BOYD GAMING CORP - FORM 8-K/A - EX-99.3

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8-K/A - FORM 8-K/A - BOYD GAMING CORP	d480588d8ka.htm
EX-23.1 - EX-23.1 - BOYD GAMING CORP	d480588dex231.htm

Exhibit 99.3

BOYD GAMING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements are based upon and should be read in conjunction with the historical consolidated financial statements and related notes of Boyd Gaming Corporation (“Boyd”) and Peninsula Gaming, LLC (“PGL”) included in Boyd’s and PGL’s Form 10-Qs for the period ended September 30, 2012 and Form 10-Ks for the year ended December 31, 2011, respectively. Boyd acquired PGL on November 20, 2012.

The unaudited pro forma condensed combined balance sheet presents the combined financial position of Boyd and PGL as if the acquisition was consummated on September 30, 2012. The unaudited pro forma condensed combined balance sheet gives effect to (i) the acquisition of PGL by Boyd; (ii) certain adjustments that are directly attributable to the acquisition of PGL; and (iii) the incremental debt incurred.

The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012, and the year ended December 31, 2011, give effect to (i) the acquisition of PGL by Boyd; (ii) certain adjustments that are directly attributable to the acquisition of PGL and will have continuing impact; and (iii) Boyd’s financing of the PGL acquisition. These unaudited pro forma condensed combined statements of operations assume that these transactions were consummated on January 1, 2011.

The unaudited pro forma condensed combined financial statements have been prepared based upon currently available information and assumptions that are deemed appropriate by Boyd’s management. The pro forma information is for informational purposes only and is not intended to be indicative of what actual results would have been, nor does such data purport to represent the combined financial results of Boyd and PGL for future periods. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements of Boyd are prepared in accordance with Article 11 of Regulation S-X.

BOYD GAMING CORPORATION

Pro Forma Condensed Combined Balance Sheet

as of September 30, 2012

(unaudited)


	September 30, 2012
	Boyd Gaming Corporation (Note 1)		Peninsula Gaming, LLC (Note 2)			Pro Forma Adjustments (Note 4)				Pro Forma Combined
	*(in thousands)*
ASSETS
Current Assets
Cash and cash equivalents	$	343,771	$	35,597		$	364,249		(a)	$	203,094
							804,446		(b)
							(1,344,969	)	(c)
Restricted funds held in escrow		364,249					(364,249	)	(a)		—
Restricted cash		21,555		5,007			—				26,562
Accounts receivable, net		56,354		4,933			412		(d)		61,699
Inventories		16,710		1,789			—				18,499
Prepaid expenses and other assets		60,075		8,910			—				68,985
Income taxes receivable		6,452					1,262		(d)		7,714
Deferred income taxes		24,122					—				24,122

Total current assets		893,288		56,236			(538,849	)			410,675
Property and equipment, net		3,498,040		428,987			1,106		(e)		3,928,133
Assets held for development		1,090,467					—				1,090,467
Deferred financing costs, net		28,948		24,477			(21,981	)	(f)		31,444
Restricted investments held by variable interest entity		21,366					—				21,366
Goodwill		213,576		85,308			373,197		(g)		672,081
Intangible assets, net		569,909		106,879			470,621		(h)		1,147,409
Investments held for sale				20,339			(1,816	)	(d)		18,523
Other assets		70,058		6,789			1,120		(d)		77,967

Total assets	$	6,385,652	$	729,015		$	283,398			$	7,398,065

LIABILITIES
Current liabilities
Current maturities of long-term debt	$	403,028	$	5,904		$	(350,000	)	(a)	$	67,182
							8,250		(b)
Accounts payable		86,555		12,168			—				98,723
Accrued and other liabilities		345,448		50,730			(8,401	)	(i)		387,777
Non-recourse obligations of variable interest entity		32,354					—				32,354
Tax liabilities		515					—				515

Total current liabilities		867,900		68,802			(350,151	)			586,551
Long-term debt, net of current maturities		3,462,938		672,270			350,000		(a)		4,717,882
							801,844		(b)
							(682,770	)	(j)
							113,600		(k)
Deferred income taxes		387,081					—				387,081
Long-term tax and other liabilities		33,471					—				33,471
Non-recourse obligations of variable interest entity		68,202					—				68,202
Other liabilities		192,225		32,177			8,456		(d)		232,858
STOCKHOLDERS’ EQUITY
Common stock		863		—			—				863
Additional paid-in capital		651,508		—			—				651,508
Retained earnings		548,088		—			(1,815	)	(l)		546,273

Total Boyd Gaming Corporation stockholders’ equity		1,200,459		—			(1,815	)			1,198,644
Noncontrolling interest		173,376		—			—				173,376
Member’s deficit		—		(44,234	)		44,234		(m)		—

Total stockholders’ equity		1,373,835		(44,234	)		42,419				1,372,020

Total liabilities and stockholders’ equity	$	6,385,652	$	729,015		$	283,398			$	7,398,065

See accompanying notes to unaudited pro forma condensed combined financial information.

BOYD GAMING CORPORATION

Pro Forma Condensed Combined Statement of Operations

for the nine months ended September 30, 2012

(unaudited)


	Nine Months Ended September 30, 2012
	Boyd Gaming Corporation (Note 1)			Peninsula Gaming, LLC (Note 2)			Pro Forma Adjustments (Note 5)				Pro Forma Combined
	*(in thousands, except per share data)*
REVENUES
Gaming	$	1,567,792		$	397,892		$	—			$	1,965,684
Food and beverage		318,123			25,295			—				343,418
Room		205,589						—				205,589
Other		110,615			12,356			—				122,971

Gross revenues		2,202,119			435,543			—				2,637,662
Less promotional allowances		340,535			37,331			—				377,866

Net revenues		1,861,584			398,212			—				2,259,796

COSTS AND EXPENSES
Gaming		742,404			165,318			—				907,722
Food and beverage		169,451			16,016			—				185,467
Room		43,671						—				43,671
Other		82,712			8,309			—				91,021
Selling, general and administrative		333,319			58,770			7		(a)		392,096
Maintenance and utilities		116,447						—				116,447
Depreciation and amortization		151,125			31,239			17,824		(b)		200,188
Corporate expense		36,197						—				36,197
Preopening expenses		5,488			2,630			(2,474	)	(d)		5,644
Affiliate management fees		—			7,049			(7,049	)	(c)		—
Other operating charges, net		(2,399	)		(46	)		(6,421	)	(d)		(8,866	)

Total costs and expenses		1,678,415			289,285			1,887				1,969,587

Operating income		183,169			108,927			(1,887	)			290,209

Other expense (income)
Interest income		(684	)		(1,685	)		(108	)	(a)		(2,477	)
Interest expense, net of amounts capitalized		202,731			53,704			24,643		(e)		281,078
Other income		—			62			—				62

Total other expense, net		202,047			52,081			24,535				278,663

Income (loss) before income taxes		(18,878	)		56,846			(26,422	)			11,546
Income taxes		7,580			—			(12,474	)	(f)		(4,894	)

Net income (loss)		(11,298	)		56,846			(38,896	)			6,652
Net loss attributable to noncontrolling interest		2,331			—			—				2,331

Net income (loss) attributable to Boyd Gaming Corporation	$	(8,967	)	$	56,846		$	(38,896	)		$	8,983

Basic net income (loss) per common share	$	(0.10	)								$	0.10

Weighted average basic shares outstanding		87,587										87,587

Diluted net income (loss) per common share	$	(0.10	)								$	0.10

Weighted average diluted shares outstanding		87,587										87,824

See accompanying notes to unaudited pro forma condensed combined financial information.

BOYD GAMING CORPORATION

Pro Forma Condensed Combined Statement of Operations

for the year ended December 31, 2011

(unaudited)


	Year Ended December 31, 2011
	Boyd Gaming Corporation (Note 1)			Peninsula Gaming, LLC (Note 2)			Pro Forma Adjustments (Note 5)				Pro Forma Combined
	*(in thousands, except per share data)*
REVENUES
Gaming	$	1,986,644		$	328,509		$	—			$	2,315,153
Food and beverage		388,148			27,127			—				415,275
Room		246,209						—				246,209
Other		135,176			15,176			—				150,352

Gross revenues		2,756,177			370,812			—				3,126,989
Less promotional allowances		419,939			38,554			—				458,493

Net revenues		2,336,238			332,258			—				2,668,496

COSTS AND EXPENSES
Gaming		924,451			144,462			—				1,068,913
Food and beverage		200,165			17,518			—				217,683
Room		56,111						—				56,111
Other		108,907			10,342			—				119,249
Selling, general and administrative		394,991			58,267			9		(a)		453,267
Maintenance and utilities		153,512						—				153,512
Depreciation and amortization		195,343			29,427			24,121		(b)		248,891
Corporate expense		48,962						—				48,962
Preopening expenses		6,634			10,136			—				16,770
Affiliate management fees					6,185			(6,185	)	(c)		—
Other operating charges, net		14,058			179			—				14,237

Total costs and expenses		2,103,134			276,516			17,945				2,397,595

Operating income		233,104			55,742			(17,945	)			270,901

Other expense (income)
Interest income		(46	)		(2,350	)		(144	)	(a)		(2,540	)
Interest expense, net of amounts capitalized		250,731			68,302			33,978		(e)		353,011
Fair value adjustment of derivative instruments		265						—				265
Loss on early retirements of debt, net		14						—				14
Other income		(11,582	)		91			—				(11,491	)

Total other expense, net		239,382			66,043			33,834				339,259

Loss before income taxes		(6,278	)		(10,301	)		(51,779	)			(68,358	)
Income taxes		(1,721	)		—			25,453		(f)		23,732

Net loss		(7,999	)		(10,301	)		(26,326	)			(44,626	)
Net loss attributable to noncontrolling interest		4,145			—			—				4,145

Net loss attributable to Boyd Gaming Corporation	$	(3,854	)	$	(10,301	)	$	(26,326	)		$	(40,481	)

Basic net loss per common share	$	(0.04	)								$	(0.46	)

Weighted average basic shares outstanding		87,263										87,263

Diluted net loss per common share	$	(0.04	)								$	(0.46	)

Weighted average diluted shares outstanding		87,263										87,263

See accompanying notes to unaudited pro forma condensed combined financial information.

BOYD GAMING CORPORATION

Notes to Unaudited Pro Forma Combined Financial Information

as of September 30, 2012, for the nine months ended September 30, 2012 and for the year ended December 31, 2011

Note 1 – Historical financial information for Boyd as of and for the nine months ended September 30, 2012, and the year ended December 31, 2011, has been derived from Boyd’s historical financial statements.

Note 2 – Historical financial information for PGL as of and for the nine months ended September 30, 2012, and the year ended December 31, 2011, has been derived from PGL’s historical financial statements.

Note 3 – The following tables set forth the determination of the consideration paid for PGL and the preliminary allocation of the purchase price. The purchase price allocation began in fourth quarter 2012 and will be completed within one year of the date of acquisition. The preliminary purchase price allocation used for the purpose of this pro forma financial information is based on currently available information including independent appraisals, discounted cash flows analyses, quoted market prices and estimates by management.


	(in millions)
Cash paid	$	1,322.3
Note payable issued by Boyd to seller		113.6
Contingent consideration obligation		9.8

Pro forma purchase price	$	1,445.7

The contingent consideration obligation represents Boyd’s obligation to make an additional payment to the seller in 2016 if EBITDA, as defined in the Merger Agreement, of the Kansas Star Casino (“KSC”) for 2015 exceeds $105 million. The additional payment would be in an amount equal to 7.5 times the amount by which KSC’s 2015 EBITDA exceeds $105 million. The fair value of the contingent consideration was calculated using an option pricing model, which requires management to forecast EBITDA for 2015, a discount rate based on the weighted average cost of capital and volatility of earnings.

The preliminary allocation of the pro forma purchase price is as follows:


	(in millions)
Property and equipment	$	430.1
Goodwill and other intangible assets		1,035.9
Other, net		(20.3	)

	$	1,445.7

Note 4 – Following are brief descriptions of the pro forma adjustments to the pro forma condensed combined balance sheet to reflect the acquisition of PGL.

(a)

To record the release from escrow of the proceeds from the August 2012 issuance of 8.375% senior notes due February 2018 in contemplation of the acquisition, and the reclassification of the liability for these notes from current to long-term.

(b)

To record the incurrence and proceeds received under a new credit facility consisting of an $825.0 million term loan and a $50.0 million revolver. The term loan was drawn down in full at closing and $28.0 million was drawn under the revolver. The proceeds are reflected net of debt issue costs, deferred finance fees and certain transaction expenses paid at closing.

(c)

To record cash payments made directly to the seller, on behalf of the seller to extinguish existing PGL debt and to terminate a management agreement.

(d)

To record miscellaneous adjustments of assets and liabilities as a result of the purchase price allocation.

(e)

To adjust the recorded value of property and equipment to reflect estimated fair value at the transaction date.

(f)

To record the write-off of historical deferred finance charges, net of new deferred finance charges incurred in connection with the financing of the transaction.

(g)

To record the net incremental goodwill arising from the preliminary purchase price allocation.

(h)

To record the net incremental intangible assets as a result of the preliminary purchase price allocation.

(i)

To record the payment of accrued interest on PGL debt extinguished as a result of the transaction.

(j)

To record the retirement of PGL debt funded by the proceeds of the transaction.

(k)

To record the issuance by Boyd of the note payable to the seller, net of discount.

(l)

To record certain transaction costs paid using proceeds of the funds drawn on the new credit facility at closing.

(m)

To record the elimination of the member’s equity as a result of the transaction.

Note 5 - Following are brief descriptions of the pro forma adjustments to the pro forma condensed combined statements of operations to reflect the acquisition of PGL.

(a)

Miscellaneous adjustments as a result of the impact of the preliminary purchase price allocation on the amortization of certain assets and liabilities.

(b)

To record net incremental depreciation expense due to the adjustment of property and equipment to fair value and the allocation of a portion of the purchase price to amortizing intangible assets. For purposes of this pro forma financial information, depreciation expense related to property and equipment is based on estimated useful lives of 27 to 40 years for buildings, riverboats and barges, and improvements; 9 to 10 years for site and leasehold improvements; and 3 to 6 years for furniture, fixtures and equipment, including gaming equipment. Amortizing intangible assets include the preliminary purchase price allocated to a customer loyalty program, valued at $136.3 million and amortizing on an accelerated basis over a five-year term, and a non-competition agreement, valued at $3.2 million and amortizing over one year. The projected amortization expense for intangible assets to be recognized over the first five years after the closing of the acquisition is as follows:


Year	Amount (in millions)
1	$	56.4
2		35.4
3		25.9
4		13.6
5		8.2

(c)

Elimination of the historical management fee paid by PGL to an affiliate. The management agreement was terminated at the closing of the transaction.

(d)

To record the removal of the direct, incremental costs incurred related to the acquisition of PGL by Boyd.

(e)

To record the increase in interest expense incurred on the incremental borrowings incurred by Boyd to fund the acquisition, including amortization of original issue discounts, debt issue costs and deferred finance charges. The pro forma interest expense arising from the additional borrowings has been computed using the stated rate on the $350.0 million of 8.375% senior notes issued in contemplation of the transaction, and the current rates on the term loan and the revolving credit facility of 5.75% and 4.25%, respectively. Each 1/8% change in the floating rate on the approximate $853.0 million borrowed under the new credit facility at closing would result in a change in interest expense of $0.8 million for the nine months ended September 30, 2012, and $1.1 million for the year ended December 31, 2011.

(f)

To record the estimated tax effect of the pro forma adjustments and on the historical taxable income of PGL. PGL was structured as a limited liability company and the members were taxed on their proportionate share of PGL’s taxable income. Accordingly, no provision for income taxes was included in the financial statements of PGL. The estimated provision for state and federal income taxes was calculated using a combined effective tax rate of 41%.

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