BOYD GAMING CORP - FORM 10-Q - November 7, 2017

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - BOYD GAMING CORP	q32017exhibit322-cfo.htm
EX-32.1 - EXHIBIT 32.1 - BOYD GAMING CORP	q32017exhibit321-ceo.htm
EX-31.2 - EXHIBIT 31.2 - BOYD GAMING CORP	q32017exhibit312-cfo.htm
EX-31.1 - EXHIBIT 31.1 - BOYD GAMING CORP	q32017exhibit311-ceo.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________

FORM 10-Q

____________________________________________________

(Mark One)



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

For the quarterly period ended September 30, 2017



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

For the transition period from to

Commission file number: 1-12882

___________________________________________________

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________________________



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

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

(Address of principal executive offices) (Zip Code)

(702) 792-7200

(Registrant's telephone number, including area code)

____________________________________________________

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

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

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



Large accelerated filer	x	Accelerated filer	o

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

		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

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



	Class		Outstanding as of November 2, 2017
	Common stock, $0.01 par value		112,473,050

BOYD GAMING CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2017

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	3

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016	4

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016	5

	Condensed Consolidated Statements of Changes in Stockholders' Equity for the nine months ended September 30, 2017 and 2016	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47

Item 4.	Controls and Procedures	47

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	48

Item 6.	Exhibits	49

Signature Page		50

PART I. Financial Information

Item 1. Financial Statements (Unaudited)

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)



	September 30,		December 31,
(In thousands, except share data)	2017		2016
ASSETS
Current assets
Cash and cash equivalents	$	158,832	$	193,862
Restricted cash	26,705		16,488
Accounts receivable, net	33,536		30,371
Inventories	17,816		18,568
Prepaid expenses and other current assets	45,673		46,214
Income taxes receivable	225		2,444
Total current assets	282,787		307,947
Property and equipment, net	2,556,116		2,605,169
Other assets, net	81,626		49,205
Intangible assets, net	846,616		881,954
Goodwill, net	888,224		826,476
Total assets	$	4,655,369	$	4,670,751
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	23,981	$	30,336
Accounts payable	80,131		84,086
Accrued liabilities	283,112		251,082
Total current liabilities	387,224		365,504
Long-term debt, net of current maturities and debt issuance costs	3,045,586		3,199,119
Deferred income taxes	123,176		83,980
Other long-term tax liabilities	3,408		3,307
Other liabilities	61,865		84,715
Commitments and contingencies (Notes 3, 8 and 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; 112,590,429 and 112,896,377 shares outstanding	1,126		1,129
Additional paid-in capital	941,142		953,440
Retained earnings (accumulated deficit)	91,656		(19,878		)
Accumulated other comprehensive income (loss)	186		(615		)
Total Boyd Gaming Corporation stockholders' equity	1,034,110		934,076
Noncontrolling interest	—		50
Total stockholders' equity	1,034,110		934,126
Total liabilities and stockholders' equity	$	4,655,369	$	4,670,751

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands, except per share data)	2017			2016			2017			2016
Revenues
Gaming	$	487,372		$	443,568		$	1,482,427		$	1,359,047
Food and beverage	85,640			74,257			261,425			226,955
Room	48,073			42,985			143,669			128,225
Other	31,639			29,579			98,592			90,738
Gross revenues	652,724			590,389			1,986,113			1,804,965
Less promotional allowances	65,059			58,488			193,238			175,812
Net revenues	587,665			531,901			1,792,875			1,629,153
Operating costs and expenses
Gaming	229,667			217,103			691,210			658,396
Food and beverage	47,487			40,745			146,538			124,664
Room	13,475			11,247			40,058			33,039
Other	18,566			18,660			58,176			56,819
Selling, general and administrative	91,288			80,833			275,938			241,686
Maintenance and utilities	30,244			27,854			82,507			76,711
Depreciation and amortization	55,201			47,928			161,728			143,831
Corporate expense	19,339			15,877			63,388			49,883
Project development, preopening and writedowns	2,975			3,735			8,731			11,473
Impairments of assets	—			—			—			1,440
Other operating items, net	758			3			1,707			555
Total operating costs and expenses	509,000			463,985			1,529,981			1,398,497
Operating income	78,665			67,916			262,894			230,656
Other expense (income)
Interest income	(452		)	(1,050		)	(1,367		)	(2,506		)
Interest expense, net of amounts capitalized	43,309			55,203			129,711			170,155
Loss on early extinguishments and modifications of debt	319			41,518			853			42,364
Other, net	(139		)	1			531			143
Total other expense, net	43,037			95,672			129,728			210,156
Income (loss) from continuing operations before income taxes	35,628			(27,756		)	133,166			20,500
Income tax (provision) benefit	(12,652		)	189,620			(47,515		)	174,231
Income from continuing operations, net of tax	22,976			161,864			85,651			194,731
Income from discontinued operations, net of tax	—			180,707			21,392			211,052
Net income	$	22,976		$	342,571		$	107,043		$	405,783

Basic net income per common share
Continuing operations	$	0.20		$	1.41		$	0.74		$	1.70
Discontinued operations	—			1.58			0.19			1.85
Basic net income per common share	$	0.20		$	2.99		$	0.93		$	3.55
Weighted average basic shares outstanding	114,836			114,567			115,108			114,335

Diluted net income per common share
Continuing operations	$	0.20		$	1.40		$	0.74		$	1.69
Discontinued operations	—			1.57			0.18			1.84
Diluted net income per common share	$	0.20		$	2.97		$	0.92		$	3.53
Weighted average diluted shares outstanding	115,501			115,202			115,768			115,051

Dividends declared per common share	$	0.05		$	—		$	0.10		$	—

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In thousands)	2017			2016		2017		2016
Net income	$	22,976		$	342,571	$	107,043	$	405,783
Other comprehensive (loss) income, net of tax:
Fair value adjustments to available-for-sale securities, net of tax	(305		)	417		801		754
Comprehensive income attributable to Boyd Gaming Corporation	$	22,671		$	342,988	$	107,844	$	406,537

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)



	Boyd Gaming Corporation Stockholders' Equity
	Common Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss), Net			Noncontrolling Interest			Total


(In thousands, except share data)	Shares		Amount
Balances, January 1, 2017	112,896,377		$	1,129		$	953,440		$	(19,878	)	$	(615	)	$	50		$	934,126
Cumulative effect of change in accounting principle, adoption of Update 2016-09	—		—			—			15,777			—			—			15,777
Net income	—		—			—			107,043			—			—			107,043
Comprehensive income attributable to Boyd, net of tax	—		—			—			—			801			—			801
Stock options exercised	233,964		2			2,021			—			—			—			2,023
Release of restricted stock units, net of tax	156,750		1			(2,226		)	—			—			—			(2,225		)
Release of performance stock units, net of tax	173,653		2			(1,793		)	—			—			—			(1,791		)
Shares repurchased and retired	(870,315	)	(8		)	(22,152		)	—			—			—			(22,160		)
Cash dividends declared	—		—			—			(11,286		)	—			—			(11,286		)
Share-based compensation costs	—		—			11,212			—			—			—			11,212
Other	—		—			640			—			—			(50		)	590
Balances, September 30, 2017	112,590,429		$	1,126		$	941,142		$	91,656		$	186		$	—		$	1,034,110

Balances, January 1, 2016	111,614,420		$	1,117		$	945,041		$	(437,881	)	$	(316	)	$	50		$	508,011
Net income	—		—			—			405,783			—			—			405,783
Comprehensive income attributable to Boyd	—		—			—			—			754			—			754
Stock options exercised	449,065		4			2,909			—			—			—			2,913
Release of restricted stock units, net of tax	261,235		2			(695		)	—			—			—			(693		)
Release of performance stock units, net of tax	159,027		2			(869		)	—			—			—			(867		)
Share-based compensation costs	—		—			7,125			—			—			—			7,125
Balances, September 30, 2016	112,483,747		$	1,125		$	953,511		$	(32,098	)	$	438		$	50		$	923,026

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	Nine Months Ended
	September 30,
(In thousands)	2017			2016
Cash Flows from Operating Activities
Net income	$	107,043		$	405,783
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations, net of tax	(21,392		)	(211,052		)
Depreciation and amortization	161,728			143,831
Amortization of debt financing costs and discounts on debt	6,957			12,654
Share-based compensation expense	11,212			7,125
Deferred income taxes	43,266			(177,106		)
Non-cash impairment of assets	—			1,440
Loss on early extinguishments and modifications of debt	853			42,364
Other operating activities	(2,106		)	1,200
Changes in operating assets and liabilities:
Restricted cash	(10,217		)	(4,262		)
Accounts receivable, net	(3,056		)	2,045
Inventories	753			733
Prepaid expenses and other current assets	(2,845		)	(2,919		)
Income taxes receivable	2,219			212
Other assets, net	3,626			(759		)
Accounts payable and accrued liabilities	25,512			32,731
Other long-term tax liabilities	101			190
Other liabilities	(482		)	2,696
Net cash provided by operating activities	323,172			256,906
Cash Flows from Investing Activities
Capital expenditures	(161,252		)	(117,330		)
Cash paid for acquisition, net of cash received	(1,153		)	(372,322		)
Advances pursuant to development agreement	(35,108		)	—
Other investing activities	492			2,719
Net cash used in investing activities	(197,021		)	(486,933		)
Cash Flows from Financing Activities
Borrowings under Boyd Gaming bank credit facility	463,300			1,622,075
Payments under Boyd Gaming bank credit facility	(628,211		)	(1,290,800		)
Borrowings under Peninsula bank credit facility	—			237,000
Payments under Peninsula bank credit facility	—			(899,750		)
Proceeds from issuance of senior notes	—			750,000
Retirements of senior notes	—			(700,000		)
Debt financing costs, net	(2,700		)	(40,718		)
Premium and consent fees paid	—			(15,750		)
Share-based compensation activities, net	(1,993		)	1,353
Shares repurchased and retired	(22,160		)	—
Dividends paid	(5,653		)	—
Other financing activities	503			—
Net cash used in financing activities	(196,914		)	(336,590		)
Cash Flows from Discontinued Operations
Cash flows from operating activities	(514		)	(26,596		)
Cash flows from investing activities	36,247			594,080
Cash flows from financing activities	—			—
Net cash provided by discontinued operations	35,733			567,484
Change in cash and cash equivalents	(35,030		)	867
Cash and cash equivalents, beginning of period	193,862			158,821
Cash and cash equivalents, end of period	$	158,832		$	159,688
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized	$	109,634		$	147,001
Cash paid for income taxes, net of refunds	5,252			31,698
Supplemental Schedule of Non-cash Investing and Financing Activities
Payables incurred for capital expenditures	$	3,709		$	4,208

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

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

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

We are a diversified operator of 24 wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the U.S. Securities and Exchange Commission ("SEC") on February 23, 2017.

The results for the periods indicated are unaudited, but reflect all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods.

The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming and its wholly owned subsidiaries. Investments in unconsolidated affiliates, which do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation. On May 31, 2016, we announced that we had entered into an Equity Purchase Agreement (the "Purchase Agreement") to sell our 50% equity interest in Marina District Development Holding Company, LLC ("MDDHC"), the parent company of Borgata Hotel Casino & Spa ("Borgata"), to MGM Resorts International ("MGM"), and the transaction closed on August 1, 2016. (See Note 3, Acquisitions and Divestitures.) We account for our investment in Borgata applying the equity method and report its results as discontinued operations for all periods presented in these condensed consolidated financial statements.

See Note 3, Acquisitions and Divestitures, for a 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.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, which include cash on hand and in banks, interest-bearing deposits and money market funds with maturities of three months or less at their date of purchase. The instruments are not restricted as to withdrawal or use and are on deposit with high credit quality financial institutions. Although these balances may at times exceed the federal insured deposit limit, we believe such risk is mitigated by the quality of the institution holding such deposit. The carrying values of these instruments approximate their fair values as such balances are generally available on demand.

Promotional Allowances

The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as a promotional allowance. Promotional allowances also include incentives earned in our slot bonus program such as cash and the estimated retail value of goods and services (such as complimentary rooms and food and beverages). We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food and beverage, and to a lesser extent for other goods or services, depending upon the property.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

The amounts included in promotional allowances are as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2017		2016		2017		2016
Rooms	$	19,394	$	18,778	$	56,750	$	56,017
Food and beverage	41,768		36,528		125,922		109,640
Other	3,897		3,182		10,566		10,155
Total promotional allowances	$	65,059	$	58,488	$	193,238	$	175,812

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2017		2016		2017		2016
Rooms	$	8,508	$	8,307	$	24,995	$	24,797
Food and beverage	37,651		32,611		112,539		96,724
Other	3,371		3,041		9,827		9,021
Total estimated cost of promotional allowances	$	49,530	$	43,959	$	147,361	$	130,542

Gaming Taxes

We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are recorded as a gaming expense in the condensed consolidated statements of operations. These taxes totaled approximately $81.5 million and $79.7 million for the three months ended September 30, 2017 and 2016, respectively, and $248.5 million and $243.8 million for the nine months ended September 30, 2017 and 2016, respectively.

Income Taxes

Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on all 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.

The effective tax rates on income from continuing operations during the nine months ended September 30, 2017 and 2016 were 35.7% and (849.9%), respectively. Our provision for the nine months ended September 30, 2017 was favorably impacted by the inclusion of excess tax benefits, related to equity compensation, as a component of the provision for income taxes, the recognition of unrecognized tax benefits due to statute expirations and the reversal of related accrued interest. These benefits were offset by state taxes resulting in an effective tax rate greater than the federal statutory rate.

In performing our third quarter 2016 valuation allowance analysis, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilized a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters ended September 30, 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during the three months ended September 30, 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from our deferred tax assets would be realized, and we released $190.4 million of valuation allowance

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

on our federal and unitary state income tax net operating loss carryforwards and other deferred tax assets during the third quarter of 2016.

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 condensed consolidated balance sheets.

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 condensed consolidated statement of changes in stockholders' equity for the nine months ended September 30, 2017.

Recently Issued Accounting Pronouncements

Accounting Standards Update 2017-9, 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 condensed 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 condensed consolidated financial statements.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

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. Interpretations of the Revenue Standard are on-going and could have a significant impact on our implementation. Currently, we expect that the historical presentation which reflects 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, will no longer be allowed. Instead, revenues will be allocated among our departmental classifications based on the relative standalone selling prices of the goods and services provided to the customer. We currently anticipate that this methodology will result in a reduction of our reported gaming revenues by an amount equivalent to our reported promotional allowance revenues. We also expect the accounting for our frequent player programs to be impacted, with possible changes to the timing and/or classification of certain transactions within revenues and between revenues and operating expenses.

The Revenue Standard is effective for our Company on January 1, 2018, and must be adopted by applying either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach with the cumulative effect of initially applying the guidance recognized at the date of initial application. We currently anticipate adopting the Revenue Standard by applying the full retrospective approach.

We are continuing to update our assessment of the effects of the Revenue Standard on our condensed consolidated financial statements, including the planned method of adoption and the quantification of the effects of the new guidance, and we will disclose those effects when known.

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 condensed consolidated financial statements.

NOTE 3. ACQUISITIONS AND DIVESTITURES

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 (the "Merger") with and into ALST, 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 condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016 and the results of its operations in our condensed consolidated statements of operations for the three and nine months ended September 30, 2017. Aliante's cash flows are reported in our condensed consolidated statements of cash flows for the nine months ended September 30, 2017. Aliante is an upscale, resort-style casino and hotel situated in North Las Vegas and offering premium accommodations, gaming, dining, entertainment and retail, and is aggregated into our Las Vegas Locals segment (See Note 11, Segment Information).

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"). 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,

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

with a corresponding net increase to goodwill of $3.8 million. The measurement period adjustment and the related tax impact were immaterial to our condensed 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

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 Eastside Cannery, 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 acquired assets and liabilities of Cannery and Eastside Cannery are included in our condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016 and the results of their operations in our condensed consolidated statements of operations for the three and nine months ended September 30, 2017. The Cannery and Eastside Cannery's cash flows are reported in our condensed consolidated statements of cash flows for the nine months ended September 30, 2017. 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 11, Segment Information).

The fair value of the consideration transferred to Seller on the Acquisition Date 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 per ASC 805 guidance. 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 net book 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 $1.9 million for the nine months ended September 30, 2017. The measurement period adjustment and the related tax impact were immaterial to our condensed consolidated financial statements.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

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

Investment in and Divestiture of Borgata

On August 1, 2016, Boyd Gaming completed the sale of its 50% equity interest in MDDHC, the parent company of Borgata in Atlantic City, New Jersey, to MGM pursuant to the Purchase Agreement entered into on May 31, 2016, as amended on July 19, 2016, by and among Boyd, Boyd Atlantic City, Inc., a wholly owned subsidiary of Boyd, and MGM.

Prior to the sale of our equity interest, the Company and MGM each held a 50% interest in MDDHC, which owns all the equity interests in Borgata. Until the closing of the sale, we were the managing member of MDDHC, and we were responsible for the day-to-day operations of Borgata.

Pursuant to the Purchase Agreement, MGM acquired from Boyd Gaming 49% of its 50% membership interest in MDDHC and, immediately thereafter, MDDHC redeemed Boyd Gaming’s remaining 1% membership interest in MDDHC (collectively, the "Transaction"). Following the Transaction, MDDHC became a wholly-owned subsidiary of MGM.

In consideration for the Transaction, MGM paid Boyd Gaming $900 million. The initial net cash proceeds were approximately $589 million, net of certain expenses and adjustments on the closing date, including outstanding indebtedness, cash and working capital. These initial proceeds did not include our 50% share of any future property tax settlement benefits related to the time period during which we held a 50% ownership in MDDHC to which Boyd Gaming retained the right to receive upon payment. On February 15, 2017, Borgata entered into a settlement agreement with Atlantic City, the terms of which provided for $72 million to be paid to Borgata to resolve the remaining property tax issues. Borgata received full payment, and we received our share of the proceeds, in June 2017. For the nine months ended September 30, 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 payments, net of tax of $14.8 million for the nine months ended September 30, 2017, are included in discontinued operations in the condensed consolidated financial statements.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Summarized income statement information for Borgata is as follows:



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

NOTE 4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:



	September 30,		December 31,
(In thousands)	2017		2016
Land	$	295,133	$	251,316
Buildings and improvements	2,920,922		2,915,664
Furniture and equipment	1,299,943		1,243,724
Riverboats and barges	239,591		239,264
Construction in progress	59,809		86,226
Other	725		726
Total property and equipment	4,816,123		4,736,920
Less accumulated depreciation	2,260,007		2,131,751
Property and equipment, net	$	2,556,116	$	2,605,169

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2017		2016		2017		2016
Depreciation expense	$	51,109	$	44,010	$	148,274	$	131,832

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

NOTE 5. INTANGIBLE ASSETS

Intangible assets consist of the following:



	September 30, 2017
	Weighted	Gross					Cumulative
	Average Life	Carrying		Cumulative			Impairment			Intangible
(In thousands)	Remaining	Value		Amortization			Losses			Assets, Net
Amortizing intangibles
Customer relationships	0.4 years	$	145,700	$	(136,158	)	$	—		$	9,542
Favorable lease rates	38.3 years	11,730		(3,017		)	—			8,713
Development agreement	—	21,373		—			—			21,373
		178,803		(139,175		)	—			39,628

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, September 30, 2017		$	1,204,025	$	(173,135	)	$	(184,274	)	$	846,616



	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

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.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

NOTE 6. ACCRUED LIABILITIES

Accrued liabilities consist of the following:



	September 30,		December 31,
(In thousands)	2017		2016
Payroll and related expenses	$	67,216	$	68,102
Interest	44,484		33,407
Gaming liabilities	54,161		41,942
Player loyalty program liabilities	18,542		19,076
Dividend payable	5,633		—
Other accrued liabilities	93,076		88,555
Total accrued liabilities	$	283,112	$	251,082

NOTE 7. LONG-TERM DEBT

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



			September 30, 2017
								Unamortized
	Interest							Origination
	Rates at		Outstanding		Unamortized			Fees and			Long-Term
(In thousands)	Sept. 30, 2017		Principal		Discount			Costs			Debt, Net
Bank credit facility	3.52	%	1,617,628		(1,613		)	(25,856		)	1,590,159
6.875% senior notes due 2023	6.88	%	750,000		—			(11,201		)	738,799
6.375% senior notes due 2026	6.38	%	750,000		—			(9,894		)	740,106
Other	5.80	%	503		—			—			503
Total long-term debt			3,118,131		(1,613		)	(46,951		)	3,069,567
Less current maturities			23,981		—			—			23,981
Long-term debt, net			$	3,094,150	$	(1,613	)	$	(46,951	)	$	3,045,586



			December 31, 2016
								Unamortized
	Interest							Origination
	Rates at		Outstanding		Unamortized			Fees and			Long-Term
(In thousands)	Dec. 31, 2016		Principal		Discount			Costs			Debt, Net
Bank credit facility	3.44	%	$	1,782,538	$	(1,888	)	$	(28,503	)	$	1,752,147
6.875% senior notes due 2023	6.88	%	750,000		—			(11,209		)	738,791
6.375% senior notes due 2026	6.38	%	750,000		—			(12,074		)	737,926
Other	5.80	%	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

Credit Facility

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").

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

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.

Interest and Fees

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).

Optional and Mandatory Prepayments

The Company shall make repayments of the Refinancing Term B Loans on or before the last business day of each fiscal quarter of the Company commencing with the first full fiscal quarter of the Company after the Refinancing Effective Date in an amount equal to (x) 0.25% of the aggregate principal amount of the Refinancing Term B Loans plus (y) 0.25% of the aggregate principal amount of any increased Refinancing Term B Loan, as defined in the Existing Credit Agreement. The Company shall repay the outstanding principal amount of all Refinancing Term B Loans on the maturity date for the Refinancing Term B Loans, which shall be September 15, 2023.

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, including a 1.00% prepayment premium for any full or partial prepayment of the Refinancing Term B Loans effected prior to the six-month anniversary of the Refinancing Effective Date that results in a lower interest rate.

The outstanding principal amounts under the Credit Facility are comprised of the following:



	September 30,		December 31,
(In thousands)	2017		2016
Revolving Credit Facility	$	135,000	$	245,000
Term A Loan	213,750		222,188
Refinancing Term B Loans	1,233,178		—
Term B-1 Loan	—		271,750
Term B-2 Loan	—		997,500
Swing Loan	35,700		46,100
Total outstanding principal amounts under the Credit Facility	$	1,617,628	$	1,782,538

At September 30, 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 $591.4 million.

Covenant Compliance

As of September 30, 2017, we believe that we were in compliance with the financial and other covenants of our debt instruments.

On March 7, 2017, Aliante, Cannery and Eastside Cannery became guarantors of the 6.875% senior notes due May 2023 ("6.875% Notes"), the 6.375% senior notes due April 2026 ("6.375% Notes" and, together with the 6.875% Notes, the "Senior Notes") and the Credit Agreement.

Loss on Early Extinguishments and Modifications of Debt

We incurred charges of $0.3 million and $0.9 million during the three and nine months ended September 30, 2017, respectively, due to costs incurred related to the Refinancing Amendment and for debt financing costs written off reflecting the ratable reduction in borrowing capacity due to optional prepayments of the Refinancing Term B Loans of $20.0 million for the three months ended September 30, 2017 and $25.0 million for the nine months ended September 30, 2017. We incurred charges of $41.5 million and $42.4 million during the three and nine months ended September 30, 2016, respectively, related to the modification of the Credit Facility, redemption of our 9.00% senior notes due 2018 and Peninsula Gaming's 8.375% senior notes due 2018, and the extinguishment of the Peninsula Gaming bank credit facility.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

NOTE 8. COMMITMENTS AND CONTINGENCIES

Commitments

There have been no material changes to our commitments described under Note 9, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 23, 2017.

Contingencies

Legal Matters

We are parties to various legal proceedings arising in the ordinary course of business. In our opinion, all pending legal matters are either adequately covered by insurance, or, if not insured, will not have a material adverse impact on our financial position, results of operations or cash flows.

NOTE 9. STOCKHOLDERS' EQUITY AND STOCK INCENTIVE PLANS

Share Repurchase Program

On May 2, 2017, the Company announced that its Board of Directors had reaffirmed the Company’s existing share repurchase program, which as of September 30, 2017, had $69.9 million remaining. The Company intends to make purchases of its common stock from time to time under this program 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.

The following table provides information regarding share repurchases during the referenced periods.⁽¹⁾



(In thousands, except per share data)	For the Three Months Ended September 30, 2017		For the Nine Months Ended September 30, 2017
Shares repurchased ⁽²⁾	429		870
Total cost, including brokerage fees	$	11,070	$	22,160
Average repurchase price per share ⁽³⁾	$	25.82	$	25.46

⁽¹⁾ Shares repurchased reflect repurchases settled during the three and nine months ended September 30, 2017. These amounts exclude repurchases traded but not yet settled on or before September 30, 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.

Dividends

On May 2, 2017, the Company announced that its Board of Directors had authorized the reinstatement of the Company’s cash dividend program and declared a quarterly dividend of $0.05 per share, to be paid July 15, 2017, to shareholders of record as of June 15, 2017. This dividend was paid in the third quarter of 2017.

On September 6, 2017, the Company declared a quarterly dividend of $0.05 per share, to be paid October 15, 2017, to shareholders of record as of September 18, 2017. This dividend was paid after the end of the third quarter of 2017.

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.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated statements of operations.



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2017		2016		2017		2016
Gaming	$	82	$	86	$	263	$	251
Food and beverage	15		17		50		48
Room	8		8		24		23
Selling, general and administrative	418		437		1,337		1,274
Corporate expense	1,859		994		9,538		5,529
Total share-based compensation expense	$	2,382	$	1,542	$	11,212	$	7,125

Performance Shares

Our stock incentive plan provides for the issuance of Performance Share Unit ("PSU") grants which may be earned, in whole or in part, upon passage of time and the attainment of performance criteria. We periodically review our estimates of performance against the defined criteria to assess the expected payout of each outstanding PSU grant and adjust our stock compensation expense accordingly.

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, Earnings Before Interest, Taxes, Depreciation and Amortization ("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 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 condensed 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 condensed consolidated statement of operations.

NOTE 10. FAIR VALUE MEASUREMENTS

The authoritative accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These inputs create the following fair value hierarchy:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

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

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

(Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Balances Measured at Fair Value

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



	September 30, 2017
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	158,832	$	158,832	$	—	$	—
Restricted cash	26,705		26,705		—		—
Investment available for sale	17,823		—		—		17,823

Liabilities
Contingent payments	$	3,019	$	—	$	—	$	3,019



	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, are based on statements received from our banks at September 30, 2017 and December 31, 2016.

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 with a maturity date of June 1, 2037 that is classified as available for sale. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The fair value of the instrument is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation at September 30, 2017 and December 31, 2016 is a discount rate of 9.9% 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 condensed consolidated balance sheets. At September 30, 2017 and December 31, 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 September 30, 2017 and December 31, 2016, $17.3 million and $16.8 million, respectively, is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $3.0 million and $3.1 million, respectively, at September 30, 2017 and December 31, 2016 is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of operations.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Contingent Payments

In connection with the development of the Kansas Star Casino ("Kansas Star"), 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 on December 20, 2011. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at September 30, 2017 and December 31, 2016, is a discount rate of 9.1% and 18.5%, respectively. At September 30, 2017 and December 31, 2016, there was a current liability of $0.8 million and $0.9 million, respectively, related to this agreement, which is recorded in accrued liabilities on the respective condensed consolidated balance sheets, and long-term obligation at September 30, 2017 and December 31, 2016, of $2.2 million, which is included in other liabilities on the respective condensed consolidated balance sheets.

The following tables summarize the changes in fair value of the Company's Level 3 assets and liabilities:



	Three Months Ended
	September 30, 2017					September 30, 2016
	Assets		Liability			Assets		Liability
(In thousands)	Investment Available for Sale		Contingent Payments			Investment Available for Sale		Contingent Payments
Balance at beginning of reporting period	$	17,456	$	(3,204	)	$	17,832	$	(3,488	)
Total gains (losses) (realized or unrealized):
Included in interest income (expense)	34		(69		)	30		(147		)
Included in other comprehensive income (loss)	333		—			417		—
Included in other items, net	—		64			—		—
Purchases, sales, issuances and settlements:
Settlements	—		190			—		200
Balance at end of reporting period	$	17,823	$	(3,019	)	$	18,279	$	(3,435	)



	Nine Months Ended
	September 30, 2017						September 30, 2016
	Assets			Liability			Assets			Liability
(In thousands)	Investment Available for Sale			Contingent Payments			Investment Available for Sale			Contingent Payments
Balance at beginning of reporting period	$	17,259		$	(3,038	)	$	17,839		$	(3,632	)
Total gains (losses) (realized or unrealized):
Included in interest income (expense)	103			(270		)	96			(452		)
Included in other comprehensive income	901			—			754			—
Included in other items, net	—			(334		)	—			—
Purchases, sales, issuances and settlements:
Settlements	(440		)	623			(410		)	649
Balance at end of reporting period	$	17,823		$	(3,019	)	$	18,279		$	(3,435	)

Balances Disclosed at Fair Value

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



	September 30, 2017
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Liabilities
Obligation under assessment arrangements	$	32,112	$	25,815	$	26,911	Level 3

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________



	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:



	September 30, 2017
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Credit Facility	$	1,617,628	$	1,590,159	$	1,621,985	Level 2
6.875% senior notes due 2023	750,000		738,799		803,438		Level 1
6.375% senior notes due 2026	750,000		740,106		815,625		Level 1
Other	503		503		503		Level 3
Total debt	$	3,118,131	$	3,069,567	$	3,241,551



	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 our Credit Facility is based on a relative value analysis performed on or about September 30, 2017 and December 31, 2016. The estimated fair values of our Senior Notes are based on quoted market prices as of September 30, 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 nine months ended September 30, 2017 or 2016.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

NOTE 11. SEGMENT INFORMATION

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



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

Results of Operations - Total Reportable Segment Net 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.

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

The following table sets forth, for the periods indicated, certain operating data for our Reportable Segments, and reconciles Total Reportable Segment Adjusted EBITDA to operating income, as reported in our accompanying condensed consolidated statements of operations:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2017			2016			2017			2016
Net Revenues
Las Vegas Locals	$	207,291		$	148,879		$	641,288		$	462,213
Downtown Las Vegas	58,832			56,606			179,137			174,423
Midwest and South	321,542			326,416			972,450			992,517
Total Reportable Segment Net Revenues	$	587,665		$	531,901		$	1,792,875		$	1,629,153

Adjusted EBITDA
Las Vegas Locals	$	56,109		$	36,173		$	185,462		$	123,617
Downtown Las Vegas	11,536			10,018			37,757			36,962
Midwest and South	90,106			90,633			277,880			281,305
Total Reportable Segment Adjusted EBITDA	157,751			136,824			501,099			441,884
Corporate expense	(17,480		)	(14,884		)	(53,850		)	(44,355		)
Adjusted EBITDA	140,271			121,940			447,249			397,529

Other operating costs and expenses
Deferred rent	290			816			977			2,449
Depreciation and amortization	55,201			47,928			161,728			143,831
Share-based compensation expense	2,382			1,542			11,212			7,125
Project development, preopening and writedowns	2,975			3,735			8,731			11,473
Impairments of assets	—			—			—			1,440
Other operating items, net	758			3			1,707			555
Total other operating costs and expenses	61,606			54,024			184,355			166,873
Operating income	$	78,665		$	67,916		$	262,894		$	230,656

For purposes of this presentation, corporate expense excludes its portion of share-based compensation expense. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations.

Total Reportable Segment Assets

The Company's assets by Reportable Segment consisted of the following amounts:



	September 30,		December 31,
(In thousands)	2017		2016
Assets
Las Vegas Locals	$	1,790,476	$	1,785,858
Downtown Las Vegas	170,172		157,319
Midwest and South	2,493,905		2,556,307
Total Reportable Segment Assets	4,454,553		4,499,484
Corporate	200,816		171,267
Total Assets	$	4,655,369	$	4,670,751

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

NOTE 12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Separate condensed consolidating financial information for our subsidiary guarantors and non-guarantors of our 6.875% Notes and our 6.375% Notes is presented below. Each of these notes is fully and unconditionally guaranteed, on a joint and several basis, by certain of our current and future domestic restricted subsidiaries, all of which are 100% owned by us. The non-guarantors primarily represent special purpose entities, tax holding companies, our less significant operating subsidiaries and our less than wholly owned subsidiaries.

On 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 September 30, 2017 and December 31, 2016, the condensed consolidating statements of operations for the three and nine months ended September 30, 2017 and 2016, and the condensed consolidating statements of cash flows for the nine months ended September 30, 2017 and 2016. We have reclassified certain prior year amounts in the current year presentation to reflect the designation of the additional Restricted Subsidiaries listed above as subsidiary guarantors.

Condensed Consolidating Balance Sheets



	September 30, 2017
						Non-			Non-
						Guarantor			Guarantor
						Subsidiaries			Subsidiaries
				Guarantor		(100%			(Not 100%
(In thousands)	Parent			Subsidiaries		Owned)			Owned)		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	(41	)	$	155,898	$	2,975		$	—	$	—		$	158,832
Other current assets	77,853			34,533		12,563			—		(994		)	123,955
Property and equipment, net	71,678			2,456,577		27,861			—		—			2,556,116
Investments in subsidiaries	4,779,506			—		3,385			—		(4,782,891		)	—
Intercompany receivable	—			1,852,237		—			—		(1,852,237		)	—
Other assets, net	14,224			29,030		38,372			—		—			81,626
Intangible assets, net	—			822,557		24,059			—		—			846,616
Goodwill, net	—			887,442		782			—		—			888,224
Total assets	$	4,943,220		$	6,238,274	$	109,997		$	—	$	(6,636,122	)	$	4,655,369

Liabilities and Stockholders' Equity
Current maturities of long-term debt	$	23,894		$	87	$	—		$	—	$	—		$	23,981
Other current liabilities	127,641			208,632		27,201			—		(231		)	363,243
Accumulated losses of subsidiaries in excess of investment	—			32,066		—			—		(32,066		)	—
Intercompany payable	817,198			—		1,035,525			—		(1,852,723		)	—
Long-term debt, net of current maturities and debt issuance costs	3,045,168			418		—			—		—			3,045,586
Other long-term liabilities	(104,791		)	314,965		(21,725		)	—		—			188,449
Total stockholders' equity (deficit)	1,034,110			5,682,106		(931,004		)	—		(4,751,102		)	1,034,110
Total liabilities and stockholders' equity	$	4,943,220		$	6,238,274	$	109,997		$	—	$	(6,636,122	)	$	4,655,369

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Condensed Consolidating Balance Sheets - continued



	December 31, 2016
						Non-			Non-
						Guarantor			Guarantor
						Subsidiaries			Subsidiaries
				Guarantor		(100%			(Not 100%
(In thousands)	Parent			Subsidiaries		Owned)			Owned)			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	1,212		$	189,364	$	3,286		$	—		$	—		$	193,862
Other current assets	78,915			26,715		8,908			—			(453		)	114,085
Property and equipment, net	73,180			2,503,127		28,862			—			—			2,605,169
Investments in subsidiaries	4,505,897			139,465		—			—			(4,645,362		)	—
Intercompany receivable	—			1,491,017		—			—			(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	$	4,672,802		$	6,065,175	$	69,606		$	—		$	(6,136,832	)	$	4,670,751

Liabilities and Stockholders' Equity
Current maturities of long-term debt	$	30,250		$	86	$	—		$	—		$	—		$	30,336
Other current liabilities	93,762			196,391		46,444			—			(1,429		)	335,168
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		)	298,624		(21,721		)	—			—			172,002

Boyd Gaming Corporation stockholders' equity (deficit)	934,076			5,569,568		(932,185		)	(254		)	(4,637,129		)	934,076
Noncontrolling interest	—			—		—			—			50			50
Total stockholders' equity (deficit)	934,076			5,569,568		(932,185		)	(254		)	(4,637,079		)	934,126
Total liabilities and stockholders' equity	$	4,672,802		$	6,065,175	$	69,606		$	—		$	(6,136,832	)	$	4,670,751

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Condensed Consolidating Statements of Operations



	Three Months Ended September 30, 2017
						Non-			Non-
						Guarantor			Guarantor
						Subsidiaries			Subsidiaries
			Guarantor			(100%			(Not 100%
(In thousands)	Parent		Subsidiaries			Owned)			Owned)		Eliminations			Consolidated
Net revenues	$	17,827	$	580,932		$	11,552		$	—	$	(22,646	)	$	587,665
Operating costs and expenses
Operating	—		298,306			10,889			—		—			309,195
Selling, general and administrative	—		89,438			1,850			—		—			91,288
Maintenance and utilities	—		29,839			405			—		—			30,244
Depreciation and amortization	3,218		50,935			1,048			—		—			55,201
Corporate expense	18,757		274			308			—		—			19,339
Project development, preopening and writedowns	1,252		646			1,077			—		—			2,975
Other operating items, net	127		631			—			—		—			758
Intercompany expenses	301		22,345			—			—		(22,646		)	—
Total operating costs and expenses	23,655		492,414			15,577			—		(22,646		)	509,000
Equity in earnings (losses) of subsidiaries	55,529		(559		)	—			—		(54,970		)	—
Operating income (loss)	49,701		87,959			(4,025		)	—		(54,970		)	78,665
Other expense (income)
Interest expense, net	42,544		306			7			—		—			42,857
Loss on early extinguishments of debt	319		—			—			—		—			319
Other, net	18		(139		)	(18		)	—		—			(139		)
Total other expense, net	42,881		167			(11		)	—		—			43,037
Income (loss) before income taxes	6,820		87,792			(4,014		)	—		(54,970		)	35,628
Income taxes benefit (provision)	16,156		(30,087		)	1,279			—		—			(12,652		)
Net income (loss)	$	22,976	$	57,705		$	(2,735	)	$	—	$	(54,970	)	$	22,976
Comprehensive income (loss)	$	22,671	$	57,400		$	(2,735	)	$	—	$	(54,665	)	$	22,671

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Condensed Consolidating Statements of Operations - continued



	Three Months Ended September 30, 2016
						Non-			Non-
						Guarantor			Guarantor
						Subsidiaries			Subsidiaries
			Guarantor			(100%			(Not 100%
(In thousands)	Parent		Subsidiaries			Owned)			Owned)		Eliminations			Consolidated
Net revenues	$	29,708	$	524,944		$	12,212		$	—	$	(34,963	)	$	531,901
Operating costs and expenses
Operating	300		276,484			10,971			—		—			287,755
Selling, general and administrative	12,491		66,717			1,623			—		2			80,833
Maintenance and utilities	—		27,463			391			—		—			27,854
Depreciation and amortization	2,355		44,595			978			—		—			47,928
Corporate expense	14,247		471			1,159			—		—			15,877
Project development, preopening and writedowns	7,213		(5,646		)	2,168			—		—			3,735
Other operating items, net	—		3			—			—		—			3
Intercompany expenses	301		34,299			365			—		(34,965		)	—
Total operating costs and expenses	36,907		444,386			17,655			—		(34,963		)	463,985
Equity in earnings (losses) of subsidiaries	230,669		(607		)	—			—		(230,062		)	—
Operating income (loss)	223,470		79,951			(5,443		)	—		(230,062		)	67,916
Other expense (income)
Interest expense, net	41,778		12,369			6			—		—			54,153
Loss on early extinguishments of debt	28,356		13,162			—			—		—			41,518
Other, net	—		20			(19		)	—		—			1
Total other expense, net	70,134		25,551			(13		)	—		—			95,672
Income (loss) from continuing operations before income taxes	153,336		54,400			(5,430		)	—		(230,062		)	(27,756		)
Income taxes benefit	189,235		363			22			—		—			189,620
Income (loss) from continuing operations, net of tax	342,571		54,763			(5,408		)	—		(230,062		)	161,864
Income from discontinued operations, net of tax	—		180,707			—			—		—			180,707
Net income (loss)	$	342,571	$	235,470		$	(5,408	)	$	—	$	(230,062	)	$	342,571
Comprehensive income (loss)	$	342,988	$	235,887		$	(5,408	)	$	—	$	(230,479	)	$	342,988

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Condensed Consolidating Statements of Operations - continued



	Nine Months Ended September 30, 2017
						Non-			Non-
						Guarantor			Guarantor
						Subsidiaries			Subsidiaries
			Guarantor			(100%			(Not 100%
(In thousands)	Parent		Subsidiaries			Owned)			Owned)		Eliminations			Consolidated
Net revenues	$	55,027	$	1,771,644		$	35,870		$	—	$	(69,666	)	$	1,792,875
Operating costs and expenses
Operating	—		903,434			32,548			—		—			935,982
Selling, general and administrative	23		270,168			5,770			—		(23		)	275,938
Maintenance and utilities	—		81,451			1,056			—		—			82,507
Depreciation and amortization	8,744		149,905			3,079			—		—			161,728
Corporate expense	61,128		1,012			1,248			—		—			63,388
Project development, preopening and writedowns	3,979		2,227			2,525			—		—			8,731
Other operating items, net	352		1,355			—			—		—			1,707
Intercompany expenses	903		68,740			—			—		(69,643		)	—
Total operating costs and expenses	75,129		1,478,292			46,226			—		(69,666		)	1,529,981
Equity in earnings (losses) of subsidiaries	207,414		(857		)	—			—		(206,557		)	—
Operating income (loss)	187,312		292,495			(10,356		)	—		(206,557		)	262,894
Other expense (income)
Interest expense, net	127,344		981			19			—		—			128,344
Loss on early extinguishments and modifications of debt	853		—			—			—		—			853
Other, net	538		45			(52		)	—		—			531
Total other expense, net	128,735		1,026			(33		)	—		—			129,728
Income (loss) from continuing operations before income taxes	58,577		291,469			(10,323		)	—		(206,557		)	133,166
Income taxes benefit (provision)	48,466		(99,325		)	3,344			—		—			(47,515		)
Income (loss) from continuing operations, net of tax	107,043		192,144			(6,979		)	—		(206,557		)	85,651
Income from discontinued operations, net of tax	—		21,392			—			—		—			21,392
Net income (loss)	$	107,043	$	213,536		$	(6,979	)	$	—	$	(206,557	)	$	107,043
Comprehensive income (loss)	$	107,844	$	214,337		$	(6,979	)	$	—	$	(207,358	)	$	107,844

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Condensed Consolidating Statements of Operations - continued



	Nine Months Ended September 30, 2016
						Non-			Non-
						Guarantor			Guarantor
						Subsidiaries			Subsidiaries
			Guarantor			(100%			(Not 100%
(In thousands)	Parent		Subsidiaries			Owned)			Owned)		Eliminations			Consolidated
Net revenues	$	91,901	$	1,608,759		$	36,606		$	—	$	(108,113	)	$	1,629,153
Operating costs and expenses
Operating	1,200		839,405			32,313			—		—			872,918
Selling, general and administrative	37,203		199,534			4,945			—		4			241,686
Maintenance and utilities	—		75,675			1,036			—		—			76,711
Depreciation and amortization	6,375		134,485			2,971			—		—			143,831
Corporate expense	45,121		1,380			3,382			—		—			49,883
Project development, preopening and writedowns	11,205		(4,382		)	4,650			—		—			11,473
Impairments of assets	1,440		—			—			—		—			1,440
Other operating items, net	106		449			—			—		—			555
Intercompany expenses	903		106,119			1,095			—		(108,117		)	—
Total operating costs and expenses	103,553		1,352,665			50,392			—		(108,113		)	1,398,497
Equity in earnings (losses) of subsidiaries	372,953		(1,375		)	—			—		(371,578		)	—
Operating income (loss)	361,301		254,719			(13,786		)	—		(371,578		)	230,656
Other expense (income)
Interest expense, net	116,245		51,386			18			—		—			167,649
Loss on early extinguishments of debt	28,356		14,008			—			—		—			42,364
Other, net	1		196			(54		)	—		—			143
Total other expense, net	144,602		65,590			(36		)	—		—			210,156
Income (loss) from continuing operations before income taxes	216,699		189,129			(13,750		)	—		(371,578		)	20,500
Income taxes benefit (provision)	189,084		(14,845		)	(8		)	—		—			174,231
Income (loss) from continuing operations, net of tax	405,783		174,284			(13,758		)	—		(371,578		)	194,731
Income from discontinued operations, net of tax	—		211,052			—			—		—			211,052
Net income (loss)	$	405,783	$	385,336		$	(13,758	)	$	—	$	(371,578	)	$	405,783
Comprehensive income (loss)	$	406,537	$	386,090		$	(13,758	)	$	—	$	(372,332	)	$	406,537

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Condensed Consolidating Statements of Cash Flows



	Nine Months Ended September 30, 2017
							Non-			Non-
							Guarantor			Guarantor
							Subsidiaries			Subsidiaries
				Guarantor			(100%			(Not 100%
(In thousands)	Parent			Subsidiaries			Owned)			Owned)			Eliminations			Consolidated
Cash flows from operating activities
Net cash from operating activities	$	(39,365	)	$	370,417		$	(9,570	)	$	254		$	1,436		$	323,172
Cash flows from investing activities
Capital expenditures	(82,241		)	(78,801		)	(210		)	—			—			(161,252		)
Cash paid for acquisition, net of cash received	(1,153		)	—			—			—			—			(1,153		)
Net activity with affiliates	—			(361,220		)	—			—			361,220			—
Advances pursuant to development agreement	—			—			(35,108		)	—			—			(35,108		)
Other investing activities	—			492			—			—			—			492
Net cash from investing activities	(83,394		)	(439,529		)	(35,318		)	—			361,220			(197,021		)
Cash flows from financing activities
Borrowings under bank credit facility	463,300			—			—			—			—			463,300
Payments under bank credit facility	(628,211		)	—			—			—			—			(628,211		)
Debt financing costs, net	(2,700		)	—			—			—			—			(2,700		)
Net activity with affiliates	318,333			—			44,577			(254		)	(362,656		)	—
Share-based compensation activities, net	(1,993		)	—			—			—			—			(1,993		)
Shares repurchased and retired	(22,160		)	—			—			—			—			(22,160		)
Dividends paid	(5,653		)	—			—			—			—			(5,653		)
Other financing activities	590			(87		)	—			—			—			503
Net cash from financing activities	121,506			(87		)	44,577			(254		)	(362,656		)	(196,914		)
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 and cash equivalents	(1,253		)	(33,466		)	(311		)	—			—			(35,030		)
Cash and cash equivalents, beginning of period	1,212			189,364			3,286			—			—			193,862
Cash and cash equivalents, end of period	$	(41	)	$	155,898		$	2,975		$	—		$	—		$	158,832

BOYD GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016

______________________________________________________________________________________________________

Condensed Consolidating Statements of Cash Flows - continued



	Nine Months Ended September 30, 2016
							Non-			Non-
							Guarantor			Guarantor
							Subsidiaries			Subsidiaries
				Guarantor			(100%			(Not 100%
(In thousands)	Parent			Subsidiaries			Owned)			Owned)			Eliminations			Consolidated
Cash flows from operating activities
Net cash from operating activities	$	(87,625	)	$	319,428		$	16,353		$	—		$	8,750		$	256,906
Cash flows from investing activities
Capital expenditures	(29,012		)	(87,679		)	(639		)	—			—			(117,330		)
Cash paid for acquisition, net of cash received	(372,322		)	—			—			—			—			(372,322		)
Net activity with affiliates	—			212,344			—			—			(212,344		)	—
Other investing activities	—			704			2,015			—			—			2,719
Net cash from investing activities	(401,334		)	125,369			1,376			—			(212,344		)	(486,933		)
Cash flows from financing activities
Borrowings under bank credit facility	1,622,075			237,000			—			—			—			1,859,075
Payments under bank credit facility	(1,290,800		)	(899,750		)	—			—			—			(2,190,550		)
Proceeds from issuance of senior notes	750,000			—			—			—			—			750,000
Retirements of senior notes	(350,000		)	(350,000		)	—			—			—			(700,000		)
Debt financing costs, net	(40,718		)	—			—			—			—			(40,718		)
Premium and consent fees paid	(15,750		)	—			—			—			—			(15,750		)
Net activity with affiliates	(185,498		)	—			(17,875		)	(221		)	203,594			—
Share-based compensation activities, net	1,353			—			—			—			—			1,353
Net cash from financing activities	490,662			(1,012,750		)	(17,875		)	(221		)	203,594			(336,590		)
Cash flows from discontinued operations
Cash flows from operating activities	—			(26,596		)	—			—			—			(26,596		)
Cash flows from investing activities	—			594,080			—			—			—			594,080
Cash flows from financing activities	—			—			—			—			—			—
Net cash from discontinued operations	—			567,484			—			—			—			567,484
Net change in cash and cash equivalents	1,703			(469		)	(146		)	(221		)	—			867
Cash and cash equivalents, beginning of period	2			156,116			2,482			221			—			158,821
Cash and cash equivalents, end of period	$	1,705		$	155,647		$	2,336		$	—		$	—		$	159,688

NOTE 13. SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after September 30, 2017. During this period, up to the filing date, we did not identify any additional subsequent events, other than the payment of a cash dividend disclosed in Note 9, Stockholders’ Equity and Stock Incentive Plans, the effects of which would require disclosure or adjustment to our financial position or results of operations.

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

Executive Overview

We are a diversified operator of 24 wholly-owned gaming entertainment properties. Headquartered in Las Vegas, Nevada, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi. We view each operating property as an operating segment. For financial reporting purposes, we aggregate our wholly owned properties into the following three reportable segments:



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

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

Most of our gaming entertainment properties also include hotel, dining, retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the number and spending levels of customers at our properties.

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

Our industry is capital intensive, and we rely heavily on the ability of our properties to generate operating cash flow in order to fund maintenance capital expenditures, fund acquisitions, provide excess cash for future development, repay debt financing and associated interest costs, repurchase our debt or equity securities, pay income taxes and pay dividends.

Our Strategy

Our overriding strategy is to increase shareholder value by pursuing strategic initiatives that improve and grow our business.

Strengthening Our Balance Sheet

We are committed to finding opportunities to strengthen our balance sheet through diversifying and increasing cash flow to reduce our debt.

Operating Efficiently

We are committed to operating more efficiently and endeavor to prevent unneeded expense in our business. As we continue to experience revenue growth in both our gaming and non-gaming operations, the efficiencies of our business model position us to flow a substantial portion of the revenue growth directly to the bottom line.

Evaluating Acquisition Opportunities

Our evaluations of potential transactions and acquisitions are strategic, deliberate, and disciplined. Our goal is to identify and pursue opportunities that are a good fit for our business, deliver a solid return for shareholders, and are available at the right price.

Maintaining Our Brand

The ability of our employees to deliver great customer service helps distinguish our Company and our brands from our competitors. Our employees are an important reason that our customers continue to choose our properties over the competition across the country.

Our Key Performance Indicators

We use several key performance measures to evaluate the operations of our properties. These key performance measures include the following:

•

Gaming revenue measures: slot handle, which means the dollar amount wagered in slot machines, and table game drop, which means the total amount of cash deposited in table games drop boxes, plus the sum of markers issued at all table games, are measures of volume and/or market share. Slot win and table game hold, which mean the difference between customer wagers and customer winnings on slot machines and table games, respectively, represent the amount of wagers retained by us and recorded as gaming revenues. Slot win percentage and table game hold percentage, which are not fully controllable by us, represent the relationship between slot handle to slot win and table game drop to table game hold, respectively.


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


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

RESULTS OF OPERATIONS

Overview



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2017		2016		2017		2016
Net revenues	$	587.7	$	531.9	$	1,792.9	$	1,629.2
Operating income	78.7		67.9		262.9		230.7
Income from continuing operations, net of tax	23.0		161.9		85.7		194.7
Income from discontinued operations, net of tax	—		180.7		21.4		211.1
Net income	23.0		342.6		107.0		405.8

Net Revenues

Net revenues increased $55.8 million, or 10.5%, for the three months ended September 30, 2017, compared to the prior year period due primarily to the acquisitions of Aliante and the Cannery Properties (the "Acquisitions") in September and December 2016, respectively. In addition, net revenues related to the Las Vegas Locals segment, excluding the Acquisitions, increased by $4.7 million from the prior year comparable period. These increases are offset by decreases in net revenues in the Midwest and South segment. Hurricane Harvey impacted business volumes for several weeks beginning in late August at Delta Downs and to a lesser extent at several of our other Louisiana and Mississippi properties. In addition, Evangeline Downs experienced declines in revenue due to localized economic weakness in its market.

Net revenues increased $163.7 million, or 10.0%, for the nine months ended September 30, 2017, compared to the prior year period due primarily to the Acquisitions. In addition, net revenues related to the Las Vegas Locals, excluding the Acquisitions, and the Downtown Las Vegas segments increased by $8.7 million and $4.7 million, respectively, from the prior year comparable period. These increases are offset by decreases in net revenues in the Midwest and South segment, primarily at Evangeline Downs and Amelia Belle.

Operating Income

Operating income increases of $10.7 million, or 15.8%, during the three months ended September 30, 2017, compared to the corresponding period of the prior year, reflect the impact of the Acquisitions, as well as the impact of our continuing cost control and operational efficiencies efforts. Operating margins in gaming, food and beverage, rooms and other changed slightly and are discussed in detail below.

The $32.2 million, or 14.0%, increase in operating income during the nine months ended September 30, 2017, compared to the corresponding period of the prior year reflects the impact of the Acquisitions, as well as the impact of our continuing cost control efforts. Operating margins in gaming, food and beverage, rooms and other all changed slightly and are discussed in detail below. Corporate expense increased $13.5 million over the comparable prior year period due to costs related to creation of back-of-house support functions as part of the implementation of our business improvement initiatives. Project development, preopening and writedowns declined by $2.7 million as compared to the prior year period due primarily to the Acquisitions that occurred in the prior period, with no similar transactions in the current period.

Income from Continuing Operations, net of tax

Income from continuing operations, net of tax for the three months ended September 30, 2017 was $23.0 million, as compared to $161.9 million in the comparable prior year period, resulting in a decrease of $138.9 million. This decrease is attributable to a $202.3 million change in the income tax provision primarily due to the release of a valuation allowance on our federal and unitary state income tax net operating loss carryforwards and deferred tax assets in the prior year. Partially offsetting this benefit, is a $41.2 million decline in loss on early extinguishments of debt compared to the prior year period due to the modification of the Boyd Gaming Credit Facility, redemption of our 9.0% senior notes due 2018 and Peninsula Gaming's 8.375% senior notes due 2018, and the extinguishment of the Peninsula Gaming bank credit facility. In addition, operating income increased $10.7 million from the prior year comparable period for those factors mentioned above and interest expense, net of amounts capitalized, declined by $11.9 million due to a decrease in average outstanding borrowings of $28.8 million, along with a decline in the weighted average interest rate of 0.6%.

Income from continuing operations, net of tax for the nine months ended September 30, 2017 was $85.7 million, as compared to $194.7 million in the comparable prior year period, a decrease of $109.1 million. The decrease is due to a $221.7 million change in the income tax provision. As discussed above, there was an income tax benefit of $190.4 million in the prior year related to the release of a valuation allowance on our federal and unitary state income tax net operating loss carryforwards and other deferred tax assets. Partially offsetting the benefit, is a $41.5 million decrease in loss on early extinguishments and modifications of debt as compared to the prior year. In addition, operating income increased $32.2 million from the prior year for those factors mentioned above and interest expense, net of amounts capitalized, declined by $40.4 million due to a decline in average outstanding borrowings of $191.2 million, along with a decline in the weighted average interest rate of 1.0%.

Income from Discontinued Operations, net of tax

Income from discontinued operations, net of tax, reflects the results of our equity method investment in Borgata, which we sold in August 2016. The results for the nine months ended September 30, 2017 include property tax recovery proceeds of $36.2 million related to the final settlement of Borgata's property tax disputes with Atlantic City. The corresponding period of the prior year, includes the $181.7 million after-tax gain on the sale of our equity interest, a $4.3 million property tax refund received after the sale, and our share of the operations of Borgata through the date of sale.

Net Income

Net income for the three months ended September 30, 2017 was $23.0 million, compared with net income of $342.6 million for the corresponding period of the prior year. The $319.6 million change is primarily due to the $138.9 million decrease in income from continuing operations, net of tax (as discussed above) along with a $180.7 million decrease in income from discontinued operations from the prior year comparable period.

Net income for the nine months ended September 30, 2017 was $107.0 million, compared with net income of $405.8 million for the corresponding period of the prior year. The $298.7 million change is primarily due to the $109.1 million decrease in income from continuing operations, net of tax (as discussed above) along with a $189.7 million decrease in income from discontinued operations from the prior year comparable period.

Operating Revenues

We derive the majority of our gross revenues from our gaming operations, which produced approximately 75% of gross revenues for each of the three and nine month periods ended September 30, 2017 and 2016. Food and beverage gross revenues represent our next most significant revenue source, generating approximately 13% of gross revenues for each of the three and nine month periods ended September 30, 2017 and 2016. Room revenues and other revenues separately contributed less than 10% of gross revenues during these periods.



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2017			2016			2017			2016
REVENUES
Gaming	$	487.4		$	443.6		$	1,482.4		$	1,359.0
Food and beverage	85.6			74.3			261.4			227.0
Room	48.1			43.0			143.7			128.2
Other	31.6			29.5			98.6			90.8
Gross revenues	652.7			590.4			1,986.1			1,805.0
Less promotional allowances	65.0			58.5			193.2			175.8
Net revenues	$	587.7		$	531.9		$	1,792.9		$	1,629.2

COSTS AND EXPENSES
Gaming	$	229.7		$	217.1		$	691.2		$	658.4
Food and beverage	47.5			40.7			146.5			124.7
Room	13.5			11.2			40.1			33.0
Other	18.6			18.7			58.2			56.8
Total costs and expenses	$	309.3		$	287.7		$	936.0		$	872.9

MARGINS
Gaming	52.9		%	51.1		%	53.4		%	51.6		%
Food and beverage	44.5		%	45.1		%	44.0		%	45.0		%
Room	71.9		%	74.0		%	72.1		%	74.2		%
Other	41.1		%	36.9		%	41.0		%	37.4		%

Gaming

Gaming revenues are comprised primarily of the net win from our slot machine operations and table games. The $43.8 million, or 9.9%, increase in gaming revenues during the three months ended September 30, 2017, as compared to the corresponding period of the prior year, was primarily due to the addition of the Acquisitions to the Las Vegas Locals segment. Partially offsetting this increase, is a decrease in gaming revenues in the Midwest and South segment. The Midwest and South segment experienced a 1.0% decrease in slot handle and a 0.8% decrease in table game drop.

The $123.4 million, or 9.1%, increase in gaming revenues during the nine months ended September 30, 2017, as compared to the corresponding period of the prior year, was primarily due to the addition of the Acquisitions to the Las Vegas Locals segment. Partially offsetting this increase, is a decrease in gaming revenues in the Midwest and South segment. The Midwest and South segment experienced a 2.2% decrease in slot handle and a 3.3% decrease in table game drop.

Food and Beverage

Food and beverage revenues increased $11.4 million, or 15.3%, during the three months ended September 30, 2017, as compared to the corresponding period of the prior year. The increase in food and beverage revenues was primarily due to the addition of the Acquisitions. Food covers increased 34.0% and average check increased 16.0% in the Las Vegas Locals segment. Partially offsetting this increase is a decrease of $1.5 million in food and beverage revenues in the Midwest and South segment, primarily due to a decrease in average check of 3.5% and food covers of 4.4%. Food and beverage expenses increased by $6.7 million, or 16.5%, during the three months ended September 30, 2017, as compared to the corresponding period of the prior year, primarily due to the addition of the Acquisitions.

Food and beverage revenues increased $34.5 million, or 15.2%, during the nine months ended September 30, 2017, as compared to the corresponding period of the prior year. The increase in food and beverage revenues was primarily due to the addition of the Acquisitions. Food covers increased 30.8% and average check increased 16.2% in the Las Vegas Locals segment. Partially offsetting this increase is a decrease of $3.5 million in food and beverage revenues in the Midwest and South segment, primarily due to a decrease in food covers of 5.3%. Food and beverage expenses increased by $21.9 million, or 17.5%, during the nine months ended September 30, 2017, as compared to the corresponding period of the prior year, primarily due to the addition of the Acquisitions.

Room

Room revenues increased by $5.1 million, or 11.8%, during the three months ended September 30, 2017, as compared to the corresponding period of the prior year due primarily to the addition of the Acquisitions in the Las Vegas Locals segment. The average daily rate increased 11.7% while hotel occupancy decreased 3.7% for the Las Vegas Locals segment. Room expenses increased by $2.2 million, or 19.8%, during the three months ended September 30, 2017, as compared to the corresponding period of the prior year, due primarily to the addition of the Acquisitions.

Room revenues increased by $15.4 million, or 12.0%, during the nine months ended September 30, 2017, as compared to the corresponding period of the prior year due primarily to the addition of the Acquisitions in the Las Vegas Locals segment. The average daily rate increased 11.9% while hotel occupancy decreased 1.4% for the Las Vegas Locals segment. Room expenses increased by $7.0 million, or 21.2%, during the nine months ended September 30, 2017, as compared to the corresponding period of the prior year, primarily due to the addition of the Acquisitions.

Other

Other revenues relate to patronage visits at the amenities at our properties, including entertainment and nightclub revenues, retail sales, theater tickets and other venues. Other revenues increased $2.1 million, or 7.0% and $7.9 million, or 8.7% during the three and nine months ended September 30, 2017, respectively, as compared to the prior year due primarily to the Acquisitions, which accounted for an increase to other revenue in the Las Vegas Locals segment.

Revenues and Adjusted EBITDA by Reportable Segment

We determine each of our properties' profitability based upon Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), which represents earnings before interest expense, income taxes, depreciation and amortization, deferred rent, share-based compensation expense, project development, preopening and writedowns expenses, impairments of assets and other operating items, net, as applicable. Reportable Segment Adjusted EBITDA is the aggregate sum of the Adjusted EBITDA for each of the properties comprising our Las Vegas Locals, Downtown Las Vegas and Midwest and South segments before net amortization, preopening and other items. Results for Downtown Las Vegas include the results of our travel agency and captive insurance company in Hawaii. Corporate expense represents unallocated payroll, professional fees, aircraft expenses and various other expenses not directly related to our casino and hotel operations. Furthermore, corporate expense excludes its portion of share-based compensation expense.

EBITDA is a commonly used measure of performance in our industry that we believe, when considered with measures calculated in accordance with GAAP, provides our investors a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Management has historically adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results.

The following table presents our net revenues and Adjusted EBITDA by Reportable Segment:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2017			2016			2017			2016
Net revenues
Las Vegas Locals	$	207.3		$	148.9		$	641.3		$	462.2
Downtown Las Vegas	58.8			56.6			179.1			174.4
Midwest and South	321.6			326.4			972.5			992.6
Net revenues	$	587.7		$	531.9		$	1,792.9		$	1,629.2

Adjusted EBITDA (1)
Las Vegas Locals	$	56.1		$	36.2		$	185.5		$	123.6
Downtown Las Vegas	11.6			10.0			37.7			37.0
Midwest and South	90.1			90.6			277.9			281.3
Total Reportable Segment Adjusted EBITDA	157.8			136.8			501.1			441.9
Corporate expense	(17.5		)	(14.9		)	(53.9		)	(44.4		)
Adjusted EBITDA	$	140.3		$	121.9		$	447.2		$	397.5

(1) Refer to Note 11, Segment Information, in the notes to the condensed consolidated financial statements (unaudited) for a reconciliation of Total Reportable Segment Adjusted EBITDA to operating income, as reported in accordance with GAAP in our accompanying condensed consolidated statements of operations.

Las Vegas Locals

Net revenues increased $58.4 million or 39.2%, and $179.1 million or 38.7%, during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding period of the prior year primarily due to the addition of the Acquisitions.

Adjusted EBITDA increased by $19.9 million or 55.1%, and $61.8 million or 50.0%, for the three and nine months ended September 30, 2017, respectively, over the comparable prior year period due primarily to the addition of the Acquisitions and our on-going cost control efforts.

Downtown Las Vegas

Net revenues increased $2.2 million or 3.9%, and $4.7 million or 2.7%, during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding period of the prior year, reflecting revenue increases in all departmental categories. We continue to tailor our marketing programs in the Downtown segment to cater to our Hawaiian market. Our Hawaiian market represented approximately 51% and 47% during the three months ended September 30, 2017 and 2016, respectively, and 51% for each of the nine months ended September 30, 2017 and 2016, of our occupied rooms in this segment.

Adjusted EBITDA increased by $1.5 million or 15.2%, and $0.8 million or 2.2%, during the three and nine months ended September 30, 2017, respectively, over the comparable prior year period due in part to the early completion of the 300-room hotel renovation at the California property in August 2017.

Midwest and South

Net revenues decreased 1.5% during the three months ended September 30, 2017, as compared to the corresponding period of the prior year, primarily due to a gaming revenue decrease resulting from a 1.0% decrease in slot handle and a 0.8% decrease in table game drop. Due to the decline in gaming revenue, there was a corresponding decrease in promotional allowances of $2.2 million. The results for the segment were impacted by Evangeline Downs experiencing localized economic weakness. In addition, weather related to Hurricane Harvey and heightened promotional activity in the Lake Charles market impacted Delta Downs, offsetting revenue gains realized from the additional hotel rooms that opened in late fourth quarter 2016.

Net revenues decreased 2.0% during the nine months ended September 30, 2017, as compared to the corresponding period of the prior year, primarily due to a gaming revenue decrease resulting from a 2.2% decrease in slot handle and a 3.3% decrease in table game drop. Due to the decline in gaming revenue, there was a corresponding decrease in promotional allowances of $6.0 million. The results for the segment were impacted by Evangeline Downs which is experiencing localized economic weakness. These declines were partially offset by room revenue growth of $2.2 million at Delta Downs due to the opening of the new hotel tower and newly renovated rooms. The average daily rate increased by 21.1% over the prior year.

The segment reported a 0.6% and 1.2% decrease in Adjusted EBITDA for the three and nine months ended September 30, 2017, respectively, as compared to the corresponding prior year period, due to the decrease in revenues offset by our cost control efforts.

Other Operating Costs and Expenses

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2017		2016		2017		2016
Selling, general and administrative	$	91.3	$	80.8	$	275.9	$	241.7
Maintenance and utilities	30.2		27.9		82.5		76.7
Depreciation and amortization	55.2		47.9		161.7		143.8
Corporate expense	19.3		15.9		63.4		49.9
Project development, preopening and writedowns	3.0		3.7		8.7		11.5
Impairments of assets	—		—		—		1.4
Other operating items, net	0.8		—		1.7		0.6

Selling, General and Administrative

Selling, general and administrative expenses, as a percentage of gross revenues, were 14.0% and 13.7% during the three months ended September 30, 2017 and 2016, respectively, and 13.9% and 13.4% during the nine months ended September 30, 2017, respectively. We continue to focus on disciplined and targeted marketing spend, and our ongoing cost containment efforts.

Maintenance and Utilities

Maintenance and utilities expenses, as a percentage of gross revenues, were relatively consistent at 4.6% and 4.7% during the three months ended September 30, 2017 and 2016, respectively, and 4.2% during each of the nine months ended September 30, 2017 and 2016.

Depreciation and Amortization

Depreciation and amortization expenses, as a percentage of gross revenues, were 8.5% and 8.1% during the three months ended September 30, 2017 and 2016, respectively. Depreciation and amortization expense increased $7.3 million for the three months ended September 30, 2017, compared to the respective prior year period.

Depreciation and amortization expenses, as a percentage of gross revenues, were 8.1% and 8.0% during the nine months ended September 30, 2017 and 2016, respectively. Depreciation and amortization expense increased $17.9 million for the nine months ended September 30, 2017, compared to the respective prior year period.

The overall increase in the periods presented is primarily due to the Acquisitions with the remaining increase driven by additional depreciation for our recent capital expenditures.

Corporate Expense

Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino and/or hotel operations, in addition to the corporate portion of share-based compensation expense. Corporate expense represented 3.0% and 2.7% of gross revenues during the three months ended September 30, 2017 and 2016, respectively, and 3.2% and 2.8% of gross revenues during the nine months ended September 30, 2017 and 2016, respectively. Elevated corporate expenses, as compared to the prior year, include increased costs related to creation of consolidated back-of-house support functions as part of the implementation of the Company’s business improvement initiatives.

Project Development, Preopening and Writedowns

Project development, preopening and writedowns represent: (i) certain costs incurred and recoveries realized related to the activities associated with various acquisition opportunities, strategic initiatives, dispositions and other business development activities in the ordinary course of business; (ii) certain costs of start-up activities that are expensed as incurred in our ongoing efforts to develop gaming activities in new jurisdictions and expenses related to other new business development activities that do not qualify as capital costs; and (iii) asset write-downs. The decreases in such costs in the current year periods as compared to the prior year periods are due primarily to the Acquisitions that occurred in the prior periods, with no similar transactions in the current periods.

Impairments of Assets

Impairments of assets for the nine months ended September 30, 2016, included non-cash impairment charges related to non-operating assets.

Other Operating Items, net

Other operating items, net, is generally comprised of miscellaneous non-recurring operating charges, including direct and non-reimbursable costs associated with natural disasters and severe weather, including hurricane and flood expenses and subsequent recoveries of such costs, as applicable.

Other Expenses

Interest Expense, net

The following table summarizes information with respect to our interest expense on outstanding indebtedness:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2017			2016			2017			2016
Interest Expense, net	$	42.9		$	54.2		$	128.3		$	167.6
Average Long-Term Debt Balance⁽¹⁾	3,165.3			3,194.2			3,234.7			3,425.9
Weighted Average Interest Rates	5.0		%	5.6		%	4.3		%	5.3		%

⁽¹⁾ Average debt balance calculation does not include the related discounts or deferred finance charges.

Interest expense, net of capitalized interest and interest income, for the three and nine months ended September 30, 2017, decreased $11.3 million or 20.9%, and $39.3 million or 23.4%, respectively, as compared to the prior year, due to the redemptions of our 9.0% senior notes and the Peninsula 8.375% senior notes, the payoff of the Peninsula bank credit facility, the refinancing of the Boyd Gaming Credit Facility in September 2016 and the refinancing of Term B Loans in March 2017. These transactions led to a reduction in the average long-term debt balance of $28.8 million and a reduction in the weighted average interest rate from 5.6% to 5.0% for the three months ended September 30, 2017. For the nine months ended September 30, 2017, the average long-term debt balance decreased $191.2 million and the weighted average interest rate was reduced by 1.0% as a result of these transactions.

Loss on Early Extinguishments and Modifications of Debt

We incurred charges of $0.3 million and $0.9 million during the three and nine months ended September 30, 2017, respectively, due to costs incurred related to the Refinancing Amendment and for debt financing costs written off, which represents the ratable reduction in borrowing capacity due to optional prepayments of the Refinancing Term B Loans of $20.0 million for the three months ended September 30, 2017 and $25.0 million for the nine months ended September 30, 2017. We incurred charges of $41.5 million and $42.4 million during the three and nine months ended September 30, 2016, respectively, related to the modification of the Boyd Gaming Credit Facility, redemption of our 9.0% senior notes due 2018 and Peninsula Gaming's 8.375% senior notes due 2018, and the extinguishment of the Peninsula Gaming bank credit facility.

The components of the loss on early extinguishments and modifications of debt, are as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2017		2016		2017		2016
9.00% Senior Notes premium and consent fees	$	—	$	15.7	$	—	$	15.8
9.00% Senior Notes deferred finance charges	—		6.0		—		6.0
8.375% Senior Notes deferred finance charges	—		4.5		—		4.5
Refinancing Amendment	—		—		0.6		—
Boyd Gaming Credit Facility deferred finance charges	0.3		6.6		0.3		6.6
Peninsula bank credit facility deferred finance charges	—		8.7		—		9.5
Total loss on early extinguishments and modifications of debt	$	0.3	$	41.5	$	0.9	$	42.4

Income Taxes

of unrecognized tax benefits due to statute expirations and the reversal of related accrued interest. These benefits were offset by state taxes resulting in an effective tax rate greater than the federal statutory rate.

During the nine months ended September 30, 2016, our effective tax rate was favorably impacted by the release of a valuation allowance on our federal and unitary state net operating loss carryforwards and other deferred tax assets. In performing our third quarter 2016 valuation allowance analysis, we determined that the positive evidence in favor of releasing the valuation allowance, particularly evidence that was objectively verifiable, outweighed the negative evidence. We utilized a rolling twelve quarters of pretax income adjusted for permanent book to tax differences as a measure of cumulative results in recent years. We transitioned from a cumulative loss position to a cumulative income position over the rolling twelve quarters ended September 30, 2016. Other evidence considered in the analysis included, but was not limited to, a trend reflective of improvement in recent earnings, forecasts of profitability and taxable income and the reversal of existing temporary differences. The change in these conditions during the three months ended September 30, 2016 provided positive evidence that supported the release of the valuation allowance against a significant portion of our deferred tax assets. As such, we concluded that it was more likely than not that the benefit from these deferred tax assets would be realized, and we released $190.4 million of valuation allowance on our federal and unitary state income tax net operating loss carryforwards and other deferred tax assets during the third quarter of 2016.

LIQUIDITY AND CAPITAL RESOURCES

Financial Position

We operate with minimal or negative levels of working capital in order to minimize borrowings and related interest costs. At September 30, 2017 and December 31, 2016, we had balances of cash and cash equivalents of $158.8 million and $193.9 million, respectively. Despite such amounts of cash, we had working capital deficits of $104.4 million and $57.6 million at such respective dates.

Our Credit Facility generally provides all necessary funds for the day-to-day operations, interest and tax payments, as well as capital expenditures. On a daily basis, we evaluate our cash position and adjust the balance under our bank credit facility as necessary, by either borrowing or paying down debt with excess cash. We also plan the timing and the amounts of capital expenditures. We believe that the borrowing capacity under the bank credit facility, subject to restrictive covenants, and cash flows from operating activities will be sufficient to meet our projected operating and maintenance capital expenditures for at least the next twelve months. The source of funds available to us for repayment of debt or to fund development projects is derived primarily from cash flows from operations and availability under our bank credit facility, to the extent availability exists after we meet working capital needs, and subject to restrictive covenants. See "Indebtedness", below, for further detail regarding funds available through our credit facility.

The Company could also seek to secure additional working capital, repay respective current debt maturities, or fund respective development projects, in whole or in part, through incremental bank financing and additional debt or equity offerings.

Cash Flows Summary



	Nine Months Ended
	September 30,
(In millions)	2017			2016
Net cash provided by operating activities	$	323.2		$	256.9

Cash flows from investing activities
Capital expenditures	(161.2		)	(117.3		)
Cash paid for acquisition, net of cash received	(1.2		)	(372.3		)
Advances pursuant to development agreement	(35.1		)	—
Other investing activities	0.5			2.7
Net cash used in investing activities	(197.0		)	(486.9		)

Cash flows from financing activities
Net payments under Boyd Gaming bank credit facility	(164.9		)	331.3
Net payments under Peninsula bank credit facility	—			(662.8		)
Retirements of senior notes	—			(700.0		)
Proceeds from issuance of senior notes	—			750.0
Dividends paid	(5.7		)	—
Shares repurchased and retired	(22.2		)	—
Other financing activities	(4.1		)	(55.1		)
Net cash used in financing activities	(196.9		)	(336.6		)
Net cash provided by discontinued operations	35.7			567.5
Increase (decrease) in cash and cash equivalents	$	(35.0	)	$	0.9

Cash Flows from Operating Activities

During the nine months ended September 30, 2017 and 2016, we generated net operating cash flow of $323.2 million and $256.9 million, respectively. Generally, operating cash flows increased during 2017 as compared to the prior year period due to the flow through effect of higher revenues, including the impact of Acquisitions, and the timing of working capital spending.

Cash Flows from Investing Activities

Our industry is capital intensive and we use cash flows for acquisitions, facility expansions, investments in future development or business opportunities and maintenance capital expenditures.

During the nine months ended September 30, 2017 and 2016, we incurred net cash outflows for investing activities of $197.0 million and $486.9 million, respectively. The decrease in outflows as compared to the prior year period is due to the acquisition of Aliante, which closed on September 27, 2016. In January 2017, we paid $35.1 million for the acquisition of land that is the intended site of the Wilton Rancheria casino, pursuant to our development agreement with the Wilton Rancheria Tribe.

Cash Flows from Financing Activities

We rely upon our financing cash flows to provide funding for investment opportunities, repayments of obligations and ongoing operations.

The net cash outflows for financing activities in the nine months ended September 30, 2017, reflect primarily the use of excess cash to reduce our outstanding debt, repurchase outstanding common stock under our share repurchase program and pay cash dividends to our shareholders. The net cash outflows in the nine months ended September 30, 2016 reflect primarily the redemption of our 9.00% senior notes due 2018 and Peninsula Gaming's 8.375% senior notes due 2018, and extinguishment of the Peninsula Gaming bank credit facility during the period, using the net cash proceeds from the sale of our equity interest in Borgata, and cash flow from the Refinancing Amendment.

Cash Flows from Discontinued Operations

The decrease in cash flows provided by discontinued operations for the nine months ended September 30, 2017, compared to the corresponding period of the prior year, is due to $589 million of cash proceeds received from the sale of our 50% equity interest in the parent company of Borgata to MGM in August 2016.

Indebtedness

The outstanding principal balances of long-term debt, before unamortized discounts and fees, and the changes in those balances are as follows:



(In millions)	September 30, 2017		December 31, 2016		Decrease
Boyd Gaming Debt
Bank credit facility	$	1,617.6	$	1,782.5	$	(164.9	)
6.875% senior notes due 2023	750.0		750.0		—
6.375% senior notes due 2026	750.0		750.0		—
Other	0.5		0.6		(0.1		)
Total long-term debt	3,118.1		3,283.1		(165.0		)
Less current maturities	23.9		30.3		(6.4		)
Long-term debt, net of current maturities	$	3,094.2	$	3,252.8	$	(158.6	)

The amount of current maturities includes certain non-extending balances scheduled to be repaid within the next twelve months under the bank credit facilities.

Boyd Gaming Debt

Credit Facility - Refinancing Amendment

Interest and Fees

Optional and Mandatory Prepayments

Amounts Outstanding

The principal amounts under the Credit Facility are comprised of the following:



	September 30,		December 31,
(In millions)	2017		2016
Revolving Credit Facility	$	135.0	$	245.0
Term A Loan	213.7		222.2
Refinancing Term B Loans	1,233.2		—
Term B-1 Loan	—		271.8
Term B-2 Loan	—		997.5
Swing Loan	35.7		46.0
Total outstanding principal amounts under the Credit Facility	$	1,617.6	$	1,782.5

The blended interest rate for outstanding borrowings under the Credit Facility was 3.5% at September 30, 2017 and 3.4% at December 31, 2016.

Debt Service Requirements

Debt service requirements under our current outstanding senior notes consist of semi-annual interest payments (based upon fixed annual interest rates ranging from 6.375% to 6.875%) and principal repayments of our 6.875% senior notes due May 2023, and our 6.375% senior notes due April 2026.

Covenant Compliance

As of September 30, 2017, we believe that we were in compliance with the financial and other covenants of our debt instruments.

The indentures governing the senior notes contain provisions that allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, the fixed charge coverage ratio (as defined in the respective indentures, essentially a ratio of our consolidated EBITDA to fixed charges, including interest) for the trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Should this provision prohibit the incurrence of additional debt, we may still borrow under our existing credit facility, as well as from other funding sources as provided under our debt agreements.

Share Repurchase Program

Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. We are subject to certain limitations regarding the repurchase of common stock, such as restricted payment limitations related to our outstanding notes and Credit Facility. Purchases under our stock repurchase program can be discontinued at any time at our sole discretion. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our Credit Facility. In July 2008, our Board of Directors authorized an amendment to our existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. The Board of Directors reaffirmed this program in May 2017. We are not obligated to purchase any shares under our stock repurchase program. During the nine months ended September 30, 2017, we repurchased 0.9 million shares of our common stock. There were no common stock repurchases for the nine months ended September 30, 2016. We are currently authorized to repurchase up to an additional $69.9 million in shares of our common stock under the share repurchase program.

We have in the past, and may in the future, acquire our debt or equity securities, through open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as we may determine.

Quarterly Dividend Program

Other Items Affecting Liquidity

We anticipate funding our capital requirements using cash on hand, cash flows from operations and availability under our Revolving Credit Facility, to the extent availability exists after we meet our working capital needs for the next twelve months. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. The outcome of the specific matters discussed herein, including our commitments and contingencies, may also affect our liquidity.

Commitments

Capital Spending and Development

We currently estimate that our annual cash capital requirements to perform on-going refurbishment and maintenance at our properties to maintain our quality standards ranges from between $140 million and $160 million.

In addition, we continue to pursue other potential development projects that may require us to invest significant amounts of capital. We continue to work with the Wilton Rancheria Tribe (the "Tribe"), a federally-recognized Native American tribe located about 30 miles southeast of Sacramento, California, to develop and manage a gaming entertainment complex. In January 2017, we funded the acquisition of land that is the intended site of the Wilton Rancheria casino for $35.1 million and, in February 2017, the land was placed into trust by the U.S. Bureau of Indian Affairs for the benefit of the Tribe. 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.

In March 2017, The Orleans Hotel and Casino exercised an option in its lease agreement to purchase the land subject to the lease for $43.0 million and terminated the lease.

Including the items above, total capital spending for 2017 is expected to range between $235 million and $255 million. We fund our capital expenditures through our credit facility and operating cash flows.

Contingencies

Legal Matters

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

Other Opportunities

We regularly investigate and pursue additional expansion opportunities in markets where casino gaming is currently permitted. We also pursue expansion opportunities in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. Such expansions will be affected and determined by several key factors, which may include the following:


•	the outcome of gaming license selection processes;


•	the approval of gaming in jurisdictions where we have been active but where casino gaming is not currently permitted;


•	identification of additional suitable investment opportunities in current gaming jurisdictions; and


•	availability of acceptable financing.

Additional projects may require us to make substantial investments or may cause us to incur substantial costs related to the investigation and pursuit of such opportunities, which investments and costs we may fund through cash flow from operations or availability under our Credit Facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources.

Off Balance Sheet Arrangements

There have been no material changes to our off balance sheet arrangements as defined in Item 303(a)(4)(ii) and described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 23, 2017.

Critical Accounting Policies

There have been no material changes, other than the adoption of ASU 2017-04, to our critical accounting policies described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the period ended December 31, 2016, as filed with the SEC on February 23, 2017.

Recently Issued Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, see Note 2, Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements, in the notes to the condensed consolidated financial statements (unaudited).

Important Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements contain words such as "may," "will," "might," "expect," "believe," "anticipate," "could," "would," "estimate," "pursue," "target," "project," "intend," "plan," "seek," "should," "assume," and "continue," or the negative thereof or comparable terminology. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include:


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


•	The risk that our acquisitions and other expansion opportunities divert management’s attention or incur substantial costs, or that we are otherwise unable to develop, profitably manage or successfully integrate the businesses we acquire.


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


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


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


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


•	The risk that negative industry or economic trends, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business, may result in significant write-downs or impairments in future periods.


•	The risk that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other adverse actions against any of our casino operations.


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


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


•	The effects of federal, state and local laws affecting our business such as the regulation of smoking, the regulation of directors, officers, key employees and partners and regulations affecting business in general.


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


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


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


•	Financial community and rating agency perceptions of us, and the effect of economic, credit and capital market conditions on the economy and the gaming and hotel industry.


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


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


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


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


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


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

Additional factors that could cause actual results to differ are discussed in Part I. Item 1A. Risk Factors of our Annual Report on Form 10-K for the period ended December 31, 2016, and in other current and periodic reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not hold any market risk sensitive instruments for trading purposes. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market, short-term and long-term LIBOR rates, and short-term Eurodollar rates, and their potential impact on our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our Credit Facility. We do not currently utilize derivative financial instruments for trading or speculative purposes.

As of September 30, 2017, our long-term variable-rate borrowings represented approximately 51.9% of total long-term debt. Based on September 30, 2017 debt levels, a 100 basis point change in the Eurodollar rate or the base rate would cause our annual interest costs to change by approximately $16.2 million.

See also "Liquidity and Capital Resources" above.

Item 4. Controls and Procedures

As of the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

There were no material changes from the risk factors previously disclosed in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table discloses share repurchases that we have made pursuant to our share repurchase program during the three months ended September 30, 2017. For additional information, see below under Share Repurchase Program.



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan	Approximate Dollar Value That May Yet Be Purchased Under the Plan
July 1, 2017 through July 31, 2017	153,652	$	25.36	153,652	$	77,063,563
August 1, 2017 through August 31, 2017	137,173	26.04		137,173	73,491,702
September 1, 2017 through September 30, 2017	137,904	26.12		137,904	69,889,449
Totals	428,729			428,729	$	69,889,449

Share Repurchase Program

On May 2, 2017, the Company announced that its Board of Directors had reaffirmed the Company’s existing share repurchase program, which as of September 30, 2017, had $69.9 million remaining. The share repurchase program does not have an expiration date. We are not obligated to purchase any shares under our stock repurchase program. Subject to applicable corporate securities laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted. We intend to fund the repurchases under the stock repurchase program with existing cash resources and availability under our bank credit facility.

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

The Company intends to make purchases of its common stock from time to time under this program 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.


Item 6.	Exhibits



Exhibit Number	Document of Exhibit	Method of Filing
2.1	Agreement and Plan of Merger entered into as of April 21, 2016, by and among Boyd Gaming Corporation, Boyd TCII Acquisition, LLC, and ALST Casino Holdco, LLC. †	Incorporated by reference to Exhibit 2.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

2.2	Membership Interest Purchase Agreement entered into as of April 25, 2016, by and among Boyd Gaming Corporation, The Cannery Hotel and Casino, LLC, Nevada Palace, LLC, and Cannery Casino Resorts, LLC. †	Incorporated by reference to Exhibit 2.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

2.3	Equity Purchase Agreement entered into as of May 31, 2016, by and among MGM Resorts International, Boyd Atlantic City, Inc., and Boyd Gaming Corporation. †	Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the SEC on June 2, 2016.

2.4	First amendment to Equity Purchase Agreement entered into as of July 19, 2016, by and among MGM Resorts International, Boyd Atlantic City, Inc., and Boyd Gaming Corporation.	Incorporated by reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K filed with the SEC on August 5, 2016.

2.5	First Amendment to Agreement and Plan of Merger, dated as of September 26, 2016, by and among Boyd Gaming Corporation, Boyd TCII Acquisition, LLC, and ALST Casino Holdco, LLC.	Incorporated by reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K filed with the SEC on September 27, 2016.

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

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

32.1	Certification of the Chief Executive Officer of the Registrant pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. § 1350.	Furnished electronically herewith

32.2	Certification of the Chief Financial Officer of the Registrant pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. § 1350.	Furnished electronically herewith

101	The following materials from Boyd Gaming Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Operations for the nine months ended September 30, 2017 and 2016, (iii) Condensed Consolidated Statements of Changes in Stockholders' Equity for the nine months ended September 30, 2017 and 2016, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (vi) Notes to Condensed Consolidated Financial Statements.	Filed electronically herewith

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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 7, 2017.



		BOYD GAMING CORPORATION

	By:	/s/ Anthony D. McDuffie
		Anthony D. McDuffie
		Vice President and Chief Accounting Officer

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