10-Q 1 byd10q9302016.htm BYD 10-Q 3Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________
FORM 10-Q
____________________________________________________
(Mark One)

x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016
OR

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

For the transition period from to
Commission file number: 1-12882
___________________________________________________
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________________________

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

3883 Howard Hughes Parkway, Ninth Floor, Las Vegas, NV 89169
(Address of principal executive offices) (Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
____________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | x |  | Accelerated filer |  | o
Non-accelerated filer |  | o (Do not check if a smaller reporting company) |  | Smaller reporting company |  | o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

| Class |  | Outstanding as of November 3, 2016 |
| Common stock, $0.01 par value |  | 112,484,580 |

BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2016
TABLE OF CONTENTS

|  | Page No.
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements (Unaudited) | 3
| Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 | 3
| Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 | 4
| Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015 | 5
| Condensed Consolidated Statements of Changes in Stockholders' Equity for the nine months ended September 30, 2016 and 2015 | 6
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 | 7
| Notes to Condensed Consolidated Financial Statements | 8
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 36
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 53
Item 4. | Controls and Procedures | 53
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings | 54
Item 1A. | Risk Factors | 54
Item 6. | Exhibits | 56
Signature Page |  | 57

PART I. Financial Information
Item 1. Financial Statements (Unaudited)
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

| September 30, |  | December 31,
(In thousands, except share data) | 2016 |  | 2015
ASSETS |  |  |
Current assets |  |  |
Cash and cash equivalents | $ | 159,688 |  |  | $ | 158,821 |
Restricted cash | 23,292 |  |  | 19,030 |
Accounts receivable, net | 26,936 |  |  | 25,289 |
Inventories | 15,749 |  |  | 15,462 |
Prepaid expenses and other current assets | 43,467 |  |  | 37,250 |
Income taxes receivable | 1,168 |  |  | 1,380 |
Total current assets | 270,300 |  |  | 257,232 |
Property and equipment, net | 2,262,630 |  |  | 2,225,342 |
Other assets, net | 51,766 |  |  | 48,341 |
Intangible assets, net | 878,105 |  |  | 890,054 |
Goodwill, net | 993,853 |  |  | 685,310 |
Investment in unconsolidated subsidiary held for sale | — |  |  | 244,621 |
Total assets | $ | 4,456,654 |  |  | $ | 4,350,900 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Current liabilities |  |  |
Current maturities of long-term debt | $ | 30,250 |  |  | $ | 29,750 |
Accounts payable | 88,141 |  |  | 75,803 |
Accrued liabilities | 270,712 |  |  | 249,518 |
Total current liabilities | 389,103 |  |  | 355,071 |
Long-term debt, net of current maturities and debt issuance costs | 2,956,998 |  |  | 3,239,799 |
Deferred income taxes | 98,814 |  |  | 162,189 |
Other long-term tax liabilities | 3,275 |  |  | 3,085 |
Other liabilities | 85,438 |  |  | 82,745 |
Commitments and contingencies (Notes 3 and 8) |  |  |
Stockholders' equity |  |  |
Preferred stock, $0.01 par value, 5,000,000 shares authorized | — |  |  | — |
Common stock, $0.01 par value, 200,000,000 shares authorized; 112,483,747 and 111,614,420 shares outstanding | 1,125 |  |  | 1,117 |
Additional paid-in capital | 953,511 |  |  | 945,041 |
Accumulated deficit | (32,098 | ) |  | (437,881 | )
Accumulated other comprehensive income (loss) | 438 |  |  | (316 | )
Total Boyd Gaming Corporation stockholders' equity | 922,976 |  |  | 507,961 |
Noncontrolling interest | 50 |  |  | 50 |
Total stockholders' equity | 923,026 |  |  | 508,011 |
Total liabilities and stockholders' equity | $ | 4,456,654 |  |  | $ | 4,350,900 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands, except per share data) | 2016 |  | 2015 |  | 2016 |  | 2015
Revenues |  |  |  |  |  |  |
Gaming | $ | 443,568 |  |  | $ | 457,397 |  |  | $ | 1,359,047 |  |  | $ | 1,390,734 |
Food and beverage | 74,257 |  |  | 76,713 |  |  | 226,955 |  |  | 230,918 |
Room | 42,985 |  |  | 41,649 |  |  | 128,225 |  |  | 123,334 |
Other | 29,579 |  |  | 32,379 |  |  | 90,738 |  |  | 92,706 |
Gross revenues | 590,389 |  |  | 608,138 |  |  | 1,804,965 |  |  | 1,837,692 |
Less promotional allowances | 58,488 |  |  | 61,825 |  |  | 175,812 |  |  | 180,934 |
Net revenues | 531,901 |  |  | 546,313 |  |  | 1,629,153 |  |  | 1,656,758 |
Operating costs and expenses |  |  |  |  |  |  |
Gaming | 217,103 |  |  | 225,653 |  |  | 658,396 |  |  | 677,036 |
Food and beverage | 40,745 |  |  | 41,900 |  |  | 124,664 |  |  | 126,380 |
Room | 11,247 |  |  | 10,765 |  |  | 33,039 |  |  | 31,494 |
Other | 18,660 |  |  | 21,548 |  |  | 56,819 |  |  | 60,938 |
Selling, general and administrative | 80,833 |  |  | 79,954 |  |  | 241,686 |  |  | 242,656 |
Maintenance and utilities | 27,854 |  |  | 29,030 |  |  | 76,711 |  |  | 80,965 |
Depreciation and amortization | 47,928 |  |  | 51,345 |  |  | 143,831 |  |  | 155,251 |
Corporate expense | 15,877 |  |  | 15,009 |  |  | 49,883 |  |  | 52,013 |
Project development, preopening and writedowns | 3,735 |  |  | 1,514 |  |  | 11,473 |  |  | 4,218 |
Impairments of assets | — |  |  | — |  |  | 1,440 |  |  | 1,065 |
Other operating items, net | 3 |  |  | 172 |  |  | 555 |  |  | 342 |
Total operating costs and expenses | 463,985 |  |  | 476,890 |  |  | 1,398,497 |  |  | 1,432,358 |
Operating income | 67,916 |  |  | 69,423 |  |  | 230,656 |  |  | 224,400 |
Other expense (income) |  |  |  |  |  |  |
Interest income | (1,050 | ) |  | (460 | ) |  | (2,506 | ) |  | (1,396 | )
Interest expense, net of amounts capitalized | 55,203 |  |  | 56,558 |  |  | 170,155 |  |  | 170,624 |
Loss on early extinguishments and modifications of debt | 41,518 |  |  | 863 |  |  | 42,364 |  |  | 32,333 |
Other, net | 1 |  |  | 1,753 |  |  | 143 |  |  | 3,641 |
Total other expense, net | 95,672 |  |  | 58,714 |  |  | 210,156 |  |  | 205,202 |
Income (loss) from continuing operations before income taxes | (27,756 | ) |  | 10,709 |  |  | 20,500 |  |  | 19,198 |
Income taxes benefit (provision) | 189,620 |  |  | (3,694 | ) |  | 174,231 |  |  | 5,931 |
Income from continuing operations, net of tax | 161,864 |  |  | 7,015 |  |  | 194,731 |  |  | 25,129 |
Income from discontinued operations, net of tax | 180,707 |  |  | 18,410 |  |  | 211,052 |  |  | 28,974 |
Net income | $ | 342,571 |  |  | $ | 25,425 |  |  | $ | 405,783 |  |  | $ | 54,103 |
Basic net income per common share |  |  |  |  |  |  |
Continuing operations | $ | 1.41 |  |  | $ | 0.06 |  |  | $ | 1.70 |  |  | $ | 0.22 |
Discontinued operations | 1.58 |  |  | 0.17 |  |  | 1.85 |  |  | 0.26 |
Basic net income per common share | $ | 2.99 |  |  | $ | 0.23 |  |  | $ | 3.55 |  |  | $ | 0.48 |
Weighted average basic shares outstanding | 114,567 |  |  | 112,608 |  |  | 114,335 |  |  | 112,100 |
Diluted net income per common share |  |  |  |  |  |  |
Continuing operations | $ | 1.40 |  |  | $ | 0.06 |  |  | $ | 1.69 |  |  | $ | 0.22 |
Discontinued operations | 1.57 |  |  | 0.16 |  |  | 1.84 |  |  | 0.26 |
Diluted net income per common share | $ | 2.97 |  |  | $ | 0.22 |  |  | $ | 3.53 |  |  | $ | 0.48 |
Weighted average diluted shares outstanding | 115,202 |  |  | 113,375 |  |  | 115,051 |  |  | 112,930 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

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

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Net income | $ | 342,571 |  |  | $ | 25,425 |  |  | $ | 405,783 |  |  | $ | 54,103 |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |
Fair value adjustments to available-for-sale securities, net of tax | 417 |  |  | 642 |  |  | 754 |  |  | (121 | )
Comprehensive income attributable to Boyd Gaming Corporation | $ | 342,988 |  |  | $ | 26,067 |  |  | $ | 406,537 |  |  | $ | 53,982 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

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

| Boyd Gaming Corporation Stockholders' Equity |  |  |  |
| Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income (Loss), Net |  | Noncontrolling Interest |  | Total
(In thousands, except share data) | Shares |  | Amount |  |  |  |  |
Balances, January 1, 2016 | 111,614,420 |  |  | $ | 1,117 |  |  | $ | 945,041 |  |  | $ | (437,881 | ) |  | $ | (316 | ) |  | $ | 50 |  |  | $ | 508,011 |
Net income | — |  |  | — |  |  | — |  |  | 405,783 |  |  | — |  |  | — |  |  | 405,783 |
Comprehensive income attributable to Boyd | — |  |  | — |  |  | — |  |  | — |  |  | 754 |  |  | — |  |  | 754 |
Stock options exercised | 449,065 |  |  | 4 |  |  | 2,909 |  |  | — |  |  | — |  |  | — |  |  | 2,913 |
Release of restricted stock units, net of tax | 261,235 |  |  | 2 |  |  | (695 | ) |  | — |  |  | — |  |  | — |  |  | (693 | )
Release of performance stock units, net of tax | 159,027 |  |  | 2 |  |  | (869 | ) |  | — |  |  | — |  |  | — |  |  | (867 | )
Share-based compensation costs | — |  |  | — |  |  | 7,125 |  |  | — |  |  | — |  |  | — |  |  | 7,125 |
Balances, September 30, 2016 | 112,483,747 |  |  | $ | 1,125 |  |  | $ | 953,511 |  |  | $ | (32,098 | ) |  | $ | 438 |  |  | $ | 50 |  |  | $ | 923,026 |
Balances, January 1, 2015 | 109,277,060 |  |  | $ | 1,093 |  |  | $ | 922,112 |  |  | $ | (485,115 | ) |  | $ | (53 | ) |  | $ | 50 |  |  | $ | 438,087 |
Net income | — |  |  | — |  |  | — |  |  | 54,103 |  |  | — |  |  | — |  |  | 54,103 |
Comprehensive income attributable to Boyd | — |  |  | — |  |  | — |  |  | — |  |  | (121 | ) |  | — |  |  | (121 | )
Stock options exercised | 1,145,302 |  |  | 11 |  |  | 8,595 |  |  | — |  |  | — |  |  | — |  |  | 8,606 |
Release of restricted stock units, net of tax | 118,319 |  |  | 1 |  |  | (286 | ) |  | — |  |  | — |  |  | — |  |  | (285 | )
Release of performance stock units, net of tax | 481,749 |  |  | 5 |  |  | (2,451 | ) |  | — |  |  | — |  |  | — |  |  | (2,446 | )
Share-based compensation costs | — |  |  | — |  |  | 8,227 |  |  | — |  |  | — |  |  | — |  |  | 8,227 |
Balances, September 30, 2015 | 111,022,430 |  |  | $ | 1,110 |  |  | $ | 936,197 |  |  | $ | (431,012 | ) |  | $ | (174 | ) |  | $ | 50 |  |  | $ | 506,171 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

| Nine Months Ended
| September 30,
(In thousands) | 2016 |  | 2015
Cash Flows from Operating Activities |  |  |
Net income | $ | 405,783 |  |  | $ | 54,103 |
Net (income) from discontinued operations | (211,052 | ) |  | (28,974 | )
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Depreciation and amortization | 143,831 |  |  | 155,251 |
Amortization of debt financing costs and discounts on debt | 12,654 |  |  | 16,576 |
Share-based compensation expense | 7,125 |  |  | 8,227 |
Deferred income taxes | (177,106 | ) |  | 17,194 |
Non-cash impairment of assets | 1,440 |  |  | 1,065 |
Loss on early extinguishments and modifications of debt | 42,364 |  |  | 32,333 |
Other operating activities | 1,200 |  |  | (341 | )
Changes in operating assets and liabilities: |  |  |
Restricted cash | (4,262 | ) |  | (6,626 | )
Accounts receivable, net | 2,045 |  |  | 2,220 |
Inventories | 733 |  |  | 55 |
Prepaid expenses and other current assets | (2,919 | ) |  | (5,131 | )
Current other tax asset | — |  |  | 1,802 |
Income taxes receivable | 212 |  |  | 1,243 |
Other assets, net | (759 | ) |  | 2,149 |
Accounts payable and accrued liabilities | 32,731 |  |  | 11,997 |
Other long-term tax liabilities | 190 |  |  | (25,580 | )
Other liabilities | 2,696 |  |  | 3,886 |
Net cash provided by operating activities | 256,906 |  |  | 241,449 |
Cash Flows from Investing Activities |  |  |
Capital expenditures | (117,330 | ) |  | (86,997 | )
Cash paid for acquisition, net of cash received | (372,322 | ) |  | — |
Other investing activities | 2,719 |  |  | 3,777 |
Net cash used in investing activities | (486,933 | ) |  | (83,220 | )
Cash Flows from Financing Activities |  |  |
Borrowings under Boyd Gaming bank credit facility | 1,622,075 |  |  | 627,000 |
Payments under Boyd Gaming bank credit facility | (1,290,800 | ) |  | (949,700 | )
Borrowings under Peninsula bank credit facility | 237,000 |  |  | 262,100 |
Payments under Peninsula bank credit facility | (899,750 | ) |  | (335,550 | )
Proceeds from issuance of senior notes | 750,000 |  |  | 750,000 |
Retirements of senior notes | (700,000 | ) |  | (500,000 | )
Debt financing costs, net | (40,718 | ) |  | (14,001 | )
Premium and consent fees paid | (15,750 | ) |  | (24,246 | )
Share-based compensation activities, net | 1,353 |  |  | 5,875 |
Other financing activities | — |  |  | (3 | )
Net cash used in financing activities | (336,590 | ) |  | (178,525 | )
Cash Flows from Discontinued Operations |  |  |
Cash flows from operating activities | (26,596 | ) |  | — |
Cash flows from investing activities | 594,080 |  |  | — |
Cash flows from financing activities | — |  |  | — |
Net cash provided by discontinued operations | 567,484 |  |  | — |
Change in cash and cash equivalents | 867 |  |  | (20,296 | )
Cash and cash equivalents, beginning of period | 158,821 |  |  | 145,341 |
Cash and cash equivalents, end of period | $ | 159,688 |  |  | $ | 125,045 |
Supplemental Disclosure of Cash Flow Information |  |  |
Cash paid for interest, net of amounts capitalized | $ | 147,001 |  |  | $ | 137,128 |
Cash paid (received) for income taxes, net of refunds | 31,698 |  |  | (1,246 | )
Supplemental Schedule of Noncash Investing and Financing Activities |  |  |
Payables incurred for capital expenditures | $ | 4,208 |  |  | $ | 5,031 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Boyd Gaming Corporation (and together with its subsidiaries, the "Company," "Boyd Gaming," "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD."
We are a diversified operator of 22 wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 25, 2016.
The results for the periods indicated are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods.
On September 27, 2016, we completed our previously announced acquisition of ALST Casino Holdco, LLC ("ALST"), pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated as of April 21, 2016, as amended on September 26, 2016, by and among Boyd Gaming, Boyd TCII Acquisition, LLC, a wholly-owned subsidiary of Boyd Gaming ("Merger Sub"), and ALST. The net purchase price, after adjustment for working capital and other items, was $372.3 million. The acquired assets and liabilities of ALST are included in our condensed consolidated balance sheet as of September 30, 2016, and the results of its operations and cash flows are reported in our condensed consolidated statements of operations and cash flows from September 27, 2016 through September 30, 2016. See Note 3, Acquisitions and Divestitures, for further information. We have not disclosed the pro forma impact of this acquisition to the results of operations for the three and nine months ended September 30, 2016, as the pro forma impact was deemed immaterial.
The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming and its wholly owned subsidiaries. Investments in unconsolidated affiliates, which do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation. On May 31, 2016, we announced that we had entered into an Equity Purchase Agreement (the "Purchase Agreement") to sell our 50% equity interest in Marina District Development Holding Company, LLC ("MDDHC"), the parent company of Borgata Hotel Casino & Spa ("Borgata"), to MGM Resorts International ("MGM"), and the transaction closed on August 1, 2016. (See Note 3, Acquisitions and Divestitures.) We account for our investment in Borgata applying the equity method and report its results as discontinued operations for all periods presented in these condensed consolidated financial statements.
Revisions and Reclassifications
The financial information for the three and nine months ended September 30, 2015 is derived from our condensed consolidated financial statements and footnotes included in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 and has been revised to reflect the results of operations and cash flows of our equity investment in Borgata as discontinued operations. (See Note 3, Acquisitions and Divestitures.)
Asset transaction costs that were previously disaggregated in our condensed consolidated statement of operations for the three and nine months ended September 30, 2015 were accumulated with preopening expenses. This reclassification had no effect on our retained earnings or net income as previously reported.
8

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Amortization of debt financing costs and amortization of discounts on debt, which were previously disaggregated in our condensed consolidated statement of cash flows for the nine months ended September 30, 2015, were combined. This reclassification had no effect on our cash provided by operating activities as previously reported.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments, which include cash on hand and in banks, interest-bearing deposits and money market funds with maturities of three months or less at their date of purchase. The instruments are not restricted as to withdrawal or use and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.
Promotional Allowances
The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as a promotional allowance. Promotional allowances also include incentives earned in our slot bonus program such as cash and the estimated retail value of goods and services (such as complimentary rooms and food and beverages). We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food and beverage, and to a lesser extent for other goods or services, depending upon the property.
The amounts included in promotional allowances are as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Rooms | $ | 18,778 |  |  | $ | 19,573 |  |  | $ | 56,017 |  |  | $ | 57,505 |
Food and beverage | 36,528 |  |  | 38,139 |  |  | 109,640 |  |  | 112,984 |
Other | 3,182 |  |  | 4,113 |  |  | 10,155 |  |  | 10,445 |
Total promotional allowances | $ | 58,488 |  |  | $ | 61,825 |  |  | $ | 175,812 |  |  | $ | 180,934 |

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

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Rooms | $ | 8,307 |  |  | $ | 8,988 |  |  | $ | 24,797 |  |  | $ | 26,240 |
Food and beverage | 32,611 |  |  | 33,925 |  |  | 96,724 |  |  | 99,874 |
Other | 3,041 |  |  | 3,214 |  |  | 9,021 |  |  | 8,889 |
Total estimated cost of promotional allowances | $ | 43,959 |  |  | $ | 46,127 |  |  | $ | 130,542 |  |  | $ | 135,003 |

Gaming Taxes
We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the condensed consolidated statements of operations. These taxes totaled approximately $79.7 million and $83.2 million for the three months ended September 30, 2016 and 2015, respectively, and $243.8 million and $252.1 million for the nine months ended September 30, 2016 and 2015, respectively.
Income Taxes
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if after weighing all positive and negative evidence, it is more likely than not that such assets will not be realized. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more likely than not realization threshold. This assessment
9

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.
In performing our third quarter valuation allowance analysis, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilize a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters ended September 30, 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during the three months ended September 30, 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from our deferred tax assets would be realized. As a result, during the third quarter, we released $190.4 million of valuation allowance on our federal and unitary state income tax net operating loss carryforwards and other deferred tax assets.
For the nine months ended September 30, 2015, we computed our benefit for income taxes by applying the actual effective tax rate, under the discrete method, to year-to-date income. The discrete method was used to calculate our income tax benefit as the annual effective tax rate was not considered a reliable estimate of year-to-date income tax benefit.
Our tax rate is impacted by adjustments that are largely independent of our operating results before taxes. In the current year, such adjustments relate primarily to the release of our valuation allowance on a significant portion of our deferred tax assets. In the prior year, the adjustments relate primarily to changes in our valuation allowance and the accrual of non-cash tax expense in connection with the tax amortization of indefinite-lived intangible assets that are not available to offset existing deferred tax assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets when determining our valuation allowance.
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.
Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the "more likely than not" standard. If it is subsequently determined that a previously recognized tax position no longer meets the "more likely than not" standard, it is required that the tax position is derecognized. Accounting standards for uncertain tax positions specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. Accrued interest and penalties are included in other long-term tax liabilities on the balance sheet.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
10

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Recently Issued Accounting Pronouncements
Accounting Standards Update 2016-15, Statement of Cash Flows ("Update 2016-15")
In August 2016, the Financial Accounting Standards Board ("FASB") issued Update 2016-15, which amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows. The Accounting Standards Update ("ASU") is intended to reduce the lack of consistent principles on certain classifications such as debt prepayment, debt extinguishment costs, distributions, insurance claims and beneficial interest in securitization transactions. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2017, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-15 to the financial statements.
Accounting Standards Update 2016-13, Financial Instruments-Credit Losses ("Update 2016-13")
In June 2016, the FASB issued Update 2016-13, which amends the guidance on the impairment of financial instruments. Update 2016-13 adds to GAAP an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-13 to the financial statements.
Accounting Standards Update 2016-12, Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients ("Update 2016-12"); Accounting Standards Update 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting ("Update 2016-11"); Accounting Standards Update 2016-10, Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing ("Update 2016-10"); and Accounting Standards Update 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("Update 2016-08")
In March 2016 through May 2016, the FASB issued Update 2016-08, Update 2016-10, Update 2016-11 and Update 2016-12, which amend and further clarify the new revenue standard, Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("Update 2014-09"), which was subsequently amended and deferred in Accounting Standards Update 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date ("Update 2015-14", and collectively with the original standard, Update 2014-09, and subsequent amendments, Update 2016-08, Update 2016-10, Update 2016-11 and Update 2016-12, the "Revenue Standard"). The Revenue Standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Earlier application is permitted only for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is evaluating the impact of the Revenue Standard on its consolidated financial statements.
Accounting Standards Update 2016-09, Compensation - Stock Compensation ("Update 2016-09")
In March 2016, the FASB issued Update 2016-09 which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-09 to the financial statements.
Accounting Standards Update 2016-07, Investments - Equity Method and Joint Ventures ("Update 2016-07")
In March 2016, the FASB issued Update 2016-07 which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2016, and early adoption is permitted. The Company determined that the impact of the new standard on its consolidated financial statements will not be material.
Accounting Standards Update 2016-02, Leases ("Update 2016-02")
In February 2016, the FASB issued Update 2016-02 which requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-02 to the financial statements.
11

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("Update 2016-01")
In January 2016, the FASB issued Update 2016-01, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted only if explicit early adoption guidance is applied. The Company is evaluating the impact of the new standard on its consolidated financial statements.
A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.
NOTE 3. ACQUISITIONS AND DIVESTITURES
Acquisition - Aliante Casino + Hotel + Spa
Overview
On September 27, 2016, Boyd Gaming completed its previously announced acquisition of ALST, the holding company of Aliante Gaming, LLC ("Aliante"), the owner and operator of the Aliante Casino + Hotel + Spa, pursuant to the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged (the "Merger") with and into ALST, with ALST surviving the Merger. ALST and Aliante are now wholly-owned subsidiaries of Boyd Gaming. Aliante is an upscale, resort-style casino and hotel situated in North Las Vegas and offering premium accommodations, gaming, dining, entertainment and retail, and is aggregated into our Las Vegas Locals segment (See Note 11, Segment Information.) The acquired assets and liabilities of ALST and Aliante are included in our condensed consolidated balance sheet as of September 30, 2016, and the results of its operations and cash flows are reported in our condensed consolidated statements of operations and cash flows from September 27, 2016 through September 30, 2016. The net purchase price was $372.3 million.
Consideration Transferred
The fair value of the consideration transferred on the acquisition date included the purchase price of the net assets transferred. The total gross consideration was $399.1 million.
Status of Purchase Price Allocation
For purposes of these financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on their respective net book values as reflected in the accounting records of ALST. The excess of the purchase price over the net book value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company will recognize the assets acquired and liabilities assumed in the Merger based on 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) is currently in process. This determination requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to arrive at estimates of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. The final fair value determinations are expected to be completed during the fourth quarter of 2016. The final fair value determinations may be significantly different than those reflected in the consolidated financial statements at September 30, 2016.
Acquisition Method of Accounting
The Company is following the acquisition method of accounting per Accounting Standards Codification ("ASC") 805 guidance. In accordance with ASC 805, the Company will allocate the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values, which will be determined primarily by management with assistance from third-party appraisals. The excess of the purchase price over those fair values will be recorded as goodwill.
12

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
The following table summarizes the preliminary allocation of the purchase price:

(In thousands) | As Recorded
Current assets | $ | 31,886 |
Property and equipment, net | 60,618 |
Other assets | 4,441 |
Total acquired assets | 96,945 |
Current liabilities | 5,693 |
Other liabilities | 636 |
Total liabilities assumed | 6,329 |
Net identifiable assets acquired | 90,616 |
Goodwill | 308,530 |
Net assets acquired | $ | 399,146 |

The following table summarizes the preliminary values assigned to acquired property and equipment and estimated useful lives:

(In thousands) | Useful Lives |  | As Recorded
Land |  |  | $ | 6,200 |
Buildings and improvements | 10 - 45 years |  | 47,945 |
Furniture and equipment | 3 - 7 years |  | 5,831 |
Construction in progress |  |  | 642 |
Property and equipment acquired |  |  | $ | 60,618 |

The goodwill recognized is the excess of the purchase price over the preliminary values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to the Las Vegas Locals reportable segment. All of the goodwill is expected to be deductible for income tax purposes.
The Company recognized $0.9 million and $1.9 million of acquisition related costs that were expensed for the three and nine months ended September 30, 2016, respectively. These costs are included in the condensed consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".
Condensed Consolidated Statement of Operations for the period from September 27, 2016 through September 30, 2016
The following supplemental information presents the financial results of Aliante included in the Company's condensed consolidated statement of operations for the three and nine months ended September 30, 2016:

| Period from
| September 27 to
(In thousands) | September 30, 2016
Net revenues | $ | 1,040 |
Net income | $ | 248 |

Pending Acquisition - Cannery Casino Hotel and Nevada Palace, LLC
On April 25, 2016, Boyd Gaming announced it has entered into a definitive agreement to acquire The Cannery Hotel and Casino, LLC ("Cannery"), the owner and operator of Cannery Casino Hotel located in North Las Vegas, and Nevada Palace, LLC ("Eastside"), the owner and operator of Eastside Cannery Casino and Hotel located in the eastern part of the Las Vegas Valley, comprising the Las Vegas assets of Cannery Casino Resorts, LLC ("CCR"), for total cash consideration of $230 million, subject to adjustment based on the working capital, including cash and less indebtedness of the acquired assets and less any transaction expenses.
Boyd Gaming will acquire Cannery and Eastside pursuant to a Membership Interest Purchase Agreement (the "Cannery Purchase Agreement") entered into on April 25, 2016, by and among, Boyd Gaming, CCR, Cannery and Eastside. The Cannery Purchase Agreement provides that, pursuant to the terms and subject to the conditions set forth therein, Boyd Gaming will acquire from
13

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
CCR all of the issued and outstanding membership interests of Cannery and Eastside (the "Cannery Purchase"), such that, following the Cannery Purchase, Cannery and Eastside will be wholly-owned subsidiaries of Boyd Gaming.
The Cannery Purchase Agreement contains customary representations, warranties, covenants and termination rights. In addition, $20 million of the cash consideration will be placed in escrow to satisfy the indemnification obligations of CCR.
On October 28, 2016, Boyd Gaming, Cannery, Eastside and CCR entered into an amendment to the Cannery Purchase Agreement (the "Cannery Purchase Amendment") to extend the outside date for the Closing (as defined in the Cannery Purchase Agreement) from October 31, 2016 to December 31, 2016.
The completion of the Cannery Purchase is subject to customary conditions and the receipt of all required regulatory approvals, including, among others, approval by the Nevada Gaming Commission and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Subject to the satisfaction or waiver of the respective conditions in the Cannery Purchase Agreement, we currently expect the Cannery Purchase to close before the end of 2016.
Investment in and Divestiture of Borgata
On August 1, 2016, Boyd Gaming completed its previously announced sale of its 50% equity interest in MDDHC, the parent company of Borgata in Atlantic City, New Jersey ("Borgata"), to MGM Resorts International ("MGM") pursuant to an Equity Purchase Agreement (the "Purchase Agreement") entered into on May 31, 2016, as amended on July 19, 2016, by and among Boyd, Boyd Atlantic City, Inc., a wholly-owned subsidiary of Boyd ("Seller"), and MGM.
Prior to the sale of our equity interest, the Company and MGM each held a 50% interest in MDDHC, which owns all the equity interests in Borgata. Until the closing of the sale, we were the managing member of MDDHC, and we were responsible for the day-to-day operations of Borgata.
Pursuant to the Purchase Agreement, MGM acquired from Boyd Gaming 49% of its 50% membership interest in MDDHC and, immediately thereafter, MDDHC redeemed Boyd Gaming’s remaining 1% membership interest in MDDHC (collectively, the "Transaction"). Following the Transaction, MDDHC became a wholly-owned subsidiary of MGM.
In consideration for the Transaction, MGM paid Boyd Gaming $900 million. The initial net cash proceeds were approximately $589 million, net of certain expenses and adjustments on the closing date, including outstanding indebtedness, cash and working capital. These initial proceeds do not include our 50% share of any future property tax settlement benefits, from the time period during which we held a 50% ownership in MDDHC, to which Boyd Gaming retains the right to receive upon payment. During third quarter 2016, we recognized $4.3 million in income for the cash we received for our share of property tax benefits realized by Borgata subsequent to the closing of the sale. Borgata estimates that it is entitled to additional property tax refunds totaling between $140 million and $160 million, including amounts due under court decisions rendered in its favor and estimates for open tax appeals.
We reflect the results of operations and cash flows from our investment in Borgata as discontinued operations for all periods presented in these condensed consolidated financial statements.
The after-tax gain on the sale of Borgata was $181.7 million and is included in discontinued operations in the three and nine months ended September 30, 2016.
14

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Summarized income statement information for Borgata is as follows:

| Period from |  | Period from
| July 1 to |  | January 1 to
| July 31, |  | July 31,
(In thousands) | 2016 |  | 2016
Net revenues | $ | 91,870 |  |  | $ | 485,510 |
Operating expenses | 63,997 |  |  | 366,812 |
Operating income | 27,873 |  |  | 118,698 |
Non-operating expenses | 6,104 |  |  | 36,280 |
Net income | $ | 21,769 |  |  | $ | 82,418 |

| Three Months |  | Nine Months
| Ended |  | Ended
| September 30, |  | September 30,
(In thousands) | 2015 |  | 2015
Net revenues | $ | 237,461 |  |  | $ | 611,213 |
Operating expenses | 175,248 |  |  | 495,473 |
Operating income | 62,213 |  |  | 115,740 |
Non-operating expenses | 25,363 |  |  | 58,909 |
Net income | $ | 36,850 |  |  | $ | 56,831 |

NOTE 4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:

| September 30, |  | December 31,
(In thousands) | 2016 |  | 2015
Land | $ | 234,186 |  |  | $ | 229,857 |
Buildings and improvements | 2,618,837 |  |  | 2,539,578 |
Furniture and equipment | 1,212,038 |  |  | 1,152,277 |
Riverboats and barges | 238,846 |  |  | 238,743 |
Construction in progress | 68,735 |  |  | 42,497 |
Other | 5,388 |  |  | 7,404 |
Total property and equipment | 4,378,030 |  |  | 4,210,356 |
Less accumulated depreciation | 2,115,400 |  |  | 1,985,014 |
Property and equipment, net | $ | 2,262,630 |  |  | $ | 2,225,342 |

Other property and equipment presented in the table above relates to the estimated net realizable value of construction materials inventory that was not disposed of with the 2013 sale of the Echelon development project. Such assets are not in service and are not currently being depreciated.
Depreciation expense is as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Depreciation expense | $ | 44,010 |  |  | $ | 44,643 |  |  | $ | 131,832 |  |  | $ | 134,904 |

15

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 5. INTANGIBLE ASSETS
Intangible assets consist of the following:

| September 30, 2016
| Weighted |  | Gross |  |  |  | Cumulative |  |
| Average Life |  | Carrying |  | Cumulative |  | Impairment |  | Intangible
(In thousands) | Remaining |  | Value |  | Amortization |  | Losses |  | Assets, Net
Amortizing intangibles |  |  |  |  |  |  |  |  |
Customer relationships | 1.1 years |  | $ | 136,300 |  |  | $ | (121,147 | ) |  | $ | — |  |  | $ | 15,153 |
Favorable lease rates | 31.7 years |  | 45,370 |  |  | (12,779 | ) |  | — |  |  | 32,591 |
Development agreement | — |  | 21,373 |  |  | — |  |  | — |  |  | 21,373 |
|  |  | 203,043 |  |  | (133,926 | ) |  | — |  |  | 69,117 |
Indefinite lived intangible assets |  |  |  |  |  |  |  |  |
Trademarks | Indefinite |  | 129,487 |  |  | — |  |  | (3,500 | ) |  | 125,987 |
Gaming license rights | Indefinite |  | 873,335 |  |  | (33,960 | ) |  | (156,374 | ) |  | 683,001 |
|  |  | 1,002,822 |  |  | (33,960 | ) |  | (159,874 | ) |  | 808,988 |
Balance, September 30, 2016 |  |  | $ | 1,205,865 |  |  | $ | (167,886 | ) |  | $ | (159,874 | ) |  | $ | 878,105 |

| December 31, 2015
| Weighted |  | Gross |  |  |  | Cumulative |  |
| Average Life |  | Carrying |  | Cumulative |  | Impairment |  | Intangible
(In thousands) | Remaining |  | Value |  | Amortization |  | Losses |  | Assets, Net
Amortizing intangibles |  |  |  |  |  |  |  |  |
Customer relationships | 1.9 years |  | $ | 136,300 |  |  | $ | (109,994 | ) |  | $ | — |  |  | $ | 26,306 |
Favorable lease rates | 32.4 years |  | 45,370 |  |  | (11,997 | ) |  | — |  |  | 33,373 |
Development agreement | — |  | 21,373 |  |  | — |  |  | — |  |  | 21,373 |
|  |  | 203,043 |  |  | (121,991 | ) |  | — |  |  | 81,052 |
Indefinite lived intangible assets |  |  |  |  |  |  |  |  |
Trademarks | Indefinite |  | 129,501 |  |  | — |  |  | (3,500 | ) |  | 126,001 |
Gaming license rights | Indefinite |  | 873,335 |  |  | (33,960 | ) |  | (156,374 | ) |  | 683,001 |
|  |  | 1,002,836 |  |  | (33,960 | ) |  | (159,874 | ) |  | 809,002 |
Balance, December 31, 2015 |  |  | $ | 1,205,879 |  |  | $ | (155,951 | ) |  | $ | (159,874 | ) |  | $ | 890,054 |

NOTE 6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:

| September 30, |  | December 31,
(In thousands) | 2016 |  | 2015
Payroll and related expenses | $ | 64,242 |  |  | $ | 71,815 |
Interest | 44,080 |  |  | 35,337 |
Gaming liabilities | 42,268 |  |  | 37,496 |
Player loyalty program liabilities | 18,280 |  |  | 18,491 |
Other accrued liabilities | 101,842 |  |  | 86,379 |
Total accrued liabilities | $ | 270,712 |  |  | $ | 249,518 |

16

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 7. LONG-TERM DEBT
Long-term debt, net of current maturities consists of the following:

|  |  | September 30, 2016
| Interest |  |  |  |  |  | Unamortized |  |
| Rates at |  | Outstanding |  | Unamortized |  | Origination |  | Long-Term
(In thousands) | Sept. 30, 2016 |  | Principal |  | Discount |  | Fees and Costs |  | Debt, Net
Bank credit facility | 3.54 | % |  | $ | 1,541,000 |  |  | $ | (1,986 | ) |  | $ | (28,483 | ) |  | $ | 1,510,531 |
6.875% senior notes due 2023 | 6.88 | % |  | 750,000 |  |  | — |  |  | (11,648 | ) |  | 738,352 |
6.375% senior notes due 2026 | 6.38 | % |  | 750,000 |  |  | — |  |  | (12,270 | ) |  | 737,730 |
Other | 5.80 | % |  | 635 |  |  | — |  |  | — |  |  | 635 |
Total long-term debt |  |  | 3,041,635 |  |  | (1,986 | ) |  | (52,401 | ) |  | 2,987,248 |
Less current maturities |  |  | 30,250 |  |  | — |  |  | — |  |  | 30,250 |
Long-term debt, net |  |  | $ | 3,011,385 |  |  | $ | (1,986 | ) |  | $ | (52,401 | ) |  | $ | 2,956,998 |

|  |  | December 31, 2015
| Interest |  |  |  |  |  | Unamortized |  |
| Rates at |  | Outstanding |  | Unamortized |  | Origination |  | Long-Term
(In thousands) | Dec. 31, 2015 |  | Principal |  | Discount |  | Fees and Costs |  | Debt, Net
Boyd Gaming Corporation Debt |  |  |  |  |  |  |  |  |
Bank credit facility | 3.75 | % |  | $ | 1,209,725 |  |  | $ | (2,702 | ) |  | $ | (9,746 | ) |  | $ | 1,197,277 |
9.00% senior notes due 2020 | 9.00 | % |  | 350,000 |  |  | — |  |  | (7,044 | ) |  | 342,956 |
6.875% senior notes due 2023 | 6.88 | % |  | 750,000 |  |  | — |  |  | (12,934 | ) |  | 737,066 |
|  |  | 2,309,725 |  |  | (2,702 | ) |  | (29,724 | ) |  | 2,277,299 |
Peninsula Gaming Debt |  |  |  |  |  |  |  |  |
Bank credit facility | 4.25 | % |  | 662,750 |  |  | — |  |  | (14,143 | ) |  | 648,607 |
8.375% senior notes due 2018 | 8.38 | % |  | 350,000 |  |  | — |  |  | (6,357 | ) |  | 343,643 |
|  |  | 1,012,750 |  |  | — |  |  | (20,500 | ) |  | 992,250 |
Total long-term debt |  |  | 3,322,475 |  |  | (2,702 | ) |  | (50,224 | ) |  | 3,269,549 |
Less current maturities |  |  | 29,750 |  |  | — |  |  | — |  |  | 29,750 |
Long-term debt, net |  |  | $ | 3,292,725 |  |  | $ | (2,702 | ) |  | $ | (50,224 | ) |  | $ | 3,239,799 |

Boyd Gaming Debt
Credit Facility
On September 15, 2016, the Company entered into an Amendment No. 1 and Joinder Agreement (the "Amendment") among the Company, certain financial institutions, 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 modified the Third Amended and Restated Credit Agreement (the "Prior Credit Facility"), dated August 14, 2013, together referred to as the "Credit Facility" or the "Credit Agreement".
As modified by the Amendment, the Credit Facility provides for: (i) increased commitments under the existing senior secured revolving credit facility (the "Revolving Credit Facility") to an amount equal to $775.0 million, (ii) commitments under the existing senior secured term A loan (the "Term A Loan") in an amount equal to $225.0 million, and (iii) a new $1.0 billion senior secured term B-2 loan (the "Term B-2 Loan"). The maturity dates of the Revolving Credit Facility and the Term A Loan have been extended to September 15, 2021 (or earlier upon the occurrence or non-occurrence of certain events); the Term B-2 Loan matures on September 15, 2023 (or earlier upon the occurrence or non-occurrence of certain events); the maturity date of the existing senior secured term B-1 loan (the "Term B-1 Loan"), under which $274.0 million in aggregate principal is outstanding, remains August 14, 2020. The increase to the Term A Loan and the new Term B-2 Loan were fully funded on the effective date of the Amendment. Proceeds from the Credit Facility were used to refinance all outstanding obligations under the Prior Credit Facility and to fund transaction costs in connection with the Credit Facility and may be used for working capital and other general corporate purposes.
17

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
The Credit Facility includes an accordion feature which permits an increase in the Revolving Credit Facility and the issuance and increase of senior secured term loans in an amount up to (i) $550.0 million, plus (ii) certain voluntary permanent reductions of the Revolving Credit Facility and certain voluntary prepayments of the senior secured term loans, plus (iii) certain reductions in the outstanding principal amounts under the term loans or the Revolving Credit Facility, plus (iv) any additional amount if, after giving effect thereto, the First Lien Leverage Ratio (as defined in the Credit Agreement) would not exceed 4.25 to 1.00 on a pro forma basis, less (v) any Incremental Equivalent Debt (as defined in the Credit Agreement), in each case, subject to the satisfaction of certain conditions.
Pursuant to the terms of the Credit Facility (i) the loans under the Term A Loan will amortize in an annual amount equal to 5.00% of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, (ii) the loans under the Term B-2 Loan will amortize in an annual amount equal to 1.00% of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, and (iii) beginning with the fiscal year ending December 31, 2016, the Company is required to use a portion of its annual Excess Cash Flow, as defined in the Credit Agreement, to prepay loans outstanding under the Credit Facility.
The outstanding principal amounts under the Credit Facility are comprised of the following:

| September 30, |  | December 31,
(In thousands) | 2016 |  | 2015
Revolving Credit Facility | $ | — |  |  | $ | 240,000 |
Term A Loan | 225,000 |  |  | 183,275 |
Term B-1 Loan | 274,000 |  |  | 730,750 |
Term B-2 Loan | 1,000,000 |  |  | — |
Swing Loan | 42,000 |  |  | 55,700 |
Total outstanding principal amounts under the Credit Facility | $ | 1,541,000 |  |  | $ | 1,209,725 |

At September 30, 2016, approximately $1.5 billion was outstanding under the Credit Facility and $12.0 million was allocated to support various letters of credit, leaving remaining contractual availability of $721.0 million.
Interest and Fees
The interest rate on the outstanding balance from time to time of the Revolving Credit Facility and the Term A Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio and ranges from 1.75% to 2.75% (if using the Eurodollar rate) and from 0.75% to 1.75% (if using the base rate). A fee of a percentage per annum (which ranges from 0.25% to 0.50% determined in accordance with a specified pricing grid based on the total leverage ratio) will be payable on the unused portions of the Revolving Credit Facility.
The interest rate on the outstanding balance from time to time of the Term B-1 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a 1.00% minimum) plus 3.00%, or (ii) the base rate plus 2.00%. The interest rate on the outstanding balance from time to time of the Term B-2 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a 0.00% minimum) plus 3.00%, or (ii) the base rate plus 2.00%.
The "base rate" under the Credit Agreement remains 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%.
Optional and Mandatory Prepayments
Amounts outstanding under the Credit Agreement may be prepaid without premium or penalty, and the unutilized portion of the commitments may be terminated without penalty, subject to certain exceptions, including a 1.00% prepayment premium for any prepayment of the Term B-2 Loan prior to March 15, 2017 that is accompanied by a repricing of the Term B-2 Loan.
The Credit Agreement contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio, (ii) establishing a maximum permitted consolidated total leverage ratio, (iii) establishing a maximum permitted secured leverage ratio, (iv) imposing limitations on the incurrence of
18

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
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 Agreement in connection with certain asset sales and issuances of certain additional secured indebtedness. In addition, it requires fixed quarterly amortization of principal and requires that the Company use a portion of its annual excess cash flow as defined in the agreement to prepay the loans.
The Company’s obligations under the Credit Agreement, 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 will grant 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 Credit Agreement.
Senior Notes
6.375% Senior Notes due April 2026
Significant Terms
On March 28, 2016, we issued $750 million aggregate principal amount of 6.375% senior notes due April 2026 (the "6.375% Notes"). The 6.375% Notes require semi-annual interest payments on April 1 and October 1 of each year, commencing on October 1, 2016. The 6.375% Notes will mature on April 1, 2026 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. Net proceeds from the 6.375% Notes were used to pay down the outstanding amount under the Revolving Credit Facility and the balance was deposited in money market funds and classified as cash equivalents on the condensed consolidated balance sheets.
In conjunction with the issuance of the 6.375% Notes, we incurred approximately $13.0 million in debt financing costs that have been deferred and are being amortized over the term of the 6.375% Notes using the effective interest method.
The 6.375% Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the 6.375% Notes, together, the "Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the Indenture), we will be required, unless certain conditions are met, to offer to repurchase the 6.375% Notes at a price equal to 101% of the principal amount of the 6.375% Notes, plus accrued and unpaid interest and Additional Interest (as defined in the Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the 6.375% Notes.
At any time prior to April 1, 2021, we may redeem the 6.375% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. After April 1, 2021, we may redeem all or a portion of the 6.375% Notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.188% in 2021 to 100% in 2024 and thereafter, plus accrued and unpaid interest and Additional Interest.
In connection with the private placement of the 6.375% Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the 6.375% Notes. We must use commercially reasonable efforts to file a registration statement and to consummate an exchange offer within 365 days after the issuance of the 6.375% Notes, subject to certain suspension and other rights set forth in the registration rights agreement. Under certain circumstances, including our determination that we cannot complete an exchange offer, we are required to file a shelf registration statement for the resale of the 6.375% Notes and to cause such shelf registration statement to be declared effective as soon as reasonably practicable (but in no event later than the 365th day following the issuance of the 6.375% Notes) after the occurrence of such circumstances. Subject to certain suspension and other rights, in the event that the registration statement is not filed or declared effective within the time periods specified in the registration rights agreement, the exchange offer is not consummated within 365 days after the issuance of the 6.375% Notes, or the registration statement is filed and declared effective but thereafter ceases to be effective or is unusable for its intended purpose for a period in excess of 30 days without being succeeded immediately by a post-effective amendment that cures such failure, the agreement provides that additional interest will accrue on the principal amount of the 6.375% Notes at a rate of 0.25% per annum during the 90-day period immediately following any of these events and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event will the penalty rate exceed 1.00% per annum, until the default is cured. There are no other alternative settlement methods and, other than the
19

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
1.00% per annum maximum penalty rate, the agreement contains no limit on the maximum potential amount of consideration that could be transferred in the event we do not meet the registration statement filing requirements. We currently intend to file a registration statement, have it declared effective and consummate any exchange offer within these time periods. Accordingly, we do not believe that payment of additional interest under the registration payment arrangement is probable and, therefore, no related liability has been recorded in the consolidated financial statements.
Senior Notes
9.00% Senior Notes due July 2020
On September 6, 2016 we redeemed all of our 9.00% senior notes due July 2020 (the "9.00% Notes") at a redemption price of 104.50% plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand.
As a result of this redemption, the 9.00% Notes have been fully extinguished.
Peninsula Gaming Debt
Bank Credit Facility
On September 2, 2016, Peninsula repaid all of the outstanding amounts, including all principal and accrued interest amounts, under the Peninsula senior secured credit facility (the "Peninsula Credit Facility") pursuant to the Peninsula Credit Agreement. In connection with the repayment in full of the Peninsula Credit Facility (the "Repayment"), the Peninsula Credit Agreement was terminated.
At December 31, 2015, the outstanding principal amount under the Peninsula Credit Facility was comprised of the following:

(In thousands) |
Term Loan | $ | 647,750 |
Revolving Facility | 9,000 |
Swing Loan | 6,000 |
Total outstanding principal amount under the Peninsula Credit Facility | $ | 662,750 |

Peninsula Senior Notes
8.375% Senior Notes due February 2018
On September 2, 2016 we redeemed all of our 8.375% senior notes due February 2018 (the "8.375% Notes") at a redemption price of 100.0% plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand.
Loss on Early Extinguishments and Modifications of Debt
The components of the loss on early extinguishments and modifications of debt, are as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
9.00% Senior Notes premium and consent fees | $ | 15,750 |  |  | $ | — |  |  | $ | 15,750 |  |  | $ | — |
9.00% Senior Notes deferred finance charges | 5,976 |  |  | — |  |  | 5,976 |  |  | — |
8.375% Senior Notes deferred finance charges | 4,497 |  |  | — |  |  | 4,497 |  |  | — |
9.125% Senior Notes premium and consent fees | — |  |  | — |  |  | — |  |  | 23,962 |
9.125% Senior Notes deferred finance charges | — |  |  | — |  |  | — |  |  | 4,888 |
Boyd Gaming Credit Facility deferred finance charges | 6,629 |  |  | 444 |  |  | 6,629 |  |  | 1,602 |
Peninsula Credit Facility deferred finance charges | 8,666 |  |  | 419 |  |  | 9,512 |  |  | 1,881 |
Total loss on early extinguishments and modifications of debt | $ | 41,518 |  |  | $ | 863 |  |  | $ | 42,364 |  |  | $ | 32,333 |

Covenant Compliance
As of September 30, 2016, we believe that we were in compliance with the financial and other covenants of our debt instruments.
20

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 8. COMMITMENTS AND CONTINGENCIES
Commitments
There have been no material changes to our commitments described under Note 10, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 25, 2016, except for the pending acquisitions of the Las Vegas assets of CCR as discussed in Note 3, Acquisitions and Divestitures.
Contingencies
Legal Matters
We are parties to various legal proceedings arising in the ordinary course of business. In our opinion, all pending legal matters are either adequately covered by insurance, or, if not insured, will not have a material adverse impact on our financial position, results of operations or cash flows.
NOTE 9. STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
Share-Based Compensation
We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.
The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated statements of operations.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Gaming | $ | 86 |  |  | $ | 68 |  |  | $ | 251 |  |  | $ | 191 |
Food and beverage | 17 |  |  | 12 |  |  | 48 |  |  | 36 |
Room | 8 |  |  | 6 |  |  | 23 |  |  | 17 |
Selling, general and administrative | 437 |  |  | 345 |  |  | 1,274 |  |  | 969 |
Corporate expense | 994 |  |  | 1,429 |  |  | 5,529 |  |  | 7,014 |
Total share-based compensation expense | $ | 1,542 |  |  | $ | 1,860 |  |  | $ | 7,125 |  |  | $ | 8,227 |

Performance Shares Vesting
The Performance Share Unit ("PSU") grants awarded in December 2012 and 2011 vested during first quarters of 2016 and 2015, respectively. Common shares were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") growth and customer service scores for the three-year performance period of the grant. As provided under the provisions of our stock incentive plan, certain of the participants elected to surrender a portion of the shares to be received to pay the withholding and other payroll taxes payable on the compensation resulting from the vesting of the PSUs.
The PSU grant awarded in December 2012 resulted in a total of 213,365 shares issued, representing approximately 0.59 shares per PSU. Of the 213,365 shares issued, a total of 54,338 were surrendered by the participants for payroll taxes, resulting a net issuance of 159,027 shares due to the vesting of the 2012 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2015; therefore, the vesting of the PSUs did not impact compensation costs in our 2016 condensed consolidated statement of operations.
The PSU grant awarded in December 2011 resulted in a total of 654,478 shares issued, representing approximately 1.67 shares per PSU. Of the 654,478 shares issued, a total of 177,274 were surrendered by the participants for payroll taxes, resulting a net issuance of 477,204 shares due to the vesting of the 2011 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2014; therefore, the vesting of the PSUs did not impact compensation costs in our 2015 condensed consolidated statement of operations.
21

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 10. FAIR VALUE MEASUREMENTS
The authoritative accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These inputs create the following fair value hierarchy:
Level 1: Quoted prices for identical instruments in active markets.
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.
Balances Measured at Fair Value
The following tables show the fair values of certain of our financial instruments:

| September 30, 2016
(In thousands) | Balance |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 159,688 |  |  | $ | 159,688 |  |  | $ | — |  |  | $ | — |
Restricted cash | 23,292 |  |  | 23,292 |  |  | — |  |  | — |
Investment available for sale | 18,279 |  |  | — |  |  | — |  |  | 18,279 |
Liabilities |  |  |  |  |  |  |
Contingent payments | $ | 3,435 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,435 |

| December 31, 2015
(In thousands) | Balance |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 158,821 |  |  | $ | 158,821 |  |  | $ | — |  |  | $ | — |
Restricted cash | 19,030 |  |  | 19,030 |  |  | — |  |  | — |
Investment available for sale | 17,839 |  |  | — |  |  | — |  |  | 17,839 |
Liabilities |  |  |  |  |  |  |
Contingent payments | $ | 3,632 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,632 |

Cash and Cash Equivalents and Restricted Cash
The fair value of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks at September 30, 2016 and December 31, 2015.
Investment Available for Sale
We have an investment in a single municipal bond issuance of $21.0 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair
22

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
value hierarchy. The estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities, and degrees of risk and a discounted cash flows analysis as of September 30, 2016 and December 31, 2015. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the condensed consolidated balance sheets. At both September 30, 2016 and December 31, 2015, $0.4 million of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at September 30, 2016 and December 31, 2015, $17.8 million and $17.4 million, respectively, is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $3.1 million and $3.2 million at September 30, 2016 and December 31, 2015, respectively, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.
Contingent Payments
In connection with the development of the Kansas Star Casino ("KSC"), KSC agreed to pay a former casino project developer and option holder 1% of KSC's EBITDA each month for a period of ten years commencing on December 20, 2011. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at both September 30, 2016 and December 31, 2015, is a discount rate of 18.5%. At both September 30, 2016 and December 31, 2015, there was a current liability of $0.9 million related to this agreement, which is recorded in accrued liabilities on the respective condensed consolidated balance sheets, and long-term obligation at September 30, 2016 and December 31, 2015, of $2.5 million and $2.7 million, respectively, which is included in other liabilities on the respective condensed consolidated balance sheets.
The following table summarizes the changes in fair value of the Company's Level 3 assets and liabilities:

| Three Months Ended
| September 30, 2016 |  | September 30, 2015
| Assets |  | Liability |  | Assets |  | Liability
(In thousands) | Investment Available for Sale |  | Contingent Payments |  | Investment Available for Sale |  | Contingent Payments
Balance at beginning of reporting period | $ | 17,832 |  |  | $ | (3,488 | ) |  | $ | 17,276 |  |  | $ | (3,642 | )
Total gains (losses) (realized or unrealized): |  |  |  |  |  |  |
Included in interest income (expense) | 30 |  |  | (147 | ) |  | 31 |  |  | (156 | )
Included in other comprehensive income (loss) | 417 |  |  | — |  |  | 642 |  |  | — |
Transfers in or out of Level 3 | — |  |  | — |  |  | — |  |  | — |
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |
Settlements | — |  |  | 200 |  |  | — |  |  | 211 |
Balance at end of reporting period | $ | 18,279 |  |  | $ | (3,435 | ) |  | $ | 17,949 |  |  | $ | (3,587 | )

23

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________

| Nine Months Ended
| September 30, 2016 |  | September 30, 2015
| Assets |  | Liability |  | Assets |  | Liability
(In thousands) | Investment Available for Sale |  | Contingent Payments |  | Investment Available for Sale |  | Merger Earnout |  | Contingent Payments
Balance at beginning of reporting period | $ | 17,839 |  |  | $ | (3,632 | ) |  | $ | 18,357 |  |  | $ | (75 | ) |  | $ | (3,792 | )
Total gains (losses) (realized or unrealized): |  |  |  |  |  |  |  |  |
Included in interest income (expense) | 96 |  |  | (452 | ) |  | 93 |  |  | 75 |  |  | (476 | )
Included in other comprehensive income (loss) | 754 |  |  | — |  |  | (121 | ) |  | — |  |  | — |
Transfers in or out of Level 3 | — |  |  | — |  |  | — |  |  | — |  |  | — |
Purchases, sales, issuances and settlements: |  |  |  |  |  |  |  |  |
Settlements | (410 | ) |  | 649 |  |  | (380 | ) |  | — |  |  | 681 |
Balance at end of reporting period | $ | 18,279 |  |  | $ | (3,435 | ) |  | $ | 17,949 |  |  | $ | — |  |  | $ | (3,587 | )

The table below summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities:

| Valuation Technique |  | Unobservable Input |  | Rate
Investment available for sale | Discounted cash flow |  | Discount rate |  | 9.7 | %
Contingent payments | Discounted cash flow |  | Discount rate |  | 18.5 | %

Balances Disclosed at Fair Value
The following tables provide the fair value measurement information about our obligation under minimum assessment agreements and other financial instruments:

| September 30, 2016
(In thousands) | Outstanding Face Amount |  | Carrying Value |  | Estimated Fair Value |  | Fair Value Hierarchy
Liabilities |  |  |  |  |  |  |
Obligation under assessment arrangements | $ | 33,823 |  |  | $ | 26,858 |  |  | $ | 28,118 |  |  | Level 3
Other financial instruments | 100 |  |  | 95 |  |  | 95 |  |  | Level 3

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

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

| September 30, 2016
(In thousands) | Outstanding Face Amount |  | Carrying Value |  | Estimated Fair Value |  | Fair Value Hierarchy
Bank credit facility | $ | 1,541,000 |  |  | $ | 1,510,531 |  |  | $ | 1,548,060 |  |  | Level 2
6.875% senior notes due 2023 | 750,000 |  |  | 738,352 |  |  | 811,875 |  |  | Level 1
6.375% senior notes due 2026 | 750,000 |  |  | 737,730 |  |  | 802,500 |  |  | Level 1
Other | 635 |  |  | 635 |  |  | 635 |  |  | Level 3
Total debt | $ | 3,041,635 |  |  | $ | 2,987,248 |  |  | $ | 3,163,070 |  |  |

24

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________

| December 31, 2015
(In thousands) | Outstanding Face Amount |  | Carrying Value |  | Estimated Fair Value |  | Fair Value Hierarchy
Boyd Gaming Debt |  |  |  |  |  |  |
Bank credit facility | $ | 1,209,725 |  |  | $ | 1,197,277 |  |  | $ | 1,202,870 |  |  | Level 2
9.00% senior notes due 2020 | 350,000 |  |  | 342,956 |  |  | 372,750 |  |  | Level 1
6.875% senior notes due 2023 | 750,000 |  |  | 737,066 |  |  | 772,500 |  |  | Level 1
| 2,309,725 |  |  | 2,277,299 |  |  | 2,348,120 |  |  |
Peninsula Gaming Debt |  |  |  |  |  |  |
Bank credit facility | 662,750 |  |  | 648,607 |  |  | 661,131 |  |  | Level 2
8.375% senior notes due 2018 | 350,000 |  |  | 343,643 |  |  | 357,000 |  |  | Level 2
| 1,012,750 |  |  | 992,250 |  |  | 1,018,131 |  |  |
Total debt | $ | 3,322,475 |  |  | $ | 3,269,549 |  |  | $ | 3,366,251 |  |  |

The estimated fair values of our Credit Facility is based on a relative value analysis performed on or about September 30, 2016 and December 31, 2015. The estimated fair value of the Peninsula Credit Facility is based on a relative value analysis performed on or about December 31, 2015. The estimated fair values of our senior notes are based on quoted market prices as of September 30, 2016 and December 31, 2015. The other debt is a fixed-rate debt that is payable in 32 semi-annual installments, beginning in 2008. It is not traded and does not have an observable market input; therefore, we have estimated its fair value to be equal to the carrying value.
There were no transfers between Level 1, Level 2 and Level 3 measurements during the nine months ended September 30, 2016 or 2015.
25

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 11. SEGMENT INFORMATION
We have aggregated certain of our properties in order to present three Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest and South. The table below lists the classification of each of our properties.

Las Vegas Locals |
Gold Coast Hotel and Casino | Las Vegas, Nevada
The Orleans Hotel and Casino | Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall | Las Vegas, Nevada
Suncoast Hotel and Casino | Las Vegas, Nevada
Aliante Casino + Hotel + Spa | North 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 |
Par-A-Dice Hotel Casino | East Peoria, Illinois
Blue Chip Casino, Hotel & Spa | Michigan City, Indiana
Diamond Jo Dubuque | Dubuque, Iowa
Diamond Jo Worth | Northwood, Iowa
Kansas Star Casino | Mulvane, Kansas
Amelia Belle Casino | Amelia, Louisiana
Delta Downs Racetrack Casino & Hotel | Vinton, Louisiana
Evangeline Downs Racetrack and Casino | Opelousas, Louisiana
Sam's Town Hotel and Casino | Shreveport, Louisiana
Treasure Chest Casino | Kenner, Louisiana
IP Casino Resort Spa | Biloxi, Mississippi
Sam's Town Hotel and Gambling Hall | Tunica, Mississippi

As a result of the agreement to sell our equity interest in Borgata (see Note 3, Acquisitions and Divestitures), we no longer report our interest in Borgata as a Reportable Segment.
In third quarter 2016, the Peninsula debt was refinanced, eliminating the financing structure that restricted our ability to transfer cash from Peninsula to Boyd Gaming. As a result of the elimination of this restriction, management has concluded that the properties previously comprising the Peninsula segment will be aggregated into the Midwest and South reportable segment, and has retrospectively adjusted the presentation for all periods presented.
Also, as of September 27, 2016, our Las Vegas Locals segment includes our wholly-owned subsidiary, Aliante (see Note 3, Acquisitions and Divestitures).
Results of Operations - Total Reportable Segment Net Revenues and Adjusted EBITDA
We evaluate each of our property's profitability based upon Property EBITDA, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, deferred rent, share-based compensation expense, project development, preopening and writedowns expenses, impairments of assets, other operating items, net, and gain or loss on early retirements of debt, as applicable. Total Reportable Segment Adjusted EBITDA is the aggregate sum of the Property EBITDA for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest and South segments. Results for Downtown Las Vegas include the results of our Hawaii-based travel agency and captive insurance company.
26

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Total Reportable Segment Adjusted EBITDA to operating income, as reported in our accompanying condensed consolidated statements of operations:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2016 |  | 2015 |  | 2016 |  | 2015
Net Revenues |  |  |  |  |  |  |
Las Vegas Locals | $ | 148,879 |  |  | $ | 148,022 |  |  | $ | 462,213 |  |  | $ | 451,356 |
Downtown Las Vegas | 56,606 |  |  | 56,685 |  |  | 174,423 |  |  | 171,723 |
Midwest and South | 326,416 |  |  | 341,606 |  |  | 992,517 |  |  | 1,033,679 |
Total Reportable Segment Net Revenues | $ | 531,901 |  |  | $ | 546,313 |  |  | $ | 1,629,153 |  |  | $ | 1,656,758 |
Adjusted EBITDA |  |  |  |  |  |  |
Las Vegas Locals | $ | 36,173 |  |  | $ | 32,261 |  |  | $ | 123,617 |  |  | $ | 113,313 |
Downtown Las Vegas | 10,018 |  |  | 10,144 |  |  | 36,962 |  |  | 33,128 |
Midwest and South | 90,633 |  |  | 96,347 |  |  | 281,305 |  |  | 294,635 |
Total Reportable Segment Adjusted EBITDA | 136,824 |  |  | 138,752 |  |  | 441,884 |  |  | 441,076 |
Corporate expense | (14,884 | ) |  | (13,581 | ) |  | (44,355 | ) |  | (45,000 | )
Adjusted EBITDA | 121,940 |  |  | 125,171 |  |  | 397,529 |  |  | 396,076 |
Other operating costs and expenses |  |  |  |  |  |  |
Deferred rent | 816 |  |  | 857 |  |  | 2,449 |  |  | 2,573 |
Depreciation and amortization | 47,928 |  |  | 51,345 |  |  | 143,831 |  |  | 155,251 |
Share-based compensation expense | 1,542 |  |  | 1,860 |  |  | 7,125 |  |  | 8,227 |
Project development, preopening and writedowns | 3,735 |  |  | 1,514 |  |  | 11,473 |  |  | 4,218 |
Impairments of assets | — |  |  | — |  |  | 1,440 |  |  | 1,065 |
Other operating items, net | 3 |  |  | 172 |  |  | 555 |  |  | 342 |
Total other operating costs and expenses | 54,024 |  |  | 55,748 |  |  | 166,873 |  |  | 171,676 |
Operating income | $ | 67,916 |  |  | $ | 69,423 |  |  | $ | 230,656 |  |  | $ | 224,400 |

For purposes of this presentation, corporate expense excludes its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations.
Total Reportable Segment Assets
The Company's assets by Reportable Segment consisted of the following amounts:

| September 30, |  | December 31,
(In thousands) | 2016 |  | 2015
Assets |  |  |
Las Vegas Locals | $ | 1,535,515 |  |  | $ | 1,155,224 |
Downtown Las Vegas | 149,172 |  |  | 138,159 |
Midwest and South | 2,597,024 |  |  | 2,634,742 |
Total Reportable Segment Assets | 4,281,711 |  |  | 3,928,125 |
Corporate | 174,943 |  |  | 422,775 |
Total Assets | $ | 4,456,654 |  |  | $ | 4,350,900 |

27

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
NOTE 12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of our 6.875% Senior Notes due May 2023 ("6.875% Notes") and our 6.375% Notes is presented below. Each of these notes is fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The non-guarantors primarily represent special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly owned subsidiaries.
On September 2, 2016, we notified the trustees of our 6.875% Notes and our 6.375% Notes of our designation of the following additional subsidiaries as "Restricted Subsidiaries": Boyd Acquisition I, LLC, Boyd Acquisition II, LLC, Peninsula Gaming, LLC, Belle of Orleans, L.L.C., Diamond Jo, LLC, Diamond Jo Worth, LLC, Kansas Star Casino, LLC, and The Old Evangeline Downs, L.L.C.
The tables below present the condensed consolidating balance sheets as of September 30, 2016, and December 31, 2015, the condensed consolidating statements of operations for the three and nine months ended September 30, 2016 and 2015, and the condensed consolidating statements of cash flows for the nine months ended September 30, 2016 and 2015. We have reclassified certain prior year amounts in the current year presentation to reflect the designation of the additional Restricted Subsidiaries listed above as subsidiary guarantors.
Condensed Consolidating Balance Sheets

| September 30, 2016
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Assets |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 1,705 |  |  | $ | 145,570 |  |  | $ | 12,413 |  |  | $ | — |  |  | $ | — |  |  | $ | 159,688 |
Other current assets | 16,023 |  |  | 88,533 |  |  | 15,764 |  |  | — |  |  | (9,708 | ) |  | 110,612 |
Property and equipment, net | 68,118 |  |  | 2,099,977 |  |  | 94,535 |  |  | — |  |  | — |  |  | 2,262,630 |
Investments in subsidiaries | 4,509,550 |  |  | — |  |  | — |  |  | — |  |  | (4,509,550 | ) |  | — |
Intercompany receivable | — |  |  | 1,489,652 |  |  | — |  |  | — |  |  | (1,489,652 | ) |  | — |
Other assets, net | 13,336 |  |  | 30,165 |  |  | 21,497 |  |  | — |  |  | (13,232 | ) |  | 51,766 |
Intangible assets, net | — |  |  | 854,046 |  |  | 24,059 |  |  | — |  |  | — |  |  | 878,105 |
Goodwill, net | — |  |  | 684,529 |  |  | 309,324 |  |  | — |  |  | — |  |  | 993,853 |
Total assets | $ | 4,608,732 |  |  | $ | 5,392,472 |  |  | $ | 477,592 |  |  | $ | — |  |  | $ | (6,022,142 | ) |  | $ | 4,456,654 |
Liabilities and Stockholders' Equity |  |  |  |  |  |  |  |  |  |  |
Current maturities of long-term debt | $ | 30,250 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 30,250 |
Other current liabilities | 127,456 |  |  | 190,831 |  |  | 40,799 |  |  | — |  |  | (233 | ) |  | 358,853 |
Accumulated losses of subsidiaries in excess of investment | — |  |  | 169,906 |  |  | 265 |  |  | — |  |  | (170,171 | ) |  | — |
Intercompany payable | 534,902 |  |  | — |  |  | 963,992 |  |  | 254 |  |  | (1,499,148 | ) |  | — |
Long-term debt, net of current maturities and debt issuance costs | 2,956,362 |  |  | — |  |  | 636 |  |  | — |  |  | — |  |  | 2,956,998 |
Other long-term liabilities | 36,786 |  |  | 163,973 |  |  | — |  |  | — |  |  | (13,232 | ) |  | 187,527 |
Boyd Gaming Corporation stockholders' equity (deficit) | 922,976 |  |  | 4,867,762 |  |  | (528,100 | ) |  | (254 | ) |  | (4,339,408 | ) |  | 922,976 |
Noncontrolling interest | — |  |  | — |  |  | — |  |  | — |  |  | 50 |  |  | 50 |
Total stockholders' equity (deficit) | 922,976 |  |  | 4,867,762 |  |  | (528,100 | ) |  | (254 | ) |  | (4,339,358 | ) |  | 923,026 |
Total liabilities and stockholders' equity | $ | 4,608,732 |  |  | $ | 5,392,472 |  |  | $ | 477,592 |  |  | $ | — |  |  | $ | (6,022,142 | ) |  | $ | 4,456,654 |

28

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Condensed Consolidating Balance Sheets - continued

| December 31, 2015
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Assets |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 2 |  |  | $ | 156,116 |  |  | $ | 2,482 |  |  | $ | 221 |  |  | $ | — |  |  | $ | 158,821 |
Other current assets | 14,602 |  |  | 74,402 |  |  | 10,415 |  |  | — |  |  | (1,008 | ) |  | 98,411 |
Property and equipment, net | 68,515 |  |  | 2,120,455 |  |  | 36,372 |  |  | — |  |  | — |  |  | 2,225,342 |
Investments in subsidiaries | 3,547,690 |  |  | — |  |  | — |  |  | — |  |  | (3,547,690 | ) |  | — |
Intercompany receivable | — |  |  | 1,701,817 |  |  | — |  |  | — |  |  | (1,701,817 | ) |  | — |
Other assets, net | 12,521 |  |  | 30,755 |  |  | 18,293 |  |  | — |  |  | (13,228 | ) |  | 48,341 |
Intangible assets, net | — |  |  | 865,995 |  |  | 24,059 |  |  | — |  |  | — |  |  | 890,054 |
Goodwill, net | — |  |  | 684,529 |  |  | 781 |  |  | — |  |  | — |  |  | 685,310 |
Investment in unconsolidated subsidiary held for sale | — |  |  | 244,621 |  |  | — |  |  | — |  |  | — |  |  | 244,621 |
Total assets | $ | 3,643,330 |  |  | $ | 5,878,690 |  |  | $ | 92,402 |  |  | $ | 221 |  |  | $ | (5,263,743 | ) |  | $ | 4,350,900 |
Liabilities and Stockholders' Equity |  |  |  |  |  |  |  |  |  |  |
Current maturities of long-term debt | $ | 21,500 |  |  | $ | 8,250 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 29,750 |
Other current liabilities | 102,946 |  |  | 198,590 |  |  | 24,071 |  |  | — |  |  | (286 | ) |  | 325,321 |
Accumulated losses of subsidiaries in excess of investment | — |  |  | 4,507 |  |  | 302 |  |  | — |  |  | (4,809 | ) |  | — |
Intercompany payable | 720,400 |  |  | — |  |  | 981,688 |  |  | 475 |  |  | (1,702,563 | ) |  | — |
Long-term debt, net of current maturities and debt issuance costs | 2,255,800 |  |  | 983,999 |  |  | — |  |  | — |  |  | — |  |  | 3,239,799 |
Other long-term liabilities | 34,723 |  |  | 226,524 |  |  | — |  |  | — |  |  | (13,228 | ) |  | 248,019 |
Boyd Gaming Corporation stockholders' equity (deficit) | 507,961 |  |  | 4,456,820 |  |  | (913,659 | ) |  | (254 | ) |  | (3,542,907 | ) |  | 507,961 |
Noncontrolling interest | — |  |  | — |  |  | — |  |  | — |  |  | 50 |  |  | 50 |
Total stockholders' equity (deficit) | 507,961 |  |  | 4,456,820 |  |  | (913,659 | ) |  | (254 | ) |  | (3,542,857 | ) |  | 508,011 |
Total liabilities and stockholders' equity | $ | 3,643,330 |  |  | $ | 5,878,690 |  |  | $ | 92,402 |  |  | $ | 221 |  |  | $ | (5,263,743 | ) |  | $ | 4,350,900 |

29

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Condensed Consolidating Statements of Operations

| Three Months Ended September 30, 2016
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Net revenues | $ | 29,708 |  |  | $ | 523,904 |  |  | $ | 13,252 |  |  | $ | — |  |  | $ | (34,963 | ) |  | $ | 531,901 |
Operating costs and expenses |  |  |  |  |  |  |  |  |  |  |
Operating | 300 |  |  | 275,916 |  |  | 11,539 |  |  | — |  |  | — |  |  | 287,755 |
Selling, general and administrative | 12,491 |  |  | 66,491 |  |  | 1,849 |  |  | — |  |  | 2 |  |  | 80,833 |
Maintenance and utilities | — |  |  | 27,463 |  |  | 391 |  |  | — |  |  | — |  |  | 27,854 |
Depreciation and amortization | 2,355 |  |  | 44,597 |  |  | 976 |  |  | — |  |  | — |  |  | 47,928 |
Corporate expense | 14,247 |  |  | 471 |  |  | 1,159 |  |  | — |  |  | — |  |  | 15,877 |
Project development, preopening and writedowns | 7,213 |  |  | (5,646 | ) |  | 2,168 |  |  | — |  |  | — |  |  | 3,735 |
Other operating items, net | — |  |  | 3 |  |  | — |  |  | — |  |  | — |  |  | 3 |
Intercompany expenses | 301 |  |  | 34,299 |  |  | 365 |  |  | — |  |  | (34,965 | ) |  | — |
Total operating costs and expenses | 36,907 |  |  | 443,594 |  |  | 18,447 |  |  | — |  |  | (34,963 | ) |  | 463,985 |
Equity in earnings of subsidiaries | 230,669 |  |  | (607 | ) |  | — |  |  | — |  |  | (230,062 | ) |  | — |
Operating income (loss) | 223,470 |  |  | 79,703 |  |  | (5,195 | ) |  | — |  |  | (230,062 | ) |  | 67,916 |
Other expense (income) |  |  |  |  |  |  |  |  |  |  |
Interest expense, net | 41,778 |  |  | 12,369 |  |  | 6 |  |  | — |  |  | — |  |  | 54,153 |
Loss on early extinguishments and modifications of debt | 28,356 |  |  | 13,162 |  |  | — |  |  | — |  |  | — |  |  | 41,518 |
Other, net | — |  |  | 20 |  |  | (19 | ) |  | — |  |  | — |  |  | 1 |
Total other expense, net | 70,134 |  |  | 25,551 |  |  | (13 | ) |  | — |  |  | — |  |  | 95,672 |
Income (loss) from continuing operations before income taxes | 153,336 |  |  | 54,152 |  |  | (5,182 | ) |  | — |  |  | (230,062 | ) |  | (27,756 | )
Income taxes benefit (provision) | 189,235 |  |  | 363 |  |  | 22 |  |  | — |  |  | — |  |  | 189,620 |
Income (loss) from continuing operations, net of tax | 342,571 |  |  | 54,515 |  |  | (5,160 | ) |  | — |  |  | (230,062 | ) |  | 161,864 |
Income from discontinued operations, net of tax | — |  |  | 180,707 |  |  | — |  |  | — |  |  | — |  |  | 180,707 |
Net income (loss) | $ | 342,571 |  |  | $ | 235,222 |  |  | $ | (5,160 | ) |  | $ | — |  |  | $ | (230,062 | ) |  | $ | 342,571 |
Comprehensive income (loss) | $ | 342,988 |  |  | $ | 235,639 |  |  | $ | (5,160 | ) |  | $ | — |  |  | $ | (230,479 | ) |  | $ | 342,988 |

30

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Condensed Consolidating Statements of Operations - continued

| Three Months Ended September 30, 2015
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Net revenues | $ | 28,946 |  |  | $ | 539,768 |  |  | $ | 12,048 |  |  | $ | — |  |  | $ | (34,449 | ) |  | $ | 546,313 |
Operating costs and expenses |  |  |  |  |  |  |  |  |  |  |
Operating | 450 |  |  | 288,296 |  |  | 11,120 |  |  | — |  |  | — |  |  | 299,866 |
Selling, general and administrative | 11,083 |  |  | 67,227 |  |  | 1,644 |  |  | — |  |  | — |  |  | 79,954 |
Maintenance and utilities | — |  |  | 28,614 |  |  | 416 |  |  | — |  |  | — |  |  | 29,030 |
Depreciation and amortization | 1,657 |  |  | 48,758 |  |  | 930 |  |  | — |  |  | — |  |  | 51,345 |
Corporate expense | 13,503 |  |  | 526 |  |  | 980 |  |  | — |  |  | — |  |  | 15,009 |
Project development, preopening and writedowns | 5 |  |  | 318 |  |  | 1,183 |  |  | 8 |  |  | — |  |  | 1,514 |
Other operating items, net | 136 |  |  | 36 |  |  | — |  |  | — |  |  | — |  |  | 172 |
Intercompany expenses | 301 |  |  | 33,827 |  |  | 321 |  |  | — |  |  | (34,449 | ) |  | — |
Total operating costs and expenses | 27,135 |  |  | 467,602 |  |  | 16,594 |  |  | 8 |  |  | (34,449 | ) |  | 476,890 |
Equity in earnings of subsidiaries | 57,937 |  |  | (665 | ) |  | (8 | ) |  | — |  |  | (57,264 | ) |  | — |
Operating income (loss) | 59,748 |  |  | 71,501 |  |  | (4,554 | ) |  | (8 | ) |  | (57,264 | ) |  | 69,423 |
Other expense (income) |  |  |  |  |  |  |  |  |  |  |
Interest expense, net | 33,883 |  |  | 22,209 |  |  | 6 |  |  | — |  |  | — |  |  | 56,098 |
Loss on early extinguishments of debt | 444 |  |  | 419 |  |  | — |  |  | — |  |  | — |  |  | 863 |
Other, net | (2 | ) |  | 1,775 |  |  | (20 | ) |  | — |  |  | — |  |  | 1,753 |
Total other expense, net | 34,325 |  |  | 24,403 |  |  | (14 | ) |  | — |  |  | — |  |  | 58,714 |
Income (loss) from continuing operations before income taxes | 25,423 |  |  | 47,098 |  |  | (4,540 | ) |  | (8 | ) |  | (57,264 | ) |  | 10,709 |
Income taxes benefit (provision) | 2 |  |  | (3,692 | ) |  | (4 | ) |  | — |  |  | — |  |  | (3,694 | )
Income (loss) from continuing operations, net of tax | 25,425 |  |  | 43,406 |  |  | (4,544 | ) |  | (8 | ) |  | (57,264 | ) |  | 7,015 |
Income from discontinued operations, net of tax | — |  |  | 18,410 |  |  | — |  |  | — |  |  | — |  |  | 18,410 |
Net income (loss) | $ | 25,425 |  |  | $ | 61,816 |  |  | $ | (4,544 | ) |  | $ | (8 | ) |  | $ | (57,264 | ) |  | $ | 25,425 |
Comprehensive income (loss) | $ | 26,067 |  |  | $ | 62,458 |  |  | $ | (4,544 | ) |  | $ | (8 | ) |  | $ | (57,906 | ) |  | $ | 26,067 |

31

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Condensed Consolidating Statements of Operations - continued

| Nine Months Ended September 30, 2016
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Net revenues | $ | 91,901 |  |  | $ | 1,607,719 |  |  | $ | 37,646 |  |  | $ | — |  |  | $ | (108,113 | ) |  | $ | 1,629,153 |
Operating costs and expenses |  |  |  |  |  |  |  |  |  |  |
Operating | 1,200 |  |  | 838,837 |  |  | 32,881 |  |  | — |  |  | — |  |  | 872,918 |
Selling, general and administrative | 37,203 |  |  | 199,308 |  |  | 5,171 |  |  | — |  |  | 4 |  |  | 241,686 |
Maintenance and utilities | — |  |  | 75,675 |  |  | 1,036 |  |  | — |  |  | — |  |  | 76,711 |
Depreciation and amortization | 6,375 |  |  | 134,487 |  |  | 2,969 |  |  | — |  |  | — |  |  | 143,831 |
Corporate expense | 45,121 |  |  | 1,380 |  |  | 3,382 |  |  | — |  |  | — |  |  | 49,883 |
Project development, preopening and writedowns | 11,205 |  |  | (4,382 | ) |  | 4,650 |  |  | — |  |  | — |  |  | 11,473 |
Impairments of assets | 1,440 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,440 |
Other operating items, net | 106 |  |  | 449 |  |  | — |  |  | — |  |  | — |  |  | 555 |
Intercompany expenses | 903 |  |  | 106,119 |  |  | 1,095 |  |  | — |  |  | (108,117 | ) |  | — |
Total operating costs and expenses | 103,553 |  |  | 1,351,873 |  |  | 51,184 |  |  | — |  |  | (108,113 | ) |  | 1,398,497 |
Equity in earnings of subsidiaries | 372,953 |  |  | (1,375 | ) |  | — |  |  | — |  |  | (371,578 | ) |  | — |
Operating income (loss) | 361,301 |  |  | 254,471 |  |  | (13,538 | ) |  | — |  |  | (371,578 | ) |  | 230,656 |
Other expense (income) |  |  |  |  |  |  |  |  |  |  |
Interest expense, net | 116,245 |  |  | 51,386 |  |  | 18 |  |  | — |  |  | — |  |  | 167,649 |
Loss on early extinguishments and modifications of debt | 28,356 |  |  | 14,008 |  |  | — |  |  | — |  |  | — |  |  | 42,364 |
Other, net | 1 |  |  | 196 |  |  | (54 | ) |  | — |  |  | — |  |  | 143 |
Total other expense, net | 144,602 |  |  | 65,590 |  |  | (36 | ) |  | — |  |  | — |  |  | 210,156 |
Income (loss) from continuing operations before income taxes | 216,699 |  |  | 188,881 |  |  | (13,502 | ) |  | — |  |  | (371,578 | ) |  | 20,500 |
Income taxes benefit (provision) | 189,084 |  |  | (14,845 | ) |  | (8 | ) |  | — |  |  | — |  |  | 174,231 |
Income (loss) from continuing operations, net of tax | 405,783 |  |  | 174,036 |  |  | (13,510 | ) |  | — |  |  | (371,578 | ) |  | 194,731 |
Income from discontinued operations, net of tax | — |  |  | 211,052 |  |  | — |  |  | — |  |  | — |  |  | 211,052 |
Net income (loss) | $ | 405,783 |  |  | $ | 385,088 |  |  | $ | (13,510 | ) |  | $ | — |  |  | $ | (371,578 | ) |  | $ | 405,783 |
Comprehensive income (loss) | $ | 406,537 |  |  | $ | 385,842 |  |  | $ | (13,510 | ) |  | $ | — |  |  | $ | (372,332 | ) |  | $ | 406,537 |

32

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Condensed Consolidating Statements of Operations - continued

| Nine Months Ended September 30, 2015
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Net revenues | $ | 91,048 |  |  | $ | 1,637,995 |  |  | $ | 35,568 |  |  | $ | — |  |  | $ | (107,853 | ) |  | $ | 1,656,758 |
Operating costs and expenses |  |  |  |  |  |  |  |  |  |  |
Operating | 1,350 |  |  | 861,418 |  |  | 33,080 |  |  | — |  |  | — |  |  | 895,848 |
Selling, general and administrative | 35,828 |  |  | 201,857 |  |  | 4,971 |  |  | — |  |  | — |  |  | 242,656 |
Maintenance and utilities | — |  |  | 79,809 |  |  | 1,156 |  |  | — |  |  | — |  |  | 80,965 |
Depreciation and amortization | 4,446 |  |  | 147,900 |  |  | 2,905 |  |  | — |  |  | — |  |  | 155,251 |
Corporate expense | 48,032 |  |  | 1,435 |  |  | 2,546 |  |  | — |  |  | — |  |  | 52,013 |
Project development, preopening and writedowns | (36 | ) |  | 1,253 |  |  | 2,923 |  |  | 78 |  |  | — |  |  | 4,218 |
Impairments of assets | — |  |  | — |  |  | 1,065 |  |  | — |  |  | — |  |  | 1,065 |
Other operating items, net | 136 |  |  | 206 |  |  | — |  |  | — |  |  | — |  |  | 342 |
Intercompany expenses | 903 |  |  | 105,899 |  |  | 1,051 |  |  | — |  |  | (107,853 | ) |  | — |
Total operating costs and expenses | 90,659 |  |  | 1,399,777 |  |  | 49,697 |  |  | 78 |  |  | (107,853 | ) |  | 1,432,358 |
Equity in earnings of subsidiaries | 163,319 |  |  | (1,778 | ) |  | (78 | ) |  | — |  |  | (161,463 | ) |  | — |
Operating income (loss) | 163,708 |  |  | 236,440 |  |  | (14,207 | ) |  | (78 | ) |  | (161,463 | ) |  | 224,400 |
Other expense (income) |  |  |  |  |  |  |  |  |  |  |
Interest expense, net | 101,302 |  |  | 67,908 |  |  | 18 |  |  | — |  |  | — |  |  | 169,228 |
Loss on early extinguishments of debt | 30,452 |  |  | 1,881 |  |  | — |  |  | — |  |  | — |  |  | 32,333 |
Other, net | 415 |  |  | 2,886 |  |  | 340 |  |  | — |  |  | — |  |  | 3,641 |
Total other expense, net | 132,169 |  |  | 72,675 |  |  | 358 |  |  | — |  |  | — |  |  | 205,202 |
Income (loss) from continuing operations before income taxes | 31,539 |  |  | 163,765 |  |  | (14,565 | ) |  | (78 | ) |  | (161,463 | ) |  | 19,198 |
Income taxes benefit (provision) | 22,564 |  |  | (16,593 | ) |  | (40 | ) |  | — |  |  | — |  |  | 5,931 |
Income (loss) from continuing operations, net of tax | 54,103 |  |  | 147,172 |  |  | (14,605 | ) |  | (78 | ) |  | (161,463 | ) |  | 25,129 |
Income from discontinued operations, net of tax | — |  |  | 28,974 |  |  | — |  |  | — |  |  | — |  |  | 28,974 |
Net income (loss) | $ | 54,103 |  |  | $ | 176,146 |  |  | $ | (14,605 | ) |  | $ | (78 | ) |  | $ | (161,463 | ) |  | $ | 54,103 |
Comprehensive income (loss) | $ | 53,982 |  |  | $ | 176,025 |  |  | $ | (14,605 | ) |  | $ | (78 | ) |  | $ | (161,342 | ) |  | $ | 53,982 |

33

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Condensed Consolidating Statements of Cash Flows

| Nine Months Ended September 30, 2016
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |
Net cash from operating activities | $ | (87,625 | ) |  | $ | 309,530 |  |  | $ | 26,251 |  |  | $ | — |  |  | $ | 8,750 |  |  | $ | 256,906 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |
Capital expenditures | (29,012 | ) |  | (87,679 | ) |  | (639 | ) |  | — |  |  | — |  |  | (117,330 | )
Cash paid for acquisition, net of cash received | (372,322 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (372,322 | )
Net activity with affiliates | — |  |  | 212,165 |  |  | — |  |  | — |  |  | (212,165 | ) |  | — |
Other investing activities | — |  |  | 704 |  |  | 2,015 |  |  | — |  |  | — |  |  | 2,719 |
Net cash from investing activities | (401,334 | ) |  | 125,190 |  |  | 1,376 |  |  | — |  |  | (212,165 | ) |  | (486,933 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |
Borrowings under bank credit facility | 1,622,075 |  |  | 237,000 |  |  | — |  |  | — |  |  | — |  |  | 1,859,075 |
Payments under bank credit facility | (1,290,800 | ) |  | (899,750 | ) |  | — |  |  | — |  |  | — |  |  | (2,190,550 | )
Proceeds from issuance of senior notes | 750,000 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 750,000 |
Retirements of senior notes | (350,000 | ) |  | (350,000 | ) |  | — |  |  | — |  |  | — |  |  | (700,000 | )
Debt financing costs, net | (40,718 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (40,718 | )
Premium and consent fees paid | (15,750 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (15,750 | )
Net activity with affiliates | (185,498 | ) |  | — |  |  | (17,696 | ) |  | (221 | ) |  | 203,415 |  |  | — |
Share-based compensation activities, net | 1,353 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,353 |
Net cash from financing activities | 490,662 |  |  | (1,012,750 | ) |  | (17,696 | ) |  | (221 | ) |  | 203,415 |  |  | (336,590 | )
Cash flows from discontinued operations |  |  |  |  |  |  |  |  |  |  |
Cash flows from operating activities | — |  |  | (26,596 | ) |  | — |  |  | — |  |  | — |  |  | (26,596 | )
Cash flows from investing activities | — |  |  | 594,080 |  |  | — |  |  | — |  |  | — |  |  | 594,080 |
Cash flows from financing activities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net cash from discontinued operations | — |  |  | 567,484 |  |  | — |  |  | — |  |  | — |  |  | 567,484 |
Net change in cash and cash equivalents | 1,703 |  |  | (10,546 | ) |  | 9,931 |  |  | (221 | ) |  | — |  |  | 867 |
Cash and cash equivalents, beginning of period | 2 |  |  | 156,116 |  |  | 2,482 |  |  | 221 |  |  | — |  |  | 158,821 |
Cash and cash equivalents, end of period | $ | 1,705 |  |  | $ | 145,570 |  |  | $ | 12,413 |  |  | $ | — |  |  | $ | — |  |  | $ | 159,688 |

34

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015
______________________________________________________________________________________________________
Condensed Consolidating Statements of Cash Flows - continued

| Nine Months Ended September 30, 2015
|  |  |  |  | Non- |  | Non- |  |  |  |
|  |  |  |  | Guarantor |  | Guarantor |  |  |  |
|  |  |  |  | Subsidiaries |  | Subsidiaries |  |  |  |
|  |  | Guarantor |  | (100% |  | (Not 100% |  |  |  |
(In thousands) | Parent |  | Subsidiaries |  | Owned) |  | Owned) |  | Eliminations |  | Consolidated
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |
Net cash from operating activities | $ | (38,073 | ) |  | $ | 281,845 |  |  | $ | (16,309 | ) |  | $ | (78 | ) |  | $ | 14,064 |  |  | $ | 241,449 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |
Capital expenditures | (38,068 | ) |  | (48,832 | ) |  | (97 | ) |  | — |  |  | — |  |  | (86,997 | )
Net activity with affiliates | — |  |  | (181,674 | ) |  | — |  |  | — |  |  | 181,674 |  |  | — |
Other investing activities | 2,618 |  |  | 1,159 |  |  | — |  |  | — |  |  | — |  |  | 3,777 |
Net cash from investing activities | (35,450 | ) |  | (229,347 | ) |  | (97 | ) |  | — |  |  | 181,674 |  |  | (83,220 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |
Borrowings under bank credit facility | 627,000 |  |  | 262,100 |  |  | — |  |  | — |  |  | — |  |  | 889,100 |
Payments under bank credit facility | (949,700 | ) |  | (335,550 | ) |  | — |  |  | — |  |  | — |  |  | (1,285,250 | )
Proceeds from issuance of senior notes, net | 750,000 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 750,000 |
Debt financing costs, net | (14,001 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (14,001 | )
Retirements of senior notes | (500,000 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (500,000 | )
Premium and consent fees paid | (24,246 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (24,246 | )
Net activity with affiliates | 178,596 |  |  | — |  |  | 17,064 |  |  | 78 |  |  | (195,738 | ) |  | — |
Share-based compensation activities, net | 5,875 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,875 |
Other financing activities | — |  |  | (3 | ) |  | — |  |  | — |  |  | — |  |  | (3 | )
Net cash from financing activities | 73,524 |  |  | (73,453 | ) |  | 17,064 |  |  | 78 |  |  | (195,738 | ) |  | (178,525 | )
Cash flows from discontinued operations |  |  |  |  |  |  |  |  |  |  |
Cash flows from operating activities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Cash flows from investing activities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Cash flows from financing activities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net cash from discontinued operations | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net change in cash and cash equivalents | 1 |  |  | (20,955 | ) |  | 658 |  |  | — |  |  | — |  |  | (20,296 | )
Cash and cash equivalents, beginning of period | 2 |  |  | 143,580 |  |  | 1,540 |  |  | 219 |  |  | — |  |  | 145,341 |
Cash and cash equivalents, end of period | $ | 3 |  |  | $ | 122,625 |  |  | $ | 2,198 |  |  | $ | 219 |  |  | $ | — |  |  | $ | 125,045 |

NOTE 13. SUBSEQUENT EVENTS
We have evaluated all events or transactions that occurred after September 30, 2016. During this period, up to the filing date, we did not identify any additional subsequent events, other than the Cannery Purchase Amendment disclosed in Note 3, Acquisitions and Divestitures, the effects of which would require disclosure or adjustment to our financial position or results of operations.
35

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
Boyd Gaming Corporation (and together with its subsidiaries, the "Company," "Boyd Gaming," "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD."
We are a diversified operator of 22 wholly-owned gaming entertainment properties. Headquartered in Las Vegas, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi. We view each operating property as an operating segment. For financial reporting purposes, we aggregate our wholly-owned properties into the following three reportable segments:

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
Aliante Casino + Hotel + Spa | North 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 |
Par-A-Dice Hotel Casino | East Peoria, Illinois
Blue Chip Casino, Hotel & Spa | Michigan City, Indiana
Diamond Jo Dubuque | Dubuque, Iowa
Diamond Jo Worth | Northwood, Iowa
Kansas Star Casino | Mulvane, Kansas
Amelia Belle Casino | Amelia, Louisiana
Delta Downs Racetrack Casino & Hotel | Vinton, Louisiana
Evangeline Downs Racetrack and Casino | Opelousas, Louisiana
Sam's Town Hotel and Casino | Shreveport, Louisiana
Treasure Chest Casino | Kenner, Louisiana
IP Casino Resort Spa | Biloxi, Mississippi
Sam's Town Hotel and Gambling Hall | Tunica, Mississippi

We also own and operate a travel agency and a captive insurance company that underwrites travel-related insurance, each located in Hawaii. Financial results for these operations are included in our Downtown Las Vegas segment, as our Downtown Las Vegas properties concentrate their marketing efforts on gaming customers from Hawaii.
On May 31, 2016, we announced that we had entered into an Equity Purchase Agreement to sell our 50% equity interest in the parent company of Borgata Hotel Casino and Spa ("Borgata") to MGM Resorts International ("MGM"), and this transaction closed on August 1, 2016. We account for our investment in Borgata by applying the equity method and report its results as discontinued operations for all periods presented in this Quarterly Report on Form 10-Q.
In third quarter 2016, the Peninsula Gaming, LLC ("Peninsula") debt was refinanced, eliminating the financing structure that restricted our ability to transfer cash from Peninsula to Boyd Gaming. As a result of the elimination of this restriction, management has concluded that the properties previously comprising the Peninsula segment will be aggregated into the Midwest and South reportable segment.
Also, as of September 27, 2016, our Las Vegas Locals segment includes our wholly-owned subsidiary, Aliante Casino + Hotel + Spa ("Aliante") (see Note 3, Acquisitions and Divestitures).
36

Most of our gaming entertainment properties also include hotel, dining, retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the number and spending levels of customers at our properties.
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 with cash or by credit card.
Our industry is capital 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 associated interest costs, repurchase our debt or equity securities, pay income taxes and pay dividends.
Our Strategy
Our overriding strategy is to increase shareholder value by pursuing strategic initiatives that improve and grow our business.
Strengthening our Balance Sheet
We are committed to finding opportunities to strengthen our balance sheet through diversifying and increasing cash flow to reduce our debt.
Operating Efficiently
We are committed to operating more efficiently and endeavor to prevent unneeded expense in our business. As we continue to experience revenue growth in both our gaming and non-gaming operations, the efficiencies of our business model position us to flow a substantial portion of the revenue growth directly to the bottom line.
Evaluating Acquisition Opportunities
Our evaluations of potential transactions and acquisitions are strategic, deliberate, and disciplined. Our goal is to identify and pursue opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price, such as the recent acquisition of Aliante Casino + Hotel + Spa, and the pending acquisition of Cannery Casino and Hotel and Eastside Cannery Casino and Hotel.
Maintaining our Brand
The ability of our employees to deliver great customer service helps distinguish our Company and our brands from our competitors. Our employees are an important reason that our customers continue to choose our properties over the competition across the country.
Our Key Performance Indicators
We use several key performance measures to evaluate the operations of our properties. These key performance measures include the following:

• | Gaming revenue measures:

• | Slot handle, which means the dollar amount wagered in slot machines, and table game drop, which means the total amount of cash deposited in table game drop boxes, plus the sum of markers issued at all table games. Slot handle and table game drop are measures of volume and/or market share.

• | Slot win and table game hold, which mean the difference between customer wagers and customer winnings on slot machines and table games, respectively. Slot win and table game hold percentages represent the relationship between slot handle and table game drop to gaming wins and losses.

• | Food and beverage revenue measures: average guest check, which means the average amount spent per customer visit and is a measure of volume and product offerings; number of guests served ("food covers") is an indicator of volume; and the cost per guest served is a measure of operating margin.

• | Room revenue measures: hotel occupancy rate, which measures the utilization of our available rooms; and average daily rate ("ADR") is a price measure.

37

RESULTS OF OPERATIONS
Overview

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In millions) | 2016 |  | 2015 |  | 2016 |  | 2015
Net revenues | $ | 531.9 |  |  | $ | 546.3 |  |  | $ | 1,629.2 |  |  | $ | 1,656.8 |
Operating income | 67.9 |  |  | 69.4 |  |  | 230.7 |  |  | 224.4 |
Income from continuing operations, net of tax | 161.9 |  |  | 7.0 |  |  | 194.7 |  |  | 25.1 |
Income from discontinued operations, net of tax | 180.7 |  |  | 18.4 |  |  | 211.1 |  |  | 29.0 |
Net income | 342.6 |  |  | 25.4 |  |  | 405.8 |  |  | 54.1 |

Net Revenues
Net revenues decreased $14.4 million, or 2.6%, for the three months ended September 30, 2016, compared to the prior year period due to a $15.2 million decrease in net revenues in the Midwest and South segment, primarily at IP, Evangeline Downs and Par-A-Dice. The three states in which these casinos operate continue to struggle with soft markets and an increased gaming capacity. Partially offsetting these decreases was an increase of $0.9 million in the Las Vegas Locals segment net revenues.
Net revenues decreased $27.6 million, or 1.7%, for the nine months ended September 30, 2016, compared to the prior year period due to a $41.2 million decrease in net revenues in the Midwest and South segment, primarily due to decreases in net revenues at Par-A-Dice, IP and Evangeline Downs. The three states in which these casinos operate continue to struggle with increased gaming capacity in their markets. These decreases were partially offset by increases of $10.9 million and $2.7 million in Las Vegas Locals and Downtown Las Vegas segments, respectively.
Operating Income
The $1.5 million, or 2.2%, decrease in operating income during the three months ended September 30, 2016, compared to the corresponding period of the prior year reflects a $2.2 million increase in project development, preopening and writedowns costs over the prior year period, related primarily to costs surrounding our pending acquisitions, as well as the impact of decreased net revenues in our Midwest and South segment.
Operating income increased $6.3 million, or 2.8%, during the nine months ended September 30, 2016, compared to the corresponding period of the prior year. Operating margins in gaming, food and beverage and rooms did not change significantly. The increase is primarily a result of a decrease in gaming operating cost in the Midwest and South segment and is partially offset by a $7.3 million increase in project development, preopening and writedowns costs over the prior year period, associated with the acquisition of Aliante and the pending acquisition of Cannery Casino Hotel and Nevada Palace, LLC (the "Cannery Properties").
Income from continuing operations, net of tax
Income from continuing operations for the three months ended September 30, 2016 was $161.9 million, as compared to income from continuing operations of $7.0 million in the comparable prior year period. The three months ended September 30, 2016 included an income tax benefit of $190.4 million related to the release of a valuation allowance on our federal and unitary state income tax net operating loss carryforwards and other deferred tax assets. Partially offsetting the benefit is $40.7 million of additional loss on early extinguishment of debt compared to the prior year period due to the modification of the Boyd Gaming Bank Credit Facility, redemption of our 9.0% senior notes due 2018 and Peninsula's 8.375% senior notes due 2018, and the extinguishment of the Peninsula Bank Credit Facility. Interest expense, net of amounts capitalized, for the three months ended September 30, 2016, decreased $1.4 million compared to the corresponding period of the prior year primarily due to interest rate effects of the same debt transactions.
The $169.6 million increase in income from continuing operations during the nine months ended September 30, 2016, compared to the corresponding period of the prior year reflects an income tax benefit of $190.4 million related to the release of a valuation allowance on our federal and unitary state income tax net operating loss carryforwards and other deferred tax assets. Partially offsetting the benefit is a $10.0 million increase of loss on early extinguishment of debt.
Income from discontinued operations, net of tax
Income from discontinued operation, net of tax, reflects the results of our equity method investment in Borgata. The increase in both the three and nine months ended September 30, 2016 compared to the corresponding periods of the prior year is primarily a result of the $181.7 million after-tax gain on the sale of our equity interest in Borgata and the property tax refund received of $4.3
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million received subsequent to the sale, both of which are included in discontinued operations in the three and nine months ended September 30, 2016.
Net Income (Loss)
Net income for the three months ended September 30, 2016 was $342.6 million, compared with net income of $25.4 million for the corresponding period of the prior year. The $317.1 million change is primarily due to the $162.3 million increase of income from discontinued operations, which includes the gain on the sale of our equity interest in Borgata on August 1, 2016, and the $193.3 million increase in income tax benefit due to the release of the valuation allowance. These increases were offset by a $40.7 million increase in loss on early extinguishments and modifications of debt in the three months ended September 30, 2016 compared to the prior year period.
Net income for the nine months ended September 30, 2016 was $405.8 million, compared with net income of $54.1 million for the corresponding period of the prior year. The $351.7 million increase over the prior year period is primarily due to the sale of Boyd Gaming's equity interest in Borgata, which is classified as income from discontinued operations, as well as the $168.3 million increase in income tax benefit due to the release of the valuation allowance. These increases were offset by a $42.4 million loss on early extinguishments and modifications of debt.
Operating Revenues
We derive the majority of our gross revenues from our gaming operations, which produced approximately 75% of gross revenues for each of the three months ended September 30, 2016 and 2015, and 75% and 76% of gross revenues for the nine months ended September 30, 2016 and 2015, respectively. Food and beverage gross revenues represent our next most significant revenue source, generating approximately 13% of gross revenues for each of the three months ended September 30, 2016 and 2015 and the nine months ended September 30, 2016 and 2015. Room revenues and other revenues separately contributed less than 10% of gross revenues during these periods.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In millions) | 2016 |  | 2015 |  | 2016 |  | 2015
REVENUES |  |  |  |  |  |  |
Gaming | $ | 443.6 |  |  | $ | 457.4 |  |  | $ | 1,359.0 |  |  | $ | 1,390.7 |
Food and beverage | 74.3 |  |  | 76.7 |  |  | 227.0 |  |  | 230.9 |
Room | 43.0 |  |  | 41.6 |  |  | 128.2 |  |  | 123.3 |
Other | 29.5 |  |  | 32.4 |  |  | 90.8 |  |  | 92.8 |
Gross revenues | 590.4 |  |  | 608.1 |  |  | 1,805.0 |  |  | 1,837.7 |
Less promotional allowances | 58.5 |  |  | 61.8 |  |  | 175.8 |  |  | 180.9 |
Net revenues | $ | 531.9 |  |  | $ | 546.3 |  |  | $ | 1,629.2 |  |  | $ | 1,656.8 |
COSTS AND EXPENSES |  |  |  |  |  |  |
Gaming | $ | 217.1 |  |  | $ | 225.7 |  |  | $ | 658.4 |  |  | $ | 677.0 |
Food and beverage | 40.7 |  |  | 41.9 |  |  | 124.7 |  |  | 126.4 |
Room | 11.2 |  |  | 10.8 |  |  | 33.0 |  |  | 31.5 |
Other | 18.7 |  |  | 21.5 |  |  | 56.8 |  |  | 60.9 |
Total costs and expenses | $ | 287.7 |  |  | $ | 299.9 |  |  | $ | 872.9 |  |  | $ | 895.8 |
MARGINS |  |  |  |  |  |  |
Gaming | 51.1 | % |  | 50.7 | % |  | 51.6 | % |  | 51.3 | %
Food and beverage | 45.1 | % |  | 45.4 | % |  | 45.0 | % |  | 45.3 | %
Room | 74.0 | % |  | 74.2 | % |  | 74.2 | % |  | 74.6 | %
Other | 36.9 | % |  | 33.7 | % |  | 37.4 | % |  | 34.5 | %

Gaming
Gaming revenues are comprised primarily of the net win from our slot machine operations and table games. The $13.8 million, or 3.0%, decrease in gaming revenues during the three months ended September 30, 2016 as compared to the corresponding period of the prior year, was due to a decrease of $16.0 million in the Midwest and South segment. In the Midwest and South segment,
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the decrease in gaming revenues was concentrated at IP, Evangeline and Par-A-Dice, all three of which continue to contend with increased gaming capacity in their markets. The Midwest and South segment experienced a 4.5% decrease in slot handle and a 5.8% decrease in table game drop. The decline was partially offset by an increase in gaming revenue of $2.3 million in the Las Vegas Locals segment, attributable primarily to a 0.2 percentage point increase in both table game hold and slot hold. Gaming expenses decreased by $8.6 million, or 3.8%, reflective of the overall reduction in gaming revenues.
The $31.7 million, or 2.3%, decrease in gaming revenues during the nine months ended September 30, 2016 as compared to the corresponding period of the prior year, was due to a decrease of $43.0 million in the Midwest and South segment. In the Midwest and South segment, the decrease in gaming revenues was concentrated at IP, Evangeline and Par-A-Dice, all three of which continue to contend with increased gaming capacity in their markets. Offsetting these decreases was a 4.7% increase in Blue Chip's gaming revenue resulting from their continued increase in market share. The Midwest and South segment experienced a 4.5% decrease in slot handle and a 5.0% decrease in table game drop. These declines in gaming revenue were partially offset by increases in gaming revenue of $8.8 million and $2.5 million in the Las Vegas Locals and Downtown Las Vegas segments, respectively, attributable primarily to increased table game hold and slot win percentages. Gaming expenses decreased by $18.6 million, or 2.8%, reflective of the overall reduction in gaming revenues.
Food and Beverage
Food and beverage revenues decreased $2.5 million, or 3.2%, during the three months ended September 30, 2016, as compared to the corresponding period of the prior year. The decrease in revenues was due to decreases in food covers of 7.6% and 6.3% in the Las Vegas Locals and Midwest and South segments, respectively. The effect of these changes was partially offset by increases in average guest check of 2.5% in the Downtown Las Vegas segment. Food and beverage expenses decreased by $1.2 million and margin remained consistent as compared to last year.
Food and beverage revenues decreased $4.0 million, or 1.7%, during the nine months ended September 30, 2016, as compared to the corresponding period of the prior year. The decrease in revenues was due to a decrease in food covers of 6.8%, 2.5% and 1.9% in the Midwest and South, the Downtown Las Vegas and the Las Vegas Locals segments, respectively. The effect of these changes was partially offset by increases in average guest check of 2.7% and 1.8% in the Downtown Las Vegas and Midwest and South segments, respectively. Food and beverage expenses decreased $1.7 million and margin remained consistent as compared to last year.
Room
Room revenues increased by $1.3 million, or 3.2%, during the three months ended September 30, 2016, as compared to the corresponding period of the prior year due to increases in average daily rate of 4.9%, 2.8% and 2.2% in the Downtown Las Vegas, Las Vegas Locals and Midwest and South segments, respectively. The increase in average daily rate was offset by 3.5% decreases in hotel occupancy over the prior year period in the Midwest and South segment. Room expenses and margin remained consistent as compared to last year.
Room revenues increased by $4.9 million, or 4.0%, during the nine months ended September 30, 2016, as compared to the corresponding period of the prior year due to increases in average daily rate of 3.1%, 2.2% and 1.9% in the Las Vegas Locals, Downtown Las Vegas and Midwest and South segments, respectively. Additionally, the increase in average daily rate was offset by 2.4% decrease in hotel occupancy over the prior year period in the Midwest and South segment. Room expenses increased $1.5 million and margin remained consistent as compared to last year.
Other
Other revenues relate to patronage visits at the amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Other revenues decreased $2.8 million, or 8.6%, during the three months ended September 30, 2016, as compared to the prior year as a result of lower consumption of property amenities and decreased visitor spending.
Other revenues decreased $2.0 million, or 2.1%, during the nine months ended September 30, 2016, as compared to the prior year as a result of lower consumption of property amenities and decreased visitor spending during the year.
Revenues and Adjusted EBITDA by Reportable Segment
We determine each of our properties' profitability based upon Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), which represents earnings before interest expense, income taxes, depreciation and amortization, deferred rent, share-based compensation expense, project development, preopening and writedowns expenses, impairments of assets and other operating items, net, 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 segments before net amortization, preopening and other items. Results for Downtown Las Vegas include the results of our travel agency and captive insurance company in Hawaii. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various
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other expenses not directly related to our casino and hotel operations. Furthermore, corporate expense excludes its portion of share-based compensation expense.
EBITDA is a commonly used measure of performance in our industry that we believe, when considered with measures calculated in accordance with GAAP, provides our investors a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Management has historically adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results.
The following table presents our net revenues and Adjusted EBITDA by Reportable Segment:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In millions) | 2016 |  | 2015 |  | 2016 |  | 2015
Net revenues |  |  |  |  |  |  |
Las Vegas Locals | $ | 148.9 |  |  | $ | 148.0 |  |  | $ | 462.2 |  |  | $ | 451.4 |
Downtown Las Vegas | 56.6 |  |  | 56.7 |  |  | 174.4 |  |  | 171.7 |
Midwest and South | 326.4 |  |  | 341.6 |  |  | 992.6 |  |  | 1,033.7 |
Net revenues | $ | 531.9 |  |  | $ | 546.3 |  |  | $ | 1,629.2 |  |  | $ | 1,656.8 |
Adjusted EBITDA (1) |  |  |  |  |  |  |
Las Vegas Locals | $ | 36.2 |  |  | $ | 32.3 |  |  | $ | 123.6 |  |  | $ | 113.3 |
Downtown Las Vegas | 10.0 |  |  | 10.1 |  |  | 37.0 |  |  | 33.1 |
Midwest and South | 90.6 |  |  | 96.4 |  |  | 281.3 |  |  | 294.7 |
Total Reportable Segment Adjusted EBITDA | 136.8 |  |  | 138.8 |  |  | 441.9 |  |  | 441.1 |
Corporate expense | (14.9 | ) |  | (13.6 | ) |  | (44.4 | ) |  | (45.0 | )
Adjusted EBITDA | $ | 121.9 |  |  | $ | 125.2 |  |  | $ | 397.5 |  |  | $ | 396.1 |

(1) Refer to Note 11, Segment Information, in the notes to the condensed consolidated financial statements (unaudited) for a reconciliation of Total Reportable Segment Adjusted EBITDA to operating income, as reported in accordance with GAAP in our accompanying condensed consolidated statements of operations.
Las Vegas Locals
Net revenues increased $.9 million, or 0.6%, during the three months ended September 30, 2016, as compared to the corresponding period of the prior year. Gaming revenue increased $2.3 million resulting from a 0.2 percentage point increase in table game hold percentage and a 0.2 percentage point increase in slot hold, offset by a 4.8% decrease in slot handle. Room revenues increased $1.4 million due to average daily rate and hotel occupancy increasing 2.8% and 0.5%, respectively. These increases were offset by a $1.2 million decrease in food and beverage revenue, resulting primarily from a 7.6% decrease in food covers, and a $2.5 million decrease in other revenues.
Net revenues increased $10.9 million, or 2.4%, during the nine months ended September 30, 2016, as compared to the corresponding period of the prior year, due primarily to an $8.8 million increase in gaming revenue and a $4.7 million increase in room revenue. The gaming revenue increase resulted from a 2.2% increase in table game drop and a 0.3 percentage point increase in table game hold percentage, and the room revenue increase related to a 1.3% increase in hotel occupancy and a 3.1% increase in average daily rate. Offsetting these increases is a $2.0 million decrease in other revenue.
Adjusted EBITDA increased by 12.1% and 9.1% for the three and nine months ended September 30, 2016, respectively, over the comparable prior year period due to the flow-through effects of higher revenues and our on-going cost control efforts.
Downtown Las Vegas
Net revenues decreased 0.1%, during the three months ended September 30, 2016, as compared to the corresponding period of the prior year. Gaming revenue was consistent with the prior year, however, promotional allowances increased $0.4 million. Additionally, food and beverage revenue and room revenues had modest increases of approximately $0.3 million each related to a 2.5% increase in average guest check and a 4.9% increase in average daily rate, respectively. We continue to tailor our marketing programs in the Downtown segment to cater to our Hawaiian market. During the three month periods ended September 30, 2016 and 2015, our Hawaiian market represented approximately 47% and 49% of our occupied rooms in this segment, respectively.
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Net revenues increased $2.7 million, or 1.6%, during the nine months ended September 30, 2016, as compared to the corresponding period of the prior year, due primarily to a $2.5 million increase in gaming revenues resulting from a 0.9% increase in slot handle and a 0.4 percentage point increase in table game hold percentage. Additionally, food and beverage revenue and room revenues had modest increases of approximately $0.5 million each related to a 2.7% increase in average guest check and a 2.2% increase in average daily rate, respectively. During both the nine month periods ended September 30, 2016 and 2015, our Hawaiian market represented approximately 51% of our occupied rooms in this segment.
Adjusted EBITDA remained relatively flat for the three months ended September 30, 2016 and increased $3.8 million for the nine months ended September 30, 2016, over the comparable prior year period due to revenue gains coupled with our cost control efforts.
Midwest and South
Net revenues decreased $15.2 million, or 4.4%, during the three months ended September 30, 2016, as compared to the corresponding period of the prior year, primarily due to a gaming revenue decrease of $16.0 million, resulting from a 4.5% decrease in slot handle and a 5.8% decrease in table game drop. Food and beverage revenues decreased 3.9% from the prior year despite a 1.3% increase in average guest check due to a 6.3% decrease in food covers. Room revenues remained consistent with the prior year. The results for the segment were impacted by the short-term impact of the recent opening of a new competitor in the Biloxi market and increased gaming capacity in Illinois.
Net revenues decreased $41.2 million, or 4.0%, during the nine months ended September 30, 2016, as compared to the corresponding period of the prior year, primarily due to a gaming revenue decrease of $43.0 million, resulting from a 4.5% decrease in slot handle and a 5.0% decrease in table game drop. Food and beverage revenues decreased 4.6% from prior year despite an 1.8% increase in average guest check due to a 6.8% decrease in food covers. Room revenues remained consistent with the prior year. The results for the segment were impacted by severe flooding that affected operations in portions of Louisiana and Mississippi in the early months of the year, the short-term impact of the recent opening of a new competitor in the Biloxi market and increased gaming capacity in Illinois. Overall net revenues for the Midwest and South segment were positively impacted by increased market share achieved by both Treasure Chest and Blue Chip.
The segment reported decreases of $5.7 million and $13.3 million in Adjusted EBITDA for the three and nine months ended September 30, 2016, respectively, as compared to the corresponding prior year period due to the decrease in revenues.
Other Operating Costs and Expenses
The following costs and expenses, as presented in our condensed consolidated statements of operations, are further discussed below:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In millions) | 2016 |  | 2015 |  | 2016 |  | 2015
Selling, general and administrative | $ | 80.8 |  |  | $ | 80.0 |  |  | $ | 241.7 |  |  | $ | 242.7 |
Maintenance and utilities | 27.9 |  |  | 29.0 |  |  | 76.7 |  |  | 81.0 |
Depreciation and amortization | 47.9 |  |  | 51.3 |  |  | 143.8 |  |  | 155.3 |
Corporate expense | 15.9 |  |  | 15.0 |  |  | 49.9 |  |  | 52.0 |
Project development, preopening and writedowns | 3.7 |  |  | 1.5 |  |  | 11.5 |  |  | 4.2 |
Impairments of assets | — |  |  | — |  |  | 1.4 |  |  | 1.1 |
Other operating items, net | — |  |  | 0.2 |  |  | 0.6 |  |  | 0.3 |

Selling, General and Administrative
Selling, general and administrative expenses, as a percentage of gross revenues, were 13.7% during the three months ended September 30, 2016 and 13.1% during the three months ended September 30, 2015. The percentage of gross revenues for selling, general and administrative during the nine months ended September 30, 2016 was 13.4% and 13.2% for the nine months ended September 30, 2015. We continue to focus on disciplined and targeted marketing spend, and our ongoing cost containment efforts.
Maintenance and Utilities
Maintenance and utilities expenses, as a percentage of gross revenues, were 4.7% and 4.8% during the three months ended September 30, 2016 and 2015, respectively, and 4.2% and 4.4% during the nine months ended September 30, 2016 and 2015,
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respectively. The decrease between the periods is primarily due to cost reductions associated with the Company's energy savings initiatives.
Depreciation and Amortization
Depreciation and amortization expenses, as a percentage of gross revenues, were 8.1% and 8.4% during the three months ended September 30, 2016 and 2015, respectively, and 8.0% and 8.5% during the nine months September 30, 2016 and 2015, respectively. Depreciation and amortization expense decreased $3.4 million for the three months ended September 30, 2016 and $11.4 million for the nine months ended September 30, 2016, compared to the respective prior year periods. The overall decreases are primarily due to the decrease in intangible asset amortization for the Midwest and South segment as its customer relationships are amortized using an accelerated method over their approximate useful life of five years.
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. Corporate expense represented 2.7% and 2.5% of gross revenues during the three months ended September 30, 2016 and 2015, respectively, and 2.8% of gross revenues for both of the nine months ended September 30, 2016 and 2015.
Project Development, Preopening and Writedowns
Project development, preopening and writedowns represent: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, strategic initiatives, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred in our ongoing efforts to develop gaming activities in new jurisdictions and expenses related to other new business development activities that do not qualify as capital costs; and (iii) asset write-downs. The increase in such costs in the current year periods as compared to the prior year is primarily due to the costs incurred related to the recently announced acquisitions. Offsetting these costs for the three and nine months ended September 30, 2016, is a $6.3 million gain from the sale of non-operating assets.
Impairments of Assets
Impairments of assets for the nine months ended September 30, 2016 and 2015, included non-cash impairment charges related to non-operating assets.
Other Operating Items, net
Other operating items, net, is generally comprised of miscellaneous non-recurring operating charges, including direct and non-reimbursable costs associated with natural disasters and severe weather, including hurricane and flood expenses and subsequent recoveries of such costs, as applicable.
Other Expenses
Interest Expense, net
The following table summarizes information with respect to our interest expense on outstanding indebtedness:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In millions) | 2016 |  | 2015 |  | 2016 |  | 2015
Interest Expense, net | $ | 54.2 |  |  | $ | 56.1 |  |  | $ | 167.6 |  |  | $ | 169.2 |
Loss on Early Extinguishments and Modifications of Debt | 41.5 |  |  | 0.9 |  |  | 42.4 |  |  | 32.3 |
Average Long-Term Debt Balance (1) | 3,194.2 |  |  | 3,342.5 |  |  | 3,425.9 |  |  | 3,421.4 |
Weighted Average Interest Rates | 5.6 | % |  | 5.8 | % |  | 5.3 | % |  | 5.8 | %

(1) Average debt balance calculation does not include the related discounts or deferred finance charges.
Interest expense, net of capitalized interest and interest income, for the three months ended September 30, 2016, decreased $1.9 million, or 3.5%, over the prior year due to the redemption of the Peninsula 8.375% senior notes due February 2018, on September 2, 2016, and a reduction in average long-term debt balance of $148.4 million. The offset to the decreasing interest expense compared to the corresponding period in the prior year was due primarily to our $750 million senior notes at 6.375% due 2026, which we issued on March 28, 2016.
Interest expense, net of capitalized interest and interest income, for the nine months ended September 30, 2016, decreased $1.6 million, or 0.9%, over the prior year due to the redemption of the Peninsula 8.375% senior notes due February 2018, on September 2, 2016. The offset to the decreasing interest expense compared to the corresponding period in the prior year due primarily to $750 million of senior notes at 6.375% due 2026 which we issued on March 28, 2016. While the proceeds were partially used to pay
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down the outstanding amount under the Boyd Gaming Revolving Credit Facility, the newly issued debt increased our average long-term debt balance of $4.6 million for the nine months ended September 30, 2016 compared to the prior year period.
On September 15, 2016, Boyd Gaming Corporation refinanced its Credit Facility. The Boyd Gaming Credit Facility provides for increased commitments under the existing senior secured revolving credit facility to an amount equal to $775.0 million, a commitment under the existing senior secured Term A Loan in an amount equal to $225.0 million, and a new $1.0 billion senior secured Term B-2 Loan. (See Note 7, Long-Term Debt.)
Loss on Early Extinguishments and Modifications of Debt
The components of the loss on early extinguishments and modifications of debt, are as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In millions) | 2016 |  | 2015 |  | 2016 |  | 2015
9.00% Senior Notes premium and consent fees | $ | 15.7 |  |  | $ | — |  |  | $ | 15.8 |  |  | $ | — |
9.00% Senior Notes deferred finance charges | 6.0 |  |  | — |  |  | 6.0 |  |  | — |
8.375% Senior Notes deferred finance charges | 4.5 |  |  | — |  |  | 4.5 |  |  | — |
9.125% Senior Notes premium and consent fees | — |  |  | — |  |  | — |  |  | 23.9 |
9.125% Senior Notes deferred finance charges | — |  |  | — |  |  | — |  |  | 4.9 |
Boyd Gaming Credit Facility deferred finance charges | 6.6 |  |  | 0.5 |  |  | 6.6 |  |  | 1.6 |
Peninsula Credit Facility deferred finance charges | 8.7 |  |  | 0.4 |  |  | 9.5 |  |  | 1.9 |
Total loss on early extinguishments and modifications of debt | $ | 41.5 |  |  | $ | 0.9 |  |  | $ | 42.4 |  |  | $ | 32.3 |

Income Taxes
As part of our review in determining the need for a valuation allowance, we assess the potential release of existing valuation allowances. In performing our analysis during the third quarter of 2016, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilize a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters ended September 30, 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during the three months ended September 30, 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from these deferred tax assets would be realized. As a result, during the third quarter, we released $190.4 million of valuation allowance on our federal and unitary state income tax net operating loss carryforwards and other deferred tax assets.
The effective tax rates on income from continuing operations during the three months ended September 30, 2016 and 2015 were 683.2% and 34.5%, respectively. The effective tax rates on income from continuing operations during the nine months ended September 30, 2016 and 2015 were (849.9%) and (30.9%), respectively. Our effective tax rate is impacted by adjustments that are largely independent of our operating results before taxes. During the nine months ended September 30, 2016, the tax benefit was favorably impacted by the release of a valuation allowance on our federal and unitary state net operating loss carryforwards and other deferred tax assets. During the nine months ended September 30, 2015, the adjustments relate primarily to changes in our valuation allowance and the accrual of non-cash tax expense in connection with the tax amortization of indefinite-lived intangible assets that are not available to offset existing deferred tax assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets when determining our valuation allowance. Additionally, in the prior year, our tax benefit was favorably impacted, as a result of an effective settlement in connection with our 2005 - 2009 IRS audit, by the realization of unrecognized tax benefits and reversal of related accrued interest.
For the nine months ended September 30, 2015, we computed our benefit for income taxes by applying the actual effective tax rate, under the discrete method, to year-to-date income. The discrete method was used to calculate our income tax benefit as the annual effective tax rate was not considered a reliable estimate of year-to-date income tax benefit.
We have maintained a valuation allowance of $56.0 million against certain federal and state deferred tax assets as of September 30, 2016 due to uncertainties related to our ability to realize the tax benefits associated with these assets. In assessing the need to establish a valuation allowance, we consider, among other matters, the nature, frequency and severity of current and cumulative
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losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above.
Income from Discontinued Operations, Net of tax
Income from discontinued operations reflects the $181.7 million after-tax gain on the August 1, 2016, sale of our equity interest in Borgata, our share of the results of Borgata through the date of sale and our portion of a property tax refund received in September 2016. The Company applied the equity method of accounting to its 50% investment in Borgata.
LIQUIDITY AND CAPITAL RESOURCES
Financial Position
Due to our debt structure, prior to the retirement of the Peninsula 8.375% senior notes due 2018 on September 2, 2016, we separately managed the working capital positions of Boyd Gaming and Peninsula, including their levels of cash and indebtedness. We operate with minimal or negative levels of working capital in order to minimize borrowings and related interest costs. The cash balances and working capital deficits are as follows:

| September 30, |  | December 31,
(In millions) | 2016 |  | 2015
Cash balance |  |  |
Boyd Gaming | $ | 159.7 |  |  | $ | 129.3 |
Peninsula (1) |  |  | 29.6 |
Working capital surplus (deficit) |  |  |
Boyd Gaming | $ | (118.8 | ) |  | $ | (79.5 | )
Peninsula (1) |  |  | (17.9 | )

(1) Peninsula 8.375% senior notes due 2018 were retired on September 2, 2016. Subsequent to that date, Peninsula cash and working capital is combined with Boyd Gaming.
Our bank credit facilities generally provide all necessary funds for the 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 bank credit facility as necessary, by either borrowing or paying down debt with excess cash. We also plan the timing and the amounts of capital expenditures. We believe that the borrowing capacity under the bank credit facility, subject to restrictive covenants, and cash flows from operating activities will be sufficient to meet our projected operating and maintenance capital expenditures for at least the next twelve months. The source of funds available to us for repayment of debt or to fund development projects is derived primarily from cash flows from operations and availability under our bank credit facility, to the extent availability exists after we meet working capital needs, and subject to restrictive covenants. See "Indebtedness", below, for further detail regarding funds available through our credit facility.
The Company could also seek to secure additional working capital, repay respective current debt maturities, or fund respective development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings.
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Cash Flows Summary

| Nine Months Ended
| September 30,
(In millions) | 2016 |  | 2015
Net cash provided by operating activities | $ | 256.9 |  |  | $ | 241.4 |
Cash flows from investing activities |  |  |
Capital expenditures | (117.3 | ) |  | (87.0 | )
Cash paid for acquisition, net of cash received | (372.3 | ) |  | — |
Other investing activities | 2.7 |  |  | 3.8 |
Net cash used in investing activities | (486.9 | ) |  | (83.2 | )
Cash flows from financing activities |  |  |
Net borrowings (payments) under Boyd Gaming bank credit facility | 331.3 |  |  | (322.7 | )
Net payments under Peninsula bank credit facility | (662.8 | ) |  | (73.5 | )
Retirements of senior notes | (700.0 | ) |  | (500.0 | )
Proceeds from issuance of senior notes | 750.0 |  |  | 750.0 |
Other financing activities | (55.1 | ) |  | (32.3 | )
Net cash used in financing activities | (336.6 | ) |  | (178.5 | )
Net cash provided by discontinued operations | 567.5 |  |  | — |
Increase (decrease) in cash and cash equivalents | $ | 0.9 |  |  | $ | (20.3 | )

Cash Flows from Operating Activities
During the nine months ended September 30, 2016 and 2015, we generated net operating cash flow of $256.9 million and $241.4 million, respectively. Generally, operating cash flows increased during 2016 as compared to the prior year period due to the flow through effect of higher revenues and the timing of working capital spending.
Cash Flows from Investing Activities
Our industry is capital intensive and we use cash flows for acquisitions, facility expansions, investments in future development or business opportunities and maintenance capital expenditures.
During the nine months ended September 30, 2016 and 2015, we incurred net cash outflows for investing activities of $486.9 million and $83.2 million, respectively. The increase in outflows as compared to the prior year period is primarily due to the acquisition of Aliante, which closed on September 27, 2016. The increase in our capital spending as compared to the prior year was due to our ongoing non-gaming amenities initiative and the hotel expansion project at our Delta Downs property.
Cash Flows from Financing Activities
We rely upon our financing cash flows to provide funding for investment opportunities, repayments of obligations and ongoing operations.
The net cash outflows for financing activities in the nine months ended September 30, 2016 reflect primarily the net retirement of senior notes and the Peninsula bank credit facility during the period using the net cash proceeds from the sale of our equity interest in Borgata and cash flow from the amended Boyd Gaming Credit bank credit facility.
Cash Flows from Discontinued Operations
On May 31, 2016, we announced that we had entered into an Equity Purchase Agreement (the "Purchase Agreement") to sell our 50% equity interest in the parent company of Borgata to MGM. During the nine months ended September 30, 2016, net cash from discontinued operations activities primarily represents cash proceeds from the sale of Borgata of approximately $589 million.
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Indebtedness
The outstanding principal balances of long-term debt, before unamortized discounts and fees, and the changes in those balances are as follows:

(In millions) | September 30, 2016 |  | December 31, 2015 |  | Increase/ (Decrease)
Boyd Gaming Debt |  |  |  |  |
Bank credit facility | $ | 1,541.0 |  |  | $ | 1,209.7 |  |  | $ | 331.3 |
9.00% senior notes due 2020 | — |  |  | 350.0 |  |  | (350.0 | )
6.875% senior notes due 2023 | 750.0 |  |  | 750.0 |  |  | — |
6.375% senior notes due 2026 | 750.0 |  |  | — |  |  | 750.0 |
Other | 0.6 |  |  | — |  |  | 0.6 |
| 3,041.6 |  |  | 2,309.7 |  |  | 731.9 |
Peninsula Gaming Debt |  |  |  |  |
Bank credit facility | — |  |  | 662.8 |  |  | (662.8 | )
8.375% senior notes due 2018 | — |  |  | 350.0 |  |  | (350.0 | )
| — |  |  | 1,012.8 |  |  | (1,012.8 | )
Total long-term debt | 3,041.6 |  |  | 3,322.5 |  |  | (280.9 | )
Less current maturities | 30.3 |  |  | 29.8 |  |  | 0.5 |
Long-term debt, net | $ | 3,011.3 |  |  | $ | 3,292.7 |  |  | $ | (281.4 | )

The amount of current maturities includes certain non-extending balances scheduled to be repaid within the next twelve months under the bank credit facilities.
Boyd Gaming Debt
Credit Facility
On September 15, 2016, the Company entered into an Amendment No. 1 and Joinder Agreement (the "Amendment") among the Company, certain financial institutions, 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 modified the Third Amended and Restated Credit Agreement (the "Prior Credit Facility"), dated August 14, 2013, together referred to as the "Credit Facility" or the "Credit Agreement".
As modified by the Amendment, the Credit Facility provides for: (i) increased commitments under the existing senior secured revolving credit facility (the "Revolving Credit Facility") to an amount equal to $775.0 million, (ii) commitments under the existing senior secured term A loan (the "Term A Loan") in an amount equal to $225.0 million, and (iii) a new $1.0 billion senior secured term B-2 loan (the "Term B-2 Loan"). The maturity dates of the Revolving Credit Facility and the Term A Loan have been extended to September 15, 2021 (or earlier upon the occurrence or non-occurrence of certain events); the Term B-2 Loan matures on September 15, 2023 (or earlier upon the occurrence or non-occurrence of certain events); the maturity date of the existing senior secured term B-1 loan (the "Term B-1 Loan"), under which $274.0 million in aggregate principal is outstanding, remains August 14, 2020. The increase to the Term A Loan and the new Term B-2 Loan were fully funded on the effective date of the Amendment. Proceeds from the Credit Facility were used to refinance all outstanding obligations under the Prior Credit Facility and to fund transaction costs in connection with the Credit Facility and may be used for working capital and other general corporate purposes.
The Credit Facility includes an accordion feature which permits an increase in the Revolving Credit Facility and the issuance and increase of senior secured term loans in an amount up to (i) $550.0 million, plus (ii) certain voluntary permanent reductions of the Revolving Credit Facility and certain voluntary prepayments of the senior secured term loans, plus (iii) certain reductions in the outstanding principal amounts under the term loans or the Revolving Credit Facility, plus (iv) any additional amount if, after giving effect thereto, the First Lien Leverage Ratio (as defined in the Credit Agreement) would not exceed 4.25 to 1.00 on a pro forma basis, less (v) any Incremental Equivalent Debt (as defined in the Credit Agreement), in each case, subject to the satisfaction of certain conditions.
Pursuant to the terms of the Credit Facility (i) the loans under the Term A Loan will amortize in an annual amount equal to 5.00% of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, (ii) the loans under the Term B-2 Loan will amortize in an annual amount equal to 1.00% of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, and (iii) beginning with the fiscal year ending December 31, 2016, the Company is required
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to use a portion of its annual Excess Cash Flow, as defined in the Credit Agreement, to prepay loans outstanding under the Credit Facility.
The blended interest rate for outstanding borrowings under the Credit Facility was 3.5% at September 30, 2016 and 3.8% at December 31, 2015.
Amounts Outstanding
The principal amounts under the Credit Facility are comprised of the following:

| September 30, |  | December 31,
(In millions) | 2016 |  | 2015
Revolving Credit Facility | $ | — |  |  | $ | 240.0 |
Term A Loan | 225.0 |  |  | 183.3 |
Term B-1 Loan | 274.0 |  |  | 730.8 |
Term B-2 Loan | 1,000.0 |  |  | — |
Swing Loan | 42.0 |  |  | 55.6 |
Total outstanding principal amounts under the Credit Facility | $ | 1,541.0 |  |  | $ | 1,209.7 |

At September 30, 2016, approximately $1.5 billion was outstanding under the Credit Facility and $12.0 million was allocated to support various letters of credit, leaving remaining contractual availability of $721.0 million.
Interest and Fees
The interest rate on the outstanding balance from time to time of the Revolving Credit Facility and the Term A Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio and ranges from 1.75% to 2.75% (if using the Eurodollar rate) and from 0.75% to 1.75% (if using the base rate). A fee of a percentage per annum (which ranges from 0.25% to 0.50% determined in accordance with a specified pricing grid based on the total leverage ratio) will be payable on the unused portions of the Revolving Credit Facility.
The interest rate on the outstanding balance from time to time of the Term B-1 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a 1.00% minimum) plus 3.00%, or (ii) the base rate plus 2.00%. The interest rate on the outstanding balance from time to time of the Term B-2 Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate (subject to a 0.00% minimum) plus 3.00%, or (ii) the base rate plus 2.00%.
The "base rate" under the Credit Agreement remains 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%.
Optional and Mandatory Prepayments
Amounts outstanding under the Credit Agreement may be prepaid without premium or penalty, and the unutilized portion of the commitments may be terminated without penalty, subject to certain exceptions, including a 1.00% prepayment premium for any prepayment of the Term B-2 Loan prior to March 15, 2017 that is accompanied by a repricing of the Term B-2 Loan.
The Credit Agreement contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio, (ii) establishing a maximum permitted consolidated total leverage ratio, (iii) establishing a maximum permitted secured leverage ratio, (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 Agreement in connection with certain asset sales and issuances of certain additional secured indebtedness. In addition, it requires fixed quarterly amortization of principal and requires that the Company use a portion of its annual excess cash flow as defined in the agreement to prepay the loans.
The Company’s obligations under the Credit Agreement, 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 will grant 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 Credit Agreement.
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Senior Notes
6.375% Senior Notes due April 2026
Significant Terms
On March 28, 2016, we issued $750 million aggregate principal amount of 6.375% senior notes due April 2026 (the "6.375% Notes"). The 6.375% Notes require semi-annual interest payments on April 1 and October 1 of each year, commencing on October 1, 2016. The 6.375% Notes will mature on April 1, 2026 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. Net proceeds from the 6.375% Notes were used to pay down the outstanding amount under the Boyd Gaming Revolving Credit Facility and the balance was deposited in money market funds and classified as cash equivalents on the condensed consolidated balance sheet.
In conjunction with the issuance of the 6.375% Notes, we incurred approximately $13.0 million in debt financing costs that have been deferred and are being amortized over the term of the 6.375% Notes using the effective interest method.
The 6.375% Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the 6.375% Notes, together, the "Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the Indenture), we will be required, unless certain conditions are met, to offer to repurchase the 6.375% Notes at a price equal to 101% of the principal amount of the 6.375% Notes, plus accrued and unpaid interest and Additional Interest (as defined in the Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the 6.375% Notes.
At any time prior to April 1, 2021, we may redeem the 6.375% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to April 1, 2021, we may redeem all or a portion of the 6.375% Notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.188% in 2021 to 100% in 2024 and thereafter, plus accrued and unpaid interest and Additional Interest.
In connection with the private placement of the 6.375% Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the 6.375% Notes. We must use commercially reasonable efforts to file a registration statement and to consummate an exchange offer within 365 days after the issuance of the 6.375% Notes, subject to certain suspension and other rights set forth in the registration rights agreement. Under certain circumstances, including our determination that we cannot complete an exchange offer, we are required to file a shelf registration statement for the resale of the 6.375% Notes and to cause such shelf registration statement to be declared effective as soon as reasonably practicable (but in no event later than the 365th day following the issuance of the 6.375% Notes) after the occurrence of such circumstances. Subject to certain suspension and other rights, in the event that the registration statement is not filed or declared effective within the time periods specified in the registration rights agreement, the exchange offer is not consummated within 365 days after the issuance of the 6.375% Notes, or the registration statement is filed and declared effective but thereafter ceases to be effective or is unusable for its intended purpose for a period in excess of 30 days without being succeeded immediately by a post-effective amendment that cures such failure, the agreement provides that additional interest will accrue on the principal amount of the 6.375% Notes at a rate of 0.25% per annum during the 90-day period immediately following any of these events and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event will the penalty rate exceed 1.00% per annum, until the default is cured. There are no other alternative settlement methods and, other than the 1.00% per annum maximum penalty rate, the agreement contains no limit on the maximum potential amount of consideration that could be transferred in the event we do not meet the registration statement filing requirements. We currently intend to file a registration statement, have it declared effective and consummate any exchange offer within these time periods. Accordingly, we do not believe that payment of additional interest under the registration payment arrangement is probable and, therefore, no related liability has been recorded in the consolidated financial statements.
Peninsula Gaming Debt
Bank Credit Facility
On September 2, 2016, Peninsula repaid all of the outstanding amounts, including all principal and accrued interest amounts, under the Peninsula senior secured credit facility (the "Peninsula Credit Facility") pursuant to the Peninsula Credit Agreement. In connection with the repayment in full of the Peninsula Credit Facility (the "Repayment"), the Peninsula Credit Agreement was terminated.
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Debt Redemption
On September 2, 2016 we redeemed all of our 8.375% senior notes due February 2018 (the "8.375% Notes") at a redemption price of 100.0% plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand.
On September 6, 2016 we redeemed all of our 9.00% senior notes due July 2020 (the "9.00% Notes") at a redemption price of 104.50% plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand. (See Note 7, Long-Term Debt.)
Debt Service Requirements
Debt service requirements under our current outstanding senior notes consist of semi-annual interest payments (based upon fixed annual interest rates ranging from 6.375% to 6.875%) and principal repayments of our 6.875% senior notes due May 21, 2023, and our 6.375% senior notes due April 1, 2026.
Covenant Compliance
As of September 30, 2016, we believe that we were in compliance with the financial and other covenants of our debt instruments.
The indentures governing the senior notes contain provisions that allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, the fixed charge coverage ratio (as defined in the respective indentures, essentially a ratio of our consolidated EBITDA to fixed charges, including interest) for the trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Should this provision prohibit the incurrence of additional debt, we may still borrow under our existing credit facility. At September 30, 2016, the available borrowing capacity under our credit facility was $721.0 million.
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 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 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 nine months ended September 30, 2016 and 2015, we did not repurchase any shares of our common stock. 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
We anticipate funding our capital requirements using cash on hand, cash flows from operations and availability under our Revolving 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 specific matters discussed herein, including our commitments and contingencies, may also affect our liquidity.
Commitments
Capital Spending and Development
Our estimated total capital expenditures for 2016, excluding the acquisition of Aliante and the pending acquisition discussed below, are expected to be approximately $225 million, primarily comprised of projects to reposition non-gaming amenities, the hotel expansion project at our Delta Downs property, and various maintenance capital expenditures across our properties. We intend to fund such capital expenditures through our credit facility and operating cash flows.
In addition to the capital spending discussed above, we also continue to pursue other potential development projects that may require us to invest significant amounts of capital. We continue to work with Wilton Rancheria, a federally-recognized tribe located about 30 miles southeast of Sacramento, California, to develop and manage a gaming entertainment complex.
Pending Acquisition
On April 25, 2016, we announced that we had entered into a definitive agreement (the "Cannery Purchase Agreement") to acquire The Cannery Hotel and Casino, LLC ("Cannery"), the owner and operator of Cannery Casino Hotel, located in North Las Vegas, and Nevada Palace, LLC ("Eastside"), the owner and operator of Eastside Cannery Casino and Hotel, located in the eastern part of the Las Vegas Valley, comprising the Las Vegas assets of Cannery Casino Resorts, LLC ("CCR"), for total cash consideration
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of $230 million, subject to adjustment based on the working capital, including cash and less indebtedness of the acquired assets and less any transaction expenses (the "Cannery Purchase").
The completion of the Cannery Purchase is subject to customary conditions and the receipt of all required regulatory approvals, including, among others, approval by the Nevada Gaming Commission and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Subject to the satisfaction or waiver of the respective conditions in the Cannery Purchase Agreement, we currently expect the transaction to close by the end of 2016. The acquisition will be funded with cash on hand and available revolver capacity under our Bank Credit Facility.
Divestiture of Borgata
Prior to the sale of our equity interest, which closed on August 1, 2016, the Company and MGM each held a 50% interest in Marina District Development Holding Company, LLC ("MDDHC"), which owns all the equity interests in Borgata. Until the closing of the sale, we were the managing member of MDDHC, and we were responsible for the day-to-day operations of Borgata.
Pursuant to the Purchase Agreement, on August 1, 2016, MGM acquired from Boyd Gaming 49% of its 50% membership interest in MDDHC and, immediately thereafter, MDDHC redeemed Boyd Gaming’s remaining 1% membership interest in MDDHC (collectively, the "Transaction"). Following the Transaction, MDDHC became a wholly-owned subsidiary of MGM.
In consideration for the Transaction, MGM paid Boyd Gaming $900 million. The initial net cash proceeds were approximately $589 million, net of certain expenses and adjustments on the closing date, including outstanding indebtedness, cash and working capital. These initial proceeds do not include our 50% share of any future property tax settlement benefits, from the time period during which we held a 50% ownership in MDDHC, to which Boyd Gaming retains the right to receive upon payment. Borgata estimates that it is entitled to property tax refunds totaling between $140 million and $160 million, including amounts due under court decisions rendered in its favor and estimates for open tax appeals.
The after-tax gain on the sale of Borgata was $181.7 million and is included in discontinued operations in the three and nine months ended September 30, 2016.
Contingencies
Legal Matters
We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.
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:

• | 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 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.
Off Balance Sheet Arrangements
There have been no material changes to our off balance sheet arrangements as defined in Item 303(a)(4)(ii) and described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 25, 2016.
Critical Accounting Policies
There have been no material changes to our critical accounting policies described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the period ended December 31, 2015, as filed with the SEC on February 25, 2016.
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Recently Issued Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, see Note 2, Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements, in the notes to the condensed consolidated financial statements (unaudited).
Important Information Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q 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," "could," "would," "estimate," "pursue," "target," "project," "intend," "plan," "seek," "should," "assume," and "continue," or the negative thereof or comparable terminology. 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 risk that our acquisitions and other expansion opportunities divert management’s attention or incur substantial costs, or that we are otherwise unable to develop, profitably manage or successfully integrate the businesses we acquire.

• | The risk that we fail to receive all required governmental approvals, including clearance from the Federal Trade Commission ("FTC") and approval of the Nevada Gaming Commission, regarding our acquisition of the Cannery Properties.

• | 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.

• | 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 new gaming licenses or jurisdictions become available (or offer different gaming regulations or taxes) that results in increased competition to us.

• | The risk that negative industry or economic trends, 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 risk 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.

• | The risk that we may be unable to refinance our respective outstanding indebtedness as it comes due, or that if we do refinance, the terms are not favorable to us.

• | 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 and imposition of smoking bans, 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 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 recent economic recession, war, terrorist or similar activity or disasters in, at, or around our properties.

• | The risk that we fail to adapt our business and amenities to changing customer preferences.

• | 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.

• | The effect of the expansion of legalized gaming in the regions in which we operate.

• | The risk of failing to maintain the integrity of our information technology infrastructure and our business and customer data.

• | Our estimated effective income tax rates, estimated tax benefits, and merits of our tax positions.

• | Risks relating to our realization and estimates of our 50% share of any future property tax settlement benefits from Borgata.

• | Our ability to utilize our net operating loss carryforwards and certain other tax attributes.

• | The risks relating to owning our equity, including price and volume fluctuations of the stock market that may harm the market price of our common stock and the potential of certain of our stockholders owning large interest in our capital stock to significantly influence our affairs.

• | Other statements regarding our future operations, financial condition and prospects, and business strategies.

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Additional factors that could cause actual results to differ are discussed in Part I. Item 1A. Risk Factors of our Annual Report on Form 10-K for the period ended December 31, 2015, 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.
Item 3. 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. We do not hold any market risk sensitive instruments for trading purposes. 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 our and Peninsula's bank credit facilities. We do not currently utilize derivative financial instruments for trading or speculative purposes.
As of September 30, 2016, our long-term variable-rate borrowings represented approximately 50.7% of total long-term debt. Based on September 30, 2016 debt levels, a 100 basis point change in the Eurodollar rate or the base rate would cause our annual interest costs to change by approximately $15.4 million.
See also "Liquidity and Capital Resources" above.
Item 4. Controls and Procedures
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.
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) 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.
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PART II. Other Information
Item 1. Legal Proceedings
We are parties to various legal proceedings arising in the ordinary course of business. We believe that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.
Item 1A. Risk Factors
Set forth below are certain risk factors related to our business that include material changes to, or discuss risks in addition to, the risks previously disclosed in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015.
We encourage investors to review the risks and uncertainties relating to our business disclosed in that Annual Report on Form 10-K, as well as those contained in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Important Information Regarding Forward-Looking Statements.
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, and senior notes, could decline significantly, and investors could lose all or part of their investment.
This report is qualified in its entirety by these risk factors.
Risks Related to our Business
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, on April 25, 2016 we announced that we had entered into a definitive agreement to acquire the Cannery Casino Hotel and Eastside Cannery Hotel (the "Cannery Properties" and such pending acquisition, the "Cannery Purchase"), and on September 27, 2016 we acquired Aliante (the acquisition of Aliante, together with the Cannery Purchase, the "Acquisitions"). The Acquisitions are discussed in detail in Note 3 to the financial statements, Acquisitions and Divestitures.
In the future, 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, including as a result of the 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 new projects that we pursue or that gaming will be approved in jurisdictions where it is not currently approved.
We may face integration difficulties and may be unable to integrate Aliante Casino + Hotel + Spa ("Aliante") and the Cannery Properties into Boyd Gaming's business successfully or realize the anticipated benefits of the Acquisitions. The acquisition of Aliante on September 27, 2016, and consummation of the pending Cannery Purchase will require the successful integration of three additional properties into Boyd Gaming’s operating structure in order to realize the anticipated benefits of the Acquisitions. We will be required to devote significant management attention and resources to ensure that such integration is successfully completed. Potential difficulties we may encounter as part of the integration process include the following:

• | the inability to successfully assume management of the new properties in a manner that permits the us to achieve the full revenue and other benefits anticipated to result from the Acquisitions;

• | complexities associated with managing the new properties, 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 properties 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 Acquisitions.

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

• | diversion of the attention of Boyd Gaming’s management; and

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• | the disruption of, or the loss of momentum in, each property’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 Acquisitions, or could reduce our earnings or otherwise adversely affect our business and financial results.
Our ability to consummate the Cannery Purchase is contingent upon the receipt of governmental approvals and satisfaction of certain closing conditions.
The consummation of the Cannery Purchase is subject to customary conditions and the receipt of all required regulatory approvals, including, among others, approval by the Nevada Gaming Commission and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR"), as amended. We have received a request from the FTC for additional information regarding our acquisition of the Cannery Properties and the FTC’s review is ongoing with respect to that acquisition. Further, the review of the Cannery Purchase by the Nevada Gaming Control Board is currently ongoing, and we have not yet received approval for from the Nevada Gaming Commission. If we fail to receive all such required regulatory approvals, or otherwise fail to satisfy a required closing condition, we will be unable to consummate the Cannery Purchase and our business will be negatively affected. Such effects could include, but are not limited to, the failure to recognize the anticipated benefits of the Cannery Purchase, the loss of management’s time and the expense expended with respect to investigating, entering into, and attempting to consummate such acquisition, as well as other related costs to Boyd Gaming’s business.
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Item 6. | Exhibits

Exhibit Number |  | Document of Exhibit |  | Method of Filing
2.1 |  | Agreement and Plan of Merger entered into as of April 21, 2016, by and among Boyd Gaming Corporation, Boyd TCII Acquisition, LLC, and ALST Casino Holdco, LLC. † |  | Incorporated by reference to Exhibit 2.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.
2.2 |  | Membership Interest Purchase Agreement entered into as of April 25, 2016, by and among Boyd Gaming Corporation, The Cannery Hotel and Casino, LLC, Nevada Palace, LLC, and Cannery Casino Resorts, LLC. † |  | Incorporated by reference to Exhibit 2.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.
2.3 |  | Equity Purchase Agreement entered into as of May 31, 2016, by and among MGM Resorts International, Boyd Atlantic City, Inc., and Boyd Gaming Corporation. † |  | Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the SEC on June 2, 2016.
2.4 |  | First amendment to Equity Purchase Agreement entered into as of July 19, 2016, by and among MGM Resorts International, Boyd Atlantic City, Inc., and Boyd Gaming Corporation. |  | Incorporated by reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K filed with the SEC on August 5, 2016.
2.5 |  | First Amendment to Agreement and Plan of Merger, dated as of September 26, 2016, by and among Boyd Gaming Corporation, Boyd TCII Acquisition, LLC, and ALST Casino Holdco, LLC. |  | Incorporated by reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K filed with the SEC on September 27, 2016.
3.1 |  | Amended and Restated By-Laws of Boyd Gaming Corporation, effective October 20, 2016. |  | Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed with the SEC on October 26, 2016.
10.1 |  | Amendment No. 1 and Joinder Agreement, dated as of September 15, 2016, among the Company, certain financial institutions, Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as swing line lender. |  | Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on September 19, 2016.
10.2 |  | First Amendment to Membership Interest Purchase Agreement, dated October 28, 2016, by and among Boyd Gaming Corporation, Cannery Casino Resorts, LLC, the Cannery Hotel and Casino, LLC, and Nevada Palace, LLC. |  | Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on November 3, 2016.
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
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
101 |  | The following materials from Boyd Gaming Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015, (iii) Condensed Consolidated Statements of Changes in Stockholders' Equity for the nine months ended September 30, 2016 and 2015, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015, and (vi) Notes to Condensed Consolidated Financial Statements. |  | Filed electronically herewith

† Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.
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SIGNATURES
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 November 8, 2016.

|  | BOYD GAMING CORPORATION
| By: | /s/ Anthony D. McDuffie
|  | Anthony D. McDuffie
|  | Vice President and Chief Accounting Officer

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