error related to a misclassification in the financial statements of LVE, the variable interest entity that we were required to consolidate during the year ended December 31, 2010. The financial statements of LVE have subsequently been restated, the revisions to which were considered in the correction of this error in our consolidated financial statements. We improperly reported LVE's interest costs as a capitalized asset, when the related costs should have been expensed due to its suspension of related construction activities.

The Company assessed the materiality of this error on both a quantitative and qualitative basis, and determined that the error was immaterial to previously reported amounts as reported in the consolidated financial statements and notes thereto, for the year ended December 31, 2010. The revision of the previously issued financial statements resulted in minor impacts on certain line items in our consolidated balance sheet, statements of operations, changes in stockholders' equity and cash flows, yet had no impact on net income attributable to Boyd Gaming Corporation or retained earnings as previously reported.

Accordingly, the Company has reconciled the impact of the differences below on the consolidated balance sheet, consolidated statements of operations, changes in stockholders' equity, and cash flows as of and for the year ended December 31, 2010. These adjustments did not have any impact on our quarterly consolidated financial statements, issued prior to the original filing; however, the Company will prospectively revise its consolidated financial statements and notes thereto, in future filings, to the extent the December 31, 2010 period is therein presented.

A summary of the revisions to the consolidated financial statements for the year ended December 31, 2010 is as follows:

Condensed Consolidated Balance Sheet
as of December 31, 2010
 As of December 31, 2010
 As Previously Reported Adjustment As Revised
   (In thousands)  
Condensed Consolidated Balance Sheet     
ASSETS     
Current assets$279,639
 $946
 $280,585
Property, plant and equipment, net3,383,371
 
 3,383,371
Assets held for development1,119,403
 (32,559) 1,086,844
Debt financing costs, net34,993
 
 34,993
Other assets871,883
 (815) 871,068
Total Assets$5,689,289
 $(32,428) $5,656,861
      
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities$610,905
 $(220,570) $390,335
Other liabilities3,683,641
 221,516
 3,905,157
      
Boyd Gaming Corporation stockholders' equity1,189,205
 
 1,189,205
Noncontrolling interests205,538
 (33,374) 172,164
Total liabilities and stockholders' equity$5,689,289
 $(32,428) $5,656,861

188


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009


Condensed Consolidated Statement of Operations
for the year ended December 31, 2010
 Year Ended December 31, 2010
 As Previously Reported Adjustment As Revised
   (In thousands)  
Condensed Consolidated Statement of Operations     
Maintenance and utilities expense$146,143
 $(5,421) $140,722
      
Operating income$183,938
 $5,421
 $189,359
      
Interest expense, net of amounts capitalized$168,699
 $11,859
 $180,558
      
Total other expense, net$157,014
 $11,859
 $168,873
      
Income (loss) before income taxes$26,924
 $(6,438) $20,486
      
Net income (loss)$18,688
 $(6,438) $12,250
Net income attributable to noncontrolling interests(8,378) 6,438
 (1,940)
Net income (loss) attributable to Boyd Gaming Corporation$10,310
 $
 $10,310

Condensed Consolidated Statement of Stockholders' Equity
for the year ended December 31, 2010
 Year Ended December 31, 2010
 As Previously Reported Adjustment As Revised
   (In thousands)  
Condensed Consolidated Statement of Stockholders' Equity     
Noncontrolling interest in Borgata$219,256
 $
 $219,256
Noncontrolling interest in variable interest entity - LVE(5,340) (39,812) (45,152)
Net income attributable to noncontrolling interests(8,378) 6,438
 (1,940)
Noncontrolling interests$205,538
 $(33,374) $172,164
      
Total stockholders' equity$1,394,743
 (33,374) $1,361,369


189


BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009

Condensed Consolidated Statement of Cash Flows
for the year ended December 31, 2010
 Year Ended December 31, 2010
 As Previously Reported Adjustment As Revised
   (In thousands)  
Condensed Consolidated Statement of Cash Flows     
 Cash Flows from Operating Activities    
 Net Income$18,688
 $(6,438) $12,250
 Amortization of debt financing costs4,117
 1,252
 5,369
 Net cash provided by operating activities285,070
 (15,679) 269,391
   
 
 Cash Flows from Investing Activities     
 Capital expenditures$(87,477) 11,519
 (75,958)
 Other investing activities(1,199) 3,345
 2,146
 Net cash used in investing activities(63,741) 14,864
 (48,877)
      
 Cash Flows from Financing Activities     
 Debt issuance cost, net$(27,872) $815
 $(27,057)
 Net cash used in financing activities(168,908) 815
 (168,093)
      
 Net increase in cash and cash equivalents52,421
 
 52,421
 Cash and cash equivalents, beginning of period93,202
 
 93,202
 Cash and cash equivalents, end of period$145,623
 $
 $145,623
      
Assets and Liabilities Recorded (net of cash received) Due to Consolidation of Variable Interest Entity     
Accounts receivable$164
 $1,187
 $1,351
Assets held for development183,016
 (19,210) 163,806
Debt financing costs, net8,509
 (4,862) 3,647
Restricted investments46,679
 1,489
 48,168
Total assets$238,368
 $(21,396) $216,972
Accounts payable$290
 $(103) $393
Accrued liabilities1,296
 (256) 1,040
Obligations of variable interest entity226,162
 16,897
 243,059
Other liabilities16,920
 2,984
 19,904
Noncontrolling interests(6,259) (40,833) (47,092)
Total liabilities and stockholders' equity$238,409
 $(21,311) $217,304


NOTE 25.24.    SUBSEQUENT EVENTS
We have evaluated all events or transactions that occurred after December 31, 2011.2012. During this period, we did not identify anythe following subsequent events have occurred.

On February 22, 2013, we and Dania Entertainment entered into the effects of which would require adjustment to our financial position or results of operations as of andNew Dania Agreement for the year ended December 31, 2011.sale of certain assets and liabilities of the Dania Jai-Alai Business, our pari-mutuel facility, located in Dania Beach, Broward County, Florida at which jai-alai and related gaming operations are conducted, including poker and inter-track wagering, for a purchase price of $65.5 million. The closing of the transactions contemplated by the New Dania Agreement is expected to occur on or prior to May 24, 2013, subject to certain closing conditions.

On February 28, 2013, we paid off $10.3 million for another loan that was scheduled to mature on February 28, 2013.

On March 1, 2013, we entered into a definitive agreement to sell the Echelon site for $350 million in cash. The sale agreement included the 87-acre land parcel, as well as site improvements. The transaction was completed on March 4, 2013, and we received $163.8 million of proceeds. After certain additional transaction fees are paid, we realized approximately $157.0 million in net proceeds from the sale after payment of a portion of the proceeds to a third party to fulfill our obligations to LVE Energy Partners, LLC.

On March 7, 2013, we announced and notified the trustee for our 6.75% Senior Subordinated Notes due 2014 that on April 6, 2013 we will redeem $150 million of our outstanding 6.75% Senior Subordinated Notes due 2014 at a redemption price of 100.00% plus accrued and unpaid interest to the redemption date, April 6, 2013, subject to the right of holders of record on April 1, 2013 to receive accrued and unpaid interest on the redemption date.



190203


2.
2. Financial Statement Schedules. Schedules are omitted since they are not applicable, not required or the information required to be set forth therein is included in Consolidated Financial Statements or Notes thereto included in this Report.


191


3.    Exhibits.

Exhibit List
Exhibit    
Number Description of Exhibit Method of Filing
     
2.1 Purchase Agreement, entered into as of June 5, 2006, by and among the Registrant, FGB Development, Inc., Boyd Florida, LLC, The Aragon Group, Inc., Summersport Enterprises, LLLP, the Shareholders of The Aragon Group, Inc., The Limited Partners of Summersport Enterprises, LLLP, and Stephen F. Snyder, as Shareholder Representative With Respect to Dania Jai-alai Incorporated by reference to Exhibit 2.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
     
2.2 Unit Purchase Agreement, dated as of July 25, 2006, as amended, by and among the Registrant, Coast Hotels and Casinos, Inc., Silverado South Strip, LLC, and Michael J. Gaughan Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K, filed with the SEC on October 31, 2006.
     
2.3 Agreement for Exchange of Assets and Joint Escrow Instructions, dated as of September 29, 2006, entered into by and between Coast Hotels and Casinos, Inc. and Harrah's Operating Company, Inc. Incorporated by reference to Exhibit 2.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
     
2.4 Letter Agreement entered into as of February 26, 2007, by and between Coast Hotels and Casinos, Inc. and Harrah's Operating Company, Inc. amending that certain Agreement for Exchange of Assets and Joint Escrow Instructions previously entered into by and between the parties as of September 29, 2006 Incorporated by reference to Exhibit 2.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.
     
2.5 Letter Agreement entered into as of August 11, 2006, by and among the Registrant, FGB Development, Inc., Boyd Florida, LLC, The Aragon Group, Inc., Summersport Enterprises, LLLP, and Stephen F. Snyder, individually and as Shareholder Representative, amending certain provisions of that certain Purchase Agreement previously entered into among the parties as of June 5, 2006 Incorporated by reference to Exhibit 2.3 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
     
2.6** Second Amendment to the Purchase Agreement entered into as of February 16, 2007, by and among the Registrant, the Aragon Group and the other parties thereto Incorporated by reference to Exhibit 2.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.
     
2.7 Third Amendment to the Purchase Agreement and Promissory Note related thereto entered into as of January 15, 2009, by and among Boyd Gaming Corporation, the Aragon Group and the other parties thereto Incorporated by reference to Exhibit 2.7 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
     

204


2.8Agreement and Plan of Merger, dated as of May 16, 2012, entered into by and among, Boyd Gaming Corporation, Boyd Acquisition II, LLC, Boyd Acquisition Sub, LLC, Peninsula Gaming Partners, LLC and Peninsula Gaming, LLC.Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the SEC on May 16, 2012.
2.9Membership Interest Purchase and Sale Agreement and Joint Escrow Instructions, dated as of March 1, 2013, by and between Echelon Resorts, LLC, Coast Hotels and Casinos, Inc., Genting Assets, Inc, and Genting Berhad. dated March 1, 2013.Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the SEC on March 7, 2013
2.1Asset Purchase Agreement among LVE Energy Partners, LLC, Echelon Resorts LLC, and Boyd Gaming Corporation, dated March 1, 2013.Incorporated by reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K filed with the SEC on March 7, 2013
3.1 Amended and Restated Bylaws Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed with the SEC on July 14, 2008.
     
3.2 Amended and Restated Articles of Incorporation of the Registrant Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K, filed with the SEC on May 24, 2006.
     

192


4.1Form of Indenture relating to $250,000,000 aggregate principal amount of 8.75% Senior Subordinated Notes due 2012, dated as of April 8, 2002, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee, including the Form of NoteIncorporated by reference to Exhibit 4.8 of the Registrant's Registration Statement on Form S-4, File No. 333-89774, which was declared effective on June 19, 2002.
4.2Form of Indenture relating to $300,000,000 aggregate principal amount of 7.75% Senior Subordinated Notes due 2012, dated as of December 30, 2002, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee, including Form of NoteIncorporated by reference to Exhibit 4.10 of the Registrant's Registration Statement on Form S-4, File No. 333-103023, which was declared effective on May 15, 2003.
4.3 Form of Indenture relating to $350,000,000 aggregate principal amount of 6.75% Senior Subordinated Notes due 2014, dated as of April 15, 2004, by and between the Registrant, as Issuer, and the Initial Purchasers, named therein Incorporated by reference to Exhibit 4.8 of the Registrant's Registration Statement on Form S-4, File No. 333-116373, which was declared effective on June 25, 2004.
     
4.44.2 Form of Indenture relating to senior debt securities Incorporated by reference to Exhibit 4.4 of the Registrant's Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005.
     
4.54.3 Form of Indenture relating to subordinated debt securities Incorporated by reference to Exhibit 4.5 of the Registrant's Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005.
     
4.64.4 Form of Specimen Common Stock Certificate Incorporated by reference to Exhibit 4.6 of the Registrant's Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005.
     
4.74.5 Indenture (including form of Subordinated Debt Securities) with respect to Subordinated Debt Securities, dated as of January 25, 2006, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee Incorporated by reference to Exhibit 4.9 of the Registrant's Current Report on Form 8-K filed with the SEC on January 26, 2006.
     
4.84.6 First Supplemental Indenture with respect to the 7.125% Senior Subordinated Notes due 2016, dated as of January 30, 2006, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee Incorporated by reference to Exhibit 4.10 of the Registrant's Current Report on Form 8-K filed with the SEC on January 31, 2006.
     
4.94.7 Lender Joinder Agreement, dated November 2, 2011, among The Company, Bank of America, N.A., as the Administrative Agent, and Bank of America, N.A., as the Increasing Lender Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed with the SEC on November 3, 2011.

205


4.8Indenture governing the Company's 9.125% senior notes, dated November 10, 2010, by and between the Company and U.S. Bank National Association, as trustee.Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report on Form 8-K filed with the SEC on November 12, 2010.
4.9Registration Rights Agreement, dated November 10, 2010, by and between the Company and J.P. Morgan Securities LLC, on behalf of itself and as representative of the several initial purchasers.
Incorporated by reference to Exhibit 4.4 of the Registrant's Current Report on Form 8-K filed with the SEC on November 12, 2010.

4.10Indenture governing the Company's 9% Senior Notes due 2020, dated June 8, 2012, by and between the Company and U.S. Bank National Association, as trustee.Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed with the SEC on June 13, 2012.
4.11Registration Rights Agreement, dated June 8, 2012, by and among the Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, on behalf of themselves and as representatives of the several initial purchasers.Incorporated by reference to Exhibit 4.3 of the Registrant's Current Report on Form 8-K filed with the SEC on June 13, 2012.
     
10.1 Ninety-Nine Year Lease dated June 30, 1954, by and among Fremont Hotel, Inc., and Charles L. Ronnow and J.L. Ronnow, and Alice Elizabeth Ronnow Incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992.
     
10.2 Lease Agreement dated October 31, 1963, by and between Fremont Hotel, Inc. and Cora Edit Garehime Incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992.
     

193


10.3 Lease Agreement dated December 31, 1963, by and among Fremont Hotel, Inc., Bank of Nevada and Leon H. Rockwell, Jr. Incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992.
     
10.4 Lease Agreement dated June 7, 1971, by and among Anthony Antonacci, Margaret Fay Simon and Bank of Nevada, as Co-Trustees under Peter Albert Simon's Last Will and Testament, and related Assignment of Lease dated February 25, 1985 to Sam-Will, Inc. and Fremont Hotel, Inc. Incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992.
     
10.5 Lease Agreement dated July 25, 1973, by and between CH&C and William Peccole, as Trustee of the Peter Peccole 1970 Trust Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995.
     
10.6 Lease Agreement dated July 1, 1974, by and among Fremont Hotel, Inc. and Bank of Nevada, Leon H. Rockwell, Jr. and Margorie Rockwell Riley Incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992.
     
10.7 Ninety-Nine Year Lease, dated December 1, 1978, by and between Matthew Paratore, and George W. Morgan and LaRue Morgan, and related Lease Assignment dated November 10, 1987, to Sam-Will, Inc., d.b.a. Fremont Hotel and Casino Incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992.
     

206


10.8 Form of Indemnification Agreement Incorporated by reference to the Registrant's Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993.
     
10.9* 1993 Flexible Stock Incentive Plan and related agreements Incorporated by reference to the Registrant's Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993.
     
10.10* 1993 Directors Non-Qualified Stock Option Plan, as amended Incorporated by reference to Exhibit 4.4 of the Registrant's Registration Statement on Form S-8, File No. 333-79895, dated June 3, 1999.
     
10.11* 1993 Employee Stock Purchase Plan and related agreement Incorporated by reference to the Registrant's Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993.
     
10.12 401(k) Profit Sharing Plan and Trust Incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992.
     
10.13* 2000 Executive Management Incentive Plan (incorporated by reference to Appendix A of the Registrant's Definitive Proxy Statement filed with the SEC on April 21, 2000). Incorporated by reference to Appendix A of the Registrant's Definitive Proxy Statement filed with the SEC on April 21, 2000.
     
10.14* 1996 Stock Incentive Plan (as amended on May 25, 2000) Incorporated by reference to Exhibit 10.35 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
     

194


10.15 Second Amended and Restated Joint Venture Agreement of Marina District Development Company, dated as of August 31, 2000 Incorporated by reference to Exhibit 10.36 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
     
10.16 Contribution and Adoption Agreement by and among Marina District Development Holding Co., LLC, MAC, Corp. and Boyd Atlantic City, Inc., effective as of December 13, 2000 Incorporated by reference to Exhibit 10.30 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000.
     
10.17* Annual Incentive Plan Incorporated by reference to Exhibit 10.29 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2002.
     
10.18* Form of Stock Option Award Agreement under the 1996 Stock Incentive Plan Incorporated by reference to Exhibit 10.37 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.
     
10.19* Form of Stock Option Award Agreement pursuant to the 2002 Stock Incentive Plan Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.
     
10.20* Form of Restricted Stock Unit Agreement and Notice of Award pursuant to the 2002 Stock Incentive Plan Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.
     

207


10.21* The Boyd Gaming Corporation Amended and Restated Deferred Compensation Plan for the Board of Directors and Key Employees Incorporated by reference to Exhibit 10.39 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
     
10.22* Amendment Number 1 to the Amended and Restated Deferred Compensation Plan Incorporated by reference to Exhibit 10.40 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
     
10.23* Amendment Number 2 to the Amended and Restated Deferred Compensation Plan Incorporated by reference to Exhibit 10.41 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
     
10.24* Amendment Number 3 to the Amended and Restated Deferred Compensation Plan Incorporated by reference to Exhibit 10.42 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
     
10.25* Amendment Number 4 to the Amended and Restated Deferred Compensation Plan Incorporated by reference to Exhibit 10.43 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
     
10.26 Ground Lease dated as of October 1, 1995, between the Tiberti Company and Coast Hotels and Casinos, Inc. (as successor to Gold Coast Hotel and Casino) Incorporated by reference to an exhibit to Coast Resorts, Inc.'s Amendment No. 2 to General Form for Registration of Securities on Form 10 (Commission File No. 000-26922) filed with the Commission on January 12, 1996.
     
10.27* Form of Stock Option Award Agreement Under the Registrant's Directors' Non-Qualified Stock Option Plan Incorporated by reference to Exhibit 10.48 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.
     
10.28* Boyd Gaming Corporation's 2002 Stock Incentive Plan (as amended and restated on May 15, 2008) Incorporated by reference to Appendix A of the Registrant's Definitive Proxy Statement filed with the SEC on April 2, 2008.
     

195


10.29 Joint Venture Agreement dated as of January 3, 2006, between Morgans/LV Investment LLC, Echelon Resorts Corporation and for limited purposes, the Registrant and Morgans Hotel Group, L.L.C. Incorporated by reference to Exhibit 10.51 of the Registrant's Current Report on Form 8-K filed with the SEC on January 3, 2006.
     
10.30* Amendment Number 5 to the Amended and Restated Deferred Compensation Plan Incorporated by reference to Exhibit 10.35 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005.
     
10.31* Amended and Restated 2000 Executive Management Incentive Plan Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K, filed with the SEC on May 24, 2006.
     
10.32* Amended and Restated 2002 Stock Incentive Plan Incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K, filed with the SEC on May 24, 2006.
     
10.33* Form of Award Agreement for Restricted Stock Units under 2002 Stock Incentive Plan for Non-Employee Directors Incorporated by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
     
10.34 First Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, by and between Morgans Las Vegas LLC and Echelon Resorts Corporation, Dated May 15, 2006 Incorporated by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
    ��

208


10.35 Second Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, by and between Morgans LV Investment LLC and Echelon Resorts Corporation, Dated June 30, 2008 Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K, filed with the SEC on July 1, 2008.
     
10.36 Third Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, by and between Morgans LV Investment LLC and Echelon Resorts Corporation, Dated September 23, 2008 Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K, filed with the SEC on September 25, 2008.
     
10.37 Letter Agreement to the Morgans Las Vegas, LLC Limited Liability Company Agreement, dated May 15, 2006 Incorporated by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
     
10.38 First Amended and Restated Credit Agreement, dated as of May 24, 2007, among the Registrant, as Borrower, certain commercial lending institutions as the Lenders, Bank of America, N.A., as the Administrative Agent and L/C Issuer, Wells Fargo Bank, N.A., as the Syndication Agent and Swing Line Lender, and Citibank, N.A., Deutsche Bank Securities Inc., JPMorgan Chase Bank, N.A., Merrill Lynch Bank USA and Wachovia Bank, National Association, as Co-Documentation Agents Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
     
10.39 First Amendment and Consent to First Amended and Restated Credit Agreement, dated as of December 21, 2009, among the Registrant, as Borrower, certain commercial lending institutions as the Lenders, and Bank of America, N.A., as the Administrative Agent for the Lenders.LendersIncorporated by reference to Exhibit 10.40 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2009.
10.40 First Amendment and Consent to FirstSecond Amended and Restated Credit Agreement, dated as of December 21, 2009,27, 2012, among the Registrant, as Borrower, certain commercial lending institutions as the Lenders, and Bank of America, N.A., as the Administrative Agent for the Lenders.LendersIncorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on December 28, 2012.
     
10.410.41 Stock Purchase Agreement, entered into as of August 1, 2006, by and between Michael J. Gaughan and the Registrant Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
     

196


10.4110.42 Form of Term Note issued by the Registrant to Michael J. Gaughan on August 1, 2006 in connection with the Stock Purchase Agreement entered into between the parties on the same date Incorporated by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
��    
10.42*10.43* Form of Award Agreement for Restricted Stock Units under the 2002 Stock Incentive Plans Incorporated by reference to Exhibit 10.3 of the Registrant's Current Report on Form 8-K filed with the SEC on May 24, 2006.
     
10.43*10.44* Form of Career Restricted Stock Unit Award Unit Agreement under the 2002 Stock Incentive Plan Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on December 13, 2006.
     
10.44*10.45* Form of Restricted Stock Unit Agreement and Notice of Award Pursuant to the 2002 Stock Incentive Plan Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
     
10.45*10.46* Change in Control Severance Plan for Tier I, II and III Executives Incorporated by reference to Exhibit 10.46 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2006.

209


     
10.4610.47 Periodic Fee Agreement, entered into as of March 4, 2011, by and amongst Echelon Resorts LLC and LVE Energy Partners, LLC Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 10-Q for the quarter ended March 31, 2011.
     
10.4710.48 Agreement for Purchase and Sale, dated June 15, 2011, amongst the Company, Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC Incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 10-Q for the quarter ended June 30, 2011.
     
10.4810.49 First Amendment to Credit Agreement, dated November 11, 2011, among Marina District Finance Company, Inc., as the Borrower, Marina District Development Company, LLC, together with the Borrower as the Credit Parties, certain commercial lending institutions as the Lenders and Wells Fargo Bank National Association, as the Administrative Agent Filed electronically herewithIncorporated by reference to Exhibit 10.48 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011.
     
10.4910.50 Form of Performance Share Unit Agreement and Notice of Award Pursuant to the 2002 Stock Incentive PlanIncorporated by reference to Exhibit 10.49 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2011.
10.51Iowa Racing and Gaming Commission Gaming License, dated July 15, 1999Incorporated by reference to Exhibit 10.l6 of Diamond Jo, LLC's Form S-4 filed October 12, 1999.
10.52Offer to Purchase Real Estate, Acceptance and Lease, dated September 27, 2006, between Diamond Jo, LLC and Dubuque County Historical SocietyIncorporated by reference to Exhibit 10.1 of Peninsula Gaming, LLC's Quarterly Report on Form 10-Q filed November 14, 2006.
10.53
Closing Agreement, dated September 27, 2006, between Diamond Jo, LLC and Dubuque County Historical Society

Incorporated by reference to Exhibit 10.1 of Peninsula Gaming, LLC's Quarterly Report on Form 10-Q filed November 14, 2006.
10.54
Real Estate Ground Lease, dated September 27, 2006, between Diamond Jo, LLC and Dubuque County Historical Society

Incorporated by reference to Exhibit 10.1 of Peninsula Gaming, LLC's Quarterly Report on Form 10-Q filed November 14, 2006.

10.55
Minimum Assessment Agreement, dated October 1, 2007, among Diamond Jo, LLC, the City of Dubuque, Iowa and the City Assessor of the City of Dubuque, Iowa

Incorporated by reference to Exhibit 10.63 of Peninsula Gaming, LLC's Annual Report on Form 10-K filed March 28, 2008.

10.56
Amended and Restated Port of Dubuque Public Parking Facility Development Agreement, dated October 1, 2007, between the City of Dubuque, Iowa and Diamond Jo, LLC

Incorporated by reference to Exhibit 10.65 of Peninsula Gaming, LLC's Annual Report on Form 10-K filed March 28, 2008.

10.57Lottery Gaming Facility Management Contract, dated October 19, 2010
Incorporated by reference to Exhibit 10.2 of Peninsula Gaming, LLC's Current Report on Form 8-K filed February 4, 2011.


210


10.58Credit Agreement, dated as of November 14, 2012, among Boyd Acquisition Sub, LLC, as the Initial Borrower, Bank of America, N.A., as Administration Agent, Collateral Agent, Swing Line Lender and L/C Issuer, the other lenders party thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., and UBS Securities LLC as Joint Lead Arrangers and Joint Book Managers.Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed November 20, 2012.
10.59Seller Merger Consideration Note, dated November 20, 2012 made by Boyd Acquisition II, LLC in favor of Peninsula Gaming Partners, LLC.Incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K filed November 20, 2012.
12Ratio of Earnings to Fixed ChargesFiled electronically herewith
18Accountants preferability letter for change in annual goodwill impairment test date. Filed electronically herewith
     
21.1 Subsidiaries of the Registrant. Filed electronically herewith
     
23.1 Consent of Deloitte & Touche LLP. Filed electronically herewith
     
24 Power of Attorney (included in Part IV to this Annual Report on Form 10-K). Filed electronically herewith
     
31.1 Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a). Filed electronically herewith
     
31.2 Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a). Filed electronically herewith
     
32.1 Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a - 14(b) and 18 U.S.C. § 1350. Filed electronically herewith
     

197


32.2 Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a - 14(b) and 18 U.S.C. § 1350. Filed electronically herewith
     
99.199.2 GovernmentalIndenture governing Boyd Acquisition Sub, LLC's and Boyd Acquisition Finance Corp.'s 8.375% Senior Notes due 2018, dated August 16, 2012, by and among the Issuers and U.S. Bank National Association, as trustee.Incorporated by reference to Exhibit 99.2 of the Registrant's Current Report on Form 8-K filed August 21, 2012.

211


101The following materials from Boyd Gaming Regulations.Corporation's Annual Report on Form 10-K for the year ended December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2012 and December 31, 2011, (ii) Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010, (iii) Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, 2012, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011and 2010, and (vi) Notes to Condensed Consolidated Financial Statements.* Filed electronically herewith

*    Management contracts or compensatory plans or arrangements/
**    Certain portions of this exhibit have been granted confidential treatment by the Securities and Exchange Commission.



212


SignaturesSIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 7, 2012.16, 2013.


 BOYD GAMING CORPORATION
   
 By:/s/ Ellie J. BowdishAnthony D. McDuffie
  Ellie J. BowdishAnthony D. McDuffie
  Vice President and Chief Accounting Officer
  (Principal Accounting Officer)


198213


POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Keith E. Smith, Josh Hirsberg and Ellie J. Bowdish,Anthony D. McDuffie, and each of them, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature Title Date
     
/s/ WILLIAM S. BOYD Executive Chairman of the Board of Directors March 7, 201216, 2013
William S. Boyd    
     
/s/ MARIANNE BOYD JOHNSON Vice Chairman of the Board of Directors, March 7, 201216, 2013
Marianne Boyd Johnson Executive Vice President and Director  
     
/s/ KEITH E. SMITH President, Chief Executive Officer and Director March 7, 201216, 2013
Keith E. Smith (Principal Executive Officer)  
     
/s/ JOSH HIRSBERG Senior Vice President, Chief Financial Officer and Treasurer March 7, 201216, 2013
Josh Hirsberg    
     
/s/ ELLIE J. BOWDISHANTHONY D. MCDUFFIE Vice President and Chief Accounting Officer March 7, 201216, 2013
Ellie J. BowdishAnthony D. McDuffie (Principal Accounting Officer)  
     
/s/ ROBERT L. BOUGHNER\BOUGHNER Executive Vice President, March 7, 201216, 2013
Robert L. Boughner Chief Business Development Officer and Director  
     
/s/ WILLIAM R. BOYD Vice President and Director March 7, 201216, 2013
William R. Boyd    
     
/s/ RICHARD FLAHERTY Director March 7, 201216, 2013
Richard Flaherty    
     
/s/ THOMAS V. GIRARDI Director March 7, 201216, 2013
Thomas V. Girardi    
     
/s/ MAJ. GEN. BILLY G. MCCOY, RET. USAF Director March 7, 201216, 2013
Maj. Gen. Billy McCoy Ret. USAF    
     
/s/ FREDERICK J. SCHWAB Director March 7, 201216, 2013
Frederick J. Schwab    
     
/s/ CHRISTINE J. SPADAFOR Director March 7, 201216, 2013
Christine J. Spadafor    
     
/s/ PETER M. THOMAS Director March 7, 201216, 2013
Peter M. Thomas    
     
/s/ VERONICA J. WILSON Director March 7, 201216, 2013
Veronica J. Wilson    
     



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