EX-99.1 3 exhibit991byd10k2017-recas.htm EXHIBIT 99.1 Exhibit


1

ITEM 8.    Financial Statements and Supplementary Data
The following consolidated financial statements for the three years in the period ended December 31, 2017 are filed as part of this Report:

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


2


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Boyd Gaming Corporation and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Boyd Gaming Corporation and subsidiaries at December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principles

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for revenue in all periods presented due to the adoption of ASU 2014-09, Revenue from Contracts with Customers, and related amendments, as well as ASU 2016-18, Statement of Cash Flows: Restricted Cash.

Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada

February 26, 2018
(June 8, 2018 as it relates to the adoption of ASU 2014-09 and ASU 2016-18 as discussed in Note 1 of the financial statements, and June 28, 2018 as it relates to the condensed consolidating financial information pertaining to the guarantors of the Company’s 6.000% Senior Notes Due 2026 as discussed in Note 15 of the financial statements)


We have served as the Company’s auditor since 1981.


3

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
______________________________________________________________________________________________________
 
December 31,
(In thousands, except share data)
2017
 
2016
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
203,104

 
$
193,862

Restricted cash
24,175

 
16,488

Accounts receivable, net
40,322

 
30,371

Inventories
18,004

 
18,568

Prepaid expenses and other current assets
37,873

 
46,214

Income taxes receivable
5,185

 
2,444

Total current assets
328,663

 
307,947

Property and equipment, net
2,539,786

 
2,605,169

Other assets, net
81,128

 
49,205

Intangible assets, net
842,946

 
881,954

Goodwill, net
888,224

 
826,476

Other long-term tax assets
5,183

 
—

Total assets
$
4,685,930

 
$
4,670,751

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
106,323

 
$
84,086

Current maturities of long-term debt
23,981

 
30,336

Accrued liabilities
255,146

 
257,554

Income tax payable
21

 
—

Total current liabilities
385,471

 
371,976

Long-term debt, net of current maturities and debt issuance costs
3,051,899

 
3,199,119

Deferred income taxes
86,657

 
81,454

Other long-term tax liabilities
3,447

 
3,307

Other liabilities
61,229

 
84,715

Commitments and contingencies (Note 9)

 

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

 
—

Common stock, $0.01 par value, 200,000,000 shares authorized; 112,634,418 and 112,896,377 shares outstanding
1,126

 
1,129

Additional paid-in capital
931,858

 
953,440

Retained earnings (accumulated deficit)
164,425

 
(23,824
)
Accumulated other comprehensive loss
(182
)
 
(615
)
Total Boyd Gaming Corporation stockholders’ equity
1,097,227

 
930,130

Noncontrolling interest
—

 
50

Total stockholders’ equity
1,097,227

 
930,180

Total liabilities and stockholders’ equity
$
4,685,930

 
$
4,670,751


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


4

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
______________________________________________________________________________________________________
 
Year Ended December 31,
(In thousands, except per share data)
2017
 
2016
 
2015
Revenues
 
 
 
 
 
Gaming
$
1,740,268

 
$
1,610,393

 
$
1,631,177

Food and beverage
346,379

 
302,705

 
303,786

Room
186,795

 
169,391

 
162,248

Other
127,377

 
116,770

 
117,620

Total revenues
2,400,819

 
2,199,259

 
2,214,831

Operating costs and expenses
 
 
 
 
 
Gaming
759,612

 
725,078

 
740,023

Food and beverage
335,506

 
300,766

 
301,813

Room
85,188

 
77,734

 
76,903

Other
83,615

 
83,407

 
86,850

Selling, general and administrative
362,037

 
322,259

 
322,672

Maintenance and utilities
109,462

 
100,020

 
104,548

Depreciation and amortization
217,522

 
196,226

 
207,118

Corporate expense
88,148

 
72,668

 
76,941

Project development, preopening and writedowns
14,454

 
22,107

 
6,907

Impairments of assets
(426
)
 
38,302

 
18,565

Other operating items, net
1,900

 
284

 
907

Total operating costs and expenses
2,057,018

 
1,938,851

 
1,943,247

Operating income
343,801

 
260,408

 
271,584

Other expense (income)
 
 
 
 
 
Interest income
(1,818
)
 
(2,961
)
 
(1,858
)
Interest expense, net of amounts capitalized
173,108

 
212,692

 
224,590

Loss on early extinguishments and modifications of debt
1,582

 
42,364

 
40,733

Other, net
(184
)
 
545

 
3,676

Total other expense, net
172,688

 
252,640

 
267,141

Income from continuing operations before income taxes
171,113

 
7,768

 
4,443

Income tax (provision) benefit
(3,115
)
 
199,933

 
6,625

Income from continuing operations, net of tax
167,998

 
207,701

 
11,068

Income from discontinued operations, net of tax
21,392

 
212,530

 
36,539

Net income
$
189,390

 
$
420,231

 
$
47,607

 
 
 
 
 
 
Basic net income per common share


 


 


Continuing operations
$
1.46

 
$
1.81

 
$
0.10

Discontinued operations
0.19

 
1.86

 
0.32

Basic net income per common share
$
1.65

 
$
3.67

 
$
0.42

Weighted average basic shares outstanding
114,957

 
114,507

 
112,789

 
 
 
 
 
 
Diluted net income per common share


 


 


Continuing operations
$
1.45

 
$
1.80

 
$
0.10

Discontinued operations
0.19

 
1.85

 
0.32

Diluted net income per common share
$
1.64

 
$
3.65

 
$
0.42

Weighted average diluted shares outstanding
115,628

 
115,189

 
113,676

 
 
 
 
 
 
Dividends per common share
$
0.15

 
$
—

 
$
—

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

5

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
______________________________________________________________________________________________________
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Net income
$
189,390

 
$
420,231

 
$
47,607

Other comprehensive income (loss), net of tax:
 
 
 
 
 
Fair value of adjustments to available-for-sale securities
433

 
(299
)
 
(263
)
Comprehensive income
$
189,823

 
$
419,932

 
$
47,344


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

6

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
______________________________________________________________________________________________________
 
Boyd Gaming Corporation Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
Retained
 
Accumulated
 
 
 
 
 
 
 
 
 
Additional
 
Earnings/
 
Other
 
 
 
Total
 
Common Stock
 
Paid-in
 
(Accumulated
 
Comprehensive
 
Noncontrolling
 
Stockholders'
(In thousands, except share data)
Shares
 
Amount
 
Capital
 
Deficit)
 
Income (Loss), Net
 
Interest
 
Equity
Balances, January 1, 2015
109,277,060

 
$
1,093

 
$
922,112

 
$
(485,115
)
 
$
(53
)
 
$
50

 
$
438,087

Cumulative effect of change in accounting principle, adoption of Revenue Standard

—

 
—

 
—

 
(6,547
)
 
—

 
—

 
(6,547
)
Net income
—

 
—

 
—

 
47,607

 
—

 
—

 
47,607

Comprehensive loss attributable to Boyd
—

 
—

 
—

 
—

 
(263
)
 
—

 
(263
)
Stock options exercised
1,301,789

 
13

 
9,794

 
—

 
—

 
—

 
9,807

Release of restricted stock units, net of tax
553,822

 
6

 
(3,678
)
 
—

 
—

 
—

 
(3,672
)
Release of performance stock units, net of tax
481,749

 
5

 
(2,451
)
 
—

 
—

 
—

 
(2,446
)
Share-based compensation costs
—

 
—

 
19,264

 
—

 
—

 
—

 
19,264

Balances, December 31, 2015
111,614,420

 
1,117

 
945,041

 
(444,055
)
 
(316
)
 
50

 
501,837

Net income
—

 
—

 
—

 
420,231

 
—

 
—

 
420,231

Comprehensive loss attributable to Boyd
—

 
—

 
—

 
—

 
(299
)
 
—

 
(299
)
Stock options exercised
452,898

 
4

 
2,936

 
—

 
—

 
—

 
2,940

Release of restricted stock units, net of tax
670,032

 
6

 
(3,374
)
 
—

 
—

 
—

 
(3,368
)
Release of performance stock units, net of tax
159,027

 
2

 
(869
)
 
—

 
—

 
—

 
(867
)
Tax effect from share-based compensation arrangements
—

 
—

 
(5,812
)
 
—

 
—

 
—

 
(5,812
)
Share-based compensation costs
—

 
—

 
15,518

 
—

 
—

 
—

 
15,518

Balances, December 31, 2016
112,896,377

 
1,129

 
953,440

 
(23,824
)
 
(615
)
 
50

 
930,180

Cumulative effect of change in accounting principle, adoption of Update 2016-09
—

 
—

 
—

 
15,777

 
—

 
—

 
15,777

Net income
—

 
—

 
—

 
189,390

 
—

 
—

 
189,390

Comprehensive income attributable to Boyd
—

 
—

 
—

 
—

 
433

 
—

 
433

Stock options exercised
241,964

 
2

 
2,082

 
—

 
—

 
—

 
2,084

Release of restricted stock units, net of tax
520,854

 
5

 
(8,009
)
 
—

 
—

 
—

 
(8,004
)
Release of performance stock units, net of tax
173,653

 
2

 
(1,793
)
 
—

 
—

 
—

 
(1,791
)
Dividends Declared
—

 
—

 
—

 
(16,918
)
 
—

 
—

 
(16,918
)
Shares repurchased and retired
(1,198,430
)
 
(12
)
 
(31,915
)
 
—

 
—

 
—

 
(31,927
)
Share-based compensation costs
—

 
—

 
17,413

 
—

 
—

 
—

 
17,413

Other
—

 
—

 
640

 
—

 
—

 
(50
)
 
590

Balances, December 31, 2017
112,634,418

 
$
1,126

 
$
931,858

 
$
164,425

 
$
(182
)
 
$
—

 
$
1,097,227


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


7


BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Cash Flows from Operating Activities
 
 
 
 
 
Net income
$
189,390

 
$
420,231

 
$
47,607

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Income from discontinued operations, net of tax
(21,392
)
 
(212,530
)
 
(36,539
)
Depreciation and amortization
217,522

 
196,226

 
207,118

Amortization of debt financing costs and discounts on debt
9,845

 
14,870

 
21,308

Share-based compensation expense
17,413

 
15,518

 
19,264

Deferred income taxes
5,203

 
(201,498
)
 
16,855

Non-cash impairment of assets
—

 
38,302

 
18,565

Gain on sale of assets
(1,027
)
 
(6,288
)
 
—

Loss on early extinguishments and modifications of debt
1,582

 
42,364

 
40,733

Other operating activities
(2,033
)
 
1,625

 
2,145

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable, net
(9,937
)
 
45

 
1,971

Inventories
565

 
884

 
(301
)
Prepaid expenses and other current assets
4,957

 
1,691

 
(4,275
)
Current other tax asset
—

 
—

 
1,802

Income taxes receivable
1,089

 
(1,064
)
 
(137
)
Other long-term tax assets, net
(5,183
)
 
—

 
—

Other assets, net
2,318

 
(626
)
 
922

Accounts payable and accrued liabilities
13,216

 
(11,605
)
 
12,825

Other long-term tax liabilities
140

 
222

 
(25,566
)
Other liabilities
(1,117
)
 
1,972

 
2,377

Net cash provided by operating activities
422,551

 
300,339

 
326,674

Cash Flows from Investing Activities
 
 
 
 
 
Capital expenditures
(190,464
)
 
(160,358
)
 
(131,170
)
Cash paid for acquisitions, net of cash received
(1,153
)
 
(592,703
)
 
—

Advances pursuant to development agreement
(35,108
)
 
—

 
—

Other investing activities
706

 
14,207

 
4,528

Net cash used in investing activities
(226,019
)
 
(738,854
)
 
(126,642
)

8
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
_____________________________________________________________________________________________________


 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
 
 
 
 
 
 
Cash Flows from Financing Activities
 
 
 
 
 
Borrowings under Boyd Gaming bank credit facility
958,000

 
2,039,175

 
1,033,500

Payments under Boyd Gaming bank credit facility
(1,119,485
)
 
(1,466,362
)
 
(1,211,200
)
Borrowings under Peninsula bank credit facility
—

 
237,000

 
345,500

Payments under Peninsula bank credit facility
—

 
(899,750
)
 
(425,150
)
Proceeds from issuance of senior notes
—

 
750,000

 
750,000

Debt financing costs, net
(3,430
)
 
(42,220
)
 
(14,004
)
Retirements of senior notes
—

 
(700,000
)
 
(657,813
)
Premium and consent fees paid
—

 
(15,750
)
 
(24,246
)
Share-based compensation activities, net
(7,711
)
 
(1,295
)
 
3,689

Shares repurchased and retired
(31,927
)
 
—

 
—

Dividends paid
(11,286
)
 
—

 
—

Other financing activities
503

 
(45
)
 
—

Net cash used in financing activities
(215,336
)
 
(99,247
)
 
(199,724
)
 
 
 
 
 
 
Cash Flows from Discontinued Operations
 
 
 
 
 
Cash flows from operating activities
(514
)
 
(27,796
)
 
14,095

Cash flows from investing activities
36,247

 
598,057

 
—

Cash flows from financing activities
—

 
—

 
—

Net cash provided by discontinued operations
35,733

 
570,261

 
14,095

Change in cash, cash equivalents and restricted cash
16,929

 
32,499

 
14,403

Cash, cash equivalents and restricted cash, beginning of period
210,350

 
177,851

 
163,448

Cash, cash equivalents and restricted cash, end of period
$
227,279

 
$
210,350

 
$
177,851

 
 
 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
 
 
Cash paid for interest, net of amounts capitalized
$
174,090

 
$
197,475

 
$
178,433

Cash paid (received) for income taxes, net of refunds
5,189

 
33,723

 
(1,159
)
Supplemental Schedule of Non-cash Investing and Financing Activities
 
 
 
 
 
Payables incurred for capital expenditures
$
9,297

 
$
9,334

 
$
7,235

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



9


NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Boyd Gaming Corporation (and together with its subsidiaries, the "Company", the "Registrant", "Boyd Gaming", "Boyd", "we" or "us") was incorporated in the state of Nevada in 1988 and has been operating since 1975. The Company's common stock is traded on the New York Stock Exchange under the symbol "BYD".

The consolidated financial statements reflect the impact of the adoption of Update 2016-18 and the Revenue Standard, as defined and discussed below under Recently Adopted Accounting Pronouncements. All amounts in the footnotes have been adjusted, when necessary, to reflect the adoption of this guidance.

As of December 31, 2017, we are a diversified operator of 24 wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi, which we aggregate in order to present the following three reportable segments:
Las Vegas Locals
 
Gold Coast Hotel and Casino
Las Vegas, Nevada
The Orleans Hotel and Casino
Las Vegas, Nevada
Sam's Town Hotel and Gambling Hall
Las Vegas, Nevada
Suncoast Hotel and Casino
Las Vegas, Nevada
Eastside Cannery Casino and Hotel
Las Vegas, Nevada
Aliante Casino + Hotel + Spa
North Las Vegas, Nevada
Cannery Casino Hotel
North Las Vegas, Nevada
Eldorado Casino
Henderson, Nevada
Jokers Wild Casino
Henderson, Nevada
 
 
Downtown Las Vegas
 
California Hotel and Casino
Las Vegas, Nevada
Fremont Hotel and Casino
Las Vegas, Nevada
Main Street Station Casino, Brewery and Hotel
Las Vegas, Nevada
 
 
Midwest and South
 
Par-A-Dice Hotel Casino
East Peoria, Illinois
Blue Chip Casino, Hotel & Spa
Michigan City, Indiana
Diamond Jo Dubuque
Dubuque, Iowa
Diamond Jo Worth
Northwood, Iowa
Kansas Star Casino
Mulvane, Kansas
Amelia Belle Casino
Amelia, Louisiana
Delta Downs Racetrack Casino & Hotel
Vinton, Louisiana
Evangeline Downs Racetrack and Casino
Opelousas, Louisiana
Sam's Town Hotel and Casino
Shreveport, Louisiana
Treasure Chest Casino
Kenner, Louisiana
IP Casino Resort Spa
Biloxi, Mississippi
Sam's Town Hotel and Gambling Hall
Tunica, Mississippi

As a result of the sale of our equity interest in Borgata (see Note 2, Acquisitions and Divestitures), we no longer report our interest in Borgata as a Reportable Segment.

Our Las Vegas Locals segment includes the results of Aliante Gaming, LLC ("Aliante"), The Cannery Hotel and Casino, LLC (“Cannery”) and Nevada Palace, LLC (“Eastside Cannery”) (see Note 2, Acquisitions and Divestitures).


10
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

In addition to these properties, we own and operate a travel agency and a captive insurance company that underwrites travel-related insurance, each located in Hawaii. Financial results for our travel agency and our captive insurance company are included in our Downtown Las Vegas segment, as our Downtown Las Vegas properties concentrate significant marketing efforts on gaming customers from Hawaii.

Basis of Presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries.

See Note 2, Acquisitions and Divestitures, for discussion of our acquisitions of Aliante, Cannery and Eastside Cannery, which were completed during the year ended December 31, 2016. We have not disclosed the pro forma impact of these acquisitions to our results of operations, as the pro forma impact was deemed immaterial.

Investments in unconsolidated affiliates, which are 50% or less 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.

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

Discontinued Operations
On August 1, 2016, Boyd Gaming completed the sale of its 50% equity interest in Marina District Development Holding Company, LLC ("MDDHC"), the parent company of Borgata, to MGM Resorts International ("MGM") pursuant to an Equity Purchase Agreement (the "Purchase Agreement") enter into on May 31, 2016, as amended on July 19, 2016 by and among Boyd, Boyd Atlantic City, Inc., a wholly owned subsidiary of Boyd, and MGM. (See Note 2, Acquisitions and Divestitures.) We accounted for our investment in Borgata by applying the equity method and reported its results as discontinued operations for all periods presented in these consolidated financial statements.

Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with maturities of three months or less at their date of purchase, and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.

The following table provides a reconciliation of cash, cash equivalents and restricted cash balances reported within the consolidated balance sheets to the total balance shown in the consolidated statements of cash flows.
 
December 31,
(In thousands)
2017
 
2016
 
2015
Cash and cash equivalents
$
203,104

 
$
193,862

 
$
158,821

Restricted cash
24,175

 
16,488

 
19,030

Total cash, cash equivalents and restricted cash
$
227,279

 
$
210,350

 
$
177,851


Restricted Cash
Restricted cash consists primarily of advance payments related to: (i) future bookings with our Hawaiian travel agency; and (ii) amounts restricted by regulation for gaming and racing purposes. These restricted cash balances are invested in highly liquid instruments with a maturity of 90 days or less. These restricted cash balances are held by high credit quality financial institutions. The carrying value of these instruments approximates their fair value due to their short maturities.

Accounts Receivable, net
Accounts receivable consist primarily of casino, hotel and other receivables. Accounts receivable are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible, based upon historical collection experience, the age of the receivable and other relevant economic factors. An estimated allowance for doubtful accounts is maintained to reduce our receivables to their carrying amount. As a result, the net carrying value approximates fair value.


11
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The activity comprising our allowance for doubtful accounts is as follows:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Beginning balance, January 1,
$
1,971

 
$
2,087

 
$
1,971

Additions due to Acquisitions
—

 
87

 
—

Additions
478

 
345

 
361

Deductions
(377
)
 
(548
)
 
(245
)
Ending balance
$
2,072

 
$
1,971

 
$
2,087


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

Property and Equipment, net
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives 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
3 through 40 years
Riverboats and barges
5 through 40 years
Furniture and equipment
1 through 10 years

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

For an asset that is held for sale, we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For a long-lived asset to be held and used, we review the asset for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. All resulting recognized impairment charges are recorded as Impairment of assets within operating expenses.

Capitalized Interest
Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. Interest capitalized during the years ended December 31, 2016 and 2015 was $0.5 million and $0.1 million, respectively. There was no interest capitalized for the year ended December 31, 2017.

Investment in Available for Sale Securities
We have an investment in $20.5 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 ("City Bonds"). This investment is classified as available-for-sale and is recorded at fair value. The fair value at December 31, 2017 and 2016 was $17.8 million and $17.3 million, respectively. At December 31, 2017 and 2016, $0.5 million and $0.4 million, respectively, is included in prepaid expenses and other current assets, and $17.3 million and $16.8 million, respectively, is included in other assets, net.


12
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Future maturities of the City Bonds, excluding the discount, for the years ending December 31 are summarized as follows:
(In thousands)
 
For the year ending December 31,
 
2018
$
475

2019
510

2020
550

2021
590

2022
635

Thereafter
17,760

Total
$
20,520


Intangible Assets
Intangible assets include customer relationships, favorable lease rates, development agreements, 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, originally ranging in duration from 41 to 52 years. Development agreements are contracts between two parties establishing an agreement for development of a product or service. These agreements are amortized over the respective cash flow period of the related agreement.

Indefinite-Lived Intangible Assets
Trademarks are based on the value of our brands, which reflect the level of service and quality we provide and from which we generate repeat business. 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. These assets, considered indefinite-lived intangible assets, are not subject to amortization, but instead are subject to an annual impairment test, 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.

Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets in a business combination that are not individually identified and separately recognized. Goodwill is not subject to amortization, but it is subject to an annual impairment test and between annual test dates in certain circumstances.

We evaluate goodwill using a weighted average allocation of both the income and market approach models. The income approach is based upon a discounted cash flow method, whereas the market approach uses the guideline public company method. Specifically, the income approach focuses on the expected cash flow of the subject reporting unit, considering the available cash flow for a finite period of years. Available cash flow is defined as the amount of cash that could be distributed as a dividend without impairing the future profitability or operations of the reporting unit. The underlying premise of the income approach is that the value of goodwill can be measured by the present value of the net economic benefit to be received over the life of the reporting unit. The market approach focuses on comparing the reporting unit to selected 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 our reporting unit relative to the selected guideline companies; and (iii) applied to the operating data of our reporting unit to arrive at an indication of value. The application of the market approach results in an estimate of the price reasonably expected to be realized from the sale of the subject reporting unit.

Player Loyalty Point Program
We have established promotional programs to encourage repeat business from frequent and active slot machine customers and other patrons. Members earn points based on gaming activity and such points can be redeemed for complimentary slot play, food

13
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

and beverage, and other free goods and services. We record points earned based on the value of a point that can be redeemed for a hotel room, food & beverage or other items. The player loyalty point program accrual is deferred and recognized as revenue when the customer redeems the points for a hotel room stay, for food & beverage or for other amenities and is included in accrued liabilities on our consolidated balance sheets.

Long-Term Debt, Net
Long-term debt, net is reported as the outstanding debt amount net of amortized cost. Any unamortized debt issuance costs, which include legal and other direct costs related to the issuance of our outstanding debt, or discount granted to the initial purchasers or lenders upon issuance of our debt instruments is recorded as a direct reduction to the face amount of our outstanding debt. The debt issuance costs and discount are accreted to interest expense using the effective interest method over the contractual term of the underlying debt. In the event that our debt is modified, repurchased or otherwise reduced prior to its original maturity date, we ratably reduce the unamortized debt issuance costs and discount and record a loss on extinguishment of debt.

Income Taxes
Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.
 
Other Long-Term Tax Liabilities
The Company's income tax returns are subject to examination by the Internal Revenue Service ("IRS") and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes, which prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. Recognition occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement is only addressed if the position is deemed to be more likely than not to be sustained. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.

Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the "more likely than not" standard. If it is subsequently determined that a previously recognized tax position no longer meets the "more likely than not" standard, it is required that the tax position is derecognized. Accounting standards for uncertain tax positions specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. Accrued interest and penalties are included in other long-term tax liabilities on the balance sheet.

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


14
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The activity comprising our self-insurance reserves is as follows:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Beginning balance
$
31,022

 
$
30,068

 
$
33,004

Additions
 
 
 
 
 
Charged to costs and expenses
84,209

 
79,685

 
80,311

Due to acquisitions
—

 
14

 
—

Payments made
(81,236
)
 
(78,745
)
 
(83,247
)
Ending balance
$
33,995

 
$
31,022

 
$
30,068


Accumulated Other Comprehensive Income (Loss)
Comprehensive income includes net income and other comprehensive income (loss). Components of the Company's comprehensive income are reported in the accompanying consolidated statements of changes in stockholders' equity and consolidated statements of comprehensive income. The accumulated other comprehensive income (loss) at December 31, 2017, consists of unrealized gains and losses on the investment available for sale resulting from changes in fair value.

Noncontrolling Interest
Noncontrolling interest represented the ownership interest in one of our subsidiaries that was held by a third party. During 2017, the joint venture in which we held an 80% interest was dissolved, thus eliminating our noncontrolling interest.

Revenue Recognition
The Company’s revenue contracts with customers consist of gaming wagers, hotel room sales, food & beverage offerings and other amenity transactions. The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gaming revenues. The transaction price for hotel, food & beverage and other contracts is the net amount collected from the customer for such goods and services. Hotel, food & beverage and other services have been determined to be separate, stand-alone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over their stay at the hotel, when the delivery is made for the food & beverage or when the service is provided for other amenity transactions.

Gaming wager contracts involve two performance obligations for those customers earning points under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for a hotel room stay, food & beverage or other amenities. Sales and usage-based taxes are excluded from revenues. An amount is allocated to the gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately. The loyalty point contract liability amount is deferred and recognized as revenue when the customer redeems the points for a hotel room stay, food & beverage or other amenities and such goods or services are delivered to the customer. See Note 6, Accrued Liabilities, for the balance outstanding related to player loyalty programs.

The Company collects advanced deposits from hotel customers for future reservations representing obligations of the Company until the hotel room stay is provided to the customer. See Note 6, Accrued Liabilities, for the balance outstanding related to advance deposits.

15
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


The Company's outstanding chip liability represents the amounts owned in exchange for gaming chips held by a customer. Outstanding chips are expected to be recognized as revenue or redeemed for cash within one year of being purchased. See Note 6, Accrued Liabilities, for the balance outstanding related to the chip liability.

The retail value of hotel accommodations, food & beverage, and other services furnished to guests without charge is recorded as departmental revenues. Gaming revenues are net of incentives earned in our slot bonus program such as cash and the estimated retail value of goods and services (such as complimentary rooms and food & beverages). We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food & beverage, and to a lesser extent for other goods or services, depending upon the property.

The estimated retail value related to goods and services provided to guests without charge or upon redemption of points under our player loyalty programs, included in departmental revenues, and therefore reducing our gaming revenues, are as follows:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Food and beverage
$
171,904

 
$
147,494

 
$
151,407

Room
76,565

 
75,647

 
77,678

Other
10,900

 
11,076

 
11,320


Gaming Taxes
We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the consolidated statements of operations. These taxes totaled approximately $324.5 million, $321.7 million and $332.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Advertising Expense
Direct advertising costs are expensed the first time such advertising appears. Advertising costs are included in selling, general and administrative expenses on the consolidated statements of operations and totaled $29.9 million, $32.3 million and $33.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Corporate Expense
Corporate expense represents unallocated payroll, professional fees, aircraft costs and various other expenses that are not directly related to our casino hotel operations.

Project Development, Preopening and Writedowns
Project development, preopening and writedowns represent: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred and do not qualify as capital costs; and (iii) asset write-downs.

Share-Based Compensation
Share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period. The requisite service period can be impacted by the provisions of the Company’s stock compensation programs that provide for automatic vesting acceleration upon retirement (including as a result of death or disability) for those long-service participants achieving defined age and years of service criteria. These acceleration provisions do not apply to stock grants and awards issued within six months of the employee’s retirement. Compensation costs related to stock option awards are calculated based on the fair value of each major option grant on the date of the grant using the Black-Scholes option pricing model, which requires the following assumptions: expected stock price volatility, risk-free interest rates, expected option lives and dividend yields. We formed our assumptions using historical experience and observable market conditions.


16
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The Company did not issue any stock option grants in 2017. The following table discloses the weighted-average assumptions used in estimating the fair value of our significant stock option grants and awards in prior years:
 
Year Ended December 31,
 
2016
 
2015
Expected stock price volatility
46.62
%
 
49.06
%
Risk-free interest rate
1.39
%
 
1.59
%
Expected option life (in years)
5.4

 
5.3

Estimated fair value per share
$
7.67

 
$
9.06


Net Income per Share
Basic net income per share is computed by dividing net income applicable to Boyd Gaming Corporation stockholders 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.

Concentration of Credit Risk
Financial instruments that subject us to credit risk consist of cash equivalents and accounts receivable.

Our policy is to limit the amount of credit exposure to any one financial institution, and place investments with financial institutions evaluated as being creditworthy, or in short-term money market and tax-free bond funds which are exposed to minimal interest rate and credit risk. We have bank deposits that may at times exceed federally-insured limits.

Concentration of credit risk, with respect to gaming receivables, is limited through our credit evaluation process. We issue markers to approved gaming customers only following credit checks and investigations of creditworthiness.

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Change in Accounting Principle
In first quarter 2017, the Company adopted Accounting Standards Update 2016-09, Compensation - Stock Compensation ("Update 2016-09") which simplified several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Update 2016-09 requires excess tax benefits and deficiencies to be recorded in income tax expense instead of equity. The cumulative effect of this change in accounting principle is to record the benefit of previously unrecognized excess tax deductions as an increase in retained earnings of $15.8 million on the consolidated statement of changes in stockholders' equity for the year ended December 31, 2017. Additionally, for the year ended December 31, 2017, we recorded an excess tax benefit in our tax expense of approximately $1.5 million. We anticipate recording excess tax benefits as a component of tax expense will cause volatility in our future effective tax rate.


17
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Recently Adopted Accounting Pronouncements
Accounting Standards Update 2016-18, Statement of Cash Flows ("Update 2016-18")
In November 2016, the FASB issued Update 2016-18, which amends Accounting Standards Codification ("ASC") 230 to add or clarify the guidance on the classification and presentation of restricted cash in the statement of cash flows. Update 2016-18 requires restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts on the statement of cash flows. The Company adopted Update 2016-18 using the retrospective approach. We adjusted our consolidated statement of cash flows from amounts previously reported due to the adoption of Update 2016-18. The effects of adopting Update 2016-18 on our consolidated statement of cash flows were as follows:
 
Year Ended December 31, 2017
(In thousands)
As Previously Reported
 
Adoption of Update 2016-18
 
As Adjusted
Net cash provided by operating activities
$
414,864

 
$
7,687

 
$
422,551

 
 
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period
$
193,862

 
$
16,488

 
$
210,350

Net increase (decrease) in cash, cash equivalents and restricted cash
9,242

 
7,687

 
16,929

Cash, cash equivalents and restricted cash, end of period
$
203,104

 
$
24,175

 
$
227,279

 
Year Ended December 31, 2016
(In thousands)
As Previously Reported
 
Adoption of Update 2016-18
 
As Adjusted
Net cash provided by operating activities
$
302,881

 
$
(2,542
)
 
$
300,339

 
 
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period
$
158,821

 
$
19,030

 
$
177,851

Net increase (decrease) in cash, cash equivalents and restricted cash
35,041

 
(2,542
)
 
32,499

Cash, cash equivalents and restricted cash, end of period
$
193,862

 
$
16,488

 
$
210,350

 
Year Ended December 31, 2015
(In thousands)
As Previously Reported
 
Adoption of Update 2016-18
 
As Adjusted
Net cash provided by operating activities
$
325,751

 
$
923

 
$
326,674

 
 
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period
$
145,341

 
$
18,107

 
$
163,448

Net increase (decrease) in cash, cash equivalents and restricted cash
13,480

 
923

 
14,403

Cash, cash equivalents and restricted cash, end of period
$
158,821

 
$
19,030

 
$
177,851


Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("Update 2014-09"); Accounting Standards Update 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date ("Update 2015-14" ); Accounting Standards Update 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("Update 2016-08"); Accounting Standards Update 2016-10, Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing ("Update 2016-10"); Accounting Standards Update 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting ("Update 2016-11"); and Accounting Standards Update 2016-12, Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients ("Update 2016-12"); (collectively, the “Revenue Standard”)
The Revenue Standard prescribes a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The Company adopted the Revenue Standard by applying the full retrospective approach and has adjusted the prior periods presented.

The guidance changed the presentation of revenues as our historical presentation reflected revenues gross for goods and services provided to our customers as an inducement to play with us, with an offsetting reduction for promotional allowances to derive net revenues. Under the new guidance, revenues are allocated among our departmental classifications based on the relative standalone

18
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

selling prices of the goods and services provided to the customer. Our reporting of amounts paid to operators of wide area progressive games has changed as a result of the adoption of the Revenue Standard. We previously reported these payments as contra-revenues. Under the Revenue Standard, these payments are reported as an operating expense. The accounting for our frequent player programs was also impacted, with changes to the timing and/or classification of certain transactions between revenues and operating expenses.

The implementation of the Revenue Standard resulted in an increase to the player point liability due to the change in our accounting method for this liability from an estimated cost of redemption model to a deferred revenue model. As of the effective date of our adoption (January 1, 2015), the cumulative effect adjustment decreased beginning Retained earnings by $3.8 million (after tax), resulted in a deferred tax asset reduction of $2.4 million and increased Accrued liabilities by approximately $6.2 million on the consolidated balance sheet. The impact of this change in accounting for these programs is not expected to be material to any annual accounting period.

The effects of the adoption of the Revenue Standard on the affected line items of our consolidated balance sheet as of December 31, 2017, are as follows:
 
As of December 31, 2017
(In thousands)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Accrued liabilities
$
248,979

 
$
6,167

 
$
255,146

Deferred income taxes
89,075

 
(2,418
)
 
86,657

Retained earnings
168,174

 
(3,749
)
 
164,425


The effects of the adoption of the Revenue Standard on the affected line items of our consolidated balance sheet as of December 31, 2016, are as follows:
 
As of December 31, 2016
(In thousands)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Accrued liabilities
$
251,082

 
$
6,472

 
$
257,554

Deferred income taxes
83,980

 
(2,526
)
 
81,454

Accumulated deficit
(19,878
)
 
(3,946
)
 
(23,824
)











19
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The effects of the adoption of the Revenue Standard on our results for the year ended December 31, 2017, are as follows:
 
Year Ended December 31, 2017
(In thousands, except per share data)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Revenues
 
 
 
 
 
Gaming
$
1,972,422

 
$
(232,154
)
 
$
1,740,268

Food and beverage
349,271

 
(2,892
)
 
346,379

Room
188,689

 
(1,894
)
 
186,795

Other
132,695

 
(5,318
)
 
127,377

Gross revenues
2,643,077

 
(242,258
)
 
2,400,819

Less promotional allowances
259,370

 
(259,370
)
 
—

Net revenues
2,383,707

 
17,112

 
2,400,819

Operating costs and expenses
 
 
 
 
 
Gaming
923,266

 
(163,654
)
 
759,612

Food and beverage
194,524

 
140,982

 
335,506

Room
52,196

 
32,992

 
85,188

Other
77,129

 
6,486

 
83,615

Selling, general and administrative
362,037

 
—

 
362,037

Maintenance and utilities
109,462

 
—

 
109,462

Depreciation and amortization
217,522

 
—

 
217,522

Corporate expense
88,148

 
—

 
88,148

Project development, preopening and writedowns
14,454

 
—

 
14,454

Impairments of assets
(426
)
 
—

 
(426
)
Other operating items, net
1,900

 
—

 
1,900

Total operating costs and expenses
2,040,212

 
16,806

 
2,057,018

Operating income
343,495

 
306

 
343,801

Other expense (income)
 
 
 
 
 
Interest income
(1,818
)
 
—

 
(1,818
)
Interest expense, net of amounts capitalized
173,108

 
—

 
173,108

Loss on early extinguishments and modifications of debt
1,582

 
—

 
1,582

Other, net
(184
)
 
—

 
(184
)
Total other expense, net
172,688

 
—

 
172,688

Income from continuing operations before income taxes
170,807

 
306

 
171,113

Income tax provision
(3,006
)
 
(109
)
 
(3,115
)
Income from continuing operations, net of tax
167,801

 
197

 
167,998

Income from discontinued operations, net of tax
21,392

 
—

 
21,392

Net income
$
189,193

 
$
197

 
$
189,390

 
 
 
 
 
 
Basic net income per common share
 
 
 
 
 
Continuing operations
$
1.46

 
$
—

 
$
1.46

Discontinued operations
0.19

 
—

 
0.19

Basic net income per common share
$
1.65

 
$
—

 
$
1.65

Weighted average basic shares outstanding
114,957

 
—

 
114,957

 
 
 
 
 
 
Diluted net income per common share
 
 
 
 
 
Continuing operations
$
1.45

 
$
—

 
$
1.45

Discontinued operations
0.19

 
—

 
0.19

Diluted net income per common share
$
1.64

 
$
—

 
$
1.64

Weighted average diluted shares outstanding
115,628

 
—

 
115,628



20
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


The effects of the adoption of the Revenue Standard on our results for the year ended December 31, 2016, are as follows:
 
Year Ended December 31, 2016
(In thousands, except per share data)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Revenues
 
 
 
 
 
Gaming
$
1,820,176

 
$
(209,783
)
 
$
1,610,393

Food and beverage
306,145

 
(3,440
)
 
302,705

Room
170,816

 
(1,425
)
 
169,391

Other
122,416

 
(5,646
)
 
116,770

Gross revenues
2,419,553

 
(220,294
)
 
2,199,259

Less promotional allowances
235,577

 
(235,577
)
 
—

Net revenues
2,183,976

 
15,283

 
2,199,259

Operating costs and expenses
 
 
 
 
 
Gaming
880,716

 
(155,638
)
 
725,078

Food and beverage
170,053

 
130,713

 
300,766

Room
44,245

 
33,489

 
77,734

Other
76,719

 
6,688

 
83,407

Selling, general and administrative
322,009

 
250

 
322,259

Maintenance and utilities
100,020

 
—

 
100,020

Depreciation and amortization
196,226

 
—

 
196,226

Corporate expense
72,668

 
—

 
72,668

Project development, preopening and writedowns
22,107

 
—

 
22,107

Impairments of assets
38,302

 
—

 
38,302

Other operating items, net
284

 
—

 
284

Total operating costs and expenses
1,923,349

 
15,502

 
1,938,851

Operating income
260,627

 
(219
)
 
260,408

Other expense (income)
 
 
 
 
 
Interest income
(2,961
)
 
—

 
(2,961
)
Interest expense, net of amounts capitalized
212,692

 
—

 
212,692

Loss on early extinguishments and modifications of debt
42,364

 
—

 
42,364

Other, net
545

 
—

 
545

Total other expense, net
252,640

 
—

 
252,640

Income from continuing operations before income taxes
7,987

 
(219
)
 
7,768

Income tax benefit
197,486

 
2,447

 
199,933

Income from continuing operations, net of tax
205,473

 
2,228

 
207,701

Income from discontinued operations, net of tax
212,530

 
—

 
212,530

Net income
$
418,003

 
$
2,228

 
$
420,231

 
 
 
 
 
 
Basic net income per common share
 
 
 
 
 
Continuing operations
$
1.79

 
$
0.02

 
$
1.81

Discontinued operations
1.86

 
—

 
1.86

Basic net income per common share
$
3.65

 
$
0.02

 
$
3.67

Weighted average basic shares outstanding
114,507

 
—

 
114,507

 
 
 
 
 
 
Diluted net income per common share
 
 
 
 
 
Continuing operations
$
1.78

 
$
0.02

 
$
1.80

Discontinued operations
1.85

 
—

 
1.85

Diluted net income per common share
$
3.63

 
$
0.02

 
$
3.65

Weighted average diluted shares outstanding
115,189

 
—

 
115,189






21
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The effects of the adoption of the Revenue Standard on our results for the year ended December 31, 2015, are as follows:
 
Year Ended December 31, 2015
(In thousands, except per share data)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Revenues
 
 
 
 
 
Gaming
$
1,847,167

 
$
(215,990
)
 
$
1,631,177

Food and beverage
307,442

 
(3,656
)
 
303,786

Room
163,509

 
(1,261
)
 
162,248

Other
123,959

 
(6,339
)
 
117,620

Gross revenues
2,442,077

 
(227,246
)
 
2,214,831

Less promotional allowances
242,645

 
(242,645
)
 
—

Net revenues
2,199,432

 
15,399

 
2,214,831

Operating costs and expenses
 
 
 
 
 
Gaming
900,922

 
(160,899
)
 
740,023

Food and beverage
168,096

 
133,717

 
301,813

Room
41,298

 
35,605

 
76,903

Other
80,508

 
6,342

 
86,850

Selling, general and administrative
322,420

 
252

 
322,672

Maintenance and utilities
104,548

 
—

 
104,548

Depreciation and amortization
207,118

 
—

 
207,118

Corporate expense
76,941

 
—

 
76,941

Project development, preopening and writedowns
6,907

 
—

 
6,907

Impairments of assets
18,565

 
—

 
18,565

Other operating items, net
907

 
—

 
907

Total operating costs and expenses
1,928,230

 
15,017

 
1,943,247

Operating income
271,202

 
382

 
271,584

Other expense (income)
 
 
 
 
 
Interest income
(1,858
)
 
—

 
(1,858
)
Interest expense, net of amounts capitalized
224,590

 
—

 
224,590

Loss on early extinguishments and modifications of debt
40,733

 
—

 
40,733

Other, net
3,676

 
—

 
3,676

Total other expense, net
267,141

 
—

 
267,141

Income from continuing operations before income taxes
4,061

 
382

 
4,443

Income tax benefit
6,634

 
(9
)
 
6,625

Income from continuing operations, net of tax
10,695

 
373

 
11,068

Income from discontinued operations, net of tax
36,539

 
—

 
36,539

Net income
$
47,234

 
$
373

 
$
47,607

 
 
 
 
 
 
Basic net income per common share
 
 
 
 
 
Continuing operations
$
0.10

 
$
—

 
$
0.10

Discontinued operations
0.32

 
—

 
0.32

Basic net income per common share
$
0.42

 
$
—

 
$
0.42

Weighted average basic shares outstanding
112,789

 
—

 
112,789

 
 
 
 
 
 
Diluted net income per common share
 
 
 
 
 
Continuing operations
$
0.10

 
$
—

 
$
0.10

Discontinued operations
0.32

 
—

 
0.32

Diluted net income per common share
$
0.42

 
$
—

 
$
0.42

Weighted average diluted shares outstanding
113,676

 
—

 
113,676



22
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The effects of the adoption of the Revenue Standard on the affected line items of our consolidated cash flow statement for the year ended December 31, 2017, are as follows:
 
Year Ended December 31, 2017
(In thousands)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Net income
$
189,193

 
$
197

 
$
189,390

Deferred income taxes
5,095

 
108

 
5,203

Accounts payable and accrued liabilities
13,521

 
(305
)
 
13,216

Net cash provided by operating activities
414,864

 
—

 
414,864


The effects of the adoption of the Revenue Standard on the affected line items of our consolidated cash flow statement for the year ended December 31, 2016, are as follows:
 
Year Ended December 31, 2016
(In thousands)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Net income
$
418,003

 
$
2,228

 
$
420,231

Deferred income taxes
(199,051
)
 
(2,447
)
 
(201,498
)
Accounts payable and accrued liabilities
(11,824
)
 
219

 
(11,605
)
Net cash provided by operating activities
302,881

 
—

 
302,881


The effects of the adoption of the Revenue Standard on the affected line items of our consolidated cash flow statement for the year ended December 31, 2015, are as follows:
 
Year Ended December 31, 2015
(In thousands)
As Previously Reported
 
Adoption of Revenue Standard
 
As Adjusted
Net income
$
47,234

 
$
373

 
$
47,607

Deferred income taxes
16,846

 
9

 
16,855

Accounts payable and accrued liabilities
13,207

 
(382
)
 
12,825

Net cash provided by operating activities
325,751

 
—

 
325,751


Recently Issued Accounting Pronouncements
Accounting Standards Update 2017-09, Compensation-Stock Compensation ("Update 2017-09")
In May 2017, the Financial Accounting Standards Board ("FASB") issued Update 2017-09, which amends the scope of modification accounting for share-based payment arrangements. An entity should account for the effects of a modification unless the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The standard is effective for the financial statements issued for annual periods and interim periods within those annual periods, beginning after December 15, 2017, and early adoption is permitted. The Company adopted Update 2017-09 during second quarter 2017. The early adoption did not have a material impact on our consolidated financial statements.

Accounting Standards Update 2017-04, Intangibles-Goodwill and Other ("Update 2017-04")
In January 2017, the FASB issued Update 2017-04, which addresses goodwill impairment testing. Instead of determining goodwill impairment by calculating the implied fair value of goodwill, an entity should perform goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods, beginning after December 15, 2019, and early adoption is permitted. The Company adopted Update 2017-04 effective January 1, 2017. The early adoption did not have an impact on our consolidated financial statements.

Accounting Standards Update 2016-17, Consolidation ("Update 2016-17")
In October 2016, the FASB issued Update 2016-17, which amends the guidance on related parties that are under common control.

23
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The ASU provides guidance on a single decision maker does not consider indirect interest held through related parties as equivalent to direct interests in determining whether it meets the economics criterion to be a primary beneficiary. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2017, and early adoption is permitted. The Company determined that the impact of the new standard on its consolidated financial statements will not be material.

Accounting Standards Update 2016-16, Income Taxes ("Update 2016-16")
In October 2016, the FASB issued Update 2016-16, which addresses the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. The Company is evaluating the impact of the new standard on its consolidated financial statements. The Company determined that the impact of the new standard on its consolidated financial statements will not be material.

Accounting Standards Update 2016-15, Statement of Cash Flows ("Update 2016-15")
In August 2016, the FASB issued Update 2016-15, which amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows. The Accounting Standards Update ("ASU") is intended to reduce the lack of consistent principles on certain classifications such as debt prepayment, debt extinguishment costs, distributions, insurance claims and beneficial interest in securitization transactions. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2017, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-15 to the consolidated financial statements.

Accounting Standards Update 2016-13, Financial Instruments-Credit Losses ("Update 2016-13")
In June 2016, the FASB issued Update 2016-13, which amends the guidance on the impairment of financial instruments. Update 2016-13 adds to GAAP an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-13 to the consolidated financial statements.

Accounting Standards Update 2016-02, Leases ("Update 2016-02")
In February 2016, the FASB issued Update 2016-02 which requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The standard is effective for financial statements issued for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. The Company is evaluating the impact of the adoption of Update 2016-02 to the consolidated financial statements.

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

NOTE 2.    ACQUISITIONS AND DIVESTITURES
Cannery Casino Hotel and Nevada Palace, LLC
On December 20, 2016 (the "Acquisition Date"), Boyd Gaming completed the acquisitions of Cannery, the owner and operator of Cannery Casino Hotel, and Nevada Palace, LLC, the owner and operator of Eastside Cannery Casino and Hotel, pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of April 25, 2016, as amended on October 28, 2016, by and among Boyd, Cannery Casino Resorts, LLC (“Seller”), Cannery and Eastside Cannery.

Pursuant to the terms of the Purchase Agreement, Boyd acquired from Seller all of the issued and outstanding membership interests of Cannery and Eastside Cannery (the “Acquisitions”). With the closing of the Acquisitions, each of Cannery and Eastside Cannery became wholly owned subsidiaries of Boyd. Accordingly, the assets and liabilities of Cannery and Eastside Cannery are included in our consolidated balance sheets as of December 31, 2017 and 2016 and the results of their operations and cash flows in our consolidated statements of operations and cash flows, respectively, for the year ended December 31, 2017 and the period from December 20, 2016 through December 31, 2016. The Cannery and Eastside Cannery are modern casinos and hotels in the Las Vegas Valley that offer premium accommodations, gaming, dining, entertainment and retail, and are aggregated into our Las Vegas Locals segment (See Note 1, Summary of Significant Accounting Policies.) The net purchase price was $228.2 million.


24
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The fair value of the consideration transferred to the Seller on the Acquisition Date included the purchase price of the net assets transferred. The total gross consideration was $238.6 million. In addition, the Purchase Agreement provided for a working capital adjustment to the purchase consideration. This adjustment was calculated during second quarter 2017 and paid during the third quarter, resulting in an additional $1.2 million being paid to Seller.

Acquisition Method of Accounting
The Company followed the acquisition method of accounting according to the guidance of FASB Accounting Standards Codification Topic 805 ("ASC 805"). For purposes of these financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values, as determined by management based on its judgment with assistance from third-party appraisals. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed has been recorded as goodwill. The purchase price allocation below represents the opening balance sheet on December 20, 2016, which was initially reported in our Form 10-K for the year ended December 31, 2016. During the measurement period, which concluded on September 30, 2017, opening balance sheet adjustments were made to finalize the preliminary fair value estimates, resulting in a $62.5 million reduction in acquired assets, primarily related to a $56.7 million reduction in property and equipment, and a $5.0 million reduction in assumed liabilities with a corresponding increase to goodwill of $58.7 million. The property and equipment adjustment resulted in a depreciation expense reduction of $2.5 million for the year ended December 31, 2017. The measurement period adjustment and the related tax impact were immaterial to our consolidated financial statements.

The following table summarizes the components and allocation of the purchase price, including the measurement period adjustments:
(In thousands)
Preliminary Purchase Price Allocation
 
Adjustments
 
Final Purchase Price Allocation
Current assets
$
29,929

 
$
(8,345
)
 
$
21,584

Property and equipment
181,757

 
(56,675
)
 
125,082

Other long-term assets
—

 
3,419

 
3,419

Intangible and other assets
16,330

 
(880
)
 
15,450

Total acquired assets
228,016

 
(62,481
)
 
165,535

 
 
 
 
 
 
Current liabilities
15,850

 
(4,984
)
 
10,866

Total liabilities assumed
15,850

 
(4,984
)
 
10,866

Net identifiable assets acquired
212,166

 
(57,497
)
 
154,669

Goodwill
26,401

 
58,651

 
85,052

Net assets acquired
$
238,567

 
$
1,154

 
$
239,721


The following table summarizes the values assigned to acquired property and equipment and estimated useful lives:
(In thousands)
Useful Lives
 
As Recorded
Land
 
 
$
7,870

Buildings and improvements
10 - 40 years
 
107,268

Furniture and equipment
3 - 7 years
 
9,820

Construction in progress
 
 
124

Property and equipment acquired
 
 
$
125,082


The goodwill was assigned to the Las Vegas Locals reportable segment. All of the goodwill is expected to be deductible for income tax purposes.

The Company recognized $1.1 million and $10.5 million of acquisition related costs that were expensed for the year ended December 31, 2017 and 2016, respectively. These costs are included in the consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".

25
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


Aliante Casino + Hotel + Spa
On September 27, 2016, Boyd Gaming completed the acquisition of ALST Casino Holdco LLC, the holding company of Aliante Casino + Hotel + Spa ("Aliante"). Pursuant to the Merger Agreement, Merger Sub merged with and into ALST (the "Merger"), with ALST surviving the Merger. ALST and Aliante are now wholly owned subsidiaries of Boyd Gaming. Accordingly, the acquired assets and liabilities of Aliante are included in our consolidated balance sheets as of December 31, 2017 and 2016 and the results of its operations and cash flows in our consolidated statements of operations and cash flows, respectively, for the year ended December 31, 2017 and the period from September 27, 2016 through December 31, 2016. Aliante is an upscale, resort-style casino and hotel situated in North Las Vegas offering premium accommodations, gaming, dining, entertainment and retail, and is aggregated into our Las Vegas Locals segment (See Note 1, Summary of Significant Accounting Policies.) The net purchase price was $372.3 million.

The fair value of the consideration transferred on the acquisition date included the purchase price of the net assets transferred. The total gross consideration was $399.1 million.

Acquisition Method of Accounting
The Company followed the acquisition method of accounting per ASC 805 guidance. In accordance with ASC 805, the Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values, which were determined primarily by management with assistance from third-party appraisals. The excess of the purchase price over those fair values was recorded as goodwill. The purchase price allocation below represents Aliante’s opening balance sheet on September 27, 2016, which was initially reported in our Form 10−K for the year ended December 31, 2016. During the measurement period, which concluded on June 30, 2017, opening balance sheet adjustments were made to finalize the preliminary fair value estimates, resulting in a $2.6 million reduction in other assets, primarily related to base stock, a $0.8 million reduction in property and equipment and a $0.4 million increase in assumed liabilities, with a corresponding net increase to goodwill of $3.8 million. The measurement period adjustment and the related tax impact were immaterial to our consolidated financial statements.

The following table presents the components and allocation of the purchase price, including the measurement period adjustments:
(In thousands)
Preliminary Purchase Price Allocation
 
Adjustments
 
Final Purchase Price Allocation
Current assets
$
31,886

 
$
—

 
$
31,886

Property and equipment
226,309

 
(760
)
 
225,549

Intangible and other assets
20,791

 
(2,643
)
 
18,148

Total acquired assets
278,986

 
(3,403
)
 
275,583

 
 
 
 
 
 
Current liabilities
5,693

 
515

 
6,208

Other liabilities
636

 
(83
)
 
553

Total liabilities assumed
6,329

 
432

 
6,761

Net identifiable assets acquired
272,657

 
(3,835
)
 
268,822

Goodwill
126,489

 
3,835

 
130,324

Net assets acquired
$
399,146

 
$
—

 
$
399,146



26
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The following table summarizes the values assigned to acquired property and equipment and estimated useful lives:
(In thousands)
Useful Lives
 
As Recorded
Land
 
 
$
16,680

Buildings and improvements
10 - 45 years
 
200,770

Furniture and equipment
3 - 7 years
 
8,099

Property and equipment acquired
 
 
$
225,549


All of the goodwill was assigned to the Las Vegas Locals reportable segment. All of the goodwill is expected to be deductible for income tax purposes.

The Company recognized $1.0 million and $2.2 million of acquisition related costs that were expensed for the year ended December 31, 2017 and 2016, respectively. These costs are included in the consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".

We have not provided the amount of revenue and earnings included in our consolidated financial results from the Aliante or Cannery acquisitions for the period subsequent to their respective acquisitions as such amounts are not material for the twelve months ended December 31, 2016.

Announced Acquisitions
On December 18, 2017, Boyd Gaming announced that it had entered into a definitive agreement to acquire Ameristar Casino Kansas City, LLC ("Ameristar Kansas City"), the owner and operator of Ameristar Casino Hotel Kansas City; Ameristar Casino St. Charles, LLC ("Ameristar St. Charles"), the owner and operator of Ameristar Casino Resort Spa St. Charles; Belterra Resort Indiana LLC ("Belterra"), the owner and operator of Belterra Casino Resort located in Florence, Indiana; and PNK (Ohio) LLC (“Belterra Park”), the owner and operator of Belterra Park, located in Cincinnati, Ohio. Ameristar Kansas City, Ameristar St. Charles, Belterra and Belterra Park are collectively referred to as the "Companies".

Boyd Gaming will acquire the Companies pursuant to a Membership Interest Purchase Agreement (the "Penn National Purchase Agreement"), made and entered into on December 17, 2017 (the "Agreement Date"), by and among Boyd, Boyd TCIV, LLC, a wholly owned subsidiary of Boyd ("Boyd Sub"), Penn National Gaming, Inc. ("Penn"), and, solely following the execution and delivery of a joinder to the Penn National Purchase Agreement, Pinnacle Entertainment, Inc. ("Pinnacle Entertainment") and its wholly owned subsidiary, Pinnacle MLS, LLC (collectively with Pinnacle Entertainment, "Pinnacle"). The Penn National Purchase Agreement provides that, pursuant to the terms and subject to the conditions set forth therein, Boyd will acquire from Pinnacle all of the issued and outstanding membership interests of the Companies as well as certain other assets (and assume certain other liabilities) of Pinnacle related to the Companies (collectively, the "Pending Acquisitions"), such that following the Pending Acquisitions, each of the Companies will be a wholly owned subsidiary of Boyd.

The Pending Acquisitions will occur substantially concurrently with the acquisition of Pinnacle Entertainment by Penn (the "Merger") pursuant to the Merger Agreement (the "Merger Agreement"), dated the Agreement Date, by and among Pinnacle Entertainment, Penn and Franchise Merger Sub, Inc., a wholly owned subsidiary of Penn.

Upon the terms and subject to the conditions of the Purchase Agreement, Boyd will acquire the Companies for total cash consideration of approximately $575.0 million, subject to adjustments based on (a) the adjusted 2017 EBITDA of each Company (as determined subsequent to the Agreement Date), and (b) working capital, cash and indebtedness of the Companies at closing and transaction expenses.

In addition, on the Agreement Date, Boyd entered into a Master Lease Commitment and Rent Allocation Agreement (the "Lease Commitment Agreement") by and among Boyd, Boyd Sub, Penn, Gaming and Leisure Properties, Inc. ("GLPI Parent") and Gold Merger Sub, LLC, a wholly owned subsidiary of GLPI Parent (collectively with GLPI Parent, "GLPI"), pursuant to which, among other things, concurrently with the consummation of the Pending Acquisitions, Boyd will enter into a new Master Lease with GLPI, under which Boyd will lease the real estate, improvements and fixtures owned by GLPI that are associated with the Companies and currently leased to Pinnacle (the "Master Lease"). The Lease Commitment Agreement also sets forth the manner in which rent will be calculated for the purposes of the Master Lease. GLPI’s commitment to enter into the Master Lease is subject to certain conditions, including that the conditions to the Merger under the Merger Agreement and the conditions to the Pending Acquisitions under the Penn National Purchase Agreement have been satisfied or waived, and that the sale of Belterra Park’s real property to

27
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

GLPI has been consummated, as contemplated by a purchase agreement between Penn and GLPI (and, upon the execution of a joinder, Belterra Park) entered into on the Agreement Date.

The completion of the Pending Acquisitions is subject to the effectiveness of the Master Lease and the consummation of the Merger, and the receipt of all required regulatory approvals, as well as customary conditions, including, among others, approval by Missouri, Ohio and Indiana gaming authorities and the acceptance or approval by the Federal Trade Commission. In addition, the Penn National Purchase is also contingent upon the successful completion of Penn National’s proposed acquisition of Pinnacle Entertainment, Inc. Subject to the satisfaction or waiver of conditions in the Penn National Purchase Agreement, Boyd currently expects the transaction to close in the second half of 2018.

The Penn National Purchase Agreement contains certain termination rights for Boyd Gaming, and the other parties thereto, and could result in a reverse termination fee payment of up to $58.0 million in certain circumstances.

On December 20, 2017, Boyd Gaming announced that it had entered into a definitive agreement to acquire Valley Forge Convention Center Partners, L.P. ("Valley Forge"), the owner and operator of Valley Forge Casino Resort in King of Prussia, Pennsylvania.

Boyd will acquire Valley Forge pursuant to an Agreement and Plan of Merger, made and entered into on December 20, 2017 (the "Valley Forge Merger Agreement"), by and among Boyd, Boyd TCV, LP, a Pennsylvania limited partnership and a wholly owned subsidiary of Boyd ("Boyd TCV"), Valley Forge, and VFCCP SR LLC, a Pennsylvania limited liability company, solely in its capacity as the representative of Valley Forge’s limited partners. The Valley Forge Merger Agreement provides that, pursuant to the terms and subject to the conditions set forth therein, Boyd TCV will be merged with and into Valley Forge (the "Merger"), following which Valley Forge will be the surviving entity and a wholly owned subsidiary of Boyd.

Upon the terms and subject to the conditions of the Valley Forge Merger Agreement, Boyd will acquire Valley Forge for cash consideration of approximately $280.5 million, subject to adjustment based on working capital, cash and indebtedness of Valley Forge at closing and transaction expenses.

The completion of the Merger is subject to customary conditions, including the receipt of all required regulatory approvals, including, among others, approval by the Pennsylvania Gaming Control Board and the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Subject to the satisfaction or waiver of conditions in the Valley Forge Merger Agreement, Boyd currently expects the transaction to close in the third quarter of 2018.

Investment in and Divestiture of Borgata
On August 1, 2016, Boyd Gaming completed the sale of its 50% equity interest in Marina District Development Holding Company, LLC ("MDDHC"), the parent company of Borgata, to MGM, pursuant to an Equity Purchase Agreement ("Purchase Agreement") entered into on May 31, 2016, as amended on July 19, 2016, by and among Boyd, Boyd Atlantic City, Inc., a wholly-owned subsidiary of Boyd ("Seller"), and MGM. Pursuant to the Purchase Agreement, MGM acquired from Boyd Gaming 49% of its 50% membership interest in MDDHC and, immediately thereafter, MDDHC redeemed Boyd Gaming’s remaining 1% membership interest in MDDHC (collectively, the "Transaction"). Following the Transaction, MDDHC became a wholly owned subsidiary of MGM.

In consideration for the Transaction, MGM paid Boyd Gaming $900 million. The initial net cash proceeds were approximately $589 million, net of certain expenses and adjustments on the closing date, including outstanding indebtedness, cash and working capital. The after-tax gain on the sale of Borgata was $181.7 million and is included in discontinued operations in the year ended December 31, 2016. The initial proceeds did not include our 50% share of any future property tax settlement benefits, from the time period during which we held a 50% ownership in MDDHC, to which Boyd Gaming retained the right to receive upon payment. During 2016, we recognized $9.1 million in income, which is included in discontinued operations, for the cash we received for our share of property tax benefits realized by Borgata subsequent to the closing of the sale. On February 15, 2017, Borgata announced that it had entered into a settlement agreement under which it would receive payments totaling $72 million to resolve the property tax issues. Borgata received full payment, and we received our share of the proceeds, in June 2017. For the year ended December 31, 2017, we recognized $36.2 million in income for the cash we received for our share of property tax benefits realized by Borgata after the closing of the sale. These proceeds, net of tax of $14.8 million for the year ended December 31, 2017, are included in discontinued operations in the consolidated financial statements.


28
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

We accounted for our investment in Borgata applying the equity method, through the date of the sale, and, as a result of the sale, we reported the results as discontinued operations for all periods presented in these consolidated financial statements.

The Borgata results presented have not been recast and therefore do not reflect the impact of the adoption of the Revenue Standard.

The table below summarizes the results of operations information for periods prior to the date of divestiture:
 
Seven Months Ended
 
Twelve Months Ended
(In thousands)
July 31, 2016
 
December 31, 2015
Net revenues
$
485,510

 
$
804,166

Operating expenses
366,812

 
657,324

Operating income
118,698

 
146,842

Interest expense
26,378

 
59,681

Loss on early extinguishments of debt
1,628

 
18,895

State income tax expense (benefit)
8,274

 
(3,731
)
Net income
$
82,418

 
$
71,997


NOTE 3.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
 
December 31,
(In thousands)
2017
 
2016
Land
$
294,533

 
$
251,316

Buildings and improvements
2,935,539

 
2,915,664

Furniture and equipment
1,311,704

 
1,243,724

Riverboats and barges
238,926

 
239,264

Construction in progress
59,538

 
86,226

Other
—

 
726

Total property and equipment
4,840,240

 
4,736,920

Less accumulated depreciation
2,300,454

 
2,131,751

Property and equipment, net
$
2,539,786

 
$
2,605,169


Construction in progress primarily relates to costs capitalized in conjunction with major improvements that have not yet been placed into service, and accordingly, such costs are not currently being depreciated. Other property and equipment relates to the estimated net realizable value of construction materials inventory that was not disposed of with the sale of the Echelon project in 2013. Such assets are not in service and are not currently being depreciated.

Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $199.3 million, $179.6 million and $179.9 million, respectively.


29
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

NOTE 4.    INTANGIBLE ASSETS
Intangible assets consist of the following:
 
December 31, 2017
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles:
 
 
 
 
 
 
 
 
 
Customer relationships
5.2 years
 
$
9,400

 
$
(3,470
)
 
$
—

 
$
5,930

Favorable lease rates
38.0 years
 
11,730

 
(3,075
)
 
—

 
8,655

Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
42,503

 
(6,545
)
 
—

 
35,958

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks
Indefinite
 
151,887

 
—

 
(4,300
)
 
147,587

Gaming license rights
Indefinite
 
873,335

 
(33,960
)
 
(179,974
)
 
659,401

 
 
 
1,025,222

 
(33,960
)
 
(184,274
)
 
806,988

Balance, December 31, 2017
 
 
$
1,067,725

 
$
(40,505
)
 
$
(184,274
)
 
$
842,946


 
December 31, 2016
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles:
 
 
 
 
 
 
 
 
 
Customer relationships
1.1 years
 
$
144,780

 
$
(125,318
)
 
$
—

 
$
19,462

Favorable lease rates
31.4 years
 
45,370

 
(13,039
)
 
—

 
32,331

Development agreement
—
 
21,373

 
—

 
—

 
21,373

 
 
 
211,523

 
(138,357
)
 
—

 
73,166

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets:
 
 
 
 
 
 
 
 
 
Trademarks
Indefinite
 
153,687

 
—

 
(4,300
)
 
149,387

Gaming license rights
Indefinite
 
873,335

 
(33,960
)
 
(179,974
)
 
659,401

 
 
 
1,027,022

 
(33,960
)
 
(184,274
)
 
808,788

Balance, December 31, 2016
 
 
$
1,238,545

 
$
(172,317
)
 
$
(184,274
)
 
$
881,954


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

Favorable Lease Rates
Favorable lease rates represent the rental rates for assumed land leases that are favorable to comparable market rates. The fair value is determined on a technique whereby the difference between the lease rate and the then current market rate for the remaining contractual term is discounted to present value. The assumptions underlying this computation include the actual lease rates, the

30
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

expected remaining lease term, including renewal options, based on the existing lease; current rates of rent for leases on comparable properties with similar terms obtained from market data and analysis; and an assumed discount rate. The estimates underlying the result covered a term of 41 to 52 years.

Development Agreement
Development agreement is an acquired contract with a Native American tribe (the "Tribe") under which the Company has the right to assist the Tribe in the development and management of a gaming facility on the Tribe's land. This asset although amortizable, is not amortized until development is completed. We are in the process of finalizing project design and construction planning. In the interim, this asset is subject to periodic impairment reviews.

Indefinite Lived Intangible Assets
Trademarks
Trademarks are based on the value of our brands, which reflect the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the trade name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; tax expense; terminal growth rate; discount rate; and the present value of tax benefit.

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. In the majority of cases, the value of our 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. In two instances, we determine the value of our gaming licenses by applying a cost approach. Our primary consideration in the application of this methodology is the initial statutory fee associated with acquiring a gaming license in the jurisdiction.
 
Activity for the Years Ended December 31, 2017, 2016 and 2015
The following table sets forth the changes in these intangible assets:
(In thousands)
Customer Relationships
 
Favorable Lease Rates
 
Development Agreements
 
Trademarks
 
 Gaming License Rights
 
 Intangible Assets, Net
Balance, January 1, 2015
$
51,958

 
$
34,414

 
$
21,373

 
$
126,001

 
$
700,503

 
$
934,249

Additions
—

 
—

 
—

 
—

 
—

 
—

Impairments
—

 
—

 
—

 
—

 
(17,502
)
 
(17,502
)
Amortization
(25,652
)
 
(1,041
)
 
—

 
—

 
—

 
(26,693
)
Balance, December 31, 2015
26,306

 
33,373

 
21,373

 
126,001

 
683,001

 
890,054

Additions
8,480

 
—

 
—

 
24,200

 
—

 
32,680

Impairments
—

 
—

 
—

 
(800
)
 
(23,600
)
 
(24,400
)
Amortization
(15,324
)
 
(1,042
)
 
—

 
—

 
—

 
(16,366
)
Other
—

 
—

 
—

 
(14
)
 
—

 
(14
)
Balance, December 31, 2016
19,462

 
32,331

 
21,373

 
149,387

 
659,401

 
881,954

Additions
—

 
—

 
—

 
—

 
—

 
—

Purchase price adjustment
920

 
—

 
—

 
(1,800
)
 
—

 
(880
)
Impairments
—

 
—

 
—

 
—

 
—

 
—

Amortization
(14,452
)
 
(228
)
 
—

 
—

 
—

 
(14,680
)
Other
—

 
(23,448
)
 
—

 
—

 
—

 
(23,448
)
Balance, December 31, 2017
$
5,930

 
$
8,655

 
$
21,373

 
$
147,587

 
$
659,401

 
$
842,946


31
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


In March 2017, The Orleans Hotel and Casino exercised an option in its lease agreement to terminate the existing lease and purchase the land subject to the lease therefore combining the remaining unamortized favorable lease rate asset into the cost of the land asset.

Future Amortization
Customer relationships are being amortized on an accelerated basis over an estimated life of five years. Favorable lease rates are being amortized on a straight-line basis over a weighted-average original useful life of 38.0 years. Future amortization is as follows:
(In thousands)
 
Customer Relationships
 
Favorable Lease Rates
 
Total
For the year ending December 31,
 
 
 
 
 
 
2018
 
$
2,291

 
$
228

 
$
2,519

2019
 
1,634

 
228

 
1,862

2020
 
1,043

 
228

 
1,271

2021
 
511

 
228

 
739

2022
 
271

 
228

 
499

Thereafter
 
180

 
7,515

 
7,695

Total future amortization
 
$
5,930

 
$
8,655

 
$
14,585


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 each year and between annual test dates in certain circumstances.

Impairment Considerations
As a result of our annual impairment testing in the fourth quarter of 2017, there were no impairment charges recognized.

During the year ended 2016, we recognized non-cash impairment charges of $23.6 million of gaming licenses and $0.8 million of trademarks in our Midwest and South segment. These amounts are included in impairments of assets in the consolidated statements of operations for the year ended December 31, 2016.

During the year ended 2015, we recognized non-cash impairment charges of $17.5 million of a gaming license in our Midwest and South segment. These amounts are included in impairments of assets in the consolidated statements of operations for the year ended December 31, 2015.

NOTE 5.     GOODWILL
Goodwill consists of the following:
(In thousands)
Gross Carrying Value
 
Cumulative Amortization
 
 Cumulative Impairment Losses
 
Goodwill, Net
Goodwill, net by Reportable Segment:
 
 
 
 
 
 
 
Las Vegas Locals
$
593,567

 
$
—

 
$
(165,479
)
 
$
428,088

Downtown Las Vegas
6,997

 
(6,134
)
 
—

 
863

Midwest and South
471,735

 
—

 
(12,462
)
 
459,273

Balance, December 31, 2017
$
1,072,299

 
$
(6,134
)
 
$
(177,941
)
 
$
888,224


Changes in Goodwill
During the year ended December 31, 2017 and 2016, we recorded $61.7 million and $153.6 million of goodwill, respectively, in our Las Vegas Locals segment related to our acquisitions of Aliante on September 27, 2016 and Cannery and Eastside Cannery on December 20, 2016 as the acquisition accounting was finalized in the current year (see Note 2, Acquisitions and Divestitures).

Goodwill decreased approximately $12.5 million during 2016 due to an impairment in the Midwest and South segment.


32
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The following table sets forth the changes in our goodwill, net, during the years ended December 31, 2017, 2016 and 2015.
(In thousands)
 
Goodwill, Net
Balance, January 1, 2015
 
$
685,310

Additions
 
—

Impairments
 
—

Balance, December 31, 2015
 
685,310

Additions
 
153,628

Impairments
 
(12,462
)
Balance, December 31, 2016
 
826,476

Additions
 
—

Impairments
 
—

Final purchase price adjustment
 
61,748

Balance, December 31, 2017
 
$
888,224


NOTE 6.    ACCRUED LIABILITIES
Accrued liabilities consist of the following:
 
December 31,
(In thousands)
2017
 
2016
Payroll and related expenses
$
70,724

 
$
68,102

Interest
19,858

 
33,407

Gaming liabilities
55,961

 
41,942

Player loyalty program liabilities
24,489


25,548

Advance deposits
18,922

 
16,999

Outstanding chip liability
4,928

 
4,553

Dividends payable
5,632

 
—

Other accrued liabilities
54,632

 
67,003

Total accrued liabilities
$
255,146

 
$
257,554


NOTE 7.    LONG-TERM DEBT
Long-term debt, net of current maturities and debt issuance costs consists of the following:
 
 
 
December 31, 2017
 
Interest
 
 
 
 
 
Unamortized
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Origination
 
Long-Term
(In thousands)
Dec. 31, 2017
 
Principal
 
Discount
 
Fees and Costs
 
Debt, Net
Bank credit facility
3.882
%
 
$
1,621,054

 
$
(1,556
)
 
$
(23,795
)
 
$
1,595,703

6.875% senior notes due 2023
6.875
%
 
750,000

 
—

 
(9,455
)
 
740,545

6.375% senior notes due 2026
6.375
%
 
750,000

 
—

 
(10,872
)
 
739,128

Other
5.800
%
 
504

 
—

 
—

 
504

Total long-term debt
 
 
3,121,558


(1,556
)

(44,122
)

3,075,880

Less current maturities
 
 
23,981

 
—

 
—

 
23,981

Long-term debt, net
 
 
$
3,097,577


$
(1,556
)

$
(44,122
)

$
3,051,899



33
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

 
 
 
December 31, 2016
 
Interest
 
 
 
 
 
Unamortized
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Origination
 
Long-Term
(In thousands)
Dec. 31, 2016
 
Principal
 
Discount
 
Fees and Costs
 
Debt, Net
Bank credit facility
3.440
%
 
$
1,782,538

 
$
(1,888
)
 
$
(28,503
)
 
$
1,752,147

6.875% senior notes due 2023
6.875
%
 
750,000

 
—

 
(11,209
)
 
738,791

6.375% senior notes due 2026
6.375
%
 
750,000

 
—

 
(12,074
)
 
737,926

Other
5.800
%
 
591

 
—

 
—

 
591

Total long-term debt
 
 
3,283,129

 
(1,888
)
 
(51,786
)
 
3,229,455

Less current maturities
 
 
30,336

 
—

 
—

 
30,336

Long-term debt, net
 
 
$
3,252,793

 
$
(1,888
)
 
$
(51,786
)
 
$
3,199,119


Boyd Gaming Corporation Debt
Bank Credit Facility
Credit Agreement
On March 29, 2017, the Company, as borrower, entered into Amendment No. 2 and Refinancing Amendment (the "Refinancing Amendment") with the lenders party thereto, and Bank of America, N.A. ("Bank of America"), as administrative agent. The Refinancing Amendment modifies the Third Amended and Restated Credit Agreement (as amended prior to the execution of the Refinancing Amendment, the "Existing Credit Agreement"), dated as of August 14, 2013, among the Company, certain financial institutions, and Bank of America, as administrative agent. The Refinancing Amendment modified the Existing Credit Agreement and is referred to as the "Amended Credit Agreement" (together referred to as the "Credit Facility").

The Amended Credit Agreement provides for (i) commitments to make Term B Loans in an amount equal to $1,264.5 million (the "Refinancing Term B Loans"), with the proceeds used to refinance in full the Company’s Term B-1 Loans and Term B-2 Loans outstanding under the Existing Credit Agreement and (ii) certain other amendments to the Existing Credit Agreement. The revolving credit facility (the "Revolving Credit Facility") of $775.0 million and the senior secured term A loan (the "Term A Loan") of $225.0 million were not modified in the Refinancing Amendment.

The Refinancing Term B Loans mature on September 15, 2023 (or earlier upon occurrence or non-occurrence of certain events). The Revolving Credit Facility and the Term A Loan mature on September 15, 2021 (or earlier upon occurrence or non-occurrence of certain events).

The Credit Facility includes an accordion feature which permits an increase in the Revolving Credit Facility and the issuance and increase of senior secured term loans in an amount up to (i) $550.0 million, plus (ii) certain voluntary permanent reductions of the Revolving Credit Facility and certain voluntary prepayments of the senior secured term loans, plus (iii) certain reductions in the outstanding principal amounts under the term loans or the Revolving Credit Facility, plus (iv) any additional amount if, after giving effect thereto, the First Lien Leverage Ratio (as defined in the Credit Agreement) would not exceed 4.25 to 1.00 on a pro forma basis, less (v) any Incremental Equivalent Debt (as defined in the Credit Agreement), in each case, subject to the satisfaction of certain conditions.

Amounts Outstanding
The outstanding principal amounts under the Credit Facility are comprised of the following:
 
December 31,
(In thousands)
2017
 
2016
Revolving Credit Facility
$
170,000

 
$
245,000

Term A Loan
210,938

 
222,188

Refinancing Term B Loans
1,170,016

 
—

Term B-1 Loan
—

 
271,750

Term B-2 Loan
—

 
997,500

Swing Loan
70,100

 
46,100

Total outstanding principal amounts
$
1,621,054

 
$
1,782,538


34
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


At December 31, 2017 approximately $1.6 billion was outstanding under the Credit Facility and $12.9 million was allocated to support various letters of credit, leaving remaining contractual availability of $522.0 million.

Interest and Fees
The interest rate on the outstanding balance from time to time of the Revolving Credit Facility and the Term A Loan is based upon, at the Company’s option, either: (i) the Eurodollar rate or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with a specified pricing grid based on the total leverage ratio and ranges from 1.75% to 2.75% (if using the Eurodollar rate) and from 0.75% to 1.75% (if using the base rate). A fee of a percentage per annum (which ranges from 0.25% to 0.50% determined in accordance with a specified pricing grid based on the total leverage ratio) will be payable on the unused portions of the Revolving Credit Facility.

The interest rate on the outstanding balance of the Refinancing Term B Loans under the Amended Credit Agreement is based upon, at the Company’s option, either: (i) the Eurodollar rate or (ii) the base rate, in each case, plus an applicable margin. Such applicable margin is a percentage per annum determined in accordance with the Company’s secured leverage ratio and ranges from 2.25% to 2.50% (if using the Eurodollar rate) and from 1.25% to 1.50% (if using the base rate).

The "base rate" under the Credit Agreement remains the highest of (x) Bank of America’s publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar rate for a one-month period plus 1.00%.

Optional and Mandatory Prepayments
Pursuant to the terms of the Credit Facility (i) the loans under the Term A Loan amortize in an annual amount equal to 5.00% of the original principal amount thereof, commencing December 31, 2016, payable on a quarterly basis, (ii) the loans under the Refinancing Term B Loans amortize in an annual amount equal to 1.00% of the original principal amount thereof, commencing June 30, 2017, payable on a quarterly basis, and (iii) beginning with the fiscal year ending December 31, 2016, the Company is required to use a portion of its annual Excess Cash Flow, as defined in the Credit Agreement, to prepay loans outstanding under the Credit Facility.

Amounts outstanding under the Refinancing Amendment may be prepaid without premium or penalty, and the commitments may be terminated without penalty, subject to certain exceptions.

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

Guarantees and Collateral
The Company's obligations under the 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 will grant the administrative agent first priority liens and security interests on substantially all of their real and personal property (other than gaming licenses and subject to certain other exceptions) as additional security for the performance of the secured obligations under the Credit Facility.

Financial and Other Covenants
The Credit Facility contains certain financial and other covenants, including, without limitation, various covenants: (i) requiring the maintenance of a minimum consolidated interest coverage ratio 1.75 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.

The maximum permitted consolidated Total Leverage Ratio is calculated as Consolidated Funded Indebtedness to twelve-month trailing Consolidated EBITDA, as defined by the Agreement. The following table provides our maximum Total Leverage Ratio during the remaining term of the Credit Facility:

35
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

 
Maximum Total
For the Trailing Four Quarters Ending
Leverage Ratio
March 31, 2017 through December 31, 2017
7.00
to
1.00
March 31, 2018 through December 31, 2018
6.25
to
1.00
March 31, 2019 through December 31, 2019
6.00
to
1.00
March 31, 2020 through December 31, 2020
5.75
to
1.00
March 31, 2021 and thereafter
5.50
to
1.00

The maximum permitted Secured Leverage Ratio is calculated as Secured Indebtedness to twelve-month trailing Consolidated EBITDA, as defined by the Agreement. The following table provides our maximum Secured Leverage Ratio during the remaining term of the Credit Facility:
 
Maximum Secured
For the Trailing Four Quarters Ending
Leverage Ratio
September 30, 2016 through December 31, 2017
4.50
to
1.00
March 31, 2018 through December 31, 2018
4.00
to
1.00
March 31, 2019 through December 31, 2019
3.75
to
1.00
March 31, 2020 and thereafter
3.50
to
1.00

Current Maturities of Our Indebtedness
We classified certain non-extending balances under our Credit Facility as a current maturity, as such amounts come due within the next twelve months.

Senior Notes
6.875% Senior Notes due May 2023
On May 21, 2015, we issued $750 million aggregate principal amount of 6.875% senior notes due May 2023 (the "6.875% Notes"). The 6.875% Notes require semi-annual interest payments on May 15 and November 15 of each year, commencing on November 15, 2015. The 6.875% Notes will mature on May 15, 2023 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 6.875% Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the 6.875% Notes, together, the "6.875% Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the 6.875% Indenture), we will be required, unless certain conditions are met, to offer to repurchase the 6.875% Notes at a price equal to 101% of the principal amount of the 6.875% Notes, plus accrued and unpaid interest and Additional Interest (as defined in the 6.875% Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the 6.875% Notes.

At any time prior to May 15, 2018, we may redeem the 6.875% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. After May 15, 2018, we may redeem all or a portion of the 6.875% Notes at redemption prices (expressed as percentages of the principal amount) ranging from 105.156% in 2018 to 100% in 2021 and thereafter, plus accrued and unpaid interest and Additional Interest.

In conjunction with the issuance of the 6.875% Notes, we incurred approximately $14.0 million in debt financing costs that have been deferred and are being amortized over the term of the 6.875% Notes using the effective interest method.


36
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

6.375% Senior Notes due April 2026
On March 28, 2016, we issued $750 million aggregate principal amount of 6.375% senior notes due April 2026 (the "6.375% Notes"). The 6.375% Notes require semi-annual interest payments on April 1 and October 1 of each year, commencing on October 1, 2016. The 6.375% Notes will mature on April 1, 2026 and are fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. Net proceeds from the 6.375% Notes were used to pay down the outstanding amount under the Revolving Credit Facility and the balance was deposited in money market funds and classified as cash equivalents on the consolidated balance sheets.

In conjunction with the issuance of the 6.375% Notes, we incurred approximately $13.0 million in debt financing costs that have been deferred and are being amortized over the term of the 6.375% Notes using the effective interest method.

The 6.375% Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the base and supplemental indentures governing the 6.375% Notes, together, the "6.375% Indenture") to incur additional indebtedness or liens, pay dividends or make distributions or repurchase our capital stock, make certain investments, and sell or merge with other companies. In addition, upon the occurrence of a change of control (as defined in the 6.375% Indenture), we will be required, unless certain conditions are met, to offer to repurchase the 6.375% Notes at a price equal to 101% of the principal amount of the 6.375% Notes, plus accrued and unpaid interest and Additional Interest (as defined in the 6.375% Indenture), if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the 6.375% Notes.

At any time prior to April 1, 2021, we may redeem the 6.375% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, up to, but excluding, the applicable redemption date, plus a make whole premium. After April 1, 2021, we may redeem all or a portion of the 6.375% Notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.188% in 2021 to 100% in 2024 and thereafter, plus accrued and unpaid interest and Additional Interest.

In connection with the private placement of the 6.375% Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the SEC to permit the holders to exchange or resell the 6.375% Notes. We filed the required registration statement and commenced the exchange offer during December 2016. The exchange offer was completed on February 10, 2017 and our obligations under the registration rights agreement have been fulfilled.

9.00% Senior Notes due July 2020
On September 6, 2016 we redeemed all of our 9.00% senior notes due July 2020 (the "9.00% Notes") at a redemption price of 104.50% plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand. As a result of this redemption, the 9.00% Notes have been fully extinguished.

Peninsula Gaming Debt
Peninsula Credit Facility
On September 2, 2016, Peninsula repaid all of the outstanding amounts, including all principal and accrued interest amounts, under the Peninsula senior secured credit facility (the "Peninsula Credit Facility") pursuant to the Peninsula Credit Agreement. In connection with the repayment in full of the Peninsula Credit Facility (the "Repayment"), the Peninsula Credit Agreement was terminated.

8.375% Senior Notes due February 2018
On September 2, 2016 we redeemed all of our 8.375% senior notes due February 2018 (the "8.375% Notes") at a redemption price of 100.0% plus accrued and unpaid interest to the redemption date. The redemption was funded using cash on hand. As a result of this redemption, the 8.375% Notes have been fully extinguished.


37
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Loss on Early Extinguishments and Modifications of Debt
The components of the loss on early extinguishments and modifications of debt, are as follows:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Boyd Gaming Credit Facility deferred finance charges
$
1,086

 
$
6,629

 
$
1,978

Refinancing Amendment
496

 
—

 
—

9.00% Senior Notes premium and consent fees
—

 
15,750

 
—

9.00% Senior Notes deferred finance charges
—

 
5,976

 
—

8.375% Senior Notes deferred finance charges
—

 
4,497

 
—

9.125% Senior Notes premium and consent fees
—

 
—

 
23,962

9.125% Senior Notes deferred finance charges
—

 
—

 
4,888

HoldCo Note
—

 
—

 
7,819

Peninsula Credit Facility deferred finance charges
—

 
9,512

 
2,086

Total loss on early extinguishments and modifications of debt
$
1,582

 
$
42,364

 
$
40,733


Covenant Compliance
As of December 31, 2017, we believe that we were in compliance with the financial and other covenants of our debt instruments.

The indentures governing the notes issued by the Company contain provisions that allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, the coverage ratio (as defined in the respective indentures, essentially a ratio of the Company's consolidated EBITDA to fixed charges, including interest) for the Company's trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Should this provision prohibit the incurrence of additional debt, the Company may still borrow under its existing credit facility. At December 31, 2017, the available borrowing capacity under our Credit Facility was $522.0 million.

Scheduled Maturities of Long-Term Debt
The scheduled maturities of long-term debt, as discussed above, are as follows:
(In thousands)
Total
For the year ending December 31,
 
2018
$
23,981

2019
23,991

2020
23,997

2021
430,040

2022
12,758

Thereafter
2,606,791

Total outstanding principal of long-term debt
$
3,121,558


NOTE 8.    INCOME TAXES
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are provided to record the effects of temporary differences between the tax basis of an asset or liability and its amount as reported in our consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.


38
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The components comprising our deferred tax assets and liabilities are as follows:
 
December 31,
(In thousands)
2017
 
2016
Deferred tax assets
 
 
 
Federal net operating loss carryforwards
$
110,350

 
$
201,978

State net operating loss carryforwards
45,096

 
38,715

Share-based compensation
14,226

 
26,344

Other
35,161

 
63,815

Gross deferred tax assets
204,833

 
330,852

Valuation allowance
(28,821
)
 
(28,402
)
Deferred tax assets, net of valuation allowance
176,012

 
302,450

 
 
 
 
Deferred tax liabilities
 
 
 
Difference between book and tax basis of property and intangible assets
219,090

 
337,654

State tax liability
33,777

 
31,443

Other
9,802

 
14,807

Gross deferred tax liabilities
262,669

 
383,904

Deferred tax liabilities, net
$
86,657

 
$
81,454


At December 31, 2017, we have unused federal general business tax credits of approximately $8.0 million which may be carried forward or used until expiration beginning in 2036 and alternative minimum tax credits of $10.4 million which may be used or refunded through 2022. We have a federal income tax net operating loss of approximately $525.5 million, which may be carried forward or used until expiration beginning in 2031. We also have state income tax net operating loss carryforwards of approximately $732.4 million, which may be used to reduce future state income taxes. The state net operating loss carryforwards will expire in various years ranging from 2018 to 2036, if not fully utilized.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). As part of our analysis of the impact of the Tax Act, we have recorded a discrete net tax benefit of $60.1 million in the period ending December 31, 2017. This tax benefit is due to the corporate federal tax rate reduction on our net deferred tax liability.

The SEC staff issued Staff Accounting Bulletin 118 ("SAB 118") which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification 740, Income Taxes ("ASC 740"). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. We have recorded an adjustment as a result of the Tax Act as described above. We believe our analysis to be complete and do not anticipate any material future changes to financial statements as a result of the impact of the Tax Act. If any changes are determined, we will record those as part of the measurement period.

Valuation Allowance on Deferred Tax Assets
Management assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. In evaluating our ability to recover deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations.


39
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

As part of our review in determining the need for a valuation allowance, we assess the potential release of existing valuation allowances. In 2016, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilize a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters during 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from these deferred tax assets would be realized. As a result, during the year ended December 31, 2016, we released $203.9 million of valuation allowance on our federal and state income tax net operating loss carryforwards and other deferred tax assets. For the year ended December 31, 2017, no significant changes of evidence have occurred that would require a change to our valuation allowance position.

We have maintained a valuation allowance of $28.8 million against certain federal and state deferred tax assets as of December 31, 2017 due to uncertainties related to our ability to realize the tax benefits associated with these assets. In assessing the need to establish a valuation allowance, we consider, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above.

Provision (Benefit) for Income Taxes
A summary of the provision (benefit) for income taxes is as follows:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Current
 
 
 
 
 
Federal
$
(10,367
)
 
$
—

 
$
—

State
5,335

 
1,242

 
2,052

Total current taxes provision
(5,032
)
 
1,242

 
2,052

Deferred
 
 
 
 
 
Federal
6,449

 
(192,472
)
 
(9,493
)
State
1,698

 
(8,703
)
 
816

Total deferred taxes benefit
8,147

 
(201,175
)
 
(8,677
)
Provision (benefit) for income taxes from continuing operations
$
3,115

 
$
(199,933
)
 
$
(6,625
)
 
 
 
 
 
 
Provision (benefit) for income taxes included on the consolidated statement of operations
 
 
 
 
 
Provision (benefit) for income taxes from continuing operations
$
3,115

 
$
(199,933
)
 
$
(6,625
)
Provision (benefit) for income taxes from discontinued operations
14,855

 
146,379

 
(540
)
Provision (benefit) for income taxes from continuing and discontinued operations
$
17,970

 
$
(53,554
)
 
$
(7,165
)

Our tax provision for the year ended December 31, 2017 was favorably impacted by the federal statutory tax rate change applied to our net deferred tax liability. Based on this revaluation, we have recorded a discrete tax benefit of $60.1 million.

Our tax benefit for the year ended December 31, 2016 resulted from the release of a valuation allowance on our federal and state net operating loss carryforwards and other deferred tax assets.

Our tax benefit for the year ended December 31, 2015 was favorably impacted by the partial release of the valuation allowance on our federal and state net operating losses, impairment charges to indefinite lived intangible assets which resulted in a reduction in our recognized deferred tax liability on these assets, federal and state audit settlements in connection with our IRS and New Jersey income tax examinations and, the realization of certain unrecognized tax benefits, inclusive of the reversal of related accrued interest.

40
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


Additionally, the tax benefit in 2015 was adversely impacted by an accrual of non-cash tax expense in connection with the tax amortization of indefinite lived intangible assets that was not available to offset existing deferred tax assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets in determining our valuation allowance.

The following table provides a reconciliation between the federal statutory rate and the effective income tax rate, expressed as a percentage of income from continuing operations before income taxes:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Tax at federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
Federal statutory rate change on deferred tax liability
(35.2
)%
 
—
 %
 
—
 %
State income taxes, net of federal benefit
2.7
 %
 
(60.8
)%
 
64.1
 %
Compensation-based credits
(1.0
)%
 
(22.3
)%
 
(55.5
)%
Valuation allowance for deferred tax assets
—
 %
 
(2,548.1
)%
 
179.9
 %
Company provided benefits
0.5
 %
 
15.2
 %
 
139.8
 %
Nondeductible expenses
0.5
 %
 
10.6
 %
 
17.3
 %
Tax exempt interest
(0.3
)%
 
(7.1
)%
 
(12.6
)%
Accrued interest on uncertain tax benefits
0.1
 %
 
2.1
 %
 
(127.7
)%
Uncertain tax benefits
—
 %
 
—
 %
 
(385.4
)%
Other, net
(0.5
)%
 
1.6
 %
 
(4.0
)%
Effective tax rate
1.8
 %
 
(2,573.8
)%
 
(149.1
)%

Status of Examinations
In January 2015, we received Joint Committee on Taxation ("Joint Committee") approval of the 2005-2009 IRS appeals settlement reached in August 2013. We received a refund of $2.4 million in connection with the appeals settlement. Additionally, in 2015, we received a final audit determination in connection with our New Jersey examination, effectively settling years 2003 through 2009. We received a refund of $1.1 million as a result of the New Jersey examination.

We generated net operating losses on our federal income tax returns for years 2011 - 2013. These returns remain subject to federal examination until the statute of limitations expires for the year in which the net operating losses are utilized.

We are also currently under examination for various state income and franchise tax matters. As it relates to our material state returns, we are subject to examination for tax years ended on or after December 31, 2001, and the statute of limitations will expire over the period September 2018 through October 2021.

We believe that we have adequately reserved for any tax liability; however, the ultimate resolution of these examinations may result in an outcome that is different than our current expectation. We do not believe the ultimate resolution of these examinations will have a material impact on our consolidated financial statements.

Other Long-Term Tax Liabilities
The impact of an uncertain income tax position taken in our income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained. Our liability for uncertain tax positions is recorded as other long-term tax liabilities in our consolidated balance sheets.

41
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Unrecognized tax benefit, beginning of year
$
2,482

 
$
2,482

 
$
30,198

Additions:
 
 
 
 
 
Tax positions related to current year
—

 
—

 
—

Reductions:
 
 
 
 
 
Tax position related to prior years
—

 
—

 
(27,716
)
Unrecognized tax benefits, end of year
$
2,482

 
$
2,482

 
$
2,482


Included in the $2.5 million balance of unrecognized tax benefits at December 31, 2017, are $2.0 million of federally tax effected benefits that, if recognized, would impact the effective tax rate. We recognize interest related to unrecognized tax benefits in our income tax provision. During the year ended December 31, 2017, we recognized interest and penalties of approximately $0.1 million in our tax provision. During the year ended December 31, 2015 we recognized interest related benefits, due to favorable settlements, of $6.2 million in our income tax provision. We have accrued $1.0 million and $0.8 million of interest and penalties as of December 31, 2017 and 2016, respectively, in our consolidated balance sheets.

During the first quarter of 2015, we received Joint Committee approval on our IRS appeals agreement, effectively settling our 2005 through 2009 examination. During the third quarter of 2015, we received a final audit determination in connection with our New Jersey examination, effectively settling years 2003 through 2009. As a result of the resolution of these audits, we reduced our unrecognized tax benefits by $27.7 million, of which $19.5 million impacted our effective tax rate. Due to the utilization of tax loss carryforwards in certain states, the statute of limitations remains open with respect to years in which the tax losses are utilized. When these years close, unrecognized tax benefits may be realized. We do not anticipate any material changes to our unrecognized tax benefits over the next twelve-month period.

NOTE 9.    COMMITMENTS AND CONTINGENCIES
Commitments
Capital Spending and Development
We continually perform on-going refurbishment and maintenance at our facilities to maintain our standards of quality. Certain of these maintenance costs are capitalized, if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. We must also comply with covenants and restrictions set forth in our debt agreements.

Acquisitions
We recently announced the Penn National Purchase Agreement and Valley Forge Merger Agreement, pursuant to which we will acquire additional casino properties. See Note 2, Acquisitions and Divestitures, for further discussion of the commitments arising from these agreements.

Kansas Management Contract
As part of the Kansas Management Contract approved by the Kansas Racing and gaming Commission on January 11, 2011, Kansas Star committed to donate $1.5 million each year to support education in the local area in which Kansas Star operates for the duration of the Kansas Management Contract. We have made all distributions under this commitment as scheduled and such related expenses are recorded in Selling, general and administrative expenses on the consolidated statements of operations.

Mulvane Development Agreement
On March 7, 2011, Kansas Star entered into a Development Agreement with the City of Mulvane ("Mulvane Development Agreement") related to the provision of water, sewer, and electrical utilities to the Kansas Star site. This agreement sets forth certain parameters governing the use of public financing for the provision of such utilities, through the issuance of general obligation bonds by the City of Mulvane, paid for through the imposition of a special tax assessment on the Kansas Star site payable over 15 years in an amount equal to the City’s full obligations under the general obligation bonds. 


42
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

All infrastructure improvements to the Kansas Star site under the Mulvane Development Agreement are complete and the City of Mulvane issued $19.7 million in general obligation bonds related to these infrastructure improvements. As of December 31, 2017 and 2016, under the Mulvane Development Agreement, Kansas Star recorded $1.7 million at each date, which is included in accrued liabilities on the consolidated balance sheets and $8.2 million, net of a $3.5 million discount, and $8.9 million, net of a $4.0 million discount, respectively, which is recorded as a long-term obligation in other liabilities on the consolidated balance sheets. Interest costs are expensed as incurred and the discount will be amortized to interest expense over the term of the special tax assessment ending in 2028. Kansas Star's special tax assessment related to these bonds is approximately $1.7 million annually. Payments under the special tax assessment are secured by irrevocable letters of credit of $5.0 million issued by the Company in favor of the City of Mulvane, representing an amount equal to three times the annual special assessment tax imposed on Kansas Star.

Contingent Payments
In connection with securing the Kansas Management Contract, Kansas Star agreed to pay a former casino project promoter 1% of Kansas Star’s earnings before interest expense, taxes, depreciation and amortization ("EBITDA") each month for a period of 10 years commencing December 20, 2011.

Minimum Assessment Agreement
In 2007, Diamond Jo Dubuque entered into a Minimum Assessment Agreement with the City of Dubuque (the "City"). Under the Minimum Assessment Agreement, Diamond Jo Dubuque and the City agreed to a minimum taxable value related to the new casino of $57.9 million.  Diamond Jo Dubuque agreed to pay property taxes to the City based on the actual taxable value of the casino, but not less than the minimum taxable value. Scheduled payments of principal and interest on the City Bonds will be funded through Diamond Jo Dubuque's payment obligations under the Minimum Assessment Agreement.  Diamond Jo Dubuque is also obligated to pay any shortfall should property taxes be insufficient to fund the principal and interest payments on the City Bonds.

Interest costs under the Minimum Assessment Agreement obligation are expensed as incurred. As of December 31, 2017 and 2016, the remaining obligation under the Minimum Assessment Agreement was $1.9 million at each date, which was recorded in accrued liabilities on the consolidated balance sheets and $13.8 million, net of a $2.6 million discount, and $14.1 million, net of a $2.8 million discount, respectively, which was recorded as a long-term obligation in other liabilities on the consolidated balance sheets. The discount will be amortized to interest expense over the life of the Minimum Assessment Agreement. Total minimum payments by Diamond Jo Dubuque under the Minimum Assessment Agreement are approximately $1.9 million per year through 2036.

Public Parking Facility Agreement
Diamond Jo Dubuque has an agreement with the City for use of the public parking facility adjacent to Diamond Jo Dubuque's casino and owned and operated by the City (the "Parking Facility Agreement"). The Parking Facility Agreement calls for: (i) the payment by the Company for the reasonable and necessary actual operating costs incurred by the City for the operation, security, repair and maintenance of the public parking facility; and (ii) the payment by the Company to the City of $65 per parking space in the public parking facility per year, subject to annual increases based on any increase in the Consumer Price Index, which funds will be deposited into a special sinking fund and used by the City for capital expenditures necessary to maintain the public parking facility. Operating costs of the parking facility incurred by Diamond Jo Dubuque are expensed as incurred. Deposits to the sinking fund are recorded as other assets. When the sinking fund is used for capital improvements, such amounts are capitalized and amortized over their remaining useful life.

Iowa Qualified Sponsoring Organization Agreements
Diamond Jo Dubuque and Diamond Jo Worth are required to pay their respective qualified sponsoring organization, who hold a joint gaming license with Diamond Jo Dubuque and Diamond Jo Worth, 4.50% and 5.76%, respectively, of the casino’s adjusted gross receipts on an ongoing basis. Diamond Jo Dubuque expensed $3.1 million, during the year ended December 31, 2017 and $3.0 million, in the year ended December 31, 2016 and 2015, respectively, related to its agreement. Diamond Jo Worth expensed $5.0 million, $4.9 million, and $5.0 million during the years ended December 31, 2017, 2016, and 2015, respectively, related to its agreement. The Diamond Jo Dubuque agreement expires on December 31, 2018. Diamond Jo Dubuque has entered into an amendment to the existing operating agreement with the qualified sponsoring organization. The new agreement will go into effect on January 1, 2019 and will extend for twelve years, expiring on December 31, 2030. The agreement is subject to review and approval by the state gaming commission. The Diamond Jo Worth agreement expires on March 31, 2025, and is subject to automatic ten-year renewal periods.


43
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

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

In July 2012, the Company and the Tribe amended and replaced the agreement with a new development agreement and a management agreement (the "Agreements"). The Agreements obligate us to fund certain pre-development costs, which are estimated to be approximately $1 million to $2 million annually, for the next several years and to assist the Tribe in its development and oversight of the gaming facility construction. Upon opening, we will manage the gaming facility. The pre-development costs funded by us are reimbursable to us with future cash flows from the operations of the gaming facility under terms of a note receivable from the Tribe.

In January 2017, the Company funded the acquisition of land that is the intended site of the Wilton Rancheria casino and, in February 2017, the land was placed into trust by the U.S. Bureau of Indian Affairs for the benefit of the Tribe. The cost of the land will be recorded as a receivable on our consolidated balance sheet, and we expect to be reimbursed for this cost when project financing is in place. Should the project be abandoned, ownership of the land would revert to the Company.

The Agreements provide that the Company will receive future revenue for its services to the Tribe contingent upon successful development of the gaming facility and based on future net revenues at the gaming facility. In September 2017, the California State Legislature unanimously approved, and the Governor of California executed, a tribal-state gaming compact with the tribe allowing the development of the casino. With the compact now in place, we are in the process of finalizing project design and preparation and expect to begin construction mid-2018, with a construction timeline of 18 to 24 months.

Future Minimum Lease Payments and Rental Income
Future minimum lease payments required under noncancelable operating leases, which are primarily related to land leases are as follows:
(In thousands)
Lease Obligations
For the year ending December 31,
 
2018
$
20,642

2019
17,826

2020
15,325

2021
14,330

2022
13,884

Thereafter
314,391

Total
$
396,398


Rent expense included in selling, general and administrative expenses on the accompanying consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 was $30.3 million, $31.0 million, and $29.0 million, respectively, and primarily relates to land leases and advertising-related expenses.


44
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Future minimum rental income, which is primarily related to retail and restaurant facilities located within our properties are as follows:
(In thousands)
Minimum Rental Income
For the year ending December 31,
 
2018
$
3,432

2019
2,371

2020
1,665

2021
930

2022
771

Thereafter
250

Total
$
9,419


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


45
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

NOTE 10.    STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS
Share Repurchase Program
We have in the past, and may in the future, acquire our 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 an existing share repurchase program to increase the amount of common stock that can be repurchased to $100 million. We are not obligated to repurchase any shares under this program. On May 2, 2017 the Company announced that its Board of Directors had reaffirmed the Company's existing share repurchase program, and 1.2 million shares were repurchased during the year ended December 31, 2017. As of December 31, 2017, $60.1 million remained available under this authorization. There were no share repurchases during the years ended December 31, 2016 or 2015.

The following table provides information regarding share repurchases during the referenced periods.(1) 
(In thousands, except per share data)
 
For the Year Ended December 31, 2017
Shares repurchased (2)
 
1,198

Total cost, including brokerage fees
 
$
31,927

Average repurchase price per share (3)
 
$
26.64

(1) Shares repurchased reflect repurchases settled during the twelve months ended December 31, 2017. These amounts exclude repurchases traded but not yet settled on or before December 31, 2017.
(2) All shares repurchased have been retired and constitute authorized but unissued shares.
(3) Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on unrounded numbers.

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. Repurchases can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our Credit Facility. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and our Credit Facility.

Dividends
Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations contained in our Credit Facility and the indentures for our outstanding notes.

On May 2, 2017, the Company announced that its Board of Directors had authorized the reinstatement of the Company’s cash dividend program. The dividends declared by the Board under this program are:
Declaration date
 
Record date
 
Payment date
 
Amount per share
May 2, 2017
 
June 15, 2017
 
July 15, 2017
 
$0.05
September 6, 2017
 
September 18, 2017
 
October 15, 2017
 
0.05
December 7, 2017
 
December 28, 2017
 
January 15, 2018
 
0.05

No dividends were declared during the years ended December 31, 2016 or 2015.

Stock Incentive Plan
In May 2012, the Company's stockholders approved the 2012 Stock Incentive Plan (the "2012 Plan"), which amended and restated the Company's 2002 Stock Incentive Plan (the "2002 Plan") to (a) provide for a term ending ten years from the date of stockholder approval at the Annual Meeting, (b) increase the maximum number of shares of the Company's common stock authorized for issuance over the term of the 2012 Plan by 4 million shares from 17 million to 21 million shares, (c) permit the future grant of certain equity-based awards, including awards designed to constitute performance-based compensation under Section 162(m) of the Internal Revenue Code, and (d) make certain other changes. Under our 2012 Plan, approximately 4.4 million shares remain available for grant at December 31, 2017. The number of authorized but unissued shares of common stock under this 2012 Plan as of December 31, 2017 was approximately 9.7 million shares.


46
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Grants made under the 2012 Plan include provisions that entitle the grantee to automatic vesting acceleration in the event of a grantee’s separation from service (including as a result of retirement, death or disability), other than for cause (as defined), after reaching the defined age and years of service thresholds. These provisions result in the accelerated recognition of the stock compensation expense for those grants issued to employees who have met the stipulated thresholds.

Stock Options
Options granted under the 2012 Plan generally become exercisable ratably over a three-year period from the date of grant. Options that have been granted under the 2012 Plan had an exercise price equal to the market price of our common stock on the date of grant and will expire no later than ten years after the date of grant.

Summarized stock option plan activity is as follows:
 
Options
 
Weighted Average Option Price
 
Weighted Average Remaining Term
 
Aggregate Intrinsic Value
 
 
 
 
 
(In years)
 
(In thousands)
Outstanding at January 1, 2015
7,169,668

 
$
25.73

 
 
 
 
Granted
200,673

 
19.98

 
 
 
 
Canceled
(1,463,497
)
 
39.82

 
 
 
 
Exercised
(1,301,789
)
 
7.53

 
 
 
 
Outstanding at December 31, 2015
4,605,055

 
26.14

 
 
 
 
Granted
216,509

 
17.50

 
 
 
 
Canceled
(1,260,750
)
 
38.63

 
 
 
 
Exercised
(452,898
)
 
6.49

 
 
 
 
Outstanding at December 31, 2016
3,107,916

 
23.36

 
 
 
 
Granted
—

 
—

 
 
 
 
Canceled
(1,323,500
)
 
39.30

 
 
 
 
Exercised
(241,964
)
 
8.61

 
 
 
 
Outstanding at December 31, 2017
1,542,452

 
$
11.99

 
5.3
 
$
35,565

 
 
 
 
 
 
 
 
Exercisable at December 31, 2016
2,696,315

 
$
24.27

 
3.1
 
$
14,587

 
 
 
 
 
 
 
 
Exercisable at December 31, 2017
1,335,717

 
$
11.00

 
4.8
 
$
32,128


Share-based compensation costs related to stock option awards are calculated based on the fair value of each option grant on the date of the grant using the Black-Scholes option pricing model.


47
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The following table summarizes the information about stock options outstanding and exercisable at December 31, 2017:
 
 
Options Outstanding
 
Options Exercisable
Range of Exercise Prices
 
Number Outstanding
 
Weighted-Average Remaining Contractual Life (Years)
 
Weighted-Average Exercise Price
 
Number Exercisable
 
Weighted-Average Exercise Price
$5.22
 
25,510

 
4.9
 
$
5.22

 
25,510

 
$
5.22

6.60
 
28,000

 
0.8
 
6.60

 
28,000

 
6.60

6.70
 
196,869

 
3.9
 
6.70

 
196,869

 
6.70

7.55
 
65,000

 
1.8
 
7.55

 
65,000

 
7.55

8.34
 
294,163

 
2.8
 
8.34

 
294,163

 
8.34

9.86
 
260,882

 
5.9
 
9.86

 
260,882

 
9.86

11.57
 
229,846

 
6.2
 
11.57

 
229,846

 
11.57

17.75
 
216,509

 
8.9
 
17.75

 
72,174

 
17.75

19.98
 
200,673

 
7.4
 
19.98

 
138,273

 
19.98

33.31
 
25,000

 
0.0
 
33.31

 
25,000

 
33.31

$5.22-$33.31
 
1,542,452

 
5.3
 
$
11.99

 
1,335,717

 
$
11.00


The total intrinsic value of in-the-money options exercised during the years ended December 31, 2017, 2016 and 2015 was $3.9 million, $5.9 million, and $11.1 million, respectively. The total fair value of options vested during the years ended December 31, 2017, 2016 and 2015 was approximately $1.6 million, $2.0 million, and $1.9 million, respectively. As of December 31, 2017, there was approximately $0.2 million of total unrecognized share-based compensation costs related to unvested stock options, which is expected to be recognized over approximately 1.4 years, the weighted-average remaining requisite service period.

Restricted Stock Units
Our 2012 Plan provides for the grant of Restricted Stock Units ("RSUs"). An RSU is an award that may be earned in whole, or in part, upon the passage of time, and that may be settled for cash, shares, other securities or a combination thereof. The RSUs do not contain voting rights and are not entitled to dividends. The RSUs are subject to the terms and conditions contained in the applicable award agreement and the 2012 Plan. Share-based compensation costs related to RSU awards are calculated based on the market price on the date of the grant.

We annually award RSUs to certain members of our Board of Directors. Each RSU is to be paid in shares of common stock upon the member’s cessation of service to the Company. These RSUs were issued for past service; therefore, they are expensed on the date of issuance.

We also grant RSUs to members of management of the Company, which represents a contingent right to receive one share of our common stock upon vesting. An RSU generally vests on the third anniversary of its issuance and the share-based compensation expense is amortized to expense over the requisite service period.


48
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Summarized RSU activity is as follows:
 
Restricted Stock Units
 
 Weighted Average Grant Date Fair Value
Outstanding at January 1, 2015
2,534,496

 
 
Granted
541,016

 
$19.05
Canceled
(40,800
)
 
 
Awarded
(713,886
)
 
 
Outstanding at December 31, 2015
2,320,826

 
 
Granted
542,220

 
$18.06
Canceled
(30,400
)
 
 
Awarded
(871,528
)
 
 
Outstanding at December 31, 2016
1,961,118

 
 
Granted
442,879

 
$27.40
Canceled
(38,964
)
 
 
Awarded
(727,821
)
 
 
Outstanding at December 31, 2017
1,637,212

 
 

As of December 31, 2017, there was approximately $12.1 million of total unrecognized share-based compensation costs related to unvested RSUs, which is expected to be recognized over approximately 2.5 years.

Performance Stock Units
Our 2012 Plan provides for the grant of Performance Stock Units ("PSUs"). A PSU is an award which may be earned in whole, or in part, upon the passage of time, and the attainment of performance criteria, and which may be settled for cash, shares, other securities or a combination thereof. The PSUs do not contain voting rights and are not entitled to dividends. The PSUs are subject to the terms and conditions contained in the applicable award agreement and our 2012 Plan. We annually award PSUs to certain members of management.

Each PSU represents a contingent right to receive a share of Boyd Gaming Corporation common stock; however, the actual number of common shares awarded is dependent upon the occurrence of: (i) a requisite service period; and (ii) an evaluation of specific performance conditions. The performance conditions are based on Company metrics for net revenue growth, EBITDA growth and customer service scores, all of which are determined on a comprehensive annual three-year growth rate. Based upon actual and combined achievement, the number of shares awarded could range from zero, if no conditions are met, a 50% payout if only threshold performance is achieved, a payout of 100% for target performance, or a payout of up to 200% of the original award for achievement of maximum performance. Each condition weighs equally and separately in determining the payout, and based upon management's estimates at the service inception date, the Company is expected to meet the target for each performance condition. Therefore, the related compensation cost of these PSUs assumes all units granted will be awarded. Share-based compensation costs related to PSU awards are calculated based on the market price on the date of the grant.

These PSUs will vest three years from the service inception date, during which time achievement of the related performance conditions is periodically evaluated, and the number of shares expected to be awarded, and resulting compensation expense, is adjusted accordingly.

Performance Shares Vesting
The PSU grants awarded in fourth quarter 2013 and 2012 vested during first quarter 2017 and 2016, respectively. Common shares were issued based on the determination by the Compensation Committee of the Board of Directors of our actual achievement of net revenue growth, EBITDA growth and customer service scores for the three-year performance period of each grant. As provided under the provisions of our stock incentive plan, certain of the participants elected to surrender a portion of the shares to be received to pay the withholding and other payroll taxes payable on the compensation resulting from the vesting of the PSUs.
The PSU grant awarded in November 2013 resulted in a total of 268,429 shares being issued during first quarter 2017, representing approximately 0.80 shares per PSU. Of the 268,429 shares issued, a total of 94,776 were surrendered by the participants for payroll

49
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

taxes, resulting in a net issuance of 173,653 shares due to the vesting of the 2013 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2016; therefore, the vesting of the PSUs did not impact compensation costs in our 2017 consolidated statement of operations.

The PSU grant awarded in December 2012 resulted in a total of 213,365 shares being issued during first quarter 2016, representing approximately 0.59 shares per PSU. Of the 213,365 shares issued, a total of 54,338 were surrendered by the participants for payroll taxes, resulting in a net issuance of 159,027 shares due to the vesting of the 2012 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2015; therefore, the vesting of the PSUs did not impact compensation costs in our 2016 consolidated statement of operations.

Summarized PSU activity is as follows:
 
Performance Stock Units
 
 Weighted Average Grant Date Fair Value
Outstanding at January 1, 2015
1,411,640

 
 
Granted
240,156

 
$16.75
Performance Adjustment
264,306

 
 
Canceled
(2,677
)
 
 
Awarded
(663,945
)
 
 
Outstanding at December 31, 2015
1,249,480

 
 
Granted
241,235

 
$17.75
Performance Adjustment
(148,272
)
 
 
Canceled
—

 
 
Awarded
(213,365
)
 
 
Outstanding at December 31, 2016
1,129,078

 
 
Granted
275,305

 
$28.94
Performance Adjustment
(73,407
)
 
 
Canceled
—

 
 
Awarded
(268,429
)
 
 
Outstanding at December 31, 2017
1,062,547

 
 

As of December 31, 2017, there was approximately $6.9 million of total unrecognized share-based compensation costs related to unvested PSUs, which is expected to be recognized over approximately 2.7 years. Based on the current estimates of performance compared to the targets set for the respective PSU grants, the Company estimates that approximately 1.4 million shares will be issued to settle the PSUs outstanding at December 31, 2017.

Career Shares
Our Career Shares Program is a stock incentive award program for certain executive officers to provide for additional capital accumulation opportunities for retirement. The program incentivizes and rewards executives for their period of service. Our Career Shares Program was adopted in December 2006, and modified in October 2010, as part of the overall update of our compensation programs. The Career Shares Program rewards eligible executives with annual grants of Boyd Gaming Corporation stock units, to be paid out at retirement. The payout at retirement is dependent upon the executive's age at such retirement and the number of years of service with the Company. Executives must be at least 55 years old and have at least 10 years of service to receive any payout at retirement. Career Shares do not contain voting rights and are not entitled to dividends. Career Shares are subject to the terms and conditions contained in the applicable award agreement and our 2012 Plan. The Career Share awards are tranched by specific term, in the following periods: 10 years, 15 years and 20 years of service. These grants vest over the remaining period of service required to fulfill the requisite years in each of these tranches, and compensation expense is recorded in accordance with the specific vesting provisions. Share-based compensation costs related to Career Shares awards are calculated based on the market price on the date of the grant.


50
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Summarized Career Shares activity is as follows:
 
Career Shares
 
Weighted Average Grant Date Fair Value
Outstanding at January 1, 2015
896,585

 
 
Granted
103,018

 
$12.51
Canceled
—

 
 
Awarded
(31,028
)
 
 
Outstanding at December 31, 2015
968,575

 
 
Granted
73,064

 
$19.01
Canceled
—

 
 
Awarded
—

 
 
Outstanding at December 31, 2016
1,041,639

 
 
Granted
66,000

 
$20.41
Canceled
(11,236
)
 
 
Awarded
(82,944
)
 
 
Outstanding at December 31, 2017
1,013,459

 
 

As of December 31, 2017, there was approximately $1.1 million of total unrecognized share-based compensation costs related to unvested Career Shares.

Share-Based Compensation
We account for share-based awards exchanged for employee services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's requisite service period.

The following table summarizes our share-based compensation costs by award type:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Stock Options
$
1,193

 
$
1,974

 
$
2,821

Restricted Stock Units
7,463

 
8,883

 
9,909

Performance Stock Units
7,381

 
3,353

 
5,135

Career Shares
1,376

 
1,308

 
1,399

Total share-based compensation costs
$
17,413

 
$
15,518

 
$
19,264


The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our consolidated statements of operations:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Gaming
$
363

 
$
428

 
$
393

Food and beverage
69

 
82

 
75

Room
33

 
39

 
36

Selling, general and administrative
1,846

 
2,176

 
1,996

Corporate expense
15,102

 
12,793

 
16,764

Total share-based compensation expense
$
17,413

 
$
15,518

 
$
19,264



51
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

NOTE 11.     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 that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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

Balances Measured at Fair Value
The following tables show the fair values of certain of our financial instruments:
 
December 31, 2017
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
203,104

 
$
203,104

 
$
—

 
$
—

Restricted cash
24,175

 
24,175

 
—

 
—

Investment available for sale
17,752

 
—

 
—

 
17,752

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent payments
$
2,887

 
$
—

 
$
—

 
$
2,887


 
December 31, 2016
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
193,862

 
$
193,862

 
$
—

 
$
—

Restricted cash
16,488

 
16,488

 
—

 
—

Investment available for sale
17,259

 
—

 
—

 
17,259

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent payments
$
3,038

 
$
—

 
$
—

 
$
3,038


Cash and Cash Equivalents and Restricted Cash
The fair value of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, is based on statements received from our banks at December 31, 2017 and 2016.


52
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Investment Available for Sale
We have an investment in a single municipal bond issuance of $20.5 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale with a maturity date of June 1, 2037. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities, and degrees of risk and a discounted cash flows analysis as of December 31, 2017 and 2016. The fair value of the investment is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation as of December 31, 2017 and 2016 is a discount rate of 9.6% and 10.3%, respectively. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income (loss) in the stockholders' equity section of the consolidated balance sheets. At December 31, 2017 and 2016, $0.5 million and $0.4 million, respectively, of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at December 31, 2017 and 2016, $17.3 million and $16.8 million, respectively, is included in investment on the consolidated balance sheets. The discount associated with this investment of $2.9 million and $3.1 million as of December 31, 2017 and 2016, respectively, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the consolidated statements of operations.

Contingent Payments
In connection with securing the Kansas Management Contract, Kansas Star agreed to pay a former casino project promoter 1% of Kansas Star’s EBITDA each month for a period of ten years commencing December 20, 2011. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at December 31, 2017 and 2016 is a discount rate of 9.2% and 18.5%, respectively. At December 31, 2017 and 2016, there was a current liability of $0.8 million and $0.9 million, respectively, related to this agreement, which was recorded in accrued liabilities on the respective consolidated balance sheets, and long-term obligations of $2.1 million and $2.2 million, respectively, which were included in other liabilities on the respective consolidated balance sheets.

The following tables summarize the changes in fair value of the Company’s Level 3 assets and liabilities:
 
December 31, 2017
 
Assets
 
Liabilities
(In thousands)
Investment
Available for
Sale
 
Contingent
Payments
Balance at January 1, 2017
$
17,259

 
$
(3,038
)
Total gains (losses) (realized or unrealized):
 
 
 
Included in interest income (expense)
138

 
(335
)
Included in other comprehensive income (loss)
795

 
—

Included in other items, net
—

 
(333
)
Purchases, sales, issuances and settlements:
 
 
 
Settlements
(440
)
 
819

Balance at December 31, 2017
$
17,752

 
$
(2,887
)

53
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

 
December 31, 2016
 
Assets
 
Liabilities
(In thousands)
Investment
Available for
Sale
 
Contingent
Payments
Balance at January 1, 2016
$
17,839

 
$
(3,632
)
Total gains (losses) (realized or unrealized):
 
 
 
Included in interest income (expense)
130

 
(600
)
Included in other comprehensive income (loss)
(299
)
 
—

Included in other items, net
—

 
346

Purchases, sales, issuances and settlements:
 
 
 
Settlements
(411
)
 
848

Balance at December 31, 2016
$
17,259

 
$
(3,038
)

The fair value of intangible assets, classified in the fair value hierarchy as Level 3, is utilized in performing its impairment analyses (see Note 4, Intangible Assets).

Balances Disclosed at Fair Value
The following tables provide the fair value measurement information about our obligation under minimum assessment agreements and other financial instruments:
 
December 31, 2017
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
31,729

 
$
25,602

 
$
26,999

 
Level 3

 
December 31, 2016
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
33,456

 
$
26,660

 
$
27,054

 
Level 3
Other financial instruments
100

 
97

 
97

 
Level 3

The following tables provide the fair value measurement information about our long-term debt:
 
December 31, 2017
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Credit Facility
$
1,621,054

 
$
1,595,703

 
$
1,625,178

 
Level 2
6.875% Senior Notes due 2023
750,000

 
740,545

 
798,750

 
Level 1
6.375% Senior Notes due 2026
750,000

 
739,128

 
810,000

 
Level 1
Other
504

 
504

 
504

 
Level 3
Total debt
$
3,121,558

 
$
3,075,880

 
$
3,234,432

 
 


54
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

 
December 31, 2016
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Credit Facility
$
1,782,538

 
$
1,752,147

 
$
1,791,853

 
Level 2
6.875% Senior Notes due 2023
750,000

 
738,791

 
806,250

 
Level 1
6.375% Senior Notes due 2026
750,000

 
737,926

 
804,375

 
Level 1
Other
591

 
591

 
591

 
Level 3
Total debt
$
3,283,129

 
$
3,229,455

 
$
3,403,069

 
 

The estimated fair value of the Credit Facility is based on a relative value analysis performed on or about December 31, 2017 and December 31, 2016. The estimated fair values of our Senior Notes are based on quoted market prices as of December 31, 2017 and December 31, 2016. The other debt is a fixed-rate debt that is payable in 32 semi-annual installments, beginning in 2008. It is not traded and does not have an observable market input; therefore, we have estimated its fair value to be equal to the carrying value.

There were no transfers between Level 1, Level 2 and Level 3 measurements during the years ended December 31, 2017 and 2016.

NOTE 12.    EMPLOYEE BENEFIT PLANS
We contribute to multiemployer pension defined benefit plans under terms of collective-bargaining agreements that cover our union-represented employees. Contributions, based on wages paid to covered employees, totaled approximately $1.6 million, $1.5 million and $1.4 million for the years ended December 31, 2017, 2016 and 2015, respectively. These aggregate contributions were not individually significant to any of the respective plans. Our share of the unfunded vested liability related to multi-employer plans, if any, is not determinable and our participation is not individually significant on an individual multiemployer plan basis.

We have retirement savings plans under Section 401(k) of the Internal Revenue Code covering our non-union employees. The plans allow employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plans. We expensed our voluntary contributions to the 401(k) profit-sharing plans and trusts of $4.4 million, $3.9 million and $3.3 million for the years ended December 31, 2017, 2016 and 2015, respectively.

NOTE 13.    SEGMENT INFORMATION
We have aggregated certain of our properties in order to present three Reportable Segments: (i) Las Vegas Locals; (ii) Downtown Las Vegas; and (iii) Midwest and South. The table in Note 1, Summary of Significant Accounting Policies, lists the classification of each of our properties.

Results of Operations - Total Reportable Segment Revenues and Adjusted EBITDA
We evaluate each of our property's profitability based upon Property Adjusted EBITDA, which represents each property's earnings before interest expense, income taxes, depreciation and amortization, deferred rent, share-based compensation expense, project development, preopening and writedowns expenses, impairments of assets, other operating items, net, and gain or loss on early retirements of debt, as applicable. Total Reportable Segment Adjusted EBITDA is the aggregate sum of the Property Adjusted EBITDA for each of the properties included in our Las Vegas Locals, Downtown Las Vegas, and Midwest and South segments. Results for Downtown Las Vegas include the results of our Hawaii-based travel agency and captive insurance company.

We reclassify the reporting of corporate expense on the accompanying table in order to exclude it from our subtotal for Total Reportable Segment Adjusted EBITDA. Furthermore, corporate expense excludes its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations.


55
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

The following tables set forth, for the periods indicated, departmental revenues for our Reportable Segments:
 
Year Ended December 31, 2017
(In thousands)
Gaming Revenue
 
Food & Beverage Revenue
 
Room Revenue
 
Other Revenue
 
Total Revenue
Revenues
 
 
 
 
 
 
 
 
 
Las Vegas Locals
$
563,785

 
$
154,451

 
$
98,406

 
$
51,735

 
$
868,377

Downtown Las Vegas
133,072

 
54,451

 
24,623

 
32,295

 
244,441

Midwest and South
1,043,411

 
137,477

 
63,766

 
43,347

 
1,288,001

Total Revenues
$
1,740,268

 
$
346,379

 
$
186,795

 
$
127,377

 
$
2,400,819


 
Year Ended December 31, 2016
(In thousands)
Gaming Revenue
 
Food & Beverage Revenue
 
Room Revenue
 
Other Revenue
 
Total Revenue
Revenues
 
 
 
 
 
 
 
 
 
Las Vegas Locals
$
422,375

 
$
108,541

 
$
82,566

 
$
41,533

 
$
655,015

Downtown Las Vegas
133,165

 
52,849

 
20,209

 
30,347

 
236,570

Midwest and South
1,054,853

 
141,315

 
66,616

 
44,890

 
1,307,674

Total Revenues
$
1,610,393

 
$
302,705

 
$
169,391

 
$
116,770

 
$
2,199,259


 
Year Ended December 31, 2015
(In thousands)
Gaming Revenue
 
Food & Beverage Revenue
 
Room Revenue
 
Other Revenue
 
Total Revenue
Revenues
 
 
 
 
 
 
 
 
 
Las Vegas Locals
$
395,108

 
$
103,353

 
$
75,282

 
$
42,827

 
$
616,570

Downtown Las Vegas
131,871

 
52,105

 
19,856

 
29,445

 
233,277

Midwest and South
1,104,198

 
148,328

 
67,110

 
45,348

 
1,364,984

Total Revenues
$
1,631,177

 
$
303,786

 
$
162,248

 
$
117,620

 
$
2,214,831


56
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


The following table reconciles, for the periods indicated, Total Reportable Segment Adjusted EBITDA to operating income, as reported in our accompanying consolidated statements of operations:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Adjusted EBITDA
 
 
 
 
 
Las Vegas Locals
$
249,906

 
$
176,066

 
$
157,269

Downtown Las Vegas
54,613

 
52,341

 
49,214

Midwest and South
364,458

 
367,579

 
381,467

Total Reportable Segment Adjusted EBITDA
668,977

 
595,986

 
587,950

Corporate expense
(73,046
)
 
(59,875
)
 
(60,177
)
Adjusted EBITDA
595,931

 
536,111

 
527,773

 
 
 
 
 
 
Other operating costs and expenses
 
 
 
 
 
Deferred rent
1,267

 
3,266

 
3,428

Depreciation and amortization
217,522

 
196,226

 
207,118

Project development, preopening and writedowns
14,454

 
22,107

 
6,907

Share-based compensation expense
17,413

 
15,518

 
19,264

Impairments of assets
(426
)
 
38,302

 
18,565

Other operating charges, net
1,900

 
284

 
907

Total other operating costs and expenses
252,130

 
275,703

 
256,189

Operating income
$
343,801

 
$
260,408

 
$
271,584


Total Assets
The Company's total assets, by Reportable Segment, consisted of the following amounts:
 
December 31,
(In thousands)
2017
 
2016
Assets
 
 
 
Las Vegas Locals
$
1,792,119

 
$
1,785,858

Downtown Las Vegas
170,574

 
157,319

Midwest and South
2,496,957

 
2,556,307

Total Reportable Segment assets
4,459,650

 
4,499,484

Corporate
226,280

 
171,267

Total assets
$
4,685,930

 
$
4,670,751


57
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________


Capital Expenditures
The Company's capital expenditures by Reportable Segment, consisted of the following:
 
Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Capital Expenditures:
 
 
 
 
 
Las Vegas Locals
$
59,382

 
$
42,069

 
$
41,772

Downtown Las Vegas
21,705

 
28,431

 
13,000

Midwest and South
37,657

 
73,255

 
60,887

Total Reportable Segment Capital Expenditures
118,744

 
143,755

 
115,659

Corporate
71,673

 
16,672

 
12,646

Total Capital Expenditures
190,417

 
160,427


128,305

Change in Accrued Property Additions
47

 
(69
)
 
2,865

Cash-Based Capital Expenditures
$
190,464

 
$
160,358

 
$
131,170


The Company utilizes the Corporate entities to centralize the development of major renovation and other capital development projects that are included as construction in progress. After the project is complete, the corporate entities transfer the projects to the segment subsidiaries.

NOTE 14.     SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents selected quarterly financial information:
 
Year Ended December 31, 2017
(In thousands, except per share data)
First
 
Second
 
Third
 
Fourth
 
Year
Summary Operating Results:
 
 
 
 
 
 
 
 
 
Total revenues
$
610,065

 
$
604,124

 
$
591,542

 
$
595,088

 
$
2,400,819

Operating income
94,830

 
89,554

 
78,940

 
80,477

 
343,801

 
 
 
 
 
 
 
 
 
 
Income from continuing operations, net of tax
$
35,076

 
$
27,692

 
$
23,157

 
$
82,073

 
$
167,998

Income from discontinued operations, net of tax
375

 
21,017

 
—

 
—

 
21,392

Net income
$
35,451

 
$
48,709

 
$
23,157

 
$
82,073

 
$
189,390

 
 
 
 
 
 
 
 
 
 
Basic net income per common share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.31

 
$
0.24

 
$
0.20

 
$
0.72

 
$
1.46

Discontinued operations
—

 
0.18

 
—

 
—

 
0.19

Basic net income per common share
$
0.31

 
$
0.42

 
$
0.20

 
$
0.72

 
$
1.65

Diluted net income per common share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.31

 
$
0.24

 
$
0.20

 
$
0.71

 
$
1.45

Discontinued operations
—

 
0.18

 
—

 
—

 
0.19

Diluted net income per common share
$
0.31

 
$
0.42

 
$
0.20

 
$
0.71

 
$
1.64


58
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

 
Year Ended December 31, 2016
(In thousands, except per share data)
First
 
Second
 
Third
 
Fourth
 
Year
Summary Operating Results:
 
 
 
 
 
 
 
 
 
Total revenues
$
556,653

 
$
548,784

 
$
535,173

 
$
558,649

 
$
2,199,259

Operating income
82,362

 
80,439

 
67,881

 
29,726

 
260,408

 
 
 
 
 
 
 
 
 
 
Income from continuing operations, net of tax
$
21,666

 
$
11,257

 
$
164,197

 
$
10,581

 
$
207,701

Income from discontinued operations, net of tax
11,630

 
18,715

 
180,707

 
1,478

 
212,530

Net income
$
33,296

 
$
29,972

 
$
344,904

 
$
12,059

 
$
420,231

 
 
 
 
 
 
 
 
 
 
Basic net income per common share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.19

 
$
0.10

 
$
1.43

 
$
0.09

 
$
1.81

Discontinued operations
0.10

 
0.16

 
1.58

 
0.01

 
1.86

Basic net income per common share
$
0.29

 
$
0.26

 
$
3.01

 
$
0.10

 
$
3.67

Diluted net income per common share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.19

 
$
0.10

 
$
1.43

 
$
0.09

 
$
1.80

Discontinued operations
0.10

 
0.16

 
1.57

 
0.01

 
1.85

Diluted net income per common share
$
0.29

 
$
0.26

 
$
3.00

 
$
0.10

 
$
3.65


NOTE 15.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of our 6.875% Notes, our 6.375% Notes and our 6.000% Notes (collectively, the "Notes") is presented below. The 6.875% Notes and 6.375% Notes 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 non-guarantors primarily represent our special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly owned subsidiaries.

On June 25, 2018, the Company issued $700.0 million aggregate principal amount of 6.000% senior notes due 2026 (the "6.000% Notes"). The 6.000% Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by certain of our current and future domestic restricted subsidiaries. With the exception of one subsidiary, the guarantors of the 6.000% Notes are the same as for our 6.375% Notes and 6.875% Notes. The non-guarantors primarily represent our special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly owned subsidiaries.

On March 7, 2017, Aliante, Cannery and Eastside Cannery became guarantors of the 6.875% Notes, the 6.375% Notes and the Credit Facility.

The tables below present the condensed consolidating balance sheets as of December 31, 2017, and 2016, the condensed consolidating statements of operations for the years ended December 31, 2017, 2016 and 2015 and the condensed consolidating statements of cash flows for the years ended December 31, 2017, 2016 and 2015. We have reclassified certain prior year amounts in the current year presentation to reflect the designation of the additional Restricted Subsidiaries listed above as subsidiary guarantors and the adoption of the Revenue Standard and ASU 2016-18.


59
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Condensed Consolidating Balance Sheets
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
347

 
$
199,574

 
$
—

 
$
3,183

 
$
—

 
$
—

 
$
203,104

Restricted cash
—

 
14,389

 
—

 
9,786

 
—

 
—

 
24,175

Other current assets
78,226

 
20,687

 
234

 
2,782

 
—

 
(545
)
 
101,384

Property and equipment, net
88,464

 
2,424,361

 
—

 
26,961

 
—

 
—

 
2,539,786

Investments in subsidiaries
4,913,592

 
—

 
—

 
18,097

 
—

 
(4,931,689
)
 
—

Intercompany receivable
—

 
1,560,841

 
373,718

 
—

 
—

 
(1,934,559
)
 
—

Other assets, net
14,725

 
33,369

 
—

 
38,217

 
—

 
—

 
86,311

Intangible assets, net
—

 
818,887

 
—

 
24,059

 
—

 
—

 
842,946

Goodwill, net
—

 
887,442

 
—

 
782

 
—

 
—

 
888,224

Total assets
$
5,095,354

 
$
5,959,550

 
$
373,952

 
$
123,867

 
$
—

 
$
(6,866,793
)
 
$
4,685,930

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
$
23,895

 
$
86

 
$
—

 
$
—

 
$
—

 
$
—

 
$
23,981

Other current liabilities
130,030

 
212,146

 
—

 
19,578

 
—

 
(264
)
 
361,490

Accumulated losses of subsidiaries in excess of investment
—

 
73,130

 
—

 
—

 
—

 
(73,130
)
 
—

Intercompany payable
888,444

 
—

 
—

 
1,046,114

 
—

 
(1,934,558
)
 
—

Long-term debt, net of current maturities and debt issuance costs
3,051,481

 
418

 
—

 
—

 
—

 
—

 
3,051,899

Other long-term liabilities
(95,723
)
 
256,584

 
900

 
(10,428
)
 
—

 
—

 
151,333

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stockholders' equity (deficit)
1,097,227

 
5,417,186

 
373,052

 
(931,397
)
 
—

 
(4,858,841
)
 
1,097,227

Total liabilities and stockholders' equity
$
5,095,354

 
$
5,959,550

 
$
373,952

 
$
123,867

 
$
—

 
$
(6,866,793
)
 
$
4,685,930


*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.


60
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Condensed Consolidating Balance Sheets - continued
 
December 31, 2016
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,212

 
$
189,364

 
$
—

 
$
3,286

 
$
—

 
$
—

 
$
193,862

Restricted cash
—

 
10,246

 
—

 
6,242

 
—

 
—

 
16,488

Other current assets
78,915

 
14,647

 
1,822

 
2,666

 
—

 
(453
)
 
97,597

Property and equipment, net
73,180

 
2,503,127

 
—

 
28,862

 
—

 
—

 
2,605,169

Investments in subsidiaries
4,501,951

 
139,465

 
—

 
—

 
—

 
(4,641,416
)
 
—

Intercompany receivable
—

 
1,140,125

 
350,892

 
—

 
—

 
(1,491,017
)
 
—

Other assets, net
13,598

 
31,899

 
—

 
3,708

 
—

 
—

 
49,205

Intangible assets, net
—

 
857,894

 
—

 
24,060

 
—

 
—

 
881,954

Goodwill, net
—

 
825,694

 
—

 
782

 
—

 
—

 
826,476

Total assets
$
4,668,856

 
$
5,712,461

 
$
352,714

 
$
69,606

 
$
—

 
$
(6,132,886
)
 
$
4,670,751

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
$
30,250

 
$
86

 
$
—

 
$
—

 
$
—

 
$
—

 
$
30,336

Other current liabilities
93,762

 
202,840

 
—

 
46,467

 
—

 
(1,429
)
 
341,640

Accumulated losses of subsidiaries in excess of investment
—

 
—

 
—

 
8,257

 
—

 
(8,257
)
 
—

Intercompany payable
521,002

 
—

 
—

 
968,811

 
254

 
(1,490,067
)
 
—

Long-term debt, net of current maturities and debt issuance costs
3,198,613

 
506

 
—

 
—

 
—

 
—

 
3,199,119

Other long-term liabilities
(104,901
)
 
295,206

 
900

 
(21,729
)
 
—

 
—

 
169,476

 
 
 
 
 
 
 
 
 
 
 
 
 


Boyd Gaming Corporation stockholders' equity (deficit)
930,130

 
5,213,823

 
351,814

 
(932,200
)
 
(254
)
 
(4,633,183
)
 
930,130

Noncontrolling interest
—

 
—

 
—

 
—

 
—

 
50

 
50

Total stockholders' equity (deficit)
930,130

 
5,213,823

 
351,814

 
(932,200
)
 
(254
)
 
(4,633,133
)
 
930,180

Total liabilities and stockholders' equity
$
4,668,856

 
$
5,712,461

 
$
352,714

 
$
69,606

 
$
—

 
$
(6,132,886
)
 
$
4,670,751


*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.



61
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Condensed Consolidating Statements of Operations
 
Year Ended December 31, 2017
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Total revenues
$
73,292

 
$
2,377,514

 
$
—

 
$
42,670

 
$
—

 
$
(92,657
)
 
$
2,400,819

Operating costs and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
—

 
1,225,765

 
—

 
38,156

 
—

 
—

 
1,263,921

Selling, general and administrative
44

 
354,423

 
—

 
7,612

 
—

 
(42
)
 
362,037

Maintenance and utilities
—

 
108,092

 
—

 
1,370

 
—

 
—

 
109,462

Depreciation and amortization
12,041

 
201,401

 
—

 
4,080

 
—

 
—

 
217,522

Corporate expense
85,362

 
1,140

 
—

 
1,646

 
—

 
—

 
88,148

Project development, preopening and writedowns
7,806

 
2,758

 
154

 
3,736

 
—

 
—

 
14,454

Impairments of assets
600

 
1

 
—

 
(1,027
)
 
—

 
—

 
(426
)
Other operating items, net
725

 
1,175

 
—

 
—

 
—

 
—

 
1,900

Intercompany expenses
1,204

 
91,411

 
—

 
—

 
—

 
(92,615
)
 
—

Total operating costs and expenses
107,782

 
1,986,166

 
154

 
55,573

 
—

 
(92,657
)
 
2,057,018

Equity in earnings (losses) of subsidiaries
330,711

 
(1,374
)
 
—

 
—

 
—

 
(329,337
)
 
—

Operating income (loss)
296,221

 
389,974

 
(154
)
 
(12,903
)
 
—

 
(329,337
)
 
343,801

Other expense (income)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
169,990

 
1,275

 
—

 
25

 
—

 
—

 
171,290

Loss on early extinguishments and modifications of debt
1,582

 
—

 
—

 
—

 
—

 
—

 
1,582

Other, net
(16
)
 
(98
)
 
—

 
(70
)
 
—

 
—

 
(184
)
Total other expense, net
171,556

 
1,177

 
—

 
(45
)
 
—

 
—

 
172,688

Income (loss) from continuing operations before income taxes
124,665

 
388,797

 
(154
)
 
(12,858
)
 
—

 
(329,337
)
 
171,113

Income tax benefit (provision)
64,725

 
(73,426
)
 
—

 
5,586

 
—

 
—

 
(3,115
)
Income (loss) from continuing operations, net of tax
189,390

 
315,371

 
(154
)
 
(7,272
)
 
—

 
(329,337
)
 
167,998

Income from discontinued operations, net of tax
—

 
—

 
21,392

 
—

 
—

 
—

 
21,392

Net income (loss)
$
189,390

 
$
315,371

 
$
21,238

 
$
(7,272
)
 
$
—

 
$
(329,337
)
 
$
189,390

Comprehensive income (loss)
$
189,823

 
$
315,804

 
$
21,238

 
$
(7,272
)
 
$
—

 
$
(329,770
)
 
$
189,823


*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.




62
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Condensed Consolidating Statements of Operations - continued
 
Year Ended December 31, 2016
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Total revenues
$
121,939

 
$
2,176,788

 
$
—

 
$
43,867

 
$
—

 
$
(143,335
)
 
$
2,199,259

Operating costs and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
1,200

 
1,148,170

 
—

 
37,615

 
—

 
—

 
1,186,985

Selling, general and administrative
49,938

 
265,735

 
—

 
6,584

 
—

 
2

 
322,259

Maintenance and utilities
—

 
98,741

 
—

 
1,279

 
—

 
—

 
100,020

Depreciation and amortization
8,767

 
183,524

 
7

 
3,928

 
—

 
—

 
196,226

Corporate expense
66,703

 
1,621

 
117

 
4,227

 
—

 
—

 
72,668

Project development, preopening and writedowns
18,079

 
(3,933
)
 
641

 
7,320

 
—

 
—

 
22,107

Impairments of assets
1,440

 
36,862

 
—

 
—

 
—

 
—

 
38,302

Other operating items, net
181

 
103

 
—

 
—

 
—

 
—

 
284

Intercompany expenses
1,205

 
140,291

 
380

 
1,461

 
—

 
(143,337
)
 
—

Total operating costs and expenses
147,513

 
1,871,114

 
1,145

 
62,414

 
—

 
(143,335
)
 
1,938,851

Equity in earnings (losses) of subsidiaries
445,130

 
(2,039
)
 
—

 
—

 
—

 
(443,091
)
 
—

Operating income (loss)
419,556

 
303,635

 
(1,145
)
 
(18,547
)
 
—

 
(443,091
)
 
260,408

Other expense (income)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
157,923

 
46,357

 
5,426

 
25

 
—

 
—

 
209,731

Loss on early extinguishments of debt
28,356

 
14,008

 
—

 
—

 
—

 
—

 
42,364

Other, net
1

 
617

 
—

 
(73
)
 
—

 
—

 
545

Total other expense (income), net
186,280

 
60,982

 
5,426

 
(48
)
 
—

 
—

 
252,640

Income (loss) from continuing operations before income taxes
233,276

 
242,653

 
(6,571
)
 
(18,499
)
 
—

 
(443,091
)
 
7,768

Income tax benefit
186,955

 
10,935

 
1,917

 
126

 
—

 
—

 
199,933

Income (loss) from continuing operations, net of tax
420,231

 
253,588

 
(4,654
)
 
(18,373
)
 
—

 
(443,091
)
 
207,701

Income (loss) from discontinued operations, net of tax
—

 
(899
)
 
213,429

 
—

 
—

 
—

 
212,530

Net income (loss)
$
420,231

 
$
252,689

 
$
208,775

 
$
(18,373
)
 
$
—

 
$
(443,091
)
 
$
420,231

Comprehensive income (loss)
$
419,932

 
$
252,390

 
$
208,775

 
$
(18,373
)
 
$
—

 
$
(442,792
)
 
$
419,932


*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.





63
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Consolidating Statements of Operations - continued
 
Year Ended December 31, 2015
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Total revenues
$
121,541

 
$
2,194,440

 
$
—

 
$
42,459

 
$
—

 
$
(143,609
)
 
$
2,214,831

Operating costs and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
1,800

 
1,165,834

 
—

 
37,955

 
—

 
—

 
1,205,589

Selling, general and administrative
48,173

 
267,913

 
—

 
6,604

 
—

 
(18
)
 
322,672

Maintenance and utilities
—

 
103,086

 
—

 
1,462

 
—

 
—

 
104,548

Depreciation and amortization
6,179

 
196,852

 
13

 
4,074

 
—

 
—

 
207,118

Corporate expense
71,700

 
1,581

 
200

 
3,460

 
—

 
—

 
76,941

Project development, preopening and writedowns
884

 
2,351

 
—

 
3,596

 
76

 
—

 
6,907

Impairments of assets
—

 
17,500

 
—

 
1,065

 
—

 
—

 
18,565

Other operating items, net
599

 
308

 
—

 
—

 
—

 
—

 
907

Intercompany expenses
1,204

 
140,321

 
650

 
1,416

 
—

 
(143,591
)
 
—

Total operating costs and expenses
130,539

 
1,895,746

 
863

 
59,632

 
76

 
(143,609
)
 
1,943,247

Equity in earnings (losses) of subsidiaries
190,943

 
(2,204
)
 
—

 
(76
)
 
—

 
(188,663
)
 
—

Operating income (loss)
181,945

 
296,490

 
(863
)
 
(17,249
)
 
(76
)
 
(188,663
)
 
271,584

Other expense
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
125,890

 
85,957

 
10,861

 
24

 
—

 
—

 
222,732

Loss on early extinguishments of debt
30,829

 
9,904

 
—

 
—

 
—

 
—

 
40,733

Other, net
396

 
2,959

 
—

 
321

 
—

 
—

 
3,676

Total other expense, net
157,115

 
98,820

 
10,861

 
345

 
—

 
—

 
267,141

Income (loss) from continuing operations before income taxes
24,830

 
197,670

 
(11,724
)
 
(17,594
)
 
(76
)
 
(188,663
)
 
4,443

Income tax benefit (provision)
22,777

 
(11,345
)
 
(4,753
)
 
(54
)
 
—

 
—

 
6,625

Income (loss) from continuing operations, net of tax
47,607

 
186,325

 
(16,477
)
 
(17,648
)
 
(76
)
 
(188,663
)
 
11,068

Income from discontinued operations, net of tax
—

 
540

 
35,999

 
—

 
—

 
—

 
36,539

Net income (loss)
$
47,607

 
$
186,865

 
$
19,522

 
$
(17,648
)
 
$
(76
)
 
$
(188,663
)
 
$
47,607

Comprehensive income (loss)
$
47,344

 
$
186,602

 
$
19,522

 
$
(17,648
)
 
$
(76
)
 
$
(188,400
)
 
$
47,344


*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.



64
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Condensed Consolidating Statements of Cash Flows
 
Year Ended December 31, 2017
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash from operating activities
$
(82,632
)
 
$
532,515

 
$
(12,907
)
 
$
(15,628
)
 
$
254

 
$
949

 
$
422,551

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
(102,277
)
 
(87,590
)
 
—

 
(597
)
 
—

 
—

 
(190,464
)
Cash paid for acquisitions, net of cash received
(1,153
)
 
—

 
—

 
—

 
—

 
—

 
(1,153
)
Net activity with affiliates
—

 
(420,716
)
 
(22,826
)
 
—

 
—

 
443,542

 
—

Distributions from subsidiary
10,867

 
—

 
—

 
—

 
—

 
(10,867
)
 
—

Advances pursuant to development agreement
—

 
—

 
—

 
(35,108
)
 
—

 
—

 
(35,108
)
Other investing activities
—

 
706

 
—

 
—

 
—

 
—

 
706

Net cash from investing activities
(92,563
)
 
(507,600
)
 
(22,826
)
 
(35,705
)
 
—

 
432,675

 
(226,019
)
 
 
 
 
 

 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrowings under bank credit facility
958,000

 
—

 
—

 
—

 
—

 
—

 
958,000

Payments under bank credit facility
(1,119,485
)
 
—

 
—

 
—

 
—

 
—

 
(1,119,485
)
Debt financing costs, net
(3,430
)
 
—

 
—

 
—

 
—

 
—

 
(3,430
)
Net activity with affiliates
389,579

 
—

 
—

 
55,166

 
(254
)
 
(444,491
)
 
—

Distributions to parent
—

 
(10,475
)
 
—

 
(392
)
 
—

 
10,867

 
—

Share-based compensation activities, net
(7,711
)
 
—

 
—

 
—

 
—

 
—

 
(7,711
)
Shares repurchased and retired
(31,927
)
 
—

 
—

 
—

 
—

 
—

 
(31,927
)
Dividends paid
(11,286
)
 
—

 
—

 
—

 
—

 
—

 
(11,286
)
Other financing activities
590

 
(87
)
 
—

 
—

 
—

 
—

 
503

Net cash from financing activities
174,330

 
(10,562
)
 
—

 
54,774

 
(254
)
 
(433,624
)
 
(215,336
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
—

 
—

 
(514
)
 
—

 
—

 
—

 
(514
)
Cash flows from investing activities
—

 
—

 
36,247

 
—

 
—

 
—

 
36,247

Cash flows from financing activities
—

 
—

 
—

 
—

 
—

 
—

 
—

Net cash from discontinued operations
—

 
—

 
35,733

 
—

 
—

 
—

 
35,733

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net change in cash, cash equivalents and restricted cash
(865
)
 
14,353

 
—

 
3,441

 
—

 
—

 
16,929

Cash, cash equivalents and restricted cash, beginning of period
1,212

 
199,610

 
—

 
9,528

 
—

 
—

 
210,350

Cash, cash equivalents and restricted cash, end of period
$
347

 
$
213,963

 
$
—

 
$
12,969

 
$
—

 
$
—

 
$
227,279

*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.

65
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Condensed Consolidating Statements of Cash Flows - continued
 
Year Ended December 31, 2016
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash from operating activities
$
(86,502
)
 
$
502,815

 
$
(122,012
)
 
$
7,234

 
$
—

 
$
(1,196
)
 
$
300,339

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
(42,840
)
 
(116,834
)
 
—

 
(684
)
 
—

 
—

 
(160,358
)
Cash paid for acquisitions, net of cash received
(592,703
)
 
—

 
—

 
—

 
—

 
—

 
(592,703
)
Net activity with affiliates
—

 
659,549

 
(448,249
)
 
—

 
—

 
(211,300
)
 
—

Distributions from subsidiary
9,150

 
—

 
—

 
—

 
—

 
(9,150
)
 
—

Other investing activities
—

 
7,529

 
—

 
6,678

 
—

 
—

 
14,207

Net cash from investing activities
(626,393
)
 
550,244

 
(448,249
)
 
5,994

 
—

 
(220,450
)
 
(738,854
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrowings under bank credit facility
2,039,175

 
237,000

 
—

 
—

 
—

 
—

 
2,276,175

Payments under bank credit facility
(1,466,362
)
 
(899,750
)
 
—

 
—

 
—

 
—

 
(2,366,112
)
Proceeds from issuance of senior notes
750,000

 
—

 
—

 
—

 
—

 
—

 
750,000

Debt financing costs, net
(42,220
)
 
—

 
—

 
—

 
—

 
—

 
(42,220
)
Retirements of senior notes
(350,000
)
 
(350,000
)
 
—

 
—

 
—

 
—

 
(700,000
)
Premium and consent fees paid
(15,750
)
 
—

 
—

 
—

 
—

 
—

 
(15,750
)
Net activity with affiliates
(199,398
)
 
—

 
—

 
(12,877
)
 
(221
)
 
212,496

 
—

Distributions to parent
—

 
(9,000
)
 
—

 
(150
)
 
—

 
9,150

 
—

Share-based compensation activities, net
(1,295
)
 
—

 
—

 
—

 
—

 
—

 
(1,295
)
Other financing activities
(45
)
 
—

 
—

 
—

 
—

 
—

 
(45
)
Net cash from financing activities
714,105

 
(1,021,750
)
 
—

 
(13,027
)
 
(221
)
 
221,646

 
(99,247
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
—

 
—

 
(27,796
)
 
—

 
—

 
—

 
(27,796
)
Cash flows from investing activities
—

 
—

 
598,057

 
—

 
—

 
—

 
598,057

Cash flows from financing activities
—

 
—

 
—

 
—

 
—

 
—

 
—

Net cash from discontinued operations
—

 
—

 
570,261

 
—

 
—

 
—

 
570,261

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net change in cash, cash equivalents and restricted cash
1,210

 
31,309

 
—

 
201

 
(221
)
 
—

 
32,499

Cash, cash equivalents and restricted cash, beginning of period
2

 
168,301

 
—

 
9,327

 
221

 
—

 
177,851

Cash, cash equivalents and restricted cash, end of period
$
1,212

 
$
199,610

 
$
—

 
$
9,528

 
$
—

 
$
—

 
$
210,350

*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.


66
BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015
______________________________________________________________________________________________________

Condensed Consolidating Statements of Cash Flows - continued
 
Year Ended December 31, 2015
 
 
 
 
 
 
 
Non-
 
Non-
 
 
 
 
 
 
 
 
 
 
 
Guarantor
 
Guarantor
 
 
 
 
 
 
 
 
 
Subsidiary
 
Subsidiaries
 
Subsidiaries
 
 
 
 
 
 
 
Guarantor
 
(100%
 
(100%
 
(Not 100%
 
 
 
 
(In thousands)
Parent
 
Subsidiaries
 
Owned)*
 
Owned)
 
Owned)
 
Eliminations
 
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash from operating activities
$
102,080

 
$
249,822

 
$
(13,384
)
 
$
(12,131
)
 
$
(76
)
 
$
363

 
$
326,674

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
(48,591
)
 
(82,392
)
 
—

 
(187
)
 
—

 
—

 
(131,170
)
Net activity with affiliates
—

 
(65,408
)
 
—

 
—

 
—

 
65,408

 
—

Distribution from subsidiary
11,200

 
—

 
—

 
—

 
—

 
(11,200
)
 
—

Other investing activities
3,292

 
1,236

 
—

 
—

 
—

 
—

 
4,528

Net cash from investing activities
(34,099
)
 
(146,564
)
 
—

 
(187
)
 
—

 
54,208

 
(126,642
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrowings under bank credit facility
1,033,500

 
345,500

 
—

 
—

 
—

 
—

 
1,379,000

Payments under bank credit facility
(1,211,200
)
 
(425,150
)
 
—

 
—

 
—

 
—

 
(1,636,350
)
Proceeds from issuance of senior notes
750,000

 
—

 
—

 
—

 
—

 
—

 
750,000

Debt financing costs, net
(14,004
)
 
—

 
—

 
—

 
—

 
—

 
(14,004
)
Payments on retirements of long-term debt
(500,000
)
 
(3
)
 
—

 
(157,810
)
 
—

 
—

 
(657,813
)
Premium and consent fees paid
(24,246
)
 
—

 
—

 
—

 
—

 
—

 
(24,246
)
Net activity with affiliates
(105,720
)
 
—

 
(711
)
 
172,124

 
78

 
(65,771
)
 
—

Distributions to parent
—

 
(11,100
)
 
—

 
(100
)
 
—

 
11,200

 
—

Share-based compensation activities, net
3,689

 
—

 
—

 
—

 
—

 
—

 
3,689

Net cash from financing activities
(67,981
)
 
(90,753
)
 
(711
)
 
14,214

 
78

 
(54,571
)
 
(199,724
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
—

 
—

 
14,095

 
—

 
—

 
—

 
14,095

Cash flows from investing activities
—

 
—

 
—

 
—

 
—

 
—

 
—

Cash flows from financing activities
—

 
—

 
—

 
—

 
—

 
—

 
—

Net cash from discontinued operations
—

 
—

 
14,095

 
—

 
—

 
—

 
14,095

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net change in cash, cash equivalents and restricted cash
—

 
12,505

 
—

 
1,896

 
2

 
—

 
14,403

Cash, cash equivalents and restricted cash, beginning of period
2

 
155,796

 
—

 
7,431

 
219

 
—

 
163,448

Cash, cash equivalents and restricted cash, end of period
$
2

 
$
168,301

 
$
—

 
$
9,327

 
$
221

 
$
—

 
$
177,851

*Subsidiary is 100% owned guarantor of the 6.375% Notes and 6.875% Notes and is a 100% owned non-guarantor of the 6.000% Notes.

NOTE 16.     RELATED PARTY TRANSACTIONS
Boyd Percentage Ownership
William S. Boyd, our Executive Chairman of the Board of Directors, together with his immediate family, beneficially owned approximately 27% of our outstanding shares of common stock as of December 31, 2017. As such, the Boyd family has the ability to significantly influence our affairs, including the election of members of our Board of Directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation or sale of assets. For each of the years ended December 31, 2017, 2016 and 2015, there were no related party transactions between the Company and the Boyd family other than compensation, including salary and equity incentives.
 

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NOTE 17.    SUBSEQUENT EVENTS
We have evaluated all events or transactions that occurred after December 31, 2017. During this period, up to the filing date, we did not identify any subsequent events, other than the payment of the cash dividend disclosed in Note 10, Stockholder's Equity and Stock Incentive Plans, the effects of which would require disclosure or adjustment to our financial position or results of operations.




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