INTANGIBLE ASSETS

Intangible assets consist of the following:



	December 31, 2012
	Weighted	Gross					Cumulative
	Average Life	Carrying		Cumulative			Impairment			Intangible
	Remaining	Value		Amortization			Losses			Assets, Net
		(In thousands)
Amortizing intangibles:
Customer relationships	4.5 years	$	154,000	$	(23,059	)	$	—		$	130,941
Non-competition agreement	0.9 years	3,200		(354		)	—			2,846
Favorable lease rates	35.4 years	45,370		(8,867		)	—			36,503
Development agreement	—	21,373		—			—			21,373
		223,943		(32,280		)	—			191,663

Indefinite lived intangible assets:
Trademarks	Indefinite	191,800		—			(5,000		)	186,800
Gaming license rights	Indefinite	955,135		(33,960		)	(180,000		)	741,175
		1,146,935		(33,960		)	(185,000		)	927,975
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 relationships	2.2 years	$	17,700	$	(10,026	)	$	—		$	7,674
Favorable lease rates	36.4 years	45,370		(7,825		)	—			37,545
Development agreement	—	21,373		—			—			21,373
		84,443		(17,851		)	—			66,592

Indefinite lived intangible assets:
Trademarks	Indefinite	141,000		—			(5,000		)	136,000
Gaming license rights	Indefinite	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 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.

Development Agreement

Development agreement is an 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 December 31, 2012 remains indeterminate. In the interim, this asset will be subject to an annual impairment test.

Indefinite Lived Intangible Assets

Trademarks

Trademarks are based on the value of our brands, which reflect 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 name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the Borgata 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; 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 15 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 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 and 2010:



	Customer Relationships				Non-competition Agreement			Favorable Lease Rates			Development Agreements		Trademarks			Gaming License Rights			Intangible Assets, Net
	(In thousands)
Balance, January 1, 2010	$	—			$	—		$	39,631		$	—	$	50,700		$	371,426		$	461,757
Additions	14,000				—			—			—		65,000			—			79,000
Impairments	—				—			—			—		—			—			—
Amortization	—				—			(1,043		)	—		—			—			(1,043		)
Balance, December 31, 2010	14,000				—			38,588			—		115,700			371,426			539,714
Additions	3,300				—			—			21,373		25,300			—			49,973
Impairments	—				—			—			—		(5,000		)	—			(5,000		)
Amortization	(9,626		)	—	—			(1,043		)	—		—			—			(10,669		)
Balance, December 31, 2011	7,674				—			37,545			21,373		136,000			371,426			574,018
Additions	136,300				3,200			—			—		50,800			387,249			577,549
Impairments	—				—			—			—		—			(17,500		)	(17,500		)
Amortization	(13,033		)	—	(354		)	(1,042		)	—		—			—			(14,429		)
Balance, December 31, 2012	$	130,941			$	2,846		$	36,503		$	21,373	$	186,800		$	741,175		$	1,119,638

Future Amortization

Customer relationships are being amortized on an accelerated basis over an approximate remaining 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. Future amortization is as follows:



	Customer Relationships		Non-competition Agreement		Favorable Lease Rates		Total
	(In thousands)
For the year ending December 31,
2013	$	45,675	$	2,846	$	1,043	$	49,564
2014	33,310		—		1,043		34,353
2015	25,652		—		1,043		26,695
2016	14,870		—		1,043		15,913
2017	11,434		—		1,043		12,477
Thereafter	—		—		31,288		31,288
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; however, these assets are subject to an annual impairment test.

Impairment Considerations

Indefinite lived intangible assets are not subject to amortization, but they are subject to an annual impairment test each year and between annual test dates in certain circumstances.

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 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.