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Acquisitions and Divestitures | 9 Months Ended
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Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Deconsolidation of Borgata | 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. 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 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. 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 |

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