Edgar Filing: BOYD GAMING CORP

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Accelerated filer

Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company

BYD 10Q 6.30.11

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 June 30, 2011



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

For the transition period from to

Commission file number: 1-12882

____________________________________________________

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________________________



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

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

(Address of principal executive offices) (Zip Code)

(702) 792-7200

(Registrant’s telephone number, including area code)

____________________________________________________

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

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

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

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

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



	Class		Outstanding as of July 29, 2011
	Common stock, $0.01 par value		86,288,485

Table of Contents

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2011

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010	4

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010	5

	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2011 and 2010	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010	7

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	59

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	90

Item 4.	Controls and Procedures	90

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	91

Item 1A.	Risk Factors	91

Item 6.	Exhibits	107

Signature Page		108

Table of Contents

PART I. Financial Information

Item 1. Financial Statements

The accompanying unaudited condensed consolidated financial statements of Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” “we” or “us”) have been prepared in accordance with the instructions to Form 10-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 (“GAAP”).

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.

When we filed our Annual Report on Form 10-K for the year ended December 31, 2010 with the Securities and Exchange Commission ("SEC") on March 15, 2011, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 with the SEC on August 5, 2010 (the “Provisional Form 10-K” or “Provisional Form 10-Q”, respectively, or collectively, the “Provisional Forms”), the initial acquisition method accounting for the effective change in control of Borgata Hotel Casino and Spa ("Borgata") was incomplete. The application of acquisition method accounting, required in accordance with the authoritative accounting guidance for business combinations, initially had the following effects on our unaudited condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the provisional fair value of the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the provisional fair value of the noncontrolling interest held in trust as a separate component of our stockholders' equity.

Since the filing of the Provisional Forms, we have made adjustments to the provisional fair value amounts recognized at the date of effective change in control, or March 24, 2010, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. These adjustments, referred to herein as “measurement period adjustments” materially shifted the value of certain tangible and intangible assets. We have applied the measurement period adjustments retrospectively to the condensed consolidated balance sheet reported as of December 31, 2010, as previously reported in the Provisional Form 10-K; however, the impact on the accompanying condensed consolidated statement of operations for the three and six months ended June 30, 2010, as retrospectively adjusted to the statement as reported on the Provisional Form 10-Q was not material, and was therefore not adjusted for any measurement period adjustments.

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, 2010.

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share data)



	June 30, 2011		December 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	175,780	$	145,623
Restricted cash	18,860		19,494
Accounts receivable, net	46,036		47,942
Inventories	14,628		16,029
Prepaid expenses and other current assets	40,197		37,153
Income taxes receivable	—		5,249
Deferred income taxes	9,634		8,149
Total current assets	305,135		279,639
Property and equipment, net	3,315,592		3,383,371
Assets held for development	1,119,938		1,119,403
Debt financing costs, net	31,927		34,993
Restricted investments	47,999		48,168
Other assets, net	75,046		70,425
Intangible assets, net	527,322		539,714
Goodwill, net	213,576		213,576
Total assets	$	5,636,535	$	5,689,289
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	356,711	$	25,690
Non-recourse obligations of variable interest entity	248,128		243,059
Accounts payable	44,955		57,183
Income taxes payable	340		6,504
Accrued liabilities	284,280		278,469
Total current liabilities	934,414		610,905
Long-term debt, net of current maturities	2,823,049		3,193,065
Deferred income taxes	362,899		362,174
Other long-term tax liabilities	47,194		44,813
Other liabilities	73,770		83,589
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.01 par value, 5,000,000 shares authorized	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized; 86,284,984 and 86,244,978 shares outstanding	863		862
Additional paid-in capital	640,661		635,028
Retained earnings	554,437		560,909
Accumulated other comprehensive loss, net	—		(7,594		)
Total Boyd Gaming Corporation stockholders’ equity	1,195,961		1,189,205
Noncontrolling interest	199,248		205,538
Total stockholders’ equity	1,395,209		1,394,743
Total liabilities and stockholders’ equity	$	5,636,535	$	5,689,289

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

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
REVENUES
Operating revenues:
Gaming	$	486,557		$	490,132		$	968,492		$	840,537
Food and beverage	94,585			94,020			186,662			154,002
Room	60,459			58,671			117,050			90,105
Other	33,276			33,813			66,307			57,635
Gross revenues	674,877			676,636			1,338,511			1,142,279
Less promotional allowances	100,474			98,190			199,162			148,698
Net revenues	574,403			578,446			1,139,349			993,581
COST AND EXPENSES
Operating costs and expenses:
Gaming	223,173			229,755			449,782			397,860
Food and beverage	50,080			49,149			97,648			81,791
Room	13,514			13,056			26,335			23,106
Other	27,335			27,006			53,574			46,244
Selling, general and administrative	96,783			99,666			192,571			169,944
Maintenance and utilities	36,773			37,970			74,188			62,109
Depreciation and amortization	48,488			55,408			99,072			95,454
Corporate expense	12,264			13,526			25,544			25,615
Preopening expenses	1,741			1,243			3,572			2,306
Write-downs and other items, net	2,262			1,991			6,969			3,592
Total operating costs and expenses	512,413			528,770			1,029,255			908,021
Operating income from Borgata	—			—			—			8,146
Operating income	61,990			49,676			110,094			93,706
Other expense (income):
Interest income	(20		)	—			(25		)	(4		)
Interest expense	66,694			34,650			123,985			63,657
Fair value adjustment of derivative instruments	48			—			265			—
Loss (gain) on early retirements of debt	—			(1,912		)	20			(3,949		)
Other non-operating expenses from Borgata, net	—			—			—			3,133
Total other expense, net	66,722			32,738			124,245			62,837
Income (loss) before income taxes	(4,732		)	16,938			(14,151		)	30,869
Income taxes	(911		)	(4,912		)	2,197			(9,161		)
Net income (loss)	(5,643		)	12,026			(11,954		)	21,708
Net (income) loss attributable to noncontrolling interest	2,692			(8,644		)	5,482			(9,891		)
Net income (loss) attributable to Boyd Gaming Corporation	$	(2,951	)	$	3,382		$	(6,472	)	$	11,817
Basic net income (loss) per common share:	$	(0.03	)	$	0.04		$	(0.07	)	$	0.14
Weighted average basic shares outstanding	87,204			86,511			87,181			86,471
Diluted net income (loss) per common share:	$	(0.03	)	$	0.04		$	(0.07	)	$	0.14
Weighted average diluted shares outstanding	87,204			86,942			87,181			86,743

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

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Six Months Ended June 30, 2011

(Unaudited and in thousands)



				Boyd Gaming Corporation Stockholders’ Equity
													Accumulated
	Other						Additional						Other						Total
	Comprehensive			Common Stock			Paid-in			Retained			Comprehensive			Noncontrolling			Stockholders'
	Income (loss)			Shares	Amount		Capital			Earnings			Loss, Net			Interest			Equity
Balances, January 1, 2011				86,244,978	$	862	$	635,028		$	560,909		$	(7,594	)	$	205,538		$	1,394,743
Net loss	$	(6,472	)	—	—		—			(6,472		)	—			—			(6,472		)
Derivative instruments fair value adjustment, net of taxes of $4,230	7,594			—	—		—			—			7,594			—			7,594
Comprehensive income	1,122
Comprehensive loss attributable to noncontrolling interest	(808		)	—	—		—			—			—			(808		)	(808		)
Comprehensive income attributable to Boyd Gaming Corporation	$	314		—	—		—			—			—			—			—
Stock options exercised				40,006	1		238			—			—			—			239
Tax effect from share-based compensation arrangements				—	—		(558		)	—			—			—			(558		)
Share-based compensation costs				—	—		5,953			—			—			—			5,953
Change in noncontrolling interest in Borgata and LVE				—	—		—			—			—			(5,482		)	(5,482		)
Balances, June 30, 2011				86,284,984	$	863	$	640,661		$	554,437		$	—		$	199,248		$	1,395,209

Six Months Ended June 30, 2010

(Unaudited and in thousands)



			Boyd Gaming Corporation Stockholders’ Equity
											Accumulated
	Other					Additional					Other					Total
	Comprehensive		Common Stock			Paid-in			Retained		Comprehensive			Noncontrolling		Stockholders'
	Income (loss)		Shares	Amount		Capital			Earnings		Loss, Net			Interest		Equity
Balances, January 1, 2010			86,130,454	$	861	$	623,035		$	550,599	$	(18,126	)	$	—	$	1,156,369
Net income	$	11,817	—	—		—			11,817		—			—		11,817
Derivative instruments fair value adjustment, net of taxes of $2,408	4,410		—	—		—			—		4,410			—		4,410
Comprehensive income attributable to Boyd Gaming Corporation	$	16,227	—	—		—			—		—			—		—
Stock options exercised			96,187	1		605			—		—			—		606
Tax effect from share-based compensation arrangements			—	—		(21		)	—		—			—		(21		)
Share-based compensation costs			—	—		5,728			—		—			—		5,728
Change in noncontrolling interest in Borgata			—	—		—			—		—			331,379		331,379
Balances, June 30, 2010			86,226,641	$	862	$	629,347		$	562,416	$	(13,716	)	$	331,379	$	1,510,288

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

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)



	Six Months Ended
	June 30,
	2011			2010
Cash Flows from Operating Activities
Net income (loss)	$	(11,954	)	$	21,708
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	99,072			95,454
Amortization of debt financing costs	4,304			2,917
Amortization of discounts on senior secured notes	1,626			—
Share-based compensation expense	5,953			5,728
Deferred income taxes	(4,991		)	4,503
Operating and non-operating income from Borgata	—			(5,013		)
Distributions of earnings received from Borgata	—			1,910
Noncash asset write-downs	6,444			—
Loss (gain) on early retirements of debt	20			(3,949		)
Other operating activities	1,556			1,135
Changes in operating assets and liabilities:
Restricted cash	634			554
Accounts receivable, net	(48		)	2,628
Inventories	1,402			(598		)
Prepaid expenses and other current assets	(2,920		)	(2,004		)
Income taxes receivable	(1,023		)	12,102
Other long-term tax assets	647			—
Other assets, net	(1,754		)	870
Accounts payable and accrued liabilities	(2,263		)	9,622
Income taxes payable	123			—
Other long-term tax liabilities	2,382			1,159
Other liabilities	(1,642		)	1,031
Net cash provided by operating activities	97,568			149,757
Cash Flows from Investing Activities
Capital expenditures	(30,874		)	(47,481		)
Net cash effect upon change in controlling interest of Borgata	—			26,025
Decrease in restricted investments	168			—
Other investing activities	55			(164		)
Net cash used in investing activities	(30,651		)	(21,620		)
Cash Flows from Financing Activities
Payments on retirements of long-term debt	—			(28,861		)
Borrowings under bank credit facility	35,920			374,800
Payments under bank credit facility	(35,920		)	(399,300		)
Borrowings under Borgata bank credit facility	365,700			190,983
Payments under Borgata bank credit facility	(406,600		)	(196,400		)
Debt financing costs, net	(828		)	—
Payments under note payable	—			(46,875		)
Proceeds from variable interest entity's issuance of debt	5,250			—
Payments on loans to variable interest entity's members	(181		)	—
Noncontrolling interest distributions by Borgata	—			(15,602		)
Other financing activities	(101		)	89
Net cash used in financing activities	(36,760		)	(121,166		)
Increase in cash and cash equivalents	30,157			6,971
Cash and cash equivalents, beginning of period	145,623			93,202
Cash and cash equivalents, end of period	$	175,780		$	100,173

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited and in thousands)



	Six Months Ended
	June 30,
	2011		2010
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	128,400	$	69,109
Cash paid (received) for income taxes, net	1,221		(9,761		)
Supplemental Schedule of Noncash Investing and Financing Activities
Payables incurred for capital expenditures	$	4,087	$	6,965
Fair value adjustment on derivative instruments	11,931		7,884
Assets and Liabilities Recorded at Fair Value (net of Cash Received) Due to Change in Controlling Interest of Borgata
Accounts receivable, net	$	—	$	29,099
Inventories	—		4,118
Prepaid expenses and other current assets	—		9,201
Deferred income taxes	—		1,290
Property and equipment, net	—		1,293,792
Intangibles	—		14,000
Indefinite lived intangibles	—		65,000
Other assets, net	—		36,641
Fair value of assets	$	—	$	1,453,141
Current maturities of long-term debt	$	—	$	632,289
Accounts payable	—		8,729
Income taxes payable	—		7,579
Accrued liabilities	—		66,854
Other long-term liabilities	—		40,204
Fair value of liabilities	$	—	$	755,655

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

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Boyd Gaming Corporation (and together with its subsidiaries, the “Company,” “we” or “us”) was incorporated in the state of Nevada in 1988 and has been operating since 1973. The Company's common stock is traded on the New York Stock Exchange under the symbol “BYD”.

We are a diversified operator of 15 wholly-owned gaming entertainment properties and one controlling interest in a limited liability company. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana and New Jersey, which we aggregate in order to present four reportable segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest and South; and (iv) Atlantic City.

We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility with approximately 47 acres of related land located in Dania Beach, Florida. On April 29, 2011, we and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) for the sale of certain assets and liabilities of the Dania Jai-Alai Business (as defined below).

The closing of the transactions contemplated by the Agreement is subject to certain conditions, including without limitation, (i) the receipt of all consents, approvals or authorizations required to permit us to transfer to the Buyer, and the Buyer to acquire from us, certain jai alai permits required to operate jai alai at the Dania facility; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the closing of the transaction; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (v) other customary closing conditions. In addition to other termination rights and events set forth in the Agreement, the Buyer has the right to terminate the Agreement at any time prior to the closing date based upon the Buyer's due diligence of the Assets and Liabilities. The closing must occur by September 26, 2011 (the “Outside Date”); provided that the Buyer may extend the Outside Date under certain limited circumstances until November 28, 2011 with payment of $2.0 million to us, $1.0 million of which shall be applied to the Purchase Price. We currently anticipate that the closing will occur in the third quarter of 2011; however, there can be no assurance that this transaction will close as scheduled, or at all.

We also own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.

Additionally, we own 85 acres of land on the Las Vegas Strip, where our multibillion dollar Echelon development project (“Echelon”) is located. On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of Echelon. At such time, however, we did not anticipate the severity or the long-term effects of the current economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas geographical area; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction of Echelon for three to five years, as previously disclosed. We also do not believe that financing for a development project like Echelon is currently available.

Basis of Presentation

Interim Condensed Consolidated Financial Statements

As permitted by the rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information reliable. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

ended December 31, 2010.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2011 and December 31, 2010, and the results of our operations for the three and six months ended June 30, 2011 and 2010, and the results of our cash flows for the six months ended June 30, 2011 and 2010. Our operating results for the three and six months ended June 30, 2011 and 2010, and our cash flows for the six months ended June 30, 2011 and 2010, are not necessarily indicative of the results that would be achieved for the full year or future periods.

Effective Control of Borgata

On March 24, 2010, as a result of the amendment to our operating agreement with MGM Resorts International (“MGM”) (our original 50% partner in Borgata), which provided, among other things, for the termination of MGM's participating rights in the operations of Borgata, we effectively obtained control of Borgata. The amendment to the operating agreement was related to MGM's divestiture of its interest pursuant to a regulatory settlement, as discussed further in Note 2, Consolidation of Certain Interests. This resulting change in control required acquisition method accounting in accordance with the authoritative accounting guidance for business combinations. As a result, we measured our previously held equity interest at a provisional fair value as of March 24, 2010, the date we effectively obtained control.

The financial position of Borgata is presented in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 and 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011 and 2010; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010.

Consolidation of Variable Interest Entity

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

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

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

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

New consolidation guidance regarding the variable interest model became effective on January 1, 2010. Under this new qualitative model, the primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the variable interest entity that most significantly impacts the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Upon adoption, this guidance required us to consolidate LVE for financial statement purposes, as we determined that we are presently the primary beneficiary of the executory contract, the ESA, giving rise to the variable interest.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and its subsidiaries.

In addition, as discussed above, the financial position of Borgata is consolidated in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; its results of operations for the period from April 1 through June 30, 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2010; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010. At June 30, 2011 and December 31, 2010, approximately $1.41 billion and $1.45 billion, respectively, of our consolidated total assets related to Borgata.

Additionally, the financial position of LVE is consolidated in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010, and its results of operations for the three and six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows during such periods. At June 30, 2011, approximately $249.6 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $195.9 million, are pledged as security on LVE's outstanding construction loan advances, and an additional $48.0 million of such assets are held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing. At December 31, 2010, approximately $249.7 million of our consolidated total assets related to LVE, however, certain of these assets, approximating $196.4 million, were pledged as security on LVE's outstanding construction loan advances, and an additional $48.2 million of such assets were held in restricted escrow funds in accordance with the underlying terms of LVE's tax-exempt bond financing.

All material intercompany accounts and transactions have been eliminated in consolidation.

Investments in unconsolidated affiliates, which are less than 50% owned and do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. See Note 2, Consolidation of Certain Interests.

Property and Equipment, Net

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, over the shorter of the asset's useful life or term of the lease.

The estimated useful lives of our major components of property and equipment are:



Building and improvements	10 through 40 years
Riverboats and barges	10 through 40 years
Furniture and equipment	3 through 10 years

Gains or losses on disposals of assets are recognized as incurred, using the specific identification method. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

Assets Held for Development

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

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(Unaudited)

Debt Financing Costs

Debt financing costs, which include legal, and other direct costs related to the issuance of our outstanding debt, are deferred and amortized to interest expense over the contractual term of the underlying long-term debt using the effective interest method. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt financing costs.

Restricted Investments

In accordance with the terms of the tax-exempt loan agreements, which are the obligations of LVE, unused proceeds are required to be held in escrow pending approval of construction expenditures. These investments are held in an interest-bearing account.

Intangible Assets

Intangible assets include customer relationships, favorable lease rates, gaming license rights and trademarks.

Amortizing intangible assets: Customer relationships represent the value of repeat business associated with our customer loyalty programs. These intangible assets are being amortized on an accelerated method over their approximate useful life. Favorable lease rates represent the amount by which acquired lease rental rates are favorable to market terms. These favorable lease values are amortized over the remaining lease term, primarily on leasehold land interests, ranging in remaining duration from 41 to 52 years.

Indefinite lived intangible assets: Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, performed in the second quarter of each year, and between annual test dates in certain circumstances. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method.

Long-Term Debt, Net

Long-term debt is reported at amortized cost. The discount on the senior secured notes and the transaction costs paid to the initial purchasers upon issuance of the senior and senior secured notes are recorded as an adjustment to the face amount of our outstanding debt. This resulting difference between the net proceeds upon issuance of the senior and senior secured notes and the face amount of the senior and senior secured notes is accreted to interest expense using the effective interest method.

Noncontrolling Interest

Noncontrolling interest is the portion of the ownership in Borgata not directly attributable to Boyd, as well as the ownership of LVE, none of which is attributable to Boyd, and is reported as a separate component of our stockholders' equity in our condensed consolidated financial statements. Our consolidated net income is reported at amounts that include the amounts attributable to both us and the noncontrolling interest. At June 30, 2011 and December 31, 2010, there was a noncontrolling interest of $214.7 million and $219.3 million, respectively, associated with the portion of ownership in Borgata that is not attributable to the stockholders of Boyd Gaming Corporation. As discussed above, we effectively obtained control of Borgata on March 24, 2010 and began consolidating its financial statements at that date. At June 30, 2011 and December 31, 2010, there was a noncontrolling interest loss of $15.5 million and $13.7 million, respectively, associated with the ownership in LVE that is not attributable to the stockholders of Boyd Gaming Corporation.

Revenue Recognition

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

Room revenue recognition criteria are met at the time of occupancy.

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

Promotional Allowances

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(Unaudited)

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 promotional allowances. Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms and food and beverages) earned in our slot bonus point program. We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time, principally for cash, and to a lesser extent for goods or services, depending upon the property. We record the estimated retail value of these goods and services as revenue and then deduct them as promotional allowances

The amounts included in promotional allowances for the three and six months ended June 30, 2011 and 2010 are as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	30,718	$	31,973	$	60,822	$	46,612
Food and beverage	41,070		42,801		83,564		72,714
Other	28,686		23,416		54,776		29,372
Total promotional allowances	$	100,474	$	98,190	$	199,162	$	148,698

The estimated costs of providing such promotional allowances for the three and six months ended June 30, 2011 and 2010 are as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Rooms	$	13,044	$	18,236	$	26,117	$	26,196
Food and beverage	37,752		48,456		76,237		78,063
Other	4,189		6,417		7,986		7,985
Total cost of promotional allowances	$	54,985	$	73,109	$	110,340	$	112,244

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are an assessment of our gaming revenues and are recorded as a gaming expense on the condensed consolidated statements of operations. These taxes totaled approximately $63.5 million and $64.6 million for the three months ended June 30, 2011 and 2010, respectively, and totaled approximately $127.3 million and $118.4 million for the six months ended June 30, 2011 and 2010, respectively.

Earnings per Share

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

The weighted average number of common and common share equivalent shares used in the calculations of basic and diluted earnings per share for the three and six months ended June 30, 2011 and 2010, consisted of the following amounts:

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(Unaudited)



	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011	2010	2011	2010
	(In thousands)
Earnings per share:
Basic weighted average shares outstanding	87,204	86,511	87,181	86,471
Potential dilutive effect	—	431	—	272
Diluted weighted average shares outstanding	87,204	86,942	87,181	86,743

Due to the net loss for the three and six months ended June 30, 2011, the effect of all potential common shares was anti-dilutive, and therefore were not included in the computation of diluted earnings per share. Anti-dilutive options totaling 7.8 million and 6.7 million have been excluded from the computation of diluted earnings per share for the three months ended June 30, 2011, and 2010, respectively. Anti-dilutive options totaling 7.8 million and 8.1 million have been excluded from the computation of diluted earnings per share for the six months ended June 30, 2011 and 2010, respectively.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated into our condensed consolidated financial statements include the estimated allowance for doubtful accounts receivable, the estimated useful lives for depreciable and amortizable assets, recoverability of assets held for development, measurement of the fair value of our controlling interest and the noncontrolling interest in Borgata, fair values of acquired assets and liabilities, estimated cash flows in assessing the recoverability of long-lived assets and assumptions relative to the valuation and impairment of goodwill and intangible assets, estimated valuation allowances for deferred tax assets, slot bonus point programs, certain tax liabilities and uncertain tax positions, self-insured liability reserves, share-based payment valuation assumptions, fair values of assets and liabilities measured at fair value, fair values of assets and liabilities disclosed at fair value, fair values of derivative instruments, contingencies and litigation, claims and assessments. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our consolidated financial statements.

Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")

In June, 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-05 Presentation of Comprehensive Income, which is an amendment to Topic 220 of the Accounting Standards Codification.

The objective of Update 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Update 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.

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(Unaudited)

our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.

NOTE 2. CONSOLIDATION OF CERTAIN INTERESTS

Controlling Interest

Borgata Hotel Casino and Spa

Overview

We and MGM each originally held a 50% interest in Marina District Development Holding Co., LLC (“Holding Company”). The Holding Company owns all the equity interests in Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa.

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

On March 17, 2010, MGM announced that its settlement agreement with the NJDGE had been approved by the New Jersey Casino Control Commission ("NJCCC"). Under the terms of the settlement agreement, MGM agreed to transfer the MGM Interest into the Divestiture Trust and further agreed to sell such interest within a 30-month period. During the first 18 months of such period, MGM has the power to direct the trustee to sell the MGM Interest, subject to the approval of the NJCCC. If the sale has not occurred by such time, the trustee will be solely responsible for the sale of the MGM Interest. The MGM Interest was transferred to the Divestiture Trust on March 24, 2010.

MGM has subsequently announced that it has entered into an amendment with respect to its settlement agreement with the NJDGE, subject to approval by the NJCCC. The amendment provides that the mandated sale of the MGM Interest be increased by an additional 18 months to a total of 48 months. During the first 36 months (or until March 24, 2013), MGM has the right to direct the Divestiture Trust to sell the MGM Interest. If a sale is not concluded by that time, the Divestiture Trust will be responsible for selling MGM''s Interest during the following 12-month period. The NJCCC is expected to hold a hearing on the amendment to the settlement on August 8, 2011.

Effective Change in Control

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

Acquisition Method Accounting

The application of the acquisition method accounting guidance had the following effects on our condensed consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity. The provisional fair value measurements and estimates of these items were estimated as of the date we effectively obtained control.

The provisional fair value measurements and estimates of these items have been subsequently refined. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, the Company had not completed its procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. The Company's subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement adjustments were identified and retrospectively recorded in the condensed consolidated balance sheet as of December 31, 2010, and certain disclosures were updated to reflect

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

the measurement period adjustments, as reflected herein.

Retrospective Adjustment to Condensed Consolidated Balance Sheet

We have retrospectively adjusted the provisional values to reflect the fair valuation, and therefore, the condensed consolidated balance sheet as of December 31, 2010 presented herein reflects the adjustments above.



			December 31, 2010
	As Originally Reported		Acquisition Method Accounting Adjustments			As Retrospectively Adjusted
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	145,623	$	—		$	145,623
Restricted cash	19,494		—			19,494
Accounts receivable, net	47,942		—			47,942
Inventories	16,029		—			16,029
Prepaid expenses and other current assets	37,390		(237		)	37,153
Income taxes receivable	5,249		—			5,249
Deferred income taxes	8,149		—			8,149
Total current assets	279,876		(237		)	279,639
Property and equipment, net	3,471,933		(88,562		)	3,383,371
Assets held for development	1,119,403		—			1,119,403
Debt financing costs, net	38,451		(3,458		)	34,993
Restricted investments	48,168		—			48,168
Other assets, net	70,425		—			70,425
Intangible assets, net	460,714		79,000			539,714
Goodwill, net	213,576		—			213,576
Total assets	$	5,702,546	$	(13,257	)	$	5,689,289
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	25,690	$	—		$	25,690
Non-recourse obligations of variable interest entity	243,059		—			243,059
Accounts payable	57,183		—			57,183
Income taxes payable	6,504		—			6,504
Accrued liabilities	279,779		(1,310		)	278,469
Total current liabilities	612,215		(1,310		)	610,905
Long-term debt, net of current maturities	3,193,065		—			3,193,065
Deferred income taxes	360,342		1,832			362,174
Other long-term tax liabilities	44,813		—			44,813
Other liabilities	85,859		(2,270		)	83,589
Stockholders' equity
Preferred stock	—		—			—
Common stock	862		—			862
Additional paid-in-capital	635,028		—			635,028
Retained earnings	560,909		—			560,909

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(Unaudited)



Accumulated other comprehensive loss, net	(7,594		)	—			(7,594		)
Total Boyd Gaming Corporation stockholders' equity	1,189,205			—			1,189,205
Noncontrolling interest	217,047			(11,509		)	205,538
Total stockholders' equity	1,406,252			(11,509		)	1,394,743
Total liabilities and stockholders' equity	$	5,702,546		$	(13,257	)	$	5,689,289

Bargain Purchase Gain

The fair valuation resulted in the recording of a bargain purchase gain, due to the excess fair value of Borgata over the historical basis of our equity interest in Borgata. Recorded in write-downs and other items, net on the condensed consolidated statement of operations, this gain was recorded as a cumulative adjustment during the six months ended June 30, 2011.

The gain was computed as follows:



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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Results of Operations of Borgata

(for the period from March 24, 2010 through June 30, 2010)

reflecting amounts included on a consolidated basis

The results of Borgata, as included in the accompanying condensed consolidated statements of operations from the date we effectively obtained control, March 24, 2010, (specifically, for the period from March 24 through June 30, 2010 for the six months ended June 30, 2010) are presented below. These results of operations do not reflect the retrospective impact from the measurement period adjustments discussed above, as such amounts were not material to either the three and six months ended June 30, 2010.



	Six Months Ended June 30, 2010
	(In thousands)
REVENUES
Operating revenues:
Gaming	$	180,475
Food and beverage	39,140
Room	29,952
Other	11,360
Gross revenues	260,927
Less promotional allowances	57,259
Net revenues	203,668

COSTS AND EXPENSES
Operating costs and expenses:
Gaming	71,073
Food and beverage	19,893
Room	4,224
Other	9,193
Selling, general and administrative	33,300
Maintenance and utilities	18,122
Depreciation and amortization	19,861
Write-downs and other items, net	12
Total operating costs and expenses	175,678
Operating income	27,990
Other expense
Interest expense	6,072
Total other expense, net	6,072
Income before income taxes	21,918
Income taxes	(2,137		)
Net income	$	19,781

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Supplemental Pro Forma Information

Pro Forma Condensed Consolidated Statement of Operations

for the six months ended June 30, 2010

The following supplemental pro forma information presents the financial results as if the effective control of Borgata had occurred as of the beginning of the earliest period presented herein, or on January 1, 2010. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what the actual results for the six months ended June 30, 2010 would have been had the consolidation of Borgata been completed as of the earlier date, nor are they indicative of any future results.

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(Unaudited)



	Six Months Ended June 30, 2010
	Boyd Gaming Corp			Borgata						Boyd Gaming Corp
	As Reported			Stub Period			Adjustments			Pro Forma
	(In thousands)
Revenues
Gaming	$	840,537		$	137,831		$	—		$	978,368
Food and beverage	154,002			31,217			—			185,219
Room	90,105			24,154			—			114,259
Other	57,635			9,179			—			66,814
Gross revenues	1,142,279			202,381			—			1,344,660
Less promotional allowances	148,698			44,091			—			192,789
Net revenues	993,581			158,290			—			1,151,871
Costs and expenses
Gaming	397,860			59,861			—			457,721
Food and beverage	81,791			13,500			—			95,291
Room	23,106			2,185			—			25,291
Other	46,244			7,127			—			53,371
Selling, general and administrative	169,944			28,981			—			198,925
Maintenance and utilities	62,109			13,522			—			75,631
Depreciation and amortization	95,454			16,754			—			112,208
Corporate expense	25,615			—			—			25,615
Preopening expenses	2,306			—			—			2,306
Write-downs and other charges	3,592			68			—			3,660
Total costs and expenses	908,021			141,998			—			1,050,019
Operating income from Borgata	8,146			—			(8,146		)	—
Operating income	93,706			16,292			(8,146		)	101,852
Other expense (income)
Interest income	(4		)	—			—			(4		)
Interest expense, net of amounts capitalized	63,657			5,060			—			68,717
Fair value adjustment of derivative instruments	—			—						—
Gain on early retirements of debt	(3,949		)	—			—			(3,949		)
Other non-operating expenses from Borgata, net	3,133			—			(3,133		)	—
Total other expense, net	62,837			5,060			(3,133		)	64,764

Income before income taxes	30,869			11,232			(5,013		)	37,088
Income taxes	(9,161		)	(1,207		)	—			(10,368		)
Net income	21,708			10,025			(5,013		)	26,720
Net income attributable to noncontrolling interest	(9,891		)	—			(5,012		)	(14,903		)
Net income attributable to Boyd Gaming Corporation	$	11,817		$	10,025		$	(10,025	)	$	11,817

The pro forma adjustments reflect the differences resulting from the conversion of the equity method of accounting to a fully consolidated presentation. There were no significant intercompany transactions affecting the statement of operations between the Boyd wholly-owned entities and Borgata which would require elimination during the six months ended June 30, 2010.

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(Unaudited)

Variable Interest

LVE Energy Partners, LLC

The effects of the consolidation of LVE on our financial position as of June 30, 2011 and December 31, 2010, and its impact on our results of operations for the three and six months ended June 30, 2011 are reconciled by respective line items to amounts as reported in our condensed consolidated balance sheets and condensed consolidated statements of operations are presented below.

The primary impact on our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010 was as follows:



	June 30, 2011
	Boyd Gaming Corporation (as historically presented)		LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Cash and cash equivalents	$	175,765	$	15		$	—		$	175,780
Restricted cash	18,486		374			—			18,860
Accounts receivable, net	46,018		2,412			(2,394		)	46,036
Prepaid expenses and other current assets	39,352		845			—			40,197
Other current assets	24,262		—			—			24,262
Property and equipment, net	3,315,592		—			—			3,315,592
Assets held for development	923,997		195,941			—			1,119,938
Debt financing costs, net	31,927		—			—			31,927
Restricted investments	—		47,999			—			47,999
Other assets	70,657		4,389			—			75,046
Intangible assets, net	527,322		—			—			527,322
Goodwill, net	213,576		—			—			213,576
Total Assets	$	5,386,954	$	251,975		$	(2,394	)	$	5,636,535

LIABILITIES
Current maturities of long-term debt	$	356,711	$	—		$	—		$	356,711
Non-recourse obligations of variable interest entity	—		248,128			—			248,128
Accounts payable	44,901		54			—			44,955
Accrued liabilities	283,253		1,027			—			284,280
Long-term debt, net of current maturities	2,823,049		—			—			2,823,049
Deferred income taxes	362,899		—			—			362,899
Other liabilities	105,452		18,246			(2,394		)	121,304
Total Liabilities	$	3,976,265	$	267,455		$	(2,394	)	$	4,241,326

STOCKHOLDERS' EQUITY
Common stock	$	863	$	—		$	—		$	863
Additional paid-in capital	640,661		—			—			640,661
Retained earnings	554,437		—			—			554,437
Noncontrolling interest	214,728		(15,480		)	—			199,248
Total Liabilities and Stockholders' Equity	$	5,386,954	$	251,975		$	(2,394	)	$	5,636,535

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	December 31, 2010
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations		Boyd Gaming Corporation (as consolidated)
	(In thousands)
ASSETS
Cash and cash equivalents	$	145,291		$	332		$	—	$	145,623
Restricted cash	19,494			—			—		19,494
Accounts receivable, net	47,537			405			—		47,942
Other current assets	66,580			—			—		66,580
Property and equipment, net	3,383,371			—			—		3,383,371
Assets held for development	923,038			196,365			—		1,119,403
Debt financing costs, net	34,993			—			—		34,993
Restricted investments	—			48,168			—		48,168
Other assets	65,963			4,462			—		70,425
Intangible assets, net	539,714			—			—		539,714
Goodwill, net	213,576			—			—		213,576
Total Assets	$	5,439,557		$	249,732		$	—	$	5,689,289

LIABILITIES
Current maturities of long-term debt	$	25,690		$	—		$	—	$	25,690
Non-recourse obligations of variable interest entity	—			243,059			—		243,059
Accounts payable	56,790			393			—		57,183
Accrued liabilities	277,429			1,040			—		278,469
Long-term debt, net of current maturities	3,193,065			—			—		3,193,065
Deferred income taxes	362,174			—			—		362,174
Other liabilities	115,948			18,958			—		134,906
Total Liabilities	$	4,031,096		$	263,450		$	—	$	4,294,546

STOCKHOLDERS' EQUITY
Common stock	$	862		$	—		$	—	$	862
Additional paid-in capital	635,028			—			—		635,028
Retained earnings	560,909			—			—		560,909
Accumulated other comprehensive loss, net	(7,594		)	—			—		(7,594		)
Noncontrolling interest	219,256			(13,718		)	—		205,538
Total Liabilities and Stockholders' Equity	$	5,439,557		$	249,732		$	—	$	5,689,289

The reduction in accounts receivable, net and other liabilities reflects the elimination of the Periodic Fee booked as a receivable by LVE, which mirrors the payable recorded on Boyd's general ledger. Both the receivable and payable are eliminated in consolidation completely, thereby having no impact on our consolidated balance sheet.

The impact on our condensed consolidated statement of operations for the three months ended June 30, 2011 was as follows:

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	Three Months Ended June 30, 2011
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
REVENUES
Other revenue	$	33,276		$	2,769		$	(2,769	)	$	33,276

COSTS AND EXPENSES
Maintenance and utilities	$	36,739		$	34		$	—		$	36,773
Preopening expenses	4,510			—			(2,769		)	1,741

Operating income	$	59,255		$	2,735		$	—		$	61,990

Other expense
Interest expense	$	61,387		$	5,307		$	—		$	66,694

Loss before income taxes	$	(2,160	)	$	(2,572	)	$	—		$	(4,732	)
Income taxes	(911		)	—			—			(911		)
Net loss	(3,071		)	(2,572		)	—			(5,643		)
Net loss attributable to noncontrolling interest	120			2,572			—			2,692
Net loss attributable to Boyd Gaming Corporation	$	(2,951	)	$	—		$	—		$	(2,951	)

The impact on our condensed consolidated statement of operations for the six months ended June 30, 2011 was as follows:



	Six Months Ended June 30, 2011
	Boyd Gaming Corporation (as historically presented)			LVE, LLC			Eliminations			Boyd Gaming Corporation (as consolidated)
	(In thousands)
REVENUES
Other revenue	$	66,307		$	5,410		$	(5,410	)	$	66,307

COSTS AND EXPENSES
Maintenance and utilities	$	73,257		$	931		$	—		$	74,188
Preopening expenses	8,982			—			(5,410		)	3,572

Operating income	$	105,615		$	4,479		$	—		$	110,094

Other expense
Interest expense	$	118,551		$	5,434		$	—		$	123,985

Loss before income taxes	$	(13,196	)	$	(955	)	$	—		$	(14,151	)
Income taxes	2,197			—			—			2,197
Net loss	(10,999		)	(955		)	—			(11,954		)
Net loss attributable to noncontrolling interest	4,527			955			—			5,482
Net loss attributable to Boyd Gaming Corporation	$	(6,472	)	$	—		$	—		$	(6,472	)

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The reduction in other revenue and preopening expenses reflects the elimination of the Periodic Fee paid by Boyd Gaming to LVE. Such fee is recognized as revenue by LVE, but eliminated in consolidation completely, thereby having no impact on our consolidated other revenues. Although this Periodic Fee is eliminated in this consolidation, it is actually paid to LVE directly on a monthly basis.

NOTE 3. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:



	June 30, 2011		December 31, 2010
	(In thousands)
Land	$	576,947	$	576,947
Buildings and improvements	3,308,851		3,309,506
Furniture and equipment	1,143,312		1,131,837
Riverboats and barges	167,505		167,420
Other	25,793		25,423
Total property and equipment	5,222,408		5,211,133
Less accumulated depreciation	1,906,816		1,827,762
Property and equipment, net	$	3,315,592	$	3,383,371

Depreciation expense for the three months ended June 30, 2011 and 2010 was $46.4 million and $55.4 million, respectively. Depreciation expense for the six months ended June 30, 2011 and 2010 was $92.2 million and $95.5 million, respectively. The amounts recorded during the six months ended June 30, 2011 include the effect of certain measurement period adjustments.

Other property and equipment presented in the table above primarily relates to costs capitalized in conjunction with major improvements and that have not yet been placed into service, and accordingly, such costs are not currently being depreciated.

We test certain of these property and equipment assets for recoverability if a recent operating or cash flow loss, combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses, is associated with the use of a long-lived asset. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

NOTE 4. ASSETS HELD FOR DEVELOPMENT

Assets held for development, which is comprised of assets associated with our Echelon development project, consists of the following:

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	June 30, 2011		December 31, 2010
	(In thousands)
Echelon Project Infrastructure
Land	$	213,649	$	213,649
Construction and development costs	501,091		500,132
Project management and other costs	115,712		115,712
Professional and design fees	93,545		93,545

Central Energy Facility
Construction and development costs	195,941		196,365
Total assets held for development	$	1,119,938	$	1,119,403

Echelon Project Infrastructure

At June 30, 2011 and December 31, 2010, the capitalized costs related to the Echelon project included land and construction in progress. The construction and development costs consist primarily of site preparation work, underground utility installation and infrastructure and common area development. Professional and design fees include architectural design, development and permitting fees, inspections, consulting and legal fees. We expect to additionally incur approximately $0.3 million to $3.0 million of capitalized costs annually, principally related to such items as transportation of stored offsite steel as well as offsite improvements.

In addition, we expect annual recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, of approximately $15.0 million to $17.0 million that will be charged to preopening or other expense as incurred during the project's suspension period. These capitalized costs and recurring project costs are in addition to other contingencies with respect to our various commitments, including commitments and contingencies with respect to the ESA entered into between Echelon Resorts and LVE.

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

The suspension of development on the Echelon project implied that the carrying amounts of the assets related to the development may not be recoverable; therefore, at the time of the suspension, we performed an impairment test of these assets, which occurred during the three months ended September 30, 2009. This impairment test was comprised of a future undiscounted cash flow analysis, and contemplated several viable alternative plans for the future development of Echelon.

One such scenario includes the outright sale of the project as is, which is primarily based upon land value. We considered the land value by analyzing recent sales transactions of sites with similar characteristics such as location, zoning, access, and visibility, to establish a general understanding of the potential comparable sales. The recoverability under this option represented any excess sales price, net of estimated selling costs, from the land over the carrying value of the assets, including land, held for development.

Another scenario is the full development of the project, as designed, at a later date. The cash inflows related to this option represent the revenue projections for the individual components associated with each planned construction element (casino, hotel, food and beverage, retail, convention and other), based upon the estimated respective dates of completion and particular graduated supply absorption rates. These projections are offset by outflows for incurred and estimated costs to complete the development. For costs already incurred, and to compensate for potential losses due to the delay, we adjusted for (i) physical deterioration; (ii) functional obsolescence; and (iii) economic obsolescence. Physical deterioration is impairment to the condition of the asset brought about by “wear and tear,” disintegration, and/or the action of the elements. Functional obsolescence is the impairment in the efficiency of the asset brought about by such factors as inadequacy or change in technology that affect the asset. Economic obsolescence is

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the impairment in the desirability of the asset arising from external economic forces, building code enhancements or changes in supply and demand relationships. For estimated costs to complete, we applied selected construction expense growth rates to our present cost analysis. In addition to these hard and soft construction costs, we estimated outflows for preservation costs that are intended and required to maintain the development site and the existing structures as well as development materials for future use. These net outflows were incrementally added to our estimated operating and ongoing maintenance costs, to establish the undiscounted net cash flow of the project.

Our final scenario is a scaled-down version of the full project, whereby only certain components would be developed. This cash flow projection considered the inflows and outflows discussed above, with relevant curtailment for revenue from, and costs related to, the amenities not completed.

Because no specific strategic plan can be determined with certainty at this time, the analysis considered the net cash flows related to each alternative, weighted against its projected likelihood. The outcome of this evaluation resulted in the determination that there was no impairment of the assets held for development, as the estimated weighted net undiscounted cash flows from the project exceed the current carrying value of the assets held for development. As we further explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability.

Central Energy Facility

The capitalized construction costs of the central energy facility include labor, materials, construction overhead and capitalized interest, all of which has been directly incurred by LVE. Depreciation is generally recorded on a straight line basis over useful lives of property ranging from 5 to 50 years, but has not commenced on the components of the facility, as it has not been placed in service. The costs of repairs and maintenance, including planned major maintenance activities and minor replacements of property are charged to maintenance expense as incurred.

These assets are tested for recoverability whenever events or changes in circumstances indicate that such amounts may not be recoverable. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

The assets of the central energy facility are pledged as collateral to the outstanding debt obligations of LVE, as further discussed in Note 6, Non-recourse Obligations of Variable Interest Entity below.

NOTE 5. INTANGIBLE ASSETS

Intangible assets consist of the following:

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				June 30, 2011
	Weighted Average Original Life	Gross Carrying Value		Cumulative Amortization			Cumulative Impairment Losses			Intangible Assets, Net
	(In thousands)
Amortizing intangibles:
Customer relationships	3.9 years	$	14,400	$	(7,271	)	$	—		$	7,129
Favorable lease rates	43.8 years	45,370		(7,303		)	—			38,067
		59,770		(14,574		)	—			45,196

Indefinite lived intangible assets:
Trademarks	Indefinite	115,700		—			(5,000		)	110,700
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		683,586		(33,960		)	(167,500		)	482,126
		$	743,356	$	(48,534	)	$	(167,500	)	$	527,322

	December 31, 2010
	Weighted Average Original Life	Gross Carrying Value		Cumulative Amortization			Cumulative Impairment Losses			Intangible Assets, Net
		(In thousands)
Amortizing intangibles:
Customer relationships	5 years	$	14,400	$	(400	)	$	—		14,000
Favorable lease rates	43.8 years	45,370		(6,782		)	—			38,588
		59,770		(7,182		)	—			52,588
Indefinite lived intangible assets:
Trademarks	Indefinite	115,700		—			—			115,700
Gaming license rights	Indefinite	567,886		(33,960		)	(162,500		)	371,426
		683,586		(33,960		)	(162,500		)	487,126
December 31, 2010		$	743,356	$	(41,142	)	$	(162,500	)	$	539,714

Customer Relationships

Customer relationships represent the value of repeat business associated with our customer loyalty programs. The value of customer relationships is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these customers, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: revenue of our rated customers, based on expected level of play; promotional allowances provided to these existing customers; attrition rate related to these customers; operating expenses; general and administrative expenses; trademark expense; discount rate; and the present value of tax benefit.

Favorable Lease Rates

Favorable lease rates represent the rental rates for assumed land leases that are favorable to comparable market rates. The fair value is determined on a technique whereby the difference between the lease rate and the then current market rate for the remaining contractual term is discounted to present value. The assumptions underlying this computation include the actual lease rates, the expected remaining lease term, including renewal options, based on the existing lease; current rates of rent for leases on comparable properties with similar terms obtained from market data and analysis; and an assumed discount rate. The estimates underlying the result covered a term of 41 to 52 years.

Trademarks

Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we

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generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the Borgata name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years.

Gaming License Rights

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year period.

Activity For the Six Months Ended June 30, 2011 and 2010

The following table sets forth the changes in these intangible assets during the six months ended June 30, 2011 and 2010:



	Customer Relationships				Favorable Lease Rates			Trademarks			Gaming License Rights		Intangible Assets, Net
	(In thousands)
Six Months Ended June 30, 2011
Balance December 31, 2010	$	14,000			$	38,588		$	115,700		$	371,426	$	539,714
Additions	—				—			—			—		—
Impairments	—				—			(5,000		)	—		(5,000		)
Amortization	(6,871		)		(521		)	—			—		(7,392		)
Balance June 30, 2011	$	7,129			$	38,067		$	110,700		$	371,426	$	527,322

Six Months Ended June 30, 2010
Balance December 31, 2009	$	—			$	39,632		$	50,700		$	371,426	$	461,758
Additions	14,000				—			65,000			—		79,000
Amortization	—			—	(524		)	—			—		(524		)
Balance June 30, 2010	$	14,000			$	39,108		$	115,700		$	371,426	$	540,234

Future Amortization

Customer relationships are being amortized on an accelerated basis over an approximate four-year period. Favorable lease rates are being amortized on a straight-line basis over a weighted-average useful life of 43.8 years. Future amortization is as follows:

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For the Year Ending December 31,	Customer Relationships		Favorable Lease Rates		Total
	(In thousands)
2011 (remainder)	$	2,391	$	523	$	2,914
2012	3,174		1,043		4,217
2013	1,564		1,043		2,607
2014	—		1,043		1,043
2015	—		1,043		1,043
Thereafter	—		33,372		33,372
	$	7,129	$	38,067	$	45,196

Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life, however these assets are subject to an annual impairment test.

Impairment Testing

Intangible assets include gaming license rights, trademarks and customer lists. Indefinite lived intangible assets are not subject to amortization, but they are subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances.

License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. If our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. As a result of such test, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The results of our annual scheduled impairment test of indefinite-lived intangible assets, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

During the first quarter of 2011, we performed an interim impairment test over the trademark we recorded in connection with the valuation of Borgata due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, our projected future results will be further impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test.

Our analysis consisted of a valuation of the trademark, using the relief from royalty method, as discussed above. The only significant change in our assumptions from the initial fair valuation were revised revenue and profitability projections, reflecting the impact of the changed present and forecasted circumstances. The impairment test shall consist of a comparison of the fair value of trademark with its carrying amount. As a result, we recorded a $5.0 million impairment to the trademark, representing the amount by which the carrying amount exceeded its fair value.

NOTE 6. NON-RECOURSE OBLIGATIONS OF VARIABLE INTEREST ENTITY

The non-recourse obligations of variable interest entity represent the outstanding debt of LVE, all of which is classified as current, and is comprised of the following:

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	June 30, 2011		December 31, 2010
	(In thousands)
Construction and term loan facility	$	120,392	$	120,572
Tax-exempt variable rate bonds	100,000		100,000
Notes payable to members of variable interest entity	27,736		22,487
	$	248,128	$	243,059

Assets serving as collateral for these debt obligations had a carrying value of $243.9 million and $244.5 million at June 30, 2011 and December 31, 2010, respectively, and primarily consist of certain assets held for development and restricted investments. The condensed consolidated statements of operations for the three and six months ended June 30, 2011 includes $2.6 million and $1.0 million of loss, respectively, and the condensed consolidated statement of cash flows for the six months ended June 30, 2011 includes $6.1 million of net operating cash outflows related to this consolidated variable interest entity; however, none of the offsetting consolidated income or operating cash inflows are available to service this debt, which is non-recourse and non-guaranteed by Boyd.

Construction and Term Loan Facility

In December 2007, LVE entered into a construction and term loan facility with two commercial banks with a committed amount of up to $143.5 million, of which $120.4 million was outstanding at June 30, 2011. Proceeds from the construction loan were used to finance the construction of the central energy center and district energy system. The loan is secured by the assets of LVE and does not contain financial covenants. Although LVE's loan is presently in default, and classified as current, the original loan maturities are as follows: $4.2 million in 2011; $83.1 million in 2012 and the remainder in 2013.

The construction loan bears interest at a variable rate based on the London InterBank Offered Rate ("LIBOR"). LVE entered into an interest rate swap with scheduled increases in the notional amount designed to fix the LIBOR portion of the interest rate on this debt until its maturity in November 2013, which was hedged against the outstanding debt. However, due to the construction delays, the outstanding amount of debt did not increase as fast as the contractual increases in notional amount of the swap, which rendered a portion of the swap ineffective. The effective rate on the outstanding construction loan, including the impact of the effective portion of the swap, was approximately 2.4% at June 30, 2011.

Tax-exempt Variable Rate Bonds

In December 2007, LVE issued $100.0 million of tax-exempt variable rate bonds through the State of Nevada Department of Business and Industry, which mature in October 2035. Unused proceeds from the tax-exempt, variable rate bonds are required to be escrowed pending approved construction expenditures. Such unused funds are reported as restricted investments on our consolidated balance sheet.

The tax-exempt variable rate bonds bear interest at rates that are determined by a remarketing agent on a weekly basis. LVE entered into an interest rate swap with a total notional amount of $100.0 million that effectively fixes the underlying interest rate index on these bonds until November 2013. Investors in these bonds receive liquidity and credit support provided by a letter of credit from a commercial bank. This letter of credit expires in November 2013, but can be accelerated by the bank in the event of a default under the construction and term loan facility. The effective interest rate on these bonds, including the impact of the swap and cost of the related letter of credit, was approximately 6.0% at June 30, 2011.

Events of Default

The central energy center and district energy system are being financed by LVE with debt that is non-recourse to us. The outstanding balance of LVE's bank debt is approximately $220.4 million as of June 30, 2011, consisting of borrowing under the construction and term loan facility of $120.4 million and outstanding tax-exempt bonds of $100.0 million. In September 2009, LVE reached an agreement with the banks that are financing the energy facilities to address defaults under the financing agreements. These LVE defaults were caused by construction delay and the termination of an energy services agreement by a hotel operator associated with the project. As a result of these defaults, the banks had previously stopped funding the project. The terms of the September 2009 agreement required the LVE joint venture partners to guarantee the payment of future interest costs by LVE through December 2010. In addition, the LVE joint venture partners had each committed to provide approximately $8.9 million of additional capital as of September 2009 to cover costs related to the termination of the energy services agreement by a hotel operator and interest costs incurred since August 2008 when construction of Echelon was suspended. In turn, the banks waived all existing defaults

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under the financing agreements and were relieved of their commitment to provide additional funding.

As a result of the ongoing construction delay, the central energy center and district energy system was not completed by the end of 2010 as originally expected. Consequently, the full amount of LVE's debt became due and payable in December 2010. LVE intends to seek additional financing to complete the facility once construction of the resort resumes; however, as of June 30, 2011, LVE was in default under the financing agreements with the banks, and all its debt has been presented as currently due.

NOTE 7. ACCRUED LIABILITIES

Accrued liabilities consist of the following:



	June 30, 2011		December 31, 2010
	(In thousands)
Payroll and related expenses	$	82,703	$	73,054
Interest	38,926		51,347
Gaming liabilities	62,244		70,908
Accrued expenses and other liabilities	100,407		83,160
Total accrued liabilities	$	284,280	$	278,469

NOTE 8. LONG-TERM DEBT

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



	June 30, 2011
	Outstanding Principal		Unamortized Discount			Unamortized Origination Fees			Long-Term Debt, Net
	(In thousands)
Boyd Gaming Long-Term Debt:
Bank credit facility	$	1,425,000	$	—		$	—		$	1,425,000
9.125% senior notes due 2018	500,000		—			(9,175		)	490,825
6.75% senior subordinated notes due 2014	215,668		—			—			215,668
7.125% senior subordinated notes due 2016	240,750		—			—			240,750
Other	11,421		—			—			11,421
	$	2,392,839	$	—		$	(9,175	)	$	2,383,664

Borgata Debt:
Bank credit facility	20,000		—			—			20,000
9.50% senior secured notes due 2015	400,000		(3,644		)	(8,558		)	387,798
9.875% senior secured notes due 2018	400,000		(2,531		)	(9,171		)	388,298
	$	820,000	$	(6,175	)	$	(17,729	)	$	796,096
Less current maturities	356,711		—			—			356,711
Long-term debt, net	$	2,856,128	$	(6,175	)	$	(26,904	)	$	2,823,049

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(Unaudited)



	December 31, 2010
	Outstanding Principal		Unamortized Discount			Unamortized Origination Fees			Long-Term Debt, Net
	(In thousands)
Boyd Gaming Long-Term Debt:
Bank credit facility	$	1,425,000	$	—		$	—		$	1,425,000
9.125% senior notes due 2018	500,000		—			(9,794		)	490,206
6.75% senior subordinated notes due 2014	215,668		—			—			215,668
7.125% senior subordinated notes due 2016	240,750		—			—			240,750
Other	11,761		—			—			11,761
	$	2,393,179	$	—		$	(9,794	)	$	2,383,385

Borgata Debt:
Bank credit facility	60,900		—			—			60,900
9.50% senior secured notes due 2015	400,000		(3,969		)	(9,319		)	386,712
9.875% senior secured notes due 2018	400,000		(2,648		)	(9,594		)	387,758
	$	860,900	$	(6,617	)	$	(18,913	)	$	835,370
Less current maturities	25,690		—			—			25,690
Long-term debt, net	$	3,228,389	$	(6,617	)	$	(28,707	)	$	3,193,065

Bank Credit Facility

Significant Terms

On December 3, 2010, we entered into an Amendment and Restatement Agreement among certain financial institutions (each a “Lender”), Bank of America, N.A., as administrative agent and letter of credit issuer and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the former credit facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the restatement effective date.

Each of the Extending Lenders permanently reduced their commitments under the former credit facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (including $500 million of term loans, and excluding $548.8 million in non-extending amounts), which commitments may be increased from time to time by up to $500 million (instead of $1 billion commitment increases provided for under the former credit facility) through additional revolving credit or term loans under the Amended Credit Facility.

Pursuant to the terms of the Amended Credit Facility, the term loans amortize in an annual amount equal to 5% of the original principal amount thereof, which commenced on March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to revolving and term loans under the Amended Credit Facility are based upon, at the option of the Company, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin under the Amended Credit Facility is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio. The applicable margin on the outstanding balance on the Extended Revolving Facility (as defined in our Amended Credit Facility) ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.0% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Amended Credit Facility.

The “base rate” under the Amended Credit Facility is the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one month period plus 1.00%.

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The letter of credit fees under the Amended Credit Facility remain the same as those under the Credit Facility; however, the margins payable to Extending Lenders are based on the margins applicable to the Extended Revolving Facility.

Subject to certain conditions, amounts outstanding under the Amended Credit Facility may be prepaid without premium or penalty, and the unutilized portion of any of the commitments may be terminated without penalty.

The blended interest rates for outstanding borrowings under our Amended Credit Facility were 3.2% and 3.3% at June 30, 2011 and December 31, 2010, respectively. At June 30, 2011, approximately $1.43 billion was outstanding under our Amended Credit Facility, with $15.6 million allocated to support various letters of credit, leaving remaining contractual availability of approximately $555.7 million.

Guarantees

The Company's obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of the Company's subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, the Company and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Amended Credit Facility.

Financial and Other Covenants

The Amended Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum consolidated interest coverage ratio of 2.00 to 1.00, (ii) establishing a maximum permitted consolidated total leverage ratio (discussed below), (iii) establishing a maximum permitted secured leverage ratio (discussed below), (iv) imposing limitations on the incurrence of indebtedness, (v) imposing limitations on transfers, sales and other dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, the Company may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.

The minimum consolidated Interest Coverage Ratio (as defined in our Amended Credit Facility) is calculated as (a) twelve-month trailing Consolidated EBITDA (as defined in our Amended Credit Facility) to (b) consolidated interest expense (as also defined in our Amended Credit Facility).

The maximum permitted consolidated Total Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through December 31, 2011, our maximum Total Leverage Ratio is set at 7.75 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 5.50 to 1.00 at March 15, 2015 through the duration of the term.

The maximum permitted Secured Leverage Ratio (as defined in our Amended Credit Facility) is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA (all capitalized terms are defined in the Amended Credit Facility). Presently, and through March 31, 2012, our maximum Secured Leverage Ratio is set at 4.50 to 1.00. Thereafter, on a scheduled basis in 0.25 basis point increments, the maximum ratio decreases to a low 3.25 to 1.00 at June 30, 2014 through the duration of the term.

Compliance with Financial Covenants

We believe that, at June 30, 2011, we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, as of that date, were 2.42 to 1.00, 6.95 to 1.00 and 4.14 to 1.00, respectively.

Debt Financing Costs

In conjunction with the Amendment and Restatement Agreement, we incurred approximately $20.6 million in incremental debt financing costs, which have been deferred and are being amortized over the remaining term of the Amended Credit Facility.

Senior Notes

9.125% Senior Notes due December 2018.

Significant Terms

On November 10, 2010, we issued, through a private placement, $500 million aggregate principal amount of 9.125% senior notes

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due December 2018. The notes require semi-annual interest payments on December 1 and June 1 of each year, which commenced on June 1, 2011. The notes will mature on December 1, 2018 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the indenture governing the notes) to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. We believe that we are in compliance with these covenants at June 30, 2011. In addition, upon the occurrence of a change of control (as defined in the indenture governing the notes), we will be required, unless certain conditions are met, to offer to repurchase the notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the notes. At any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.125% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to December 1, 2014, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to December 1, 2014, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.563% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.

Registration Rights Agreement

In connection with the private placement of the 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 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 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 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 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 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 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 condensed consolidated financial statements.

Senior Subordinated Notes

6.75% Senior Subordinated Notes due April 2014.

Significant Terms

On April 15, 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all, except for $50,000 in aggregate principal amount of these notes, were exchanged for substantially similar notes that were registered with the SEC. The notes require semi-annual interest payments on April 15 and October 15 of each year, through April 2014, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at June 30, 2011. Effective April 15, 2009, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.375% in 2009 to 100% in 2012 and thereafter, plus accrued and unpaid interest.

Senior Subordinated Notes

7.125% Senior Subordinated Notes due February 2016.

Significant Terms

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On January 30, 2006, we issued $250 million principal amount of 7.125% senior subordinated notes due February 2016. The notes require semi-annual interest payments on February 1 and August 1 of each year, through February 2016, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at June 30, 2011. We may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.563% in 2011 to 100% in 2014 and thereafter, plus accrued and unpaid interest.

Repurchases of Senior Subordinated Notes

We did not repurchase any of our senior subordinated or senior notes during the six months ended June 30, 2011. During the three and six months ended June 30, 2010, we purchased and retired $17.5 million and $33.0 million, respectively, principal amount of our senior subordinated notes. The total purchase price of the notes was $15.5 million and $28.9 million, respectively, resulting in a gain of $1.9 million and $3.9 million, respectively, net of associated deferred financing fees, which is recorded on our condensed consolidated statement of operations for the respective period. The transactions were funded by availability under our former bank credit facility.

Indentures

The indentures governing the senior and senior subordinated notes each include permitted investment clauses, the most restrictive of which limits the amount of permitted investments to a basket of $150 million, increased by a calculated amount including 50% of net income, as defined in the indentures, and net of previous permitted investments. Also, the indentures allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, our coverage ratio (as defined in the indentures, essentially a ratio of consolidated EBITDA to fixed charges, including interest) for a trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Such pro forma coverage ratio was above 2.0 to 1.0 at the dates in which these respective tranches of senior and senior subordinated notes were issued; and, at June 30, 2011, after giving effect to the repayment of certain indebtedness, as defined in the indentures, our coverage ratio was above 2.0 to 1.0.

Borgata Bank Credit Facility

Significant Terms

In August 2010, Marina District Finance Company, Inc. (“MDFC”) closed a $950 million debt financing, consisting of the establishment of a $150.0 million new payment priority secured revolving credit facility (the "Borgata bank credit facility") and the issuance of $800 million of aggregate principal amount of notes. MDFC is a wholly-owned subsidiary of MDDC, which develops and owns Borgata, and which is the guarantor of both the Borgata bank credit facility and the notes. The proceeds from the financing were used to (i) pay fees and expenses related to the financing; (ii) repay the former credit facility; and (iii) make a one-time distribution to Borgata's joint venture owners.

The Borgata bank credit facility provides for a $150.0 million payment priority secured revolving credit facility and matures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of the assets of the Company, MDDC and any future subsidiaries of MDDC, subject to certain exceptions. The obligations under the Borgata bank credit facility will have priority in payment to payment of the notes.

Neither Boyd Gaming nor any of its wholly-owned subsidiaries is a guarantor of Borgata's new bank credit facility.

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

At June 30, 2011, the outstanding balance under the Borgata bank credit facility was $20.0 million, leaving contractual availability of $130.0 million. The interest rate on the outstanding borrowings at June 30, 2011 was 4.4%.

Financial and Other Covenants

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facility) of $30 million as of the end of each calendar quarter; (iii) imposing limitations on MDFC's ability to incur additional debt; and (iv) imposing restrictions on Borgata's ability to pay dividends and make other distributions, make certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

Compliance with Financial Covenants

We believe that MDFC was in compliance with the Borgata bank credit facility covenants, including minimum consolidated EBITDA and minimum liquidity, which, at June 30, 2011, were $160.2 million and $130.4 million, respectively.

Borgata Senior Secured Notes

9.5% Senior Secured Notes Due 2015.

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.5% senior secured notes due October 2015, at an issue price of 98.943%, resulting in a discount at issuance of $4.1 million. The notes require semi-annual interest payments on April 15 and October 15, which commenced on April 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

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

9.875% Senior Secured Notes Due 2018.

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.875% senior secured notes due August 2018, at an issue price of 99.315%, resulting in an original issue discount of $2.7 million. The notes require semi-annual interest payments on February 15 and August 15, which commenced on February 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

At any time prior to August 15, 2014, the notes may be redeemed at 100% of the principal amount thereof, plus a “make-whole premium” and accrued and unpaid interest. In addition, until August 15, 2013, MDFC may redeem up to 35% of the notes at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from certain equity offerings. In addition, at any time prior to August 15, 2013, MDFC may redeem up to an aggregate of 10% of the notes in each twelve month period at a redemption price of 103% of the principal amount thereof plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after August 15, 2013, MDFC shall have the option to redeem the 2018 Notes, in whole or in part, at redemption prices (expressed as percentages of the principal amount) ranging from 104.938% beginning on August 15, 2014, to 102.469% beginning on August 15, 2015, to 100% beginning on August 15, 2016 and thereafter, plus accrued and unpaid interest, to the applicable redemption date.

The original issue discount has been recorded as an offset to the principal amount of these notes and is being accreted to interest expense over the term of the notes using the effective interest method. The effective interest rate on the 9.50% notes due 2015 notes is 10.2% and on the 9.875% notes due 2018 is 10.3%.

Registration Rights Agreement

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principal amount of 9.5% Senior Secured Notes due 2015 and $400.0 million aggregate principal amount of 9.875% Senior Secured Notes due 2018 for new 9.5% Senior Secured Notes due 2015 and 9.875% Senior Secured Notes due 2018, respectively, that have been registered under the Securities Act of 1933. On June 28, 2011, the expiration date of the exchange offer, $396.4 million of the 9.5% Senior Secured Notes due 2015 and $400.0 of the 9.875% Senior Secured Notes due 2018 were validly tendered and accepted for exchange. This amount represents approximately 99.1% of the 9.5% Senior Secured Notes due 2015 and 100% of the 9.875% Senior Secured Notes due 2018, respectively.

NOTE 9. DERIVATIVE INSTRUMENTS

We utilize derivative instruments to manage interest rate risk.

Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. We designated current interest rate swaps as cash flow hedges through September 30, 2010, and measured their effectiveness using the long-haul method. If the derivative qualifies and is designated as a hedge, depending on the nature of the hedge, changes in its fair value will either be offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The effective portion of any gain or loss on our interest rate swaps is recorded in other comprehensive income (loss). We use the hypothetical derivative method to measure the ineffective portion of our interest rate swaps. Any ineffective portion of a derivative's change in fair value is immediately recognized in earnings.

Interest Rate Swap Agreements

The Company has entered into floating-to-fixed interest rate swap arrangements in order to manage interest rate risk relating to its Amended Credit Facility. We were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. These interest rate swap agreements modified the Company's exposure to interest rate risk by synthetically converting a portion of the Company's floating-rate debt to a fixed rate. The interest rate swap agreements terminated on June 30, 2011, however, the following presents the activity related to our accounting for the interest rate swaps during the periods in which they were outstanding.

The following table presents the historical fair value of the interest rate swaps recorded in the accompanying condensed consolidated balance sheets as of December 31, 2010, the balance of which are included in other long-term liabilities.




	Notional				December 31,
Effective Date	Amount		Fixed Rate		2010		Maturity Date
September 28, 2007	$	100,000	5.13	%	$	2,374	June 30, 2011
September 28, 2007	200,000		5.14	%	4,751		June 30, 2011
June 30, 2008	200,000		5.13	%	4,746		June 30, 2011
Totals	$	500,000			$	11,871

Hedge Accounting

These derivative instruments were accounted for as cash flow hedges through September 30, 2010. Accounting for cash flow hedging requires determining a division of hedge results deemed effective and deemed ineffective. However, most of the Company's hedges were designed in such a way so as to perfectly offset specifically-defined interest payments, such that no ineffectiveness has occurred, nor would any ineffectiveness occur, as long as the forecasted cash flows of the designated hedged items and the associated swap contracts remain unchanged.

However, on October 1, 2010, in anticipation of the refinancing of our former bank credit facility, we de-designated all of our interest rate swap agreements as cash flow hedges. Concurrent with the de-designation of the hedging relationship, hedge accounting was suspended and the amount remaining in accumulated other comprehensive loss associated with this cash flow hedging relationship was frozen. This amount is being amortized into interest expense over the respective remaining term of the associated debt. Prospectively, all changes in the fair value of these interest rate swaps will be recognized immediately in earnings.

Fair Value

Fair value approximates the amount we would pay if these contracts were settled at the respective valuation dates. Fair value is

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estimated based upon current, and predictions of future, interest rate levels along a yield curve, the remaining duration of the instruments and other market conditions, and therefore, is subject to significant estimation and a high degree of variability and fluctuation between periods. The fair value is adjusted, to reflect the impact of credit ratings of the counterparties or the Company, as applicable. These adjustments resulted in a reduction in the fair values as compared to their settlement values.

Credit risk relating to derivative counterparties is mitigated by using multiple, highly rated counterparties, and the credit quality of each is monitored on an ongoing basis.

The fair values of our derivative instruments at December 31, 2010 included approximately $0.2 million of credit valuation adjustments to reflect the impact of the credit ratings of both the Company and our counterparties, based primarily upon the market value of the credit default swaps of the respective parties. These credit valuation adjustments resulted in a reduction in the fair values of our derivative instruments as compared to their settlement values.

Classification of Changes in Fair Value

The effect of derivative instruments on the condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 was as follows (in thousands):




Derivatives in a Cash Flow Hedging Relationship - Interest Rate Swap Contracts	Gain Recognized in OCI on Derivative (Effective Portion)		Location of Gain (Loss) Reclassified from AOCI into Income (Ineffective Portion)	Gain (Loss) Reclassified from AOCI into Income (Ineffective Portion)
Three Months Ended
June 30, 2011	$	—	Interest expense	$	(6,063	)
June 30, 2010	4,869		Interest expense	554

Six Months Ended
June 30, 2011	—		Interest expense	(11,824		)
June 30, 2010	6,818		Interest expense	1,066



Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Contracts	Location of Loss Recognized in Income on Derivative (Ineffective Portion)	Loss Recognized in Income on Derivative (Ineffective Portion)

Three Months Ended June 30, 2011	Fair value adjustment of derivative instruments	$	48

Six Months Ended June 30, 2011	Fair value adjustment of derivative instruments	$	265

The net effect of our floating-to-fixed interest rate swaps resulted in an increase in interest expense of $6.1 million and $5.6 million for the three months ended June 30, 2011 and 2010, respectively, and an increase in interest expense of $11.8 million and $11.2 million for the six months ended June 30, 2011 and 2010, respectively, as compared to the contractual rate of the underlying hedged debt, for these periods.

During the three and six months ended June 30, 2011, due to the de-designation of our interest rate swap agreements as hedges during 2010, we recognized $0.0 million and $0.3 million, respectively, as a loss on the change in the fair value of these swaps. In addition, the Company amortized $6.1 million and accreted $0.6 million during the three months ended June 30, 2011 and 2010, respectively, and amortized $11.8 million and accreted $1.1 million during the six months ended June 30, 2011 and 2010, respectively, in OCI related to these, and other derivatives that were previously de-designated as hedging instruments.

NOTE 10. COMMITMENTS AND CONTINGENCIES

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Commitments

There have been no material changes to our commitments described under Note 12, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 15, 2011.

Contingencies

Nevada Use Tax Refund Claims

On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meals was exempt from use tax. On April 14, 2008, the Department filed a Petition for Rehearing (the “Petition”) on the decision. Additionally, on the same date the Nevada Legislature filed an Amicus Curiae brief in support of the Department's position. The Nevada Supreme Court denied the Department's Petition on July 17, 2008. We paid use tax, over the period November 2000 through May 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino properties and estimate the refund to be in the range of $17.5 million to $19.9 million, including interest. In late 2009, the Department audited and denied our refund claim and subsequently issued a $12.3 million sales tax deficiency assessment, plus interest of $7.5 million. We appealed both the denial of the refund claim as well as the deficiency assessment in a hearing before the Nevada Administrative Law Judge in September 2010. In April 2011, the judge issued a split decision, granting a refund on employee meals and applying a sales tax measure on complimentary meals; however, the ruling barred retroactive application of the sales tax measure to all years included in the refund claim period, effectively overturning the Department's 2009 deficiency assessment. Both we and the Department appealed the decision, with the exception of the portion related to the deficiency assessment, to the Nevada State Tax Commission (the "Commission"). Our Appeals hearing is scheduled for August 8, 2011. The Department did not appeal the Judge's decision overturning the 2009 deficiency assessment and therefore, the ruling on the deficiency assessment is final and non-appealable. Due to uncertainty surrounding the ultimate resolution of the Commission appeal, as well as subsequent appeals to higher levels of the state judicial system, we will not record any gain until both we and the Department have exhausted all appeal options and a final, non-appealable decision has been rendered. For periods subsequent to May 2008, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is probable, based on both procedural issues and the technical merits of the Department's arguments, that we will owe this tax.

Blue Chip Property Taxes

In May 2007, Blue Chip received a valuation notice indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. At that time, we estimated that the increase in assessed property value could result in a property tax assessment ranging between $4 million and $11 million for the eighteen-month period ended June 30, 2007. We recorded an additional charge of $3.2 million during the three months ended June 30, 2007 to increase our property tax liability to $5.8 million at June 30, 2007 as we believed that was the most likely amount to be assessed within the range. We subsequently received a property tax bill related to our 2006 tax assessment for $6.2 million in December 2007. As we have appealed the assessment, Indiana statutes allow for a minimum required payment of $1.9 million, which was paid against the $6.2 million assessment in January 2008. In February 2009, we received a notice of revaluation, which reduced the property's assessed value by $100 million and the tax assessment by approximately $2.2 million per year. We have subsequently paid the minimum required payment of $1.9 million against provisional bills received in 2007 through 2011, all of which were based on the 2006 valuation notice. In March 2011, we reached a settlement with the assessor, reducing the valuation by an additional $96.0 million and $74.0 million for the 2006 and 2007 tax years, respectively. As a result of the agreement reached on the 2006 and 2007 valuations, we have revised our accrual for years 2008 through 2011 to reflect the expected carryforward effect of the reductions received in the prior year settlements. Such reduction resulted in the reversal of previously accrued property tax expense of approximately $5.9 million during the six months ended June 30, 2011. We are currently in negotiations related to the 2008 and 2009 years but have not received valuation notices for years 2008 through 2011. We believe the assessment for the period from January 1, 2008 through June 30, 2011 could result in a property tax assessment ranging between $14.0 million and $18.0 million. We have accrued, net of the payments discussed above, approximately $18.0 million of property tax liability as of June 30, 2011, based on what we believe to be the most likely assessment within our range, once all appeals have been exhausted; however, we can provide no assurances that the estimated amount will approximate the actual amount. The final assessment notices for the period January 1, 2008 through June 30, 2011, which have not been received as of June 30, 2011, could result in further adjustment to our estimated property tax liability at Blue Chip.

Copeland

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his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland's objection. Copeland then filed an appeal of the agency's decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest's license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On September 21, 2002, the First Circuit Court of Appeal reversed the trial court's decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and results of operations.

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

NOTE 11. STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

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 from time to time. 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.

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our bank credit facility.

We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our bank credit facility.

During the six months ended June 30, 2011 or 2010, 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.

Dividends

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Dividends are declared at our Board of Director's discretion. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods; therefore, we did not declare a dividend during the six months ended June 30, 2011 or 2010.

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 June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Gaming	$	52	$	74	$	104	$	148
Food and beverage	10		14		20		28
Room	4		7		9		13
Selling, general and administrative	266		422		531		845
Corporate expense	1,808		2,355		5,289		4,694
Total shared-based compensation expense	$	2,140	$	2,872	$	5,953	$	5,728

NOTE 12. ACCUMULATED OTHER COMPREHENSIVE LOSS

Comprehensive income includes net income and all other non-stockholder changes in equity, or other comprehensive income. Components of the Company's comprehensive income are reported in the accompanying condensed consolidated statements of stockholders' equity. The cumulative balance of other comprehensive income consists solely of fair value adjustments related to hedged derivative instruments.

A portion of the net derivative instruments market adjustment included in accumulated other comprehensive loss, net, at June 30, 2011 relates to certain derivative instruments that we de-designated as cash flow hedges.

The following table reports the effects of the changes in the fair valuations of our derivative instruments.



	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(In thousands)
Fair value adjustment of derivative instruments	$	6,063		$	4,869		$	11,824		$	6,818
Tax effect	(2,177		)	(1,724		)	(4,230		)	(2,408		)
Fair value adjustment of derivative instruments, net of tax	$	3,886		$	3,145		$	7,594		$	4,410

NOTE 13. NONCONTROLLING INTEREST

Noncontrolling interest represents: (i) the 50% interest in Borgata, held by the Divestiture Trust for the economic benefit of MGM, which was initially recorded at fair value at the date of the effective change in control, on March 24, 2010; and (ii) all 100% of the members' equity interest in LVE, the variable interest entity which was consolidated in our financial statements effective January 1, 2010, but in which we hold no equity interest. Pursuant to the authoritative accounting guidance for noncontrolling interests, a noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit

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noncontrolling interest balance, as is the case with LVE, as presented below.

Changes in the noncontrolling interest during the six months ended June 30, 2011 are as follows:



	Borgata			LVE			Total
	(In thousands)
Six Months Ended June 30, 2011
Beginning balance, January 1, 2011	$	219,256		$	(13,718	)	$	205,538
Attributable net loss	(4,527		)	(955		)	(5,482		)
Comprehensive loss	—			(808		)	(808		)
Ending Balance, June 30, 2011	$	214,729		$	(15,481	)	$	199,248

LVE

Comprehensive Income

LVE has entered into interest rate derivative contracts in order to hedge exposure to increasing interest rates, and the impact of those rates on the cash flows of its variable-rate debt. LVE's active interest rate swaps are as follows (notional amount in thousands):



Effective Date	Notional Amount		Fixed Rate		Maturity Date
Derivatives Designated as Hedging Instruments:
December 21, 2007	$	131,986	4.59	%	November 1, 2013

Derivatives Not Designated as Hedging Instruments:
December 21, 2007	100,000		3.42	%	November 1, 2013
Totals	$	231,986

The fair value of these derivatives was $18.2 million at June 30, 2011, which represents the amount LVE would have to pay the counterparty to terminate these contracts as of such date.

At inception, these interest rate derivatives were designated as cash flow hedges and determined to be highly effective. The differential to be paid or received as a result of these swaps is accrued as interest rates change and is recognized as an adjustment to interest expense. The change in fair value of the effective portion of these derivative has been recorded in accumulated other comprehensive loss. During the three and six months ended June 30, 2011, LVE recognized $2.1 million and $0.8 million, respectively, in comprehensive loss related to the changes in the fair value of the effective portion of these hedges.

Prior to January 1, 2010, the date LVE is first reflected in our financial condition and results of operations, hedge accounting was discontinued on the interest rate swap related to the taxable debt because it was no longer expected to be highly effective in hedging the exposure to increased interest rates and the impact of those rates on cash flows. The ineffective portion of the swap caused the variable-rate debt to increase at a slower pace than the contractual increases in notional amount of the swap.

NOTE 14. FAIR VALUE MEASUREMENTS

We have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions.

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

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that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Balances Measured at Fair Value

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



	June 30, 2011
	Balance		Level 1		Level 2		Level 3
			(In thousands)
Assets
Cash and cash equivalents	$	175,780	$	175,780	$	—	$	—



	December 31, 2010
	Balance		Level 1		Level 2		Level 3
			(In thousands)
Assets
Cash and cash equivalents	$	145,623	$	145,623	$	—	$	—

Liabilities
Derivative instruments	$	11,871	$	—	$	11,871	$	—

The fair value of our cash and cash equivalents, classified in the fair value hierarchy as Level 1, is based on statements received from our banks at June 30, 2011 and December 31, 2010.

Our derivative instruments are classified in the fair value hierarchy as Level 2 as the LIBOR swap rate is observable at commonly quoted intervals for the full term of the interest rate swaps. See Note 9, Derivative Instruments for further discussion regarding the fair valuation of our interest rate swaps.

Balances Disclosed at Fair Value

The following table provides the fair value measurement information about our long-term debt at June 30, 2011 and December 31, 2010.

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	June 30, 2011
	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
	(In thousands)
Bank credit facility	$	1,425,000	$	1,425,000	$	1,332,663	Level 2
9.125% Senior Notes due 2018	500,000		490,825		513,750		Level 1
6.75% Senior Subordinated Notes due 2014	215,668		215,668		214,320		Level 1
7.125% Senior Subordinated Notes due 2016	240,750		240,750		225,660		Level 1
Borgata bank credit facility	20,000		20,000		20,000		Level 2
Borgata 9.50% Senior Secured Notes due 2015	400,000		387,798		416,000		Level 1
Borgata 9.875% Senior Secured Notes due 2018	400,000		388,298		411,000		Level 1
Other	11,421		11,421		10,850		Level 3
Total long-term debt, including current maturities	$	3,212,839	$	3,179,760	$	3,144,243



	December 31, 2010
	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
	(In thousands)
Bank credit facility	$	1,425,000	$	1,425,000	$	1,346,625	Level 2
9.125% Senior Notes due 2018	500,000		490,206		487,755		Level 1
6.75% Senior Subordinated Notes due 2014	215,668		215,668		212,163		Level 1
7.125% Senior Subordinated Notes due 2016	240,750		240,750		217,879		Level 1
Borgata bank credit facility	60,900		60,900		60,900		Level 2
Borgata 9.50% Senior Secured Notes due 2015	400,000		386,712		375,111		Level 1
Borgata 9.875% Senior Secured Notes due 2018	400,000		387,758		379,518		Level 1
Other	11,761		11,761		11,173		Level 3
Total long-term debt, including current maturities	$	3,254,079	$	3,218,755	$	3,091,124

The estimated fair value of the Amended Credit Facility is based on a relative value analysis performed on or about June 30, 2011 and December 31, 2010, respectively. The estimated fair value of Borgata's bank credit facility at June 30, 2011 and December 31, 2010 approximates its carrying value due to the short-term nature and variable repricing of the underlying Eurodollar loans comprising the Borgata bank credit facility. The estimated fair values of our senior subordinated and senior notes and Borgata's senior secured notes are based on quoted market prices as of June 30, 2011 and December 31, 2010, respectively. Debt included in the “Other” category is fixed-rate debt that is due March 2013 and is not traded and does not have an observable market input; therefore, we have estimated its fair value based on a discounted cash flow approach, after giving consideration to the changes in market rates of interest, creditworthiness of both parties, and credit spreads.

There were no transfers between Level 1 and Level 2 measurements during the six months ended June 30, 2011 or the year ended December 31, 2010.

Fair Value of Non-Recourse Obligations of Variable Interest Entity

At June 30, 2011 and December 31, 2010, the carrying value of LVE's long-term debt approximates its fair value due to the prevailing interest rates on the debt, which are comparable to market.

NOTE 15. WRITE-DOWNS AND OTHER ITEMS, NET

Write-downs and other items, net are comprised of the following:

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	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010
	In thousands
Impairment of trademark	$	—		$	—	$	5,000		$	—
Measurement period adjustments	(103		)	—		(473		)	—
Asset write-downs	852			12		929			12
Acquisition related expenses	370			1,979		370			3,580
Tunica flood expenses, net of recoveries	1,143			—		1,143			—
Total write-downs and other items, net	$	2,262		$	1,991	$	6,969		$	3,592

Impairment of Trademark

As discussed in Note 5, Intangible Assets, during the six months ended June 30, 2011,we recorded a $5.0 million impairment to the trademark, based upon the performance of an interim impairment test in connection with the valuation of Borgata.

Measurement Period Adjustments

In connection with the valuation procedures we performed on Borgata, we recorded measurement adjustments of $0.1 million and $0.5 million during the three and six months ended June 30, 2011, which were primarily comprised of a $0.3 million bargain purchase gain.

Asset Write-Downs

During the three months ended June 30, 2011 and 2010, we recognized a loss of $0.9 million and $0.0 million in connection with the disposal of certain property and equipment in the ordinary course of business. During the six months ended June 30, 2011, we recognized a loss of $0.9 million and $0.0 million in connection with the disposal of certain property and equipment in the ordinary course of business.

Acquisition Related Expenses

During the three months ended June 30, 2011 and 2010, we recorded $0.4 million and $2.0 million of expenses related to evaluating various acquisition possibilities and other business development activities. During the six months ended June 30, 2011 and 2010, we recorded $0.4 million and $3.6 million of expenses related to evaluating various acquisition possibilities and other business development activities.

Tunica Flood Expenses, Net of Recoveries

Due to flooding of the Mississippi River and temporary closure of the property in May 2011, during the three and six months ended June 30, 2011, we recorded $1.1 million of Tunica flood expenses, net of recoveries.

NOTE 16. SEGMENT INFORMATION

We have aggregated certain of our properties in order to present four Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; (iii) Midwest and South; and (iv) Atlantic City. The table below lists the classification of each of our properties.

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Las Vegas Locals
Gold Coast Hotel and Casino	Las Vegas, Nevada
The Orleans Hotel and Casino	Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall	Las Vegas, Nevada
Suncoast Hotel and Casino	Las Vegas, Nevada
Eldorado Casino	Henderson, Nevada
Jokers Wild Casino	Henderson, Nevada

Downtown Las Vegas
California Hotel and Casino	Las Vegas, Nevada
Fremont Hotel and Casino	Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel	Las Vegas, Nevada

Midwest and South
Sam's Town Hotel and Gambling Hall	Tunica, Mississippi
Par-A-Dice Hotel Casino	East Peoria, Illinois
Blue Chip Casino, Hotel & Spa	Michigan City, Indiana
Treasure Chest Casino	Kenner, Louisiana
Delta Downs Racetrack Casino & Hotel	Vinton, Louisiana
Sam's Town Hotel and Casino	Shreveport, Louisiana

Atlantic City
Borgata Hotel Casino & Spa	Atlantic City, New Jersey

Results of Operations - Adjusted EBITDA

We determine each of our wholly-owned properties' profitability based upon Property EBITDA, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, preopening expenses, write-downs and other charges, share-based compensation expense, deferred rent, change in value of derivative instruments, and gain/loss on early retirements of debt, as applicable. Reportable Segment Adjusted EBITDA is the aggregate sum of the Property EBITDA for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest and South segments, and also includes our share of Borgata's operating income before net amortization, preopening and other items.

Results for Downtown Las Vegas include the results of our travel agency and captive insurance company. Effective April 1, 2008, we reclassified the reporting of our Midwest and South segment to exclude the results of Dania Jai-Alai, our pari-mutuel jai-alai facility, since it does not share similar economic characteristics with our other Midwest and South operations; therefore, the results of Dania Jai-Alai are included as part of the “Other” category on the accompanying table.

We reclassify the reporting of corporate expense on the accompanying table in order to exclude it from our subtotal for Reportable Segment Adjusted EBITDA and include it as part of total other operating costs and expenses. Furthermore, corporate expense is now presented to include its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations, in addition to the corporate portion of share-based compensation expense. Other operating costs and expenses include Property EBITDA from Dania Jai-Alai, deferred rent, and share-based compensation expense charged to our Reportable Segments. Interest expense is net of interest income and amounts capitalized.

The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Adjusted EBITDA to operating income (loss), as reported in our accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010.

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	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Gross Revenues
Las Vegas Locals	$	167,346	$	169,658	$	338,792	$	343,555
Downtown Las Vegas	62,911		61,007		124,538		120,720
Midwest and South	203,526		205,466		410,616		413,522
Atlantic City	239,609		238,924		461,525		260,927
Reportable Segment Gross Revenues	673,392		675,055		1,335,471		1,138,724
Other	1,485		1,581		3,040		3,555
Gross revenues	$	674,877	$	676,636	$	1,338,511	$	1,142,279

Reportable Segment Adjusted EBITDA
Las Vegas Locals	$	38,570	$	36,810	$	78,213	$	77,223
Downtown Las Vegas	9,366		9,310		18,370		17,682
Midwest and South	42,276		35,590		83,487		74,869
Atlantic City	38,657		42,960		70,339		56,043
Reportable Segment Adjusted EBITDA	$	128,869	$	124,670	$	250,409	$	225,817

Other operating costs and expenses
Depreciation and amortization	$	48,488	$	55,408	$	99,072	$	95,454
Corporate expense	12,264		13,526		25,544		25,615
Preopening expenses	1,741		1,243		3,572		2,306
Our share of Borgata's other items and write-downs, net	—		—		—		34
Write-downs and other items, net	2,262		1,991		6,969		3,592
Other	2,124		2,826		5,158		5,110
Total other operating costs and expenses	66,879		74,994		140,315		132,111
Operating income	$	61,990	$	49,676	$	110,094	$	93,706

Operating Income from Borgata

The following table reconciles our operating income from Borgata, as reported in our condensed consolidated statements of operations, to the Atlantic City Reportable Segment Adjusted EBITDA, as reported above:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	In thousands
Operating income from Borgata	$	—	$	—	$	—	$	8,146
Our share of Borgata's write-downs and other items, net	—		—		—		34
Our share of Borgata's operating income before net amortization, preopening and other items	—		—		—		8,180
Borgata EBITDA(1)	38,657		42,960		70,339		47,863
Adjusted EBITDA, Atlantic City	$	38,657	$	42,960	$	70,339	$	56,043


(1)	As discussed above, Borgata's results of operations for the three and six months ended June 30, 2011 and for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations for the three and six

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

months ended June 30, 2011 and 2010, respectively.

Total Assets

The Company's total assets, by Reportable Segment, consisted of the following amounts at June 30, 2011 and December 31, 2010:



	June 30, 2011		December 31, 2010
	(In thousands)
Assets
Las Vegas Locals	$	1,253,016	$	1,284,160
Downtown Las Vegas	133,977		136,868
Midwest and South	1,090,603		1,117,959
Atlantic City	1,413,434		1,433,265
Total Reportable Segment assets	3,891,030		3,972,252
Corporate	1,457,118		1,428,763
Other	288,387		288,274
Total assets	$	5,636,535	$	5,689,289

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

NOTE 17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In contemplation of the registration of our 9.125% Senior Notes due 2018 under the Securities Act of 1933, separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of this debt is presented below. The non-guarantors primarily represent special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly-owned subsidiaries.

The tables below present the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010 and the condensed consolidating statements of operations for the three and six month periods ended June 30, 2011 and 2010 and the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010.

Condensed Consolidating Balance Sheets



	June 30, 2011
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
					(In thousands)
Assets
Cash and cash equivalents	$	76,513	$	74,481	$	3,926		$	20,860		$	—		$	175,780
Other current assets	42,220		22,711		18,673			45,751			—			129,355
Property and equipment, net	107,365		1,895,308		76,698			1,236,221			—			3,315,592
Assets held for development	—		923,997					195,941			—			1,119,938
Investments in subsidiaries	3,715,764		334,221		32			4,570			(4,054,587		)	—
Intercompany receivable	—		2,063,821		66,146						(2,129,967		)	—
Other assets, net	37,161		19,908		2,966			94,937			—			154,972
Intangible assets, net	—		460,193		—			67,129			—			527,322
Goodwill, net	—		212,794		782			—			—			213,576
Total assets	$	3,979,023	$	6,007,434	$	169,223		$	1,665,409		$	(6,184,554	)	$	5,636,535

Liabilities and Stockholders' Equity
Current liabilities	$	41,040	$	164,305	$	17,526		$	106,704		$	—		$	329,575
Intercompany payable	349,820		1,386,606		255,615			—			(1,992,041		)	—
Current maturities of long-term debt	356,002		709		—			—			—			356,711
Non-recourse obligations	—		—		—			248,128			—			248,128
Long-term debt, net of current maturities	2,016,241		10,712		—			796,096			—			2,823,049
Other long-term liabilities	19,959		403,406		1,538			58,960			—			483,863

Preferred stock	—		—		—			—			—			—
Common stock	863		31,128		32			—			(31,160		)	863
Additional paid-in capital	640,661		2,972,069		41,724			476,733			(3,490,526		)	640,661
Retained earnings (deficit)	554,437		1,038,499		(147,212		)	(21,212		)	(870,075		)	554,437
Total Boyd Gaming Corporation stockholders' equity (deficit)	1,195,961		4,041,696		(105,456		)	455,521			(4,391,761		)	1,195,961
Noncontrolling interest	—		—		—			—			199,248			199,248
Total stockholders' equity (deficit)	1,195,961		4,041,696		(105,456		)	455,521			(4,192,513		)	1,395,209
Total liabilities and stockholders' equity	$	3,979,023	$	6,007,434	$	169,223		$	1,665,409		$	(6,184,554	)	$	5,636,535

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Balance Sheets, continued



	December 31, 2010
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)		Eliminations			Consolidated
						(In thousands)
Assets
Cash and cash equivalents	$	11,231		$	88,282	$	3,679		$	42,431	$	—		$	145,623
Other current assets	10,395			61,829		15,246			46,546		—			134,016
Property and equipment, net	111,921			1,939,834		77,949			1,253,667		—			3,383,371
Assets held for development	—			923,038		—			196,365		—			1,119,403
Investments in subsidiaries	3,373,486			424,707		—			5,185		(3,803,378		)	—
Intercompany receivable	50,824			—		69,931					(120,755		)	—
Other assets, net	73,420			46,885		2,979			89,836		(59,534		)	153,586
Intangible assets, net	—			460,714		—			79,000		—			539,714
Goodwill, net	—			212,794		782			—		—			213,576
Total assets	$	3,631,277		$	4,158,083	$	170,566		$	1,713,030	$	(3,983,667	)	$	5,689,289

Liabilities and Stockholders' Equity
Current liabilities	$	39,663		$	175,870	$	17,462		$	109,161	$	—		$	342,156
Intercompany payable	—			472,795		246,144					(718,939		)	—
Current maturities of long-term debt	25,000			690		—			—		—			25,690
Non-recourse obligations	—			—		—			243,059		—			243,059
Long-term debt, net of current maturities	2,346,623			11,072		—			835,370		—			3,193,065
Other long-term liabilities	30,786			399,148		1,538			59,104		—			490,576

Preferred stock	—			—		—			—		—			—
Common stock	862			30,298		32			—		(30,330		)	862
Additional paid-in capital	635,028			2,320,477		41,724			421,472		(2,783,673		)	635,028
Retained earnings (deficit)	560,909			747,734		(136,334		)	44,864		(656,264		)	560,909
Accumulated other comprehensive loss	(7,594		)	—		—			—		—			(7,594		)
Total Boyd Gaming Corporation stockholders' equity (deficit)	1,189,205			3,098,509		(94,578		)	466,336		(3,470,267		)	1,189,205
Noncontrolling interest	—			—		—			—		205,538			205,538
Total stockholders' equity (deficit)	1,189,205			3,098,509		(94,578		)	466,336		(3,264,729		)	1,394,743
Total liabilities and stockholders' equity	$	3,631,277		$	4,158,084	$	170,566		$	1,713,030	$	(3,983,668	)	$	5,689,289

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations



	Three months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	38,350		$	377,443		$	14,204		$	185,525		$	(41,119	)	$	574,403

Costs and expenses
Operating	—			203,551			14,537			96,014			—			314,102
Selling, general and administrative	—			62,073			2,011			32,699			—			96,783
Maintenance and utilities	—			20,316			1,038			15,419			—			36,773
Depreciation and amortization	2,004			29,204			732			16,548			—			48,488
Corporate expense	22,511			11,611			653			—			(22,511		)	12,264
Preopening expenses	240			(3,007		)	4,416			92			—			1,741
Write-downs and other items, net	397			1,116			—			749			—			2,262
Total costs and expenses	25,152			324,864			23,387			161,521			(22,511		)	512,413

Equity in earnings of subsidiaries	15,397			(2,842		)	—			—			(12,555		)	—
Operating income	28,595			49,737			(9,183		)	24,004			(31,163		)	61,990

Other expense (income)
Interest expense, net	39,847			198			(6		)	26,635			—			66,674
Fair value adjustment of derivative instruments	48			—			—			—			—			48
Total other expense, net	39,895			198			(6		)	26,635			—			66,722

Income (loss) before income taxes	(11,300		)	49,539			(9,177		)	(2,631		)	(31,163		)	(4,732		)
Income taxes	8,349			(10,691		)	1,611			(180		)				(911		)
Net income (loss)	(2,951		)	38,848			(7,566		)	(2,811		)	(31,163		)	(5,643		)
Net loss attributable to controlling interest	—			—			—			—			2,692			2,692
Net income (loss) attributable to Boyd Gaming Corporation	$	(2,951	)	$	38,848		$	(7,566	)	$	(2,811	)	$	(28,471	)	$	(2,951	)

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations, continued



	Three months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	34,310		$	375,466		$	16,088		$	186,892		$	(34,310	)	$	578,446

Costs and expenses
Operating	—			208,469			14,052			96,445			—			318,966
Selling, general and administrative	—			65,693			2,132			31,841			—			99,666
Maintenance and utilities	—			21,257			1,067			15,646			—			37,970
Depreciation and amortization	3,134			32,927			1,111			18,236			—			55,408
Corporate expense	24,368			(14,055		)	3,213			—			—			13,526
Preopening expenses	76			(98		)	1,265			—			—			1,243
Write-downs and other items, net	1,979			—			—			12			—			1,991
Total costs and expenses	29,557			314,193			22,840			162,180			—			528,770

Equity in earnings of subsidiaries	18,106			8,299			—			—			(26,405		)	—
Operating income	22,859			69,572			(6,752		)	24,712			(60,715		)	49,676

Other expense (income)
Interest expense, net	28,879			183			—			5,588			—			34,650
Gain on early retirements of debt	(1,912		)	—			—			—			—			(1,912		)
Total other expense, net	26,967			183			—			5,588			—			32,738

Income (loss) before income taxes	(4,108		)	69,389			(6,752		)	19,124			(60,715		)	16,938
Income taxes	7,490			(11,581		)	1,016			(1,837		)	—			(4,912		)
Net income (loss)	3,382			57,808			(5,736		)	17,287			(60,715		)	12,026
Net loss attributable to noncontrolling interest	—			—			—			—			(8,644		)	(8,644		)
Net income (loss) attributable to Boyd Gaming Corporation	$	3,382		$	57,808		$	(5,736	)	$	17,287		$	(69,359	)	$	3,382

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations, continued



	Six months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	76,700		$	758,920		$	28,583		$	357,256		$	(82,110	)	$	1,139,349

Costs and expenses
Operating	—			411,161			29,053			187,125			—			627,339
Selling, general and administrative	—			124,750			4,275			63,546			—			192,571
Maintenance and utilities	—			40,484			1,937			31,767			—			74,188
Depreciation and amortization	4,028			58,101			1,529			35,414			—			99,072
Corporate expense	48,685			—			1,333			—			(24,474		)	25,544
Preopening expenses	495			(699		)	9,094			92			(5,410		)	3,572
Write-downs and other items, net	369			835			—			5,765			—			6,969
Total costs and expenses	53,577			634,632			47,221			323,709			(29,884		)	1,029,255

Equity in earnings of subsidiaries	30,180			(5,265		)	—			—			(24,915		)	—
Operating income	53,303			119,023			(18,638		)	33,547			(77,141		)	110,094

Other expense (income)
Interest expense, net	79,570			344			—			44,046			—			123,960
Fair value adjustment of derivative instruments	265			—			—			—			—			265
Loss on early retirements of debt	20			—			—			—			—			20
Total other expense, net	79,855			344			—			44,046			—			124,245

Income (loss) before income taxes	(26,552		)	118,679			(18,638		)	(10,499		)	(77,141		)	(14,151		)
Income taxes	20,080			(21,595		)	3,221			491						2,197
Net income (loss)	(6,472		)	97,084			(15,417		)	(10,008		)	(77,141		)	(11,954		)
Net loss attributable to noncontrolling interest	—			—			—			—			5,482			5,482
Net income (loss) attributable to Boyd Gaming Corporation	$	(6,472	)	$	97,084		$	(15,417	)	$	(10,008	)	$	(71,659	)	$	(6,472	)

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations, continued



	Six months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Net revenues	$	69,826		$	755,808		$	34,105		$	203,668		$	(69,826	)	$	993,581

Costs and expenses
Operating	—			416,540			28,078			104,383			—			549,001
Selling, general and administrative	—			132,150			4,494			33,300			—			169,944
Maintenance and utilities	—			41,901			2,086			18,122			—			62,109
Depreciation and amortization	6,416			66,811			2,366			19,861			—			95,454
Corporate expense	47,268			—			6,785			—			(28,438		)	25,615
Preopening expenses	156			(74		)	2,224			—			—			2,306
Write-downs and other items, net	3,580			—			—			12			—			3,592
Total costs and expenses	57,420			657,328			46,033			175,678			(28,438		)	908,021

Equity in earnings of subsidiaries	40,830			14,165			—			—			(46,849		)	8,146
Operating income	53,236			112,645			(11,928		)	27,990			(88,237		)	93,706

Other expense (income)
Interest expense, net	57,213			368			—			6,072			—			63,653
Gain on early retirements of debt	(3,949		)	—			—			—			—			(3,949		)
Other non-operating expenses, net	3,133			—			—			—			—			3,133
Total other expense, net	56,397			368			—			6,072			—			62,837

Income (loss) before income taxes	(3,161		)	112,277			(11,928		)	21,918			(88,237		)	30,869
Income taxes	14,978			(24,016		)	2,014			(2,137		)	—			(9,161		)
Net income (loss)	11,817			88,261			(9,914		)	19,781			(88,237		)	21,708
Noncontrolling interest	—			—			—			—			(9,891		)	(9,891		)
Net income (loss) attributable to Boyd Gaming Corporation	$	11,817		$	88,261		$	(9,914	)	$	19,781		$	(98,128	)	$	11,817

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Cash Flows



	Six months ended June 30, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations		Consolidated
							(In thousands)
Cash flows from operating activities
Net cash from operating activities	$	64,350		$	7,102		$	464		$	25,652		$	—	$	97,568

Cash flows from investing activities
Capital expenditures	—			(20,563		)	(217		)	(10,094		)	—		(30,874		)
Investments in subsidiaries, net	787			—			—			(787		)	—		—
Other investing activities	55			—			—			168			—		223
Net cash from investing activities	842			(20,563		)	(217		)	(10,713		)	—		(30,651		)

Cash flows from financing activities
Borrowings under bank credit facility	35,920			—			—			365,700			—		401,620
Payments under bank credit facility	(35,920		)	—			—			(406,600		)	—		(442,520		)
Payments on long-term debt	—			(340		)	—			—			—		(340		)
Proceeds from issuance of non-recourse obligations	—			—			—			5,250			—		5,250
Debt financing cosst, net	(149		)	—			—			(679		)	—		(828		)
Other financing activities	239			—			—			(181		)	—		58
Net cash from financing activities	90			(340		)	—			(36,510		)	—		(36,760		)

Net change in cash and cash equivalents	65,282			(13,801		)	247			(21,571		)	—		30,157
Cash and cash equivalents, beginning of period	11,231			88,282			3,679			42,431			—		145,623
Cash and cash equivalents, end of period	$	76,513		$	74,481		$	3,926		$	20,860		$	—	$	175,780

Table of Contents

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Condensed Consolidating Statements of Cash Flows



	Six months ended June 30, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (100% Owned)			Non-Guarantor Subsidiaries (Not 100% Owned)			Eliminations			Consolidated
							(In thousands)
Cash flows from operating activities
Net cash from operating activities	$	107,356		$	(5,277	)	$	(1,216	)	$	38,471		$	10,423		$	149,757

Cash flows from investing activities
Capital expenditures	(8,021		)	(34,002		)	(342		)	(5,116		)	—			(47,481		)
Investments in subsidiaries, net	—			223			—			(525		)	—			(302		)
Net cash upon change in control of Borgata				26,025						26,025			(26,025		)	26,025
Other investing activities	138			—			—			—			—			138
Net cash from investing activities	(7,883		)	(7,754		)	(342		)	20,384			(26,025		)	(21,620		)

Cash flows from financing activities
Borrowings under bank credit facility	374,800			—			—			190,983			—			565,783
Payments under bank credit facility	(399,300		)	—			—			(196,400		)	—			(595,700		)
Payments under note payable	(46,875		)	—			—			—			—			(46,875		)
Distributions to noncontrolling interest	—			—			—			(31,204		)	15,602			(15,602		)
Proceeds from stock options exercised	606			—			—			—			—			606
Payments on long-term debt	(28,861		)	(321		)	—			—			—			(29,182		)
Other financing activities	99			—			—			(295		)	—			(196		)
Net cash from financing activities	(99,531		)	(321		)	—			(36,916		)	15,602			(121,166		)

Net change in cash and cash equivalents	(58		)	(13,352		)	(1,558		)	21,939			—			6,971
Cash and cash equivalents, beginning of period	363			88,071			4,768			—			—			93,202
Cash and cash equivalents, end of period	$	305		$	74,719		$	3,210		$	21,939		$	—		$	100,173

NOTE 18. SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after June 30, 2011. During this period, the following material subsequent events occurred.

Pending Acquisition of IP Casino Resort Spa

On August 4, 2011, as required by the Agreement for Purchase and Sale with Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC (collectively, the “Seller”), we made a non-refundable (except under certain circumstances) earnest money deposit of $10 million. Pursuant to the agreement, the Seller agreed to sell and transfer, and we agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP Casino Resort Spa in Biloxi, Mississippi, on an as-is basis (except as otherwise provided in the agreement), for a purchase price of $278 million in cash. The $10 million earnest money deposit will be credited against the purchase price upon the closing. Following the closing of the transaction, we will also make charitable contributions to the Engelstad Family Foundation equal to an aggregate of $10 million, which funds are intended to be distributed on behalf of, and in the name of, the Company, over five years to local and regional Biloxi charitable organizations to be designated by the Company. In addition, following the closing, we intend to perform certain capital improvement projects with respect to the IP Casino Resort Spa with costs estimated to be $44 million.

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BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

contemplated by the Agreement and other licenses and permits required to operate the Property; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the Closing; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iv) other customary closing conditions.

In addition to certain other termination rights, the agreement may be terminated by either us or the Seller if the closing has not occurred by the date that is six months following the date of the agreement. We currently anticipate that the closing will occur before the end of the year.

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

Executive Overview

Boyd Gaming Corporation (the “Company,” “Boyd Gaming,” “we” or “us”) is a multi-jurisdictional gaming company that has been operating for approximately 35 years.



Las Vegas Locals
Gold Coast Hotel and Casino	Las Vegas, Nevada
The Orleans Hotel and Casino	Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall	Las Vegas, Nevada
Suncoast Hotel and Casino	Las Vegas, Nevada
Eldorado Casino	Henderson, Nevada
Jokers Wild Casino	Henderson, Nevada

Downtown Las Vegas
California Hotel and Casino	Las Vegas, Nevada
Fremont Hotel and Casino	Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel	Las Vegas, Nevada

Midwest and South
Sam's Town Hotel and Gambling Hall	Tunica, Mississippi
Par-A-Dice Hotel Casino	East Peoria, Illinois
Blue Chip Casino, Hotel & Spa	Michigan City, Indiana
Treasure Chest Casino	Kenner, Louisiana
Delta Downs Racetrack Casino & Hotel	Vinton, Louisiana
Sam's Town Hotel and Casino	Shreveport, Louisiana

Atlantic City
Borgata Hotel Casino & Spa	Atlantic City, New Jersey

We also own and operate Dania Jai-Alai, which is a pari-mutuel jai-alai facility with approximately 47 acres of related land located in Dania Beach, Florida. As discussed under "Other Items Affecting Liquidity", on April 29, 2011, we and Dania Entertainment Center, LLC entered into an asset purchase agreement for the sale of certain assets and liabilities of Dania Jai-Alai.

We also own and operate a travel agency in Hawaii, and a captive insurance company, also in Hawaii, that underwrites travel-related insurance.

Our Properties

We operate gaming entertainment properties, most of which also include hotel, dining, retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the volume and spending levels of customers at our properties, which affects our operating results.

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Our properties have historically generated significant operating cash flow, with the majority of our revenue being cash-based. While we do provide casino credit, subject to certain gaming regulations and jurisdictions, most of our customers wager with cash and pay for non-gaming services by cash or credit card.

Our industry is capital intensive; 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, purchase our debt or equity securities, pay income taxes and pay dividends.

Our Strategy

Our overriding strategy is to increase shareholder value. We follow several strategic initiatives on which we are focused to improve and grow our business.

Strengthening our Balance Sheet: We remain committed to finding opportunities to strengthen our balance sheet. We took an important step in this direction when we reached an agreement in April 2011 to sell Dania Jai-Alai for $80 million. This asset is not consistent with our current growth strategy, and by selling it, we will raise a significant amount of capital that can be used to repay debt.

Operating Efficiently: We also remain committed to operating more efficiently. We will endeavor to prevent unneeded expense from returning to the business. The efficiencies of our business model position us to flow a substantial portion of revenue gains directly to the bottom line. Margin improvements will remain a driver of profit growth for the Company going forward.

Evaluating Acquisition Opportunities: Another key component of our strategy could be acquisitions. We will evaluate potential transactions in a way that is strategic, deliberate, and disciplined. Our intention is to pursue opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price.

Maintaining our Brand: Finally, the ability of our employees to deliver great customer service remains a key differentiator for our Company and our brands. Our employees are a big reason that our customers continue to choose our properties over the competition across the country.

Our Focus

As we have come to appreciate over the recent past, we cannot control the national economy, the pace of the recovery or the spending habits of the consumer. What we can control is our focus - and our focus will remain on: (i) ensuring our existing operations are managed as efficiently as possible and remain positioned for growth; (ii) our capital structure and strengthening our balance sheet, not just by paying down debt, but also by strengthening our operations and diversifying our asset base; and (iii) our growth strategy, which is built on finding those assets that are a good strategic fit and provide an appropriate return to our shareholders.

Overall Outlook

We believe that our key operating results for each of the three and six months ended June 30, 2011 and 2010 have begun to show positive trends. Although over the course of the past several years, the severe economic recession has had a profound effect on consumer confidence, and has shifted spending away from discretionary items, such as leisure, hospitality, gaming and entertainment activities, these recent quarterly results indicate that we have realized some stabilizing trends in our business. Generally, the job market is strengthening, as the national unemployment rate has continued to decline throughout 2011. As the job market recovers and expands, we believe that consumer confidence will strengthen further.

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

In addition to the “B Connected” player loyalty program, we launched the “B Connected Mobile” program in July 2010. “B Connected Mobile,” the first multi-property, loyalty program-based iPhone application of its kind in the gaming industry, is a personalized mobile application that delivers customized offers and information directly to a customer's iPhone, iPod Touch or iPad. The application further expands the benefits of the “B Connected” program. “B Connected Mobile,” a GPS powered feature,

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provides real-time personalized information when a customer visits a Boyd property, including: hotel, dining and gaming offers, such as “Best Rates Available” on hotel rooms for “B Connected” members, instant access to event information, schedules and special offers at all Boyd Gaming properties using “B Connected,” a search engine that allows customers to find Boyd Gaming casinos that have their favorite machines and displays the games' locations on a casino floor map, the ability to track “B Connected” point balances in real time, and the ability to make immediate hotel or restaurant reservations.

Development Activities

On August 1, 2008, due to the difficult environment in the capital markets, as well as weak economic conditions, we announced the delay of our multibillion dollar Echelon development project on the Las Vegas Strip. At such time, we did not anticipate the long-term effects of the economic recession and continued economic downturn, evidenced by lower occupancy rates, declining room rates and reduced consumer spending across the country, but particularly in the Las Vegas region; nor did we predict that the incremental supply becoming available on the Las Vegas Strip would face such depressed demand levels, thereby elongating the time for absorption of this additional supply into the market. As we do not yet believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction of Echelon for three to five years, as previously disclosed. We also believe financing for a development project like Echelon continues to be unavailable.

Nonetheless, we remain committed to having a significant presence on the Las Vegas Strip. During the suspension period, we continue to consider alternative development options for Echelon, which may include developing the project in phases, alternative capital structures for the project, scope modifications to the project, or additional strategic partnerships, among others. We can provide no assurances as to when, or if, construction will resume on the project, or if we will be able to obtain alternative sources of financing for the project. As we develop and explore the viability of alternatives for the project, we will monitor these assets for recoverability. If we are subject to a non-cash write-down of these assets, it could have a material adverse impact on our consolidated financial statements.

LVE Energy Partners, LLC (“LVE”) is a joint venture between Marina Energy LLC and DCO ECH Energy, LLC. Through our wholly-owned subsidiary, Echelon Resorts LLC ("Echelon Resorts"), we have entered into an Energy Sales Agreement ("ESA") with LVE, to design, build, own (other than the underlying real property which is leased from Echelon Resorts) and operate a central energy center and related distribution system for our planned Echelon resort development. Pursuant to the ESA, LVE will provide chilled and hot water, electricity and emergency electricity generation to Echelon and potentially other joint venture entities associated with the Echelon development project or other third parties. The term of the ESA is 25 years, beginning when Echelon commences commercial operations. Assuming the central energy center is completed and functions as planned, we will pay a monthly service fee, which is comprised of a fixed capacity charge, an escalating operations and maintenance charge, and an energy charge. The aggregate of our monthly fixed capacity charge portion of the service fee will be $23.4 million per annum (the “Annual Fixed Capacity Charge”). The Annual Fixed Capacity Charge, which will be payable for a 25-year period, was to commence in November 2010. However, LVE has suspended construction of the central energy center and the obligation to pay the Fixed Capacity Charge has not commenced.

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

On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). LVE has agreed not to initiate any litigation with respect to its April 3, 2009 claim of an alleged breach of the ESA and both Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. Under the Periodic Fee Agreement, Echelon Resorts agreed to pay LVE, beginning on March 4, 2011, a monthly periodic fee (the “Periodic Fee”) and an operation and maintenance fee until Echelon Resorts either (i) resumes construction of the project or (ii) exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval. We have posted a letter of credit in the amount of $6.0 million to secure Echelon Resorts' obligation to pay the Periodic Fee and the operation and maintenance fee.

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As of June 30, 2011, we have incurred approximately $924.0 million in capitalized costs related to the Echelon project, including land, and not including approximately $195.9 million associated with the construction costs of the central energy facility. As part of the delay of the project, we expect to additionally incur approximately $0.3 million to $3.0 million of capitalized costs annually, principally related to such items as offsite fabrication of a skylight and curtain wall as well as offsite improvements. In addition, we expect annual recurring project costs, consisting primarily of monthly charges related to construction of the central energy center, site security, property taxes, rent and insurance, of approximately $15.0 million to $17.0 million that will be charged to preopening or other expense as incurred during the project's suspension period.

In addition to the expansion projects mentioned above, we regularly evaluate opportunities for growth through the development of gaming operations in existing or new markets, along with opportunities associated with acquiring other gaming entertainment facilities.

Other Events

Effective Control of Borgata

As discussed above, due to our controlling interest in Borgata, we measured our previously held equity interest at a provisional fair value. Additionally, the financial position of Borgata is presented in our condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010; its results of operations for the three months ended June 30, 2011 are included in our condensed consolidated statement of operations for the three months ended June 30, 2011; its results of operations for the six months ended June 30, 2011 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2011; its results of operations for the three months ended June 30, 2010 are included in our condensed consolidated statement of operations for the three months ended June 30, 2010; and its results of operations for the period from March 24 through June 30, 2010 are included in our condensed consolidated statements of operations and cash flows for the six months ended June 30, 2010.

At the date we obtained effective control, and applied the acquisition method of accounting, we were required to make significant estimates and assumptions regarding the provisional fair values of Borgata's assets and liabilities. This method also allowed us to refine these estimates over a one-year measurement period to reflect new information obtained about facts and circumstances that existed as of the date of effective control, which, if known, would have affected the measurement of the amounts recognized as of that date. Any changes to the provisional valuation during this one-year period are referred to as “measurement period adjustments”. We recorded certain measurement period adjustments and retrospectively included the effects of those adjustments in the condensed consolidated balance sheet as of December 31, 2010 included herein.

RESULTS OF OPERATIONS

Summary of Operating Results

Three and six months ended June 30, 2011 and 2010

Throughout the discussion in this section, our results of operations for the six months ended June 30, 2010 are presented considering the pro forma effect of the consolidation of Borgata as if such had occurred on January 1, 2010, rather than March 24, 2010. This presentation is for the purposes of comparability, and all such results reflecting this pro forma are identified as such.

Specifically, in our Las Vegas Locals region, visitor counts have been increasing or stable over the past eighteen months. Our Downtown Las Vegas segment is benefiting from the present strength of its Hawaiian customer base. The economy in the Midwest and South region has progressed a bit ahead of both the national and certainly of Las Vegas economies. Although we have gained market share and increased non-gaming revenues in Atlantic City, the entire market continues to experience a difficult period, due to increased local and regional competition, resulting in increased promotional slot credits and table games incentives.

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The following provides a summary of certain key operating results:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010		2010
									Actual		Pro Forma
	(In thousands)
Net revenues	$	574,403		$	578,446	$	1,139,349		$	993,581	$	1,151,870
Operating Income	61,990			49,676		110,094			93,706		101,851
Net income (loss) attributable to Boyd Gaming Corporation	(2,951		)	3,382		(6,472		)	11,817		11,817

Net revenues

Net revenues were $574.4 million for the three months ended June 30, 2011, compared to $578.4 million for the comparable period in the prior year. The decline was relatively flat, as most regions of our business continue to stabilize. As discussed below, we saw marginal growth in our Downtown and Midwest and South regions, which was slightly offset by a slight decline in our Las Vegas Locals segment, and more significantly by a decrease in Atlantic City. While our Las Vegas Locals and Midwest and South segments experienced slight year-over-year declines in net revenues, our Downtown segment experienced a year-over-year increase.

Giving consideration to the pro forma effect of the consolidation of Borgata, net revenues were $1.14 billion compared to $1.15 billion for the six months ended June 30, 2011 and 2010, respectively, a slight decline, which was primarily driven by the competitive pressures in Atlantic City.

Operating income

Operating income increased by 24.8% to $62.0 million during the three months ended June 30, 2011 compared to the corresponding period of the prior year primarily due to improved operating gaming margins, our ongoing cost containment efforts and lower depreciation and amortization expense, as discussed below.

For largely the same reasons, operating income increased by 8.1% to $110.1 million during the six months ended June 30, 2011 as compared to $101.9 million in the comparable period of the prior year, as adjusted to reflect the pro forma consolidation of Borgata during such entire period.

Net income (loss) attributable to Boyd Gaming Corporation

Net loss attributable to Boyd Gaming was $3.0 million for the three months ended June 30, 2011, compared to net income of $3.4 million for the corresponding period of the prior year, due primarily to increased interest expense on higher outstanding debt balances, and higher average interest rates related to our refinancing activities in 2010 and the adverse effect of unitary state income taxes.

Net loss attributable to Boyd Gaming was $6.5 million for the six months ended June 30, 2011compared to net income of $11.8 million for the six months ended June 30, 2010. The decrease in this period is also due to higher interest costs, as interest expense increased significantly, as further discussed below.

Operating Revenues

Three and six months ended June 30, 2011 and 2010

The following analysis discusses our operating revenues, on a consolidated basis, which is further supplemented by operating segment detail below.

We derive the majority of our gross revenues from our gaming operations, which produced approximately 72% of gross revenues for the three months ended June 30, 2011 and 2010, and 72% and 73% of gross revenues for the six months ended June 30, 2011 and 2010, respectively. Food and beverage gross revenues, which produced approximately 14% of gross revenues for all of the three months ended June 30, 2011 and 2010, and the six months ended June 30, 2011 and 2010, respectively, represent the next most significant revenue source, followed by room and other, both of which separately contributed less than 10% of gross revenues during these respective periods.

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010			2010
										Actual			Pro Forma
	(In thousands)
REVENUES
Gaming	$	486,557		$	490,132		$	968,492		$	840,537		$	978,368
Food and beverage	94,585			94,020			186,662			154,002			185,219
Room	60,459			58,671			117,050			90,105			114,259
Other	33,276			33,813			66,307			57,635			66,814
	$	674,877		$	676,636		$	1,338,511		$	1,142,279		$	1,344,660

COSTS AND EXPENSES
Gaming	$	223,173		$	229,755		$	449,782		$	397,860		$	457,721
Food and beverage	50,080			49,149			97,648			81,791			95,291
Room	13,514			13,056			26,335			23,106			25,291
Other	27,335			27,006			53,574			46,244			53,371
	$	314,102		$	318,966		$	627,339		$	549,001		$	631,674

MARGINS
Gaming	54.1		%	53.1		%	53.6		%	52.7		%	53.2		%
Food and beverage	47.1		%	47.7		%	47.7		%	46.9		%	48.6		%
Room	77.7		%	77.8		%	77.5		%	74.4		%	77.9		%
Other	17.9		%	20.1		%	19.2		%	19.8		%	20.1		%

Three Months Ended June 30, 2011 and 2010

Gaming

Gaming revenues are significantly comprised of the net win from our slot machine operations and table games win. The $3.6 million, or 0.7%, decrease in gaming revenues during the three months ended June 30, 2011 as compared to the corresponding period of the prior year was due primarily to a 0.5% decrease in slot win, including a 1.9% decrease in slot handle, as well as a 1.5% decrease in table game win, including a 0.4% decrease in table game drop.

Food and Beverage

Food and beverage revenues increased 0.6% during the three months ended June 30, 2011 as compared to the corresponding period of the prior year, due to a corresponding increase in average covers and tickets.

Room

Room revenues increased 3.0% during the three months ended June 30, 2011 as compared to the corresponding period of the prior year, due to increased ADR and occupancy driven by destination and convention business.

Other

Other revenues have decreased 1.6% during the three months ended June 30, 2011 as compared to the corresponding period of the prior year, due primarily to timing of events.

Six Months Ended June 30, 2011 and 2010

Gaming

Gaming revenues decreased by $9.9 million, or 1.0%, during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, due primarily to a 3.5% decrease in table game win, including a 2.2% decrease in table game drop, offset by a 0.3% increase in slot win, despite a 1.0% decrease in slot handle.

Food and Beverage

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Food and beverage revenues increased 0.8% during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, due to a corresponding increase in average covers and tickets, which reflect increased convention and meeting business.

Room

Room revenues increased 2.4% during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, primarily due to increased overall average daily rates and occupancy.

Other

Other revenues have decreased 0.8% during the six months ended June 30, 2011 as compared to the corresponding period of the prior year, primarily due to a slight decline in retail sales.

Revenues and Adjusted EBITDA by Reportable Segment

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

The following table presents our gross revenues and Adjusted EBITDA, by Reportable Segment, for the three and six months ended June 30, 2011 and 2010.



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Gross revenues
Las Vegas Locals	$	167,346	$	169,658	$	338,792	$	343,555
Downtown Las Vegas	62,911		61,007		124,538		120,720
Midwest and South	203,526		205,466		410,616		413,522
Atlantic City	239,609		238,924		461,525		260,927
Reportable Segment Gross Revenues	673,392		675,055		1,335,471		1,138,724
Other	1,485		1,581		3,040		3,555
Gross revenues	$	674,877	$	676,636	$	1,338,511	$	1,142,279

Adjusted EBITDA
Las Vegas Locals	$	38,570	$	36,810	$	78,213	$	77,223
Downtown Las Vegas	9,366		9,310		18,370		17,682
Midwest and South	42,276		35,590		83,487		74,869
Atlantic City	38,657		42,960		70,339		47,863
Our share of Borgata's operating income before net amortization, preopening and other items	—		—		—		8,180
Adjusted EBITDA	$	128,869	$	124,670	$	250,409	$	225,817

Significant factors that affected our Reportable Segment Gross Revenues and Adjusted EBITDA for the three and six months ended June 30, 2011, as compared to the corresponding period of the prior year, are listed below:

Three months ended June 30, 2011 and 2010

Las Vegas Locals

Gross revenues declined slightly by 1.4% while Adjusted EBITDA increased 4.8% during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, which reflect the stabilization of business volumes and the positive ongoing effects of our cost control measures. Growth in our convention and meeting business increased more than 20% during

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the second quarter. We continued to experience strong operating performances particularly at The Orleans, and multiple properties also reported year-over-year Adjusted EBITDA gains in the second quarter. Our management teams continue to focus on operating efficiently while maintaining a high level of customer service. During this quarter, our Las Vegas Locals business posted an Adjusted EBITDA margin of 23.0%, which represents a 130 basis-point increase over the second quarter of 2010.

Downtown Las Vegas

Gross revenues and Adjusted EBITDA increased 3.1% and 0.6%, respectively, during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, due primarily to growth from our Hawaiian customers, offset by significantly higher fuel costs at our Hawaiian charter operation. Our Hawaiian customer base is essential to our downtown operations, and we continue to invest in them.

Midwest and South

Gross revenues declined to $203.5 million during the three months ended June 30, 2011, from $205.5 million, or by 0.9% , as compared to the three months ended June 30, 2010, while Adjusted EBITDA increased by 18.8% during the same respective periods. Results were impacted by strong performances at Treasure Chest, Delta Downs and Par-A-Dice, which wer offset by the closure of our property Sam's Town Hotel and Gambling Hall in Tunica during the month of May as a result of the flooding of the Mississippi River. All other five properties in this region posted positive growth during this period, as Adjusted EBITDA margin improved by 350 basis points due to improved flow through.

Atlantic City

Borgata's gross revenues for the three months ended June 30, 2011 were $239.6 million, up 0.3% from $238.9 million in the three months ended June 30, 2010, while Adjusted EBITDA declined 10.0% to $38.7 million from $43.0 million during the same respective periods. Competition remains elevated in the region, and we have responded by increasing investments in our customer base. In table games, the hold rate was 13%, in line with our long-term expectations; however, this rate was 80 basis points below prior-year levels. Slot win rose slightly, and table game volume was flat year-over-year.

Six Months Ended June 30, 2011 and 2010

Las Vegas Locals

Gross revenues declined 1.4% and Adjusted EBITDA increased 1.3% during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, reflecting improved performance at The Orleans, and successful marketing initiatives. The region also experienced an increase in convention and meeting business.

Downtown Las Vegas

Gross revenues and Adjusted EBITDA increased 3.2% and 3.9%, respectively, during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, due primarily to growth from our Hawaiian customers. Greater efficiencies in our operations contributed to strong flow-through in our results, which were also partially offset by significantly higher fuel costs at our Hawaiian charter operation. Jet fuel prices have risen sharply, and fierce competition on Hawaiian air routes limited our ability to increase fares.

Midwest and South

Gross revenues declined slightly by 0.7% during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, reflecting the impact of severe winter weather, which resulted in reduced business volumes despite an increase in market share. Adjusted EBITDA increased by 11.5% during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, as our business continues to grow across this region, particularly due to highly effective marketing and overall economic strength in southern Louisiana.

Atlantic City

Results were not consolidated fully during the six months ended June 30, 2010, however, on a comparable pro forma basis, gross revenues declined to $461.5 million from $463.3 million and Adjusted EBITDA declined to $70.3 million from $81.0 million, for the six months ended June 30, 2011 and 2010, respectively. Overall, results during the the current six months were adversely impacted by promotional spend, which increased to 23.8% of gross gaming revenue for the six months ended June 30, 2011 from 21.9% for the six months ended June 30, 2010. This spend represented increased promotional slot credit and table game incentives in response to the increasingly competitive environment in the Atlantic City and Eastern Pennsylvania gaming markets.

Other Costs and Expenses

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

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010	2010
							Actual	Pro Forma
	(In thousands)
Selling, general and administrative	$	96,783	$	99,666	$	192,571	169,944	198,925
Maintenance and utilities	36,773		37,970		74,188		62,109	75,631
Depreciation and amortization	48,488		55,408		99,072		95,454	112,208
Corporate expense	12,264		13,526		25,544		25,615	25,615
Preopening expenses	1,741		1,243		3,572		2,306	2,306
Write-downs and other items, net	2,262		1,991		6,969		3,592	3,660

The results for the three and six months ended June 30, 2011 and for the three months ended June 30, 2010, as reported above, reflect the consolidation of Borgata for the entire periods while the results for the six months ended June 30, 2010 reflect the consolidation of Borgata for the period from March 24, 2010 through June 30, 2010. The "Pro Forma" column in the six months ended June 30, 2010 column above reflects the results of operations as if Borgata had been consolidated for such entire period, and thus, for purposes of comparability, will be the basis for the six month analytical discussions below.

Three months ended June 30, 2011 and 2010

Selling, general and administrative

Selling, general and administrative expenses, as a percentage of gross revenues, declined to 14.3% during the three months ended June 30, 2011 from 14.7% during the three months ended June 30, 2010, due to disciplined and targeted marketing spend, and our ongoing cost containment efforts.

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of gross revenues, decreased to 5.4% during the three months ended June 30, 2011 from 5.6% during the three months ended June 30, 2010, due primarily to our consolidation of LVE, from which we recorded the unreimbursed expenses associated with the central energy facility at Echelon. Excluding the consolidation of LVE, maintenance and utilities expenses were relatively consistent during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, as no major maintenance projects were undertaken in either period.

Depreciation and Amortization

Depreciation and amortization expense declined as a percentage of gross revenues during the three months ended June 30, 2011, as compared to the corresponding period of the prior year, representing 7.2% and 8.2%, respectively, as certain property and equipment became fully depreciated and there were no significant expansion capital expenditures placed into service.

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense. The decrease in corporate expense, as a percentage of gross revenues of 1.8% and 2.0%, during the three months ended June 30, 2011 and 2010, respectively, primarily reflects the benefits from certain marketing initiatives earned during the quarter, which offset our overall marketing spend.

Preopening Expenses

We expense certain costs of start-up activities as incurred. During the three months ended June 30, 2011 and 2010, we recorded preopening expenses related to our Echelon development project, expenses related to our efforts to develop gaming activities in other jurisdictions and expenses related to other business development activities. The Period Fees, as discussed above, are included in the expenses related to our Echelon development project during the three months ended June 30, 2011; however, such amounts were eliminated upon the consolidation of LVE and not reflected in total preopening expenses.

Write-downs and Other Items, Net

During the three months ended June 30, 2011, write-downs and other charges primarily related to the insurance costs associated with the closure of Sam's Town Tunica during the month of May, as well as certain costs incurred in relation to acquisition activities. During the three months ended June 30, 2010, we recorded $2.0 million of expenses related to the evaluation of various acquisition

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opportunities and other business development activities.

Six months ended June 30, 2011 and 2010

Selling, general and administrative

Selling, general and administrative expenses, as a percentage of gross revenues, declined to 14.4% during the six months ended June 30, 2011 from 14.8% during the six months ended June 30, 2010, due to disciplined and targeted marketing spend, and our ongoing cost containment efforts.

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of gross revenues, decreased to 5.5% during the six months ended June 30, 2011 from 5.6% during the six months ended June 30, 2010, due primarily to our consolidation of LVE, from which we recorded the unreimbursed expenses associated with the central energy facility at Echelon. Excluding the consolidation of LVE, maintenance and utilities expenses were relatively consistent during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, as no major maintenance projects were undertaken in either period.

Depreciation and Amortization

Depreciation and amortization expense declined as a percentage of gross revenues during the six months ended June 30, 2011, as compared to the corresponding period of the prior year, representing 7.4% and 8.3%, respectively, as there were no significant expansion capital expenditures and certain property and equipment became fully depreciated.

Corporate Expense

Corporate expense, as a percentage of gross revenues, was flat at 1.9% during the six months ended June 30, 2011 and 2010, reflecting the offset of increased share-based compensation costs due to a one-time adjustment to a specific vesting provision with benefits of certain marketing initiatives.

Preopening Expenses

We expense certain costs of start-up activities as incurred. During the six months ended June 30, 2011 and 2010, we recorded preopening expenses related to our Echelon development project, expenses related to our efforts to develop gaming activities in other jurisdictions and expenses related to other business development activities. The Period Fees, as discussed above, are included in the expenses related to our Echelon development project during the six months ended June 30, 2011; however, such amounts were eliminated upon the consolidation of LVE and not reflected in total preopening expenses.

Write-downs and Other Items, Net

During the six months ended June 30, 2011, we recorded a $5 million impairment of the trademark valued under the acquisition accounting for Borgata, $1.1 million associated with the insurance costs related to the temporary closure of Tunica, $0.9 million of asset disposal costs, which were partially offset by the bargain purchase gain recorded upon the change in control of Borgata and various other measurement period adjustments. During the six months ended June 30, 2010, write-downs and other items, net primarily consisted of $3.6 million of direct expenses related to evaluating various acquisition opportunities and other business development activities.

Operating Income from Borgata

Three and six months ended June 30, 2011 and 2010

Our share of Borgata's operating income represents the amounts recorded in our consolidated financial statements under the equity method, which is partially reflected in the six months ended June 30, 2010, as part of that period was prior to our consolidation of the operating results of Borgata .

Other Expense (Income)

Interest Expense

The following table presents our interest expense for the three and six months ended June 30, 2011 and 2010.

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010			2010
										Actual			Pro Forma
	(In thousands)
Interest on long-term debt
Boyd Gaming Corporation	$	33,997		$	23,496		$	68,116		$	46,428		$	46,428
Borgata	21,328			5,588			38,611			6,072			11,132
Effects of interest rate swaps	6,063			5,566			11,824			11,157			11,157
Interest on non-recourse debt obligations of variable interest entity	5,306			—			5,434			—			—
Interest expense	$	66,694		$	34,650		$	123,985		$	63,657		$	68,717

Average long-term debt balance
Boyd Gaming Corporation	$	2,392,925		$	2,567,973		$	2,393,267		$	2,604,377		$	2,604,377
Borgata	$	800,026		$	628,581		$	815,733		$	653,246		$	653,246

Average interest rates
Boyd Gaming Corporation	6.7		%	4.5		%	6.7		%	4.4		%	4.4		%
Borgata	9.5		%	2.9		%	9.6		%	2.8		%	2.8		%

The results for the three and six months ended June 30, 2011 and for the three months ended June 30, 2010, as reported above, reflect the consolidation of Borgata for the entire periods while the results for the six months ended June 30, 2010 reflect the consolidation of Borgata for the period from March 24, 2010 through June 30, 2010. The "Pro Forma" column in the six month ended June 30, 2010 column above reflects the results of operations as if Borgata had been consolidated for such entire period, and thus, for purposes of comparability, will be the basis for the six month analytical discussions below.

Three months ended June 30, 2011 and 2010

Interest expense was $66.7 million for the three months ended June 30, 2011, a 92% increase as compared to the corresponding period of the prior year. The increase was primarily due to higher average interest rates on higher average outstanding Borgata debt balances, offset by lower Boyd debt balances during the three months ended June 30, 2011, compared to the corresponding period of the prior year. Average outstanding note balances and interest rates during this period are reflected in the table above. Interest on the non-recourse debt obligations also increased, due to the consolidation of LVE in 2010.

During the three months ended June 30, 2011 and 2011, we were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. As market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps, the effect of the swaps increased our interest expense by $6.1 million and $5.6 million for the three months ended June 30, 2011 and 2010, respectively. Our interest rate swap agreements expired on June 30, 2011.

Six months ended June 30, 2011 and 2010

Interest expense was $124.0 million for the six months ended June 30, 2011, an 80% increase as compared to the corresponding period of the prior year. The increase was primarily due to higher average interest rates on higher average outstanding Borgata debt balances, offset by lower Boyd debt balances during the six months ended June 30, 2011, compared to the corresponding period of the prior year. Average outstanding debt balances and interest rates during this period are reflected in the table above. Interest on the non-recourse debt obligations also increased, due to the consolidation of LVE in 2010.

During the six months ended June 30, 2011 and 2011, we were a party to certain floating-to-fixed interest rate swap agreements with an aggregate notional amount of $500 million, whereby we received payments based upon the three-month LIBOR and made payments based upon a stipulated fixed rate. As market interest rates during the period were significantly lower than the 5.1% weighted-average fixed rate associated with these swaps, the effect of the swaps increased our interest expense by $11.8 million and $11.2 million for the six months ended June 30, 2011 and 2010, respectively. Our interest rate swap agreements expired on

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June 30, 2011.

Fair Value Adjustment of Derivative Instruments

During 2010, in anticipation of the execution of our Amended Credit Facility, we de-designated all of our interest rate swap agreements as cash flow hedges. Concurrent with the de-designation of the hedging relationship, hedge accounting was suspended and the amount remaining in accumulated other comprehensive loss associated with this cash flow hedging relationship was frozen. This amount is being amortized into interest expense over the respective remaining term of the associated debt. Prospectively, all changes in the fair value of these interest rate swaps will be recognized immediately in earnings. This mark-to-market adjustment resulted in a realized loss of $0.0 million and $0.3 million during the three and six months ended June 30, 2011.

Gain on Early Retirements of Debt

Income Taxes

The effective tax rate during the three months ended June 30, 2011 was -19.25%, as compared to 29.0% during the three months ended June 30, 2010. The effective tax rate during the six months ended June 30, 2011 was 15.5%, as compared to 29.7% during the six months ended June 30, 2010. Our 2011 and 2010 tax benefit and provision, respectively, were favorably impacted by permanent adjustments related to our consolidating interests in the Borgata and LVE. We consolidate Borgata's and LVE's income or loss for financial statement purposes; however, under federal income tax statutes, we only receive a benefit from or are subject to income tax on our fifty percent interest in the Borgata and we exclude LVE's income in its entirety. In 2011 our tax benefit was adversely impacted by certain recurring permanent adjustments that are unaffected by our loss from continuing operations. Additionally, in 2011, and to a lesser extent in 2010, our state tax provision was adversely impacted by a statutory change in state income tax rates, changes in apportionment and the geographic mix of our income.

Adjusted Earnings (Loss) and Adjusted EPS

We believe that Adjusted Earnings (Loss) and Adjusted Earnings Per Share ("EPS") are important supplemental measures of operating performance to investors, and management believes that Adjusted Earnings (Loss) and Adjusted EPS are widely used measures of performance in the gaming industry. We use Adjusted Earnings (Loss) and Adjusted EPS in this Quarterly Report on Form 10-Q because we believe they are useful to investors in allowing greater transparency related to significant measures used by management in its financial and operational decision-making. Management believes it is appropriate to adjust net income (loss) attributable to Boyd Gaming Corporation for certain adjustments, which are eliminated from net income (loss) in order to enable investors to isolate the core operating results of the Company.

Adjusted Earnings (Loss) is net income (loss) before preopening expenses, adjustments to property tax accruals, net, change in value of derivative instruments, write-downs and other items, net, gain on early retirements of debt, and our share of Borgata’s other items and write-downs, net.

The following tables present our Adjusted Earnings (Loss) and Adjusted Earnings per Share for the three and six months ended June 30, 2011 and 2010.

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In thousands)
Net income (loss) attributable to Boyd Gaming Corporation	$	(2,951	)	$	3,382		$	(6,472	)	$	11,817
Adjustments related to Boyd Gaming:
Preopening expenses, excluding impact of LVE	4,418			1,243			8,890			2,306
Adjustments to property tax accruals, net	(772		)	—			(3,538		)	—
Write-downs and other items, net	—			—			(309		)	—
Change in fair value of derivative instruments	48			—			265			—
(Gain) loss on early retirements of debt, net	—			(1,912		)	20			(3,949		)
Acquisition related expenses	370			1,979			370			3,580
Tunica flood expenses, net of recoveries	1,143						1,143

Adjustments related to Borgata:
Preopening expenses	92						92
Write-downs and other items, net	749			12			5,765			12
Valuation adjustments related to consolidation, net	367			—			(327		)	—
Our share of Borgata's write-downs and other items, net	—			—			—			34
Total adjustments	6,415			1,322			12,371			1,983

Income tax effect for above adjustments	(2,093		)	(468		)	(3,745		)	(702		)
Impact on noncontrolling interest, net	(604		)	(6		)	(2,599		)	(6		)
Adjusted earnings (loss)	$	767		$	4,230		$	(445	)	$	13,092

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Basic net income (loss) per common share	$	(0.03	)	$	0.04		$	(0.07	)	$	0.14
Adjustments related to Boyd Gaming:
Preopening expenses, excluding impact of LVE	0.05			0.01			0.10			0.03
Adjustments to property tax accruals, net	(0.01		)	—			(0.04		)	—
Write-downs and other items, net	—			—			—			—
Change in fair value of derivative instruments	—			—			—			—
(Gain) loss on early retirements of debt, net	—			(0.02		)	—			(0.05		)
Acquisition related expenses	0.01			0.02						0.04
Tunica flood expenses, net of recoveries	0.01						0.01

Adjustments related to Borgata:
Preopening expenses	—			—			—			—
Write-downs and other items, net	0.01			—			0.07			—
Valuation adjustments related to consolidation, net	—			—			—			—
Our share of Borgata's write-downs and other items, net	—			—			—			—
Total adjustments	$	0.07		$	0.01		$	0.14		$	0.02

Income tax effect for above adjustments	(0.02		)	—			(0.04		)	(0.01		)
Impact on noncontrolling interest, net	(0.01		)	—			(0.03		)	—
Adjusted earnings (loss) per share	$	0.01		$	0.05		$	—		$	0.15

Adjusted earnings per share for the three months ended June 30, 2011 were computed using our diluted weighted average shares outstanding, although the presentation on our condensed consolidated statement of operations for such period does not consider the effect of common stock equivalents, as such were anti-dilutive to the net loss, as reported. However, as such net loss has been adjusted to the earnings per share amount, the dilutive effect is considered in the per share calculation above.

During the three and six months ended June 30, 2011 and 2010, the following items were included in the calculation of Adjusted Earnings and Adjusted EPS:

Adjustments Related to Boyd Gaming Corporation

Preopening Expenses, Excluding Impact of Consolidation of LVE

Preopening expenses are comprised of costs primarily related to maintenance of our Echelon development project and expenditures for the exploration of new business development initiatives.

Adjustments to Property Tax Accruals

Property tax accruals have been adjusted based on assessments from the relevant taxing authorities and changes in our estimate of past liabilities related to such assessments.

Write-Downs and Other Items, net

Write-downs and other items, net, is comprised of the bargain purchase gain recorded in connection with the valuation procedures on Borgata.

Change in Fair Value of Derivative Instruments

Change in fair value of derivative instruments is comprised of the charge to earnings for the change in fair value of our interest rate swaps that were de-designated as cash flow hedges during 2010.

(Gain) Loss on Early Retirements of Debt

(Gain) loss on early retirements of debt represents the difference between the principal amount of our senior subordinated notes repurchased and the purchase price of such notes.

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Acquisition Related Expenses

Acquisition related expenses are comprised of certain costs incurred related to the evaluation of various acquisition opportunities and other business development activities.

Tunica Flood Expenses, net of Recoveries

These expenses relate to the insurance and other direct and non-reimbursable costs associated with the closure of Sam's Town Tunica during the month of May 2011 due to the flooding of the Mississippi River.

Adjustments Related to Borgata

Preopening Expenses

Preopening expenses at Borgata related to costs incurred to open a new retail outlet during the quarter.

Write -Downs and Other Items, net

Write-downs and other items represent the net losses upon the disposition or sale of certain assets as well as an impairment charge related to the trademark which resulted from a decline in revenue projections specific to Borgata.

Valuation Adjustments Related to Consolidation, net

These adjustments represent the aggregate impact of the measurement activity associated with the changes from historical value to fair value of Borgata, upon consolidation, primarily representing depreciation and amortization expense resulting from the recordation of certain tangible and intangible assets.

LIQUIDITY AND CAPITAL RESOURCES

Financial Position

The significant change in our financial position relates to the classification of certain non-extending balances due under our Amended Credit Facility as a current liability, as such amounts come due within the next twelve months. We are evaluating our options with respect to funding repayment of this indebtedness when it becomes due, which include, borrowing against the availability under our Amended Credit Facility, securing new indebtedness, using portions of our available cash or any combination of these options.

At June 30, 2011, we reported LVE's total assets and total liabilities of $249.6 million and $265.1 million, respectively in our condensed consolidated balance sheet. However, LVE's financial position, including its working capital and indebtedness, are not discussed herein as such indebtedness is non-recourse to us and will not require our working capital or free cash flows in order to service such. Therefore, the assets and liabilities of LVE are completely disregarded from the discussion below, due to the irrelevance to our overall liquidity and capital resources.

Working Capital

Historically, we have operated with minimal or negative levels of working capital in order to minimize borrowings and related interest costs under our Amended Credit Facility. As of June 30, 2011 and December 31, 2010, we had balances of cash and cash equivalents of $175.8 million and $145.6 million, respectively. In addition, we had working capital deficits of $381.3 million and $87.5 million as of June 30, 2011 and December 31, 2010, respectively, which has increased due to the classification of certain of our debt obligations becoming due in May 2012.

We and Borgata separately manage our working capital positions, including our cash and indebtedness levels. Our respective bank credit facilities generally provide any necessary funds for our day-to-day operations, interest and tax payments, as well as capital expenditures. On a daily basis, we evaluate our cash position and adjust the balance under our respective bank credit facilities as necessary, by either borrowing or paying it down with excess cash. We also plan the timing and the amounts of our capital expenditures. We each believe that our borrowing capacity under our respective bank credit facilities, subject to restrictive covenants, and cash flows from operating activities will be sufficient to meet our projected operating and maintenance capital expenditures for at least the next twelve months. The source of funds for the repayment of our debt or our development projects is derived primarily from cash flows from operations and availability under our respective bank credit facilities, to the extent availability exists after we meet our respective working capital needs, and subject to restrictive covenants.

We or Borgata could also seek to secure additional working capital, repay our respective current debt maturities, or fund our respective development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings. If availability does not exist under our respective bank credit facilities, or we are not otherwise able to draw funds on our respective bank credit facilities, additional financing may not be available to either us or Borgata, and if available, may not be on terms favorable to either us or Borgata.

Indebtedness

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Our indebtedness primarily consists of amounts outstanding under our $1.5 billion Amended Credit Facility (including $500 million of term loans, and excluding the non-extending amounts of $331.0 million) and $956.4 million aggregate principal amount of our senior and senior subordinated notes, which are the obligations of Boyd, and a $150 million bank credit facility and $800 million aggregate principal amount of senior secured notes, all of which are the obligations of Borgata.

Bank Credit Facility

Significant Terms

On December 3, 2010, we entered into an Amendment and Restatement Agreement with certain financial institutions (each a “Lender”), including Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the former credit facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the restatement effective date.

Each of the Extending Lenders permanently reduced their commitments under the Amended Credit Facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (including $500 million of term loans, and excluding $331.0 million in non-extending amounts), which commitments may be increased from time to time by up to $500 million (instead of $1 billion commitment increases provided for under the former credit facility) through additional revolving credit or term loans under the Amended Credit Facility.

Pursuant to the terms of the Amended Credit Facility, the term loans amortize in an annual amount equal to 5% of the original principal amount thereof, which commenced on March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to revolving and term loans under the Amended Credit Facility are based upon, at our option, LIBOR or the “base rate,” plus an applicable margin in either case. The applicable margin under the Amended Credit Facility is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio. The applicable margin on the outstanding balance on the Extended Revolving Facility ranges from 2.50% to 3.50% (if using LIBOR), and from 1.50% to 2.50% (if using the base rate). The applicable margin on the outstanding balance of the loans and commitments of the non-extending lenders continues to range from 0.625% to 1.625% (if using LIBOR), and from 0.0% to 0.375% (if using the base rate). A fee of a percentage per annum (which ranges from 0.250% to 0.500%) determined by the level of the total leverage ratio is payable on the unused portions of the Amended Credit Facility.

Guarantees

Our obligations under the Amended Credit Facility, subject to certain exceptions, are guaranteed by certain of our subsidiaries and are secured by the capital stock of certain subsidiaries. In addition, subject to certain exceptions, we and each of the guarantors granted the administrative agent first priority liens and security interests on substantially all of our real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Amended Credit Facility.

Financial and Other Covenants

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dispositions and (vi) imposing restrictions on investments, dividends and certain other payments. Subject to certain exceptions, we may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.

Compliance with Financial Covenants

We believe that we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, at June 30, 2011, were 2.42 to 1.00, 6.95 to 1.00 and 4.14 to 1.00, respectively.

At June 30, 2011, assuming our twelve-month trailing Consolidated EBITDA remains constant, we estimate that we could draw an additional $276 million of the availability under our Amended Credit Facility and maintain compliance with our Total Leverage Ratio.

Debt Financing Costs

Senior Notes

9.125% Senior Notes due December 2018

Significant Terms

On November 10, 2010, we issued, through a private placement, $500 million aggregate principal amount of 9.125% senior notes due December 2018. The notes require semi-annual interest payments on December 1 and June 1 of each year, which commenced on June 1, 2011. The notes will mature on December 1, 2018 and are fully and unconditionally guaranteed, in a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the indenture governing the notes) to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. We believe that we are in compliance with these covenants at June 30, 2011. At any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 109.125% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, with the net cash proceeds that we raise in one or more equity offerings. In addition, prior to December 1, 2014, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. Subsequent to December 1, 2014, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 104.563% in 2014 to 100% in 2016 and thereafter, plus accrued and unpaid interest.

Registration Rights Agreement

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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 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 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 condensed consolidated financial statements.

Senior Subordinated Notes

6.75% Senior Subordinated Notes due April 2014

Significant Terms

On April 15, 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all of the notes, except for $50,000 in aggregate principal amount of these notes, were exchanged for substantially similar notes that were registered with the SEC. The notes require semi-annual interest payments on April 15 and October 15 of each year, through April 2014, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations, and limitations on restricted payments (as defined in the indenture governing the notes). We believe that we are in compliance with these covenants at June 30, 2011. We may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.375% in 2009 to 100% in 2012 and thereafter, plus accrued and unpaid interest.

7.125% Senior Subordinated Notes due February 2016

Significant Terms

Indentures

Repurchases of Senior Subordinated Notes

Borgata Bank Credit Facility

Significant Terms

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develops and owns Borgata, and which is the guarantor of both the Borgata bank credit facility and the notes. The proceeds from the financing were used to (i) pay fees and expenses related to the financing; (ii) repay the former credit facility; and (iii) make a one-time distribution to Borgata's joint venture owners.

The Borgata bank credit facility provides for a $150.0 million payment priority secured revolving credit facility and matures in August 2014. The Borgata bank credit facility is guaranteed on a senior secured basis by MDDC and any future subsidiaries of MDDC and is secured by a first priority lien on substantially all of the assets of MDFC, MDDC and any future subsidiaries of MDDC, subject to certain exceptions. The obligations under the Borgata bank credit facility have priority in payment to payment of the notes.

Neither Boyd Gaming nor any of its wholly-owned subsidiaries is a guarantor of Borgata's new bank credit facility.

Financial and Other Covenants

The Borgata bank credit facility contains certain financial and other covenants, including, without limitation, (i) establishing a minimum consolidated EBITDA (as defined in the Borgata bank credit facility) of $150 million over each trailing twelve-month period ending on the last day of each calendar quarter; (ii) establishing a minimum liquidity (as defined in the Borgata bank credit facility) of $30 million as of the end of each calendar quarter; (iii) imposing limitations on MDFC's ability to incur additional debt; and (iv) imposing restrictions on Borgata's ability to pay dividends and make other distributions, make certain restricted payments, create liens, enter into transactions with affiliates, merge or consolidate, and engage in unrelated business activities.

Compliance with Financial Covenants

Borgata Senior Secured Notes

9.5% Senior Secured Notes Due 2015

Significant Terms

In August 2010, MDFC issued, through a private placement, $400 million principal amount of 9.5% senior secured notes due October 2015, at an issue price of 98.943%, resulting in a discount at issuance of $4.1 million. The notes require semi-annual interest payments on April 15 and October 15, and commenced on April 15, 2011. The notes are guaranteed on a senior secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

9.875% Senior Secured Notes Due 2018

Significant Terms

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secured basis by MDDC and any future restricted subsidiaries of MDDC. The notes contain covenants that, among other things, limit MDFC's ability and the ability of MDDC to (i) incur additional indebtedness or liens; (ii) pay dividends or make distributions; (iii) make certain investments; (iv) sell or merge with other companies; and (v) enter into certain types of transactions. MDFC believes that it is in compliance with these covenants at June 30, 2011.

The original issue discount has been recorded as an offset to the principal amount of these notes and is being accreted to interest expense over the term of the notes using the effective interest method. The effective interest rate on the 9.5% notes due 2015 notes is 10.2% and on the 9.875% notes due 2018 is 10.3%.

Registration Rights Agreement

Pursuant to the registration rights agreement entered into which the initial purchasers of these senior secured notes at the time of the private placement, on May 27, 2011, MDFC commenced an offer to exchange all of the outstanding $400.0 million aggregate principal amount of 9.5% Senior Secured Notes due 2015 and $400.0 million aggregate principal amount of 9.875% Senior Secured Notes due 2018 for new 9.5% Senior Secured Notes due 2015 and 9.875% Senior Secured Notes due 2018, respectively, that have been registered under the Securities Act of 1933. On June 28, 2011, the expiration date of the exchange offer, $396.4 million of the 9.5% Senior Secured Notes due 2015 and $400.0 of the 9.875% Senior Secured Notes due 2018 were validly tendered and accepted for exchange. This amount represents approximately 99.1% of the 9.5% Senior Secured Notes due 2015 and 100% of the 9.875% Senior Secured Notes due 2018, respectively.

Cash Flows Summary



	Six Months Ended
	June 30,
	2011			2010
	(In thousands)
Net cash provided by operating activities	$	97,568		$	149,757
Cash flows from investing activities:
Capital expenditures	(30,874		)	(47,481		)
Net cash effect upon change in controlling interest of Borgata	—			26,025
Decrease in restricted investments	168			—
Other investing activities	55			(164		)
Net cash used in investing activities	(30,651		)	(21,620		)
Cash flows from financing activities:
Payments on retirements of long-term debt	—			(28,861		)
Net borrowings under bank credit facility	—			(24,500		)
Net payments under Borgata bank credit facility	(40,900		)	(5,417		)
Debt financing costs, net	(828		)	—
Payments under note payable	—			(46,875		)
Proceeds from variable interest entity's issuance of debt	5,250			—
Payments on loans to variable interest entity's members	(181		)	—
Noncontrolling interest distributions by Borgata	—			(15,602		)
Other financing activities	(101		)	89
Net cash used in financing activities	(36,760		)	(121,166		)
Increase in cash and cash equivalents	$	30,157		$	6,971

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Cash Flows from Operating Activities

For the six months ended June 30, 2011, we generated operating cash flow of $97.6 million, compared to $149.8 million for the six months ended June 30, 2010, a decrease of $52.2 million. Generally, operating cash flows dropped due to a decrease in net income, an increase in interest paid and a reduction in our operating and non-operating income from Borgata under the equity method of accounting.

We did not receive distributions from Borgata during the six months ended June 30, 2011. Our distributions from Borgata were $17.5 million during the six months ended June 30, 2010. Borgata has significant uses for its cash flows, including maintenance capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata's cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness. As discussed above, Borgata's bank credit facility and senior secured notes contain certain covenants. Borgata's bank credit facility allows for certain limited distributions to be made to its partners. In the event that Borgata fails to comply with its covenants, it may be prevented from making any distributions to us during such period of noncompliance.

Cash Flows from Investing Activities

Cash paid for capital expenditures on major projects for the six months ended June 30, 2011 were $30.9 million and included the Echelon development project, which included spending of approximately $1.0 million, and maintenance capital expenditures of approximately $29.9 million.

Cash paid for capital expenditures on major projects for the six months ended June 30, 2010 were $47.5 million and included the Echelon development project, which included spending of approximately $26.6 million, and maintenance capital expenditures of approximately $19.0 million.

As a result of our consolidation of Borgata during the six months ended June 30, 2010, we included its cash balance of $26.0 million as an investing cash flow.

Cash Flows from Financing Activities

Substantially all of the funding for our acquisitions and renovation and expansion projects comes from cash flows from operations and debt financing.

During the six months ended June 30, 2010, we made a final principal payment of $46.9 million related to the promissory note to the seller of Dania Jai-Alai.

During the six months ended June 30, 2010, Borgata made distributions of $35.0 million, of which we received $17.5 million.

Dividends

Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. In July 2008, our Board of Directors suspended the quarterly dividend for the current and future periods; therefore, we did not declare a dividend during the six months ended June 30, 2011 or 2010.

Share Repurchase Program

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our bank 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 bank 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

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repurchase program.

During the six months ended June 30, 2011 and 2010, 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.

Other Items Affecting Liquidity

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

Agreement to Sell Dania

On April 29, 2011, we and Dania Entertainment Center, LLC (the “Buyer”) entered into an Asset Purchase Agreement (the “Agreement”) for the sale of certain assets and liabilities of the Dania Jai-Alai Business (as defined below).

Pursuant to the terms of the Agreement, we agreed to sell and transfer, and the Buyer agreed to purchase and assume, certain assets and liabilities (“Assets and Liabilities”) related to our Dania Jai Alai pari-mutuel facility, located in Dania Beach, Broward County, Florida at which jai alai and related gaming operations are conducted, including poker and inter-track wagering (the “Dania Jai-Alai Business”), for a purchase price of $80.0 million (the “Purchase Price”), subject to adjustment based on the amount of cash held by the Dania Jai-Alai Business as of the closing, including a non-refundable (except under certain limited circumstances) deposit of $5.0 million. We and the Buyer also agreed to indemnify each other against losses incurred or sustained due to actions arising out of the Agreement and the transactions contemplated thereby; however, our liability (and that of our respective affiliates) under the Agreement and the transaction documents is limited to a maximum amount.

Pending Acquisition of IP Casino Resort Spa

On June 15, 2011, we entered into an Agreement for Purchase and Sale (the "IP Agreement") with Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC (collectively, the “Seller”), pursuant to which the Seller agreed to sell and transfer, and we agreed to purchase and assume, certain assets and liabilities, respectively, related to the IP Casino Resort Spa (the "Property") in Biloxi, Mississippi, on an as-is basis (except as otherwise provided in the agreement), for a purchase price of $278 million in cash. Following the closing of the transaction, we will also make charitable contributions to the Engelstad Family Foundation equal to an aggregate of $10 million, which funds are intended to be distributed on behalf of, and in the name of, the Company, over five years to local and regional Biloxi charitable organizations to be designated by the Company. In addition, following the closing, we intend to perform certain capital improvement projects with respect to the IP Casino Resort Spa with costs estimated to be $44 million.

The closing of the transactions contemplated by the agreement is subject to the satisfaction or waiver of certain conditions, including, without limitation, (i) the receipt of certain consents, approvals or authorizations required to consummate the transactions contemplated by the IP Agreement and other licenses and permits required to operate the Property; (ii) the absence of injunctions, judgments or other legal impediments seeking to prohibit the closing; (iii) the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iv) other customary closing conditions.

The IP Agreement provides us a forty-five day due diligence period that commenced June 20, 2011, pursuant to which we, at our

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sole discretion, and without any cost or penalty, may terminate the agreement at any time prior to the expiration of such period. In the event that we do not terminate the agreement prior to the expiration of the due diligence period, we are required to make a non-refundable (except under certain circumstances) earnest money deposit of $10 million which will be credited against the purchase price upon the closing. If we fail to make the deposit at or prior to the expiration of the due diligence period, then the agreement will be automatically terminated. In addition to certain other termination rights, the IP Agreement may be terminated by either us or the Seller if the closing has not occurred by the date that is six months following the date of the agreement. We currently anticipate that the closing will occur before the end of the year.

Commitments

There have been no material changes to our commitments 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, 2010 filed with the SEC on March 15, 2011.

Contingencies

Nevada Use Tax Refund Claims

Blue Chip Property Taxes

In May 2007, Blue Chip received a valuation notice indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. At that time, we estimated that the increase in assessed property value could result in a property tax assessment ranging between $4 million and $11 million for the eighteen-month period ended June 30, 2007. We recorded an additional charge of $3.2 million during the three months ended June 30, 2007 to increase our property tax liability to $5.8 million at June 30, 2007 as we believed that was the most likely amount to be assessed within the range. We subsequently received a property tax bill related to our 2006 tax assessment for $6.2 million in December 2007. As we have appealed the assessment, Indiana statutes allow for a minimum required payment of $1.9 million, which was paid against the $6.2 million assessment in January 2008. In February 2009, we received a notice of revaluation, which reduced the property's assessed value by $100 million and the tax assessment by approximately $2.2 million per year. We have subsequently paid the minimum required payment of $1.9 million against provisional bills received in 2007 through 2011, all of which were based on the 2006 valuation notice. In March 2011, we reached a settlement with the assessor, reducing the valuation by an additional $96.0 million and $74.0 million for the 2006 and 2007 tax years, respectively. As a result of the agreement reached on the 2006 and 2007 valuations, we have revised our accrual for years 2008 through 2011 to reflect the expected carryforward effect of the reductions received in the prior year settlements. Such reduction resulted in the reversal of previously accrued property tax expense of approximately $3.1 million and $2.8 million, net of fees, in the first and second quarter of 2011, respectively. We are currently in negotiations related to the 2008 and 2009 years but have not received valuation notices for years 2008 through 2011. We believe the assessment for the period from January 1, 2008 through June 30, 2011 could result in a property tax assessment ranging between $14.0 million and $18.0 million. We have accrued, net of the payments discussed above, approximately $18.0 million of property tax liability as of June 30, 2011, based on what we believe to be the most likely assessment within our range, once all appeals have been exhausted; however, we can provide no assurances that the estimated amount will approximate the actual amount. The final assessment notices for the period January 1, 2008 through June 30, 2011, which have not been received as of June 30, 2011, could result in further adjustment

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to our estimated property tax liability at Blue Chip.

Copeland

Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland's objection. Copeland then filed an appeal of the agency's decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest's license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On September 21, 2002, the First Circuit Court of Appeal reversed the trial court's decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and 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 Amended Credit Facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to us. Moreover, we can provide no assurances that any expansion opportunity will result in a completed transaction.

Off Balance Sheet Arrangements

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There have been no material changes to our off balance sheet arrangements 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, 2010 filed with the SEC on March 15, 2011.

Critical Accounting Policies

A description of our critical accounting policies can be found in our Annual Report on Form 10-K for the year ended December 31, 2010. The following summarizes the material changes to our critical accounting polices during the six months ended June 30, 2011, representing those of particular importance due to the retrospective recording of the measurement period adjustments reflected herein.

Application of Acquisition Method Accounting

Upon effectively obtaining control of Borgata, we were required to apply acquisition method accounting in accordance with the authoritative accounting guidance for business combinations. The application of the acquisition method accounting guidance had the following effects on our consolidated financial statements: (i) our previously held equity interest was measured at a provisional fair value at the date control was obtained; (ii) we recognized and measured the identifiable assets and liabilities in accordance with promulgated valuation recognition and measurement provisions; and (iii) we recorded the noncontrolling interest held in trust for the economic benefit of MGM as a separate component of our stockholders' equity.

The provisional fair value measurements and estimates of these items were subsequently refined during the one-year measurement period. We had provisionally recorded these fair values using an earnings valuation multiple model, because, at the time of the preliminary estimate, we had not completed our procedures with respect to the independent valuation of the business enterprise and Borgata's tangible and intangible assets. Our subsequent valuation procedures have necessitated a revision of the valuation of the provisional assets and liabilities. Thus, upon finalization of our valuation, certain measurement period adjustments were identified and retrospectively recorded in the condensed consolidated balance sheet as of December 31, 2010. These measurement period adjustments materially shifted the value of certain tangible and intangible assets. We have applied the measurement period adjustments retrospectively to the condensed consolidated balance sheet reported as of December 31, 2010; however, the impact on the condensed consolidated statements of operations for the three and six months ended June 30, 2011, as retrospectively adjusted to the statement as reported was not material, and was therefore not adjusted for any measurement period adjustments. The revisions to the provisional values of assets consists of reallocations of certain tangible assets and the recordation of other intangible assets; the accrual of certain liabilities including the recording of the deferred tax effect of the appreciated asset values; and the resulting effect on the fair value of the controlling and noncontrolling interests.

We determined the fair value of identifiable intangible assets such as customer relationships, a trademark and any other significant tangible assets or liabilities, such as long-lived property. The enterprise value allocation methodology requires management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities primarily using discounted cash flows and replacement cost analysis. If estimates or assumptions used to complete the enterprise valuation and estimate the fair value of acquired assets and liabilities significantly differed from assumptions made, the resulting difference could materially affect the fair value of net assets. We will undertake impairment tests of the indefinite lived intangible assets in accordance with our existing policy, as discussed below. Additionally, given the eventual sale of the MGM interest, we will maintain a heightened awareness of any potential triggering events which would indicate a possible impairment of the intangible assets or long-lived assets.

The financial position of Borgata is consolidated in our condensed consolidated balance sheet as of June 30, 2011. We recorded a step up to the basis of Borgata's historical financial statements of $16.8 million, which is an appreciation over their historical book basis of 1% at the date of consolidation. In total, the assets of Borgata consolidated at June 30, 2011 represents 25.1% of our consolidated total assets at June 30, 2011.

Valuation of Indefinite-Lived Intangible Assets

Gaming License Rights

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance with these certain jurisdictions. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, performed in the second quarter of each year, and between annual test dates in certain circumstances. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. License rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. The value of gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only

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to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. These projections are modeled for a five year period.

The results of our annual scheduled impairment test of these gaming license rights, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The carrying value of our gaming license rights was $371.4 million, or 6.6% of our consolidated total assets as of June 30, 2011, and all such rights are recorded within our Midwest and South reportable segment. The fair value of these rights exceeded their carrying value by an aggregate amount of $222.1 million, or by a multiple of 1.7.

Trademarks

Trademarks are based on the value of our brand, which reflects the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the brand name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; general and administrative expenses; tax expense; terminal growth rate; discount rate; and the present value of tax benefit. The projections underlying this discounted cash flow model were forecasted for fifteen years. Applying the selected pretax royalty rates to the applicable revenue base in each period yielded pretax income for each property's trademarks and trade name. These pretax totals were tax effected utilizing the applicable tax rate to arrive at net, after-tax cash flows. The net, after-tax flows were then discounted to present value utilizing an appropriate discount rate. The present value of the after-tax cash flows were then added to the present value of the amortization tax benefit (considering the 15-year amortization of intangible assets pursuant to recent tax legislation) to arrive at the recommended fair values for the trademarks and trade names.

The carrying value of our trademarks within our Las Vegas Locals reportable segment was $50.7 million, or 0.9% of our consolidated total assets as of June 30, 2011 and the fair value of our reporting units exceeded their carrying value by $18.2 million, or 36%. Specific to the value of our Las Vegas Locals' trademarks, a respective annual decline in their gaming revenues of 6%, in hotel revenues of 2% or an aggregate decline in both streams of 2% would impact the fair value of the trademarks by $1 million, and result in a future impairment in such amount.

We also recorded a trademark related to the fair valuation of Borgata on March 24, 2010. The current carrying value of the Borgata trademark is $60 million, or 1.1% of our consolidated total assets as of June 30, 2011. During the six months ended June 30, 2011, we performed an interim impairment test of this trademark due to our consideration of certain facts and circumstances surrounding an adverse change in the business climate in Atlantic City. We believe our actual results have been adversely impacted by increased regional competition, and that in addition, our projected future results will be further impacted by cannibalization of our business upon the opening of a new property in Atlantic City, which was announced in February 2011. We also believe the refinancing of Borgata's debt and recapitalization of its member equity contributed to the results of this impairment test. As a result of the impairment test , which was in advance of our planned annual impairment test, and due to the adverse change in Borgata's business climate, we recorded a $5 million impairment charge. Specific to the value of Borgata's trademark, a respective annual decline in their gaming revenues of 3%, in hotel revenues of 5% or an aggregate decline in both streams of 2% would impact the fair value of the trademark by $1 million, and result in a future impairment in such amount.

Trademarks are considered indefinite lived intangible asset and will not be subject to future amortization, but rather subject to an annual impairment test in the second quarter of each year and between annual test dates in certain circumstances. We will continue to evaluate whether any triggering events or changes in circumstances have occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. This evaluation required significant judgment, including consideration of whether there had been any significant adverse changes in legal factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or likely sale or disposal of all or a significant portion of a reporting unit. Should any further events as described above occur, or any significant assumption in our valuations methods is adversely impacted, the impact could result in a material impairment charge in the future.

Valuation of Goodwill

The authoritative guidance related to goodwill impairment requires goodwill to be tested for impairment at the reporting unit level at least annually using a two-step impairment test. Step One of the test is a screen used to identify whether or not goodwill

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impairment may exist. In Step One, an entity compares the fair value of a reporting unit with its carrying amount. If a reporting unit's carrying amount exceeds its fair value, goodwill impairment may exist. Step Two of the test must then be performed to measure the amount of impairment, if any. In Step Two, an entity compares the implied fair value of goodwill with its carrying amount. An impairment loss is measured by the excess of the carrying amount of goodwill over its implied fair value. The implied fair value of goodwill should be determined in the same manner that goodwill is measured in a business combination; that is, an entity must allocate the fair value of a reporting unit to the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination.

We solicit third party valuation expertise to assist in the performance of the Step One valuations of the goodwill of our reporting units. We perform the test in the second quarter of our fiscal calendar year, using a weighting of two different approaches to determine fair value: (i) the income approach and (ii) the market approach.

The income approach is based on a discounted cash flow method, which focuses on the expected cash flow of the subject company. In applying this approach, the cash flow available for distribution is calculated for a finite period of years. Cash flow available for distribution is defined, for purposes of this analysis, as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the subject company. The cash flow available for distribution and the terminal value (the value of the subject company at the end of the estimation period) are then discounted to present value to derive an indication of value of the business enterprise.

In the valuation of an asset, the income approach focuses on the income-producing capability of the subject asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in applying this approach include estimating the expected after-tax cash flows attributable to the asset over its life and converting these after-tax cash flows to present value through “discounting.” The discounting process uses a rate of return which accounts for both the time value of money and investment risk factors. Finally, the present value of the after-tax cash flows over the life of the asset is totaled to arrive at an indication of the fair value of the asset.

The market approach is comprised of the guideline company method, which focuses on comparing the subject company to selected reasonably similar, or “guideline”, publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the subject company relative to the selected guideline companies; and (iii) applied to the operating data of the subject company to arrive at an indication of value. In the valuation of an asset, the market approach measures value based on what typical purchasers in the market have paid for assets which can be considered reasonably similar to those being valued. When the market approach is utilized, data are collected on the prices paid for reasonably comparable assets. Adjustments are made to the similar assets to compensate for differences between reasonably similar assets and the asset being valued. The application of the market approach results in an estimate of the price reasonably expected to be realized from the sale of the subject asset.

The two methodologies were weighted 80.0% toward the income approach and 20.0% toward the market approach, to arrive at an overall fair value.

The results of our annual scheduled impairment test of goodwill, performed during the second quarter of 2011, did not require us to record an impairment charge; however, if our estimates of projected cash flows related to these assets are not achieved, or if any other significant assumptions are changed, we may be subject to an interim impairment test prior to our next annual scheduled impairment test. Such test could result in a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

The carrying value of our goodwill was $213.6 million, or 3.8% of our consolidated total assets as of June 30, 2011. Although we satisfied Step One by fair margin ranging from $192.7 million to $324.9 million for each reporting unit tested, certain underlying assumptions and variables could greatly impact the results of future tests.

On a macro-economic level, we believe that over the next few years, several trends are expected to continue to adversely affect the gaming industry. The most significant trends include (i) delayed development of new construction; (ii) increased bankruptcy filings; and (iii) decreased consolidation. The impact of the weakening economy, credit crunch, and general outlook of the casino resort industry is illustrated through the recent trend of abandoned casino projects. Bankruptcy has served as a deterrent to deals because of the large decline in cash flow as well as significant increases in leverage. Debt to EBITDA ratios for public companies has nearly doubled overall in the past few years, indicating the inability to service debt. Analysts generally expect a sudden decrease in merger and acquisition activity after reports show that buyers are demanding a higher capitalization rate and lenders are significantly raising the equity portion required for deals. Deals are not only taking longer to fulfill, but as credit markets remain frozen, the slowdown is expected to continue into 2011. Although we cannot control or influence the impact of these factors from

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a fair valuation perspective, they could nonetheless have a material effect on the results of valuation, particularly the guideline company method under the market approach, in the future.

Additionally, several of the assumptions underlying the discounted cash flow method under the income approach could pose a high degree of sensitivity to the resulting fair value. These factors include, but are not limited to, the following: total revenue, depreciation expense, depreciation overhang, tax expense and effective rates, debt-free net working capital, capital additions, terminal year growth factor, discount rate and the capitalization rate. A change in any of these variables that cause our undiscounted cash flows or terminal value or both to adversely and materially would result in the failure of the Step One test, and a resulting impairment of our goodwill in an amount up to its book value of $213.6 million.

Recently Issued Accounting Pronouncements

financial statements.

Accounting Standards Update 2011-05 Presentation of Comprehensive Income ("Update 2011-05")

The amendments in Update 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does the amendment affect how earnings per share is calculated or presented. The amendments in this Update should be applied retrospectively. The amendment will effective for our fiscal year, and interim periods within the fiscal year beginning January 1, 2012. Update 2011-05 will not have a material impact on the computation of comprehensive income, but will require a revised presentation thereof.

Important Information Regarding Forward-Looking Statements

This Annual 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,” “outlook,” “could,” “would,” “estimate,” “continue,” “pursue,” “target,” “project,” “intend,” “plan,” “seek,” “estimate,” “should,” “may,” “assume,” and “continue,” or the negative thereof or comparable terminology, and may include statements regarding:


•	the factors that contribute to our ongoing success and our ability to be successful in the future;


•	our business model, areas of focus and strategy for realizing improved results;


•	competition, including expansion of gaming into additional markets, the impact of competition on our operations, our ability to respond to such competition, and our expectations regarding continued competition in the markets in which we compete;


•	expenses;


•	our commitment to having a significant presence on the Las Vegas Strip;


•	indebtedness, including our ability to refinance or pay amounts outstanding under our bank credit facilities and

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notes when they become due and our compliance with related covenants, and our expectation that we and Borgata will need to refinance all or a portion of our respective indebtedness at maturity;


•	our expectations with respect to Borgata, including our responsibility and control over day-to-day operations and the managerial resources we expect to devote to effectuate the sale of the MGM Interest;


•	our expectation regarding the trends that will affect the gaming industry over the next few years and the impact of these trends on merger and acquisition activity in general;


•	our belief that consumer confidence will strengthen as the job market recovers and expands;


•	our expectations with respect to the valuation of Borgata's tangible and intangible assets;


•	the type of covenants that will be included in any future debt instruments;


•	our expectations with respect to continued disruptions in the global capital markets, the effect of this on consumer confidence and reduced levels of consumer spending and the impact of these trends on our financial results;


•	our ability to meet our projected operating and maintenance capital expenditures and the costs associated with our expansion, renovations and development of new projects;


•	our ability to pay dividends or to pay any specific rate of dividends, and our expectations with respect to the receipt of dividends from Borgata;


•	our commitment to finding opportunities to strengthen our balance sheet and to operate more efficiently;


•	our intention to pursue acquisition opportunities and our ability to obtain financing for and successfully take advantage of such opportunities;


•	our intention to fund purchases made under our share repurchase program, if any, with existing cash resources and availability under our bank credit facility;


•	our expectations regarding the closing of the sale of the Assets and Liabilities related to the Dania Jai-Alai Business in the third quarter of 2011;


•	our expectations regarding the closing of the sale of the transactions contemplated by the IP Agreement before the end of the year;


•	Adjusted EBITDA, Adjusted Earnings (Loss) and Adjusted Earnings Per Share and their usefulness as measures of operating performance or valuation;


•	the impact of new accounting pronouncements on our consolidated financial statements;


•	that our Amended Credit Facility and Borgata's credit facility and our respective cash flows from operating activities will be sufficient to meet our respective projected operating and maintenance capital expenditures for the next twelve months;


•	our ability to fund any expansion projects using cash flows from operations and availability under the Amended Credit Facility;


•	our market risk exposure and efforts to minimize risk;

•

the timing of the delay of construction at Echelon, when, or if, construction will recommence, the effect that such delay will have on our business, operations or financial condition, our expectations as to the costs associated with delays related to the project as well as the value of capitalized costs and recurring project costs we expect to incur in the future, and our belief that financing for a development project like Echelon continues to be unavailable;


•	expansion, development, investment and renovation plans, including the scope of such plans, expected costs, financing (including sources thereof and our expectation that long-term debt will substantially increase in

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connection with such projects), timing and the ability to achieve market acceptance;


•	our belief that, except for the Copeland matter discussed herein, all pending claims, if adversely decided, will not have a material adverse effect on our business, financial position, or results of operations;


•	that margin improvements will remain a driver of profit growth for the Company going-forward;


•	our belief that the risks to our business associated with USCG inspection should not change by reason of inspection by ABSC;


•	development opportunities in existing or new jurisdictions and our ability to successfully take advantage of such opportunities;


•	regulations, including anticipated taxes, tax credits or tax refunds expected, and the ability to receive and maintain necessary approvals for our projects;


•	our asset impairment analyses and our intangible asset and goodwill impairment tests;


•	the resolution of our pending litigation, including the litigation involving Treasure Chest casino;


•	our relationship with LVE including, without limitation, our mutual agreement to not initiate litigation, the monthly periodic fee and our option to purchase LVE's assets;


•	our intention to file a registration statement pursuant to the registration rights agreement entered into in connection with the private placement of our 9.125% senior notes due 2018;


•	the likelihood of interruptions to our rights in the land we lease under long term leases for certain of our hotels and casinos;


•	the outcome of various tax audits and assessments, including our appeals thereof, timing of resolution of such audits, our estimates as to the amount of taxes that will ultimately be owed and the impact of these audits on our consolidated financial statements;


•	our overall outlook, including all statements under the heading Overall Outlook in Part I. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations;


•	our ability to receive insurance reimbursement and our estimates of self-insurance accruals and future liability;


•	that operating results for previous periods are not necessarily indicative of future performance;


•	that estimates and assumptions made in the preparation of financial statements in conformity with U.S. GAAP may differ from actual results;


•	our estimates as to the effect of any changes in our Consolidated EBITDA on our ability to remain in compliance with certain Amended Credit Facility covenants; and


•	expectations, plans, beliefs, hopes or intentions regarding the future.

Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include:

•The effects of intense competition that exists in the gaming industry.


•	The economic downturn and its effect on consumer spending.


•	The fact that our expansion, development and renovation projects (including enhancements to improve property performance) are subject to many risks inherent in expansion, development or construction of a new or existing project, including:


•	design, construction, regulatory, environmental and operating problems and lack of demand for our

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projects;


•	delays and significant cost increases, shortages of materials, shortages of skilled labor or work stoppages;


•	poor performance or nonperformance of any of our partners or other third parties upon whom we are relying in connection with any of our projects;


•	construction scheduling, engineering, environmental, permitting, construction or geological problems, weather interference, floods, fires or other casualty losses;


•	failure by us, our partners, or Borgata to obtain financing on acceptable terms, or at all; and


•	failure to obtain necessary government or other approvals on time, or at all.


•	The risk that our ongoing suspension of construction at Echelon may result in adverse affects on our business, results of operations or financial condition, including with respect to our joint venture participants and other resulting liabilities.


•	The risk that USCG may not continue to allow in-place underwater inspections of our riverboats.


•	The risk that any of our projects may not be completed, if at all, on time or within established budgets, or that any project will result in increased earnings to us.


•	The risk that significant delays, cost overruns, or failures of any of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.


•	The risk that our projects may not help us compete with new or increased competition in our markets.


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


•	The risk associated with challenges to legalized gaming in existing or current markets.


•	The risk that the actual fair value for assets acquired and liabilities assumed from any of our acquisitions differ materially from our preliminary estimates.


•	The risk that negative industry or economic trends, including the market price of our common stock trading below its book value, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business, may result in significant write-downs or impairments in future periods.


•	The risks associated with growth and acquisitions, including our ability to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems.


•	The risk that we may not receive gaming or other necessary licenses for new projects or that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other adverse actions against any of our casino operations.


•	Our inability to select the new joint venture partner for Borgata and the possibility that a new operating agreement will be entered into with the new venture partner, which could result in changes to Borgata's ongoing operations.

•

The risk that we may be unable to finance our expansion, development, investment and renovation projects, including cost overruns on any particular project, as well as other capital expenditures through cash flow, borrowings under our Amended Credit Facility or Borgata's bank credit facility and additional financings, which could jeopardize our expansion, development, investment and renovation efforts.


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


•	Risks associated with our ability to comply with the Total Leverage, Secured Leverage and Interest Coverage ratios in our Amended Credit Facility, and the risks associated with Borgata's ability to comply with the minimum consolidated EBITDA and minimum liquidity covenants.

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•	The risk that we ultimately may not be successful in dismissing the action filed against Treasure Chest and may lose our ability to operate that property, which result could adversely affect our business, financial condition and results of operations.


•	The effects of the extensive governmental gaming regulation and taxation policies that we are subject to, as well as any changes in laws and regulations, including increased taxes, which could harm our business.


•	The effects of extreme weather conditions or natural disasters on our facilities and the geographic areas from which we draw our customers, and our ability to recover insurance proceeds (if any).


•	The risks relating to mechanical failure and regulatory compliance at any of our facilities.


•	The risk that the instability in the financial condition of our lenders could have a negative impact on our Amended Credit Facility and Borgata's bank credit facility.


•	The effects of events adversely impacting the economy or the regions from which we draw a significant percentage of our customers, including the effects of the current economic recession, war, terrorist or similar activity or disasters in, at, or around our properties.


•	The effects of energy price increases on our cost of operations and our revenues.


•	Financial community and rating agency perceptions of our Company, 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 mid-Atlantic region.


•	Borgata's expected liabilities under the multiemployer pensions in which it operates.

Additional factors that could cause actual results to differ are discussed in Part II. Item 1A. Risk Factors of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 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

As of June 30, 2011, there were no material changes to the information previously reported under Item 7A. in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 15, 2011.

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

Copeland

Alvin C. Copeland, the sole shareholder (deceased) of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino (“Treasure Chest”), has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against Treasure Chest. In November 1993, Copeland objected to the relocation of Treasure Chest from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland's objection. Copeland then filed an appeal of the agency's decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland unsuccessfully attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest's license, an award of the license to him, and monetary damages. The suit was dismissed by the trial court, citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On September 21, 2002, the First Circuit Court of Appeal reversed the trial court's decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was partially denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds. There was no activity regarding this matter during 2005 and 2006, and the case was set to be dismissed by the court for failure to prosecute by the plaintiffs in mid-May 2007; however on May 1, 2007, the plaintiff filed a motion to set a hearing date related to the motions to dismiss. The hearing was scheduled for September 10, 2007, at which time all parties agreed to postpone the hearing indefinitely. The hearing has not yet been rescheduled. Mr. Copeland has since passed away and his son, the executor of his estate, has petitioned the court to be substituted as plaintiff in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter Jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and results of operations.

Item 1A. Risk Factors

We have revised the risk factors that relate to our business as set forth below. These risks include any material changes to and supersede 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, 2010. 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 I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Important Information Regarding Forward-Looking Statements, above.

If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our securities, including our common stock, senior notes and senior subordinated notes, could decline significantly, and investors could lose all or part of their investment.

Risks Related to our Business

Our business is particularly sensitive to reductions in discretionary consumer spending as a result of downturns in the economy.

Consumer demand for entertainment and other amenities at casino hotel properties, such as ours, are particularly sensitive to downturns in the economy and the corresponding impact on discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions, effects of the current decline in consumer confidence in the economy, including the current housing, employment and credit crisis, the impact of high energy and food costs, the increased cost of travel, the potential for continued bank failures, decreased disposable

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consumer income and wealth, or fears of war and future acts of terrorism could further reduce customer demand for the amenities that we offer, thus imposing practical limits on pricing and negatively impacting our results of operations and financial condition.

For example, the year ended December 31, 2009 was one of the toughest economic periods in Las Vegas Locals history. The current housing crisis and economic slowdown in the United States has resulted in a significant decline in the amount of tourism and spending in Las Vegas. Similarly, weak economic conditions have also adversely affected tourism and spending in Atlantic City, where Borgata is located. Since our business model relies on consumer expenditures on entertainment, luxury and other discretionary items, continuation or deepening of the economic downturn will further adversely affect our results of operations and financial condition.

Intense competition exists in the gaming industry, and we expect competition to continue to intensify.

The gaming industry is highly competitive for both customers and employees, including those at the management level. We compete with numerous casinos and hotel casinos of varying quality and size in market areas where our properties are located. We also compete with other non-gaming resorts and vacation destinations, and with various other casino and other entertainment businesses, and could compete with any new forms of gaming that may be legalized in the future. The casino entertainment business is characterized by competitors that vary considerably in their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent and geographic diversity. In most markets, we compete directly with other casino facilities operating in the immediate and surrounding market areas. In some markets, we face competition from nearby markets in addition to direct competition within our market areas.

In recent years, with fewer new markets opening for development, competition in existing markets has intensified. We have invested in expanding existing facilities, developing new facilities, and acquiring established facilities in existing markets. In addition, our competitors have also invested in expanding their existing facilities and developing new facilities. This expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies of many of our competitors have increased competition in many markets in which we compete, and this intense competition can be expected to continue. In addition, competition may intensify if our competitors commit additional resources to aggressive pricing and promotional activities in order to attract customers.

If our competitors operate more successfully than we do, if they attract customers away from us as a result of aggressive pricing and promotion, if they are more successful than us in attracting and retaining employees, if their properties are enhanced or expanded, if they operate in jurisdictions that give them operating advantages due to differences or changes in gaming regulations or taxes, or if additional hotels and casinos are established in and around the locations in which we conduct business, we may lose market share or the ability to attract or retain employees. In particular, the expansion of casino gaming in or near any geographic area from which we attract or expect to attract a significant number of our customers could have a significant adverse effect on our business, financial condition and results of operations.

Also, our business may be adversely impacted by the additional gaming and room capacity in states which may be competitive in the other markets where we operate or intend to operate. Several states are also considering enabling the development and operation of casinos or casino-like operations in their jurisdictions.

For example, the expansion of casino gaming in or near the mid-Atlantic region from which Borgata attracts and expects to attract most of its customers has had an adverse effect on its business, results of operations and financial condition. In January 2010, table game legislation was signed into Pennsylvania law which allows up to 250 table games at each of the twelve largest authorized casinos and up to 50 table games at each of the remaining two smaller authorized casinos. Table games became operational at the nine existing casinos in Philadelphia in mid-July 2010. In addition, other states near New Jersey, including New York and Delaware, either have or are currently contemplating gaming legislation. In January 2010, Delaware legalized table games, which became operational in June 2010 at all three Delaware casinos. Convenience may be a more important factor than amenities for some customers, especially mid-week and repeat customers. These customers may prefer the convenience of a closer drive to a nearby casino rather than dealing with a longer drive to enjoy the amenities that Borgata has to offer. Expansion of gaming facilities in Pennsylvania and other nearby states therefore has resulted in fewer customer visits to Borgata, which has adversely impacted Borgata's business, results of operations and financial condition.

We also compete with legalized gaming from casinos located on Native American tribal lands. Expansion of Native American gaming in areas located near our properties, or in areas in or near those from which we draw our customers, could have an adverse effect on our operating results. For example, increased competition from federally recognized Native American tribes near Blue Chip and Sam's Town Shreveport has had a negative impact on our results. Native American gaming facilities typically have a significant operating advantage over our properties due to lower gaming taxes, allowing those facilities to market more aggressively and to expand or update their facilities at an accelerated rate. Although we have expanded our facility at Blue Chip in an effort to be more competitive in this market, these competing Native American properties could continue to have an adverse impact on the

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operations of Blue Chip and Sam's Town Shreveport.

The global financial crisis and decline in consumer spending may have an effect on our business and financial condition in ways that we currently cannot accurately predict.

The significant distress recently experienced by financial institutions has had, and may continue to have, far-reaching adverse consequences across many industries, including the gaming industry. The ongoing credit and liquidity crisis has greatly restricted the availability of capital and has caused the cost of capital (if available) to be much higher than it has traditionally been. Therefore, we have no assurance that we will have further access to credit or capital markets at desirable times or at rates that we would consider acceptable, and the lack of such funding could have a material adverse effect on our business, results of operations and financial condition, including our ability to refinance our or Borgata's indebtedness, our flexibility to react to changing economic and business conditions and our ability or willingness to fund new development projects.

We are not able to predict the duration or severity of the economic downturn, and the resulting impact on the solvency of many of the financial institutions, that have been negatively impacted. If a large percentage of our lenders were to file for bankruptcy or otherwise default on their obligations to us, we may not have the liquidity under our Amended Credit Facility to fund our current projects. There is no certainty that our lenders will continue to remain solvent or fund their respective obligations under our Amended Credit Facility. If we were otherwise required to renegotiate or replace our Amended Credit Facility, there is no assurance that we would be able to secure terms that are as favorable to us, if at all.

We may incur impairments to goodwill, indefinite-lived intangible assets, or long-lived assets.

In accordance with the authoritative accounting guidance for goodwill and other intangible assets, we test our goodwill and indefinite-lived intangible assets for impairment annually or if a triggering event occurs. We perform the annual impairment testing for goodwill and indefinite-lived intangible assets in the second quarter of each fiscal year. The results of our annual scheduled impairment test of goodwill and indefinite-lived intangible assets did not require us to record an impairment charge during the six months ended June 30, 2011; however, as discussed below, if our estimates of projected cash flows related to these assets are not achieved, we may be subject to a future impairment charge, which could have a material adverse impact on our consolidated financial statements.

In addition, in accordance with the provisions of the authoritative accounting guidance for the impairment or disposal of long-lived assets, we test long-lived assets for impairment if a triggering event occurs. During the six months ended June 30, 2011, we performed an interim impairment test on the trademark we recorded in connection with the valuation of Borgata due to our consideration of a change in facts and circumstances surrounding an adverse change in the business climate in the Atlantic City region. As a result, we recorded a $5.0 million impairment to the trademark.

We are entirely dependent upon our properties for future cash flows and our continued success depends on our ability to draw customers to our properties. Significant 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 have resulted in significant write-downs and impairment charges during the years ended December 31, 2009 and 2008, and, if one or more of such events were to recur, additional impairment charges may be required in future periods. If we are required to record additional impairment charges, this could have a material adverse impact on our consolidated financial statements.

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

The change in circumstances implies that the carrying amounts of the assets related to Echelon may not be recoverable; therefore, we performed an impairment test of these assets during the year ended December 31, 2009. While the outcome of this evaluation resulted in no impairment of Echelon's assets, as the estimated weighted net undiscounted cash flows from the project exceeded the current carrying value of the assets of approximately $928 million at December 31, 2009, we can provide no assurances that future evaluations will not result in impairment charges. As we further develop and explore the viability of alternatives for the project, we will continue to monitor these assets for recoverability. If we are subject to a non-cash write-down of these assets, it could have a material adverse impact on our consolidated financial statements.

Due to the circumstances regarding the final development plan of Echelon, we reviewed our former investment in the Morgans joint venture for impairment during 2009. Considering the subsequent mutual termination of this joint venture, certain of our

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contributions, primarily related to the architectural and design plans, were ultimately not realizable and, as a result, we recorded an other-than-temporary non-cash impairment charge of $13.5 million during the year ended December 31, 2009 related to such costs.

In addition, during the year ended December 31, 2009, in conjunction with an amendment to the Dania Jai-Alai purchase agreement to settle the contingent payment prior to the satisfaction of the legal conditions, we recorded the remaining $28.4 million of the $75 million contingent liability as an additional cost of the acquisition (goodwill). We tested the goodwill for recoverability, which resulted in a noncash impairment charge of $28.4 million during the year ended December 31, 2009.

During the year ended December 31, 2008, we recorded $290.2 million in aggregate noncash impairment charges to write-down certain portions of our goodwill, intangible assets and other long-lived assets to their fair value at December 31, 2008. The impairment test for these assets was principally due to the decline in our stock price that caused our book value to exceed our market capitalization, which was an indication that these assets may not be recoverable. The primary reason for these impairment charges relates to the ongoing economic downturn and increased discount rates in the credit and equity markets, which has caused us to reduce our estimates for projected cash flows, and has reduced overall industry valuations.

Our partner in the Holding Company, the limited liability company that owns and operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey, has divested its 50% interest and we do not have the ability to select the new partner.

We own a 50% controlling interest in the limited liability company that operates Borgata. MGM currently beneficially owns the other 50% interest. As a result of the NJDGE's investigation of MGM's relationship with its joint venture partner in Macau, MGM entered into a settlement agreement with the NJDGE and the NJCCC under which MGM placed its 50% ownership interest in Borgata into a Divestiture Trust, which was established for the purpose of selling the MGM Interest to a third party.

We are the managing member of the limited liability company that operates Borgata, and have been, and will continue to be responsible for the day-to-day operations of Borgata, including the operations and improvement of the facility and business. Additionally, we hold a right of first refusal on any sale of the MGM Interest in Borgata. However, we believe we will expend managerial resources to effectuate the eventual sale of the MGM Interest from the Divestiture Trust to a new partner, regardless of whether we exercise our right of first refusal. Other than exercising our right of first refusal, we do not have the ability to affect the selection of the potential new partner at Borgata.

While we believe we will retain direct control of the operations of Borgata, based on our current and amended operating agreement, a new partner may want to negotiate greater rights or different terms. If we agree to consider changes to the operating agreement, these negotiations may decrease our ability to directly control the facility and effectively manage our financial risk. Any new partner could have economic or business interests or goals that are inconsistent with our economic or business interests or goals. The ongoing operation of the facility could change if we agree to negotiate agreements with a new partner that contain terms that differ from our existing operating agreement.

Borgata's bank credit facility matures in August 2014. At the time of maturity, if Borgata is unable to refinance its bank credit facility on favorable terms, additional credit support and/or capital contributions may be necessary to fund the ongoing operations of Borgata. This additional credit and/or equity may need to be contributed by us or a new partner, if any, or from both. If we are unable to obtain adequate financing in a timely manner, or at all, we may be unable to meet the operating cash flow needs of Borgata, and our investment would be at risk. Moreover, if any new partner does not have the financial resources to meet its share of the obligations, or subsequently declares bankruptcy, we could be required to fund more than our 50% share.

We face risks associated with growth and acquisitions.

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

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

On August 1, 2008, we announced that, due to the difficult environment in both the capital markets and the economy, our Echelon project would be delayed. As previously disclosed, we do not anticipate that Echelon will resume construction for three to five years. We also believe financing for a project like Echelon continues to be unavailable. We can provide no assurances regarding the timing or effects of our delay of construction at Echelon and when, or if, construction will recommence, or the effect that such delay will have on our business, operations or financial condition. In addition, our agreements or arrangements with third parties could require additional fees or terms in connection with modifying their agreements that may be unfavorable to us, and we can provide no assurances that we will be able to reach agreement on any modified terms.

Additionally, in February 2008, management determined to indefinitely postpone redevelopment of our Dania Jai-Alai facility, and in connection with that determination we recorded an $84.0 million noncash impairment charge to write-off Dania Jai-Alai's intangible license rights and to write-down its property and equipment to their estimated fair values. Our decision to postpone the development was based on numerous factors, including the introduction of expanded gaming at a nearby Native American casino, the potential for additional casino gaming venues in Florida, and the existing Broward County pari-mutuel casinos performing below our expectations for the market.

There can be no assurance that we will not face similar challenges and difficulties with respect to new development projects or expansion efforts that we may undertake, which could result in significant sunk costs that we may not be able to fully recoup or that otherwise have a material adverse effect on our financial condition and results of operations.

Our expansion, development, investment and renovation projects may face significant risks inherent in construction projects or implementing a new marketing strategy, including receipt of necessary government approvals.

We regularly evaluate expansion, development, investment and renovation opportunities. On January 4, 2006, we announced our planned Las Vegas Strip development, Echelon, which represents the largest and most expensive development project we have undertaken to date.

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


•	delays and significant cost increases;


•	shortages of materials;


•	shortages of skilled labor or work stoppages;


•	poor performance or nonperformance by any of our joint venture partners or other third parties on whom we place reliance;


•	unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems; and


•	weather interference, floods, fires or other casualty losses.

The completion dates of any of our projects could differ significantly from expectations for construction-related or other reasons. For example, on August 1, 2008, we announced that, due to the difficult environment in the capital markets, as well as weak economic conditions, our Echelon project would be delayed. As we do not yet believe that a significant level of economic recovery has occurred along the Las Vegas Strip, we do not expect to resume construction for three to five years, as previously disclosed.

In addition, actual costs and construction periods for any of our projects can differ significantly from initial expectations. Our initial project costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared at inception of the project in consultation with architects and contractors. Many of these costs can increase over time as the project is built to completion. We have incurred significant incremental costs in connection with delaying construction of Echelon and anticipate that additional cost increases could continue to occur if and when we recommence development of Echelon.

Additional costs upon restarting construction of Echelon could include, without limitation, costs associated with remobilization, changes in design, increases in material, labor, or insurance costs, construction code changes during the delay period, corrosive damage risk, damage to uncompleted structures, etc. The cost of any project may vary significantly from initial budget expectations and we may have a limited amount of capital resources to fund cost overruns. If we cannot finance cost overruns on a timely basis,

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the completion of one or more projects may be delayed until adequate funding is available. We can provide no assurance that any project will be completed on time, if at all, or within established budgets, or that any project will result in increased earnings to us. Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.

LVE has suspended construction of the central energy center while the Echelon project is delayed. On April 3, 2009, LVE notified us that, in its view, Echelon Resorts would be in breach of the ESA unless it recommences and proceeds with construction of the Echelon development project by May 6, 2009. We believe that LVE's position is without merit; however, in the event of litigation, we cannot state with certainty the eventual outcome nor estimate the possible loss or range of loss, if any, associated with this matter. On March 7, 2011, Echelon Resorts and LVE entered into both a purchase option agreement (the "Purchase Option Agreement") and a periodic fee agreement (the "Periodic Fee Agreement"). Under the Periodic Fee Agreement, Echelon Resorts and LVE have mutually agreed that neither LVE nor Echelon Resorts would give notice of, file or otherwise initiate any claim or cause of action, in or before any court, administrative agency, arbitrator, mediator or other tribunal, that arises under the ESA, subject to certain exceptions, and that any statute of limitations or limitation periods for defenses, claims, causes of actions and counterclaims shall be tolled while the Periodic Fee Agreement is in effect. The prohibition on the initiation of litigation and the tolling of the statute of limitations provided for in the Periodic Fee Agreement should be applicable to any litigation with respect to LVE's April 3, 2009 claim of an alleged breach of the ESA. Under the Periodic Fee Agreement, Echelon Resorts has agreed to pay LVE, beginning March 4, 2011, the Periodic Fee and an operation and maintenance fee until either (i) Echelon notifies LVE that it has resumed construction of a portion of the Echelon development project that it will own in fee simple and Echelon and LVE have mutually agreed to changes to the dates in their respective construction milestones under the ESA: or (ii) Echelon exercises its option to purchase LVE's assets pursuant to the terms of the Purchase Option Agreement. The amount of the Periodic Fee is fixed at $11.9 million annually through November 2013. Thereafter, the amount of the Periodic Fee is estimated to be approximately $10.8 million annually. The operation and maintenance fee cannot exceed $0.6 million per annum without Echelon Resorts' prior approval. We have posted a letter of credit in the amount of $6.0 million to secure Echelon Resorts' obligation to pay the Periodic Fee and the operation and maintenance fee.

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

Certain permits, licenses and approvals necessary for some of our current or anticipated projects have not yet been obtained. The scope of the approvals required for expansion, development, investment or renovation projects can be extensive and may include gaming approvals, state and local land-use permits and building and zoning permits. Unexpected changes or concessions required by local, state or federal regulatory authorities could involve significant additional costs and delay the scheduled openings of the facilities. We may not obtain the necessary permits, licenses and approvals within the anticipated time frames, or at all.

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

If we are unable to finance our expansion, development, investment and renovation projects, as well as other capital expenditures, through cash flow from operations, borrowings under our Amended Credit Facility and additional financings, our expansion, development, investment and renovation efforts will be jeopardized.

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debt, reducing the amount or suspending or discontinuing the distribution of dividends, obtaining additional equity financing or joint venture partners, or modifying our Amended Credit Facility. These sources of funds may not be sufficient to finance our expansion, development, investment and renovation projects, and other financing may not be available on acceptable terms, in a timely manner, or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness.

Recently, there have been significant disruptions in the global capital markets that have adversely impacted the ability of borrowers to access capital. We anticipate that these disruptions may continue for the foreseeable future. We anticipate that funding for any of our expansion projects would come from cash flows from operations and availability under our Amended Credit Facility (to the extent that availability exists under our Amended Credit Facility, as applicable, after we meet our working capital needs).

If availability under our Amended Credit Facility does not exist or we are otherwise unable to make sufficient borrowings thereunder, any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. As a result, if we are unable to obtain adequate project financing in a timely manner, or at all, we may be forced to sell assets in order to raise capital for projects, limit the scope of, or defer such projects, or cancel the projects altogether. In the event that capital markets do not improve and we are unable to access capital with more favorable terms, additional equity and/or credit support may be necessary to obtain construction financing for the remaining cost of the project.

Risks Related to the Regulation of our Industry

We are subject to extensive governmental regulation, as well as federal, state and local laws affecting business in general, which may harm our business.

We are subject to a variety of regulations in the jurisdictions in which we operate. Regulatory authorities at the federal, state and local levels have broad powers with respect to the licensing of casino operations and may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other actions, any one of which could have a significant adverse effect on our business, financial condition and results of operations. A more detailed description of the governmental gaming regulations to which we are subject is included in Exhibit 99.1 to our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 15, 2011. If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals are introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and our company. Legislation of this type may be enacted in the future.

Regulation of smoking

Each of New Jersey and Illinois has adopted laws that significantly restrict, or otherwise ban, smoking at our properties in those jurisdictions. The New Jersey and Illinois laws that restrict smoking at casinos, and similar legislation in other jurisdictions in which we operate, could materially impact the results of operations of our properties in those jurisdictions.

Additionally, on April 15, 2007, an ordinance in Atlantic City became effective which extended smoking restrictions under the New Jersey Smoke-Free Air Act. This ordinance mandated that casinos restrict smoking to designated areas of up to 25% of the casino floor. During April 2008, Atlantic City's City Council unanimously approved an amendment to the ordinance, banning smoking entirely on all casino gaming floors and casino simulcasting areas, but allowing smoking in separately exhausted, non-gaming, smoking lounges. The amendment to the ordinance became effective on October 15, 2008, however, on October 27, 2008, Atlantic City's City Council voted to postpone the full smoking ban for at least one year due to, among other things, the weakened economy and increased competition in adjoining states. The postponement of the full smoking ban became effective on November 16, 2008. In December 2009, Atlantic City's City Council announced that it would not consider a full smoking ban in casinos until at least the end of 2011.

Regulation of directors, officers, key employees and partners

Our directors, officers, key employees and joint venture partners must meet approval standards of certain state regulatory authorities. If state regulatory authorities were to find a person occupying any such position or a joint venture partner unsuitable, we would be required to sever our relationship with that person or the joint venture partner may be required to dispose of their interest in the joint venture. State regulatory agencies may conduct investigations into the conduct or associations of our directors, officers, key employees or joint venture partners to ensure compliance with applicable standards.

Certain public and private issuances of securities and other transactions that we are party to also require the approval of some state regulatory authorities.

Regulations affecting businesses in general

In addition to gaming regulations, we are also subject to various federal, state and local laws and regulations affecting businesses

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in general. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, smoking, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. For example, Nevada recently enacted legislation that eliminated, in most instances, and, for certain pre-existing development projects such as Echelon, reduced, property tax breaks and retroactively eliminated certain sales tax exemptions offered as incentives to companies developing projects that meet certain environmental “green” standards. As a result, we, along with other companies developing projects that meet such standards, may not realize the full tax benefits that were originally anticipated.

We are subject to extensive taxation policies, which may harm our business.

The federal government has, from time to time, considered a federal tax on casino revenues and may consider such a tax in the future. In addition, gaming companies are currently subject to significant state and local taxes and fees, in addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any time. For example, in June 2006, the Illinois legislature passed certain amendments to the Riverboat Gambling Act, which affected the tax rate at Par-A-Dice. The legislation, which imposes an incremental 5% tax on adjusted gross gaming revenues, was retroactive to July 1, 2005. As a result of this legislation, we were required to pay additional taxes, resulting in a $6.7 million tax assessment in June 2006. Also, in May 2007, Blue Chip received a valuation notice indicating an unanticipated increase of nearly 400% to its assessed property value as of January 1, 2006. At that time, we estimated that the increase in assessed property value could result in a property tax assessment ranging between $4 million and $11 million for the eighteen-month period ended June 30, 2007. We recorded an additional charge of $3.2 million during the three months ended June 30, 2007 to increase our property tax liability to $5.8 million at June 30, 2007 as we believed that was the most likely amount to be assessed within the range. We subsequently received a property tax bill related to our 2006 tax assessment for $6.2 million in December 2007. As we have appealed the assessment, Indiana statutes allow for a minimum required payment of $1.9 million, which was paid against the $6.2 million assessment in January 2008. In February 2009, we received a notice of revaluation, which reduced the property's assessed value by $100 million and the tax assessment by approximately $2.2 million per year. We have subsequently paid the minimum required payment of $1.9 million against provisional bills received in 2007 through 2010, all of which were based on the 2006 valuation notice. In March 2011, we reached a settlement with the assessor, reducing the valuation by an additional $96.0 million and $74.0 million for the 2006 and 2007 tax years, respectively. As a result of the agreement reached on the 2006 and 2007 valuations, we have revised our accrual for years 2008 through 2011 to reflect the expected carryforward effect of the reductions received in the prior year settlements. Such reduction resulted in an income statement benefit of approximately $3.1 million and $2.8 million, net of fees, in the first and second quarter of 2011, respectively. We are currently in negotiations related to the 2008 and 2009 years but have not received valuation notices for years 2008 through 2011. We believe the assessment for the period from January 1, 2008 through June 30, 2011 could result in a property tax assessment, net of payments, ranging between $14.0 million and $18.0 million. We have accrued, net of the payments discussed above, approximately $18.0 million of property tax liability as of June 30, 2011, based on what we believe to be the most likely assessment within our range, once all appeals have been exhausted; however, we can provide no assurances that the estimated amount will approximate the actual amount. The final assessment notices for the period January 1, 2008 through June 30, 2011, which have not been received as of June 30, 2011, could result in further adjustment to our estimated property tax liability at Blue Chip.

If there is any material increase in state and local taxes and fees, our business, financial condition and results of operations could be adversely affected.

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options and a final, non-appealable decision has been rendered. For periods subsequent to May 2008, we have not collected, remitted or accrued a liability for sales tax on complimentary and employee meals at our Nevada casino properties, as we do not believe it is probable, based on both procedural issues and the technical merits of the Department's arguments, that we will owe this tax.

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

We own real property and are subject to extensive environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.

We may incur costs to comply with environmental requirements, such as those relating to discharges into the air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of our property affected by hazardous substances. Under these and other environmental requirements we may be required to investigate and clean up hazardous or toxic substances or chemical releases at our property. As an owner or operator, we could also be held responsible to a governmental entity or third parties for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination. These laws typically impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. The liability under those laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of those substances may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use our property.

Borgata is a participant in a multiemployer pension plan, and the plan has been certified in critical status by the fund's actuary.

In connection with Borgata's collective bargaining agreement with the culinary and hotel workers union, Local 54/UNITE HERE, it participates in the UNITE HERE National Retirement Fund pension plan (the “Fund”). On March 31, 2010, as a result of the extraordinary decline in the financial markets and downturn in the economy, the Fund was certified in critical status by the Fund's actuary under the federal multiemployer plan funding laws pursuant to the Pension Protection Act of 2006 (the “PPA”). In connection with the certification, the Fund's board of trustees has adopted a rehabilitation plan effective on April 1, 2010 (the “Rehabilitation Plan”) with the goal of enabling the Fund to emerge from critical status by January 1, 2023. The Rehabilitation Plan provides for certain increases in employer contributions and, in some cases, a reduction in participant benefits.

Borgata's current monthly pension contributions to the Fund range from $0.4 million to $0.5 million, and its unfunded vested liability to the Fund is $47.1 million for the plan year beginning on January 1, 2010. A renewed economic decline could have a significant adverse effect on the financial condition of the Fund, which may require Borgata to make contributions in addition to those already contemplated. Any such increases in required contributions could adversely affect Borgata's results of operations.

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

Risks Related to our Properties

We own facilities that are located in areas that experience extreme weather conditions.

Extreme weather conditions may interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected areas.

For example, due to flooding of the Mississippi River, the Mississippi Gaming Commission ordered the nine casinos located in Tunica, Mississippi to close indefinitely to ensure the safety of visitors and employees. Accordingly, effective May 1, 2011, we closed Sam's Town Hotel and Gambling Hall in Tunica. We were able to reopen on May 28, 2011; however, Sam's Town Hotel and Gambling Hall suffered minor damage, and we are still negotiating a settlement with our insurer.

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In addition, our Treasure Chest Casino, which is located near New Orleans, Louisiana, suffered minor damage and was closed on August 30, 2008 for eight days over Labor Day weekend, as the New Orleans area was under mandatory evacuation orders during Hurricane Gustav. Hurricane Ike resulted in a two-day closure starting September 12, 2008 at Treasure Chest. Although Hurricane Katrina in 2005 caused only minor damage at Treasure Chest, it was closed for 44 days as a result of that hurricane. Additionally, at our Delta Downs Racetrack Casino & Hotel, which is located in Southwest Louisiana, Hurricane Gustav forced us to close for six days, beginning on August 30, 2008, and Hurricane Ike led to a second closure from September 11, 2008 to September 17, 2008. The hurricane closures during 2008 totaled 10 days for Treasure Chest and 13 days for Delta Downs, including two full weekends at both properties. In 2005, Delta Downs suffered significant property damage as a result of Hurricane Rita and closed for 42 days.

Moreover, Blue Chip, Par-A-Dice, Sam's Town Tunica, Sam's Town Shreveport, Treasure Chest and Borgata are each located in an area that has been identified by the director of the Federal Emergency Management Agency (“FEMA”) as a special flood hazard area, which, according to the FEMA statistics, has a 1% chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.

In addition to the risk of flooding and hurricanes, snowstorms and other adverse weather conditions may interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected area. For example, during January and February 2011, much of the country was impacted by some of the worst winter weather in decades, particularly in the Midwest. Although our properties at Blue Chip and Par-A-Dice were not closed as a result, these storms made it very difficult for our customers to visit, and we believe such winter weather had a material and adverse impact on the results of our operations during such time. Additionally, February 2010 was the snowiest month ever recorded in Atlantic City, which generally kept would-be gamblers from traveling to Borgata, contributing to a drop in Borgata's monthly revenues from January to February. The 2010 winter season was the worst on record, and travel throughout the entire Northeast was extremely difficult. The residual impact from these record winter storms resulted in day trip visitations to Atlantic City that were reduced or delayed as regional school calendars were extended in order to make up for prior school closures. Additionally, extreme heat and low precipitation levels in the latter half of the first six months of 2010, particularly in the month of June, had an adverse impact on visitation and spending at Borgata's property. If there is a prolonged disruption at Borgata or any of our other properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition could be materially adversely affected.

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

If we are not ultimately successful in dismissing the action filed against Treasure Chest Casino, we may potentially lose our ability to operate the Treasure Chest Casino property and our business, financial condition and results of operations could be materially adversely affected.

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in the case. On June 9, 2009, the plaintiff filed to have the exceptions set for hearing. The parties decided to submit the exceptions to the court on the previously filed briefs. The court issued a ruling denying the exceptions on August 9, 2010. Copeland's counsel indicated a desire to move forward with the litigation and requested that the parties respond to outstanding discovery. Subsequently, on August 11, 2010, Robert J. Guidry, the co-defendant, filed a third party demand against the U.S. Attorney's Office seeking enforcement of Guidry's plea agreement which would limit Guidry's exposure in the case. On September 9, 2010, the U.S. Attorney's Office removed the suit to the U.S. District Court, Middle District of Louisiana. Pending before the District Court are a motion to dismiss for failing to state a cause of action filed by Guidry, asserting the same arguments he tried in state court, which the Company joined, and a motion to dismiss for lack of subject matter jurisdiction filed by the U.S. Attorney, which may result in the case being remanded to state court. The U.S. District Court heard the motions on March 16, 2011. A ruling has not yet been issued. On April 1, 2011, the U.S. Attorney's Office moved for summary judgment, maintaining its jurisdictional argument as well as seeking substantive relief. We currently are vigorously defending the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it could have a significant adverse effect on our business, financial condition and results of operations.

Our insurance coverage may not be adequate to cover all possible losses that our properties could suffer. In addition, our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future.

Although we have “all risk” property insurance coverage for our operating properties, which covers damage caused by a casualty loss (such as fire, natural disasters, acts of war, or terrorism), each policy has certain exclusions. In addition, our property insurance coverage is in an amount that may be significantly less than the expected replacement cost of rebuilding the facilities if there was a total loss. Our level of insurance coverage also may not be adequate to cover all losses in the event of a major casualty. In addition, certain casualty events, such as labor strikes, nuclear events, acts of war, loss of income due to cancellation of room reservations or conventions due to fear of terrorism, deterioration or corrosion, insect or animal damage and pollution, may not be covered at all under our policies. Therefore, certain acts could expose us to substantial uninsured losses.

We also have “builder's risk” insurance coverage for our development and expansion projects, including Echelon. Builder's risk insurance provides coverage for projects during their construction for damage caused by a casualty loss. In general, our builder's risk coverage is subject to the same exclusions, risks and deficiencies as those described above for our all risk property coverage. Our level of builder's risk insurance coverage may not be adequate to cover all losses in the event of a major casualty.

Blue Chip, Par-A-Dice, Sam's Town Tunica, Sam's Town Shreveport, Treasure Chest and Borgata are each located in an area that has been identified by the director of the FEMA as a special flood hazard area. According to the FEMA statistics, a special flood hazard area has a 1% chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year. Over a 30-year period, the risk of a 100-year flood in a special flood hazard area is 26%. At all times when we have a loan or credit facility from federally insured or regulated lender or lenders, we are required to maintain flood insurance at least equal to the lesser of (i) the outstanding principal balance of the loan; (ii) the maximum amount of coverage allowed for the type of property under the National Flood Insurance Program (“NFIP”) managed by FEMA; or (iii) the full replacement cost value of the collateral. The maximum amount of NFIP insurance currently available on a commercial building is currently $0.5 million. Our level of flood insurance coverage may not be adequate to cover all losses in the event of a major flood.

Due to flooding of the Mississippi River, Sam's Town Hotel and Gambling Hall was closed from May 1, 2011 until May 28, 2011. Sam's Town Hotel and Gambling Hall was damaged, and while we carry business interruption insurance and general liability insurance, we have not settled on our claims, and this insurance may not be adequate to cover all losses in any such event.

We renew our insurance policies (other than our builder's risk insurance) on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy limits or agree to certain exclusions from our coverage.

Our debt instruments and other material agreements require us to meet certain standards related to insurance coverage. Failure to satisfy these requirements could result in an event of default under these debt instruments or material agreements.

We draw a significant percentage of our customers from certain geographic regions. Events adversely impacting the economy or these regions, including public health outbreaks and man-made or natural disasters, may adversely impact our business.

The California, Fremont and Main Street Station draw a substantial portion of their customers from the Hawaiian market. For the three months ended June 30, 2011, patrons from Hawaii comprised 66% of the room nights sold at the California, 54% at Fremont and 58% at Main Street Station, For the six months ended June 30, 2011, patrons from Hawaii comprised 67% of the room nights sold at the California, 52% at Fremont and 54% at Main Street Station. Decreases in discretionary consumer spending, as well as an increase in fuel costs or transportation prices, a decrease in airplane seat availability, or a deterioration of relations with tour and travel agents, particularly as they affect travel between the Hawaiian market and our facilities, could adversely affect our business, financial condition and results of operations.

Our Las Vegas properties also draw a substantial number of customers from certain other specific geographic areas, including the

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Southern California, Arizona and Las Vegas local markets. Native American casinos in California and other parts of the United States have diverted some potential visitors away from Nevada, which has had and could continue to have a negative effect on Nevada gaming markets. In addition, due to our significant concentration of properties in Nevada, any man-made or natural disasters in or around Nevada, or the areas from which we draw customers to our Las Vegas properties, could have a significant adverse effect on our business, financial condition and results of operations. Each of our properties located outside of Nevada depends primarily on visitors from their respective surrounding regions and are subject to comparable risk.

Additionally, the expansion of casino gaming in or near the mid-Atlantic region from which Borgata attracts and expects to attract most of its customers could have a significant adverse effect on its business, results of operations and financial condition. In 2010, Pennsylvania passed legislation allowing table games at certain casinos in the state, and other states near New Jersey, including New York, Delaware, Connecticut, and Maryland have or are currently contemplating gaming legislation. The expansion of gaming facilities in nearby states will further increase competition and may adversely impact our business, financial condition and results of operations.

Borgata also competes with Native American tribes in the Northeast and Mid-Atlantic region. Expansion of Native American gaming could have an adverse effect on Borgata's business, results of operations and financial condition, as Native American gaming facilities typically have a significant operating advantage over Borgata due to lower gaming taxes, allowing those facilities to market more aggressively and to expand or update their facilities at an accelerated rate.

The strength and profitability of our business depends on consumer demand for hotel casino resorts in general and for the type of amenities our properties offer. Changes in consumer preferences or discretionary consumer spending could harm our business. The terrorist attacks of September 11, 2001, other terrorist activities in the United States and elsewhere, military conflicts in Iraq, Afghanistan and in the Middle East, outbreaks of infectious disease and pandemics, adverse weather conditions and natural disasters, among other things, have had negative impacts on travel and leisure expenditures. In addition, other factors affecting travel and discretionary consumer spending, including general economic conditions, disposable consumer income, fears of further economic decline and reduced consumer confidence in the economy, may negatively impact our business. We cannot predict the extent to which similar events and conditions may continue to affect us in the future. An extended period of reduced discretionary spending and/or disruptions or declines in tourism could significantly harm our operations.

Furthermore, our facilities are subject to the risk that operations could be halted for a temporary or extended period of time, as a result of casualty, flooding, forces of nature, adverse weather conditions, mechanical failure, or extended or extraordinary maintenance, among other causes. If there is a prolonged disruption at any of our properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition could be materially adversely affected.

The outbreak of public health threats at any of our properties or in the areas in which they are located, or the perception that such threats exist, including pandemic health threats, such as the avian influenza virus, SARS, or the H1N1 flu, among others, could have a significant adverse affect on our business, financial condition and results of operations. Likewise, adverse economic conditions that affect the national or regional economies in which we operate, whether resulting from war, terrorist activities or other geopolitical conflict, weather, general or localized economic downturns or related events or other factors, could have a significant adverse effect on our business, financial condition and results of operations.

In addition, to the extent that the airline industry is negatively impacted due to the effects of the economic recession and continued economic downturn, outbreak of war, public health threats, terrorist or similar activity, increased security restrictions or the public's general reluctance to travel by air, our business, financial condition and results of operations could be adversely affected.

Energy price increases may adversely affect our cost of operations and our revenues.

Our casino properties use significant amounts of electricity, natural gas and other forms of energy. In addition, our Hawaiian air charter operation uses a significant amount of jet fuel. While no shortages of energy or fuel have been experienced to date, substantial increases in energy and fuel prices, including jet fuel prices, in the United States have, and may continue to, negatively affect our results of operations. The extent of the impact is subject to the magnitude and duration of the energy and fuel price increases, of which the impact could be material. In addition, energy and gasoline price increases could result in a decline of disposable income of potential customers, an increase in the cost of travel and a corresponding decrease in visitation and spending at our properties, which could have a significant adverse effect on our business, financial condition and results of operations.

Borgata has an executory contract with a wholly-owned subsidiary of a local utility company with terms that extend to June 2028, 20 years from the opening of The Water Club. The utility company provides Borgata with electricity and thermal energy (hot water and chilled water). Obligations under the thermal energy executory contract contain both fixed fees and variable fees based upon usage rates. The fixed fee components under the thermal energy executory contract were estimated at approximately $11.4 million per annum as of June 30, 2011. Borgata is also obligated to purchase a certain portion of its electricity demand at essentially a

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fixed rate which is estimated at approximately $1.7 million per annum. Electricity demand in excess of the commitment is subject to market rates based on Borgata's tariff class.

Our facilities, including our riverboats and dockside facilities, are subject to risks relating to mechanical failure and regulatory compliance.

Generally, all of our facilities are subject to the risk that operations could be halted for a temporary or extended period of time, as the result of casualty, forces of nature, mechanical failure, or extended or extraordinary maintenance, among other causes. In addition, our gaming operations, including those conducted on riverboats or at dockside facilities could be damaged or halted due to extreme weather conditions.

We currently conduct our Treasure Chest, Par-A-Dice, Blue Chip and Sam's Town Shreveport gaming operations on riverboats. Each of our riverboats must comply with United States Coast Guard (“USCG”) requirements as to boat design, on-board facilities, equipment, personnel and safety. Each riverboat must hold a Certificate of Inspection for stabilization and flotation, and may also be subject to local zoning codes. The USCG requirements establish design standards, set limits on the operation of the vessels and require individual licensing of all personnel involved with the operation of the vessels. Loss of a vessel's Certificate of Inspection would preclude its use as a casino.

USCG regulations require a hull inspection for all riverboats at five-year intervals. Under certain circumstances, alternative hull inspections may be approved. The USCG may require that such hull inspections be conducted at a dry-docking facility, and if so required, the cost of travel to and from such docking facility, as well as the time required for inspections of the affected riverboats, could be significant. To date, the USCG has allowed in-place underwater inspections of our riverboats twice every five years on alternate two and three year schedules. The USCG may not continue to allow these types of inspections in the future. The loss of a dockside casino or riverboat casino from service for any period of time could adversely affect our business, financial condition and results of operations.

Indiana and Louisiana have adopted alternate inspection standards for riverboats in those states. The standards require inspection by the American Bureau of Shipping Consulting (“ABSC”). ABSC inspection for our riverboats at Blue Chip, Treasure Chest and Sam's Town Shreveport commenced during 2010. The Par-A-Dice riverboat will remain inspected by the USCG for the foreseeable future. ABSC imposes essentially the same design, personnel, safety, and hull inspection standards as the USCG. Therefore, the risks to our business associated with USCG inspection should not change by reason of inspection by ABSC. Failure of a vessel to meet the applicable USCG or ABSC standards would preclude its use as a casino.

USCG regulations also require us to prepare and follow certain security programs. In 2004, we implemented the American Gaming Association's Alternative Security Program at our riverboat casinos and dockside facilities. The American Gaming Association's Alternative Security Program is specifically designed to address maritime security requirements at riverboat casinos and their respective dockside facilities. Only portions of those regulations will apply to our riverboats inspected by ABSC. Changes to these regulations could adversely affect our business, financial condition and results of operations.

Some of our hotels and casinos are located on leased property. If we default on one or more leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected hotel and/or casino.

We lease certain parcels of land on which The Orleans, Suncoast, Treasure Chest, Sam's Town Shreveport and Borgata's hotel and gaming facility are located. In addition, we lease other parcels of land on which portions of the Cal and the Fremont are located. As a ground lessee, we have the right to use the leased land; however, we do not retain fee ownership in the underlying land. Accordingly, with respect to the leased land, we will have no interest in the land or improvements thereon at the expiration of the ground leases. Moreover, since we do not completely control the land underlying the property, a landowner could take certain actions to disrupt our rights in the land leased under the long term leases. While such interruption is unlikely, such events are beyond our control. If the entity owning any leased land chose to disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our business and operations could be adversely affected. If we were to default on any one or more of these leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected land and any improvements on the land, including the hotels and casinos. This would have a significant adverse effect on our business, financial condition and results of operations as we would then be unable to operate all or portions of the affected facilities.

Risks Related to our Indebtedness

We have a significant amount of indebtedness.

We had total consolidated long-term debt, net of current maturities, of approximately $2.82 billion at June 30, 2011. If we pursue, or continue to pursue, any expansion, development, investment or renovation projects, we expect that our long-term debt will substantially increase in connection with related capital expenditures. This indebtedness could have important consequences,

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including:


•	difficulty in satisfying our obligations under our current indebtedness;


•	increasing our vulnerability to general adverse economic and industry conditions;


•	requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, which would reduce the availability of our cash flows to fund working capital, capital expenditures, expansion efforts and other general corporate purposes;


•	limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;


•	placing us at a disadvantage compared to our competitors that have less debt; and


•	limiting, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds.

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

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


•	incur additional debt, including providing guarantees or credit support;


•	incur liens securing indebtedness or other obligations;


•	dispose of assets;


•	make certain acquisitions;


•	pay dividends or make distributions and make other restricted payments;


•	enter into sale and leaseback transactions;


•	engage in any new businesses; and


•	enter into transactions with our stockholders and our affiliates.

On December 3, 2010, we entered into an Amendment and Restatement Agreement among us, certain financial institutions (each a “Lender”), Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as swing line lender (the “Amendment and Restatement Agreement”). Pursuant to the terms of the Amendment and Restatement Agreement, our First Amended and Restated Credit Agreement, dated as of May 24, 2007, as amended by the First Amendment and Consent to First Amended Credit Agreement, dated as of December 21, 2009 (as amended, the “Amended Credit Facility”), was amended and restated to, among other things, (i) reduce the aggregate commitments under the Credit Facility and (ii) permit consenting Lenders to extend the maturity date of their commitments, new Lenders to issue revolving commitments and term loans and existing Lenders to increase their commitments (each, an “Extending Lender”) in each case with a maturity date five years from the restatement effective date.

Each of the Extending Lenders permanently reduced their commitments under the former credit facility by up to 50% of the amount thereof. As a result, the aggregate commitments under the Amended Credit Facility were reduced from $3 billion to approximately $1.5 billion (including $500 million of term loans, and excluding $331.0 million in non-extending amounts), which commitments may be increased from time to time by up to $500 million (instead of $1 billion commitment increases provided for under the former credit facility) through additional revolving credit or term loans under the Amended Credit Facility.

Our current debt service requirements on the extending amounts under the Amended Credit Facility primarily consist of interest payments on the outstanding borrowings. However, pursuant to the terms of the Amended Credit Facility, the term loans amortize in an annual amount equal to 5% of the original principal amount thereof, and commenced March 31, 2011, payable on a quarterly basis. The interest rate per annum applicable to revolving and term loans under the Amended Credit Facility is based upon, at our option, LIBOR or the “base rate,” plus an applicable margin in either case. Debt service requirements under our current outstanding senior subordinated and senior notes consist of semi-annual interest payments (based upon fixed annual interest rates ranging from 6.75% to 9.125%) and repayment of our senior subordinated and senior notes due April 15, 2014, February 1, 2016 and December 1, 2018 for each of our 6.75% and 7.125% senior subordinated notes and our 9.125% senior notes, respectively.

The Amended Credit Facility 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, we may be required to repay the amounts outstanding under the Amended Credit Facility in connection with certain asset sales and issuances of certain additional secured indebtedness.

In addition, our Amended Credit Facility requires us to maintain certain ratios, including a minimum Interest Coverage Ratio (as

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defined in the Amended Credit Facility) of 2.00 to 1.00, a Total Leverage Ratio and a Secured Leverage Ratio (both as defined in the Amended Credit Facility) that adjust over the life of our Amended Credit Facility. We believe that we were in compliance with the Amended Credit Facility covenants, including the minimum consolidated Interest Coverage Ratio, the maximum permitted consolidated Total Leverage Ratio and the maximum permitted Secured Leverage Ratio, which, at June 30, 2011, were 2.42 to 1.00, 6.95 to 1.00 and 4.14 to 1.00, respectively.

At June 30, 2011, assuming our current level of Consolidated Funded Indebtedness remains constant, we estimate that a 10.3% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to June 30, 2011, would cause us to exceed our maximum permitted consolidated Total Leverage Ratio covenant for that period. In addition, at June 30, 2011, assuming our current level of Secured Indebtedness remains constant, we estimate that a 8.0% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to June 30, 2011, would cause us to exceed our maximum permitted Secured Leverage Ratio covenant for that period. Additionally, at June 30, 2011, assuming our current level of interest expense remains constant, we estimate that a 17.2% or greater decline in our twelve-month trailing Consolidated EBITDA, as compared to June 30, 2011, would cause us to go below our minimum consolidated Interest Coverage Ratio covenant for that period.

However, in the event that we project our Consolidated EBITDA may decline by such levels or more, we could implement certain actions in an effort to minimize the possibility of a breach of the maximum permitted consolidated Total Leverage Ratio, the maximum permitted Secured Leverage Ratio and the minimum consolidated Interest Coverage Ratio covenants. These actions may include, among others, reducing payroll, benefits and certain other operating costs, deferring or eliminating certain maintenance, expansion or other capital expenditures, reducing our outstanding indebtedness through repurchases or redemption, and/or increasing cash by selling assets or issuing equity.

In addition, Borgata has significant indebtedness which could affect its ability to pay dividends to us. While we received a one-time distribution from Borgata of approximately $135.4 million in August 2010 in connection with Borgata's financing, any future distribution from Borgata (other than distributions to satisfy tax liabilities relating to income of Borgata) will be subject to the limitations on dividends, distributions and certain other restricted payments under Borgata's bank credit agreement and the indenture governing Borgata's senior secured notes.

We did not receive distributions from Borgata during the six months ended June 30, 2011 and received $17.5 million from Borgata during the six months ended June 30, 2010. Other than the August 2010 distribution, the distributions from Borgata have generally declined as a result of the decline in Borgata's operating results. Borgata has significant uses for its cash flows, including maintenance capital expenditures, interest payments, state income taxes and the repayment of debt. Borgata's cash flows are primarily used for its business needs and are not generally available, except to the extent distributions are paid to us, to service our indebtedness.

In addition, Borgata's bank credit facility contains customary affirmative and negative covenants, including covenants that limit Borgata's ability to:


•	incur additional debt;


•	pay dividends and make other distributions;


•	create liens;


•	enter into transactions with affiliates;


•	merge or consolidate; and


•	engage in unrelated business activities.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and expansion efforts will depend upon our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

It is unlikely that our business will generate sufficient cash flows from operations, or that future borrowings will be available to us under our Amended Credit Facility in amounts sufficient to enable us to pay our indebtedness, as such indebtedness matures and to fund our other liquidity needs. We believe that we will need to refinance all or a portion of our indebtedness, at maturity, and cannot provide assurances that we will be able to refinance any of our indebtedness, including our Amended Credit Facility, on commercially reasonable terms, or at all. We may have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint venture partners. These financing strategies may not be effected on satisfactory terms, if at all. In addition, certain states' laws contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Some restrictions

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may prevent us from obtaining necessary capital.

We and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indentures governing our senior subordinated and senior notes and Borgata's senior secured notes do not fully prohibit us or our subsidiaries from doing so. Approximately $555.7 million of contractual availability was available for borrowing under our Amended Credit Facility as of June 30, 2011. If new debt is added to our, or our subsidiaries', current debt levels, the related risks that we or they now face could intensify.

Borgata may be unable to refinance its indebtedness.

In August 2010, Borgata entered into a $150 million bank credit facility that matures in August 2014 and issued $800 million in senior secured debt, $400 million of which matures in October 2015 and $400 million of which matures in August 2018. Borgata's ability to refinance its indebtedness will depend on its ability to generate future cash flow and Borgata is entirely dependent on its operations, including the Water Club, for all of its cash flow. Its ability to generate cash in the future, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control.

It is unlikely that Borgata's business will generate sufficient cash flows from operations in amounts sufficient to enable it to pay the principal on its indebtedness at maturity and to fund its other liquidity needs. We believe Borgata will need to refinance all or a portion of its indebtedness before maturity, and we cannot provide assurances that it will be able to repay or refinance its indebtedness on commercially reasonable terms, or at all. Borgata may have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint venture partners. These financing strategies may not be effected on satisfactory terms, if at all. In addition, New Jersey laws and regulations contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Such restrictions may prevent Borgata from obtaining necessary capital.

If we are unable to finance our expansion, development, investment and renovation projects, as well as other capital expenditures, through cash flow, borrowings under the credit facility and additional financings, our expansion, development, investment and renovation efforts will be jeopardized.

We intend to finance our current and future expansion, development, investment and renovation projects, as well as our other capital expenditures, primarily with cash flow from operations, borrowings under the Amended Credit Facility, and equity or debt financings. If we are unable to finance our current or future expansion, development, investment and renovation projects, or our other capital expenditures, we will have to adopt one or more alternatives, such as reducing, delaying or abandoning planned expansion, development, investment and renovation projects as well as other capital expenditures, selling assets, restructuring debt, reducing the amount or suspending or discontinuing the distribution of dividends, obtaining additional equity financing or joint venture partners, or modifying the Amended Credit Facility. These sources of funds may not be sufficient to finance our expansion, development, investment and renovation projects, and other financing may not be available on acceptable terms, in a timely manner, or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness.

Recently, there have been significant disruptions in the global capital markets that have adversely impacted the ability of borrowers to access capital. We anticipate that these disruptions may continue for the foreseeable future. We anticipate that we will be able to fund any expansion projects using cash flows from operations and availability under the Amended Credit Facility (to the extent that availability exists after we meet our working capital needs).

If availability under the Amended Credit Facility does not exist or we are otherwise unable to make sufficient borrowings thereunder, any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. As a result, if we are unable to obtain adequate project financing in a timely manner, or at all, we may be forced to sell assets in order to raise capital for projects, limit the scope of, or defer such projects, or cancel the projects altogether. In the event that capital markets do not improve and we are unable to access capital with more favorable terms, additional equity and/or credit support may be necessary to obtain construction financing for the remaining cost of the project.

Risks Related to our Equity Ownership

Our common stock price may fluctuate substantially, and a shareholder's investment could decline in value.

The market price of our common stock may fluctuate substantially due to many factors, including:


•	actual or anticipated fluctuations in our results of operations;


•	announcements of significant acquisitions or other agreements by us or by our competitors;


•	our sale of common stock or other securities in the future;

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•	trading volume of our common stock;


•	conditions and trends in the gaming and destination entertainment industries;


•	changes in the estimation of the future size and growth of our markets; and


•	general economic conditions, including, without limitation, changes in the cost of fuel and air travel.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to companies' operating performance. Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, shareholder derivative lawsuits and/or securities class action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management's attention and resources.

Certain of our stockholders own large interests in our capital stock and may significantly influence our affairs.

William S. Boyd, our Executive Chairman of the Board of Directors, together with his immediate family, beneficially owned 37.2% of the Company's outstanding shares of common stock as of June 30, 2011. As such, the Boyd family has the ability to significantly influence our affairs, including the election of members of our Board of Directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation, or sale of assets.

Item 6. Exhibits

Exhibits



10.2			Agreement for Purchase and Sale, dated June 15, 2011, among the Company, Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC.

31.1			Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

31.2			Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

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.

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.

101			The following materials from Boyd Gaming Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (iii) Condensed Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2011, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (vi) Notes to Condensed Consolidated Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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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 August 5, 2011.



BOYD GAMING CORPORATION

By:		/S/ ELLIE J. BOWDISH
		Ellie J. Bowdish
		Vice President and Chief Accounting Officer (Principal Accounting Officer)

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EXHIBIT LIST



10.2			Agreement for Purchase and Sale, dated June 15, 2011, among the Company, Imperial Palace of Mississippi, LLC and Key Largo Holdings, LLC.

31.1			Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

31.2			Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act rule 13a-14(a).

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.

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.

101			The following materials from Boyd Gaming Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (iii) Condensed Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2011, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (vi) Notes to Condensed Consolidated Financial Statements.

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